HI5014 - Cross Business Strategic Exchange Rate Assignment

Assignment task

Question

• Foreign direct investment is explained by the OLI paradigm using three conditions (Ownership advantages, location advantages and internalization). Examine the factors that influence firms to locate subsidiaries close to market. 
• Managers of multinational enterprises are advised to take advantage of their home region institutions such as the European Union. Assume you are the manager of a multinational enterprise in Belgium. Why is the institutional framework created by the EU pivotal for business? 
• Identify firms’ strategic responses that managers adopt in order to deal with foreign currency exchange rate movements.

Question

 You have been approached by the CEO of a declining MNE to provide management consulting advice. The company is called FURD Auto Ltd, based in Detroit, Michigan, USA, which was once a global leader in automotive manufacturing in North America, the UK and Australia.

Competitors from Japan, Germany and now South Korea have eroded FURD’s global market share and its’ automotive sales have been in steady decline for the past 20 years in all of its main markets.

FURD has been unable to produce affordable, competitive, innovative and high quality vehicles, which are attractive to consumers in both its domestic American market or in new markets in developing countries, such as China and India, which are known to either heavily subsidise or support local manufacturers. 7 HI5014 International Business Across Borders FINAL EXAM - MG T2.2019

The CEO has openly discussed three options with you to “turn-around” FURD Auto Ltd. The specific options being considered include:

• Firstly, a full acquisition of a small sized highly innovative foreign entity in a developing country in Asia, which has a very large population and a growing middle class, who desire cost-effective cars.

• Secondly, a strategic alliance with a well-established, larger sized and technologically advanced European rival in a much smaller market and with a declining population. The European market is considered to be mature, dominated by established players and noted for its very discerning consumers.

• Thirdly, pursuing a merger with another similar sized rival company in the MNE’s home market, in order to consolidate its market share in its existing markets.

Required

1. Critique each of the three options noted above by considering one advantage and one disadvantage of each option. To which option can the VRIO criteria be used? 
2. Based on your analysis in (i) recommend one specific option to the CEO of FURD Auto Ltd and explain why you have selected this option.

Question

The COVID 19 depression can be noted as being worse than the 1928 World Great Depression. Indeed, many businesses across the world have closed down their businesses.

Required

As an advisor to the President of Happy-land Republic:

1. Examine the survival strategies you would provide to enable firms to survive the effects of COVID 19.
2. You envisage that for each strategy, challenges exist. Accordingly, you believe that the Prime Minister should be aware of these challenges. What challenges do you think would arise a result of adopting each of the strategies you have provided to the Prime Minister.

Question

• A manager needs to continuously create resources and benchmark against best practices. Explain how you could use the VRIO framework to benchmark a firm where you are the Chief Executive.
• Cross-functional capabilities are critical for the success of multinational enterprises. With examples, examine the cross functional capabilities that influence a firm’s competitive strategy.

Question 

1. Knowledge conversion is one of the approaches through which multinational enterprises can succeed while transacting business across borders.

Required:

Using the figure above:

• Label the parts A to 1 of knowledge conversion figure.
• Assume you are the manager of a multinational enterprise. Use arrows 1-4 to explain how you would convert the knowledge of your centre of excellence located in Japan to other subsidiaries located in Europe, Africa and South East Asia.

1. Label the parts A to 1 of the Equity control-growth matrix.

Assume you the Chief Executive Officer. Examine the various equity entry modes you would adopt to expand the business empire of your multinational enterprise.

Use Equity Control-Growth matrix below and explain the various equity entry modes used by small and medium enterprises to internationalize. Then answer the questions that follow.

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