FIN Unit1 - Individual Project Introduction The ACME group is one of the leading energy management organizations. The organization provides innovative solutions for the alternate energy and telecommunication sectors. The organization provides energy efficient, cost effective and environmental friendly green technological solutions that are capable of providing quick return on investment (ACME, 2011). ACME is a US based multinational enterprise. The objective of the study is to develop a Greenfield production facility for the organization in either Italy or in Turkey. Italy is the member of European Union. On the other hand, Turkey is not the member of European Union.
The proposal will consider each country’s trade policies, currencies and culture. Turkey and Italy: Review This part of the assignment will discuss about the currency, trade policy and culture of a turkey and Italy. Currency of two countries: Advantages and Disadvantages Italy is the member of European Union. Euro is the currency of Italy. This currency has both advantages and disadvantages. The advantages of this currency outweigh the disadvantages. Euro is the single currency between the members of European Union.
It eradicates the need of currency exchanging between Economic and monetary members. Economic and Monetary members saved an average of 30 billion US dollar in a year by switching to this currency. Elimination of volatility of currency exchange rate between the members of European Union is another advantage of Euro. On the other hand, switching to a single currency forced the members of European Union to give up their rights to the change of monetary and economic policies. It is the major disadvantage of Euro. Despite the disadvantage, the members of European Union made it easy to sell and purchase the goods cross borders.
Moreover, the lending and borrowing become easy through the concept of this single currency. In addition, fixed exchange rate of 2.25% provides significant benefits to the members of European Nation. This benefit includes the promotion of international investment and trade. In developing countries this benefit can enhance economic growth. Recent financial crisis is the major concern for Italy. On the other hand, Turkey is not the member of European Union. The country uses Turkish Lira as their major currency.
The currency of Turkey has several bilateral tax treaties and investment with US that can ensure the elimination of double taxation. Moreover, this currency gives guarantee repatriation of capital in the convertible currencies. The central bank of Turkey has tightened the monetary policy after the inflation rate increased to 10.5% in the year 2011. The central bank of the Republic of Turkey provides several flexible policies, such as foreign exchange auctions, interest rate corridor, and adjustments to the repo auctions and requirements. These policies will help to stabilize the Turkish Lira.
The currency recently has depreciated by 25%. EU and Turkey: Trade Policies Europe is considered as the leading global trading block. It accounts for one-fifth of the global trade. Each and every trade policy is developed for the 27 member states among the European Union. These members generally share a single market and border. It helps to empower European Commission when it talks with all the partners of European Union. The commission effectively acts as the negotiator for a specific negotiation process. This commission represents the members of European Union in the World Trade Organization.
The European Commission provides unity to mould a key open for global trading process that offers fair rule. However, the trade policy of Europe helps several European organizations to generate employment and significant investment opportunities. Several new markets for the European E\exports are effectively open through the trade policy of Europe. The European Commission works on daily basis to remove unwanted export barriers. Moreover, effective and potential opportunities in European investment are motivating several leading organization to prefer their business practices in countries like Italy.
On the other hand, Turkey is the potential member of WTO. The country has free trade agreements with Israel, European Free Trade Association and other several countries. The nominal GDP of Turkey is 797.6 billion US dollars. The exchange rate regime is quite flexible in Turkey. Moreover, they do major exports in US. In addition, Germany and France are the other trading partners of Turkey. Flexible exchange rate can provide several significant economic advantages to a country and the business entities within the country. Price stability, stable growth, full employment and significant adjustment of exchange rate are the positive consequences of flexible exchange rate.
However, flexible exchange rate has several disadvantages, such as inflation, speculation, instability and uncertainty in trade, and lack of internal and external investment. Cultures of Turkey and Italy Italy is known for traditional cultural and historical places. 93% of total population speaks Italian. However, people who used to work for large international or domestic firms generally speak in English. Business culture is considered as another significant culture in Italy. The Italians only prefer to do business with the top level executives in an organization.
People of Italy always seek to select best people for business negotiation. Age is also considered as the contribution social factors in the workplace of an organization. Old employees generally possess more experience and knowledge base comparing to the young employees (Kenna & Lacy, 2005). The people of Italy are trying to use substitute energy resources due to hike in oil and hike price. The business process and products of ACME can influence the Italians to consume several differentiated green products. On the Turkey is popular due to the beautiful rugs and textiles.
The people of Turkey are extremely friendly in nature. In addition, they love to interact and socialize with other individuals. Turkish is the official language of this country. 90% of total population speaks in Turkish. Arabic and Kurdish are other languages that are utilized by the minorities. There are several similarities between Turkey and Italy regarding the business culture. The Turkish people concentrate on the trusted people regarding the business negotiation process. Business meetings within the organization are generally spearheaded by the top level management and executives of the firm.
In terms of decision making process, the Turkish people generally take time to undertake final decision. They try to investigate all the aspects and insights of the future strategies (Atilgan, 2009). Then only they take decisions to enhance business growth. People of Turkey are more comfortable in oral and visual business negotiation process. Along with potential financial gains, they try to gain power, influence, respect and several non-monetary benefits in the business environment. Turkish people are trying to reduce the consumption level of fossil fuel due to the affected purchasing power and depreciation of currency.
Conclusion It is clear from above analysis of Turkey and Italy’s currency, culture and trade policy that the development of Greenfield production facility in Italy will be beneficial for ACME. It is true that Turkey is experiencing financial growth, but several financial risk of flexible exchange rate can outweigh the advantages. On the other hand, it is known to all the Italy is passing through as critical financial and economic situation. However, effective economic and monetary policy of EU will help the country to reform their economic environment.
Large commercial market, single currency among all the members of EU, well-developed client base, lack of communication and language barrier, and effective market demand will help ACME to attain sustainable business growth. Italy is the member of European Union. This membership has several benefits like free trade that can eliminate the trade barriers. Therefore, development of Greenfield production facility in Italy could be successful choice due to free trade zones and comfortable or easy or hazard free access in each and every country of EU.
References ACME. (2011). About Us. Retrieved from: < http: //www. acme. in/about/index. html>. Atilgan, R. (2009). Culture Wise Turkey. London: Survival Books. Kenna, P., & Lacy, S. (2005). New York: Passport Books.