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International Business Management - Foreign Direct Investment

Your firm is considering to open a new factory via direct investment in Latin America and management is evaluating the specific country locations for this project. The pool of candidate countries has been narrowed to Honduras, Chile, and Mexico.

Discuss the national differences in political economy between these three countries.
Discuss any cultural barriers your firm may experience in each of the three countries.
Find each country's rating on the corruptions perceptions index (CPI).
Click here to read the country commercial guides (CCGs) prepared by the U.S. Department of State. Based on the reading, compare the FDI climate and regulations of these three countries.

Based on your findings, prepare a 3- to 4-page Microsoft Word document addressing the above questions and making a recommendation to your firm as to which country would be the best choice for your new factory.

Support your responses with examples.

Cite any sources in APA format.

Solution Preview

Step 1
The economy of Honduras is mainly agriculture. It is 22% of gross domestic product. Its main exports are coffee. 60% of Honduras is below poverty line. The unemployment rate is 4.4%. The economy of Chile is a high income country marked by stability and prosperity. 11.0% of the population of Chile is below poverty line. The unemployment rate is 6%. Mexico is the 10th largest economy in terms of purchasing power parity according to the World Bank. In 1996 the country suffered economic crisis but since has recovered significantly. It has maintained low but steady rates of economic growth. The population below poverty line is 4.0%. The unemployment rate is 5%.

Step 2
The first cultural barrier that one may experience in Honduras is that the country has a collectivist culture(b). Every person has a greater allegiance to his group rather than to her employer. The barrier is that employee commitment to the organization is low. The in-groups are hostile to the company. The cultural barrier that a business will face in Chile is that there is need for structure and well defined rules. If the rules are missing or the structure cannot be seen there can be lack of direction. When my firm, a US company is opening a branch in Chile, it must lay down elaborate rules about how things have to be done (a). Leaving how work is to be done to the workers will not be sufficient in Chile. In Mexico, the first cultural barrier that the firm I work for will face is that Mexico has ...

Solution Summary

This solution explains selection of a country for foreign direct investment. The sources used are also included in the solution.