International Engineering Management - Report Example

International Engineering Management By: Professor: Class: University: City: State: Date of submission: Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Overview of the region 4 3.0 Malaysia 5 3.1 Economic Outlook 5 3.2 Advantages and Perspectives 7 3.2 Disadvantage and Risks 8 3.4 Recommendations 9 4.0 Vietnam 10 4.1 Economic Outlook 10 4.2 Advantages and Perspective 12 4.3 Disadvantages and risks 14 4.4 Recommendations 15 5.0 Summing Up 15 6.0 References 16 Figure 1: Malaysian GDP performance 6 Figure 2: Graphical representation of Malaysian GDP performance 7 Figure 3: Performance of industry and construction in the previous years 11 Figure 4: Growth in total demand driven by consumption and fixed formation 12 Figure 5: Manufacturing sector for Vietnam compared to other South East Asian Countries 12 International Engineering Management 1.0 Introduction Considered as the leading supplier of turnkey, TNA integrated its food packaging and processing solutions globally. Moreover, it has more than 3,000 installed base systems in over 130 countries. The organization boasts of its high performance packaging and processing solutions due to high return on investment (ROI) and low cost ownership presented with its unique combination of the innovative strategy, 24/7 international support system ensuring that customers receive high flexibility at all time, and extensive experience in project management. The packaging and processing solutions offered in TNA are used in different industries including pet foods, frozen, meat and poultry, baked snacks, salty snacks, pasta, fresh produce, powder, and cereals (Packaging Gateway, 2016). For more than 26 years, TNA has been able to set a benchmark within the industry with aim of increasing maximum output and flexibility especially for the Vertical Form, Fill, and Seal (VFFS), creation of very efficient machines, and utilization of fewer parts with simple designs. Currently, the organization provides a complete products line using its popular Roflo® and Robag® VFFS packaging systems that are transfer and distribution systems to the seasoning equipment, complete processing equipment lines, metal detectors, multi-head scales, case packers, and checkweighers. Being an international leader within the food processing and packaging industry, the company also provides vital solutions and single systems to all its clients. It provides of having solution to any problem that relates to food packaging. For years, the company has been operating in various regions including Europe, North America, South Africa, and North America and currently considers expansion in the Middle East and Asian region. With such expansion, the report aims to undertake on analysis of the Asian market especially in Vietnam and Malaysian. 2.0 Overview of the region With increasing demand for the packaging products in the Asian, the market provides several opportunities for TNA. TNA commenced its investment in the Asian market in 1996 in Philippines before stretching the provision of its services and products to Japan, Thailand, and Korea. Moreover, with China as one of the emerging markets, it is becoming an important market for TNA products making Asia the major growth market considering the rising need for the systems that assist in saving the cost labour in responding to the increased demand for food packaging and increasing labour cost. In 2015, TNA had 15 per cent of its total sales in Asia with positive market growth reflecting the opportunity for enlarging its operations. However, the company experiences high level of competition from Aerison Pty Limited, A. Noble & Sons Limited, A.N. Cooke Manufacturing Co. Pty. Limited, Advanced Conveyors Pty Limited, and Advansa Pty. Limited. Through the years, the company has been able to cope with the increasing demand for the packaging products and high level of competition within the market. Besides, the company focused on the provision of the integrated turnkey systems for the transformation of the production processes (Packaging Gateway, 2016). Through establishment of proper relationship and offering suitable responses to the local conditions of the Asian market, TNA has been in a position of developing itself quickly based on its sales capability. With growth and increased demand, the company opened a factory in China in 2011. Despite the wavering confidence over the strength of the Asian economies, the food and packaging market within the region remains strong with an expectation increased global growth rates at 6 percent annually. In addition, the Asia savoury market value is predicted to increase to $27.5 billion. The major factor contributing to such resilient and robust growth could increment in the levels of urban populations and development in the retail infrastructure responsible for driving and supporting the requirement for the packaged products within the region. Although there have been global economic downturn, the Asian markets continue to exhibit high level of economic of growth which attracts many investors. In a survey undertaken by the World Bank in 2014, the report found that developing countries within the East Asia Pacific would experience stable economic growth rate of 7.1 per cent. The move to expand the operations of the company form part of its global expansion strategy and confirmation of TNA’s commitment to the region while at the same time reinforcing institutional leadership position within the international packaging and processing industry. Even with the decrease in the Asian average growth rate from 2009 to 2013, the market remained stable attracting the company to exploit it further. The Asian market offers several opportunities for the Australian companies with the market becoming the major economic driver on international basis, which also attract the multinational corporations aiming to expand their activities in the Asian market. Considering that most Asian companies are low cost and utilize less innovative and outdated technologies, they less threat to TNA which enjoys the appropriate competitive advantage due to its improve technological services. Different organizations are considering investment in the Asian markets, which to some extent provides several opportunities for TNA to invest. 