American Intercontinental University
FIN630 – Financial Management Theory and Practice
Unit 1 Individual Project
November 12, 2011
This paper will present an analysis of the United Kingdom (U.K.) and the United Arab Emirates (U.A.B.) to determine both suitability and potential in each of the countries for a Greenfield project. This analysis will compare the financial conditions in each country as well as trade policies, currencies and cultural variables which could affect the project. This paper will also include a recommendation to the steering committee of Acme as to which may be the preferred country for the Greenfield project.
To begin, I will give ...view middle of the document...
Market Size and Competition
As of 2010, the approximate population of the United Kingdom was 62 million, whereas the population of the United Arab Emirates stood at 7.5 million (World Bank 2011). While the UK has a much larger population, it also has a wealth of established industries that may prove difficult for Acme to try to breach with their Greenfield project. The UK also has a high product and market competition for local products. The United Arab Emirates, while having a smaller population, offers greater opportunities for new business ventures. Dubai, located within the UAE, is one of the fastest growing markets in the world, having grown exponentially within the last decade. While the market in Dubai is still considered quite young, they are considered to have greater market opportunities with less competition in market entry.
The EU’s trade policies favor trade between member states. Their external trade policy played a major role in the opening of new markets as well as expanding world trade by the EU and strengthening international regulations that govern trade with non EU countries. By doing so, it served to level the competitive field within the member countries of the EU. By establishing the Greenfield project in the UK, it would serve to provide a more favorable trade policy for the goods produced in the UK, as well as reaching other members of the EU without the normal export restrictions. The UK will also provide a larger market base by which goods produced in the UK can be traded more readily to other member nations of the EU.
Taking the EAU into consideration, we have to realize that their trade policies are not as favorable to foreign investitures. They employ a restrictive trade agency law as well as restrictive competition legislation. This makes it difficult for foreigners to make an investment in this entity. Although the UAE has great potential for capturing market share and profitability, the restrictions imposed on foreign investors make it more difficult to fully invest in this market. For the majority of foreign businesses, they will need to obtain a national agency or sponsor who will have exclusive rights. Fortunately, the laws governing foreign investitures in the UAE are evolving. Right now, even though the business environment is restrictive, it has recently been more favorable to the United States (U.S.), thanks to the economic ties between the two countries. In fact, the UAE is among the fastest growing U.S. economic partnerships within the Gulf region. “U.S. foreign direct investment in the UAE rose 445 percent from at least $834 million in 2001 to $4,547 million in 2006, as well as U.S. goods exports to the UAE increased by 352 percent from $2.6 billion in 2001 to $11.9 billion in 2006. This is far greater than the 42 percent increase for overall U.S. exports around the world” (US-UAE Business Council, 2008). This cooperative attitude would provide Acme a favorable...