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Running a firm in a country within or outside of the EU

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There are different implications of running a country that is within or outside of the European Union. If you were the head of a firm based in the United States, please answer the following questions:

1. Would you seek to acquire a company within the European Union or outside of it? Why?
2. Describe the advantages and disadvantages of the choice you made.
3. Explain why an MNC may invest funds in a financial market outside its own country.
4. Explain why some financial institutions prefer to provide credit in financial markets outside their own country.

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Solution Summary

Issues relating to doing business in EU are explained in a structured manner in this response. The answer includes references used.

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There are different implications of running a country that is within or outside of the European Union. If you were the head of a firm based in the United States, please answer the following questions:

1. Would you seek to acquire a company within the European Union or outside of it? Why?
I will not seek to acquire a company within the European Union. The European Union is in the midst of a severe financial crisis called the Euro zone crisis. This has created several problems in the European Union. The governments have changed leading to political instability and there is a strong prospect of financial uncertainty. For example, in Cyprus banks are not functioning. If a company is to be acquired, its assets must be secured and it must be able to carry on its operations. In EU, assets of companies and individuals are frozen. For example if a company is not allowed to draw cash from the bank the value of acquiring the company gets defeated. Similarly, if the business is not able to carry out normal financial transactions because of the European Sovereign debt crisis, then the company cannot carry on its operations. It is advisable to avoid acquiring a company in the European Union.
There are other countries where such problems do ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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