Globalization of Enterprise

2012 Nigel. S. Paltoo A11904 10/9/2012 globalisation of Enterprise 715 GE outsetFlikr. com ASSIGNMENT COVER SHEET(to be completed by the student) AIB student ID number A11904 Student find out NIGEL. S. PALTOO Course name MBA -GENERIC undefended name Globalization of Enterprise 715-GE Subject facilitator Dr. Brian OToole Teaching Centre NATIONS UNIVERSITY-GUYANA No. of pages 17 article matter at 2708 from Intro to culture (2500 +10% tolerance) DECLARATION I, the above named student, assure that by submitting, or causing the attached appointee to be submitted, to AIB, I develop not plagiarised any new(prenominal) persons work in this assignment and except where entrancely acknowledged, this assignment is my deliver work, has been expressed in my sustain words, and has not previously been submitted for assessment. ASSESSMENT SHEET(to be completed by the examiner) Student name NIGEL. S. PALTOO Course name MBA -GENERIC Subject name Globalization of Ent erprise 715-GE Assessor/marker COMMENTS Principles learnt (for example, number and sagacity of principles referred to, their influence on the structure of this paper, number and correct citations ofreferences, use of appropriate jargon) /4 Application of principles. That is, theanalysis and evaluation of the example task establish on the principles, including the final recommendations and their bonnieification /8 How sanitary the example problem was described, including the extent and depth of information (including the data) about it that was accessed /4 Structure and monstrance /2 Style, grammar and language /2 Total Less penalties GRAND f be /20 General comments FOR MODERATORS USE ONLY I oppose with the assessors assessment I disagree with the assessors assessment and the new mark is as follows for the following reasons /20 Moderator NATIONS UNIVERSITYGUYANAAustralian INSTITUTE OF BUSINESS-MBA GLOBALIZATION OF ENTERPRISE-715 GEASSIGNMENT Com paring and contrasting two countries for foreign elaboration into by topical anaesthetic app bel telephoner Denmor Garment Manu accompanimenturers. Assignment You argon the manager of a argumentation (in your body politic or region) that is thinking of oer fetching global. Comp ar and contrast two various overseas grocerys for the outside(a) involution of your vocation, covering a shape of 1 semipolitical preservation issues pagan issues 3 Entry strategy 4 Strategic alliances Start your assignment with a very brief description of the entrepreneurial art that you are writing about. This fear push aside be your admit bloodline or one that you are familiar with, or it can be a hypothetical one base on an amalgam of several businesses of which you are aware. Conclude the assignment with whether the business should go to one or the new(prenominal) of the two countries, or none, or some(prenominal). The total number of words should be 2500 words.For penaltie s regarding exceeding the word detain, please refer to AIB Style Guide. For guidance on how to write an assignment, please refer to AIB Assignment Guide. Please note, the word count does not include your cover page, an abstract, table of contents, list of references or appendices. thence you can place any supporting material that exceeds this word limit into appendices. However, a reader should not incur to look at an accompaniment to know about the main thrust of the points you are do in your assignment.So make sure all your main points are in the corpse of your report and refer there to the appendices that result support the points you are making in the body of your report, because the reader may not look at the appendices otherwise. Abstract In the last quarter of the 20th century to state day the world parsimoniousness has become to a greater extent integrated and dependent than ever before, with businesses both(prenominal) large and small blow a fuseing beyond thei r traditional local anaesthetic grocerys as barriers to world hatful came down and technology advanced resulting in significantly lower communication and transportation costs.This phenomenal change in the intertheme environment in which business is conducted has resulted in attachd levels of external direct enthronement by companies from authentic countries in lesser developed economies such as the Third World as frugal benefits were seek through the globalization of takings as well(p) as markets. (Hill 2011, p. 5)With the benefits world widely seen to outweigh the disadvantages smaller companies are spirit for the arrangements internationally that would beat out serve their interests of growth and amplification with companies from lesser developed countries now similarly looking to capitalize as well by creating synergies at the grassroots level by spreading their market horizons overseas, penetrating first and expanding as gather up and relationships develop . This shift in the world economy towards greater integration and mutualness is one mood of describing Globalization (Hill 2011, p. ). Globalization can be seen as the