Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.
Introduction
Most successful multinational companies have ventured into foreign markets where they establish subsidiaries in countries with favorable economic factors. The subsidiaries seek business environments that are favorable in terms of the country of choice economic growth, the business cycle, unemployment and employment levels as well as inflation levels. Specifically, those entering the foreign markets assess and evaluate market factors concerning the country’s business cycle which highlights the market fluctuations in a country. This is because every business works towards gaining a profit and such factors may hinder that accomplishment.
Economic factors
Businesses require funding for start up and this is usually sourced from banks and other lending institutions. The loans usually are granted inclusive of interest rates and are usually charged as per annum. If interest rates are too high, businesses will be constrained and therefore keep away investors. This enables businesses to assess their businesses’ viability. This includes issues such as recession which indicates a slowdown in a country’s economic activity, which when it lasts too long it becomes a depression.
Other factors that shed light on economic conditions in a country include rates of inflation, exchange rates and national incomes. Inflation acts as a mirror of a country’s existing economy whereby it shows increases in the price of goods and services. This means that the subsidiary will suffer if the inflation rate is high as the cost of goods needed for production will also rise hence running the business to a loss. In these situations, lending institutions do not lend money to businesses and if they do it is usually at high interest rates.
Exchange rates define the current market prices that different currencies are exchanged at. If currencies in existing countries are higher than in countries where raw materials are being sourced, the cost of production will be low translating to good business. The reverse will mean negative impacts on the subsidiary. Current exchange rates show a strong dollar than the Turkish lira. The subsidiary will use available local materials and import most of its products. This means that the subsidiary will earn profits as the cost of production and exportation will be low in addition to available markets in Turkey and America.
Turkey reported a steady growth of 9% in 2010 and it was anticipated to decline to 5%. Unemployment levels have also been rising with time but it has become steady with a low of 11.9%. Inflation rates have also been fluctuating from 10.4% in 2008 and 6.3% in 2009 with a rise in 2010. This shows the unfavorable current market conditions. Persistence of the market forces and the dire predictions of ever increasing make the current business environment dangerous for investors. High levels of inflation and unemployment will make life more difficult as the cost of goods needed for production will rise. This will mean the end for many businesses as the subsidiary will be hard pressed in trying to make a profit when the prices are too. It is important to mention that many changes have been put in place to address the current situation and the investment climate is primed to be better. More research and vigilance on market fluctuations will need to be carried out to ensure that changes are positive and thus enabling establishment of a subsidiary (Datamonitor Plc 4).
Legal requirements
Businesses in foreign markets are expected to adhere to the host country’s regulation of the business environment. As such, companies that establish subsidiaries in other countries are subject to that country’s business laws, whereby the management assesses the legal requirements governing establishing a new business. Different countries have different legal requirements. For instance, in Turkey a subsidiary can be established in the private sector with limitations in some areas especially in the civil aviation and maritime transport among others. On the other hand, American requirements allow entry of businesses in every sphere of American life and hence more opportunities for business. Both American and Turkish law allows formation of limited liability companies, joint stock companies, and partnerships limited by shares. Turkey encourages most forms of businesses enabling flexibility of making or changing one’s choices. The business legal environment in America is complex as different states have different regulations in establishing and running of businesses.
The new Turkish commercial code has also simplified the time taken to establish a subsidiary compared to American law that takes a long process before one is registered (Price Waterhouse Coopers 18). The American corporate income tax is currently at 30% flat rate (Wise 8) while that of turkey is at 20% (Price Waterhouse Coopers 9). However, foreign investors are required to pay an advance corporate income tax based on their quarterly based statutory financials at 20%. This is offset after corporate annual tax returns are deducted. In consideration to the information, business in Turkey is predicted to be favorable. The legal issues have been really simplified so as to attract more foreign investors. This will enable the management to successfully establish a subsidiary and make good returns due to the enabling environment. However, the decision will have to be considered in the light of the current market forces which are too unpredictable and therefore relatively dangerous.
Works Cited
Datamonitor Plc. Turkey Country Profile. Country Analysis Report. Web. 2012.
Price Waterhouse Coopers. Doing Business in Turkey. 2010. Web.
Wise, A. N. Doing Business in the U.S.A: A “Bullet Point” Guide For Foreign Business People. 2009. Web.
Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.