Global Business: Money And Finance Essay

Question:

Discuss about the Global Business for Money and Finance.

Answer:

Introduction

In the current time, it is essential, valuable and significant for the business firms or companies to expand their business at the global level by entering into a global market. It is because, expanding business into the global market, can provides a lot of tangible and intangible benefits and opportunities to grow and enhance the level of profit. But, when a new company or firm enter into another market or global market, several kinds of serious issues and challenges are faced by the organization in the market. But, such issues/challenges can be overcome or reduce by using strategic, dynamic and innovative global business strategies in an effective and proper manner. Moreover, for this research paper an Australian pharmaceutical company would be selected and background information about the selected company would be described. On the other hand, this research study would also conduct an analysis on the risk/challenges, and opportunities within both China and South Africa market. At the same time, based on the above analysis, a best country for the selected company would be recommended so that it can effectively enter into in the global market. Furthermore, an entry strategy/mode for the selected company would be proposed to enter into another market. Hence, all these are the main objectives related with this research study that would be attained in order to reach a valid outcome or conclusion.

Background to the Company

Generally, with regards to this research paper, Lawley Pharmaceuticals is selected that is one of the leading and major Australian pharmaceutical companies. Moreover, it is accessed that, the company is expecting and considering China as well as South Africa for the purpose to enlarge its business activities and enter the global marketplace for the first time. On the other hand, it should also be noted down that, it is a well reputed and well known Australian privately held pharmaceutical organization that was founded by the pharmacist Michael Buckley in the year 1995 at Perth, Western Australia. At the same time, it is found that, in the current time, the company is providing a wide range of products and services related to the pharmaceutical in the country. For example, it is one of the leading and specialized manufactures of the pharmaceutical-grade hormone replacement therapies within the Australian pharmaceutical industry (Lawley Pharmaceuticals, 2016).

In addition to this, it is the largest and biggest manufactures of the Australia that develops progesterone as well as testosterone creams for the different kinds of endocrine deficiencies and medical conditions. Along with this, it is also analysed and found that, in the area of research and development of transdermal hormone preparations, Lawley Pharmaceuticals is the market leader. Moreover, the company is also heavily focusing on advancing clinical research from the last 20 years in the country. Furthermore, the company was founded and established for the vision of developing naturally occurring hormones. Moreover, this company comes under the most profitable companies with highest sales, market share, and revenue within the Australian Pharmaceutical business sector (Lawley Pharmaceuticals, 2016).

Analysis of Risks/Challenges and Opportunities in South Africa and China

Risks/Challenges:

Basically, there are four kinds of risks/challenges faced by a company when it enters into another market or global marketplace. For example, commercial, country, financial and cross cultural risks etc are the major examples of risk that may be faced by a company in the global market. These risks negatively affect the business operations, strategies, methods, market share, level of revenues, and profitability of a new company into the global market. Moreover, it is important for the new companies or firms to access potential of a new country by conducting risks and opportunities analysis (Thoo, 2013).

Commercial Risks: It is kinds of risk that occurs from the potential losses arising from the trading partners or the market. But, in the China, there are less commercial risks by comparing to South Africa. For example, China had developed a lot of Free trade agreements with the Australia and strong business relations exits among these two. In contrast, there is lack of such business agreement among the South Africa and Australia (Abbey and Doukas, 2015).

Currency/Financial Risks: There are fewer changes in the changes in the currency of China because of high real GDP rate.

Country Risks: These risks include political risk, exchange rate risk, economic risk, sovereign risk and transfer risk. For case, the political and economic environment of the China is highly stable and effective as compare to South Africa due to availability of strict and supportive business rules, laws, regulations, and standards. In contrast, the both political and economic environment of South Africa is not strong and effective as compare to China due to gap in regulatory policies. Hence, there is less country risks in the China as compare to South Africa (Chou, Wang, and Wang, 2015).