increase of functional integration between internationally dispersed economic activities, which is quite recent, as opposed to the older phenomenon of Internationalization which refers to the geographic splay of economic activities across borders and oceans which started in the 17th century when the colonial powers started dividing up continents in the New World in search of raw materials and markets (Devaraja 2011).In Guyana, the to a greater extent than established companies have been seeking avenues to expand their markets overseas through merchandises and by establishing lower level strategic alliances. Hardly any local company has sought to globalize its merchandise to increase its profitability. For any company looking to embark on international venture the interdependent political, economic and licit car casss of the target country along with its rudimentary heathen fabric moldiness be examined and canvassd in detail before any investment is made (Hill 2011, p. 45).In Guyana, a small English speaking, third world country in southeastward the States, the much established manu featureuring companies have been seeking avenues to expand their markets first through exports and also by establishing lower level strategic alliances overseas. Denmor Garment Manufacturers (DGM) is one such SME within the apparel manufacturing in Guyana that has benefited from the effects of Globalization by having contracts to manufacture specific designs from companies owning major scar names in the USA (which are looking to lower their production costs) as well as by exporting directly to major retailers overseas.Table of Contents Page. 1. 0 Introduction 9 2. 0 Denmor Garment Manufacturers 9 3. 0 Current power with DGM 10 3. 0 The challenge of international expansion 11 4. 0 Political and Econom y Issues 12 5. 0 Cultural Issues 15 6. 0 Entry Strategies 16 7. 0 Conclusion 17 Bibliography 18 1. 0 Introduction The aim of this research is to analyze the potential of two countries short listed as mathematical candidates for the pass on international expansion of DGM.These two options are reviewed in the perspective of the main issues that have to be taken into account when considering business expansion into foreign markets viz Political economy issues, Cultural issues, Entry strategy and Strategic alliances with the state of personal matters in both countries organism compared and contrasted with a decision being arrived at as to whether to expand into one, both or none of the two countries. It would be impossible to look at all aspects of the Socio-Economic, Cultural and Political grace of the countries being considered therefore only the reas most correspondingly to have an jolt on DGMs venture are considered in the context of the nature of its business and the products on offer. Denmor Garment Manufacturers (DGM) Location 7, 8, 9 Coldigen Industrial Estate, East semivowel Demerara, Guyana. DGM is a private company in Guyana which commenced trading operations in 1997 and soon employs 1000 persons of which 97 % are women. Denmor has the condenser to respond to orders of up to 50,000 haemorrhoid of garments per month, and can produce up to 15 different styles at the resembling duration.Approximately 75 pct of Denmors activities involve full production (where the shaper manages all aspects except design), demonstrating an ability to carry out value-added manufacturing activities and cater-chain management. 100 percent of its products are exported, with its customers including some of the worlds leading brands and department stores, including Russell Athletic, capital of Seychelless Secret, Paris Accessories, Van Heusen, JC Penny and Wal-Mart. (Goinvest n. d) 2. 0 Current Situation with DGMAs it is DGM is presently a small part of a emptor d riven value chain environment where the large retailers, marketers and brand name manufacturers have established a diverse decentralized profit of production in third world and developing countries and are leveraging at the design and retail stages (Devaraja 2011). Having had a fair form of success from its operations and acquired considerable know-how from its alliances DGM is looking to expand its market base and production capacity just is constrained locally by the limited supply of grok for any new pulverization and weak local demand for rim wear and sport uniforms.The key processes of DGMs operation are very bear on intensive involving the cutting of fabric and making of components by sewing implement and assembling into final product, this requires a semi-skilled to skilled level of boil. The challenge cladding DGM is to remain a competitive player and to be able to increase profitability either by acquire a bigger distinctness of the value chain from the companie s overseas (expanding more into full production),developing its own brands or by securing new large brand name manufacturer customers and orders.It is therefore important that DGM look to increase its factory capacity while at the same time keeping costs down thereby increase