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I would prefer to acquire a company that is within the European Union. This is due to a simple fact- external surroundings. This means that the company can transact with several other nations within that European Union market segment without encountering any trading barriers. Additionally, the company cannot encounter any employment restrictions, and even setting up extra shops or branches in the European Union market is made simple (Cini, & Borragán, 2016). In terms of supporting business ventures and companies, European Union policies shape the market into a competitive place hence upgrading quality products and fuels the creation of jobs. This then stimulates economic expansion and growth due to the business-friendly surrounding. With globalization and stiffer competition from other regions, the European region's strong economic affluence relies on the foundations of its manufacturing base and not items and services offered alone.
The European commission invested in European industries which in turn led to contemporary, clean, and fair economies. The European Union promoted quality products through various initiatives and aimed at empowering Europeans, revive areas, and put up suitable technologies for future manufacturing industries. Manufacturing is the primary fuel for invention, efficiency, and exportation. It leads to the generation of quality jobs among the European residents (Chalmers, Davies, & Monti, 2019). Nevertheless, the industrial system is under intricate alteration influenced by digitization and other emerging technologies. Therefore, European Union ensures that the entire European industrial sector stays competitive on a global scale by embracing modern technology, incorporation of items and services, creating cost-effective technologies that utilize less energy, cut wastage and avert pollution.
It is vital to note that the European Union is both a political and economic entity. Since its formation, the European Union grew in magnitude and incorporation. The main objective of the European Union is to support European coordination via the generation of a single market. The amalgamation of the European nations facilitates the free movement of products, services, and Europeans from one region to another (Cini, & Borragán, 2016). Thus, the first benefit is the creation of European unity which in turn makes management easier as one moves from one country to another. European unity was able to heal and streamline the once still relationship among the European nations. Since the formation of the European Union, international cooperation and peace have been fostered and retained among the member states. Peace creates understanding hence enabling businesses to flourish among the member states. Accordingly, the European Union promoted economic and political stability. Secondly, the European Union resuscitated the lawful and human rights aspects of a business. For further illustration, a consistent obligation to human rights prevents unfair judgment and legal procedures are followed to the latter. This attracts many nations to the European Union hence increasing its credulity and acceptance internationally (Richardson, 2015). The conditions created to cause an increase in profits and acceptance all over the world. As stated earlier, membership prospects assisted in modernizing the nations under the European Union as they had to have a standard measure against which they would operate and do business, and this encouraged competition among the member states. Similarly, the European Union strengthened the economic zones of its members. With a more than 500 million population, the Union controls 7.3% of the entire world populace which then translates into 23% GDP worldwide. The ability to create free trade and remove trade barriers assisted in the reduction of expenses and customer prices. As a pendulum affect the trade increment created employment and gave way to higher salaries. An estimated 52% of exportation comes from the European Union member states hence increasing trading activities among the member states.
On the other side, European Union membership is costly. The UK has to part with $15billion annually. This explains some of the underlying reasons which made the UK drop out of the union. The European Union charges its members heftily hence the balancing the benefits against the expenses or recurrent expenditure becomes an uphill task. Secondly, the European Union has inefficient policies that imply that the policies are not adequate to secure businesses from incurring losses (Bache et al., 2020). For instance, most policies are geared toward agricultural industries by cutting down food costs consequently an upsurge in demand for agricultural products. Besides, other policies require an amendment so that they can boost business growth among the member states.
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The main advantage of acquiring companies outside the European Union is having total autonomy over the business's core functions and operations. The European Union cannot set the standards for the company and this means that the company running outside the European Union can set its own pace by adopting better policies as compared to those of the member states. The business environment is still dictated by external commercial forces such as market value, branding, and pricing. An independent company will be able to curve its image by tactfully giving out fair prices, leveling the playing field by carefully observing the weaknesses of the member states. Additionally, setting up a subsidiary office which is subjected to the host country's tax rules and employment practices helps in the management process and decision making. Alternatively, a company can merge with other companies so that it can accurately match up companies under the European Union umbrella. Either way, outside the European Union a company can adopt numerous forms which then enable it to accomplish a lot of things.
