Question

You are a senior manager in a U.S. automobile company who is considering investing in production facilities in China, Russia, or Germany. These facilities will serve the local market demand. Develop a summary that determines the benefits, costs, and risks associated with doing business in each nation. Which country seems to be the most attractive target for foreign direct investment? Why? The course is International Business and Global Strategy.

Answer 1

There are several factors that influence the investment. The socio-economic and political conditions influences the investment patterns. U.S have more friendly ties with Germany than Russia and China. Though China is a big market, the authoritarian regime undermined intellectual property rights, technological transfer, patent etc. In some situations, foreign firms have to share their patent and technology with Chinese firm and they copied it in their own way. These are the risks associated with investment in China. The benefits of investing in China are the availability of cheap labourers, larger population and thereby purchasing power, low cost of production. The risk associated with investment in China mainly depends on growing conflicts and tensions between countries.  

Russia and U.S had a bitter legacy. The investment policies between countries are not flexible in nature and ideological differences also hinders the investment patterns. The benefits of investing in Russia includes political stability and better economic position of country. But the less availability of raw materials and higher cost of productions are the drawbacks.

The best country for investing among these countries is Germany which had a track record of better automobile industry. Thus as a senior manager , I will prefer Germany. The investment in Germany will help in exploiting the larger European markets. The country is democratic in nature and highly a developed country in the Europe. Thus investing in Germany will result in better outcome. The risk associated with investment in Germany is the competition threat and higher cost of productions .The economic costs are relatively higher in Germany. The U.S investing in China and Russia is inappropriate to present international scenario.