Acme Cite Considerations

Acme Site Considerations

Introduction

The expansion of Acme requires extensive planning as they are establishing a Greenfield within an overseas facility. The legalities must be carefully examined. The two separate countries which are being considered for this production site, Italy and Mexico. Italy is a member of the European Union Trade Block and Mexico is not. The differences in the Trade Blocs are explained as well as the forms of currency which their members use. The advantages and disadvantages, trade policies and cultural variables are all considered for each of these countries.

Italy: EU Trade Bloc

In 1957 Italy joined as a member of the European Union Trade Block, now with 26 other member countries. Italy is now a G- 8 nation. It is ranked as the world's eighth-largest market economy. Italy joined the EU Trade block in 1998. As a stipulation for this membership, Italy was to keep their budget debt ratio lower than 3 percent. In 2010 their deficit grew to a 4.5 % ratio, prompting the Prime Minister Mario Monti to implement tax increases and spending cuts. Monti has announced that the budget will become balanced by 2013. The Economic crisis has impacted Italy’s exports and domestic demands. (Trade Blocs, 2012).

Currency: Euro

G-8 nations which include Italy use the Euro as the primary form of currency. These currencies are considered “Hard,” which is in reference to the stability and reliability of a globally traded currency. In Italy because the countries deficit is much higher than the EU’s guidelines, the currency is considered weak. (Global Insights-Italy, 2012).

Trade Policies

Because of Italy’s week Euro, there is a pricing advantage to exporters but because of high input costs the advantages are rarely felt. As Italy is a member of the European Union, it is bound by all EU treaties and laws. Italy is obliged to provide national treatment to U.S. investors in residing in Italy by implementing the Right of Establishment and the Friendship, Commerce and Navigation treaty. (Global Insights-Italy, 2012).

Cultural variables

Italy is going through a recession but does have some strengths and weaknesses. The country has a high potential with its tourism market and even its industrial market. The averages of the household debt are low and there is a strong capacity for saving. There are cultural weaknesses too, as many residents do not obtain higher education. There are a large number of civil servants with a government which is largely inefficient. Southern Italy is known to be backward with a high unemployment rate. (Global Insights-Italy, 2012).

Mexico: APEC Trade Bloc

Mexico is a member of the Asia-Pacific Economic