Merge and Joint Venture Opportunity - Example

Moving EMAL from UAE to Japan Name: College: Course: Lecturer: Date: The Competitors in Japan Japan being one of the most industrialized countries in the world, has various business organizations which have specialized in producing aluminium as well as aluminium products (About.Com, 2009). In this regard, AMEL is more likely to face stiff competition from these Japanese business organizations. The competitors of AMEL in Japan include Aichi Steel Corporation, Daido Steel Company, Falconbridge Limited, Kawasaki Steel Corporation, Metallurg Group, Nippon Light Metal Company, Sumitomo Metal Industries and Sambo Copper Alloy Company. However, Daido Steel Company and Kawasaki Steel Corporation are the most competitive aluminium and steel producing companies in Japan. These two companies have more than 100 years of operation thus they have captured a large market not only in Japanese market but also in other countries (About.Com, 2009). The companies have high valued brand thus for EMAL to outperform them will have to employ effective and competitive strategies (About.Com, 2009). Merge and Joint Venture Opportunity The corporate law in Japan does not prohibit mergers and joint ventures. In this regard, EMAL ha a good opportunity to enter the Japanese market through either merger or joint venture. As far as merging is concerned, EMAL has an opportunity to partner with competitive aluminium and steel producing business organizations. As aforementioned, Japan has competitive business organizations which produce aluminium and other metallic elements. These firms include Daido, Sumitomo and Kawasaki. Bearing in mind that these three companies are more competitive in Japan, partnering with them will ensure stability for EMAL. Besides, the company has an opportunity to forma joint venture with small aluminium and other metal producing companies. Since EMAL is an established business organizations, to form a joint venture the company requires a growing business organization such as Nippon Light Metal Company and Nikko Materials Company (About.Com, 2009). Forming a merger or a joint venture is one of the best entry strategies in Japan market. Through Joint venture or merger the company will be able to adopt the culture and nature of the Japanese market more easily thus being in a position to address the customers’ needs more precisely (Fredrick, 2009, p.5). Opportunity to Enter Japanese Market The Japanese market is one of the best markets in the world which EMAL can reap a lot of benefits if its entry and sustenance strategies are more competitive. To start with, the Japanese market has a ready-made market for the products of EMAL. Japan is known in the world as one of the countries which host big automotive manufacturing and other electronic manufacturing companies (Ruth, 2009, p.12). These companies need aluminium and other non-rusting metals in order to manufacture parts of their products. In this regard, EMAL will get more domestic market for its products thus lowering the cost of operation substantially. Besides, Japan is one of the most developed countries in the world thus its infrastructure is modern and more sophisticated. For instance, availability of efficient water and road transport will enable the company to transport its products and materials with more ease and less costly thus being in a position to meet the needs of the customers effectively. In addition, the government of Japan encourages foreign business organizations to operate in their market thus the corporate laws are friendlier to foreign business organizations (Ruth, 2009, p.12). Availability of ready-made market and improved infrastructure in Japan offers a great opportunity to EMAL. However, availability of stiff competition in aluminium and other metal manufacturing market poses a threat to the company. The company must utilize effective marketing and operation strategies in order to survive the markets and enjoy the conducive business environment in Japan (Brian, 2006, p.927). Infrastructure Characteristics Japan being one of the industrialized and developed countries, its infrastructure is generally at a good status. To start with, water supply to all citizens was attained in 1970s when the government of Japan place the water resource development as one of the most valuable priority. Besides, the government of Japan ensured that all industrial companies were able to access sufficient water supply by the year 1995. In addition, the government of Japan in collaboration with city and town councils have been able to manage the sewage system effectively. As a result, the residents of the country are able to enjoy clean water. Due to improved sewage system, industrial business organizations face little threat from water conservation activists. In this regard, EMAL Company should be assured of getting sufficient water for its operations and facing little threat or none from the water conservation activists (Claudia, 2008, p.27). Japan also boasts as one of the countries in