Business in Asia - Case Study Example

Business in Asia Name Institution: Tutor: Date: Table of Contents Introduction 3 Political factors 6 Socioeconomic factors 7 Technological factors 7 An insight of growth of Asian Economy 8 The advantages and disadvantages of engaging in business in Asia 10 Advantages 10 Disadvantages 13 Conclusion 16 Reference 17 Introduction Business is an organization, a company or firm that engages in all activities of buying and selling of goods and services. Business can be an occupation; it can be traded and it can also be a profession. The main purpose of a buying and selling goods and services is to make a profit. Many people earn a living through engaging in business, and the more businesses are in the nation, the more stable the economy of that nation. Business is, therefore, a general term used to imply all the profit making activities. Before one can start a business, he or she should be able to understand the nature of the business, prepare a business plan that will help him to determine the difference between the available resources and the expected business budget. Understanding external and internal environment also helps a business thrive (Richard, 2002.pg 45). In any nation, there are benefits of engaging in business such as; creation of employment; a nation that has a high rate of employment levels is because there are many organizations or companies that have created employment for the citizens of that nation. It is obvious that the activities of buying and selling goods cannot take place without the help of human effort. Therefore, the employment provided is a drive to the success of that organization. The improvement in economic development; when citizens of a nation engage in profit making activities, they will influence the circulation of money through borrowing loans from the banks and because the repayments is in terms of interest, it will enable the nation to benefit. The nation benefits from taxing the businesses and also institutions for lending money. Enterprises also facilitate economic development in terms of infrastructure that the country invests in them to enable smooth running of profit making activities. Earning a country foreign exchange; foreign exchange will be in the form of engaging in international trade. When a country has industries that manufacture goods, they are able to export their products, this will earn the country some foreign revenue and thus the economic development of the country will improve. Reduced poverty levels; a nation that relies on businesses has been able to eradicate poverty. Let’s look at the aspect of employment brought about by organization or companies. The people employed will earn income in the form of salary; they will be able to fend for themselves through being enabled to access the basic human wants. This is poverty eradication. When a nation also provides loans for the citizens to start up their own enterprises, it is a way of eliminating poverty and ensuring the living standards of the citizens are improved. Above factors and others are the results of engaging in business. However, before engaging in any business, there are factors to consider. Business studies refer to these factors as internal and external environment of the business. Internal business environment refers to the factors that are within the organization that contributes to its stability. Factors like finance, management aspects, production aspects and distribution aspects, are all analyzed as internal factors. All these factors are interconnected such that failure of one factor has an impact on the overall objective of making profits. Internal performance of any business determines its survival in a competitive market. External factors are those factors outside the organization that contributes to its strive in a competitive market. These factors include economic, political, socio-cultural forces, legal aspects and the environment. Conducting an analysis of these factors is important so as to prevent the business from external shocks that may lead to a collapse of the organization. All the businesses globally always perform analysis to enable them to determine the enterprise to engage in. When we focus on business in Asia, we find that Asia is a continent that has many countries that have proven to be most successful in terms of businesses. Asia forms the largest populated continent, and its climate and the presence of alluvial soils together with topography forms part of Asia. To name some few countries in Asia like Japan, Korea, China and Taiwan, businesses in Asia are considered successful because of the resource endowments they are blessed with. This continent has natural resources that have helped them to invest in big organizations and companies. Agriculture is one of the investments that enable Asian countries to remain stable in their economy (Das, 2007.pg 289). The countries in Asia have big industries, and they rely on the available natural resources to thrive in business. Countries like Southwest Asia, Russia, Indonesia and Malaysia benefit from the petroleum minerals. They export these minerals and hence able to earn foreign exchange. Other minerals are manganese and chromate. All these activities, of extracting, processing and exporting minerals result in the establishment of industries to carry out all the operations (Tokoro, 2007.pg 148). In order to understand business in Asia, it is important to analyze the economic, social and political factors that contribute to the success of Asia. Political factors In Asia, the countries have a stable political environment that stimulates the expansion of industries. There is good leadership and management in the countries of Asia. This enables the countries to participate in profit making activities by expanding small industries and channeling their resources towards wealth creation. Political stability involves the government being able to conduct their operations peacefully, for example elections. When there is a political stability in the country. The activities can flow smoothly and also the citizens will be motivated to work hard to boost the economy. In Asia, the political stability has enabled peaceful trade between countries of Asia and other international countries. They are able to negotiate without interference of