Question

PART B: JOINT VENTURE FDI (Total points -24) Euphoria Chocolate (EC), a Eugene producer of premier chocolates, would like to set up production in Mexico to have better access to the Mexican consumers. But the firm is not very familiar with the Mexican market and considers starting a joint venture with a Mexican candy

Answer 1

Greenfield Plant : p=48 - 2Q TR= PQ = (48-2Q) Q = 480 - 202 TC = MC Q = 120 Profit = TR - TO T = (USQ - QQ2 - 12Q 2 48Q - 2Q2-12 Q t = 36Q2Q² air : 36 - 4Q 20 JQ 4 Q = 36 Q = qunets An CS canned with CamScanner

Joint Venture TR = P.Q = (usa - do) a = 48aQ-202 TC = MC XQ = 12Q Profit = TR - TO = (482Q -203) - 12a T - 480 Q-2Q2-122 a1 - 488 - 4Q -12 =0 a Q 40 = (48Q-12) Q- 48a-12 4 -C12a -3) App a = 1.25 e = 12X 1.25 - 3 = 15-3 Qj - /2 units pa 48 x1.25-2012 60-24 P=36 Profit = TR - TC = PQi - 12Q; = Qi (P-12) = 12736-12) - 12 X24 2 288

QG = 9 p=48-2x9 = 48 -1.8 p=30 Porfit - TR - TC -.PQ-12QG - 3079 - 1249 o 9130-12) s 9x18 T = 162 Euphoria's plant - profit with $ 162 Greenfield Euphoria's profit with joint Venture =' šo x288 26149 50% of 288 1 I Therefore, prefer Euphoria should Greenfield plant. Scanned with

Euphoria would prefer to use Greenfield plant because it gives higher profit.