International Management: Rwanda - Research Paper Example

? International management: Rwanda Program: November 19, International management: Rwanda External environmental factors are important to decisions towards selection of a business location in the global set ups. Social and political stability as well as the legal environment dictates a organization’s internal factors and the external factors should be understood before a decision to invest or expand business in a country. This paper reviews the external environment for organization in Rwanda with the aim of establishing the country’s suitability for a multinational corporation and the first three sections focuses on introduction to the country’s background information, its economic environment, and major macroeconomic factors. Introduction Rwanda is a country I Central Africa with a total area of 24669 square kilometres. It has a temperate climate with two rain seasons and has natural resources such as gold and tin. The country is landlocked and experiences occasional droughts and volcanic eruptions in some areas. A king ruled it prior to colonization by Belgium (Central Intelligence Agency 2013). Rwanda experienced genocide because of long-term ethnic conflict. About a million people died in the genocide and more than two million fled the country. A rebel group that overthrew the then government restored order and the country is currently stable (Central Intelligence Agency 2013). Political stability is one of the post genocide developments as the rebel group established a government and order in the country. Other aspects such as security, justice, reconciliation, and economy have improved and the economy recorded a growth rate of seven percent in recent statistics (King, 2013). Rwanda’s population majorly consist of two ethnic groups, Hutus and Tutsi. Hutus overthrew the king that ruled the country in the year 1959 and this led to civil war in which Tutsis were murdered and many of them forced to flee to exile. Descendants of the exiled formed a rebel group that returned to Rwanda in the year 1990 and together with political and economic interests culminated to the country’s genocide in the year 1994. About a million people died, including three quarters of the minority Tutsi, before the Rwandan Patriotic Front defeated government forces. The victory by the Tutsi rebels caused mass exile of more than two million Hutus for fear of ethnic cleansing. The country stabilized from the civil war and joined commonwealth in the year 2009 and the United Nations’ security council in 2013 (Central Intelligence Agency 2013). Rwanda has a population of slightly more than 12 million people, most of which the Hutu while the remaining 15 percent is Tutsi and one percent is Twa. Catholic is the major religion, commanding more that 50 percent of the population followed by protestant churches and seventh day Adventist church. Kinyarwanda, French, and English are national languages (Central Intelligence Agency 2013). The country has gained significant level of political stability (King, 2013). Cultural development in Rwanda has been independent of other countries. Social and religious groups have facilitated the development (Onwumechili and Ndolo, 2012). Economic environment Transitions after the genocide that led to deregulation of the economy defines a free market system (Malunda and Musana, 2012). The country’s economic environment is considerably underdeveloped. Its major industries and poverty rates supports this. The country’s major industries that include agriculture, beverages in small scale, textile, and cigarettes identify low-level economic development and high level of poverty, with more that 60 percent of the country’s population living on expenditure of below $ 1 per day identify underdevelopment (Central Intelligence Agency 2013, Diao, Thurlow, Benin and Fan, 2012). Corruption level in the country is relative, compared to other nations in the globe. This is because latest Transparency international rating ranked it at number 89 out of the 180 nations (Holmberg and Rothstein, 2012). This is an improvement from previous ranking in which Rwanda was ranked 121 out of 163 countries in the year 2006. It also suggests expectation of higher transparency (The World Bank, 2010). Major export partners for Rwanda are “Kenya, Democratic republic of Congo, China, Malaysia, U.S., and Pakistan” (Central Intelligence Agency 2013) and this information is important to a multinational corporation because it defines the legal environment and entry barriers that such organization should expect in the country. Lack of treaties of active trade with a corporation’s host country suggests entry barriers. China and the United States are the major investors in Rwanda as data on foreign direct investment inflow indicates. Brazil, France, Singapore, and the United Kingdom are other major investors (The world Bank1, 2013). Levels of foreign direct investment from other sources are lower than $ 50 million per year, based on statistics for the year 2012. These sources are less significant as compared to the United States and China that contributed more than $ 200 million each (The world Bank1, 2013). Mining, financial, ICT, and manufacturing sectors are the major sectors of the Rwanda’s economy that attract foreign direct investments. Companies and direct investment enterprises are the significant players in the inflow and government’s investment in infrastructure and privatization of the mining industry explains significance of the industries (National Bank of Rwanda, 2011). Macroeconomic factors Macroeconomics is the branch of economics that relates to the structure, trend, and forces that affects an entire economy. This section discusses macroeconomic factors of the Rwandese economy. The country recorded a real gross domestic product growth rate