One of the main disadvantages of a company operating outside the European Union is the inability to beat the ever-increasing competition among the member states. A company within the European Union can adopt pricing and expand its business across the member states. However, the alone company is forced to bear the tax burden and still offer services at an affordable rate (Collings, & Dick, 2011). More so, the pressure to conform to stringency forces companies operating outside the European Union to cut costs and introduce extra ways of doing business. These measures sometimes lead to economic inactivity. Also, since a company operating outside the European Union is not immune to challenges created by the European Union it has to participate in the creation of a solid solution for the rest of the market players.
3
Underlying reasons why MNC can invest in the financial market outside its own host country
An MNC invests resources within a financial market situated outside its host nation due to appreciation of the currency in the near future. Another reason may be high-interest rates which allow the MNC to earn higher interest rates when they invest in that particular nation. In other words, the state of the financial market influences how an MNC invests its main financial assets. They tend to lean toward an appreciating market so that they can increase their profit margins throughout the financial year (Beck, Demirgüç & Levine, 2010). As time goes by, the company has to stay afloat and meet marketing demands. It is vital to note that a company an MNC has to facilitate its financial assets in more than one nation. This way, it forces the MNC to balance its strategical management its profits and losses. Most of the time, MNCs derive more than half of their profits from the international market located outside their parent nation. Mostly, this nation can create quality employment offers across the different nations and technologically advance items and services and this is the reason they tend shift invests from the parent host nation to neighboring nations with suitable demands. Moreover, MNC is said to change the investment landscape of the nations they are hosted in because they stabilize the nation and bring in another political aspect of which they might not be liable for in the long run. Meanwhile, MNCs can regulate other commercial needs of the neighboring nation.
Market seeking is one of the primary reasons an MNC will look to go across other boarders. Catching a new consumer market enables the market to sells its items and services to a wider target market. The top managers realize that quality products and services are a unique mechanism to beat the competition and expand into foreign markets while at the same time looking for other business opportunities all over the global space (Collings, & Dick, 2011). The second motivation is finding which has few market players which then allows the MNC to sell products without any hindrance or penetrating an already saturated market. Another reason for expanding into an international market is seeking efficiency or productivity. The extensive economic changes permit the MNC to alter their external structure while reacting to the various economic changes.
4
Most of the financial institutions claim that they might earn higher profits if they give out credit to overseas financial markets as long as the interest rates are higher and other risk factors are contained. Furthermore, banks may want to accommodate different markets in their client portfolio hence the need to lend other people credit (Bache et al., 2020). A diversified portfolio helps in increasing profit margins and capturing a wider market which hinders them from being exposed to tough financial situations. For a long period of time, financial institutions have helped to come up with definite solutions to the hard financial crisis. After any financial crisis, scholars tend to design financial policies based on loans so that they can offset any pending debts without tipping off the balancing scales. financial stability is important for developing nations and this is one of the main reasons financial institutions lean toward offering credit to international regions no matter the financial situation they might be facing (Collings, & Dick, 2011). Most of the time foreign nations present financial institutions with many benefits compared to local markets. Thus, it always seems prudent to finance business based on the ability to return investments rather than regional differentiation which in the long term is not beneficial to the lender. Banks are keystone elements within the financial frameworks as they help in the allocation of money to borrowers in a sufficient manner. the specialized services end up minimizing expenditure and attain evidence on saving and other financial market trends across the region. Consequently assisting in financing loans and general market growth.
References
Bache, I., Bulmer, S., George, S., Parker, O., & Burns, C. (2020). Politics in the European union. Oxford University Press.
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2010). Financial institutions and markets across countries and over time: The updated financial development and structure database. The World Bank Economic Review, 24(1), 77-92.
Chalmers, D., Davies, G., & Monti, G. (2019). European union law. Cambridge university press.
Čihák, M., Demirgüç-Kunt, A., Feyen, E., & Levine, R. (2012). Benchmarking financial systems around the world. World Bank Policy Research Working Paper, (6175).
Cini, M., & Borragán, N. P. S. (Eds.). (2016). European Union politics. Oxford University Press.
Collings, D. G., & Dick, P. (2011). The relationship between ceremonial adoption of popular management practices and the motivation for practice adoption and diffusion in an American MNC. The International Journal of Human Resource Management, 22(18), 3849-3866.
Richardson, J. (2015). European Union: power and policy-making. Routledge.
