Countries Selected for Market Entry
The Commonwealth Bank of Australia (CBA) is a multinational bank and Australia’s largest retail bank. The bank was founded in the nineteenth century as a partnership and private corporation and is currently rated as the second largest organization in Australia as per the list of Australia Security Exchange. The bank has its operation across Asia, United Kingdom, United States of America, New Zealand and Fiji. The bank provides several financial services such as insurance, booking services, superannuation, insurance, institutional and business banking, retail and investments. The main purpose of the bank is to promote savings and development of the local areas as its core business is to provide institutional banking business and retail services.
The origination has approximately 51,000 employees with the majority of them being women and it has over 1100 branches nationally (Laing & Dunn, 2018 p.1). Furthermore, the company also has over 4200 ATMs nationally and 3700 Australian post agencies. The main competitors of the Commonwealth Bank are NAP, ANZ, and Westpac. Furthermore, in 2007 the company faced stiff competition and lost the existing customers because Westpac strategized and changed the product structure as it provides more variety products such as online banking, increased ATM boxes and a variety of banking services (Decker & McCracken, 2018 p.245).
China’s market entry challenge has increasingly become of importance for western companies of all sizes. Despite experiencing difficulties in Europe and the United States’ economic climate, the economy of China has increasingly grown by double-digit rates in the past years. China has struggled to overtake the United States as the world’s second-largest economy and concentrating its efforts to remain a driver of growth globally in the coming decades, the understanding and knowledge on methods of entering complex and large markets has become critically important to China
The Belgian market, on the other hand, is penetrated by exporters through distributors, specialized retailers or wholesalers, depending on the company size and their products. Interested exporters usually focus on innovative ideas, competitive pricing, and quality so as to enter the market successfully. For example, due to its support Belgium’s commercial interest, the United States Brussels embassy has employed the combined resources method of agencies of the United States government to promote exports of United States services and goods. Investment opportunities and trade information is also supplied, which serve as an advocate for firms in the United States. Firms usually contact the Commercial Specialist in-charge at the United States embassy in Brussels to seek advice on the best market entry strategies which are tailored to their services and products (Zott & Amit, 2008 p.4).
The Chinese inflation rate is high. The rate of inflation refers to the general prices rise measured against a purchasing power level that is standard. In April 2009, there was a 1.5% drop in price from last year, after the prices fell steadily at the beginning of 2009 (Zhiyong, 2008 p.102). The fall in prices lowered the goods costs and encourages the expenditure of consumers. The Chinese economy, through this method, has been helped to recover its exports that are diminishing. The 8.5% inflation led to the increase of pork price due to a shortage of meat. The price of non-food items fell at a rate of 1.5%, utilities at 2.2%, service costs at 1.4%, and garments at 2.5% (Zheng & Henneberry, 2012 p.1090). Additionally, crude oil decreased by 53.6% signifying a drop from historical numbers In response to the inflation, the Chinese Central Bank delayed purchases in order to lower demand and strain the growth of the economy, hence taking caution to the risk. The risk has since been countered by the government through the rise of prices of resources controlled by the state and the purchasing of products from farmers so as to make the prices stable.
The Current Macro-Environmental and Geo-Political Forces impacting China
In 1978, the foreign exchange reserves of China were minimal although they were enough to sustain requirements with minimal import. Reserves rose to $17.4 billion in 1980’s whereby exports were the main contributors (Coudert & Couharde, 2008 p.94). In the early 1990’s an economic slowdown was experienced which created a steep fall in imported items, with a constant rise in exports. The aspect led to the creation of a merchandise trade surplus which hiked to $9.2 billion. later, imports increased faster than exports hence eventually eroding the surplus. The current and trade accounts created a deficit in 1993, although the inward Foreign Direct Investment (FDI) acceleration maintained the increase of foreign exchange reserves. In 2006, China’s FDI inflows, expanded exports, and rapid growth surpassed $60 billion annually, an aspect which was contributed by China’s move to join the World Trade Organization (WTO) in 2001 (Luo, Xue & Han, 2010 p.68)
Trade is a major factor affecting the Chinese economy. Becoming competitive in the international market was China’s main driving factor for joining the WHO, with the country’s main industrial exports being electronics, garments, textiles, and manufactured goods. China’s main export materials include salt, barite, manganese, mercury, molybdenum, magnesium, tin, antimony, and tungsten, with the country being the largest producer of aluminum globally. China’s economy has been strengthened by the 1980’s liberal economic policies (Hart, & Spero, 2013 p.1). However, China still faces inadequate energy resources, communication, and transportation. The country has since the 1980’s undertaken the main program of construction of a highway and has started work on building a world-class infrastructure with the Human Development Index (HDI) being 0.777 hence presenting the disparity between rural hinterlands and urban China (Hart & Spero, 2013 p.1).
China currently manipulates its currency holdings at a level which is artificially low. Through July 2008, the currency appreciated at 21% and went flat against the dollar since the Chinese government was concerned with the slipping exports (Hua, Huang & Jiang, 2018). The continued currency manipulation of the country has been hurting its own economy. The Chinese constitution presents the people’s republic of China as a socialist state which is under the dictatorship of the people’s democracy based on the acceptance of peasants and workers and led by the working class. The Chinese government comprises of a people’s congresses system and the system of the political party which is led by the Communist Party of China (CPC).
