Political, Economical and Business Environments of Taiwan and China - Case Study Example

Running Head: COUNTRY ANALYSIS- FEASIBILITY REPORT Country Analysis- Feasibility Report Name: Course: College: Date: Table of Contents Table of Contents ii Executive summary 3 Introduction 4 China 4 Business Environment 4 Economic Environment 5 Political Environment 6 Market Entry 6 Taiwan 6 Business Environment 6 Economic Environment 7 Political Environment 7 Mode of market entry 8 Country Analysis Report Summary 8 References 11 Executive summary This report analyses political, economical and business environments of Taiwan and China. I have concentrated on articles which have rich details about the two countries. The research will help Octahedron company to make a good investment decision with minimal risks and more benefits. The aim of the research is to examine Taiwan and China markets in order to come up with the best country that Octahedron can venture into. The research is also expected to assist Octahedron in coming up with a good market strategy that will help in selling its products. The company should be well informed before making any investment decision. Therefore, it requires quality assured research findings from qualified researchers and publishers. Foreign investment can result to heavy losses or even failure of any given company if the decision is not based on facts about the countries involved. Success in foreign investment of Octahedron Company will market its products worldwide leading to more profits. Introduction Octahedron Company has been marketing its products in U.S and European markets. Its SWIM software product has been doing well in the jewellery industry. Currently, the company top executives are thinking of expanding the market of their products to other countries worldwide. China and Twain are two countries that the company is targeting. However, the company intends to choose only one of the two countries. In order to come up with the best choice, the company requested me to research on political, economic and business environment of China and Twain. This will help the company come up with the best mode of entry into the market. In order for the company to maintain its market status in the long run, it is advisable to invest in countries that have political and economic stability. Factors that affect business operations differ in various countries. China Business Environment The media has currently been suggesting that the business environment of China has been worsening for foreign investors for the past few years. However, these claims cannot be proofed since China market is only becoming competitive and tough to foreign investors. If foreign investors can come up with new strategies of dealing with this competition, they can be able to maintain their market status. Foreign investors in China have to comply with all regulations that govern the business markets. Previously, In order to discourage foreign investors, they were expected to apply unobtainable licenses. They wasted a lot of time trying to get those licenses hence it acted as barriers to their investment plans. These realities can discourage foreign investment it also helps the investors to gain knowledge on the challenges they expect to face. Market advisers have been advising foreign investors not to enter the China market due to the many barriers erected for them in order to avoid competition with domestic companies. These barriers were set over ten years ago but currently doing business in china is much easier. Operational costs of businesses in China have been increasing, but it should not decline foreigners’ attitude to invest. Business climates in China keeps changing thus investors should adapt to the changes (China Briefing, 2013). Large corporations that have employed many workers are also being affected by the increase in labour costs. However, the level of losing profits has not yet been reached. The government requires investors to run their businesses in accordance with the law. Those foreign investors, who have been operating businesses that do not require compliance, are now being found and facing the law. In China, there are so many business opportunities which foreign investors can invest on and get a lot of profits (China Briefing, 2013). Economic Environment China economy has grown for the past 30 years and now it is the world’s largest single country-economy. Economic growth has been the government central task since market-oriented reforms were introduced in 1979. In order to maintain low transactions costs when dealing with exports, china business investors need to operate on a much better business environment thus increase economical growth of the country. The government should protect its brands and fight intellectual- property theft. The government must start treating foreign investors as creators of wealth hence encourage them to invest. China economy will continue to grow if regulations and law of foreign investment can continue to be respected and exercised. A stable economy motivates investors because they feel protected and guaranteed of successful operation in future (Editorial Opinion, 2013). Political Environment Policy making process in China usually takes a long time. This time is taken for the policy to get approval because central government does not have power over a vast country. Chinese government is taking steps to come up with a stricter legal system that will support global market place and free commerce. People’s Republic of China (PRC), started developing its current legal system in 1970’s. Sino-Foreign Equity Joint Venture Law was passed in 1979 to assist the government in building a legal structure to control and govern foreign investment. The government has maintained its agenda to build a better legal system that will guard and protect the rights of foreign investors. This law has been a contributing factor to the current heavy foreign investments in China (Milson, 2003). Market Entry Foreign investment has become very popular in China nowadays. All investors must follow the law and regulation that governs the market. Investors are given the rights to advertise products and expand business through advertisements channels like media. The mode of entry to the market must be legal and all investments should be licensed. Some foreign companies get contracts from China domestic companies hence they are able to penetrate into the market (China Briefing, 2013). Taiwan Business Environment Taiwan nation has vowed not to leave any leave any issue unaddressed in order to strengthen its business environment. This will increase the nation’s global visibility and competitiveness in accordance to Economic Planning and Development Council. The council plans to work with various agencies to reform guidelines that will assist Taiwan to be the world’s best country where one can do business. Several measures have been put in place to improve the business environment. This includes proposing legal changes, regulatory implementation and empowering information disclosure system (Chang, 2013). This will increase the level of foreign investment hence improve the economic status. Economic Environment Taiwan’s economy is much needed to direct, guide and