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Foreign Investments in BRIC Countries

Empirical Evidence from Multinational Corporations

Series:

Thomas Poplat

Investments in BRIC countries have been a main driver of the significant increase of cross-border investment activity in recent years. But investments in these emerging economies entail significant risks as institutional voids, host governments and national champions dictate the local business conditions for multinationals. This study investigates decision processes underlying cross-border investments in BRIC countries and discusses their critical success factors. The empirical results show how internal and external forces influence corporate decision-making efficiency. Moreover, the study highlights country-specific challenges for corporations which consider investing in BRIC countries.

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4 Empirical results

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4.1 Firm-level cases 4.1.1 GasCo Case 4.1.1.1 Company profile GasCo is a world-leading gas supplier and engineering corporation. GasCo’s business is reported along the three strategic segments gases, engineering and logistics. The second dimension of GasCo’s matrix organization is represented by the three regional hubs of EMEA, America and Asia/Pacific. The company produces different industrial gases and provides facilities for gas applications. GasCo employs approximately 50,000 people in 100 different countries. In terms of foreign sales and employees GasCo is highly internationalized. In fiscal year 2011, revenues amounted to € 14 bil- lion thereof 90% due to customers in foreign countries. About 43,000 employees work in foreign locations outside Germany. These numbers reflect the high degree of inter- national experience which is an important factor for selecting GasCo’s investments as research objects. The strategic focus of GasCo is aligned to the three global trends energy & environ- ment, healthcare and growth markets. GasCo’s management intends to gain market leading positions in growth markets, whereby growth markets mean emerging markets like BRIC countries. Already in 2011, GasCo invested more in growth markets than in mature markets. GasCo’s main strategic segment – the gases division – has a diversi- fied customer base which supplies end-customers in chemistry, energy, manufacturing, metallurgy, glass, retail, electronic and food industries. The subsequent investment projects have been undertaken by GasCo’s gases division. GasCo’s engineering divi- sion delivered the core technology for the new plants. In the past, GasCo used a few large cross-border acquisitions to create a strong region-...

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