International Business: Exporting Goods from Australia - Coursework Example

University: Subject: Financial Management Report International Business Report Submission date: Name: Student Number: Seminar: Seminar Leader: Executive Summary While exploring the opportunities for the marketing of agricultural and irrigation instruments, it was found that the business in all the states of Australia regarding this field was reaching a saturation point and heavy competition was in existence. It is prudent to look for the opportunities in the developing countries which are gradually liberalising their economy. In search of those types of countries Egypt and India were short-listed and India was selected finally to market the instruments manufactured in Australia or by subsidiary in India. The reason for selecting the India was the large area of land under cultivation, robust and ever growing economy in the era of liberalised economic policies. Comparing with India, Egypt was not showing that much growth and the economy of Egypt was also not that much big compared to India. Good monsoon forecasting for India and hoping the absence of elnino and lanino, which caused scant rainfall in India in past years due to heating of sea water, the company decided to invest in a subsidiary in India. That subsidiary will manufacture and market the time tested instruments of Australia in that country. That amount of profit earned can be used in R&D in Australia and new products can be designed for manufacturing and marketing in Australia. International Business Report: Financial Forecasting Introduction: The CEO’s status report along with plans for improving financial management and performance are outlined in this section. The plans have been developed to meet the requirements of the marketing the products of the company due to slag in the business which is a result of over competition. The search of ‘Australian Agriculture and Irrigation Company’ for a potential place to market its products yielded a result. India can be chosen as there are crores of farmers and construction of some big projects were being done. The company can meet the needs of the farmers and the irrigation purposes. There is a large scope of bagging orders regarding agricultural instruments, irrigation material used in agriculture and dams. The environment in India, which is buzzing with activity due to continuous implementation of economic reforms, is conducive for investing and exporting. The goods manufactured in India can earn more profits by selling them not only in India but also in other countries as the Government there is following the policy of depreciating its currency for encouraging exports. But care must be taken that the exports are to the country having currency value higher than that of Indian Rupee. The choice of investing or exporting can be decided in recommendation and the outcome of the report. Actually the environment in India is conducive for investing as large amount of FDI is flowing into that country due to liberalisation and vast market it contains naturally. PESTLE analysis Political Economical Social Technological Legal Environmental The political situation in India comprised of a number of regional parties and four national parties. The country follows a parliamentary democracy. This compelled formation of alliances to form governments. But the two main National parties heading the two alliances were in support of economic reforms. So the political obstacles are nullified for investment in that country. Due to the fast growing GDP from the date of implementing economic reforms, India now is one of the largest economies in the world in the terms of GDP. It even recently dominated Russia in its GDP. As the share of agriculture is a major part of GDP till now the monsoon failures and successes played with economy. Though there is a need of vast infrastructure of irrigation, the present infrastructure and agricultural activities provide good market for the company’s products. The Social conditions of the country can be termed as foreign friendly as it was revealed by history and the present. Every business company, men and invaders came here chose to settle. Coming to the point of the economic activity at least 40% of population is directly or indirectly depend on agriculture. This makes a huge customer base of at least 100 millions of farmers for the marketing of agricultural instruments. The technological prowess of the country is moderate till now. But it was due to the lack of government support for R&D. But the