3.0 Malaysia 3.1 Economic Outlook In the second quarter, the country’s GDP increased at the slowest rate due to the global financial crisis that hit the economy in 2009; however, the growth is likely to remain sluggish in the near quarters. The deceleration in the economic growth was within the expectation considering that the country’s net exports and agricultural sector continued dragging on the growth in the second quarter. Nonetheless, the domestic demand remained resilient due to enhancement in both the public and private consumptions, which is the major factor encouraging local investment by international organizations. Similarly, the industrial production has been registering sharp improvement since 2015 (Economic Transformation Programme, 2013). Even though domestic demand is poised to continue propping up the economy of Malaysia, the recovery path is strewed continuously with the risks. There are various external factors influencing the economy and growth outlook for Malaysia including the slowdown in China, hiking in the potential Fed rate, and depression of the energy prices. Statistics show that the Malaysian GDP would expand to 4.1 per cent in 2016, which is considered a 0.1 percentage points from the previsions forecasts. However, it is projected that the GDP would grow to 4.4 per cent in 2017. Figure 1: Malaysian GDP performance Figure 2: Graphical representation of Malaysian GDP performance 3.2 Advantages and Perspectives Currently, Malaysia is its most radical transformation as it aims to achieve its Vision 2020. The country’s transformation is visible in its political front, business entities, and the public sector. Located within the heart of South East Asia, Malaysia enjoys strategic location considered cost-competitive for the investors intending to set up their offshore operations to manufacture improved technological products for the markets: regional and international. Moreover, the Asia enjoys market-oriented economy and pro-business government policies, which ensure businesses, have vibrant business environment and attracting dynamic investors making it a perquisite for profits and growth. The key strengths of Malaysia are properly established infrastructure, legal system and productive workers, political stability, and provision of attractive incentives for the investors. Improvement in technology is becoming important part of Malaysia’s growth as an industrialized country (Focus Economics, 2016). With the assistance from the technology, the country is steadfast in the provision of the modern requirements for undertaking businesses. Within the ASEAN region, Malaysia is one of the highly developed technologically among the industrialized states. The country is persistent in its drive to engaging the modern technologies, which proves to be a greater advantage to Malaysian manufacturers. Due to the country’s strategic planning and adequate resources, the country offers to the investors an array of investment opportunities. As a technologically inclined economy, the economy is proving through its R&D, improved manufacturing electronics, innovation, and highly automated manufacturing sector. Moreover, the government aims to make Malaysia a hub for various value chain activities (Malaysian Institute of Economic Research, 2016). With such development and attractive market opportunities, it is clear that TNA will benefit significantly. The county’s vision 2030 encourages market entry for investors, which is an advantage for TNA allowing it to provide valuable packaging services to the investors coming into the country. Allowing investment in various sectors including biotechnology, R&D, and manufacturing of electronics, the company will the opportunity of accessing different market segments and increase its customer base. With the central position of Malaysia, the company would able to enjoy accessibility to different market without straining its resources. In addition, advancement in technology reflects reduction in the cost of technology transfer from Australia. The Malaysian government continuously strive to provide business friendly environment, which makes it easy for the company to undertake its business and explore different Malaysian market sectors. 3.2 Disadvantage and Risks One of the challenges that the company is likely to experience from investing in Malaysia is cultural risks considering the difference in Australia and Asian cultures. Cultural perspective and products tend to vary between the two countries; therefore, when entering such market, TNA might have different expectations than the ones it already established. Moreover, Malaysia is currently focusing on the technological advancement, which has significant percentage in the country’s export including the electronic equipment and materials. With such focus, it would be difficult for TNA to recommend advancement in technology, which could attract the manufacturers in Malaysia. Such advanced technology contravenes the aim of TNA, which establishes it base from technical innovation (Malaysian Investment Development Authority, 2016). The country is becoming highly competitive with the government encouraging foreign investors, which could lead to poor marketing strategies and establishment of poor competitive advantage. Cultural and language barriers could make it difficult for TNA to establish contacts and effective communications; therefore, the company would have to rely on the trust and commitment of the locals to assist in overcoming such challenges. Besides, Malaysian culture is sensitive on the humours that most businesses use in marketing and promoting its activities; hence, it would restrict TNA from using words and behaviours to communicate its products and services. With increasing number of people acquiring education in Malaysia, the cost of labour might be higher than initially expected by the management. As a result, while establishing a marketing strategy, it is significant to incorporate these risks for efficient and effective delivery of the goods and services. 