The company you work for would like to expand its United States business in the country of Croatia. The company would provide new technology to manufacture light bulbs, and you would take over the managerial aspects of the project from the beginning of the project in Croatia if the project is accepted. You must decide from your research if this would be an advisable project for your company, and present your business plan and recommendations to your managers.
1. The company wants to use a joint venture or wholly owned subsidiary. Discuss both modes, but identify the better of the two modes of entry into the country, justify your selection, and develop a strategy for a successful mode of entry.
2. Research and discuss these issues:
A. Advantages and disadvantages of an American business in Croatia.
B. Country overview:
a. Political overview and possible risks. (Democracy or totalitarianism? What form of political influence? Wartime influence? Explain)
b. Legal system overview information.
c. Economic overview (Individualistic or collectivism? What would be the influences for your company?)
d. Social overview (language, cultural, customs, traditions, values, and ethical challenges).
C. Investment overview and the business environment.
D. The HR strategy you would use; include the types of workers you would use and why (women, expatriate, home-country nationals, host-country nationals, etc.)
E. What exit strategy (contingency plan) would you suggest? Explain.
E. Make a recommendation for your company to enter into this project or reject it and explain why.
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Business opportunity in Croatia
The purpose of this plan is to analyze the existing market situation in Croatia for the American firm, XYZ for expansion. The firm proposes to provide new technology to manufacture light bulbs. The plan outlines the different entry options the firm has to enter Croatian market, advantages and disadvantages of American business in Croatia, and the business environment that prevails in the country. The aim of this plan is to help the firm reach a decision on whether it would be beneficial for the firm to enter the Croatian market.
1. Wholly Owned Subsidiary versus Joint Venture
Wholly Owned Subsidiary is a more integrated method for entry in the foreign market that offers more control. It requires major commitment in terms of resources and means greater risk and less flexibility. A firm would choose this method of entry if it possesses very specific assets which can generate huge profits. In this case the firm might choose to protect these assets from partner from using them for his own interest. Moreover, the firm might chose not to share the high profit volume with the partner.
On the other hand a firm chooses joint venture when it wants to share risks, needs additional resources to invest, and when the firm does not have adequate business experience or country-specific experience (Álvarez, Montserrat, 2003-05).
The American firm would go with joint venture for gaining entry into the Croatian market to gain knowledge from the partner's knowledge about the country. The firm has technological advantage but it lacks the expertise of manufacturing and selling in a foreign country. Also, not long back the country was not stable politically, it has had major economic reforms recently to promote short-term economic growth. Hence, to minimize the risk, the firm would find a local manufacturing partner in Croatia. The partner would provide the human resources and capital and the American firm would provide the technical expertise and financing required for the project.
2. A. Advantages of American business in Croatia
• Excellent geographical and infrastructure network which provides an optimal link between the west and the east, and in north and south.
• Innovative, effective, and multilingual workforce
• Great market accessibility and great business opportunities
• Stable macroeconomic environment with low inflation rate
• Most modern infrastructures- transport infrastructure, ...
The expert examines joint ventures for global business management.