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    Challenges of Expansion to a Foreign Location

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    5-3-16: I need your help getting this paper going. Determining a good foreign market to expand the auto industry into, the competition faced in that market, growth of the population, GDP, exports, and sales. Similiar to how you have helped me in the past. You provide good background info and then I'm able to expand on it through investigation and research. Does that make sense?
    Revise your Week 3 economic analysis using the feedback provided by your facilitator to evaluate the challenges of expanding your company's production to a foreign market. This will require you to revise previously recommended pricing and non-pricing strategies for your company's product based on the selected country's economy's stage in the business cycle and the projected economic conditions. Discuss the evidence that supports your recommendations.
    Select a foreign market in which to expand your chosen product.
    Write a 1,750-word paper (including any material you include from your Week 3 assignment) detailing your findings. The use of tables and/or charts to display economic data over the time period discussed is highly encouraged.
    Describe current global economic conditions and their effect on local macroeconomic indicators in your selected country. Consider forecasts for population growth, GDP growth, GDP per capita growth, export growth, and sales growth.
    Evaluate the competitors' existing production in the chosen country.
    Evaluate forecast sales in the selected country.
    Determine the type of economy that exists in your selected country - closed, mixed, or market. What is the difference between these types of economies and how might this affect your expansion?
    Describe how your chosen country's current credit market conditions affect demand for your product or service and your planning or operating decision for your production in that country.
    Analyze the role of the selected country's central bank on that country's economy.
    Evaluate the availability, education, and job skills of the work force in the selected country. Discuss the additional challenges of international production, such as political stability, availability of government financing or other incentives, threat of capital controls, and exchange rate risks.
    Discuss any additional supply chain challenges you anticipate if attempting to sell your product made in your chosen country to countries outside of that market.
    Discuss any comparative advantages your company will have over competitors in that country.
    Recommend either for or against expanding your company's production into your chosen country based on your research.

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    Solution Preview

    The Market:
    A good auto market to expand to is the Russian auto market. The Russian auto market is forecast to grow fast and become the largest market in Europe by 2016 and the world's fifth biggest market by 2020. The rationale for the selection of this market is that there is a growing middle class, an increase in car ownership, low fuel prices, and expanding Russian economy. From the quantitative perspective, it is an attractive market in terms of cars per thousand inhabitants. The Russian auto market is expected to grow by an annual rate of six percent through 2020. The annual sales are forecast to reach 4.4 million automobiles. Russian integration into the global economy will drive car sales.
    Some forecasts say that because of current weak macroeconomic conditions, short and medium term automotive sales may stagnate. This means the forecast of 4.4 million vehicles by 2020 may be reduced to 4.0 million vehicles. Also there is uncertainty in macroeconomic and political situation, ambiguous market indicators, and delay in economic boost (1). However, there is reason why Russia is an attractive market for autos. Currently, there are only 290 cars per 1,000 Russians versus 560 in Western Europe. Many of the vehicles in Russia are old and are likely to be replaced. In addition, Russia's mineral wealth is empowering the population (2). The auto market may be transformed and cars made locally may be purchased in larger numbers. The expected change is that the sale of imported cars will decline and sale of locally made cars will increase.
    The current nominal GDP of Russia is $1,176 trillion according to 2016 figures. The 2015 GDP growth rate is minus 3.7%. The Russian government forecasts that there ...

    Solution Summary

    The answer to this problem explains the entry of an automobile company into a foreign country. The references related to the answer are also included.