Asia with more sophisticated transport infrastructure. Japan has more refined rail, road, marine and air transport. However, road transport is the primary means of transport in Japan. The well paved road network covers about 1.2 million kilometres within Japan making it the most utilized means of transport not only for passenger transportation but also for industrial and agricultural goods transportation. The country has one high-speed, limited access toll road which links major cities (Brian, 2006, p.927). This network is operated by toll-collecting enterprises thus making it very efficient. Though road transport is the major transportation system in Japan, road traffic jams is very rare. As one of the countries surrounded by sea water, Japan has utilized this opportunity by developing modern and extensive water transportation system. The country has many harbours and ports which include Amagasaki, Akita, Hakodate, Chiba, Himeji, Hachinohe, Tokyo and Yokohama among others. The country has a large merchant-marine fleet which ensures efficient international trade and uninterrupted delivery of fuel, raw materials, food stuffs and other essential products. Japan also boasts of an extensive and high tech air transportation system. The country has more than 170 airports. 140 of the airports comprise paved runways while 14 of the airports are heliports (Claudia, 2008, p.27). However, only airports in Osaka, kagoshima, Tokyo and Kansai offer international services. It is evident that transport system in Japan is efficient thus EMAL will have no problems while transporting its products or receiving raw materials (Claudia, 2008, p.27). The telecommunication system of Japan is also very advanced. The industry consists of both public and private service providers thus making it a competitive one. As the economic term goes, “competition is healthy” the stiff competition in telecommunication market has made business organizations to embrace more advanced telecommunication technologies. However, Nippon Telephone and Telegraph Company control the largest part of the market. In Japan, more than 60 million fixed telephone lines are in use while more than 35 million cellular phones are also in use. The adoption of the mobile phones and computer technology has been embraced immensely in Japan. Almost every adult in Japan has a cellular phone while a third of the population have personal computers or laptops. This is an indication that advanced telecommunication technology in Japan has been embraced. Internet connectivity in Japan has also covered larger part of the country. People have access to high speed internet thus enhancing communication and flow of information (Claudia, 2008, p.27). Japan residents have access to adequate power supply. Just like the telecommunication industry, the power-generation industry has both public and private players. The electricity of Japan is derived from four primary methods which include nuclear power, hydro power, thermal power and non-conventional power sources such as wind and geothermal. The power generated out of the four methods is usually above the required consumption by industries and individual residents. For instance, in the year 2008 the country produced 995.982 billion KWh which was far above the required consumption of 926.263 billion KWh. However, due to anticipation of substantial increase in power consumption in the 21st century, the government of Japan has a plan to increase the production of power to 1,280 billion KWh by the year 2020 (Trading Economics, 2010). This is an indication that future increased need for more power by industries and individual residents is currently being addressed by the government of Japan. As a result, industries and individual residents will not be subjected to power rationing in future. This gives assurance to continuous normal operation of business organizations (Claudia, 2008, p.27). Labour Factors Japan being one of the developed countries in the world, unemployment issues are minimal. To start with, the unemployment rate of the country is very low. According to a report published by the Trading Economics Research Company, the unemployment rate in Japan was only 4.90% in January 2010. The lab our force is usually the summation of employed and unemployed people looking for jobs. The 4.9% unemployment rate portrays a decline of the unemployment rate in Japan since in July 2009 it recorded 5.6% unemployment rate. This is a major indication that Japan is recovering from the 2007-2009 global financial crisis effects (Trading Economics, 2010). Due to global financial crisis, many business organizations not only in Japan but also across the world dismissed many employees. As a result, the unemployment rate went high thus offering business organizations with a great pool of potential workforce. This is because there were many potential employees who were looking for new jobs. The supply of labour force increased while the demand decreased. However, the current decline in unemployment rate in Japan implies that, business