Question

International business class

Iraq is a land of opportunities for foreign oil companies. Thanks in part to increased political stabilization, Iraq’s oil production reached levels near peak output before the U.S. invasion in 2003. Further, according to the U.S. Department of Energy, ten undeveloped oil fields in the country have a potential value of $3 trillion dollars. Any MNE that would seek to exploit this lucrative source would face steep institutional obstacles. For one, when national elections were approaching, politicians who were eager to sound nationalistic were hesitant to facilitate the entry of foreign companies. To make matters worse, Iraq’s oil ministry was extremely slow in approving exploration licenses and even in signing contracts for completed deals. The irony of all this is that because of the political turmoil of the past decade, most native oil experts left the country, leaving Iraq in dire need of an infusion of foreign expertise. (Source: “Deterring Foreign Investors” The Economist, September 24, 2009, pg. 61–62). Directions: Respond to the following questions in paragraph format from the perspective of the CEO of a MNE. 1. What do you perceive is the most effective strategy for responding to the institutional challenges presented by Iraq’s political situation (in this text) and entering this unstable, unpredictable market? Explain your choice(s). 2. How would a particular strategy allay or compound Iraq’s fears of being dominated by foreign companies? 4. 3. What would you suggest Iraq due to encourage FDI?

Answer 1

1) One of the main reasons that the US and Iraq situation is vulnerable is that the two countries are not ready to allow each other on any trade peace. While as an MNE you can play it well. As you know that the country has potential sources and places where the oil fields can be brought up which will eventually help the country manage the oil refineries and also the need it has to compensate any future loss of lack of oil. As a CEO you can propose a plan to the responsible or concerned institutions that your company will invest in making a better deal out of the situation and make sure the 3 trillion target is achieved.

2) Iraq has already had the invasion it feared. With a tift in case of USA it has dug a pit for its self, as no compnay would wish to take chances with their market in USA. As a CEO of MNE you will have to convince that the trade between the country and the compnay will all be on the global market basis with no political influence involved through trade. Some barriers initially will have to be borne by your company inorder to gain the trust that Iraq has as of now lost in foreign companies.

3) A very balanced amount of trade and tariffs can help persuade Iraq. Also, the fact that a complete isolation would crumble the economy of Iraq will eventually make the goverment understand that political challenges cannot be taken on the stake of development a country can go through.