3.4 Recommendations Before the company begins investing in Malaysia, it is vital to have proper plan adequately covering its financial goals, timeframe, and risk appetite. On financial goals, TNA needs to set clear goals of what it needs to achieve. Since the company offers services related to packaging and distribution of packaging materials, it is important to focus on high technology that ensures sufficient sustainability of environmental conditions. Besides, many countries are encouraging investors with the ability of monitoring the effect of their activities on environmental conditions. With such, TNA would develop an effective competitive advantage against the increasing number of competitors within the industry. Malaysia has several risks; nonetheless, it has a promising market growth favourable for TNA investment. Therefore, TNA needs risk appetite which involves understanding the risks and its improving on its ability to overcome them. Risks often have several effects financial risks and disorientation on the set marketing objectives (Hennessey, 2004, 122). Consequently, TNA has to develop an effective rapport with the locals to assist in the market penetration, understanding of the cultures, and identification of societal challenges for corporate social responsibility (CSR). However, if the company notes that the potential downsides of investing in Malaysia are greater, then it should consider realigning its objectives. 4.0 Vietnam 4.1 Economic Outlook The growth of Vietnam is powered with the foreign direct investment (FDI), free trade agreements (FTA), and the Trans-Pacific Partnership, which attract the foreign investors. Vietnam is one of the Asian countries experiencing quick growth in the real GDP since the onset of international financial crisis. There have recovery in domestic demand due to favourable inflation rates, accommodative monitory policy, and increased confidence of the consumers. Additionally, the growth has as well been driven by the strength of the export-oriented manufacturing industry, which continues to be powered by FDI. Vietnam’s real GDP stood at 6.7 per cent in 2015, which exceeded the target growth rate, 6.2 per cent. The major driving force is the construction and manufacturing sector, which grew to 9.6 per cent reflecting a contribution of 3.2 per cent to the country’s overall growth. Manufacturing bolstered the industry that grew at 10.6 per cent while construction at 10.8 per cent which represented the highest growth in the last five years. Continued inflow of FDI is that major factor buoying the manufacturing and construction sectors. In similar year, services registered steady healthy growth rate of 6.3 per cent representing 2.4 per cent to the overall growth. From the expenditure point, the final consumption, both the private and public showed robust growth in 2015 compared 2014. Vietnam is steadily becoming an emerging hub for the manufacturing industries. Over the past decade, companies have been setting up production centres and building on their initial investment. Consequently, the country’s economy has continued attracting steady flow of FDI of $15.5 billion in 2015 representing a 17.4 increment. Much of the investments come from processing and manufacturing sector which account for 67 per cent of the total capital investment coming at a moment when various manufacturing competing economies within South East Asia experience pressure from Chinese showdown and reduced international demand. Figure 3: Performance of industry and construction in the previous years Figure 4: Growth in total demand driven by consumption and fixed formation Figure 5: Manufacturing sector for Vietnam compared to other South East Asian Countries 4.2 Advantages and Perspective Vietnam enjoys a stable political system and dynamic economy. Over the last decade, the country’s average economic growth remained 7.5 per cent. Even though the country experienced global economic crisis, its growth rate remained over 5 per cent. These factors attract foreign investors due to fast and stable development of the businesses investing in Vietnam. In addition, the golden population structure of Vietnam also attracts the investors. The country has 60 per cent of its population as working age with the Vietnamese labour popular for its young, highly educated, hardworking, and easy to train personnel creating a stronger comparative for the foreign investors in Vietnam. As a result, it would be easy for the foreign countries to recruit good workers at a very low cost of labour in comparison to Malaysia (Department for International Trade, 2016). The Vietnamese government is committed in creation of fair and attractive business environment for the foreign investors through simplifying the country’s legal structure, reduction in taxes, and reduction in the lad rental. These efforts by the government attract foreign investors making them give Vietnam a priority while considering investment abroad. Additionally, with its 90 million populations, the country offers huge market for the companies operating within the state. The country has ever-increasing GDP growth, which promises a huge improvement in the level of consumption by the local Vietnamese. In Vietnam, the government recognizes that FDI sector plays vital role in the economy, which makes it essential to restructure the economy and raise the competitiveness nationally. Considering the geographical location of the country, South East of Indo-Chinese peninsula, and adjacent between two continents, the nature of the interactions with various natural systems makes it vital for TNA to invest. As a result, the company would have access to various markets and acquire manufacturing resources from different regions. Since the country is politically and socially stable and seldom faces religious issues compared to the other ASEAN states, TNA could enjoy the