Acme is widely known for its services all over the world in the production and provision of services. The idea of starting up a Greenfield production plant is one of its steps in meeting its goals as a multinational organization. The company has therefore selected a steering committee that will establish an appropriate country to locate its new production plant. In this proposal two countries, the United Kingdom and Japan will be proposed for the establishment of the Greenfield production. Several factors have to be put into place before establishing the company.
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The United Kingdom
Being a member of the European Union and a permanent member of NATO, United Kingdom is a strong country in Europe. The country has got a small manageable population with advanced technology. United Kingdom’s government interventions after the Second World War were aimed at reaching high levels of industrial development. As a result, a leissez fair approach to industrialization was encouraged by Margaret Thatcher in 1979. The labor government today stresses the support of horizontal measures in business with the sterling pound increasing in value against the US dollar.
This means that by establishing a multinational organization in the United Kingdom, the Acme Company will have added advantages to run its business in the country. There are several advantages that the company may benefit from as a result of establishing a greenfield production plant in the United Kingdom.
The policymakers have a great interest in production industries which will enable the proper provision of job opportunities to the people. When people are busy with economic development, they contribute to economic development by paying taxes.
The company will have supportive services available in the United Kingdom as it has many global companies both in the service and manufacturing sectors. The Five Drivers of Productivity in the United Kingdom can favor the establishment of a multinational company. The challenges are
To improve competition as competition is the key to strong and efficient markets; it also puts downward pressure on costs and prices through innovative products that brings quality to consumers.
The culture of the people in the United Kingdom has no much difference when compared to the American culture and hence the establishment of this company in the UK will not raise issues in the country.
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The Promotion of enterprise, by removing obstacles to entrepreneurship, hence promoting an enterprise culture, and delivering different and fundamental approaches for delivering the ways in which regulations are made and enforced aimed at delivering actual reductions in the burdens on business. The acme company will enjoy this promotion of industrial manufacturing. (Kirsty, 2003 pp. 23-98)
The policies support science and technological innovation which promote the development of new technologies and more efficient ways of working hence increasing rewards to innovation. This means that the UK will increasingly rely on its ability to create and embrace new knowledge and convert it into innovative goods and services. The idea of the multinational greenfield company will therefore be embraced in the United Kingdom.
The policies also advocate for the raise in skills levels to the process of production in order to create a new flexible and dynamic workforce that can implement innovative technologies and permit individuals to shift into new areas of work. A multinational company will have provided these dynamic skills to the country.
The government policies also encourage foreign investment to raise the stock of physical capital, with stronger efficient capital markets.
Taxation on the operation of a multinational company in the United Kingdom may be higher than in Japan as the policies of running up business in the country by an EU nonmember are not favorable.
Due to the higher per capita income in the United Kingdom, Acme may have a high cost of operation based on the labor which will obviously be expensive. The government on the other hand may impose high licensing costs of operation to the multinational Greenfield production company in order to protect its people against possible exploitation and degradation of the environment. (Kirsty, 2003 pp. 23-98)
The Acme Company may also establish a Greenfield production company in Japan a non-EU country in Asia. The country is well developed just like the UK but has concentrated on technological innovations. In fact, Japan is a major producer of vehicles and electronics.
The Ministry of International Trade and Industry (MITI) in Japan was formed in 1949 aimed at curbing postwar inflation and give government leadership and support for the refurbishment of industrial productivity and employment favors such facilities. In the recent past, the Japanese Yen has continued to decrease in value against the US dollar.
The multinational company will have the following advantages in operating in Japan;
Japan is highly developed and has a good infrastructure to support the growth of a company. The production of electricity for example surpasses their consumption which is a favorable factor for the establishment of any company.
The large population in Japan of about 127 million people is a guarantee to a bigger market for the products of Greenfield as compared with the United Kingdom which only has a population of 61 million people. The ready market will promote the growth of the green field production plant. (Mukio, 2006 pp. 150-234)
However, the company might face the following disadvantages in Japan;
According to Japan’s Ministry of International Trade and Industry (MITI) policies, the local industries are favored over the foreign companies. Therefore the company may run at a very high operation cost even though there is labor availability. Considering that Japan is an industrialized developed country, the new company is likely to face stiff competition from other existing companies in Japan or from other countries which may have established a good market in Japan.
The culture of Japan differs significantly from that of the United States and the establishment of an American Company in Japan might bring cultural issues that may hinder the development of the company.
The pollution control policies in Japan are very tight and require the company to have pollution control measures. This might give the company extra costs of operation which will reduce the profit margin of the company.
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Being a non-EU member, Japan has no restrictions in the establishment of companies from other countries as long as they contribute to the development of the country.
From the above information, the Acme Company will have more advantages if established in the United Kingdom as opposed to Japan. The benefits accrued in the UK are more as compares with Japan even though the UK is a member of the European Union. EU member countries may provide a market for the Greenfield products. High competition in Japan might kill the company, hindering it from development. The Acme Company also needs to observe environmental pollution control measures which are highly legible in the United Kingdom. Other considerations are necessary including the cultural policies in the countries of the establishment.
Kirsty, H. (2003). The future of UK competitiveness and the role of policies, New York: New York Publishers, pp. 23-98.
Mukio, S. (2006). A History of Japanese Trade and Industry Policy, New York: McMillan Publishers, pp. 153-316.
Phil, B. and Richard S. (2001) Britain’s Industrial Renaissance, London: Oxford University Press, pp. 213-257.