BSB119 Case Study Assessment 1 - Andy Ly PDF

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QUT Business School

BSB119 Case Study Word Count: 817

PART A Conclusion 1: An industrial business specializing in heavy machinery for the use in agriculture was looking to export its equipment to another country to increase their customer base. Country B is the ideal country for this business as its labour force is majorly agriculture (48%). Often countries with a lower urban population are ideal due to more coverage of the land can be focused on growing produce. Due to country B main imports already being machinery and equipment, it is another reason as to why it would be ideal for the business to choose country B as there is a local market there for machinery, which would give the business a fighting chance, instead of a country that did not have a labour force heavily in agriculture or a higher urban population.

Conclusion 2: An online clothing retail business was looking to find a potential country to set up their office, and to do so there are certain socio-economic data that must be considered before setting up. Country A is the ideal country due to its high number of internet users, approximately 83 million (59.7%) out of 207.35 million users. Not only does a high number of internet users contribute to the e-commerce business but citizens within Country A have a GDP Per Capita (PPP) of US$15,500 in comparison to Country B only at US$6,900. Often countries which attain a higher GDP Per Capita (PPP) show that residents of the country have the opportunity of spending money on luxury goods due to having a higher disposable income. In Contrary to Country B who has a significantly lower GDP Per Capita (PPP), it portrays that residents within country B will not have as much disposable income to spend on wants, as the money will be mainly used on the necessity needed. Focusing on the unemployment rate (13.1%) and the labour force allocation, particularly services (50.2%), shows that proceeding the business within Country A will be ideal as it will more likely benefit the company with the knowledge and buying potential within the area.

Conclusion 3: The data shown for country A is ideal for a business looking to export iron ore to. In country A, the industrial labour force is larger than country B, being 39.8% and 21% respectively. Countries A is also significantly lower for the inflation rate at 3.7% in comparison to country B at 4.4%, therefore making a profit is more achievable and the economic state of the country less of a risk than country B. Employing labourers will be easy due to the country having a much higher unemployment rate. Persons unemployed are highly likely to be skilled making an assumption due to the UN Human Development Index (HDI) in country A (.514) being higher than country B (.337). The human development index considers education, life expectancy and per capita income. Therefore, the higher the HDI, the more developed the country is estimated to be.

Part B

% Change in GDP

Percentage change in Real GDP, between 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2013

2014

2015

2016

2017

2018

2019

2020

Years CHINA

[ CITATION EIU18 \l 3081 ]

UNITED KINGDOM

2021

2022

2023

Part C: An international joint venture (IJV) typically is when two separate enterprises in two or more countries form a partnership to exchange resources, share risks and divide rewards [CITATION Ste \l 3081 ]. Often, when a business wants to explore international trade without taking on full responsibilities of cross-border business transactions, it has an option of forming a joint venture with a foreign partner that is often well established within the local market. With the knowledge transfer from both firms in the IJV, it often leads to both businesses having a competitive advantage as they share their partner’s resources which in relation to the tech-based firm would be, the technologies, people and materials. The main important difference between an IJV and wholly own subsidiary (WOS) is its ownership structure, as an IJV often is operated by two or more companies both contributing together whereas a WOS is completely owned by one business who has complete control over the business. This aspect is one of the detrimental factors that can occur with a WOS as if the business fails, the risk is all bared on the one company whereas, in a joint venture, the burden is divided equally between two businesses. A joint venture often has less risk due to co-operating with another firm, however, these two entry modes also differ in potential benefit. One of the significant benefits with WOS is that profits do not need to be shared, thus WOS is often the mode to be chosen when the firm’s business is considered low risk and does not require any assistance; in terms of skills, knowledge, materials to become established in the chosen market.

References EIU. (2018). United Kingdom and China: Selected Series 2013 to 2023 [Data File] . Retrieved from https://eiu-bvdep-com.ezp01.library.qut.edu.au/version-20171023/cgi/template.dll? product=101&user=ipaddress&dummy_forcingloginisapi=1 Stewart, M. R., & Maughn, R. D. (2011). International Joint Ventures, A Practical Approach. Davis Write Tremaine LLP....