Reference no: EM131029269

You need to select a multinational corporation from Fortune's GLOBAL 500 MNCs list (https://fortune.com/global500/). We suggest you to think of your future career and industry that you are interested in while selecting a company from the list.

Step 2:

Select one country where your company has invested in (in any foreign direct investment forms). Then, you need to analyse the internationalisation of the company. In doing this you can follow the following points:

• Overview of the company as an MNC (Short Intro)- 5-10Lines, Statistic, Sizes.
• Host country analysis (Short Intro, To be selective)- The key characteristic and had an impact on the organization. (Economic Stability, Government Politics, Restriction or limitation on FDI, Corruption Level, Culture.)
• Internationalisation process of the firm (how? why? with whom? key challenges?)
• Contributionsofthecompanytothehostcountry (More details and examples)
• Youareencouragedtouseheadingsand/orsub-headingstoseparatethesections/casesofyouressay
• 2500Words(+-10%)
• Pleaseuse7ormorequalityreferences
• It's better for you to use an organization that is producing and selling at the same time. For example, Apple Co In China, Volkswagen in United States.
• Please also include the facts and analysis the facts and data or information.

Overview of Volkswagen as an MNC

Fortune global 500 is an analogy and comprehensive list of companies that have proven to be trailblazers in the business and cooperate world in the global arena. Volkswagen, a giant automobiles manufacturer headquartered in Wolfsburg, Germany, fits being an MNC because of its large-scale revenue it earns which is estimated to be at around 14,571 million dollars and has an asset strength position of almost 430,000 million dollars. The company was founded in the year 1937 and has maintained a solid repute of global command over the yearsBlomström, M., Kokko, A., &Mucchielli, J. L. (2003) pg. 32. The company operates in the motor vehicle and parts industry and has been an MNC for 21 years ranking on position 8 as at the year 2015.

Foreign direct investments of Volkswagen

Volkswagen has mastered the art and act of mobility and has taken advantage of the constant global insatiable need of automobiles to invest outside the borders of its parent country, that is, Germany. The company has now foreign direct investments in other countries totaling to about 150 countries and an employee base of about 570,000 around the globeBlomström, M., Kokko, A., &Mucchielli, J. L. (2003) pg. 59. The major counties of the company's foreign direct investments are China, United States, Brazil, the European Union, as well as a presence in Africa in South Africa just to mention a few. In this case, the selected case study for a country where Volkswagen has done major foreign direct investments is the United States.

Analysis of the United States as a Volkswagen host country.

The United States is a diverse country with people of all walks of life and massive economic growth that enables it to have the advantages of having the suitability of being a company's foreign direct investments destination. There are many advantages that enable the company to take United States as its investment partner. For example the automobile industry of the United States is large, and growing dailyShaver, J. M., Mitchell, W., & Yeung, B. (1997) pg.5. The average demand of automobiles is large hence enabling Volkswagen to thrive and sustain itself in the country. Also considering a Good Target market should fulfill the following characteristics .It should be Measurable; Accessible i.e. the target market must be within reach when marketing. Profitable meaning that this group has the willingness to buy, sufficient size, and is able to pay for the product. Last but not least it should be distinguishable from other sections of the market in matters pertaining to product awareness, the coherence of response to potential advertising messages and percentage of potential customers. The investment environment of the country is also favorable for the growth of foreign investments unlike most nations. The United Nations has a fairness policy that banishes acts such as discrimination of foreign investors hence making it a safe haven for foreign direct investors such as Volkswagen. The presence of a calm less volatile political environment in the country makes it predictable and almost a sure guarantee to the foreign investors that their returns will be available. The United States is also favorable as a host country to Volkswagen because of its providence of technology. Technology is the main fuel of automobiles and a country with the required technological assess and breeding of more technological inventions is a country that perfectly fits the bill of being a Volkswagen partnerShaver, J. M., Mitchell, W., & Yeung, B. (1997) pg. 5. The depreciation of the country's currency which is the standard of payments in most countries globally, is also a factor that favors the United Sates as a host country of Volkswagen. From when the dollar started depreciating in 1970s, most foreign firms prefer operating and owning properties inside the country to exporting them to the United States because of the high costs as a result of high exchange rates hence making the United States an automatic darling of foreign direct investments the likes of Volkswagen. It is in the same vein that Volkswagen chose to establish a manufacturing plant of its own in the United StatesShaver, J. M., Mitchell, W., & Yeung, B. (1997) pg.7. This enabled the company to retain its United States market by lowering the costs of importing cars made in Germany to the United States.