Cross-Cultural Risks: As with the highest population, China is the largest country in the global world with a population of 1.357 billion and this is increasing rapidly day by day. In contrast, the population of South Africa is approximate 52.98 million. This great difference indicates that the Chinees population is highly diversified as compare to South Africa. In China, there is diverse population with different needs, wants and demand that may affect the success and growth of a company in the nation. In the same way, Chinese culture is highly complex as compare to South Africa so there are greater cross cultural risks exits in China (Flint, Lepone, and Yang, 2014).

Opportunities: The following table indicates the main opportunities available both in China and South Africa Market:

China

· World’s largest and Biggest Market and Economy

· Emerging focus on innovation, higher-end consumer goods and services

· Innovative and Supportive Business policies, laws, rules, and Regulations

· Availability of Trained and well skilled employees or workforce

· Reduced rates of Taxes and Tariffs (National Industry Program, 2016).

· Chinese Business Etiquette and Culture

· Availability of resources at the cheaper rate or price

· Low labour costs, Strong political and economic structure

· Availability of a number of Large and small financial companies and financial institutions (Carroll, 2013).

· A large number of customers

· Growing and distinctive Chinese pharmaceutical market

South Africa

· The pharmaceutical market or industry of the nation is small so a new company can easily target their customers for their product

· There is no tight competition in the market and companies can easily expand business in the nation.

· Innovative and supportive business environment

· No strict business rules for the new companies

· Eco-friendly health policies

The Selected Destination Country

Based on the identified risks, challenges and opportunities, it is suggested that Lawley Pharmaceuticals should enter and expand their business in China not in South Africa. It is because, there are greater and high level of risks and challenges exits in the market of South Africa as compares to China. Moreover, as compare to South Africa, a lot of business opportunities are available in the Chinees market that can be gained by the Lawley in order to expand the business. Moreover, it is also found that, the political, economic, social, technological and legal environment of the China is more supportive as compare to South Africa (Pacific Bridge Medical, 2016). So, it is recommended that, the company should go for China to expand the business operations. At the same time, it is also found that, in the South Africa, there is a weak policy environment and limited governmental support for the Pharmaceuticals companies. In contrast, in China, there is a strong policy for such companies and proper support is provided by the government to the companies in order to grow and expand the business (Nanda, and Kumar, 2012).

Additionally, the Pharmaceutical market of the China is larger and biggest as compare to South Africa so there are more opportunities available in the Chinees market for the Pharmaceuticals companies. In contrast, within the Pharmaceuticals business sector of the South Africa, there is a gap among the enforcement capacities and regulatory framework that may affect the success of the company in the market (Sun Pharma, 2016). On the other hand, as compare to China, in South Africa, there is shortfalls in capital and skills. Along with this, China is one of the biggest and most populated countries in the global world. Moreover, the Pharmaceutical sector of the China is also working very well and fast with fastest growing rate of economy and the economic and political structure of the nation is effective. Hence, it is suggested that, Lawley Pharmaceuticals should enter and expand their business in China as compare to South Africa in order to take the benefits of biggest and largest market of the world (Pacific Bridge Medical, 2014).

Proposed Entry Mode/Strategy for the Chosen Country

Today, it is more important and valuable for the companies or business firms to identify and chose a best market entry strategy in order to expand the business and enter into the global bazaar. For example, there are different kinds of market entry strategy such as: Greenfield Investments, Piggybacking, Turnkey Projects, Merger, Acquisition, Partnering, Joint venture, Franchising, Licensing, direct exporting etc. All these strategies may be used by Lawley Pharmaceuticals in order to expand the business into the China. Hence, it is more comprehensive for the Lawley Pharmaceuticals to analyse and select a best market entry strategy in order to enter into the Chinese market or Pharmaceutical industry (IMS Health, 2016).

