For several decades now, we are experiencing an unavoidable and strongly growing market globalization. Beyond the traditional export business, industrial globalization keeps penetrating the world´s countries and markets under many different forms of international
businesses and strategic alliances. This term paper describes, justifies and compares two forms of cross-border business expansion strategies into the Brazilian Market that a Multi-National-Corporation (MNC) may resort to: Foreign Direct Investment (FDI) and International Joint Venture (IJV). Their implementation strongly depends of the market type that a host country offers.
A common denominator of both international market entry modes is the obviously advantageous presence of interests of the involved MNC´s when trying to expand their businesses into host countries. This direct presence in a host country means additional speed to market and provides the MNC´s far more possibilities of establishing, conducting and controlling international businesses, than the traditional export business.
The generalizing statement made in the paragraph above is only meant to provide an introductory feeling on how the market of a host country determines the strategy for business expansion. Naturally, there are far more important facts and reasons to be considered that
ultimately force investors into conducting extensive, deep and detailed analysis of not only the market conditions and structures found in pinpointed host countries of their interest, but much more must they make profound and accurate analyses of the socio-cultural and political dynamics that overlay the people which they will rely on, as well as work and cooperate with in the host country. Only a very careful and detailed preparation of their business expansion plan under all aspects involved will enable them to enter, expand, subsist and succeed in a host country. Needless saying here is that there is no easy common way out, since most host countries have very diverse cultures and customs that are seldom known to the interested investors.
The dynamic issue of industrial globalization and international business expansion gets overly well reported on, as well as commented and documented in the world wide Internet. For this reason I chose to compile and comment relatively recent information obtained over the Internet, complementing and concluding it with some backing and legitimizing information derived from the UNCTAD and OECD annual reports.
Inhaltsverzeichnis (Table of Contents)
- International Joint Ventures (IJV) and Foreign Direct Investments (FDI)
- International Joint Ventures (IJV): Advantages and Disadvantages
- Legal Business Structure of the IJV
- Advantages of the IJV for the host country and the local company
- Disadvantages of the IJV for the host country and the local company
- Advantages of the IJV for the participating MNC
- Disadvantages of the IJV for the participating MNC
- Three good examples of MNC's participating in Brazilian hosted IJV's
- American Electric Technologies Announces Joint Venture in Brazil to Deliver Turnkey Power Solutions
- Oil States forges Joint Venture in Brazil
- Ecometals signs Joint Venture Agreement in Brazil
- Foreign Direct Investment (FDI): Advantages and Disadvantages
- Legal Business Structure of the FDI business
- Advantages of the FDI business for the host country and its economy
- Disadvantages of the FDI business for the host country and its economy
- Advantages of FDI for the investing MNC
- Disadvantages of FDI for the investing MNC
- Two good examples of MNCs doing FDI business in Brazil
- Brazil/Germany: VW increases investment in Brazil
- Brazil/USA: Ford Motors invests $2.9 bn in Brazil
- Cultural business barriers encountered when entering the Brazilian market by means of IJV or FDI and possibilities to overcome them
- Patriarchal Society and vertical hierarchies
- Family oriented society
- Relationally based trust
- Time
- National pride
- Fashion
- Class differences
- Coffee invitations, small talk, sovereignty, acting cool
- Pyramidal Corporate Governance practices in Brazil
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This term paper explores the strategic business expansion options available to Multi-National Corporations (MNCs), focusing on International Joint Ventures (IJV) and Foreign Direct Investment (FDI). It aims to differentiate these approaches, analyze their advantages and disadvantages for both host countries and participating companies, and offer insights into cultural challenges associated with entering the Brazilian market.
- Analyzing the differences between International Joint Ventures (IJVs) and Foreign Direct Investments (FDIs)
- Evaluating the advantages and disadvantages of IJVs and FDIs for both host countries and participating MNCs
- Highlighting cultural barriers faced by MNCs entering the Brazilian market
- Exploring strategies for overcoming these cultural barriers
- Providing real-world examples of MNCs engaged in IJVs and FDIs in Brazil
Zusammenfassung der Kapitel (Chapter Summaries)
The first chapter introduces the concepts of International Joint Ventures (IJVs) and Foreign Direct Investments (FDIs), contrasting their strategic implementations within the context of market globalization. The paper argues that the choice between these two modes of international business expansion depends heavily on the market conditions and specific characteristics of the host country. Chapter two delves into the advantages and disadvantages of IJVs for both the host country and the participating MNCs. It analyzes the legal business structure of IJVs, highlighting its contractual nature and the responsibilities of the co-venturers. This chapter emphasizes the potential benefits for host countries, including technological transfer, employment opportunities, and local market development. Conversely, it explores the potential risks for both host countries and MNCs, such as political instability, cultural differences, and potential exploitation. Chapter three showcases real-world examples of MNCs involved in Brazilian hosted IJVs, demonstrating the practical application of this business strategy. These examples offer insights into the specific advantages and challenges faced by these MNCs in the Brazilian context. The fourth chapter examines Foreign Direct Investment (FDI), discussing its advantages and disadvantages for both the host country and the investing MNC. It details the legal business structure of FDI, outlining its reliance on subsidiaries and independent entities. The chapter analyzes the economic benefits of FDI for host countries, highlighting the potential for job creation, infrastructure development, and technological advancements. However, it also explores the potential drawbacks, such as increased competition for local companies and the risk of environmental damage. The fifth chapter provides real-world examples of MNCs implementing FDI strategies in Brazil, showcasing the practical implications of this approach. Chapter six tackles the crucial issue of cultural business barriers encountered by MNCs when entering the Brazilian market. It examines various socio-cultural factors, such as the patriarchal society, family-oriented culture, and the importance of trust in building business relationships. This chapter explores the potential challenges these factors pose for MNCs and offers suggestions for overcoming them.
Schlüsselwörter (Keywords)
This paper focuses on the concepts of International Joint Ventures (IJVs), Foreign Direct Investment (FDI), and cross-border business expansion strategies. It examines the advantages and disadvantages of these approaches for both host countries and participating MNCs, emphasizing cultural barriers, market entry strategies, and successful examples of MNCs operating in Brazil. Key themes include globalization, strategic alliances, business culture, and market penetration.
- Quote paper
- M.Sc. Siegfried Hotter (Author), 2010, International Joint Ventures in Brazil´s Markets, Munich, GRIN Verlag, https://www.grin.com/document/188393
