Unit 1 Individual Project
October 7, 2012
FIN630-1204D-02: Global Financial Management
American InterContinental University
International Financial Markets
Not to be confused with an acquisition, a Greenfield venture is a strategy in which a parent company enters into a new market without the involvement of another business or partner. This popular strategy entails a company leasing or purchasing land, building a new facility, employing or relocating managers and employees, and then independently launching a new operation where none has existed before. Basically, the operations within a Greenfield venture are done from the ground up. As of today, many organizations have succeeded in entering global markets by way of a Greenfield investment. With that in mind, Acme’s feasibility to establish a Greenfield production facility in Mexico or in France will be evaluated. While France has been a European Union (EU) member since 1952, Mexico has been declared as an independent, self-governing country that is not an EU member. In an effort to compare the pros and cons of starting operations in one of the two aforementioned countries, each country’s trade policies, currencies, and social and cultural differences will be explored and discussed. Trade Policies
According to the US Census Bureau (2012), France has accumulated billions of dollars’ worth of exports and imports, placing them as the ninth largest trading partner with the United States. As a member of the EU, France’s day-to-day operations, decision making as far as trading issues and legislation is delegated to the European Commission (EC). This institution not only upholds and enforces the European Union’s trade treaties but it also is responsible for bargaining, consulting and negotiating (Consolidated version of the treaty on European Union , 2010). Even though France along with the other 26 EU countries is legally obligated to abide by the Commission’s policies and decisions, they are a part of the rise seen in emerging economies and the proof that the trade-driven development in the EU is possible and plays a major role in generating growth. France comes in second on the world’s leading agricultural exporter of products and services list and fourth on the overall list for the biggest market for exports (US Department of State, 2012). Given that France has over two million firms, these rankings are very significant. So significant that the amount of foreign investment has increased and several new jobs have been created. Such statistics and figures indicate that France possesses the government’s support and a labor force competent enough to generate, promote, and attract investors. With this and the European Union’s population of approximately 700 million people, France might just be the way into a larger market (Advameg, Inc., 2009). After Canada and China, Mexico is the third top country with which the United States trades with and is the second largest export market (US Department of State, 2012). The trade policy in Mexico mostly focuses on manufacturing and encourages foreign investment. Different from France, Mexico with the help of the North American Free Trade Agreement, NAFTA for short, has been able to develop more of a personal but accommodating and mutual trading relationship with the U.S. NAFTA has also allowed both the U.S. and Mexico to enjoy and promote cooperation, which ultimately sparked numerous agreements including a free trade agreement on cement, tequila, and sugar. Needless to say, both countries have experienced an increase in economic assimilation. NAFTA encompasses the world’s largest free trade area and accounts for an excess of 450 million people and is also responsible for producing close to 17.5 trillion in goods and services by close to 400,000 Mexican companies and many more American firms (Mexico, 2008). In the case of trade policies, the...
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