Multinational Enterprises

Multinational Enterprises

Table of Contents

Executive Summary—————————————————————————–3


MNE Analysis———————————————————————————–5

Industry/Sector Analysis———————————————————————–6

Country Analysis——————————————————————————–7

Analysis of Regional Organization———————————————————–8

FMSS/ Mode of Entry analysis and recommendation————————————-9


Works Cited————————————————————————————-17

Executive Summary

Multinational enterprises are firms that have grown due to the availability of open market entries in many nations. Countries have opened their markets for foreign direct investments, which have encouraged companies to invest in those countries. The reason for this liberalization of markets is because foreign direct investments come with economic development as many locals get employed in addition to improved infrastructure among other benefits (Cantwell). This article touches on multinational business management. It first begins by introducing multinational businesses and their management. It then goes ahead to pick an MNE, Pv Crystalox, and analyzes it. The analysis is based on the current area of operations of the company. The analysis leads to the identification of a new target market are for the business. The identified market for Pv Crystalox is Brazil. Brazil is also analyzed to check inform the mode of entry for the business. After the analysis, it is found that Brazil is a low market region with moderate potential of growth in market. The possible methods for Pv Crystalox to enter into Brazil are analyzed. This is termed FMMS analysis (Eroglu).

There are five identified methods, which include no entry, sole venture, joint venture, exporting, and licensing. Each of these methods is examined and after a considerable deliberation of Brazil’s economic situation and government policies, sole venture is chosen as the mode of entry for Pv Crystalox. Sole venture is chosen because is seen as the most appropriate method for business that wants to exercise full control of their activities. The method offers Pv Crystalox high level of control for its businesses in Brazil. Moreover, it encourages it to apply experience gained in other countries in Brazil. Another thing that motivated this choice was that Pv Crystalox will integrate itself into the economic system of Brazil and develop at a fast pace and generally maximize profits. It is concluded that sole venture is the best methods of entry for Pv Crystalox and was to be adopted by the firm. The paper recommends Pv Crystalox to adopt sole venture in its mover strategy to Brazil. After this analysis, that summarizes the content of the article. Lastly, the various works cited in the articled are referenced.


Multinational enterprises are businesses that operate in many nations. Most multinational enterprises operate in neighboring countries within a single continent. However, some large multinational enterprises exist in more than one continent. These enterprises get into new economies at a fast pace and grow depending on the government policies of the concerned nations. The main reason for the spread of multinational enterprises all over the world is the liberalization in many countries. Many nations have opened their markets for foreign direct investments. This implies that companies can move from one nation to another and establish their businesses. One thing that encourages many companies to invest in other nations is the availability of grace periods and the equal government duties and subsidies for new businesses (Dunning and Sarianna). This paper explores a multinational enterprise, Pv Crystalox. It assesses the strengths and the weaknesses of the company, examines its area of operation, and identifies a country that the MNE is supposed to extend its operations. After identifying the nation, it goes ahead and analyses the existing market of the country and business feasibility in the region. It then recommends the best move that the enterprise can use to get into the nation. Brazil has been chosen as the area of expansion for Pv Crystalox (Willeke).

MNE analysis

Pv Crystalox is a multinational enterprise based in the United Kingdom. The company produces and supplies multicrystalline silicon wafers. It provides the silicon wafers to several main photovoltaic producers all over the world. The company utilizes silicon feedstock to come up with multicrystaline silicon wafers and ingots. The production facilities for the silicon ingots is situated in Oxfordshire, UK, while the production services for the silicon wafers is situated in Erfurt, Germany. The company has fully owned subsidiary, solar silicon GmbH, is charged with production of silicon for the enterprise in the Bitterfeld. The company has other branches in Germany, Italy, Japan, USA, and China. Pv Crystalox is currently the leading supplier of photovoltaic silicon wafers ( 2013).

One of the strengths enjoyed by the company is a large market share. The company is currently commanding a half the world’s market in the production of silicon. The company has branches in several nations (Solar Power Feed-in Tariffs).

However, the company does not have any headquarters or industries in Australia and Latin America. These nations experience sunny weather over a half of the year. This gives reason for the production of solar panels in such nations. Competitors such as Sharp electronics, Kaneka Corporation, SolarWorld AG, Swiss Wafers AG, and ReneSolar Ltd have expanded their operations into many nations and established industries, as well as solar panel offices. However, in Latin America, none of these offices exist so far ( 2013).