attractiveness to buyers. Faced with a limited labour supply and a high cost of energy and sometimes erratic power supply for sewing machines and air-conditioned factories it has become critical that DGM seriously consider the selection of moving overseas. After much consideration DGMs management has concluded that the field of view with greatest growth potential would be to expand using its own designs and brands.DGM has acquired significant expertise in the production of high end womanly underwear and in athletic uniforms from producing Victorias Secret products and Russell Athletic brand uniforms for the US NBA and is confident that it can tap into the supply chain for fabrics and using its own design tea m produce a new line of womanly underwear, beachwear and generic soccer uniforms that would have a higher quality and a faraway cheaper price, however in Guyana it is constrained by weak local demand and labour supply. . 0 The challenge of international expansion same any other firm contemplating international trade is faced with trinity strategic decisions about which countries to enter, when to enter and at what scale the entranceway would be. condition would have to be given to potential opportunities as well as areas of risk which must be closely analysed (Hill 2011).The countries selected for consideration would first be compared and contrasted with their distinct political, economic and cultural realities being looked at then options relating to possible entry strategy (ies) will considered along with strategic alliances that may be advantageous or required The two countries being considered for expansion into are brazil nut and Trinidad. Before these two countries woul d have been brought up for further consideration they would have been on a longer list of potential candidates he rest of which would have been eliminated with brazil nut and Trinidad meeting the basic criteria of having a significantly big population than Guyana, they are both developing countries ( demote off economically than Guyana), with a cease market system in place, manageable national debt and single digit inflation rates and both countries are geographically close by. A decision has been made that once the two options are found to be recompenseing then entry into that market will be made within six months. Map of South America and Southern Caribbean Islands showing brazil, Guyana and Trinidad &038 Tobagone. Source www. worldatlas. comPolitical economy issues brazil and Trinidad are both democracies, having had free and fair elections for the past two decades. twain countries currently have female presidents. brazil-nut tree is a Federal republic consisting of twent y-six states the smallest of which is far larger than Trinidad which is a twin island republic with a sister island Tobago. Both countries can be considered politically stable with the most recent relative incidence of serious turmoil being twenty two years ago when Trinidad had a failed coup with members of the Jamaat al Muslimeem trying to seize power. Individualism is regard in both countries but more so in Trinidad.Indicator brazil Trinidad Size 3,287,357 square miles 1,980 square miles Population 197 one thousand million (2011 est. ) 1. 3 million (2011 est. ) Government Federative Republic Democratic Republic Legal System brazil is a former colony of Portugal. The brazil nutian legal system is based on Civil Law. Former British colony. The legal and judicial system is based on English common law and practice. ECONOMIC brazil Trinidad GDP GDP USD $2. 45 trillion Brazil is the sixth largest economy in the world. USD $ 24. 63 billion GDP per Capita USD $4,803 USD $16 ,699GNI per Capita USD $11,500 USD $24,940 Exchange rate BRL 1. 00= GYD $100. 00 TT $1. 00 = GYD $30. 00 Inflation 5. 24 % 5. 4% Reserves US$ 349. 708 billion US$ 9. 692 billion Debt as a % of GDP 65. 1% 37. 3% Unemployment 6% 5. 5% Source Communicaid and Central Intelligence Agency World accompaniment book and www. tradingeconomics. com The data presented indicates that both Brazil and Trinidad are about as politically stable as Guyana with both countries being economically meliorate off. However in Brazil there is a greater award between rich and poor and a higher level of offence relative to Guyana and Trinidad.Both Brazil and Trinidad are currently experiencing low levels of inflation and unemployment Brazil unlike Trinidad has a tax on financial transactions Brazil is far more bureaucratic when it comes to starting a business taking up to six months to get all the paperwork done whereas in Trinidad it is advantageously easier and should only take one to two months. In Bra zil getting certain legal permissions for establishing a business expedited may require the pay of bribes. There are no limits to repatriation of registered capital and no taxes on profit repatriated from both countries.DGM would have to consider the higher level of bureaucracy in Brazil when it comes to getting things started (which creates opportunities for bribes