Expansion of the Blue Sun Energy Company - Essay Example

Submitted President of Blue Sun Energy Company International Development Director SUBJECT: Expansion of the Blue Sun Energy Company The purpose of this memo is to propose an expansion of the company to Nigeria according to the discussed prevailing factors in the country that prove favorable for the launch of the company. Blue Sun Energy Company deals with renewable energy and it is established in Greensboro, North Carolina. The company is focused on forming strategic affiliations with technological companies in the United States and chosen manufactures in Germany and China. Being a company that was established in May 2008, it is a young but thriving business. The focus of the company was to successfully introduce products into the growing market through teaming up with foremost partners in China whichwere already established pacesetters in the expertise of LED lighting and Solar Energy (Buchsbaum 42). It also centers on marketing products and services derived from energy with the United States of America andother worldwide renewable energy markets. As discussed in class, it is important to survey a country of interest before making a decision on whether to establish the company. The survey on Nigeria includes some important factors such as the history, economic, political, social, and cultural factors. Overview of Nigeria Nigeria is the most heavily populated country in Africa. It is located on the Guinea Gulf in West Africa. Chad, Benin, Cameroon and Niger are the immediate neighbors of Nigeria. The country gained independence on Oct 1, 1960 making it an official constituent of the Commonwealth of Nations which led to its connection to United Nations. In 1975, Gowon’s rule lasted for 3 years and ended in a coup which went ahead to declare the Army Brig Muritala Mohammed a chief of state. The country experienced an oil boom which maintained the Nigerian economy during the 1980s (Afolabi 54). By this time, it was regarded as a paradigm of economic wellbeing and democracy in Africa. In 1984, the military seized power again and another military coup followed again. After swaying from one coup to another, the country finally attained a solid elected leadership. However, this happened after the government of United States imposed several sanctions on the country. The period that followed was filled with rising strained relations but the replacement of General Abacha by General Abubakar after his death led to a fresh phase which was marked by improved bilateral relations. The transition to democracy permitted the lifting of the bans on visas leading to augmented high-level trips of United States officials and dialogues of future backing. The counter narcotics provision of Vital National Interest Certification became effective during the month of March 1999 making a way for re-launching quicker ties between Nigeria and U.S as a major partner in the continent as well as the region (Afolabi 56). There has been major improvement since Obasanjo was sworn in as the President of Nigeria with improvement of bilateral relationships. In addition, there has been cooperation on many significant foreign policy objectives such as peacekeeping in the region. Even though there have been reported cases of widespread corruption, attention continues to be paid on Nigeria as a country and its contribution to economy. Political System of Nigeria The country is structured after the US, with decision-making power implemented by the head of state. Goodluck Jonathan is the current head of state for Nigeria after he took over Umaru Musa Yar’Adua in the year 2010. The president controls the country as the national executive and the head of state. He only enters the office if he is voted for by the majority of the population (Kifordu 288). The maximum term that he can spend in the office is four-year terms. The power invested in the head of state is assessed by the House of Representatives and the senate which when combined forms a bicameral body which is referred to as the National Assembly. The Nigerian senate comprises of 109 seat body. There are a total number of 3 members coming from each state together with the Abuja capital region. All the members are only able to enter the office if they are voted for by the majority. Just like the head of state, they also have a four year term. There are 360 seats contained in the House and the total number of these seats according to each seat is dependent on the country’s population. Obstacles the Company may Face When Entering the Market The Nigerian legal system: it originated from the English common law. The country’s customs play a considerable role in the implemented legalities of Nigeria. The system is very strong and has a reputation for following rules and regulations just to the right extent. The Constitution of the Nigeria’s Federal States is responsible for governing the National Assembly. Furthermore, it has been granted the power to form its own laws (Kalley 70). Before starting up a business in Nigeria, our company will have to follow the legal process which is responsible for foreign business. This has got to be done in the start-up procedure of foreign business. Basically the company will experience some issues with the country’s legal system due to the reason that the startup process has around twelve processes and a total number of forty four days to launch a liability organization owned by foreign owned in Lagos, Nigeria. The start-up process though long is a bit quicker that the regional average for that of the Sub-Saharan Africa. When compared to that of the IAB global average, it is slightly slower. The Nigerian law allows entirely foreign-owned subsidiaries, with a law that they ought to include in the least, two shareholders as well as a local currency denomination for the share capital (Siollun 1967). The company can only be integrated by a local counsel who deals with a Corporate Affairs Commission. Additionally, the foreign-owned LCC is urged to register the venture with the (NIPC) Nigerian Investment Promotion Commission in order to make the procedure of repatriation of funds uncomplicated. These funds include equity upon investment and dividends. The Nigerian Foreign Exchange Act requires that there must be importation of foreign capital ventured in the Limited Liability Company by means of authorized dealer. This step will ensure that the company is given a Capital Importation Certificate. The certificate will warrant the company as a foreign investor to acquire a bank account operated in the foreign currency (Oshikoya 2). The company will have to attain an import-export license issued by the Nigerian Customs Service since it will be taking on international trade. A minimum capital of approximately $66,500 is required for the foreign companies. 