political instability. The role of government is also another contributor to the flourish of economic practices in Asia. The government provides incentives for engaging in profit making activities; it also provides security by protecting the natural resources. The government provides links for international trade. The government also inhibits more imports into the country that will result in competition to the local industries of Asian countries. Tarrification is one of the ways the government does to restrict imports (Anders, 2008). This is a factor that has influenced the countries of Asia to specialize in the utilization of natural resources to expand their industrial sectors. The government also ensures accessibility of machines and production plants in the country. Since this country's extract minerals, the extraction plants and machinery are availed by the government to facilitate more production and to export of minerals. When these machines are available, it reduces the human labor required in the production and processing zones. It also ensures faster performance because of the advanced technology. For any business to succeed, they should integrate the human capability and the available technology so that the operations in the organization are performed at a faster rate thus saving time and increasing the output level. Socioeconomic factors These are factors that influence commercial activities in Asia. One of them is good infrastructure. Availability of good roads and power supply enables the movement of raw material to the processing firms and transportation of output from the firm to the markets. In Asia, the countries have invested in better roads and electricity. Power supply enables running of machines used in production and extraction of minerals. When there is good infrastructure, people will be influenced to establish their own enterprises since they can transport raw materials into the firm and are able to run operations of the power supply. Availability of cheap labor, since Asia is highly populated due to commercial activities that attract people from different continents, there is the availability of cheap labor that influence high production and commercial activities. Labor is needed in the industries to perform tasks that cannot be performed by machines. Cheap labor results in low production costs and, therefore, high output, which generate more profits. Technological factors Use of technology, Asian countries, invest in importing advanced technologies that help in production and processing. The use of technology is a strategy that aims at providing quality products. Use of technology is integrated with the skills and expertise from Asian people. They have skilled manpower to control technology and facilitate good performance. When there is the use of efficient technology, the production sector will experience high production rates, which contribute to the overall increase in profits. Natural resource endowments in Asia have enabled the flourishing of commercial activities. Water, for example, is a natural resource that is essential for all the activities. Land is also another resource that holds production and processing activities in the form of buildings. These resources facilitate business expansion and growth. Asian countries have sensitized appropriate use of these available natural resources. They avoid overexploitation of these resources by ensuring recycling of waste. Availability and access to markets; for any country that thrives on commercial activities, there should be easy access to markets. Markets triggers competition, which will, therefore, result in product specialization and improvement of its quality. Markets enable the activity of exchanging of goods and services to take place; it also contributes to the rising number of business activities. In Asia, there are enough markets because of business activities taking place. An insight of growth of Asian Economy Asia began growing from the year 1960, and it has surpassed many international countries in its growth rate. The growth strategy was not achieved once in all continents; Asia is one of the richest continents and many countries are emulating their growth strategies. Research shows that the Asian countries have accumulated manpower and machinery which has enabled them to remain ahead of other continents in its rate of growth. Government interventions also contribute to the growth and also investments in the countries and exports have led to excellent growth rate. Due to the success of business activities in Asia, many countries are aiming at forming partnerships with Asian countries so that they can get access to Asian markets and engage in commercial activities with them (Nixon, 2012.pg 84). The main aim of the need for other countries to engage in trading or commercial activities is to get a chance to borrow their skills and emulate their strategies of success. The borrowed skills will later on be applied in their countries and thus enabling them to also flourish. There are, however, factors to be considered before engaging in business activities with Asian countries. Other countries may wish to export their produce to Asia since they specialize mostly in minerals and, therefore; they do not have access to any other products that they can acquire from other countries. One of the factors to consider before engaging in Asian business is their terms and conditions, you find that some continents may put in place restrictions pertaining trading because they want to protect their industries. If the terms and conditions for the trade are favorable to the interested country, it will be an advantage because they will be able to trade well. Considering the climate change is essential because it will determine the right time to engage in business with Asia. For example, if a country wants to trade with Asia by exporting to them agricultural produce, it is important to analyze the demand trends of agricultural products in Asia. Having knowledge on the seasonality of production in Asia will enable the country that wishes to trade to identify the demand. This will enable the country to increase supply due to the demand. Analyzing monetary and fiscal policies of the countries in Asia enables interested businessmen to understand the nature of the economy of these