3. Middle East and Europe
U.A.E. and Germany
Strategy for Going Global
Formulate
Evaluate
Discuss
Selected Geographic Regions
4. Motivations
Corporate mergers and acquisitions
Lower tax burdens
Perceived attractiveness of the MNC's present home country
Internationalization of MNC's shareholders and assets
Availability of talent
Quality of service clusters
Costs of the fiscal regime
Quality of legal and regulatory regimes
Higher potential revenues
Logistics
Economies of scale
(Baaij, Mom, Van den Bosch, & Volberda, 2015)
5. Benefits of Investing
Germany
A significant contributor to renewable energy
Central location
Known for quality in manufacturing
Quality labor pool
(Romero-Rubio & De Andrés Díaz, 2015)
U.A.E.
Preferred destination for International Businesses
Finance hub of the Middle East and U.S. companies
Logistically ideal location
High level of economic growth
(Sbia, Shahbaz, & Hamdi, 2014)
6. Relationship and Agreement Impacts
Bilateral Relationships
Multilateral Arrangements
Regional Agreements
Agreements between Germany and the U.A.E.
7. Relationship and Agreement Impacts, cont.
Bilateral Relationships
Multilateral Arrangements
Regional Agreements
Agreements between Germany and the U.A.E.
13. Conclusion
Selected Geographic Regions
Motivations
Benefits of Investing
Relationship and Agreement Impacts
Entry Strategies
Strategic Alliances
Equality in the Workplace
Workers’ Behaviors
Conclusion
14. References
Baaij, M. G., Mom, T. J., Van den Bosch, F. A., & Volberda, H. W. (2015). Why Do
Multinational Corporations Relocate Core Parts of Their Corporate
Headquarters Abroad?. Long Range Planning, 4846-58. doi:10.1016/j.lrp.2012.07.001
Luthans, F., & Doh, J. (2012). International Management: Culture, Strategy, and Behavior 8th New
York, NY McGraw-Hill Irwin
Ralston, D. A., Egri, C. P., Riddle, L., Butt, A., Dalgic, T., & Brock, D. M. (2012). Managerial values
in the greater Middle East: Similarities and differences across seven countries.
International Business Review, 21480-492. doi:10.1016/j.ibusrev.2011.05.007
Romero-Rubio, C., & de Andrés Díaz, J. R. (2015). Sustainable energy communities: a study
contrasting Spain and Germany. Energy Policy, 85397-409. doi:10.1016/j.enpol.
2015.06.012
Sbia, R., Shahbaz, M., & Hamdi, H. (2014). A contribution of foreign direct investment,
clean energy, trade openness, carbon emissions and economic growth to energy
demand in UAE. Economic Modelling, 36191-197.
doi:10.1016/j.econmod.2013.09.047
Editor's Notes
As a company begins to grow, a multinational strategy should be evaluated for implementation. This study will focus upon two different geographical locations in the world. The two areas chosen are the Middle East and Europe. The specific countries located within each are the United Arab Emirates (U.A.E.) and Germany. These two regions were selected for their central location to the other half of the world and personal familiarity with the areas. In addition, these two areas host a wide variety of international businesses, have easy access to all necessary supplies, and are excellent locations logistically. This presentation focus on strategy within these two countries.
Companies have a variety of reasons to move and grow in an overseas environment. The reasons that motivate a company to move aboard are diverse. The reasons could include a corporate merger and acquisition of the company. By moving a majority of the company and consolidating resources to a solitary location would make logical sense. Other reasons to move a company abroad include, l) lower tax burdens, 1) perceived attractiveness of the MNC’s home country, 3) internationalization of MNC’s stakeholders, 4) internationalization of MNC’s assets, 5) availability of talent, 6) quality of service of clusters, 7) costs of the fiscal regime, 8) higher potential revenues (Baaij, Mom, Van den Bosch, & Volberda, 2015).
The benefits of investing in Germany and the U.A.E. are many. Germany has a number of qualities that make investing desirable which include: 1) Germany is a significant contributor to renewable energy projects, 2) centrally located European country, 3) known for a high level of quality manufacturing, 4) a quality labor pool to choose from (Romero-Rubio & De Andrés Díaz, 2015).
