You are the chief executive officer of a multinational’s subsidiary in a developing host country.?

Question

The subsidiary has been in business

for about eight years, making electric motors for the host country’s domestic market, with mediocre financial results. Before

you left the home country a month ago, you were told to make the subsidiary profitable or consider closing it.

After a month in the host country, you have discovered that it is running a worsening balance of payments (BOP) deficit and

that the government officials are very concerned about the situation. They are considering various measures to stanch or reverse

the deficit flow.

What measures might they adopt? Given that you would prefer to keep the subsidiary open, since it employs locals and contributes

to the country’s economy in other ways also, can you think of some ways your company might profit from or at least minimize

the damage of these potential measures?

Answer 1

you need to put your companies interest in line with the host countries government's interests, then ask for the government's support.

The government has two possible solutions (1) decrease the imports or (2) increase the exports, most likely they will seek a combination of both techniques.

You need to realize a profit (or close), so maybe you can increase your production (and hire new employees).

My suggestion would be to produce for other (neighboring) countries and ask government support for it.

Answer 2

There are a few things available to you if you are trying to stay afloat depending on the country you are in.  Most offer tax reductions for having your business in their country, and another one would be to simply lay off a certain percentage of employee's or offer early retirement to alleviate expenses without having to shut down the business.

Cheers

Mark