countries. They will be able to predict the right time to venture into profit making activities. The monetary and fiscal policies determine the interest rates, exchange rate land prices and also the prices of commodities. Analyzing them will enable smooth running of the business because the entrepreneur will have risks absorbers when there is a challenge resulting from money circulation. The advantages and disadvantages of engaging in business in Asia According to Mongay (2012), the most convenient way of ensuring success of your business as a result of going global in commercial activities is by weighing the advantages and disadvantages of engaging in global business. This will enable one to decide on either to conduct business activities or to rely on local markets. The advantages and disadvantages of doing business in Asia will help one to understand the Asian market and make decisions. Advantages Asia has a growing number of middle class people who affect the demand of goods and services. This implies that doing business in Asia; one has to specialize in products that are consumed by the growing number of the middle class. This could be a market opportunity for a country that wants to export their products to the Asian countries. The expanding growth of middle class influence growth in many areas of Asian countries, this will influence the growth and expansion of industries that will attract more entrepreneurs. There is a rising consumer confidence as a result of expanding the level of the middle class. This will attract more investors who will want to meet the demands of the rising consumer needs in Asian countries. Since they live above poverty level, the good and services demanded will be of high quality. For an entrepreneur that wants to venture into business with Asia, the rising level of middle class consumers will be an opportunity that will lead to reaping of substantial profits. The business pursued in this case will have to meet the demands, and it will be important for an entrepreneur to conduct an opportunity analysis by considering factors like demographic trends, economic trends, socio-cultural trends and policies and regulatory trends Asian countries. This will enable accuracy of the information on the product or service to specialize in it. The growth phase of Asian market has globally attracted investors who want to get an opportunity to penetrate to these profit promising markets of Asian countries. Asian countries are growing in population and also in economic sectors. This is an advantage to an entrepreneur because of the assurance of market access. Before deciding on investing in Asian markets, it is important to analyze the growth phase of the market which will give information on whether penetrating to these markets will involve huge amounts of relocating costs. If the growth phase is only geared towards urban centers; therefore, there will be an opportunity since transport costs will be reduced. Another advantage of engaging in business in Asia result from the profitable businesses during the growth phase. This is an opportunity for a business to be able to reap huge profits during the growth phase. The business will invest on maximum production while minimizing the costs of production. When there is enough supply during the growth phase, commercial activities will be able to make profits since it is the peak season and the businesses will be booming. An entrepreneur wishing to start a business should consider the growth phase as an opportunity to stabilize in terms of getting loyal customers and building the image of their firms. The currency of Asia is growing stronger as the growth phase continues to escalate, when there is a strong currency in the country, they will be able to get more foreign revenues because many countries will want to engage in international trade due to a strong currency. Asia because of its growing strength of its currency will, therefore, import goods at a cheaper price. This means that exports will be expensive, and this will benefit those business countries or partners who will invest in Asian countries since they can import raw materials at a cheaper rate. The skills and know-how acquired from Asia as a result of engaging in business is another advantage. It is obvious that the success of Asian economy did not occur as a miracle. It occurred due to the ability to integrate the skills and knowledge and know how in the economic sector. The skills on how to engage in profit making activities will be passed to the aggressive entrepreneur who will employ those skills in their business and thus being able to flourish. These skills will help one to understand the socio-economic and political factors are affecting business in the country. It will also help one to have confidence in engaging in business activities and the ability to use the advanced technology. The above factors enable a business to thrive in Asia and, therefore, are important to an interested entrepreneur. After going through these advantages, the entrepreneur will be forced to make a decision on whether to start a business in Asia. For a yes decision, one has to prepare a business plan that will enable him organize all activities and determine the amount of capital he has to start a business. The contents of a business plan are; a technical plan which describes the technology that will be suitable, marketing plan which describes marketing aspects that suit the products and services, management plan which stipulates how managerial aspects will be employed in the business, financial plan that will involve the budget for the business and economic plan which focuses on micro-economic policies outside the firm. After preparing a business plan, the entrepreneur finds the best location for the business or firm to be. He also has to consider factors like nearness to power supply, raw material and transport and not forgetting market access. Disadvantages Language barrier, in Asia the only country where businessmen speak English is India; other countries have their own languages and are able to communicate within themselves. For a business person interested in investing in Asian countries, the language barrier will inhibit flourish of their activities. This has been observed whereby people from Asia only know their language. This will