Internationalization process of Volkswagen as a company.

Continued success of Volkswagen formed the backbone of Volkswagen's need to replicate it to other countries internationally. With many industries such as the apparel industry joining the bandwagon of internationalization, it is with no doubt that the internationalization of Volkswagen has been a complex and dynamic process. In order to launch its internationalization process which started around 60 years ago, Volkswagen used the paradigm of output to cost analysisPries, L., &Schweer, O. (2004) pg.3. This means that the company used all means possible of using the lowest output means yet achieving the highest returns in the shortest way possible. This made the company enhance its sole aim, which is the aim of every business entity, profit maximization at the lowest costs possible.  The main ways used by Volkswagen to be internationalized is through its building of plants in the host countries and creating a huge presence in these countries.

The reasons for the internalization process by the company are varied. For instance the need for the company to establish and build a strong global presence inspired its decision for going international. This is because having a global appeal makes a company have a competitive advantage over others because of the customer base that is higher than the other competitive companies. Another reason of the company's decision of going international is filling the need to take over other markets after the parent country's market is saturated with the company's productsPries, L., &Schweer, O. (2004) pg.23. This thus makes foreign direct investment the best bet to take the company's products to the next unoccupied market and yield gains from such new markets. Another key reason why Volkswagen launched its internationalization process is to reduce its operation costs. This is because due to the need of its quality products abroad, the company established itself in the form of manufacturing plants in other countries. This thus greatly reduced the importation costs to the consumer markets and alternatively manufacturing them from the consumers, own countries. The company has undertaken its internationalization process by partnering with respective governments of their target hosts countries. This has enabled the company to have ties with the governments in their areas of operations hence making its business efficient. This is through proper licensing by the host governments, to employ the citizens of those countries and also carry the general businesses of the companyPries, L., &Schweer, O. (2004) pg.70. It is with no doubt that going international is quite a hurdle for any business and Volkswagen is no exception.

 The challenges that the company faces is uncertainty of tomorrow business wise in some of the host countries. Some countries have a relatively unstable business climate comprised of political qualms, social unrests and general instability. This makes the making of key decisions for the company a challenge because of that lack of surety that the company has a future in such areas and that their operations are well secured. In the face of the twenty first century, another hurdle that internationalized companies have to face is terrorism. Some of the countries of investment are insecure and acts of terror and horror such as mass destruction of property through bombings make the company stare at possible losses right in the glare. Another key challenge that an international company such as Volkswagen has to face is double taxation. Some of the host countries have stringent measures of business operations that require foreign direct investments to remit high amounts of taxation in those host countries. This makes the company to experience high costs as a result of taxation because it still has to pay a certain amount of taxation to the parent country. Another key challenge that Volkswagen is facing in its internationalization process are ardent competitors who are threatening to change the entire automobile industry. Competitors such as Tesla are proving to be quite an obstacle for traditional automobiles pacesetters such as Volkswagen because they too are in the process of being international in a very aggressive and brusque way.

Contribution of Volkswagen to its host country.

Foreign direct investments has massive benefits to any host countries. Therefore it is always the goal of any government, whether incumbent or a government in waiting to aspire to boost the investor confidence in their countries for foreign investors. The United States too has benefited immensely as a result of being a host country to Volkswagen. For example the presence of Volkswagen has led to the production of demand of the country's domestic goods and products. For example the Volkswagen plant in New Stanton, Pennsylvania, benefited the country because of the chain demand of car manufacturing related products. As a result of the plant, the need for Motorola radios to fits in the manufactured cars raises the demand of domestic Motorola products. Domestic manufacturers such as Bendix also get a market for their domestic productsPromberger, M., Seifert, H., &Trinczek, R. (1999) pg.7. The United States has also benefited from the employment opportunities that arise as a result of Volkswagen setting base at the country. This has reduced the high unemployment dependency which otherwise greatly dents the economy because the once jobless individuals are now part of the larger Volkswagen workforce. This thus translates to a reduction of economic problems that the United States has to tackle. Another contribution of Volkswagen to the United States is the providence of service and assistance to startup companies in the country. This can be in the form of capital inflows that boost the balance of payments in the United States economy and add the availability of funds in the economy hence encouraging the lending of bank loans to business startups and innovations. This in turns boosts the entrepreneurial spirit of the United States citizens because of the availability of money for use to advance their business ideas. Volkswagen group could be the best company producing super cars. This as a result will make them be more aggressive in innovating to make their cars the best in the market.

