Foreign Competition Assignment Instruction
Provide an analysis of the following question: Does the presence of foreign firms help or hurt domestic competition? Use an example either from your textbook or from external readings and be sure to describe whether the firms collaborate or compete for market share.
Your paper should be 900-1200 words, well written, and formatted per CSU-Global specifications for APA Style. Support your analysis by referencing and citing at least three credible sources in addition to the course textbook, which can also be cited in your essay.
SAMPLE ANSWER
Introduction
Foreign in the middles east has been made by various multinationals who have eventually affected the domestic market regarding market share and the various benefits that come with their investment. The multinational have vast resources at their disposal and usually set up base in many countries. Their investment usually comes with establishing companies and getting the workforce from the domestic markets in those regions (Hill, 2008). Foreign companies in the Middle East usually introduce new products in the domestic market, which may either crowd in or crowd out the domestic firms. The foreign direct investment further brings in new products that can help domestic comes use the various technologies to improve their businesses especially considering technological firms. As such, the state of the art operations and technology brought by the firms may help boost domestic competition and help increasing more productive since the domestic firms use the various new technologies to improve their business. In such cases, the foreign investment leads to various spillovers in that affect the other businesses positively.
The spillovers include the lessening of the various costs of using technological services among many other benefits that help the domestic companies reduce the use of various technologies that are essential for faster moderation of business activities. As such, the new technologies increase the rate of growth and ensure that there is a healthy business environment for both the domestic and foreign firms. Diffusion of business processes thus occurs by either technology or the foreign workers moving to the domestic companies thus bringing on board effective business practices that were not there before. Foreign investment also brings with a supply of capital and management resources that the host country does not have access to at that moment.
Some of the negatives regarding the foreign investments are the infiltration of the domestic markets with cheaper products. Some of the companies, therefore, bring undue competition in the domestic markets and may eventually drive out some companies due to the extremely low prices set by such companies. Some of the local companies in the Middle East may not lower the price, as that would mean counting losses and eventually betting out of business. Various regions in the middle that provide a positive environment for foreign investment include Bahrain, Kuwait, Iran and most conspicuously Saudi Arabia (Henry & Springborg, 2010). Countries like Saudi Arabia have stifled the entry into the pharmaceutical markets especially by providing stringent measures to such companies like recertification of their products. The pharmaceutical markets are such a hotspot that most foreign companies have taken the opportunity to set up their businesses especially in the free market zones.
The global giants as such will alter the domestic market since they will set their manufacturing sites for the drugs and regulations that are more stringent will not apply to them. The companies will be closer to their customers and as such have an advantage over those companies that has not set base in Saudi Arabia. Exporting drugs by foreign pharmaceutical firms into Saudi Arabia has been very tiresome due to the stringent measures put in place to protect the local firms (Yu & Hassan, 2008). The foreign firms have little or no presence at all and sometimes have to form joint ventures with the domestic firms, which enables such firms to heave a more competitive advantage in the market. The firms, therefore, favor such measures as accessing the foreign markets using trade and various licensing ventures to ensure that their concerns on their intellectual property are safeguarded and the tightly protected domestic market. As an example of a booming economy in the Middle East Saudi Arabia aims to stand out by introducing the free market zones in the kingdom that would help more foreign companies to have more space to expand their business throughout the kingdom. As such, the foreign firms stand to benefit from the investment of foreign firms as explained above. More firms will benefit from the new ways of operations and the increase in the market for the various products available. Some of the leading pharmaceutical targeting the Saudi Arabian kingdom are Pfizer. Such companies will come in and change competitive edge of the local market.
With the introduction of new players in the pharmaceutical market, tenders will be conducted, and the local people will further benefit from those tenders. As such, the whole country will be helped, as there will be more capital flowing throughout the economy (Issawi, 2013). More companies will not depend on the importation of drugs, and this will affect those local companies that engaged in such endures. As such from the above example, it is important to note the benefits of the foreign investments, while at the same time looking at the benefit it brings to the country. Such big multinational companies like Pfizer bring alto of foreign direct investment in the country and help in contributing to foreign currencies reserves of the country. Most foreign companies deal with expensive products and, therefore, may get the market share that can afford those products. In such cases, the domestic market will have their share of the market without much hindrance in their profitable margins. The various collaborations can be noted in joint ventures carried out by firms in the Middle East, especially in the telecommunication sector.
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