imply that one has to learn the language of that particular country to be able to communicate while conducting commercial activities. Cultural barrier is another aspect that goes with language, for one to understand the culture of people living in a certain place, they have to communicate. If there is a language barrier, communication becomes difficult and hence understanding the culture will be a problem. Opportunity analysis involves collecting information on the cultural structure of the target population. This will not be achieved if there is a language barrier. Restrictions on imports imposed by the Asian countries will add costs of production; this is a disadvantage to an entrepreneur since they will be forced to adapt to the cost changes resulting from import restrictions. Another cost incurred is that of ensuring that your business is within the acceptable business ethics in the community or society that one will establish their business. Costs incurred in packaging to suit the customers and also marketing costs will be incurred. Customers in Asian countries may have different preferences; you may find that the one has to conduct research on the preference of the target customers. This is costly and will involve travelling in Asian countries to look for the target market segment. Since the aim of business is to identify customer demand and satisfy their needs, it is upon the entrepreneur to look for these customers. Same case applies to countries that want to engage in trading activities with Asian countries, they will have to incur costs of research on customer wants in Asia, this will enable them to channel their resources towards specializing in that particular product which may face the challenges of low demand. The marketing strategy to be applied to create awareness for Asian customers will be changed to suit their cultural norms. New branding of your products will have to be done so that the products will suit the country that the target customers are located. Designing a new marketing strategy is costly and so does the process of branding the product name. This disadvantage discourages investment in Asian countries (David, 2013.pg 75). Conducting commercial activities in Asian countries will require one to have the local knowledge. This is the knowledge of the socio-economic and political considerations for starting a business. There are two ways of ensuring local knowledge is available, one is by having local distributors who have knowledge of the best channels of distribution and understand the geographical nature of the country, and the second option is that of travelling to the country to check the business process or to resort to settle there permanently. All these aspects are costly and will require time to find trusted local people who will your business well. The cost of capital needed for starting a business globally and in this case, in Asian countries is high. This will involve the purchase of raw materials when there are restrictions on importing products and raw materials. Transportation costs are also another disparity in investing in these developed countries. When there are trade sanctions, for example, your business is likely to collapse since these countries would only protect their industries without considering those of investors unless they were formed through a partnership. For countries that are interested in investing through exporting products to Asian countries they should have enough capital to sustain their production rate until they are paid by the importing countries from Asia. Since the Asian countries are developing their product standard requirement are demanding to the entrepreneur who has to incur costs of having to protect their products and brand name from copycats. They demand original products and that has a certification mark on them. They have the technology for detecting qualified products, this implies that the products and services offered should be certified and should be able to satisfy the needs of the customers. From the discussed disadvantages, it is, therefore, important for an entrepreneur to look for ways of ensuring these disadvantages do not overlap the advantages. Richard (2001) explains that a good entrepreneur is the one who takes risks; therefore the countries that invest in Asian countries through trading are risk takers and are ready to face any challenges. It is good to invest in these developed countries because of the benefits accrued in the process of commercialization. It establishes long term relationships between countries and especially when there is a comparative advantage in the trading whereby both countries benefit. Established relationship leads to borrowing of skills and know how and also there is cultural diffusion. All these factors promote peaceful interactions and the nations will be able to prosper in their activities. Conclusion In conclusion, Asia should consider the following factors before expanding its activities globally, there are factors it should consider. Designing a global business plan will enable the organization to determine its status and whether it is capable of penetrating international markets. Budgeting is also another aspect that enables an organization to gauge its ability to conduct business globally. Planning for a lead-time for penetrating into the markets because a successful enterprise has to endure with patience, therefore giving a period for lead-time will facilitate the gradual penetration and the end result will be conquering international markets. Another aspect is conducting market research in the intended country so as to have an idea of the target population and this will ease market penetration. Forecasting of sales should also be done by going through past records of performance for the segment chosen; this will enable the organization to estimate the amount of output and thus will prevent losses. Preparing pricing through considering the market prices should also be done to estimate the expected output. All the factors and other are important to enable the firm or organization to plan extensively by making appropriate decisions. Reference Anders, et. al. (2008). A quest for repositioning:The emerging internalization of chinese companies. Palgrave journals , 115-142. 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