Multinational Corporation Expansion Research Paper

Multinational Corporation Expansion - Research Paper Example After examining the international market most favorable for expansion, Abercrombie and Fitch should consider entering the Brazilian market as this chosen market maintains national economic policy and market conditions that will provide A&F with considerable opportunities for revenue growth. The first dimension of international finance favorable for Abercrombie & Fitch in Brazil is the movement of financial institutions across international borders, including securities firms, banks and various investment companies. Brazil currently maintains an annual GDP growth rate of five percent annually, influenced by growth in financial institutions both domestic and related to foreign direct investment. Brazil maintains membership with a variety of economic institutions including Mercosur, G20, the World Trade Organization and the Cairns Group, giving the market more exposure in Europe as a viable market for financial investment and institutional development. High volumes of financial lenders and a strong stock market provide economic sustainability that provides for commercial business development and support from governmental leadership. The only legitimate risk in this dimension is that the majority of investment institutions stem from foreign markets and are not being developed by domestic financial institutions that would not be reliant on significant exchange rate differences that impact pricing for exported products. Secondly, Brazil has positive movement of capital across its borders triggered by rising interest in foreign direct investment into Brazil. The International Monetary Fund identified billions of dollars of investment moving into Brazil, including derivatives and new corporate capital development projects. The growth in capital movements into Brazil provide for a more enhanced distribution and supply infrastructure that will benefit Abercrombie and Fitch in relation to marketing expenses and retail center distribution. The risk in this dimension of int ernational finance is that these improvements are private constructions not controlled by governmental regulators whereby a corporate pull-out of investment could limit the scope of infrastructure growth during a period where Brazil is working through a long-lasting economic recovery affecting domestic investment potential and opportunities. The third dimension of international finance relevant to Abercrombie is the regulatory system currently in place that guides economic policy. In the 1990s, Brazil was plagued with considerable inflation (approximately 15 percent annually) that caused a supplementary increase in utility costs, fuel and oil costs, and up to 25 percent interest on corporate and personal credit cards (Selva, 2010). The government has been more adept in recent years at changing index prices and employee wages as well as a variety of consumer price freezes to stimulate spending (Selva, 2010). Continuing governmental influence in economic policy and monetary stimulatio n tactics have reduced risks of ongoing inflation on the consumer price index that will provide A&F with a more stable consumer market where real wages are in-line with expectations for a consumer price index equalized with real GDP. The risk to this dimension of international finance is that not all efforts to curb inflation in certain supply sectors has been achieved, thus adding potential burden to supply budgets in a price-inflated value and supply chain. Brazil is currently the eighth largest economy