economic reforms touched this area also prompting the big business entities to team up with western and technological giants for R&D and product development. This situation of technological friendly attitude of the local companies can be used by the company to promote a subsidiary with the local collaboration. Once there were so many licence formalities and redtapism in the country. But the country is in the mode of liberalising the laws in order to gain and invite more and more foreign investment into the country. As it helps its economy and export oriented businesses, the government is in support of the policy of depreciating its currency, which results in more profits for exporters and also creates good climate for investors from industrialised countries as the Indian currency is far less valued compared to the currency of the country of the investor. As it was part of the Indian Ocean Coast Countries federation which includes Australia, the trade matters and disputes can be solved and discussed in that forum. Regarding to environmental issues it is in a far better position than many developing countries in taking protective measures to curtail pollution. The industrial environment is investor friendly as all the states were competing with one another in developing infrastructure and giving land to the companies, which invest in their respective states. According to PESTLE analysis it is better for any medium sized or a major company to invest in the country like India to make use of vast customer base. It is better to form a subsidiary in which Indian partner has a reasonable share and major responsibility of marketing as they have more hold and familiarity with the people and situation. This way is better as the responsibility of the company can be limited to supplying the products or technology required for manufacturing them in India. The sole responsibility of marketing depends upon Indian partner. This mode of entry requires a maximum period of six months. In this period the first two months can be spent on searching a potential partner and the next 4 months to formalise the plans and agreements needed to invest in the country along with the construction process needed to manufacture the products. The legal issues such as converting the currency also could be done in this period. An amount of Rs.300/- crores can be invested of which Rs.100 crores can be from the Indian partner. Calculating in Australian dollars it amounts to 6.67 crores as the company’s share in the subsidiary. Financial Forecast Figures in crores of rupees. They are converted into Australian dollars at the end of the statements while calculating the profit of the parent company’s share. 2006-07 Quarter1 Quarter2 Quarter3 Quarter4 Income Spring Loaded Tiller Heavy Duty Spring Loaded Tiller Heavy Duty Spring Loaded Cultivator Tine Rigid Tiller Offset Disc Harrow (Mounted Type) Mounted Disc Harrow Mounted Disc Plough Automatic Disc Plough Seed Cum Fertilizer Speeding Attachment Mould Board Plough Leveller Thrashing Equipment Water tubes Heavy Duty Hose Clamps Single Bolt Hose Clamp Bolt Hose Clamp 000 000 200 15 12 12 9 12 12 11 07 15 20 7 6 15 10 19 18 100 7.5 6 6 4.5 6 6 5.5 3.5 7 10.5 4 2.5 6 6.5 9.5 9 50 3.5 3.25 3 2 3 3 2.5 1.5 3.5 5.5 2 1 3 3.5 4 4.75 Costs 172 86 42 Income after costs 28 14 7 Tax payable 5.6 2.8 1.4 Net income after tax paid 22.4 11.2 5.6 Stocks remained 2.5 The net income of the company after one year is forecasted as Rs.39.2crore rupees. The stock that was forecasted to be carried to the next year is 2.5 crores of rupees. Financial forecast for year 2007-08 2007-08 Quarter1 Quarter2 Quarter3 Quarter4 Stock Income Spring Loaded Tiller Heavy Duty Spring Loaded Tiller Heavy Duty Spring Loaded Cultivator Tine Rigid Tiller Offset Disc Harrow (Mounted Type) Mounted Disc Harrow Mounted Disc Plough Automatic Disc Plough Seed Cum Fertilizer Speeding Attachment Mould Board Plough Leveller Thrashing Equipment Water tubes Heavy Duty Hose Clamps Single Bolt Hose Clamp Bolt Hose Clamp 2.5 200 15 12 12 9 12 12 11 07 15 20 7 6 15 19 18 100 7.5 6 6 4.5 6 6 5.5 3.5 7 10.5 4 2.5 6 6.5 9.5 9 25 1.75 1.50 1.5 1 1.5 1.5 1.25 0.75 1.75 2.25 1 0.5 1.5 1.75 2 2.25 25 1.75 1.50 1.5 1 1.5 1.5 1.25 0.75 1.75 2.25 1 0.5 1.5 1.75 2 2.25 Costs 172 86 21.5 21.5 Income after costs 28 14 3.5 3.5 Tax payable 5.6 2.8 0.7 0.7 Net income after tax paid 22.4 11.2 2.8 2.8 Stocks remained 2.5 The total net income from the four quarters was again forecasted as 39.2 crore rupees. This seems to be no increase in profit, but it was