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Answered: - Nur 1 International Business Assignment 3: International Trade


Hello All,

I need a 25 page country analysis on Brazil for a private security firm.

The assignment guidelines and other resourceful material ?are attached in the attachment section.

Also i have attached my other assignments that i have done in the class, they might be helpful.

I need all resources referenced through out the paper and please use APA citation.?

The assignment guidelines are very detailed!! SO please read over them before starting the paper!?


Nur 1

 


 

International Business Assignment 3:

 

International Trade and Foreign Direct Investment

 

Prof Power

 

Ahmedali Nur

 

T00556366

 


 

Nur 2

 


 

Part A: Economic Systems

 

China started off as a centrally planned economy, which is a system where a nations land and

 

resources are controlled by the government. In a centrally planned economy, the government

 

decides who sales what and for what price are the goods, grains and products. The ultimate

 

goal of a centrally planned economy is to achieve a wide range of political, social and economic

 

goals by controlling the resources and land of the country. A centrally planned economy places

 

great interest in the collective goals of a country and not the individualist achievements. Karl

 

Marx seen the suffering of Europe?s people during or after the industrial revolution, so he stated

 

that the economic system is corrupt and it needs to be overthrown. In the 1900?s a sweeping

 

violent revolt took over, where centrally planned economies took over, bringing to power a

 

communist regime. Centrally planned economies where the governing system in most of

 

Western Europe, Asia and Latin America and some parts of Africa. This type of system didn?t last

 

long and countries started reforms in the 1980?s.

 

This type of system was used by the communist party that took over china in 1940?s.

 

Throughout this time, china had a unique economic system, which controlled the agricultural

 

landscape. With growing world economy, china seen it was imperative that they change their

 

system, so they implemented drastic economic changes, that seen a more market economy

 

flourish in the once centrally planned economy. China has the fastest growing in the world,

 

while trade and foreign investment is the leading reasons for this growth.

 

South Africa is a Mixed Economy, which is a system where the land, factories and other

 

resources of the country are equally split between the government and the private. In a mixed

 


 

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economy the government tends to own less than a centrally planned economy, but holds on to

 

the sectors that if finds to be of national security importance and long term stability, like the

 

steel and iron industry, oil and gas production, and automobile manufacturing. Mixed

 

economies also tend to have a very well run welfare and healthcare system to feed and

 

medicate the poor and sick. People who support mixed economies point stat that a successful

 

economy has to be open to innovation shouldn?t foster social inequalities, and the greed of

 

individualism and corporatism. South Africa is a mixed economy, where the government

 

controls or subsidies important economies, while also giving welfare to the poorest in the

 

country.

 

Factors of

 


 

South Africa

 


 

China

 


 

Canada

 


 

t

 

GDP

 


 

350,085,020,840

 


 

10,354,831,729,340

 


 

1,785,386,649,602

 


 

GNP

 


 

367,183,209,163.

 


 

10,096,966,499,143.

 


 

1,835,099,236,078.

 


 

7

 


 

6

 


 

4

 


 

PPP

 


 

12,446.4

 


 

12,599.2

 


 

42,777.9

 


 

HDI

 


 

0.619

 


 

0.687

 


 

0.913

 


 

Economic

 

Developmen

 


 

Based on the information that I have gathered, I can say that china is the better of the two

 

countries to do business. The reason for my answer is based on the GDP of the country which is

 


 

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in the trillions, which is second best in the world to the United States only. Its GNP is also in the

 

trillions, but its lacking in its Human development index, which is not so impressive.

 


 

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Part B: Trade Barriers and Treaties

 

Trade between nations has been occurring for thousands of years, but it wasn?t till 500 years ago that

 

people started to study and categories it. One of the earliest theories was that of the mercantilism.

 

Mercantilism is a trade theory that states, nation states should accumulate wealth through gold, while

 

putting an emphasis on export but not importing. It also states that other measurers of a nation?s

 

wellbeing are not important. Some of the most prominent European states such as Britain, Spain,

 

Portugal, Netherlands, and France had this system form the 1500?s to the 1700?s.

