This paper addresses the concept of creating an MNE, and how that MNE would then engage in FDI. The company is fictional, as is the product. However, the information about how the company would go about FDI and what it would consider important in the chosen country is non-fictional and based upon resources and readings that are important to consider any time a business is going to move into a foreign market.
Successful FDI
MNE: A Business Plan for Successful FDI
The MNE
For this paper, the MNE will be a company that originates in the United States, but that is considering FDI in Thailand. The company manufactures a snack product that is popular in the U.S. market, but has not been tested in other (particularly Asian) markets at all. This does not mean the product will not do well there, but there is not much research into the suspected success of the product. Nevertheless, the company is forging ahead with Thailand plans. This is noteworthy, because FDI is a complicated process that requires much study and thought (Calderon, Loayza, & Serven, 2004; Ho, 1998). Development in the third world is changing, and so is development in countries that are relatively well-established but that still have some trouble competing when it comes to comparison with countries like the United States (Ho, 1998; Ghemawat, 1986).
In order to be successful, the MNE must be able to move its operation to Thailand or open up operations there that perform well and are a complement to what is seen in the U.S. If the MNE is successful in doing that, there can be benefits for the company and for the host country. Whether the home country will lose out based on jobs sent overseas and other factors is also something that remains to be seen. Many times, the company that sends operations overseas ends up cutting U.S. production to the point that many jobs are lost (Wu, et al., 2002). Still, this is not always the case. Sometimes a company simply needs something to supplement its U.S. base, so it can continue to provide high-quality goods at a fair price. This is the hope with the proposed MNE and its fictional snack product, because that would keep the company from giving away too many U.S. jobs.
Business Plan for the MNE
A successful business plan is one that is designed to protect against as many eventualities as possible. However, no business plan is 100% complete because there are always potential problems that can appear without warning (Porter, 1979). Despite the risk of problems, a business plan for the MNE should be well thought-out and ready for any of the more common issues that may appear. Because the company has already been in business for some time in the U.S. And has a successful product base and an established presence there, it already has a business plan for its company. The consideration here is not how to come up with a completely new business plan, but how to change the existing business plan in such a way that it becomes appropriate for Thailand. There are many factors that have to be taken into account, and there is more than just financial issues at stake.
For example, how is the culture different in Thailand as compared to the U.S. Are there concerns in one country that would not be valid or important in another? How is business conducted in Thailand, and what is expected of companies that are moving into that country? The MNE must thoroughly research the country into which it wants to move, or it will not be able to create a business plan that will be considered successful (Porter, 1979). Each and every business plan created by a company that is moving into an FDI situation takes time, and the company should not be in too much of a hurry to get started in business. Taking the time to address all issues in its business plan will help a company be more successful when it comes to not only the financial aspects of FDI, but also the cultural aspects that have to be considered. Some countries are much more welcoming than others, and it is important that the company find a country that will welcome it and its product. The business plan should incorporate that information.
Costs and Benefits: Home and Host Countries
As with any FDI plans, the home and host countries should be carefully compared with one another from the standpoint of costs and benefits (Hofstede, Steenkamp, & Wedel, 1999). The home country (in this case the U.S.) is one in which the MNE is already established, so that is certainly an important benefit. Additionally, the home country is also welcoming to the MNE and "used to" its presence and its offerings. If the company comes out with a new product, people are likely to try that product because they recognize the company's name and make the assumption that the product must be on par with the other products produced by that company. Assuming the company has a good reputation, new products will get picked up quickly and consumers will purchase them frequently. However, the U.S. is a costly place in which to do business for many companies. That can hinder what the MNE is able to produce and how much it charges for its goods.
By getting involved in FDI in Thailand, the MNE believes that it can lower its production costs. That will do one of two things: lower the cost to the customer, or make more profit for the company. Many companies just take the extra profit, but some companies will actually reduce the cost of the product to the consumer, so there is a higher chance of seeing more volume (i.e. consumers will purchase more of the product because it costs less, which will actually make more profit for the company overall). Despite the lower costs of production, however, there are still many moving and set-up costs for the MNE, as well as cultural differences and other concerns to which the company will have to adjust. This is very important to consider, because too many companies only look at things from a financial perspective. There is much more than just finances at stake when a company decides it is going to get involved in FDI and start operating in another country.
Conclusion - The Future of the MNE
As with any company that moves toward FDI, the future looks good but still slightly uncertain. There are concerns to be faced and considerations to be addressed. How the people of Thailand will accept the company from a cultural perspective matters, as does whether the company calculated the financial risks and benefits correctly. If the company made a serious error in either one of those areas, there could be big problems for that company down the road. Naturally, any company would want to avoid issues with finances or even issues with culture. If production of a product is not lower in the new country and/or the product does not sell well in that country, much of the money the company spent to begin operations there could be lost - and that could even bankrupt the MNE. The majority of companies catch these kinds of problems in the planning stages, but that is not always the case. Sometimes companies have to pull back and regroup after a failed run at FDI.
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