Assignment: MNC Enters China
Select one MNC that does not currently do business in China. Next, consider the steps that the company should consider in determining the feasibility of entering the Chinese market and establishing a market for its products or services there.
Focus on the following areas: corruption, political stability, exchange rate stability, regulatory oversight, freedom of the press, and rule of law. Research other factors that you believe you should evaluate. Additionally, consider the importance of culture in evaluating risk.
Then, go to the Hofstede Center's Country Comparison cultural tool. Compare China to the U.S. on Hofstede's six key cultural dimensions scale by selecting "United States" from the "Comparison Country" drop-down menu.
Write an eight page paper in which you:
1. Summarize the business that you have chosen, and provide a two to three paragraph justification as to why China would be a viable market for the selected business.
2. Examine the exchange rate of the U.S. dollar and the Chinese Yuan for the last 24 months. Explain the major overall changes that have occurred and speculate on the key economic variables that most likely have influenced the exchange rate movements. Provide a rationale for your response.
3. Analyze the major exchange rate risks associated with transaction and translation exposure within the Chinese market. Based on what you have gleaned from your analysis, predict the major changes that you believe will occur in the next 24 months. Justify your response.
4. Recommend key steps that the chosen MNC could take in order to mitigate or eliminate exchange rate risk. Suggest one method that the MNC in question could use with derivatives in order to mitigate, or eliminate such risks. Provide a rationale for your response.
5. Recommend one hedging technique geared toward managing the economic, transaction, and translation exposure in the Chinese market. Justify your response.
6. Conduct a country risk assessment to ascertain whether or not management should support the proposal for your chosen MNC to enter into the Chinese market. Based on Geert Hofstede's six dimensions of culture, predict three likely problems posed by the cultural differences between the chosen MNC's culture and the Chinese culture. Provide a rationale for your response.
7. Use at least six quality references, with at least two from peer reviewed journal articles.