hospitality of the people making it easy to penetrate different various market segments (Ministry of Planning and Investment: Foreign Investment Agency, 2016). From the high and educated population, TNA would enjoy low cost of labour considering the level of investment would be low especially for training the workforce. Simplification of the policies makes it easy to acquire the required legal documents for investment and understanding of the country’s dos and don’ts. 4.3 Disadvantages and risks Contrary to the positive reasons for investing in Vietnam, the country’s legal system has some of the weaknesses that TNA needs to cautious while considering investment in the country. The country’s legal systems is insufficient and to some extent lack guidance and coherency. The legal system creates several conflicts between the central authorities and provincial governments as in some cases, the provincial authorities would pursue independent economic policies especially those related to foreign investment. These factors could result in confusion and unfairness for foreign investors since some institutions could get more incentives. In Vietnam, the legal system contributes to bureaucracy in both the central government and provincial authorities. With the recent country’s Law on investment, it only takes 15 days to acquire the documents of registration. Nonetheless, with governmental bureaucracy, it takes much time to set up the ventures and acquisition of the investment documents (Ernest & Young, 2015). As a result, these activities could increase the cost of TNA considering its value. Therefore, with continuous changes in the legal system, it is important that the investors take into consideration the changes and meetings of the Party Congress with an aim of reducing some of the unexpected risks associated with drastic changes in the regulations. Moreover, in Vietnam, having consultation with various government agencies is vital for compliance with various regulations, which increases the cost of operating within the country. With the favourable environment for business set by the government and increased level of bureaucracy, there could be poor competition strategies used by the competitors and circulation of fake packaging and manufacturing materials. Currently, the World Bank’s Ease of Doing Business, Vietnam is in position 78 with major challenges including inadequate infrastructure, inadequate skills, and corruption, and language barrier, grey areas of the Vietnamese Law, bureaucracy, and lack of Intellectual Property Rights (IPR) enforcement. 4.4 Recommendations Before investing in Vietnam, it is clear that TNA needs to understand the country’s legal structure and development effective mechanisms of investing within the country. From such perspective, TNA needs experts in international human resources management (IHRM) to assist in identifying potential employees and ways of breaking through the country’s corruption and bureaucracy. Since the country’s IPR enforcement is weak (PWC, 2014), TNA should consider international IPR in a bid to prevent circulation of fake products within the Vietnamese economy. With the language barrier, TNA needs translators and training of Australian workforce to reduce the cost of labour. 5.0 Summing Up With increased competition in Australia and benefits presented with the Malaysian and Vietnamese economy, TNA needs to consider expanding its market segment in these Asian countries. Both countries showed continuous increment in the GDP which present opportunity for TNA due to favourable consumption behaviour of the populations and stable economic conditions. In addition, the political and social stability of both the countries is vital especially for the foreign investors. The laws allow free entry of the foreign investment into the market making it easier for the company to establish it activities. However, cultural differences in both countries are issues that TNA needs to work on to prevent violation of the beliefs and development of unfavourable marketing strategies. However, TNA might not have the power to control bureaucracy in Vietnam; it needs to ensure adequate protection of its IPR to prevent manufacturing and circulation of fake products. 6.0 References Department for International Trade. (2016, January 8). Doing business in Vietnam: Vietnam trade and export guide - GOV.UK. Retrieved September 21, 2016, from https://www.gov.uk/government/publications/exporting-to-vietnam/exporting-to-vietnam Economic Transformation Programme. (2013). Why Malaysia? Retrieved September 21, 2016, from http://etp.pemandu.gov.my/Invest_In_Malaysia-@-Why_Malaysia%5E.aspx Ernest & Young. (2015). Doing Business in Vietnam. Retrieved September 21, 2016, from http://www.ey.com/Publication/vwLUAssets/Doing_Business_in_Vietnam/$FILE/Doing_Business_in_Vietnam_16000319.pdf Focus Economics. (2016). Malaysia GDP - Malaysia Economy Forecast & Outlook. Retrieved September 21, 2016, from http://www.focus-economics.com/country-indicator/malaysia/gdp Hennessey, H. D. (2004). Cases in global marketing strategies. Boston: Houghton Mifflin. Malaysian Institute of Economic Research. (2016, July 26). Malaysian Institute of Economic Research. Retrieved September 21, 2016, from https://www.mier.org.my/outlook/ Malaysian Investment Development Authority. (2016, September 21). MIDA | Malaysian Investment Development Authority :. Retrieved September 21, 2016, from http://www.mida.gov.my/home/why-malaysia/posts/ Ministry of Planning and Investment: Foreign Investment Agency. (2016, September 21). Investment Environment in Vietnam. Retrieved September 21, 2016, from http://fia.mpi.gov.vn/detail/1096/Investment-Environment-in-Vietnam Packaging Gateway. (2016). TNA Australia - Integrated Food Packaging and Processing Equipment - Packaging Gateway. Retrieved September 21, 2016, from http://www.packaging-gateway.com/contractors/machinery/tna-australia/ PWC. (2014). Doing Business in Vietnam. Retrieved September 21, 2016, from https://www.pwc.de/de/internationale-maerkte/assets/doing-business-in-vietnam.pdf Read More