Strength of the company is that it has invested hugely on its research and demand sector. Its research and demand departments worldwide keep updating the business with any developing information, and projection future market demands that guide the decision makers and leaders in coming up with sound decisions with regard to the handling of its products. The other strength is that the company has focused on supply chain management. This helps in improving their productivity, speeding delivery, and reducing operations costs (Gatto).

Industry or Sector Analysis

The current environment in which Pv Crystalox operates predominantly is in the United Kingdom. The future of solar PV in this region is very vital to the subsidy level offered. Installation of big PV units in the past had been more profitable and numerous. Further installation of these units in the region would take up a large proportion of the residual budget while not meeting the aim of increasing household distribution generation of for households.

There are many estimates on the capacity of PV in the UK by 2020. DECC projects that 2.7 GW of PV will be available. The national grid projects that 1.5 GW may be installed, which was a revision from their earlier 3.5 GW estimate.

The market for PV can be broken into two—downstream and upstream. Upstream involves the marching of raw materials, like silicon, and the fabrication of inverters and PV modules. Downstream market touches on financing and installation of PV.

The United Kingdom is has little involvement in the upstream of PV. The upstream of UK capacity includes two manufacturing plants for PV units; Sharp’s Wrexham and Crystalox plant. The two combine to deliver 570 MW–a figure more than 90% of the total production capacity in UK by 2009 (IEA). Another company that manufactures in the UK is Romag.

Downstream services involve domestic businesses. It contributes up to a half of the quality established in the market of Solar PV. There is slight public information on how the downstream market unfolds. Collection of information about these values is very challenging. Majority of these units fitted in the UK are small in electrical capacity and volume.

Currently, the government supports the operation of Pv Crystalox in the UK. It does so through Feed –In Tariffs and involvement in the Renewables Obligation.

Country Analysis

The country that Pv Crystalox will venture into is Brazil. Brazil is a country found in the Latin. America. Brazil is a situated in a region that sunshine is not a problem. This implies that the production and sell of silicon wafers and ingots will be handy in Brazil. Many people will most likely buy Solar panels due to the sunny nature of Brazil.

In Brazil, there is low GDP and the GDP is projected to reduce at a rate of 4.32% due to the rise in inflation. Additionally, Brazil in the year 2012 earned revenue of $ 201.9 billion from exports. The and lower and the middle class in Brazil is composed of 67% of the total population. This creates a huge pool of demand for the solar products. Moreover, external analysis of Brazil technology shows that Brazil is constantly progressing towards a better future.

Moreover, the government of Brazil has good policies that touch on foreign direct investments and multinational enterprises. The country offers subsidies to new businesses. Its market is open to foreign direct investments. New businesses are given a six-year grace period after their founding before they start paying taxes to the government. This is hard to come by anywhere. Moreover, the tax rates levied by the government industries are same for both local and foreign countries. This means that companies have the chance of easily settling in Brazil, as there is no bias by the government.

Analysis of regional organization

The region that the country will establish its business is a large industrial region. Brazil has go many industries that are situated in collections forming families of industries. They industries enhance each other in so many ways. Some industries depend on each other for labor, market, source of raw materials and much more. The specific region that Pv Crystalox will be situated will be an area with good road networks. Brazil has good road networks linking industries to their main markets. Photovoltaic solar panels, being international products, can be exported to other neighboring countries in the Latin America. Therefore, the availability of good road networks makes it easy for the products to reach the market. Another important thing that Brazil emphasizes on is education for its populace. The level of literacy is high in Brazil. Many people have gone to school and therefore there is enough pool of labor for the business. The business will not have to import expats (Athukorala).

The establishment of Pv Crystalox in Brazil will also benefit the local population due to improved infrastructure. The establishment of an industry comes with the need for social amenities, such as water, electricity, and roads. This not only profits the organization but also brings many advantages to the local population. People will be able to water, electricity and good roads due to repairs that come with industries. Corporate social responsibility is another area that Pv Crystalox might consider while if Brazil.

FMSS/Mode of Entry Analysis and Recommendation

The method of entry for any firm into a foreign market is always determined by several factors. Firms do not just wake up one day and decide to venture into a market. There needs to be a study of the chosen market before deciding on the most appropriate mode of entry. Various modes of entry exist for MNEs to choose from before getting into new markets. The most typical entry modes available include exporting mode, joint venture mode, a sole venture ode, and a licensing mode. The choice of these methods depends on a number of factors that are based on a tradeoff between returns and risks (Gilroy).