25% of the shares are required by law to be given out at the incorporation. Access to Industrial Land: the state governor is responsible for vesting land in Lagos. It will be quite unfeasible to acquire an utter interest in land. The company will need to acquire a right of occupancy when buying land supposed to last for approximately 99 years or less. However, the company may buy land or lease land interests from landowners who are private because they are usually given the right of occupancy by the state (Kalley 70). The company can also acquire a lease from state- held property development corporations. If the leases will last for more than three years, it is required that the company should acquire permission form the governor. Nevertheless, no restrictions have been made on the quantity of land which may be leased. Commercial Dispute Arbitration: This is an Arbitration and Conciliation Act which was enacted in 1988, but re-enforced as the 2004 Arbitration and Conciliation Act. The act governs International and domestic arbitrations and is founded on UNCITRA’s Model Law. Any form of arbitration which does not come under that of domestic, is regarded as international arbitration. The country does not possess any form of online arbitration (Kalley 72). There is minimal support of arbitration which is experienced from the court especially in matters of domestic arbitrations. The process of arbitration enforcement takes an average of twenty weeks regarded as a long period rendered in Nigeria. It is conducted by means of filling a request to an injunction of execution appending assets and it takes an average of 21 weeks to attain a foreign award. Corruption: it is one of theproblems that may be encountered by the company when entering the Nigerian markets in relation to legal and political system. Even though the government permits entire foreign companies in the private sectors, the two shareholders required are a means for corruption. What happens is that in the country’s system, it augments the business cost by means of the cost of illicit payments, handling price of bargaining with the officials and the threat of breached contracts or detection (Adegbite, Kenneth and Olufemi390). Even though some people imply that corruption decreases prices by cutting official procedure, the accessibility of kickbacks can also provoke officials to contrive delays and new rules. Openly getting rid of lengthy and costly regulations is better than secretly permitting them to be going around by using kickbacks. Where corruption raises the outlay of business as well as disfiguring the playing field, this protects firms with association from completion and therefore maintaining ineffective firms. Economic System The country has made some development in the attempt to launch a market based financial system. The components of the economy include; Natural resources: Natural gas and oil which took up 37% of the GDP during 2006. These resources include; iron ore, tin, limestone, zinc, led, coal and columbite. Agriculture: These products include sorghum, yams, palm oil, cassava, groundnuts, cotton, livestock, corn, rice and millet and they are responsible for a 40% contribution to the GDP. Industry: This includes car assembly, food products, textiles, footwear, cement, metal products, beer, lumber and detergents. In the recent years there was privatization of the only petrochemical company owned by the government and traded its interest in 8 companies in the oil service. The government of Yar’ Adua paid much attention to appropriate procedure by reviewing and overturning a number of suspect agreements granted by its predecessor (Adegbite, Kenneth and Olufemi392). It is clear that the government plays a principal role in ordering economic policy. This is shown through a scenario whereby the central bank of Nigeria and the government took considerable procedure to back the banking sector. In the process of performing financial audits for 24 Nigerian national banks, it was discovered that there were ten of them which were suffering from illiquidity and undercapitalization. There was pumping of approximately six billion into the banks as well as replacement of the management teams. Moreover, the Central bank went ahead to reveal the people who were involved included business and political figures. The action by the bank led to a more good repute in the global community since the results of this work proved to be very helpful for the country due to the economic reform (Kifordu 300). Some of the additional successes include; Nigerian government attempt to deregulate the prices of the fuel; the country’s participation in a commitment for anticorruption initiative; formation of an effective commission in an effort to recover the funds which have been lost due to mishandling; building up several offices to monitor incomes and expenditures. Social Issues The country has been going through some imperative social problems currently. One of the most dominant issues is the dispute of the Niger Delta. It is a region that is responsible for approximately 75% of Nigeria’s oil production which was since the early 1970s. Even with these benefits brought about by the region, the political history still acts as a variance and marginalization. This has been the sole problem leading to the political anxiety, criminality and protest occurring in the delta which is the source of most of the oil (Afolabi 57). The various occurrences such as systemic production theft and infrastructure vandalism have been connected to this conflict. This is a dilemma for the company since this was the proposed site for establishing the company which means that there has to be more consideration. Another