The topic chosen in the research deals with the combination in between a company and industry for transforming the national company in to multinational one. However, the subsequent topic focuses on a Family business of El , which implies the automobile industry in Egypt. It has been found from research that the automobile industry in Egypt has suffered highly for the period of 3-4 years since the surge of dollar currency during inflation. Therefore, business owners as those period, has faced high losses in terms of their productivity.
According to Ascani Crescenzi & Iammarino (2016), the Egyptian Industry of automobile resonates as a market of prestige and self-sufficient industry, but it also has tangible advantages for growing the economy of the country.
In spite of the positive forecasts of Egyptian automobile market, industry players are less expecting for their short-term outlook in the industry. This is because, most of the 2015 era have seen the manufacturers subject to a huge dimensions of wider macroeconomic challenges consisting of an energy crisis, a devaluation of currency and reeducation in dollar that is hampering the results and inflating cost of manufacturing. Apart from these, AMIC has given an optimistic assumption that there will be 7% growth in the year 2017, but the existing figures of the industry shows that there is tough year ahead for the industry (Manova, Wei & Zhang, 2015). However, in existing era, the ownership of vehicles in Egypt is comparatively low, with an approximate amount of 35% out of every Egyptians who owned care in relation to the statistical figure of almost 130 per car amongst 1000 in Algeria (Lasserre, 2017).
The weakening Egyptian pound has made the importation of the car products for assembling more expensive than any other countries. Provided with this, the automobile industry transports almost 60% of the required parts, as a result, there is a substantial effect on the cost of production followed by the selling price of the vehicles (Preuss, Barkemeyer & Glavas, 2016). Therefore, provided with limited availability to Egyptian dollars owing to the measures taken by the Central bank of Egypt to stop the currency in an effort to resist the prolonged political instability, the automobile manufactures have faces several challenges in receiving the letters of credit from the banking organization.
As a result people are now scared to go near the automobile companies as they are scared of hearing the surging up of prices. It is evident that purchasing a car is not luxury people can afford currently. Specifically for those, people, who had the choice to upgrade their new cares and for even those who purchased the cars for their members within the family. It has turned increasingly difficult and problematic for the peoples to pay such huge amount on things that they already have (Eljayash, 2015). Other than purchasing, people would like to maintain their vehicles so that they could utilize the products as long as possible in a proper condition.
The significance of the issues lie in the question such as to “how to transform the national automobile company in Egypt to a multinational company? “
“What are trending issues that could impact on the company while starting the business in other country?”
The issue is significant because the present condition of automobile industry in Egypt is in a situation of stake. Government have passed several regulation for managing the care production industry in Egypt that is estimated to be approved by the parliament in November and regional care industry is preparing for expanding their business in to multinational company of manufacturing. The legislation that has been passed address to provide incentives to the Egyptian automobile industry by expanding the local factors in vehicle assembly from 45% to 60% (Andreff & Balcet, 2015). The law has stipulate that automobile industries cannot produce less than 60,000 cars within a period of eight year for taking the advantages from exemptions of tax and customers.
Therefore, in order to face those challenges the automobile industry is seeking to take an aggressive action for enhancing their competitiveness in the global market. In this context, several approaches taken by the private organization and government initiatives are under consideration. In this one of the proposal is readjustment of the sales tax for regional assemblers for redeveloping the cost of advances. There are several other suggestion for restructuring the industry through global expansion thereby increasing its value and sustainability and by expanding the local products of the industry. In this study, this suggestion has been seen as Key component for expanding El Kersh Cars Company into the United States. Therefore, this would allow the company as well as the industry to increase the local value added parts and the producers as well would be able to reduce their liabilities of tax.
Based on this the research is based on the opportunities and challenges faced by the automobile industry if they decide to place the business in United States. In this context, contributing factors and challenges will be determined through primary quantitative research on the United States market.
A multinational company can be illustrated as an organisation that involves with the foreign direct investments and that owns their investment to certain extent, manages value added practices in different countries. As stated by Oppong (2017), these activities are carried out within subsidiary that can also take the formation of completely owned subsidiary and minority equity investments and joint ventures as well. However, Multinational companies exist in different variety of forms ranging from smaller organisation that has invested abroad to larger groups that handle the subsidiaries in different countries. Presently, the boundaries in between the multinational company and the environment have turned lose. This is because foreign organisation nowadays frequently cooperated with the regional and national organisation for interacting in an autonomous way with other actors of local business environment. Therefore, multinational companies are embedded within several channels that are likely emerge over the period in accordance to the local environment where they function.
According to the figures reported by UNCTAD, there are almost 82,000 multinational organisation in all over the world that has more than 810,000 subsidiary scattered in several countries (Bucheli & Kim, 2015). In this context, Egypt’s existing framework of investment continuous to support the interest of the multinational organisation over the interest of the public, this national infrastructure is the reflection of the international framework prepared by the world trade organisation along with its specified rules and regulation that has particularly the perception of local government.
