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MNE
The Manufacture and Distribution of Flabbergasts in Saudi Arabia: Diversification and Regional Market Share
Confusions, Inc., the owner of the patent for the brand-new and never-before-seen Flabbergast, a product to cure all kinds of ills, is seeking a country in which to locate its manufacturing operations and a distribution hub. As the Flabbergast is suited to arid environments and will be marketed to more affluent markets, a country in the Middle East would be an ideal distribution hub, and locating manufacturing as close to the distribution center as possible (potentially even in the same compound) would improve efficiency and reduce costs. It is for this reason that Confusions, Inc. is happy to unveil its proposal for foreign direct investment in Saudi Arabia as a manufacturing and distribution center for the Flabbergast.
Business Plan
Confusions, Inc. began with the kernel of an idea, but has now grown into a patent-holding enterprise with tentative sales contracts and an opportunity to offer the first product of its class starting in select international markets. The company seeks fast growth and rapid acquisition of market share not only through the innovative and unique nature of its product, the Flabbergast, but also through the careful control of costs and logistical planning far in advance and with great detail. Saudi Arabia has been selected as a key country in which to locate manufacturing and distribution efforts not only due to its centrality in the desired market but also due to a positive business atmosphere that will allow for strong cost controls (Akhtar, 2012).
The current concrete operational plan is to locate manufacturing facilities and to hire labor for the running of these facilities in...
A significant immigrant population seeking largely blue-collar work in the country makes for ideal employer conditions, with relatively low labor costs but a high degree of job loyalty and a fair amount of sill, and thus manufacturing should provide a solid foundation of quality and efficiency for the company (Icduygu & Sert, 2011). Distribution will take place from the manufacturing facility or nearby the facility, with exportation to other countries and distribution within Saudi Arabia achieved and key markets easily reached and acquired. This model is somewhat suggested by current models of foreign direct investment in Saudi Arabia, where foreign direct investors do not tend to export to the country but rather to locate facilities there (Roberts & Almahmood 2009). Initial financing will be provided primarily by debt with some sale of equity; revenue is expected to fund growth within the first three years of operation.
Benefits of FDI
The benefits of foreign direct investment to the home country and company are quite clear. By allowing more immediate access to the market identified as the primary geographic target for the Flabbergast, Confusion, Inc. will be able to increase its bottom line through this foreign direct investment. This will increase the taxes paid and the overall economic output of Confusion, Inc.'s home country, leading to higher levels of employment and general prosperity. A successful venture will also increase the home country's perceived partnership value abroad.
The benefits to Saudi Arabia, the target country of this proposed foreign direct investment, are also quite demonstrably clear. Foreign direct investment has contributed to economic diversification in Saudi Arabia, and to greater…
References
Akhtar, M. (2012). Foreign Direct Investment in Saudi Arabia: A Competitiveness Analysis. The GCC Economies 3: 165-74.
Icduygu, A. & Sert, D. (2011). Project-Tied Labor Migration from Turkey to the MENA Region: Past, Present, and Future. International Labor & Working Class History 79(s1): 62-80.
Mahasen, A. (2009). FDI and its Reflection on the Saudi Economy. Riyadh: Optimead.
Roberts, B. & Almahmood, A. (2009). Source Country Characteristics and the Inflow of Foreign Direct Investment into Saudi Arabia. The World Economy 32(12): 1730-46.
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