 

While exploring the earth, European countries claimed the resources of the countries they landed on to

 

finance their explorations, the earliest explorers landed in Africa, Asia and the Americas, where they

 

established colonies. Most of these nations that were colonized are still trying to shake off their reliance

 

on European countries by trading with each other.

 

The principal of Mercantilism for it to survive depends on 3 principals: trade surpluses, government

 

intervention and colonialism.

 

Nations believed that if they stayed in a trade surplus they would be successful. Trade Surplus is the

 

condition that occurs when a nations exports exceeds a nations imports, which means it takes in more

 

gold on its exports then it pays out for its imports.

 

In order for countries to be in trade surplus, on some occasions governments would have to intervene in

 

international trade. The accumulation of wealth depends on the trade surplus and not typically in the

 

quantity or volume of trade. Governments would impose strict rule for import of different products into

 

the country either through tariffs or quotes. The governments would give subsides to industries that

 

they wanted to export and for goods that were being import a lot, they would ban.

 


 

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Mercantilist nations needed colonies around the world that had raw materials that they could use for

 

trade or manufacturing. The colonist countries, would buy the raw material at a very low cost form their

 

colonies and send it back to their countries, and change them to goods, which were sold back to the

 

colonies at a high price. Raw materials like tea, tobacco, spices would be bought at a low price and sold

 

back to the colonies as cigars, clothes, tea?s and other products. Colonial countries made a lot of money

 

through this practice of mercantilism, with that money they would build their armies and navies, so they

 

could control their colonies in distant lands and their trade routes form attacks from other nations.

 

Through this practice, countries grow by political power.

 

Mercantilism in its essence is a very flawed system, despite its seemingly benefit for the countries

 

implementing, the colonized countries resources were diminished. It was a system that allowed the

 

countries implementing it to get ahead by stepping on other countries, by the way things were going

 

international trade would have been greatly hampered. If the colonized countries were being paid a

 

small amount for its raw material but had to pay a large amount to buy it back, then there would be no

 

money to trade with anymore.

 

Absolute advantage was coined by a Scottish economist named Adam Smith, he stated it as the ability of

 

a nation to produce a good better than any other nation. Adam Smith also stated that international trade

 

shouldn?t be stifled by tariffs or quotas but should be allowed to follow based on demand for the

 

product.

 

Comparative advantage was stated by an English economist named David Ricardo. Comparative

 

advantage is the inability of a nation to produce a good more efficiently than other nations but ability to

 

produce that good more efficiently than it does other goods.

 

Absolute advantage also stats that if countries were allowed to trade to together as they say fit, no

 

country would need to produce every good, so if every country focused on the product that it had an

 


 

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absolute advantage on, than they would trade with the other countries with the remaining goods. In

 

absolute advantage the gains form trade for a country would depend on the total number of resource a

 

country has and the demand for each good in each country.

 


 

Michael Porter put forth a theory to explain why some nations are the leaders in production of certain

 

products, so he coined the term competitive advantage theory, which stats that a nation?s

 

competitiveness in an industry depends on the industries capacity to innovate and upgrade. Porter is not

 

preoccupied with the import and export conundrum but explains why certain countries are more

 

competitive than others. Porter?s diamond consists of 4 factors that are present in every nation, those

 

being 1. Factor conditions 2. Demand conditions 3. Related and supporting industries, and 4. Firm

 

strategy, structure and rivalry.

 

After applying porter?s diamond to our services in China we could come up with the following:

 

1. Factors Conditions:

 

Large labour force

 

Economic growth

 

Leading in foreign exports and investments

 

Fastest growing economy in the world

 

Largest population

 

2. Demand Conditions:

 

A more demanding local/ global market has given China international/national

 


 


 


 

advantage

 

A strong trend setting local market has helped local firms anticipate global

 


 


 


 

trends

 

China?s growing rich upper class and foreign business people are leading to more

 


 

need for private security

 

3. Related and Supporting Industries:

 

The success of exporting products made in China has led to the success of the

 

security industry.

 


 

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With China?s leading the world economy in the last 20 years, lots of diplomates

 

and foreign dignitaries are settling in, has led to the growth in need for security

 


 

guards and security hardware for homes and private properties.