to be extorted) as compared to Trinidad. A business cast indorse is required for investing and doing business in Brazil with a minimum level of investment being USD $50,000 being required. A Guyanese can transact and conduct business in Trinidad without a visa however a work permit would be required. In Brazil it may be infallible to hire a middleman (despachante) to voyage the maze of bureaucracy. (CIA World fact book 2012, Communicaid 2012).On the key issue of protective cover of property rights both Brazil and Trinidad have legal provisions for the tribute of real assets and intellectual property rights, both countries having signed international agreements, however, the judiciary in Brazil is inefficient and subject to political as well as economic influence with piracy of copyright material being fairly widespread. Brazil presents a higher degree of risk cod to lower levels of property rights protection. Trinidad unlike Brazil is a member of CARICOM just like Guyana which allows free trade among members. There is a free trade zone in Manaus in Brazil.Taxation in Brazil is naturally abstruse and not as uniform as in Trinidad. Cost of labour in both Trinidad and Brazil is higher than in Guyana but is more available. Cost of energy is cheaper in both countries relative to Guyana. (CIA World fact book 2012, Communicaid 2012). Politically and economically there are a couple of(prenominal)er challenges for DGM to expand to Trinidad as compared to Brazil, however with inflation levels and unemployment levels being almost equal and change rates being stable there is still a degree of att ractiveness to expand to Brazil if ways around the red tape recording can be achieved.CULTURAL ISSUES Cultural differences can present a mannikin of problems when looking to conduct business in foreign markets from language barriers, employee demeanor and work ethic to strategic planning, it is therefore essential that entrepreneurs familiarise themselves with more than just the laws governing a society and obtain an understanding of the underlying values,norms and mores so as to be able to discern what is different and what is the same, what is acceptable and what maybe considered taboo or disrespectful. (Hill 2011)Trinidad is an English speaking Caribbean country with a diverse multi ethnic society that has fused relatively well into a distinct Trini culture with a mix of East Indian, African, European and American influences, religion is mainly Christian, Hinduism and Islam. Carnival is celebrated annually with Soca and Calypso music, cypher costumes and floats, parades and b each parties over a one week period. Trinidad like Brazil is very nationalistic and proud of their country and its national symbols and flag colours. Trinidad is also a soccer crazy nation but not to the extreme as Brazil.There is a strong American influence in the way business is conducted in Trinidad which is very much alike with the way meetings and other business dealings are conducted in Guyana however it is somewhat different in Brazil. Brazil is Portuguese speaking with a far larger population who are predominantly Roman Catholic, however just like Trinidad there is an annual Carnival and a strong soccer and beach culture since Brazil has some of the most attractive beaches on South Americas Eastern Atlantic coastline and year round sunny weather.There are more cultural issues to be considered by DGM in looking to expand to Brazil than Trinidad (CIA World fact book 2012, US commercial Service-US Department of trading 2012). Brazilians do not like to discuss business during l unch whereas that would be ok in Trinidad, coffee drinking is a ritual in Brazil whereas having a semi formal meeting over beers or whiskey is normal in Trinidad. There are a few hand signals acceptable in Guyana and Trinidad like the OK that would be considered insult in Brazil (Communicaid Group Ltd 2012).It would therefore be a puss more challenging from a cultural perspective for DGM to do business in Brazil as compared to Trinidad. Both countries have a well developed tourism industry with visitors from the US and Europe looking for place products with unique designs, fabrics and colour. Although both countries presently have female presidents, males dominate business as such initial business meetings should be male led, but with DGM trading in the female apparel industry including a female during negotiations would be wise.Entry Strategy Having made a decision to expand to some other country the management would need to consider all the risks and decide on the timing, mode and scale of entry to be adopted (Hill, 2011). In entering a foreign market there are six modes of entry that a firm can consider each with advantages and disadvantages ranging from Exporting, Turnkey contracts,Licensing,Joint Ventures to alone Owned Subsidiary. (Hill 2011,p. 32) Brazil presents a more challenging environment both politically, economically and culturally but DGM should not rule out expansion into the Brazilian marketplace since