The benefits of investing in the U.A.E are also significant. Dubai is one of the primary cities located in the U.A.E. and was built in the middle of the desert specially to become the major hub in the Middle East. A few significant points to mention are: 1) the U.A.E. is the preferred destination for international businesses, 2) it is the finance hub of of the Middle East and the U.S., 3) logistically ideal location, and 4) high level of economic growth (Sbia et al., 2014)
Relationships and agreements amongst companies, as well as countries, offer a significant impact to the way business is conducted. The three types to discuss are bilateral, multilateral, and regional, as well as agreements between Germany and the U.A.E.
With a bilateral relationship, agreements can be formed up front as to how business will be conducted and which rules are to be followed. Multilateral agreements are agreements made between several countries at one time. While this may be significantly more difficult than a JV or bilateral agreement, they are very effective when in place. Each country within the agreement has the same rights and same terms as every other country within the agreement (Baaij et al., 2015).
Regional Agreements ensure that the external company will be able to acquire the same status as the host nation’s company. Regional agreements affect several countries within the same area. Regional agreements such as the North American Free Trade Agreement (NAFTA) has allowed for the barriers to trade to be removed between the U.S., Mexico, and Canada. With this type of agreement, tariffs, import, and export quotas are removed, as well as the restrictions on agricultural products, auto parts, and energy goods. (Baaij et al., 2015).
Utilizing a JV or a bilateral agreement between U.A.E. and Germany can provide a hub for business on the opposite side of the globe. While Germany is known for designing and manufacturing quality automobiles, the U.A.E. provides a logistical hub.
There are a number of different entry strategies for a business to become a multinational corporation. Companies can significantly increase profits by entering foreign markets and with any of the entry strategies that will be discussed herein. To begin, exporting may be the only real choice for new and small firms moving into the international environment. Larger firms can also use this strategy to expand with a minimum level of risk and investment.
Licensing is another type of entry strategy that allows the rights to a product to be utilized by another company to make or sell the product for a royalty or fee. By doing so, the company using the license can add to the existing product line and while the party that owns the license acquires a percentage of sales.
Franchising is an agreement between the owner of the company and an independent party for the use of a trademark, logo, product line, or operation. Franchising is an easier way to set up a new company by using the benchmark of the original company.
Joint ventures (JV) are an international alliance of two or more firms from different countries, either permanent or temporary, and are collaborative by nature. The JV operates outside of the typical business environment and is set up for a specific purpose. The agreement define which company is responsible for which function. By combining resources and knowledge the JV can provide a greater capability and skillset.
Fully owned subsidiaries or wholly owned subsidiaries are overseas operations that are owned by MNCs. A smaller company should pursue this strategy to control transaction costs such as negotiating and transferring information. This strategy can be very profitable, but it can also be risky due to placing a large investment in a single area.
An internal and external organizational structure should be developed to create an understanding for the work flow. By developing a structure between joint venture partners or newly acquired businesses, the chain of command is identified and the responsibility matrix understood.
Control systems are put in place to assist the decision making process. If risks can be mitigated up front by deciding what will happen if a problem happens, the stressors become less. Management can not only prepare for possible issues, but can also make a decision that is well thought out rather than a knee-jerk reaction.
Labor relations are becoming increasingly important and have a significant impact on the workforce within organizations. Labor laws vary from country to country and what may be acceptable in one country may not in another. Companies should invest in human resources and development programs to ensure employees are moving towards company goals (Luthans and Doh, 2012).
Employee equality within the U.S. will allow employees to take legal action if not treated fairly. While this applies in the U.S. it does not necessarily apply abroad. If an individual takes a job abroad and is not treated equally, laws will not allow the U.S. employee justice. This needs to be considered as partnerships with global partners are developed. An understanding of which country’s laws govern could make a difference in how business is conducted. Sovereign immunity states that citizens who take a job in Japan cannot sue their Japanese employer, if equal opportunity standards are not met. In addition, the governing laws, international jurisdiction, territoriality, jurisdiction, and nationality principles also determine which laws an employee falls under when working abroad.
Different societies have varying communication methods, values, and beliefs. A society that is individualistic in nature tend not to be subservient towards others. The have the primary perception of focusing on me, myself, and I. People that fall within this type of culture focus primarily on making up their own minds and decisions. Collectivism societies and cultures work and make decisions based upon an overall collective decision of the society or group. Both the U.A.E. and Germany were noted as individualistic societies. The U.A.E. had more intermediate individualism scores while Germany’s scores were more significant. The primary influence to the U.A.E. is the exposure to Western civilizations (Ralston, Egri, Riddle, Butt, Dalgic, and Brock, 2012).