Would you seek to acquire a company within the European Union or outside of it? Why?

Would you seek to acquire a company within the European Union or outside of it? Why?

I will not seek to acquire a company within the European Union. Because there is turmoil in the European Unions’ market currently due to a recession and a banking crisis Italy and Greece is experiencing, uncertainties of Brexit by the United Kingdom, the banking crisis in Cyprus, and high government tax reforms, for example, France which led yellow vest protests as a result of higher fuel taxes. Currently, Italy is borrowing at 130 percent of its gross domestic product and Greece is experiencing the same and it is being bailed out by Germany due to its vast debts and which led to a removal of its sitting president. These crisis EU is experiencing is creating political tension in the Eurozone. As well it is creating a failure of European Union countries to carry out financial transactions successfully due to a colossal debt crisis experienced by member states as well as due to the banking crisis EU is experiencing. Uncertainties from ongoing Brexit deal by the United Kingdom has shaken a few trade transactions and financial transactions of the EU, which has led to fluctuations of Euro currency.

Furthermore, Hungary is has created more political tension in European Union block as it is against government policies by the European Union. All these crises cannot make a successful acquisition of the company within the European Union, and surprisingly European Union is freezing assets due to these crises they are experiencing and this would not guarantee company’s operations and survival. Therefore it is not advisable to acquire a company within the European Union.

Describe the advantages and disadvantages of the choice you made.

Advantages of not acquiring a company in the European Union are; Avoidance of high taxation rates. European Union has high taxation structures has led to the recession in Italy, massive debts accumulation in Greece, an increase in labour strikes, for example, France’s yellow vest protests and Brexit deal by the UK. These sort of effects of high taxation by the European Union may have led to the acquired company not able to operate due to less operating income due to higher taxation structures by the EU. Avoidance of the effects of a single currency is another advantage. European Union member countries are using single currency named Euro, and it has caused some problems to the block, and some are increased unemployment rates, low economic growth, and unfavourable interest rates. These effects limit the company high profits and would have possibly led to losses which affect company’s survival chances in the European Union since the company cannot expands its branches and activities due low or no profits. Disadvantages of not choosing to acquire a company in the European Union are; Loss of opportunity of enjoying lower prices of goods and services. Goods transported within EU countries are custom and excise free.

Moreover, the EU is regulating the prices of some products and; thus, investors do not acquire goods and services at exorbitant prices. Furthermore, the company will miss an opportunity for a broader European Union market base. European Union has 28 member states and consumers have full access to all services and goods across all the EU-28 countries. Choosing not to acquire a company within the EU would deny me an opportunity of European Unions’ broader market base, which would have led to a high sales volume of the acquired company.

Describe the advantages and disadvantages inherent in the option you did not choose.

Advantages of choosing to acquire a company within the EU are: Wider market base since all citizens of the member counties all allowed full access of goods and services within the EU. Thus would have boosted the acquired company’s sales volume and its global market share. Another advantage is low operating costs due to low prices of goods and services and workers’ protection within the EU. Disadvantages of choosing to acquire a company within the EU are: Higher taxation rates in the EU block may lead to low or no profit in the acquired company leading. Financial and banking crisis, political tension, and ongoing Brexit deal by the UK would have led to a minimal survival rate of the company due to failure to carry its financial and banking transactions successfully.

Explain why an MNC may invest funds in a financial market outside its own country

An MNC may invest in a financial market outside its own country due to anticipation that the currency of that country they will invest in will be appreciating. Another reason for this is due to higher interests rates in the country they want to invest in since will allow MNC to earn higher interest rates.

Explain why some financial institutions prefer to provide credit in financial markets outside their own country.

Some financial institutions prefer to provide credit in financial markets outside their own country because that institution wants to achieve credit diversification strategy which enables them not to depend on the economic conditions of a single country. Another reason is that foreign markets may be having higher interest rates; hence the institution will be earning more than their own country. Moreover, a foreign country with stable economic conditions cushions the financial institution against credit defaulters since they will be able to payback on time.