Supply chain cost

Topics: Investment, Macroeconomics, Developed country Pages: 13 (3950 words) Published: February 12, 2014
Table of Contents
Table of Contents1
Executive Summary2
Investment Environment in China 3
PESTEL Analysis of Investment Environment in China4
1 Political Factors 4
2 Economic Factors5
3 Social-cultural Factors6
4 Technological Factors7
5 Environmental Factors7
6 Legal Factors8
PESTEL Analysis of Investment Environment in Japan8
1 Political Factors8
2 Economic Factors9
3 Socio-Cultural Factors10
4 Technological Factors10
5 Environmental Factors10
6 Legal Factors11
International Strategies Recommended11
International Strategy for Investing in China11
International Strategy for Investing in Japan12
Determination of the Most Suitable Country to Invest in12

Executive Summary
This report is mainly to determine the most appropriate country for a “foreign direct investment (FDI)” of ABC Company. This report chooses from China and Japan as two alternative options for ABC Company’s FDI and analyzes the investment environment so as to understand the advantages and disadvantages of investing in the two countries. It also identifies the most suitable international strategy for entering the foreign market.

ABC Company is a large British Manufacturer. Due to the economic downturn in Euro area after the international financial crisis, demand growth has become very slow during the recent years (IMF, 2013). Thus, ABC Company is planning to launch its international strategy in order to increase its overall profitability by entering into foreign markets.

As with ABC Company’s FDI destination, it focuses on two countries, namely China and Japan. China is the largest developing country in the world which has been experiencing rapid economic growth for a long time, while Japan is a country famous for its manufacturing industry products, ABC Company can only choose one country to invest in.

In order to make the right choice, both FDI destinations are analyzed with respect to the investment environment. Advantages and disadvantages of investing in both countries are identified. Based on these analyses, whether to adopt the Greenfield or Merger/Acquisition strategy is discussed. Comparisons are made between the situations of both countries and the final recommendation of FDI destination for ABC Company is also included in the report.

ABC Company is a large British Manufacturer which has a long history and a stable market share in Britain and European market. Manufacturing industry in the developed world has grown in to the mature phase in general (Buciuni et al., 2012). Due to the economic downturn in the recent days because of the international financial crisis and the European sovereign debt crisis, the performance of ABC Company is becoming less satisfactory. The recent economic downturn leads to a shrink in the consumption of ABC Company’s products and causes a decline in its profitability. As the British and European markets are saturated to some extent and the competition among different manufacturers is fierce, ABC Company is now considering launching an internationalization strategy. By entering a foreign market with foreign direct investment, ABC Company is able to find the best locational conditions, such as having closer approaches to customers, raw materials or advanced technologies. After making the decision to internalize, ABC Company is now conducting researches on the most suitable country to invest in. Initially, five emerging markets, namely Brazil, China, Russia, India and South Africa as well as three developed countries, namely Australia, Japan and Canada are all taken into consideration. However, as ABC company is more prone to entering the Asian market, it focuses on two of them which locate in Asia, namely China and Japan. China and Japan are two distinct countries in Asia and they are in different development phases. China is the largest developing economy in the world and...
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