organizations operating in the country have smaller pool of potential workforce. As a result, the bargaining power of employees has increased (Trading Economics, 2010). The government of Japan has endorsed labour laws which protect the welfare of employees. In this regard, any business organization such EMAL with an intention to start operating in Japan must be conversant with the Labour laws to avoid labour issues which may affect the business adversely. To start with, organizations must provide working conditions which address the needs of employees who live normal lives. In other words, the working condition must be conducive to all employees. Besides, the Labour Act prohibits employers from exercising any discrimination act in regard to working hours, wages, promotion based on social status, race or creed. The working conditions must be clearly stated in labour contract and employees have the right to terminate their contract and demand for compensation if the conditions stated in the contracts happens to differ with the actual working condition. The Labour Act also prohibits employers from dismissing employees while they are in their period of rest due to illness or pregnancy and within 30 days thereafter. In case the employer terminates the service of an employee due to pregnancy or illness, the employee must be compensated. However, the Act also gives an option for employers to dismiss employees by issuing a 30 days notice or committing to pay the dismissed employee 30 days salary in case of abrupt dismissal. However, this does not apply if the dismissal has been facilitated by natural disasters affecting the enterprise negatively (Fukui, 2010). The Labour Act in Japan also provides 40 hours as the maximum working hours for an employee within a week. However, this period of 40 hours a week excludes recesses. An employer is entitled to provide at least one hour recess during working hours per day in case the working hours exceed eight hours. Similarly, in case the daily working hours exceed 6 hours but less than 8 hours, an employer is entitled to provide at least a 45 minutes recess. Employers are also required to provide an annual leave to their employees and pay them for 10 working days. In addition, employers are entitled to cater for medical bills for employees who suffer illness or injury while on duty (Fukui, 2010). In addition, the business organization has to note that, Japan has got a Minimum Wage Law which prohibits employers from offering low salaries or wages to their workers. However, the minimum wages in Japan differs in region and industry. Miyazaki is the region with the lowest minimum wage which is 4,712 Yens, approximately USD 47.34 per day. Tokyo, Osaka and Kanagawa are the regions with the highest minimum wage which is 5465 Yens, approximately USD54.91 per day. The cost of leaving in different towns is the primary factor in setting different minimum wages for different regions (Fukui, 2010). Besides, the government encourages business organizations to establish their firms in remote or small towns in order to enjoy the low wage rates. The power of labour unions in Japan should not also be ignored. Japan workers have three major labour unions which include RENGO (National Federation of Private Sector Unions), ZENROREN (National Confederation of Trade Unions) and ZENROKYO (National Trade Unions Council) with 6.6 million, 846, 362 and 139,424 members respectively. These major unions have more political power thus their bargaining power is very high. As a result, any business organization intending to operate in Japan must observe the rights of employees so as to avoid labour issues (Shujiro, 2009, p.46). Fiscal Framework of Japan For any company to operate smoothly in Japan, understanding the taxation system, accounting system and rules for export and import is very essential. In this regard, EMAL Company Managers should be aware of the fiscal framework in Japan to avoid legal issue or protect the company from incurring unnecessary losses. Corporate tax in Japan is divided into two notably foreign corporation and Domestic Corporation. Foreign corporations entail business organizations which are founded and registered in other countries rather than Japan. The taxable income for foreign business organizations vary based on the nature of operations as well as capital structure. However, the taxable income is limited to income arising from the operation of the business organization in Japan. In other words, foreign business organizations with other subsidiaries in other countries will only be taxed on income generated in Japanese market (Yokoyama, 2009). Business organizations operating in Japan are subjected to two major taxes notably corporation tax and the local taxes. The local taxes include business tax, municipal inhabitant tax and prefectural inhabitant tax. For corporation tax, company is charged 30% if it has a corporation capital of more than 100 million. However, corporations with less than 100 million as a corporation capital but with a taxable income