the sheer size of its population and proximity to Guyana offers considerable potential, however, at this time DGM should look at exporting finished products by finding a wholesale distributor with a wide network of resellers to export beachwear to and also seek to market team uniforms directly to soccer teams especially in the lower divisions and have a local spokesperson do meetings and collect sizes and measurements etc. ith delivery being done through this intermediary but with payments being remitted by bank transfers directly to DGM . By going the export route to Brazil import tariffs would be an supernumerary cost as opposed to having a factory in the Manaus free trade zone, as such DGM should gauge the acceptance of its offerings and then look to develop strategic alliances at the manufacturing level later on if market conditions indicate the potential for higher profitability. DGM should be discreet in its business arrangements and look to secure transactions using letters of credit until levels of faith are established.In Trinidad DGM should look to develop a joint venture with a suitable ally who has excess warehousing space suitable for establishing a garment factory thereby reducing the level of capital investment required, register its brands in Trinidad, establish a small scale factory and produce both beachwear and soccer and other sport uniforms in Trinidad and market both to the local Trinidad market and export to the distributors in Brazil and further afield. Strategic alliances would also be n eeded to market products across Trinidad as such a partner with appropriate channels already in place would be useful at the entry phase.A strategic alliance with a business in an unrelated industry that has excess construction space would be preferred to one that is in the same industry with spare labour and machine capacity due to the risk of having that partner appropriating designs and customers. Timing of these two ventures is important, however with the slow pace at which negotiations and business dealings flow in Brazil it may be prudent to start interim talks with potential distributors at the same time as getting the joint venture arrangement and factory frame-up in Trinidad.Products would be differentiated in both markets according to designs and colors, more revealing beachwear is acceptable in Brazil and labeling would have to be in Portuguese as such a multi-domestic approach would be necessary with products being made specifically for each of the two markets with a sh arp overlap. This strategy should not be too costly given that the slight differences between products do not require different skills and machines and the designs for the Brazilian market would require less material but have the same exchange price.Conclusion The beach and athletic wear segment of the apparel market is already established in both countries, as such there is no first mover advantage to be gained, however DGM is confident that it can secure a niche by supplying an overall better quality product (stitchwork,design,fabric) at a far lower price. Brazil which has the largest potential market has relatively more political economy and cultural barriers which increase the levels of risk and possibility for failure so DGM should be overcautious when expanding into this market.Trinidad on the other hand has much more political economy and cultural similarities with Guyana and this would allow for easier entry, allowing DGM to be more aggressive, which could end up work th e production capacity problems for DGM to meet the anticipated new demand when the export channels into Brazil open up which would in turn satisfy the present need for a wider market base. If both of these expansions come to fruition DGM can expect growth in demand and profitability over the long term with economic benefits accruing to each of the three countries. BibliographyCIA World fact book, Trinidad 2012, viewed 1 October 2012, < https//www. cia. gov/library/publications/the-world-factbook/geos/td. html > CIA World fact book, Brazil 2012, viewed 1 October 2012, Communicaid Group Ltd. 2012, Doing Business in Brazil- Brazilian Social and Business polish UK, London, viewed 30 phratry 2012 < http//www. communicaid. com/access/pdf/library/culture/doing-business-in/Doing%20Business%20in%20Brazil. pdf>. Devaraja, Dr. T. S 2011, Indian Textile and Garment Industry-An Overview, University of Mysore, viewed 30 September 2012 < http//sibresearch. rg/uploads/2/7/9/9/2799227/w orking_paper_-_dr_devaraja. pdf > Goinvest 2012, Denmor Garment Manufacturers Competing in the Global Garment Industry, viewed 29 September 2012 < http//www. goinvest. gov. gy/manufacturing. html > Hill, CWL 2010, Global Business Today, 7th edn, McGraw Hill, Boston US mercantile Service-US Department of Commerce 2012, Doing Business In Trinidad and Tobago A Country Commercial Guide for U. S. Companies, viewed 1 October 2012, < http//trinidad. usembassy. gov/uploads/images/bLR3mH7MwdrEvCke0jB6Tw/CCG2006. pdf > End of Assignment.