The Case Of The Building Material Sector In China

3286 words - 13 pages

IntroductionThere is a trend to do business internationally recent years. In order to diversify the business further and compete with the Multinational Enterprise (MNE), Hong Leong Group (HLG) should expand its business internationally, especially the Emerging and Transitional Economies. However, to enter such frontier markets, there will be some risks and uncertainties accompanying this expansion. The purpose of this report is to do an analysis of the emerging and transitional economies and find new business opportunities in these areas, and help the board of directors make a decision on choosing an appropriate entry mode to enter the chosen market.Regional analysis - East AsiaIn contrast to most other regions in the world where the economy growth becomes slowdown, East Asia becomes the fastest growing region in the world. Since the re-establishment after the financial crisis in 1997, this region has experienced a high speed growth, such as China, Vietnam, Thailand and so on. The growth rate reached more than 2 percentage points in 2002 to 6.7 percent--a surprisingly robust rate given the slow pace of global recovery and high levels of uncertainty in the world economy. Appendix 1 shows the East Asia forecast and summary. Meanwhile, the inflation rate, a shift to more flexible exchange rate, a marked improvement in external balance sheet enhanced many East Asian central banks to implement supportive monetary policy, plus the low interest level, strong household consuming and increasing investment expenditure; all of these factors provide an environment conducive to growth. So the business environment is very good for investing here. HLG invests in East Asia can have the following advantages:Abundant of opportunities. Because of the rapid growth, many industries need capitals, technologies, management skills etc.Cheap labours with improving quality and lots of natural resources available.Privileges offered by governments of these countries, such as tax reliefFamiliar with this region's culture. HLG is also an East Asia company, so it must understand this region's culture better than other regionsLocation advantages. To invest in East Asia will also make HLG's management, market researching, transportation, distribution etc. become convenient.However, before starting a business, the disadvantages are also worth noting.The regulation and law need to be amended further. The copyrights and other Intellectual Property related rights cannot be protected very well. Pirate is serious.Red tape. Usually there is a long and complicated process for the foreign investors to get permission to do business.Sometimes local government's protection will bring unfair competition.Because of the low educational level of the labours, the expenditure for training is necessaryPolitical instability exists in this region, e.g. the Nuclear Weapon in North Korea, the strained relationship between China and Taiwan.Despite the disadvantages, East Asia is still a favourite place...

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