of 7.7 percent in the year 2012. This established it as one of the best countries in the world, having ranked 21st in the entire globe (Central Intelligence Agency 2013). World Bank plays an important role in empowering Rwandese government and citizens. Examples of the bank’s input in Rwanda are research on challenges affecting people and investment programs for empowerment, lending to projects in different sector’s of Rwanda’s economy, and partnership with the Rwandese government the country’s “energy, public financials, and agricultural” sectors (The World Bank 2013). Rwanda is still a developing country and its industries are at their developmental stage. Major industries that are developing in the country are “cement, agricultural products, small-scale beverages, soap, furniture, shoes, plastic goods, textile, and cigarettes” industries (Central Intelligence Agency 2013, p. 1). Major industries in the country past deal in production or processing of “wood, beer, soft drinks, tobacco, textile” and beverages (Rwanda State of Environmental Outlook report 2009, p. 1). The government’s support for the economy is very low as government’s taxes and other revenue only makes 23 percent of the country’s gross domestic product (Central Intelligence Agency 2013). Tourism and mining industries have been some of its major focus as the government has invested in infrastructure to promote the tourism industry while its privatization initiatives have improved activities and income from mining. Identified potentials in the sectors are the major driver into the focus (Rwanda State of Environmental Outlook report 2009). The currency has been losing value against the U.S. dollar. It exchanged at 568.18, 583.13, 601.83, and 616.6 Rwandan Franc in the years 2009, 2010, 2011, and 2012 respectively and is currently exchanging at 676.5 Francs per dollar (Central Intelligence Agency 2013). Inflation rate on consumer products is about 6.3 percent (Central Intelligence Agency 2013). The developed information can help a multinational corporation to understand economic potentials and risks in the Rwandan environment. It is important in informing the corporation’s decisions on whether or not to invest in the country and the level of investment that they can risk in the country (Jain, Trehan and Trehan, 2009). References Central Intelligence Agency. (2013). The world’s factbook. Central Intelligence Agency. Retrieved from: https://www.cia.gov/library/publications/the-world-factbook/geos/rw.html. Diao, X., Thurlow, J., Benin, S. and Fan, S. (2012). Strategic and priorities for African agriculture: Economic perspectives from country studies. Washington, DC: Intl Food Policy Res Inst. Link: http://books.google.co.ke/books?id=YiRC5v9XzEYC&printsec=frontcover&dq=Strategic+and+priorities+for+African+agriculture:+Economic+perspectives+from+country+studies&hl=en&sa=X&ei=gRqeUsDfJsrb7Abeq4CYAQ&ved=0CCwQ6AEwAA#v=onepage&q=Strategic%20and%20priorities%20for%20African%20agriculture%3A%20Economic%20perspectives%20from%20country%20studies&f=false Holmberg, S. and Rothstein, B. (2012). Good government: The relevance of political science. Cheltenham, UK: Edward Elgar Publishing. Link: http://books.google.co.ke/books?id=nd1kKwqKXPkC&printsec=frontcover&dq=Good+government:+The+relevance+of+political+science&hl=en&sa=X&ei=ARueUvrlF-Ks7Qas9YHACw&ved=0CCwQ6AEwAA#v=onepage&q=Good%20government%3A%20The%20relevance%20of%20political%20science&f=false Jain, T., Trehan, M. and Trehan, R. (2009). Business environment. New Delhi: FK Publications. Link: http://books.google.co.ke/books?id=9v_DCK8kyAoC&printsec=frontcover&dq=business+environment&hl=en&sa=X&ei=RBueUt_GIomM7AahmYDgCA&sqi=2&ved=0CE4Q6AEwBg#v=onepage&q=business%20environment&f=false King, E. (2013). From class to conflict in Rwanda. New York, NY: Cambridge University Press. Link: http://books.google.co.ke/books?id=rRHrAQAAQBAJ&pg=PA18&dq=From+class+to+conflict+in+Rwanda&hl=en&sa=X&ei=gxueUubBHuPy7Aaa1oFA&ved=0CF8Q6AEwCQ#v=onepage&q=From%20class%20to%20conflict%20in%20Rwanda&f=false Malunda, D. and Musana, S. (2012). Rwanda case study on economic transformation. Kigali: Imstitute of Policy Analysis and Research-Rwanda. National Bank of Rwanda. (2011). Foreign private investment in Rwanda 2011. National Bank of Rwanda. Retrieved from: http://www.bnr.rw/uploads/media/Foreign_private_Investment_in_Rwanda_2011_Booklet_.pdf. Onwumechili, C. and Ndolo, I. (2012). Re-imagining development communication in Africa. Lanham, MA: Rowman & Littlefield. Link: http://books.google.co.ke/books?id=dLQFMtDA4AEC&printsec=frontcover&dq=Re-imagining+development+communication+in+Africa&hl=en&sa=X&ei=xxueUrK-KaX17Ab9hoCgDQ&ved=0CCwQ6AEwAA#v=onepage&q=Re-imagining%20development%20communication%20in%20Africa&f=false Rwanda State of Environmental Outlook report. (2009). Industrial sector in Rwanda. Rwanda State of Environmental Outlook report. Retrieved from: http://www.rema.gov.rw/soe/chap4.php. The World Bank. (2010). Budgeting for effectiveness in Rwanda: From reconstruction to reform. Washington, DC: World Bank Publications. Link: http://books.google.co.ke/books?id=Sj2X2doEEIQC&printsec=frontcover&dq=Budgeting+for+effectiveness+in+Rwanda:+From+reconstruction+to+reform&hl=en&sa=X&ei=8RueUti3PMWy7Ab3iIHgBw&ved=0CCwQ6AEwAA#v=onepage&q=Budgeting%20for%20effectiveness%20in%20Rwanda%3A%20From%20reconstruction%20to%20reform&f=false The World Bank. (2013). Results profile: Rwanda. The World Bank. Retrieved from: http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/0,,contentMDK:23276917~pagePK:146736~piPK:226340~theSitePK:258644,00.html. The world Bank1. (2013). Foreign direct investment, net inflows (BOP, current US$). The world Bank. Retrieved from: http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?order=wbapi_data_value_2012+wbapi_data_value+wbapi_data_value-last&sort=desc. Read More