The United States has one of the largest automobile markets in the global markets and is the home for several major vehicle and parts of auto producers. In the year 2017, the sales for light vehicles in US reached 17.1 million units along with the third straight year in which the production reached over $17million. Overall, United States is the world’s second largest automobile market for the production of vehicles. As stated by Waycaster et al., (2018) the automobile industry is at the primary front of innovation due to its R&D approaches that are consistently to the growing opportunities of the 21st century. According to Auto Alliance, it has been observed that almost $108billion is spend globally for the purpose of R&D and almost fifth, if it is expended in the United states (Noori & Tatari, 2016). In the year 2017, the United States exported approximately 2 million new light automobile vehicles and nearly 130,000 medium and heavy trucks to almost 200 markets across the international boundary. Therefore, with an open investment policy, a large consumer market, a highly expertise workforce and accessible infrastructure and with state government incentives, the United States is the premium market for the 21st Century automobile sector.
Necessary changes are undergoing in the U.S market, both in terms of vehicles preferred by the customers and the system of production that helps in delivering the vehicles to the customers. Alongside this, equally important, foreign organisation are opening new assembly plants in the United States and foreign suppliers of parts that are building a regional presence in the country. However, Hashmi & Biesebroeck (2016) states that in response to the changing preferences of the customer, there are variety of products has grown in a dramatic way specifically in case of products that are being produced by automobile industry. At the same time, the average transaction price for the new automobile products have also started to rise at a fast rate that is higher than the growing average household income. This is posing a severe challenge for the automobile industry in the United States.
On the contrary, Hu & Chen, (2016) states that dramatic change is also taking plan in the down streaming activities of the automobile industry, in case of distribution and retailing of products. These activities shows 20-30% of the value for the new automotive vehicle and these are significant sources of cost savings. However, these changes in these areas represent a shift from the capital-intensive operation towards information intensive functions. Hence, this shift is resulting in the establishment of flexible and high entrepreneurial structures that provide service to the customer. According to Benmelech, Meisenzahl & Ramcharan (2017), recently, new assembly plans for automobile industry by the Japanese and German automobile manufacturers have been developed in the United States, thereby introducing additional competitive challenges for the emerging industry. These, new manufacturing transplanting facilities have been accompanied by the emergence of the new suppliers that has benefitted both the new assemblers and the Big 3 by launching additional competition into production.
From a wider perspective it has been found that the productivity date underlying the requirement of cont9nious improvement in those areas showing the convergence of average performance across the international boundary. It has been reported that European plants has enhanced their production to almost 30% and new emergence of the countries has reported potential improvements as well.
The global automobile industry is a subject of several factors that are drastically increasing complicacy and affecting the economic options accessible to the automobile manufacturers. As stated by Lo (2014), the majority of these factors interacts with one another and has strong interdependencies with each other. In this the factors that automobile production directly are:
As stated by Byrne, Fernald & Reinsdorf (2016), it has been found that liberalisation has turned the national market in to increasingly globalised nation. These, provides the companies with a chance to expand in to emerging markets, and also pose challenges for the new emergence in the market and increased competition in the United states market.
As stated by Guajardo, Cohen & Netessine (2015), customers are no longer accepting standard products, rather they are asking for products that help in satisfying their individual needs. Specifically, target groups have been highly downsized by the organisation so that the products that are offered attract the customers. On the contrary Desmet & Rappaport, (2017) stated that due to the international increase in the competition along with the strong focus on prices and not on the brand loyalty, customers are easily drawn towards the organisation that offer individualised products. As a result, of these issues, automobile companies have new demanding needs within their field of practice.
The companies in United States have to limit their product lifecycles of the automobile models in order to respond towards the changing expectations of individualise and fast changing customers’ demands for bringing innovation in the products. However, Majid & Russell (2015) states that during the past, an average lifecycle of the products was about eight years while in the existing period the automobile industry have to bring changes and improvement in their products within a period of two years. Moreover, the cost of development for the new model are also increasing. These indicates shortening of amortization time for the OEM provided with lower amount of profits for the Industry.
In the year 2002, digital technology in cars averaged at almost 22% of the total production of cars, with an assumption to increase with 35% of the total production in the year 2010. However, Eid et al., (2016) states that the incorporation of hardware and software components in to the automobile industry could increase the operation ability of the car but that could increase the complicacy of the products. Therefore, this complicacy in results in the overstrained development of car departments, failures of the products, explosion of cost in accordance to the guarantee and warranty cost of the product may influence the satisfaction of the customers.