There are three main determinant factors for the choice of an entry mode. They include location advantage of the firm, ownership advantage of the firm, and internalization advantages of incorporating transactions within the firm in a given nation. Ownership advantage involves the ability of a firm to come up with differentiated products, the size of the firm and its multinational experience. Location advantage entails the market potential and the investment risks resent in the new market. Internalization advantages involves contractual risks that are concerned with the cost of drafting and enforcing contacts, the risk of decline in value of services , and the risk of knowledge dissipation in a given area (Heinecke).

The choice of the most appropriate method of investment depends on the above three mentioned factors. It is through striking a balance in the above factors that a firm is able to effectively invest in a market and draw maximum profits from it. Most firms prefer investment modes that have both high market potentials and multinational experience. This is because the two factors aid in the growth of the business as the business adapts and develops at a fast rate. The development is owed to the fact that the firm has prior knowledge and skills and there is market for its activities. However, it is difficult to come by nations that offer both advantages. Most countries have these advantages but in limited scales. Some could offer high market potential but no multination experience on the firm and vice versa (Kleinert). Moreover, nations usually have policies that govern businesses. In some countries, policies for foreign direct investments are different from those of local investments. However, some nations treat all businesses equally. Restrictive policies for foreign direct investments usually curtail MNEs from venturing in certain markets. Changes in government policies also affect the way in which businesses operate in certain markets. This is because a change in the policies of a nation may bring repatriation of business earnings. Worse still, it can cause expropriation of a company’s assets (Jäger-Waldau).

Exporting as a mode of entry has its advantages and its misgivings. Companies normally choose exporting as a mode of entry due many factors. One such factor is limited resource availability. Exporting is chosen by businesses that lack the requisite capital to invest in new economies. Others prefer exporting when there are restrictive policies in the host nation while other prefers it when the host nation has a high investment risk. Exporting is normally characterized by low resource investment and this implies that the firm incurs low risk alternatives, as well as earns low return alternatives. However, the method does not come with market control, which is indispensable for many market-oriented firms. Firms do not get full control of investment activities in the host country and have no effect on decisions made that pertain to their operations (Lymbersky).

Another investment mode adopted by MNEs if the joint venture mode. This mode implies that a multinational firm collaborates with a business that is already established in the host nation. The two are commonly businesses in the same production line. There are usually signed covenants concerning risk/return sharing. Joint ventures are usually characterized by relatively low investment. They provide returns, controls, and risks that are in tandem with the extent of equity participation of the firm concerned. The motivations behind many firms investing in this mode are usually not in harmony with those of the partner firm in the host nation (Mababaya). However, the mode comes with a competitive advantage. This competitiveness is brought about by the integration of the two companies, which gives them a wider view of the market than that which can be spotted by individual businesses. The firm has the advantage of moving resources across national boundaries with ease. They can also use the experience gotten in one nation in another country whenever needed.

Sole venture is another mode of entry that is most commonly used by large firms with enough resources and skills to utilize in host countries. This is the most appropriate method for firms that require full control of their activities. The method is characterized by high resource investment and hgh return or risk alternative. The mode also offers a high level of control for businesses. Moreover, a firm can utilize the experience gained in one country in another country when need arises. The entry modes entails that a firm gets into a country and begins its operations from zero. This gives it a chance to integrate itself into the country’s economic system and develop depending on its financial position and the other environmental factors in the host nation. Most firms chose this mode because they prefer full control of their resources foreign countries. Full control comes with general profit maximization and hence firms should remain subordinate parents to their foreign venture (McIntyre, Ivanaj, and Ivanaj. ).

Licensing is another mode of entry for firms. It is characterized by low resource investment. It also comes with low risk or return alternatives and low control. This is the most unpopular means of venturing in foreign nations by firms. Mostly small firms that are at the initial stages of growth adopt the method. There no big businesses that always claim their growth from this method. However, most big firms say that firms normally use this method as a litmus test to the feasibility of their operations in the target market (Quaschning).

Low control levels usually come with higher costs compared with the integration of assets and skills within firms whenever managers cannot predict future contingencies. A high level of uncertainties makes the cost for drafting and enforcing contracts very expensive. Low modes of control profit many businesses. This is because it allows them to benefit from the economies of scale in the market. They do not encourage bureaucratic disadvantages that come with sole ventures and joint ventures. This is because firms are not tied up by changes in local policies (Rugman). Moreover, if so, they always have the liberty to opt out any time they want. Nations that experience lower market potential are projected to possess a lower rate of attracting foreign investments. Businesses always want to grow and develop. A number of factors apart from capital determine this development. The market for the products of a company determines whether a company grows or not. Therefore, when there is no possibility of growth in the market potential, then there is no need for investment. This point explains the above case. However, ventures with branches all over the world are not hindered by such factors. Most of them could have interest in those nations because of the need to enjoy slow profit objectives and growth. Brazil and India are two third world countries that do not have some good market potential for investment, but their potential is moderate. They may not be as lucrative as developed countries, but may still harbor the market potential and strategic importance that warrants consideration for MNEs (van). Additionally, these countries act as potential markets for MNEs as they come with an extra benefit—they have a higher propensity of better returns owing to greater market instabilities.