 

4. Firm Strategy, structure and rivalry:

 

Local strategies have improved the economy in China

 

Companies are improving the way they manufacture products so they could lead

 

the industry.

 

After analysing porter?s diamond in the industry of private security in China, there are a lot of factors

 

that overlap within the diamond, for example demand conditions and factor conditions are very similar

 

in the sense that the large workforce and growth of the Chinese economy have led to the same

 

outcomes. The Chinese government plays a big role in their economy, as it controls who get a

 

government subsidy and which companies will do well.

 


 

Part C: Government Interference and Foreign Direct Investment

 

Governments intervene in trade for multiple reasons, such as political, economic and cultural motives.

 

The political motives countries might have to do with protecting jobs, preserving national security,

 

responding to other nation?s unfair trade practices and gaining influence over other nations. Protecting

 

jobs, is one of the important things that politicians have to do, in order for them to save their jobs. Many

 

countries protect some industries form import or export in order to protect National Security, industries

 


 

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like ammunition, guns, bombs, sea and air transportation, due to the fact that if a war broke out, these

 

items are needed to protect the country. When governments respond to unfair practice of other

 

countries, if they are closing certain industries or are charging a higher tariffs on goods and services, that

 

country might stop trade with the other country for them to prove their point.

 

Economic motives just like political motives are meant to strengthen the host country, whenever

 

governments intervene for economic purposes, they would do it to protect the infant industries, which is

 

to protect that industry in its development stages form international competition, till it can become

 

competitive. The other reason is to pursue strategic trade policies.

 

The major reason why governments intervene in trade for cultural reason is to preserve national identity.

 

Culture and trade are greatly intertwined, and go with one another. Countries are influenced to other

 

cultures through trade and new economic relationships, so many cultures are starting to take on other

 

cultures.

 

Some of the methods that China and South Africa might use to either restrict or increase international

 

trade would be subsides that the host governments would give to our company for us to work in their

 

country, and some of the restrictions would be administrative delays, were it would take long for

 

company officials or security personal would take long to pass through.

 

I think that our private security firm would get a lot of government attention due to the fact that the host

 

governments might want to either keep tabs on it or hire our firm to protect foreign diplomats or

 

government interests.

 

The difference between foreign direct investment and portfolio investment can only be understood, after

 

defining the terms. Foreign direct investment is a purchase of a physical assets or significant amount of

 

ownership in a company in a foreign country to gain a measure of management control, while portfolio

 

investment is the investment that does not involve a degree of control in a company. So for foreign direct

 


 

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investment, you have a control factor and there is a certain percentage that you have to meet to reach

 

that criteria, while the portfolio investment can purchase any amount as long as you don?t have a

 

management control. Foreign direct investment, would be appropriate for the service I have chosen,

 

either for us to investment or for the company to be open up to other investment. When running a

 

service company, you would need a good investment to start up with, so buying into a company in order

 

to get certain degree of management control would be a very suitable option, especially if there is a lot

 

of opposition form the side of the government towards a foreign company.

 


 

Part D: Canadian Government Business Assistance

 

When starting a new business, you need all the money that is available to you, especially government

 

assistance in the form of grants, loans and subsides. Some potential sources of financing and start up

 

support or assistance that may be appropriate for our international business would be:

 


 


 


 


 

Bank loans:

 

To help you get started with the business

 

Government Grants:

 

Government grants come in the form of subsides by the government, loans and grants.

 

Foreign Government loans

 


 

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Investors

 


 

Some of the government sources that are available to Canadian Businesses establishing operations in

 

foreign markets are extensive but we will discuss the following:

 

1. Forum for international trade training (FITT):

 

For individuals who are new to international business and

 

Want to understand their corporate strategic needs, undertake effective international trade

 

research, create policies for costing, pricing, promotion and distribution

 

2. Trade Commissioner: Step by step guide to exporting

 

Is intended to help you learn about the global marketplace and how your company can do

 


 


 


 

business there.

 

The Guide will help you asses your companies? readiness, build an export plan, research and

 

select your target market, create an export marketing plan.

 


 

These government agencies are a good fit because any preparation for a foreign market is much needed

 

and in the end of the day, the more you prepare the better equipped you will be to succeed.

 


 

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