Required: Assume that you are the Managing Director for one of the Multinational

Question

Required: Assume that you are the Managing Director for one of the Multinational Company (MNC) in Malaysia. You are required to prepare a strategic plan on how to manage your business internationally so that you can take advantages from the OBOR initiatives You are required to answer the following questions in order to prepare the strategic plan: 1. Perform an environmental analysis particularly on the macro-environmental forces to identify the new opportunities and the possible risks or threat of OBOR initiatives on your global businesses. You are required to use relevant analysis tools (i.e. PESTLE) to assess THREE (3) of the macro-environmental forces in order to justify the opportunities and (Total: 25 marks) threats.

Explanation / Answer

One belt one road ( OBOR) is also known as belt & Road initative (BRI) is apart of China's development strategy to improve its trades relations with the countries adjoining such as Asia, Europe, middle East , & Africa, its not just for China to gain the economic benefits , but also be beneficial to the countries participating with OBOR. It has the potential to be one of the most sucessfuleconomic development initatives globally There are many opportunites for investment along this route& thus multinational companies are looking forward tomake the most out of this project .

Multinational companies will have a new opportunities to explore along these economic corridors – for example-, trading companies can take advantage of these routes for logistics, while energy companies can use these corridors for exploring new sites of natural resources such as oil and natural gas. along with dedicated routes, OBOR will require huge investment which is proposed to come. The two routes will form six economic corridors as the framework of the initiative outside China – New Eurasian Land Bridge, China-Mongolia-Russia Corridor, China-Central Asia-West Asia Corridor, China-Indochina Peninsula Corridor, China-Pakistan Corridor, and Bangladesh-China-India-Myanmar Corridor.As all these countries make up the benefits

it is evident that China will play a major role in most of the business collaborations. Therefore multinational companies investing in OBOR will prefer to partner with Chinese companies & leverage the partnership to access projects &assignments in other countries. Companies are also planning to access new routes to sell products cheaply &efficiently, but looking for opportunities across OBOR would definitely involve initial partnerships between multinationals and Chinese state-owned enterprises.

Opportunites for multinational companies will be mainly of Trading & logistcs, Energy projects, & benefit to Tourism sectors- Launch of tourism & opening of new air routes to countries to promote tourism & business.

OBOR has the potential to open up opportunities for collaboration in the areas of oil, gas, coal, & electricity. Several energy opportunities may emerge with the OBOR initiative, & these energy-related investment projects are likely to be an important part of OBOR. For example the much discussed -the Gwadar-Nawabshal LNG Terminal & Pipeline in Pakistan includes building an LNG terminal in the Balochistan province & a gas pipeline between Iran &central Pakistan.

The company invested in Malaysia as the country is considered an ideal investment destination for a long-term gain. & with the long term vision of OBOR to promote tourism sector in countries and regions along the MSR.

DISADVANTAGES : One Belt One Road Initiative assures opportunities for companies, but the path may not be smooth for all. Investing in these new geographical areas. companies havecome across various economies with different legal & regulatory frameworks. Political stability is also a matter of concern – some regions may not have sound political structures , may be dealing with ineffective government policies. So political instability &violence is one of the most critical challenges in the development of OBOR. Weak government policies & lack of communal benefit may lead to political instability including terrorism & riots. These factors negatively impact the setting up of businesses locally, thus resulting in financial losses for multinationals. Therefore Local investments need policies & investment protection backed by the governments to facilitate growth which is far more difficult to achieve in case of political & economic instability. Manycompanies need to be cautious about the obstacles associated with them.

Many Chinese companies do not implement a clear structure of partnership with other international companies. Decision making &profit sharing is often not properly documented. Lack of clarity in business dealings give these state-owned enterprises an upper hand.

Complexity and lack of transparency in local laws & other regulatory framework for setting up a new business is also a hindrance in developing local business. Absence of clear policies & delays in decision-making processes can prove too challenging for companies to adapt to which may even lead to financial losses or failed attempts to establish local operations. Issues such as corruption, challenges associated with supply chain security, & financial risks are some of the other obstacles that companies are likely to face while setting up businesses in new countries along the OBOR route.

As aasked in the question that Iam the MD of a multinational company in Malaysia & have to take a decision to operate MNC then also I have to figure out all the aspects which have been mentioned above.

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