motivate foreign investment. Taiwan government has a role to play in reinforcing the law and ensuring that economy growth rate is commendable. Since 1960s, the government decided to be the economic caretaker. Currently, many foreign companies choose to invest in Taiwan due to its stable economy and its digital content industries. Ministry of Economic Affairs held seminar in 2012 entitled “Taiwan Investment Environment and Business Opportunities.” Foreign investors were welcomed to participate hence create a good investment environment (Ministry of Economic Affairs, 2012). Taiwan is expected to continue improving its economic growth rate in future as more investors invest in the nation’s market. Political Environment Political unrest can discourage foreign investors who aim to invest in the country involved. Approximately 20 Taiwanese companies are located in Gazipur County and some in the Dhaka. There was violence that broke and many people got killed across the nation. The violence resulted from the death sentence of Delwar hossain Sayedee who was accused of crimes during the war for independence in 1971.political campaigns in Taiwan affects the nation stability hence disco urging foreign investors who may fear to incur losses or destruction of their properties during such periods (Focus Taiwan, 2013). Mode of market entry Taiwanese firms mostly adopt an accelerated globalization strategy hence they mobilize available relational assets in order to take advantage of market networks within its reach. They create linkages in their foreign investments countries which facilitative smooth marketing operations. They usually prefer solely owned subsidiaries than joint ventures in able to maximize their profits and enable them to explore local resources of the given country. Foreign investors, who invest in Taiwan, tend to use the same mode of market entry used by Taiwan to other countries (Chen, 2004). Country Analysis Report Summary Octahedron Company is a well established company which cannot affordable to invest in foreign country that will jeopardise its current success. SWIM software is the product the company intends to sell in foreign markets of China or Taiwan. The two countries have different political, business and economical environments. China is politically stable and the rules and regulations that govern foreign investment are strictly followed by all the foreign countries that invest in the nation. China is well known worldwide due to its market diversity and successful innovations that increases its GDP. Currently, China is the largest single-country economy all over the world. Its economic status promises a good future for investors and high profits. The legal system being put in place by Chinese government, will increase protection for the foreign investors and better procedures followed when a foreign country is trying to venture into China market. The system will ensure that short time is taken to pass policies into law and also save the time wasted before a foreign company is registered. (Ministry of Economic Affairs, 2012; Milson, 2003; Editorial Opinion, 2013; China Briefing, 2013). Taiwan is another country well known for foreign investments across many countries worldwide. It has a stable economy, which enables local and foreign companies to make more profits since the cost of operation is fair. Various changes are done in the business environment regularly thus facilitates smooth business operations across the nation. However, sometimes there are political challenges that may discourage foreign investors. During political campaigns periods, violence and demonstrations are reported. Demonstrators destroy properties in various parts of the nation thus investors incur heavy losses. When the country is politically unstable, labour becomes a problem and companies are forced to pay the available workers handsomely to maintain them. (Focus Taiwan, 2013; Ministry of Economic Affairs, 2012; Chang, 2013). By doing so, companies incurs more operational costs and business operations are interfered are affected. The two countries have different modes of entry into foreign markets that are practiced within the nations. The report shows that the best country for Octahedron foreign investment is China. This is because; China has a stable political, business and economical environment, which enables investors to do successful business without failures or interruptions. Many companies like Octahedron only invest in countries, which promise a steady growth in economy and infrastructure. After comparing the common modes of entry into foreign markets between the two countries, I think it is advisable for Octahedron to change its mode of entry in order to successful market the SWIM software product. Direct investment is the best alternative mode of entry that can favour Octahedron Company. In foreign direct investment, the company will be able to direct own facilities in the target country. This can be achieved through acquisition of an already existing enterprise or establish a new one. This will assist the company to better know the competition environment and control the operations well. Octahedron will have to transfer its capital, technological and personnel resources to China for the business to start operating. Direct investment will assist in overcoming import barriers and unfair pricing of the products. This mode of entry is favoured by high sales potential and low political risk of China. Advantages foreign direct investment includes; better application of specialized skills, there is minimum knowledge spill-over, investor is able to gain knowledge of the local market and the foreign company is viewed as an insider hence given special priorities. However, disadvantages that accompany direct investment include; it requires more commitment and resources and it may be a bit challenging to manage the local resources. Octahedron Company is expecting to gain more profits from this investment and also sell their product to other countries in future. References China Briefing (2013). China’s Current Business Environment: It’s Not Tough, Just Comply. Retrieved from http://www.china-briefing.com/news/2013/01/04/chinas-current-business-environment-its- Chang, M. (2013). Taiwan moves to improve business environment. Retrieved from http://taiwantoday.tw/ct.asp?xItem=201927&ctNode=413 Chen, T. (2004). Liability of foreignness and entry mode choice: Taiwanese firms in Europe. Retrieved from http://homepage.ntu.edu.tw/~ntuperc/docs/publication/2005_05_Chen.pdf Editorial Opinion (2013). China’s political climate is hostile to the vital next stage of economic growth. Retrieved from http://www.thestar.com/opinion/editorialopinion/2012/07/12/chinas_political_climate_is_hostile_to_the_vital_next_stage_of_economic_growth.html Focus Taiwan (2013). Taiwan's companies in Bangladesh affected by unrest. Retrieved from http://focustaiwan.tw/news/aall/201303010045.aspx Ministry of Economic Affairs (2012). Department of Investment Services, Ministry of Economic. Retrieved from http://www.moea.gov.tw/Mns/english/news/News.aspx?kind=6&menu_id=176&news_id=26830 Milson, M. (2003). China – Political and Regulatory Systems. Retrieved from http://www.sixsmart.com/SSPapers/pmw10.htm Read More