The business strategy method is developed based on pragmatism philosophy. In this context, the business strategy theory states that organisation may make trade-off in between some of the variables in their decision making or internalising the methods. In this context, Palmer et al., (2018) argues that international expansion of a business is based on contingency that usually takes place by making an choice in between rivalry expansion strategy directed by the nature of market. Therefore, Antwi & Hamza, (2015) states that this factors are required to be analysed while utilising the business strategy approach, market attractiveness, accessibility and informal challenges.
This theory implies to the cost that incurred while developing economic trading within an international market. The theory involves with the cost that incurred from the starting of a given transaction until its logical end. Creswell (2014) states that it can be signified as the complete expenses of all the incurred cost before establishing business in the different market. Majid & Russell (2015) explains that international entry market strategy is a sensible issue as the transaction of cost plays a major role that is needed to be analyses before establishing automobile subsidiary in the other market.
The size of the sample for the study will be decided in relevance to the questionnaire and survey results that will be carried out. In this context, the most appropriate way to collect a large number of sample will be reliable by consulting with people and by gathering various opinions from the people residing in United States and Egypt. All the questions will be based on a specific subject where all the perceptions will be seen from different perspective.
The main method of the following research will be collecting information through mixed methods of qualitative and quantitative interviews and survey questionnaires collected from the course papers and various professional documents and studies that have been carried out on particular industries and different markers (Sparkes, 2015). In this the survey, and interview questionnaires will be carried out either on a personal level through the method of phone calls and face-to-face meetings that will consisted of a discloser message that the information cannot shared with any one.
Data analysis will be followed a mixed method of study, where the primary qualitative data will be collected through interviews. In this context, all the data will be properly analysed as per confidentiality and relevancy of the results deduced. However, in case analysing secondary, data several reports will be evaluated from the organisation and industries reports (Sparkes, 2015). Moreover, whole analysis group of population or industry survey, the statistical results will be analysed to measure the error within the readings and then recommendation will be passed based on the results.
In order to remove and reduce the ambiguity within the written research, all relevant variables are required to be illustrated. In order to operationalize the variables within the study, all the concepts of the study is required to be illustrated in an effective way for measuring the results quantitatively and qualitatively (Creswell, 2014). Therefore, while approaching the research it is necessary to demonstrate the assessment task. In this, it is required to recognise the actions that is needed to be undertaken and compared with each other by classifying the results in to major elements thereby operationalizing the variables (Turner, Cardinal & Burton, 2017). The research will be based on three months period for measuring the data and results. In this period all, the data will be measured based on theoretical framework in support of the research. However, this variable is required to be utilised in a manageable way, that it is not only about measuring the data but all the results and data is needed to be manipulated in accordance to the criteria of the research.
The research study is expected to produce e a new knowledge on the international opportunity for El Kersh Cars Cars in United States provided with the challenges and benefits of setting up business in other country. It will be found from the study that international strategy does not only influence the financial dimensions of business, in the international market bit will also help in enhancing the strategic position of the organisation thereby dealing with the global competition. In terms of scientific contribution, the expected results of the study are associated with the emergence of theoretical understanding of management of business services in the multinational market. Therefore, by combining various fields of research, including marketing and management of network the study will offering a holistic understanding of the topic provided with cross-disciplinary approach.
Since the international strategy of business is multidimensional in nature, the research is expected to incorporate all the dimensions of the global study, other than one factors. This will help in bringing out a significant comparison amongst various studies thereby enhancing the understanding about the international strategy.
Moreover from the conducted survey ad interview the study will be able to determine the feasibility of the new market opportunities, availability of resources from which the company will be required to compete with the organisation that are already existing in the country and will be needed to improve the technology as well.
The research will enhance the prospects of the economy as a whole and will help in improving the capabilities and competitive benefits of the service provided by the business company. In this aspect, the study also targets Small and medium enterprises to enhance possibilities of growth. Therefore, the study will contribute towards the environment of business with stronger awareness about the challenges in service business and different ways to overcome the issue.
References list
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Ascani, A., Crescenzi, R., & Iammarino, S. (2016). What drives European multinationals to the European Union neighbouring countries? A mixed-methods analysis of Italian investment strategies. Environment and Planning C: Government and Policy, 34(4), 656-675.
Benmelech, E., Meisenzahl, R. R., & Ramcharan, R. (2017). The real effects of liquidity during the financial crisis: Evidence from automobiles. The Quarterly Journal of Economics, 132(1), 317-365.
Bucheli, M., & Kim, M. (2015). Attacked from both sides: a dynamic model of multinational corporations’ strategies for protection of their property rights. Global Strategy Journal, 5(1), 1-26.
Byrne, D. M., Fernald, J. G., & Reinsdorf, M. B. (2016). Does the United States have a productivity slowdown or a measurement problem?. Brookings Papers on Economic Activity, 2016(1), 109-182.
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