of less than 8 million are charged corporation tax at a rate of 22%. Those with taxable income excess of 8 million are charged at 30% as corporation tax. In case of business tax, corporations with paid up capital of 100 million or above and with taxable income of more than 8 million are charged a standard rate of 7.2%. For preferential and municipal inhabitant taxes, corporation are charged 5% and 12.3% as a standard rate. As a result, EMAL will have the obligation to pay both corporation and local taxes (Yokoyama, 2009). Just like many other countries, the central bank of Japan does not restrict exports of goods by corporations. However, the central bank through the government or vice versa sometimes imposes ban to exports of certain goods in order to control the economy of the country. For instance, the government of Japan may impose some food exportation ban in order to ensure that residents or the government does not run out of food supply. Tax incentives for exports were eliminated in 1970s by the Central Bank of Japan in collaboration of the government since the country had attained its objectives of encouraging industrialized companies. In fact, by 1980s the company was convinced by GATT to exercise export restraints for some products such as steel, automobiles and colour television in order to promote fair competition in the global market (Yokoyama, 2009). The accounting system of Japan has improved overtime to ensure effective accountability of business organizations. Business organizations are supposed to prepare books of accounts through out the year as per International Financial Reporting System. Besides, corporations are entitled to prepare quarterly and annual financial statements notably balance sheet, income statement and cash flow statement. However, the reported financial reports must be audited by a registered independent accounting body in Japan (Yokoyama, 2009). Japan’s Micro-Economic Status The Japan’s economy is ranked second in the world after that of United States. According to Japan’s government statistics, the nominal GDP is currently at USD5.07 trillion (Nation Master, 2010). However, Japan’s economy is ranked third in the world after adjustment of the purchasing power parity. China takes the second position while United States of America maintains the first position. According to global economic reports, the employees or workers of Japan are ranked 18th in the world labour market as far as GDP per hour worked is concerned. However, according to the BIG Mac Index, the wages in Tokyo rank at the top of the major cities in the world. This is an indication that, Japan is one of the countries with highly paid employees (Nation Master, 2010). Though the economy of Japan declined in 1980s due to housing bubbles, the economy experienced growth in 2003 and 2007 when Junichiro Koizumi took leadership of the country. The new president then improved global trade resulting to an average increase of 2.1% per annum (Ministry of Internal Affairs and Communications, 2009). However, global financial crisis of 2007 to 2009 affected the economy of Japan adversely. As expected, the economy of Japan shrank by 1.2%b in the year 2008 and reached its worst position in 2009 when it shrank by 5.0%. As far as Gross National Product (GNP) is concerned, Japan is currently ranked in the second position. The current value of GNP of Japan is USD4.52 trillion (Nation Master, 2010). References About.Com. (2009). Japan metal suppliers, Retrieved March 30, 2010, from http://metals.about.com/od/japan/Japan_Metal_Suppliers.htm Brian, U. (2006). Japan’s network economy: structure, persistence and change. American Journal of Sociology, 111(3), p.927-929. Claudia, D. (2008). Resources and infrastructure: Energy provision. Country Profile: Japan, 4(3), p.27-30. Fredrick, J. (2009). 5 tips if doing business in Japan. Finweek, 7(3), pp.12-12. Fukui, JP. (2010). Working in Japan: the labour standards law, Retrieved March 29, 2010, from http://info.pref.fukui.jp/kokusai/tagengo/html_e/konnatoki/3sigoto/e_hourei/roudou.html Japan Customs. (2009). Outline of import clearance, Retrieved March 29, 2010, from http://www.customs.go.jp/english/summary/import.htm Ministry of Internal Affairs and Communications. (2009). Statistical handbook of Japan, Retrieved March 30, 2010, from http://www.stat.go.jp/english/data/handbook/c03cont.htm Nation Master. (2010). Economic statistics: gross national income (most recent by country), Retrieved March 30, 2010, from http://www.nationmaster.com/graph/eco_gro_nat_inc-economy-gross-national-income Ruth, W. (2009). Japanese formal organizations. Research Starters Sociology, 1(1), p.1-5. Shujiro, U. (2009). Japan’s free trade agreement strategy. Japanese Economy, 36(2), p.46-77. Trading Economics. (2010). Japan unemployment rate, Retrieved March 29, 2010, from http://www.tradingeconomics.com/Economics/Unemployment-Rate.aspx?Symbol=JPY Yokoyama, A. (2009). Taxation in Japan, Retrieved March 30, 2010, from http://www.hi- ho.ne.jp/yokoyama-a/taxationinjapan.htm Read More