forecasted in that manner keeping in view the monsoon climate of India and the long term ups and downs in sales. The stocks remained to be carry forward remained the same level indicates that the there was a little bit increase in operational profit after settling in the country for 1 year. Financial forecast for year 2008-09 2008-09 Quarter1 Quarter2 Quarter3 Quarter4 Stock Income Spring Loaded Tiller Heavy Duty Spring Loaded Tiller Heavy Duty Spring Loaded Cultivator Tine Rigid Tiller Offset Disc Harrow (Mounted Type) Mounted Disc Harrow Mounted Disc Plough Automatic Disc Plough Seed Cum Fertilizer Speeding Attachment Mould Board Plough Leveller Thrashing Equipment Water tubes Heavy Duty Hose Clamps Single Bolt Hose Clamp Bolt Hose Clamp 2.5 200 14 12 12 9 12 12 10 07 14 19 7 6 15 19 14 100 7.5 6 6 4.5 6 6 5.5 3.5 7 10.5 4 2.5 6 6.5 9.5 9 25 1.75 1.50 1.5 1 1.5 1.5 1.25 0.75 1.75 2.25 1 0.5 1.5 1.75 2 2.25 25 1.75 1.50 1.5 1 1.5 1.5 1.25 0.75 1.75 2.25 1 0.5 1.5 1.75 2 2.25 Costs 166 86 21.5 21.5 Income after costs 26.8 14 3.5 3.5 Tax payable 5.6 2.8 0.7 0.7 Net income after tax paid 21.2 11.2 2.8 2.8 Stocks remained 8.5 This year the net income may decrease to 38.0 crores keeping view that the people who bought once the instrument may not buy every year and gaining new customers every year at the same rate is also not possible. This may make stocks rise to 8.5 crores of rupees. Financial forecast for the year 2009-10 2009-10 Quarter1 Quarter2 Quarter3 Quarter4 Stock Income Spring Loaded Tiller Heavy Duty Spring Loaded Tiller Heavy Duty Spring Loaded Cultivator Tine Rigid Tiller Offset Disc Harrow (Mounted Type) Mounted Disc Harrow Mounted Disc Plough Automatic Disc Plough Seed Cum Fertilizer Speeding Attachment Mould Board Plough Leveller Thrashing Equipment Water tubes Heavy Duty Hose Clamps Single Bolt Hose Clamp Bolt Hose Clamp 8.5 200 16 14 14 11 12 12 10 07 16 19 7 6 15 19 14 100 7.5 6 6 4.5 6 6 5.5 3.5 7 10.5 4 2.5 6 6.5 9.5 9 25 1.75 1.50 1.5 1 1.5 1.5 1.25 0.75 1.75 2.25 1 0.5 1.5 1.75 2 2.25 25 1.75 1.50 1.5 1 1.5 1.5 1.25 0.75 1.75 1.25 1 0.5 1.5 1.75 1 1.25 Costs 176 86 21.5 20.5 Income after costs 29 14 3.5 1.5 Tax payable 5.8 2.8 0.7 0.7 Net income after tax paid 23.2 11.2 2.8 2.8 Stocks remained 3.5 The net income for the fourth year is predicted as 40.0 crores and the stocks that should be carried forward must be 3.5 crores. The profit of the company in Australian dollars is 5.21 crores after 4 years of investment of $6.67 crores. This means the turnover increased this year after three years of existence of the company in India. The above forecasting is possible, if company attracts new customers due to its rigorous publicity and due to the performance of its instruments sold. These values forecasted above are done assuming that in the coming four years there will be good monsoon in India. There was 5 years of continuous drought 2 years back. Historical studies reveal that after 5 or6 years of drought, there is possibility of good monsoon for 7 to 10 years. The good forecasting for the year 2009-10 is done not only keeping in the fact that the company completed three years of its stint in India but also expecting the completion of some irrigation projects like sardar sarovar project in Gujarat and other small, medium and lift irrigation projects that were being constructed all over India. References: The details were given in the following order: Name of author, year/date, title, publisher, edition, type of medium, website. 1. News bureau, 2004, Human development and infrastructure in subcontinent, South asian’s voice, sep2004, electronic, http://india_resource.tripod.com/development.html 2. New Report, 2005, Poverty and underdevelopment, South Asian’s voice, sep2005, electronic, http://india_resource tripod.com/development. Html. 3. Tribune report, 2003, India has ability to join select groups, Tribune, Apri.2003, electronic, http://www.tribuneindia.com/2003/20030421/nation.htm#2 4. Hindu Bureau, 2006, Indo-china regional trade agreement, Hindu Business line, Feb2003, electronic, http://www.blonnet.com/2006/02/23/stories/2006022302390300.htm 5. Foreign ministry team, 2006, Recent developments, Australian Government, electronic, 23-07-06, http://www.dfat.gov.au/trade/iorarc/index.html 6. Perumal Koshy, 2006, regional cooperation, BOLOJI.com, july 23, electronic, 23-07-06, http://www.boloji.com/analysis/052.htm 7. KRKYL team, 2006, profile, KRKYL, 2006, electronic, 24-07-06, http://www.indiamart.com/krkylu/ 8. www.bushmantanks.com 9. http://www.watertube.com.au/ Read More