A company's software could be the intangible asset to assist in fostering innovation and creativity. There are software designed to detect loop holes in the market and identify what the product needs as a result it helps in innovation. Foreign capital is also an additional resource to inject funds to failing United States firms for their business revival. Revival of such firms' translates to further economic activity which greatly benefits the country because their revival of such companies means that the once failing part of the economy has now been revivedPromberger, M., Seifert, H., &Trinczek, R. (1999) pg.19. The introduction of new technology is also a contribution of Volkswagen to the United States economy.  This is because when Volkswagen sets up a new manufacturing plant, it brings with it technology that was not available in the country. For instance the technology of hydraulics when introduced to the United States will greatly benefit the country because of its availability and can be used in the manufacture of other products for exports such as industrial springs. Another example is the mushrooming of new technological ideas in the United States as a result of Volkswagen trying its car technologies in the Silicon Valley hence transferring its technological knowledge to the benefit of the countryPromberger, M., Seifert, H., &Trinczek, R. (1999) pg. 21. Competition as a result of Volkswagen's presence will act as an incentive for United States companies to work harder to beat the competition brought about by the presence of Volkswagen. This in turn accelerates economic growth and efficiency of the country as a result of the robust economic activities of the companies. The United States also benefit by a positive outlook and image the presence of a global company such as Volkswagen brings. When a respected global company such as Volkswagen invests and portrays its presence in a country, that country gains the assurance of being politically stable to accommodate a company of such repute. Such a positive branding then has helped United States gain investor confidence thus more economic activity because of increased foreign director investments form other entities.

However it is also crucial to analyze the side effects of foreign direct investments in a country such as United States by a company such as Volkswagen. Some of the sidelines are the possible fear of dominance by the foreign companies over the domestic companies in these hosts' countriesPromberger, M., Seifert, H., &Trinczek, R. (1999) pg. 49. Foreign domestic investors may directly or indirectly kill domestic industries because of the possible domineering and takeover of all the countries resources hence leaving little or no space for domestic companies to thrive and survive. Another side effect is the possible result of corruption in the host countries. There have been cases of corruption where officials of the foreign direct investment companies want to take shortcuts in their areas of business operations. This means that some freeing companies perpetrate corruption in their host countries hence derailing the host country both socially and economically.

In conclusion, Volkswagen is a global trailblazer and its presence I n other market economies such as The United States is highly beneficial hence its continued appearance in the Fortune 500 MNC companies list.

References

Pries, L., &Schweer, O. (2004). The product development process as a measuring tool for company internationalisation? The case studies of DaimlerChrysler and Volkswagen. International journal of automotive technology and management, 4(1), 1-21.

Blomström, M., Kokko, A., &Mucchielli, J. L. (2003). The economics of foreign direct investment incentives (pp. 37-60). Springer Berlin Heidelberg.

Shaver, J. M., Mitchell, W., & Yeung, B. (1997). The effect of own-firm and other-firm experience on foreign direct investment survival in the United States, 1987-92. Strategic Management Journal, 18(10), 811-824.

Jensen, N. M. (2008). Nation-states and the multinational corporation: A political economy of foreign direct investment. Princeton University Press.

Promberger, M., Seifert, H., &Trinczek, R. (1999). Experiences with the Four-Day Week at the Volkswagen Company. Journal of Human Resource Costing & Accounting, 4(2), 27-43.

Werner, S. (2002). Recent developments in international management research: A review of 20 top management journals. Journal of Management, 28(3), 277-305.Godfrey, B. J., & Zhou, Y. (1999). Ranking world cities: multinational corporations and the global urban hierarchy. Urban Geography, 20(3), 268-281.