International Trade For Liberal Capitalistic Democracy: Evaluating Expansion Opportunities

Evaluation of expansion opportunities

Discuss about the International Trade for Liberal Capitalistic Democracy.
 

• The three countries identified for the purpose of expansion are Australia, India and Pakistan.
• Economic environment:

1. Australia-

In terms of the economic background Australia is among one of the most developed nations. It is the second wealthiest country in respect for the wealth available per adult (Jones & Kierzkowski, 2018).

1. Pakistan-

The economy of Pakistan is semi- industrialist. It is among the next eleven which refers to the eleven countries that have the capacity or ability to become large economies by 2021.

1. India-

India is the sixth in the world in terms of GDP and is currently the fastest growing country even ahead of China. The young population healthy savings habits and decent investments make India lucrative for any business

1. Australia-

The culture of the country is most identical to the western culture. It is primarily influence by Britain’s culture and the geographical location of the country also plays a certain role of its own.

1. Pakistan-

The culture of Pakistan is basically Islamic and the population the government and the entire socio-cultural background of the country is based upon the Muslim religion and the Islamic ideology.

1. India-

The country is the most diverse in terms of its cultural background. It is a Hindu majority country but people belonging to every religion and caste around the world can be found in the country (Feenstra, 2015).

1. Australia-

The economy of the Australia is a liberal capitalistic democracy. Consequently the state involves itself significantly with the economy by undertaking various roles and actions. This include setting up of new taxes by the parliament which it considers is important for the economy or implementing new environmental laws that are needed to protect the heritage of the country. Some of the ways in which the government intervenes with the business are by imposing:

2. Subsidies
3. Voluntary export restraints(VER)
4. Controls in respect of currency.
5. Anti-dumping rules.
6. Pakistan-

The political system of the country is not competent enough to eradicate the corruption prevalent in the country. This is because the legislation made by the government is not strong enough. The businesses have to face serious issues with the government in respect of money laundering, commission, corruption and other serious allegations. The execution of the laws in the country is not at all satisfactory and it is coupled with consistent danger of terrorist attacks. The government has engaged in taxing almost all of the commodities sold in the market including eatables. 

1. India-

The political environment is mainly influenced by presence of several forms of taxes instead of one tax. Also it gets affected by multiverse of political factors like policies of the government, interests of the politicians, the ideology put forward by political parties. The ideology adopted by various parties can prove to be detrimental to the interest of the business activities of the entities.

Cultural environment

Comparison of the companies on the basis of some relevant factors:

• Potential profitability:

1. Australia-

The potential of earning high profits from the country is not possible. Because of the few constraints in comparison to other two options like higher labour costs, higher cleanliness and hygiene costs standards, fewer customers for the rich menu being offered.

1. Pakistan-

The profitability can be assumed to be moderate. The reasons being that the price cannot be kept too high because of the moderate and lower income of the individuals. However, the demand for the items offered on the menu is immense and the customer base can be huge in the country.

1. India-

The most profitable of all the three options is India. Due to the huge demand of the items offered on the menu and lower labour costs, people belonging to all the earning groups and the abundance of skilled labour in terms of mastery in preparation of such kind of dishes.

1. Australia-

In Australia the company will have to face least amount of competition among the three countries. This is because of the limited amount of customers available for the menu to be served in the country.

1. Pakistan-

The competition in the country is going to be as there are numerous restaurants and local shops offering the same product in a lower price than the entity.

1. India-

The highest competition will be faced in India because of the abundance of the well-established and renowned hotels operating within the country offering excellent quality items at very competitive prices (Neary, 2016).

• Pressure for local customisation:

1. Australia-

The pressure for local customisation is immense in the country due to the nature pf the food offered. The nature of the food is very rich and spicy. Due to the influence of the western culture on the country the people do not prefer such kind of foods. Hence the company must adapt to the preferences of the people to make the necessary changes in the menu. Also the quality check in the country is very stringent and has to be factored in properly by the company. 

1. Pakistan-

The requirement of local customisation is not so immense for the country because the diet of the country circulates around the menu that is being offered by the company. The only customisation will be required only in the aspect of price adjustments and cost reduction for the preparations. This is because the people of the country expect the same menu at a lower price. 

1. India-

Legal and political environment

In case of India no change is required to be made either in the quality or the price of the commodity. This is because the people love the menu presented by the company and also are capable of paying reasonable prices for the same. The company can on its own discretion make innovations in respect of its product so as to stand apart from the competitors who are present in bulk within the country. 

• cost reduction opportunities:

1. Australia-

Among the three countries the cost involved in executing the entire business will be highest in case of Australia. This is because of the high labour cost due to deficiency of skilled labour at cheaper rates, higher acquisition costs of assets etc.

1. Pakistan-

The country is relatively cheaper in terms of availability of the labour and the lower cost of acquisition of fixed assets.

