Reference no: EM1375120

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I would have selected JEL industries as it is located in a country which is part of the European Union and using Euro as its currency. Being part of a large trading block like European Union proves to be advantageous in most of the cases as it results in more stabilization of economic and political factors, greater cooperation among member nations and improved and better access to a fairly large market such as Europe in this case. If a country remains aloof from a big union like EU, there might be situations when the member countries try to subdue the aloof nation with their competitive policies and restrictions.

Moreover, being part of a large trading bloc allows a company to take advantage of special treaties, agreements and benefits. From global perspective also, it is more benefical for long term stability of macroeconomic factors. The companies operating in countries which are part of the bloc are given preferential treatment as compared to countries which are from countries other than the members of the bloc and are trying to compete in these markets. Often, import tariffs and restrictions are imposed on such companies.

Further, the company will also enjoy a fairly stable currency while being part of the EU as a single unified currency called Euro is being used in these countries which is much more strong and stable as compared to currencies of individual countries. Therefore, exchange risk management can be easily done in case of unified currency.

The disadvantages could be that global economic changes with respect to the whole region will lead to an effect on the situation in the domestic environment of the member nation, even if it is not directly linked to the event. This is due to the fact that its economy is pegged to other member countries and the whole group. Further, there might be few other restrictions in doing trade with other nations which are not part of the trading bloc or the European Union. Therefore, the company might have to restrict its trade to members of the European Union only.

Would your decision change if the company you acquired primarily sold its products within all countries in Europe? Why or why not?

Knowledge of the above mentioned facts will not change my decision to chose JEL because the benefits derived from being part of the trading bloc outweighs by a large percentage, especially in the case when business has to be done primarily in Europe. In order to access the large markets and enjoy the treaties existing between nations of the European Union, it is necessary to be located in a country which is a member of this trading bloc. Such location provides strategic advantage and removes certain barriers to international trade in these countries and are being given preferential treatment.

Would your decision change if the company you acquired primarily exported its products to Far East nations and the United States? Why or why not?

In this scenario, however, if there is a particular treaty between the countries to export(USA/Far East) and the country which is not member of the union and results in significant benefits, then the decision might go in favor of that particular nation. In that case, the fact there is a special treaty or trade agreement between the chosen country and the country to which products are to be exported might result in substantial comparative advantage which may outweigh the benefits derived from being a member of the trading bloc. For example, the country in which DBC is located might have a treaty with US with respect to avoiding dual taxation as well as huge subsidies are being given to companies that are of US origin and are willing to set up operations in that country.