This document will provide a detailed summary of what the company should consider when deciding to invest into foreign markets. The intent is for the Chief Executive Officer (CEO) to get a better understanding of the European Union Market. Including some advantages and alternatives within the EU.
The European Union consists of 28 different countries, each with their own governments and economies. The EU was created to stop the wars between these 28 countries which was the initial cause of World War II. There are still a few countries with their own currencies but the EURO is the currency of the EU. If the company were to acquire a company within the EU we could use this as a stepping stone into the European Market. According to the Pew Research Center, the EU is the second largest economic power by GDP in 2016 of $20.3 Trillion behind China of $21.4 Trillion. There is a huge advantage investing into such a big market like the EU. With this acquisition the new market allows for us to reach an additional +500 Million people within the EU. This is on top of the +300 Million from the USA.
Some disadvantages in acquiring a company from the EU would be the fact that a lot of these countries still speak their own languages. However, the predominantly spoken language of the EU is English. The reason this is a disadvantage is the fact that the company may need to hire some translators or train our employees which will cost more money. Another disadvantage is the distance from location to location. From the USA to the EU is a huge distance to cover so the upper level management will need to be in constant communication with the headquarters company so that the CEO is aware of all things that are happening.
If the company wants to become an MNC within the next decade, it must invest in foreign markets. An MNC would invest into foreign markets because it’s a great rule of thumb to not have all your eggs into one basket. For example, if we had our money only invested into the USA and the market crashes again like it did back in 2008 then are assets would crumble. Investing into other markets allows for diversity and for leverage in other markets.
Investing in other markets is also done by financial institutions to gain trust in foreign partners as well as creating alliances for their customers to use other banks in foreign countries. For example, Bank of America created a Global ATM Alliance with other foreign banks to allow their customers to withdraw from their ATMs overseas without a fee. This is done because of the trust with each of the banks within this alliance. Therefore, investing into foreign companies is something the company should consider in the future to adapt to changing environments within the market.
Budiman, A., & Manevich, D. (2017, August 09). Few see EU as world’s top economic power. Retrieved December 16, 2018, from http://www.pewresearch.org/fact-tank/2017/08/09/few-see-eu-as-worlds-top-economic-power-despite-its-relative-might