The overall regulatory environment of Belgium is transparent and effective. The macro-environment of the country has experienced rapid growth previously after a long period of economic instability, with the country emerging among the countries which are highly industrialized in Europe. However, the country is lacking sufficient natural resources and therefore it imports raw material from trading partners in large quantities, processes them and then exports them to large countries. The exports of the country are considered to be two-thirds of GDP and approximately three-quarter of country’s foreign trade is held with other European Union countries (Muûls & Pisu, 2009 p.692). The country has highly developed infrastructure systems which are closely linked with neighborhood countries. The country has a productive workforce, highly skilled employees, and a diversified economy. During the year 2002, approximately seventy percent of GDP accounted from service sector which was followed by manufacturing at twenty-five percent and agriculture at two percent (Halpenny, Burke, McNeill, Snow & Torreggiani, 2010 p.768).
The Current Macro-Environmental and Geo-Political Forces impacting Belgium
The country’s top income tax rate is estimated to be fifty percent and the corporate tax is thirty-three percent and other taxes include estate taxes and value-added taxes (Kanagaretnam, Lee, Lim & Lobo, 2018 p.1). Furthermore, the in the previous years the government spending has increased to 54.1 percent of the total GDP output and 2.8 percent of GDP is estimated to be budget deficits and public debts is equal to 105.5 percent of GDP (Neaime, 2015 p.18). The growth of GDP from 1.1 in 2001 to 2.8 in 2018 clearly shows the country economic power is extremely growing. The countries unemployment rate is falling significantly as in 2018 it reached 7.4% as compared to 2016 when it was 7.9% (Collado 2018 p.1). Unemployment has affected non-European immigrants and youth with a large number of elderly leaving the labor markets and therefore low-labor market participation has remained a great challenge.
Both China and Belgium have had the best economic story of success in the past 30 years. In 2013, urbanization reached 52% for China which was previously an agricultural society. Belgium’s economy extremely values trade. In 2016, the combination of imports and exports in the country equals 167 percent of the GDP (Bodart, Dejemeppe & Linden, 2018 p.428). The tariff rate applied in the country is 1.6 percent average and non-tariff barriers delay some trade. In conclusion, the government policies of the country do not significantly interfere with foreign investment as the financial system are still fairly stable although some sectors like banking have undergone restructuring and are currently smaller than it was previously. According to Berganza, Borrallo and Río (2018 p.185) the country has an inflation rate of 1.8 percent and unemployment rates of 8.3 percent with 1.4 percent GDP growth. Furthermore, the company has notable success in investment freedom, trade freedom, and monetary stability.
The current concerns in the countries’ economy are tax policies, government spending, and labor freedom. Furthermore, terrorism has affected the economy of the countries hence costing them billions of money in the expansion of security measures and tax revenue losses. The current term policies have protected the property rights with strict laws. Corruption has been relatively rare and the efforts of addressing underlying competitiveness, weaknesses and fiscal policies reducing opportunities for seeking rentals.
7. Conclusion:
China, therefore, is a preferable country for market entry as its macro-environment and geopolitical factors are suitable for market and trade development. Furthermore, China has reduced business risk and high opportunities for investment as compared to Belgium. The Commonwealth Bank of Australia should, therefore, consider extending their operations to China as compared to Belgium
References:
Berganza, J.C., Borrallo, F. and del Río, P., 2018. Determinants and implications of low global inflation rates. In International Macroeconomics in the Wake of the Global Financial Crisis (pp. 183-216). Germany: Springer, Cham.
Bodart, V., Dejemeppe, M. and Van der Linden, B., 2018. The labor market in Belgium, 2000-2016. IZA World of Labor, (428).Germany: Econstor
Collado, D., 2018. Financial work incentives and the long-term unemployed: the case of Belgium.Belgium:uantwerpen
Coudert, V. and Couharde, C., 2008. Real Equilibrium Exchange Rate in China. Is the Renminbi Undervalued?. In Exchange Rates and Macroeconomic Dynamics (pp. 94-112). Palgrave Macmillan, London.
Decker, F. and McCracken, S., 2018. Central banking in Australia and New Zealand: historical foundations and modern legislative frameworks. Research Handbook on Central Banking, p.245.USA: Edward Elgar publishing
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Muûls, M. and Pisu, M., 2009. Imports and Exports at the Level of the Firm: Evidence from Belgium. World Economy, 32(5), pp.692-734.New Jersey :Wiley Online Library
Neaime, S., 2015. Sustainability of budget deficits and public debts in selected European Union countries. The Journal of Economic Asymmetries, 12(1), pp.1-21.USA: Elsevier
Zheng, Z. and Henneberry, S.R., 2012. Estimating the impacts of rising food prices on nutrient intake in urban China. China Economic Review, 23(4), pp.1090-1103.USA: Elsevier
Zhiyong, F., 2008. Is Chinese Inflation Pushed by Wages: An Empirical Research Based on Excess Wage [J].Economic Research Journal, 8, pp.102-11.China: cnki
Zott, C. and Amit, R., 2008. The fit between product market strategy and business model: implications for firm performance. Strategic management journal, 29(1), pp.1-26.New Jersey: Wiley Online Library
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