social issue presented is the insecurity, regional terrorism and Islamic Sharia Law. The company has one of the largest populations of the Muslim religion with some of the states taking up Sharia Law. However in some, the introduction has caused major conflicts to occur between Christians and Muslims which resulted to thousands of deaths. Most of these conflicts involve people without employment and this is a strong reason why the company ought to be established to take in some of the idle people (Kifordu 300). Corruption has had negative effects on the country including political instability, lack of funding for schools and social service systems, poor conditions of refineries which lead to fuel shortages in large numbers. Nevertheless, the issue has been put to control from the year 1996 but still the issue shall be put into consideration when establishing the company. Proposed Corporate Social Responsibility Programs The modern world is filled with long world supply chains whereby the balance of control between worldwide corporations and the individual societies where they function is leaning in favor of the corporations as the age progresses (Bhattacharya 15). In the process of commanding the authority they have, these companies not only form value, but also pass on these values compared to other universal institutions. Even though our company is simply a developing company and not so huge in size to part produce or money, it is our commitment to engage in assisting the communities which are less privileged. Corporate Social Responsibility will involve the free provision of utensils to hospitals, schools around and the clinics. Furthermore we will also partner with non-profit institutions to see through the dealings that entail providing help in the community and promote hardworking children in the community through offering scholarships.The country is a feasible economy and our company can play a major role in supporting sanity into the structure through productive decisions and recommendation to the government as the nation currently undertakes an open system of government in social equality. Cultural Aspect of Nigeria There are 371 tribes in Nigeria and they all have diverse cultures just as the number of tribes therefore our company ought to offer room for diversity especially in recruiting a number of the ethnic groups in an attempt to coagulate our operations in the country. The main cultures include Hausa, Igbo and Yoruba cultures (Siollun 1968). As per the class discussions conducted, it is wise to enter a market that is culturally diverse since there are a wide range of benefits that are associated with it. Ibo culture: This culture is mostly found in the South-East region of Nigeria. It is mainly recognized for the people’s sharpness in trade and business. They have got immense self-confidence and believe in fairness and equality. They also always suppose that the success of life is highly dependent on honesty. They are Christians and practice religious life and merits. Nevertheless, these people can help the company a great deal to achieve a good turnover through employment opportunities (Bhattacharya 16). Yoruba Culture: It is found in the South-West part of Nigeria. Yorubas prove to be broad minded and this can be illustrated through their open acceptance of Islam and Christian in a big proportion. These people love doing business, and especially for the fact that they mainly reside in Lagos which is a big commercial city. They also value land as a big issue in the country. Hausa Tribe: It is situated in the Northern part of Nigeria. These people are a target by the company especially because they are perceived as the most transparent and honest people especially in business transactions in the country than all the other cultures (Siollun 1973). One of the disadvantages is that they do not show a lot of interest to involve themselves with business especially with western countries. Most of the country’s cultures have instilled moral cultural values to themselves. These includes value for hospitality and acceptance; authority and old age; community life; sacred of religion; family oneness Summary In summation, Nigeria is a country which is fast developing. It is one of the most populated countries in Africa which makes it favorable in terms of market for our company. The political and economic stability of the country has improved from the period of violence which was seen some years ago. In addition, the country is rich with culture which makes it diverse for our market. Our company will also be able to give back to the community through the creation of jobs for the people. With this information the company management should expand the business to the country as a measure for global expansion and creation of a larger customer base. Works Cited Adegbite, Emmanuel, Kenneth Amaeshi, and OlufemiAmao. "The Politics Of Shareholder Activism In Nigeria." Journal of Business Ethics 105.3 (2012): 389-402. Business Source Complete.Web. 27 Apr. 2012. Afolabi, Gabriel K. "Corruption In Contemporary Nigeria." DLSU Business & Economics Review 19.2 (2010): 53-61. Business Source Complete.Web. 27 Apr. 2012. Bhattacharya, CB, Daniel Korschun, and Sankar Sen. "What Really Drives Value In Corporate Responsibility?." Mckinsey Quarterly 1 (2012): 14-16. Business Source Complete.Web. 27 Apr. 2012. Buchsbaum, Lee. "Energy Innovators.(Cover Story)."Coloradobiz 33.1 (2006): 42. Regional Business News.Web. 27 Apr. 2012. Kalley, Karanta. "Nigeria." Nigeria Country Monitor (2011): 69-75. Business Source Complete.Web. 30 Apr. 2012. Kifordu, H. A. (2010). Political Elite and the Vicissitudes of Accountability in Nigeria. Politikon: South African Journal Of Political Studies, 37(2/3), 287-309. doi:10.1080/02589346.2010.522339 Oshikoya, TemitopeW.. "Nigeria in the global economy: Nigeria's integration into the global economy is below its potential." Business Economics.The National Association for Business Economists. 2008: 1-2. HighBeam Research. 27 Apr. 2012 Siollun, Max. Oil, Politics And Violence : Nigeria's Military Coup Culture (1966-1976). Algora Pub, 2009. eBook Collection (EBSCOhost). Web. 30 Apr. 2012. http://www.afribiz.info/content/starting-a-foreign-business-in-nigeria Read More