Moreover, it is also necessary for the Lawley to select a best market entry strategy by analysing and accessing the business environment of China market. So, in order to choose a best strategy, the company would analyse the economic integration between Australia (Home Country) and host country (China). Moreover, the company would also need to analyse both the political and legal environment of the China (Mitrev, and Culpepper, 2012).

Level of Economic Integration: The economic integration among the China and Australia is at the regional level which is marked in the level of the expansion of intermediate goods deal, intraregional trade, and harmonization between disjointed parts of the manufacture procedures in the different business sectors. On the other hand, a free trade agreement is also exits and developed among the Australia and China in order to reduce trade barriers. At the same time, it is also analysed that, in the year 2014, China is the biggest and largest trading partner of China (Pfizer, 2016).

For example, the accounting for 23 per cent of Australia’s two-way trade, the second year bilateral trade values have exceeded A$150 billion. In the same way, China is the biggest and largest export market (A$98 billion) and source of imports (A$54 billion). In the same way, China is the largest importer and exporter of the Australia that indicates strong business relationships among these two nations. In the current time, Australia is also enhancing its two-way trade with China to improve its economic situation. Hence, it can be said that, there is a high level of economic integration among the China and Australia (African Union, 2012).

Economic and Political Environment of China: The political as well as economic environment of China is very strong as compare to other nations of the global world. For example, the new foreign companies may take the benefits of weaker exchange rate and effectively expand the business in the nation by improving their market share. In addition to this, the economic transformation made by the China from the last few years had created an attractive and supportive destination investors as well as exporters. Moreover, there is a rapid improvement in the GDP rate of China from the last 10 years. For example, from the last ten decades, the GDP of China had expanded by an average 10% p.a. In contrast, the equity market of the nation is already suffered from the sharp downturn (Roncoroni, Fusai, and Cummins, 2015).

But, China is using several strategies in order to deal with this downturn in the equity market. This is beneficial for the investors as well as new company that want to expand the business in China. On the other hand, it is accessed that, the political climate of China is also very strong and effective. For example, according to the World Bank, China is the second ranked bottom quartile of economies for three dimensions of governance including lack of violence, political stability, strong law rules, and control of corruption. Furthermore, CPSC (Central Politburo Standing Committee) is the most influential and highest decision making body in the nation (Moses, Moore, Pleasant and Vest, 2011).

On the other hand, it can be said that based on the level of economic integration, political and economic environment, joint venture would be one of the most valuable, dynamic, effective and best market strategy as compare to others for the Lawley in order to improve and expand business in the Chinese market. For example, according to this strategy, Lawley Pharmaceuticals would develop and create business arrangement with the Chinees Pharmaceutical companies by agreeing to pool their resources for the purpose of accomplishing a specific task. Additionally, by using this strategy, Lawley can also effectively expand the business in the China and make maximum profit effectively. For example, risks as well as profits would be shared equally by both the companies in the market. In the same way, Lawley can be able to increase its business capacity and access greater resources effectively (Cullen, and Parboteeah, 2010).

Additionally, Joint venture would also allow the home company to growth and expand business operations in the host country without having to borrow funds. In this way, it would be easier for Lawley to establish a strong presence in the China market and generate maximum profit and revenue effectively. Additionally, different kinds of tangible and intangible benefits can also be gained by Lawley through joint ventures. For example, such benefits includes: larger market reach, Barriers to competition, shorter learning curve, new revenue streams, enhanced credibility, product and intellectual property gains, Expertise and knowledge gain. Hence, in order to gain such benefits, Lawley would use Joint venture as a market entry strategy to enter and expand the business in China (Xiong, Yamada, and Terano, 2015).

Conclusion

On the basis of above discussion, it is summarized and suggested that, Lawley Pharmaceuticals should enter and expand its business in China not in South Africa by using joint venture market entry strategy or mode. Moreover, it is also important for a company to enter into global market to access the current political, economic, and social environment. Finally, it can be concluded that, different kinds of risks/challenges and opportunities are exits in the global environment.

References

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