When firms decide to venture into low markets such a Brazil and India, they normally do so with a high likelihood of adopting the sole venture entry mode. This satisfies their need for managing and monitoring their resources and services all over the world.

Joint venture and exporting are appropriate methods of entry in low potential markets. This is because there is a reduced risk view. However, these methods do not come with flexibility, control, and change required by firms to hold on to long-term competitiveness. Joint venture usually creates hindrances for strategic coordination. Therefore, larger companies with high multinational experience will most likely go for sole venture mode as an entry mode into lower market potential countries.

Joint ventures are commonly chosen by smaller firms with lower multinational experience as entry modes especially in nations with higher projected market capital. This is normally due to the greater possibility of the firms to grow in such markets. Moreover, returns in such areas are better. Joint venture allows firms to share risk and costs, as well as complementary assets and skills with the partner company in the host country. This is advantageous, as the firm does not incur all the death alone. Furthermore, the venture allows for more investments as risks are spread across a wide pool. This method cuts the long-term doubt at a reduced cost compared to ideal market approaches.

Firms that have a higher propensity of coming up with differentiated products have the capability of choosing sole venture entry mode in countries with high investment risk. However, MNEs with high multinational experience harbor lower possibilities of choosing sole entry mode in those nations.

The availability of increased market potential encourages firms to invest in foreign nations while low market growth rate implies that firms will most likely avoid entry. High levels of investment contingencies hinder firms from venturing into countries while low investment risks attract MNEs. In nations with high market potential coupled with high contingency investments, MNEs may opt for exporting modes or joint ventures. Therefore, companies should strive to strike a balance between all the above factors (Wustenhagen, Rolf, and Wuebker).

Based on the above-discussed factors, it is evident that the best method for Pv Crystalox to venture into the Brazilian market is through the sole venture entry method. Pv Crystalox is a company that has branches all over the world. It has the necessary capital to invest in a country like Brazil. Moreover, Pv Crystalox has a high market experience in many nations that will help it advance well in a nation like Brazil. Brazil has no restrictive measures for foreign direct investments. In fact, its foreign policies are very favorable. The country encourages foreign direct investments by offering subsides to MNEs. The country is a democratic country that is developing on a daily basis. There is stability in the nation. The nation has sunny weathers throughout the year. This weather, coupled with the large pool of its populace makes it a vantage point for Pv Crystalox to venture into. Sole venture for Pv Crystalox will be aided by the fact that Brazil offers subsidies to industries that promise common good for the entire population.

Pv Crystalox has ownership advantage. This is evidence by its capacity to offer differentiated products and its multinational experience. The company has many firms in nations all over the world. Going into Brazil will be a walk in the park for the MNE. This is because all the company needs is permission. Another thing that gives Pv Crystalox an ownership advantage is its size. The company is so large and has networks throughout the world this is something essential for sole mode of entry. The firm will benefit from profit maximization and grow at a fast rate.

Moreover, the investment risks in Brazil are moderate given the current state of its economy. This is advantageous to Pv Crystalox as it gives it the advantage of profiting from the unstable market of Brazil. The company may adopt a fast mover strategy and solidify its operations within a very short time. Sole mode of entry is best for emerging markets because of the inconsistent markets.


The paper has touched on management of international business by exploring a Multinational Enterprise, Pv Crystalox. The document began by giving an overview of multinational business and introducing us to the main purpose of this document, which was to identifying an MNE and going all the way to establishing ways of extending its operations in a new market. The current state of Pv Crystalox has been analyzed followed by a country analysis of its current area of operation. The paper also explores the target country of venture and gives a regional analysis of the country. It further goes ahead to give the possible entry modes that Pv Crystalox can adopt and selects the best mode of entry for the company after analysis its potentials. The various modes of entry discussed in the paper include no entry, exporting, joint venture, sole venture, and licensing. The method chosen for Pv Crystalox was sole venture which is so far the best method that will for its in Brazil considering regional conditions. Briefly, the aim of the project has been realized.

Works Cited

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