1. India-

Among the three the most lucrative destination in terms of cost savings will be India (Edmond et al., 2015). The reasons include the company can apply the economies of scale due to immensely high population and also the corresponding easy availability of labour and relatively lower fixed costs expenditure.

• Risks:

1. Australia-

The risks in the country include lower customer footprint and running into losses and non-recovery of costs involved. But, the governmental and other institutional risks are lowest among the three options selected.

1. Pakistan-

There is high risk of violence and terrorism due to the presence of many prominent and most dangerous terrorist groups within the country.

1. India-

The risk involved both in terms of security and profitability is lowest in the country. The country is moderately safe and the customer footprint and is the highest among the three (Viner, 2016). 

• Ranking of the countries based upon the analysis:

After conducting the analysis of all the three countries the most attractive of them all is India, Pakistan is moderately favourable and the least favourable is Australia.

The reasons for the ranking are that the customer footprint in India and Pakistan is going to be significantly higher than that of Australia. In addition to that the menu offered is the staple diet of the Indian and the Pakistanis. The benefit of reduced cost of operation is also available.

• The time period in which the business will be able to expand in each of the countries are discussed below:

1. Australia-

The time period required to expand the business will be the highest in case of Australia. It might take couple of years to bring the business to momentum.

1. Pakistan-

The time period required to expand the business will be much lower than Australia due to higher customer footprint and better acceptability of the product.

1. India-

Comparison of the companies on the basis of some relevant factors

The time required to expand the business will be least in India due to its potential of making the company register higher customer footprints and the lower cost of operations would boost the extension further (Winham, 2014).

The scale of operations will be the highest in India compared to the other two countries in a time frame of 5 years.

The operational changes will include use of more men than machinery in India and Pakistan whereas there is no such requirement in case of Australia (Patterson, 2015).

• The country chosen for the expansion is India. The changes to be made are as follows:

1. Product: Increase the gravy content of the product for the people of the country like it that way.
2. Pricing strategy: penetration pricing strategy will be used.
3. Distribution:  The Business to customer model will be used.  
4. Branding: the product will be presented in the company’s original brand only.

• The reason for the extended time period required in case of Australia compared to other countries is because of the lower customer footprint expected. The am reason is applicable in case of extension along with higher cost of operations.

The changes made in respect of the product, pricing, distribution and branding is the result of the demography of the population of India and their unique preferences especially in case of personal contact requirement (Burstein & Vogel, 2017).  

• The mode of entry will be by opening of various franchises of the company.

1. The most suitable organisational structure of operations would be divisional structure as the business is dependent upon specialised skills possessed by the employees (Yarbrough & Yarbrough, 2014). The division of duties and responsibilities of the employees as per their qualifications is very important for the execution of the operations.
2. The best structure for different business functions as per the research conducted above are as follows:
3. Marketing: The marketing will be done keeping in mind the perfect competition present in India and Pakistan.
4. Production and distribution:

The production and distribution will be done using the business to customer model.

• Human resource management:

The human resource will be comprised of few specialised individuals carrying out specific tasks (Brack, 2017).

After analysing the various aspects of the business functions comprised of both the financial and non-financial aspects of the business it was observed that India came to be the best option for the company for the purposes of expanding its business. The reason being that the profitability of the company is expected to be the most, no requirement of changing the functional areas of the company, availability of cheaper labour and a very short time period required for expansion. 

Reference

Antras, P., & Foley, C. F. (2015). Poultry in motion: a study of international trade finance practices. Journal of Political Economy, 123(4), 853-901.

Brack, D. (2017). International trade and the Montreal Protocol. Routledge.

Burstein, A., & Vogel, J. (2017). International trade, technology, and the skill premium. Journal of Political Economy, 125(5), 1356-1412.

Edmond, C., Midrigan, V., & Xu, D. Y. (2015). Competition, markups, and the gains from international trade. American Economic Review, 105(10), 3183-3221.

Feenstra, R. C. (2015). Advanced international trade: theory and evidence. Princeton university press.

Jones, R. W., & Kierzkowski, H. (2018). The role of services in production and international trade: A theoretical framework. World Scientific Book Chapters, 233-253.

Leamer, E. E., & Stern, R. M. (2017). Quantitative international economics. Routledge.

Neary, J. P. (2016). International trade in general oligopolistic equilibrium. Review of International Economics, 24(4), 669-698.

Patterson, G. (2015). Discrimination in International Trade, the Policy Issues: 1945-1965. Princeton University Press.

Viner, J. (2016). Studies in the theory of international trade. Routledge.

Winham, G. R. (2014). International trade and the Tokyo Round negotiation. Princeton University Press.

Yarbrough, B. V., & Yarbrough, R. M. (2014). Cooperation and governance in international trade: The strategic organizational approach. Princeton University Press.