Running head: International markets Instructor: Date: Introduction In an increasingly competitive global environment where competition for market and resources has totally taken over the business world, several considerations must always be drawn in place prior to establishing any Greenfield investment in a foreign land. The world is never similar in any way and this creates the need to clearly analyze and understand all the variables that may impact on the business operations. Such differences may exist in terms of currencies, trade policies, cultures and government policies. This paper is an attempt to look into the differences that exist in two countries where Acme Corporation is considering establishing a Greenfield investment.
These two countries are the United Kingdom and Nigeria. Well, it must be remembered that these two countries are totally different in several aspects that can really affect the decision of the corporation to venture into their markets. The UK is a member of the European Commission and is generally a developed economy with good and well managed sectors. On the other hand, Nigeria is one of the largest economies in Africa with a very large consumer population that drives economic growth.
Trade and economic policies The UK prractices an open economy where trade liberalization and competition for free trade is highly cherished and encouraged. Any business is able to trade freely and invest competitively without any unnecessary restrictions from the government. One of the greatest concerns of the government here is to maximize the opportunities that exist for international trade in order to economically benefit the country. Well, this is after the recognition that trade enables countries to specialize in activities that enable them to fully explore and exploit their resources and strengths.
This open economy system has enabled the UK to experience high economic growth rates over the years especially in the post-war era. The policy has also strengthened the UK’s consumer markert as corporations and businesses strive to stay competitive amid the challenges and realities of this age (Smith, 2010). Over the years the UK has been known as a haven of very favorable trade policies that enabled many of its firms go multinational. Even though this attribute has slightly been lost over the years courtesy of very high interest rates and the global financial meltdown, the government through the Bank of England has incessantly been trying to bring down the interest rates and increase the money supply in the banking system with a view of restoring economic stability.
Nevertheless it must be remembered that the trade policies in the UK are generally investor friendly and may not be much different from the US case. Nigeria is a developing economy grappling with the economic challenges that affect most countries in this category. However, it is a booming economy driven by its productive oil sector coupled with a very high population that creates a lot of demand for consumer goods and services.
Even though the federal government of Nigeria recognizes the benefits of trade liberalization and the need to open up the market for international competition, challenges have always been realized. Like in any other developing country, the infant industries have to be protected from the stiff competition posed by foreign corporations. There also exists the common assumption that free trade can only exist under an ideal economic system which is always impossibility.
Nigerian trade policies are driven under the auspices of the Structural Adjustment Program (SAP) that seeks to restore the economy of the country after several decades of economic instability that bedeviled the country (Olaloku, 2007). As such, the government has been trying to encourage capital inflows into the country through foreign direct investments. This is in a bid to reduce the country’s dependence on the oil sector by creating other sources of revenue. However, the federal government is a very active member in the Nigerian market economy, hoping to achieve balance of payments and fiscal stabilities.
Sectional deregulation of the economy has recently encouraged many multinationals to consider Nigeria as an option for investment. Privatization is becoming a common trend in Nigeria as resource allocation is being left into the hands of the private sector. Nevertheless, there is still a lot of government intervention in the trade sector that may greatly disfavor most foreign investors. Compared to the United Kingdom, it can comfortably be argued that the trade policies in Nigeria are certainly still in the infant stage and may need a lot of reforms.
Even though much has been done in terms of structural and macroeconomic reforms, most of the policies in Nigeria are purely protectionist in nature much to the detriment of foreign firms. Currency The Nigerian currency, the naira, has experienced some of its worst times in the recent years. The exchange value of the naira has always been down against the US dollar and this greatly disadvantages corporations that rely much on imports as raw materials. Much of these fluctuations have been a function of several internal economic factors and international occurrences like the global economic meltdown which greatly affected developing nations like Nigeria.
In the United Kingdom, such fluctuations have also been realized in the Euro and the Sterling pound especially as a result of the recent economic happenings. However, these currencies have generally maintained a level of stability over the years thereby making the UK market environment very predictable unlike the Nigerian situation where the future of the naira cannot easily be predicted.
It is also important to realize that the wage-rates in the UK are far much higher than those in Nigeria and workers in the UK enjoy many benefits than their counterparts in Nigeria. However, this is effectively supported by high standards of living in the UK which greatly contrasts the penury evidenced in Nigeria (Aggarwal, 2008). Cultural differences Nigeria is generally a rich haven of cultural diversity where different ethnic groups with slightly different cultural orientations exist together. It has been established that a significant relationship exists between culture and organizational performance. In that regard, most Nigerians are generally aggressive people and tend to exercise individualistic tendencies (Olaloku, 2007).
While most of them exercise religious values in the workplace, some are normally determined to achieve what is best for them regardless of the means. Any multinational hoping to venture into the Nigerian market must therefore take into account these cultural issues in the analysis process. The UK on the other hand is a free market driven by competition and free demand where workers are self-conscious and well aware of their rights with full backing of very strong labor organizations (Greenway, 2011).
In terms of the working population, Nigeria is richly endowed with a high, young educated population that can greatly benefit foreign corporations. However, great competition in the job market and the search for better opportunities has really translated into a high job turnover in the Nigerian market. Such trends are never seen in the UK where the labor market is generally stable as a result of very effective policy measures in place. On the total scorecard, it can be well realized that Nigeria as an option for a Greenfield investment, is greatly disadvantaged in some instances as compared to the UK.
In that case, any multinational seeking to maximize profits and lower operational costs should not really opt for Nigeria at the expense of the United Kingdom. More importantly, the global financial disturbances have created the need for firms to invest in relatively stable markets where they can be assured of immunization against any potential risks. This certainly puts the UK miles ahead of Nigeria. Acme enterprise should therefore consider investing in the UK and not in Nigeria. References Aggarwal, V.
(2008). EU Trade Strategies. New York: Palgrave Macmillan. Greenway, D. (2011). The World Economy 2010: Global Trade Policy. London: Wiley Blackwell. Olaloku, A. (2007). Structure of the Nigerian Economy. Lagos: Macmillan. Smith, P. (2010). Internationaql trade policy. New York: John Wiley and Sons.