Global Enterprise and International Trade: OLI Mode Assessment Answer
GLOBAL ENTERPRISE AND INTERNATIONAL TRADE
OLI Model stands for Ownership, location and internalization is a eclectic paradigm helps in developing internalization. Ownership advantages help to overcome the liability of foreignness. The inherent disadvantages are from foreign exchange in Mexico, Brazil and China because of their non-native status. The management needs to deal with the competitive advantages that can be transferred. The ownership advantages in developing countries are lacking, and economies are focusing on overcoming the problems. It helps to seek certain export services with advanced economies has been highlighted.
Three emerging countries face problems during export services
Mexico primary trading partner is the United States. In the year 2018, the GDP was $20.5 trillion. Mexico economy depends upon trade. Mexico is the 12th largest exporter in the world. Mexico’s number 1 products are silver, fruit, vegetables, cotton and coffee. After signing North America, Free Trade Agreements Mexico has increased around $2.2trilion, which has become increasingly oriented. The monetary value is a significant challenge that Mexico faces while exporting importing of products from the United States. The monetary value of Mexico is 1 dollar is equal to 19.1903 Pesos. When US export productsto Mexico, then Mexico has to pay a vast amount to America, which is one of the most significant ownership advantages gained by the US. The US faces challenges while exporting of products to Mexico; they are size and diversity, legal system and banking system. The banking system has been crucial as this has been increasing, which eventually affects the insecurity areas. US firm has strongly advised that it is necessary to conduct diligence with Mexican Firm or an individual before entering into various types of agreements. The private firms need to do diligence all over the country. The US Commission Service offers diligence services which are called as International Company Profile (ICP) which helps to order from certain domestic US Export Assistance Centres. The Mexican centres are providing various factors that eventually need to deal with the changes in an appropriate way.
The Mexican government has focused on increasing traffic to determine the United States to stop traffic on aluminium and steel products. Mexico has been focusing on applying traffic to commodities by using HS Codes 71 and 72. The Mexican government has increased traffic as this helps in dealing with export costs. Mexican legal system has been one of the fundamental ways to deal with the US system. The competent legal counsel with significant for the small and medium-sized enterprise. As stated by Rayet al. (2017) the medium enterprises help to find out difficulties that help in obtaining financing it affordable rates despite Mexican government efforts to increase capital. Hence, due to it, Mexico cannot gain ownership advantages. US companies are exporting low price products at a higher cost. The manufacturing compensation in Mexico has been currently about 14% of US levels which are needed for raising it all about only 20%. The low labour cost has been significant labour cost advantages. The production operation in Mexico needs to deal with a complex set of regulations. For example, 25 more prominent companies have been account for 47% of GDP as bet compared to the United States GDP that is 4.3%. The Mexican toy companies have gained a profit by foreign competitions as this has been intended by presenting in industry association as it deals with under license foreign branded toy.
During the 13th Five Year Plan period, China has been facing problems in exporting of products to developed countries such as the United States and Japan. China is competing during their middle age as well as low-end product market, and developed countries tried to make their effort of developing countries. The monetary value of China is 7 Yan to 1 dollar. China has a low-cost export of its machinery. The state-owned companies are less profitable than that if private firms. It has been focusing over return only by 4.9% of the asset. China ships 18% of its export to the United States as it helps in contributing to $419 billion trade. China trade with South Korea at a lower rate by only 4.5% was much smaller. Hence, due to it, China is not able to enjoy ownership advantages. China focuses on the manufacturing of products for foreign businesses which has been including US companies as well. United States ship raw material to China factory, workers build products out of it then export it back to the US.
Apart from, China also impacts the US economy. In the year 2019, China has owned about 1.11 trillion in the treasury that is about 27% to public debt that is held by foreign countries as well. China buys US debt for supporting its currency. China changes its money from the Yuan to the US dollar. As stated by Winterhalteret al. (2017) the currency value of China leads to dealing with competitive export prices. The government has emphasised its growth rate by lowering its assets buddle, which eventually needed by presenting its value for the growth of public debt. China export has been gradually slowing down that has forced to optimize foreign trade structure. International trade development helps in dealing with coordinated with all its national economic growth as well as protection of resources. China has adopted a new strategy and direction which is based on driving out innovation. It is required for dealing with a modern competitive edge as well as establishing new trade system.
Brazil lacks in trade openness which helps to obtain by looking at number and characteristics by exporting firms. Brazilian exporters are sharing only 0.5% of the interest from developed countries. The absolute numbers of exporters are less than 20,000. The names of exporters in Brazil are relatively high to population, which has lowered by controlling for GDP per capita income. Brazil is lacking from the integration of global production networks which eventually needs for focusing over various changes those impacts on relative distance. The international trade is good in exporting of products has been increased by US$10 trillion in 2004, and in the year 2015, it was increased to US$18.5 trillion. The international trade in intermediate inputs as well as components which helps to accounted for almost US$8 Trillion in the year 2014. Brazil accountability has been increased by 1.2% of global export of goods. Brazil has exported commercial services by gaining US$40 billion. The roadmap helps in the forecasting of national competitiveness that helps in understanding the structural changes with all global production system. It is also induced by presenting the needs as well as criticized all international trade as well as industrial activities with specialization in low technology commodities.
In Brazil, only a few firms’ exports as no such benefit are gained by owners. Hence, ownership advantages are not appropriately increased. The proper integration of the traditional value chain is one of the most significant issues which hampers trade relation with the individual. For example, the domestic value of Brazil has been extremely high at 93%, which is highest among economies which are under OECD WTO Trade. Brazil has discovered top issues which eventually affect an individual as this is needed for presenting the cross border value chain. Productivity can be gained by equal participation in global production networking. In accordance to Thiteet al. (2016) the global production networking helps to provide significant as well as increasing the opportunity for cost reduction. It is also needed to deal with the Brazilian economy to support a vertically integrated supply. For examples, despite rising trade barriers, Mercosur’s coefficient of imports from China has increased in recent years. Brazil also needs to focus over labour shortage as well as aspirations that help in rising purchasing power ad growing productive activities. The production helps in encouraging its on-going high density of production chains which eventually needed for perpetuating with extraordinary closeness for particular Brazil economy. Brazil's immersion in global value chains helps in focusing on various induced changes that are gained by providing it practically. Apart from it, it also helps in encouraging the on-going high density of production chain with the Brazilian economy. It is also required for presenting it in better ways which are considered for increasing the sales rate. The Brazilian law, regulation helps in increasing combat corruption as well as improving the effectiveness. Bribery is illegal that results in criminal penalties for individuals for administrative sanctions that can be gained by utilising it inappropriate ways.
It can be concluded that developed countries gain ownership advantages. Hence, developing countries are lacking in it. It can be analysed that Mexico has been facing issues due to its industrial revolution, which are required by presenting it in specific ways. It is also needed for performing better management as it helps to carry out various activities which help in developing export with the United States. It has been emphasised China has been facing issues in exporting of products to the United States and Japan. It has been observed Brazil is dealing with export issues as this impact on international trade. The production can be increased by equal participation in global production networking.