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Russia Vs. China: Fdi Analysis For Energy Company

1567 words - 6 pages

Introduction
A company that is considering investing internationally has to evaluate some important factors that are crucial in choosing the right country. In order to choose the best decision a businessperson has to analyze economic, political, geographical and social factors before entering a new market. This paper will analyze two countries using a fictive sample of Energy Company based in US. This private company wants to enter to a new market in one of the BRIC countries located in Europe or Asia. The energy company wants to build ECO power plants (environmental friendly) and introduce a new concept of sustainable energy source to these two countries (Russia and China). Hydropower, Wind power and solar energy should be used to generate the electricity. The capital investment is quite high in order to build new power plants, but the goal of the company is to become a big competition for already existing companies in this industry. The major advantage of this energy company is that they produce electricity for a fair price and do not pollute the environment. The company wants to build a chain of ECO power plants in one of these countries and expand to other markets outside the US.

Social risks and benefits
Russia and China are countries with large population. These states belong to BRIC group, which are countries with fast developing economy. Both are very attractive destinations for foreign direct investments that can benefit whole country. Despite of the prosperity a huge amount of the population live below the poverty line and lack basic needs or education. The average wages in these countries are very unstable because they vary from region to region. While average wages in China are rising those in Russia are still too low. The “advantage” of lower salaries can attract FDI to the country but still the labor is non-educated and the investor has to train the labor force. The situation in China is quite similar. The average wages are still lower comparing to other countries, but many organizations dealing with human rights are trying to improve the exploitation of labor force in China. Because of the amount of the population a demand for electricity is huge and the Energy Company could be prosperous in these two countries. Some regions in both countries lack a reliable and market competitive electricity power supply. From the social point of view both countries are great destinations for FDI because a lot of unemployed people are willing to work for low salaries.

Economic benefits and threats
Both countries have “boosting” economies. In last few years they have become a “big fish” in the world market and started to compete other big countries. Russia is well known for energy industry (oil and gas), metal industry and production of heavy machinery. Some of the wealthiest people in the world are from Russia and guess in which industry their businesses operate. On the other hand, if you go to a supermarket and you want to buy...

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