Transition at Whirlpool Tatramat:
From Joint Venture to Acquisition
Global Business Management
November 28, 2012
I. According to the definition, a Greenfield investment is a form of foreign direct investment in which a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. With the addition of new facilities, most parent companies create new long-term jobs in the foreign country by hiring new employees. As with other investments, Greenfield investments have their advantages and disadvantages. The advantages associated with the Greenfield investment include a new facility, full control of the day to day operations, own trained labor force and low costs. On the other hand, disadvantages include local competition, increased obstacles from the government and local authorities, no inherited market share, no previous brand name recognition, no labor force at hand and more training will be required. The question asks if I would recommend a Greenfield investment over a joint venture and the answer is no. The reasoning behind this decision is the fact that the advantages of a joint venture definitely outweigh those of the Greenfield investment. If Whirlpool decides to enter into a joint venture they will have access to existing facility, existing brand, existing labor force as well as an established market share. By Whirlpool essentially acquiring the new plant that is well established, they are able to reduce costs especially when it comes to production. In addition, there is potential to increase ownership control at a later stage. Disadvantages of the joint venture include the need to overcome negative attitude toward the local brand name, labor force training would need to change local attitudes, the control would shared and trust would need to be built. I would definitely recommend the joint venture to Whirlpool...