Bulgaria
1. Key criteria and considerations
The Bertos Financial Services Inc. is a multinational company with subsidiaries in Mexico, United States of America and Canada, all members of the North American Free Trade Agreement. The company has the objective to open a new subsidiary of the company in a new country with the goal to increase the market penetration and sales of the company (Buckley y Casson). The company has considered ten countries to ten countries to be candidates for the new subsidiary of the company. Those countries are Algeria, Argentina, Qatar, Brazil, Romania, Indonesia, Philippines, Slovenia, Ghana and Czech Republic.
The first criteria to consider the new subsidiary are the location of the country in a different economic region from the existent subsidiaries. A new economic region depends on of the current free trade agreements in the world as Mercosur in South America, Pacific Alliance in Latin America, the European Union in Europe, the African Union in Africa, Arab Tree Trade in Muslim Middle East Countries and South Pacific Trade Agreement. The selection of the economic region where the country wants to enter gives the first criteria of selection (Madura)
The second criteria are the macroeconomic conditions of the country and its perspectives in the middle and long term that is from five to twenty years and the perspectives of the country in economic growth, unemployment rate, population, infrastructure, education and business environment to invest (Johanson y WiedersheimPaul)
The third criteria are the existence of a business environment of a country with a robust network of other industries and multinational enterprises. The existence of other companies, including competition, because that guarantees the existence of the required elements of the supply chain of the company (Hughes y MacDonald). In the specific case of Berthos Financial Services Inc. The existence of a robust financial sector helps the company to insert in a convenient market, than in another market without experience in the financial sector (Gitman, Joehnk y Billingsley).
2. Most suitable countries for the establishment of a BFSI subsidiary.
The country or group of countries must be located outside the American country due to the existence of three subsidiaries in the continent (The United States of America, Canada, and Mexico). Europe is the best region to consider opening a new subsidiary due to the development of the region in the financial sector, the attractive conditions of the financial sector, regulations and the size of the market (Eiteman, Stonehill y Moffett). Europe offers an important market, and it is possible to find capital and partners to develop the new subsidiary.
The Eastern Europe has an economic growth higher to the Occidental Europe, with a value of 4% for the Eastern Europe against the 1.5% for the Occidental Europe (Investopedia). That is, because the lower labor costs in Eastern Europe, a professional and educated population and the opening of new subsidiaries of European companies in Eastern Europe (Dunning).
Considering the previous considerations: The Czechs Republic, Romania, and Slovenia are the two countries considered to open a new subsidiary for the Berthos Financial Services Inc. The countries have a financial sector in development with a potential market of more than 40 million clients and later all the European Market, once the countries have full integration with the European Market.
3. Unsuitable countries for a BFSI subsidiary
Considering that the company has three subsidiaries in the American continent, this is not a good idea to open a new subsidiary in America, because the current three subsidiaries (Canada, United States of America and Mexico) are located in America and have the ability to attend the economic regions of the country. The election of a European country with a non-saturated market it is convenient for the company and that condition is offered by European countries with recent membership in the European Union. The previous consideration considers unsuitable for the creation of new subsidiaries to Brazil and Argentina. Those countries may have interesting conditions to create a subsidiary but the impact to the company in new clients and revenues will be low. In fact, the Mexican subsidiary has the ability to attend all the Latin American market without problems (McMillan).
Algeria and Ghana are two countries that the company must not consider opening the new subsidiary because the African country represents a high risk to the company. Berthos is not a mature multinational enterprise, and Africa represents a high risk for the company when the company needs to do secure steps of grows. The legal system and the political stability are hazardous, and the entrance cost in the Continent are higher than other regions as Eastern Europe.
Qatar, same to other countries of the Middle East represent interesting conditions for the company to invest, but the financial services in Muslim countries are different than the way the company makes business and the company need to consolidate itself as a Multinational Enterprise and Qatar represents a challenge for the company.
Indonesia and Philippines are two countries of South East Asia with similar conditions but with a strong competition of the financial sector from Hong Kong and Singapore. The financial sector in Indonesia and Philippines has a high cost of entrance than the financial sector of Eastern Europe.
Works Cited
Buckley, P y M. Casson. The Future of Multinational Enterprise. New York: Cengage Learning, 1976.
Dunning, J.H. «The eclectic paradigm of international production.» Journal of International Business Studies (1988): 1-31.
Eiteman, D., A. Stonehill y M. Moffett. Multinational Business Finance. New York: Prentice Hall, 2010.
Gitman, L., M. Joehnk y R. Billingsley. Personal Financial Planning. New York: Prentice Hall, 2011.
Hughes, J. y S. MacDonald. International Banking. Hoboken, NJ: Addison Wesley, 2002.
Investopedia. Economic Growth of Europe. 2015. 23 de April de 2016.
Johanson, J. y WiedersheimPaul. «The internationalization of the firm: four.» Journal of Management Studies (1975): 302-325.
Madura, J. Financial Markets and Institutions. New York: Cengage Learning, 2011.
McMillan, Dunning. Trade location of economic activity and the MNE. Berlin: Holmes and Meier, 1977.
