Macquarie Group - Research Paper Example

Macquarie Group Introduction Macquarie Group is leading global provider of financial, banking, funds, investment and advisory services with branches in major financial cities across the globe1. Macquarie’s offers diversified financial and banking services to a wide range of consumers who include but not limited to retailers, individuals, and corporate. It is noteworthy that Macquarie Group is listed in the Australian security exchange (ASX.MQG) with total net worth equivalent to approximately A$340 billion as at 20102. Political Environment Government stability Myanmar also known as Burma has been under the ruler ship of military junta over the past five decades3. The top government post such has ministries has been dominated by top military leaders. The military junta has been overseeing and controlling every aspect of the country ranging from the natural resources to economic affairs of the country. Government and contribution A former military general and Prime minister in the previous regime Mr Thein Sein was elected as the President of Myanmar4. However since President Thein Sein assumed office there is hope though minimal that the country is abandoning its dark past years of paranoid authoritarianism and poor economic management that has plunged the country into a den of poverty. Myanmar has been governed in secluded political environment5. Analysis President Thein Sein has showed interest in reviving the country’s economy and moving away from erratic political leadership whereby he freed a large number of political prisoners and also decentralised various sectors of the economy which has been under state control for the past 50 decades6. Legal Environment Regulatory framework Myanmar has no stable judiciary system presently and therefore earning fair ruling and justice in the court systems of Myanmar is a toll order. The country has no stable regulatory framework considering that most of the laws and regulations were inherited from the former colonial master-British and no significant changes has been made to amend the laws despite the changes in the economic environment7. Business laws In relation to investment a few amendments have been made to bring sanity into the business environment. However bribery and corruption is the order of the day as there are no effective laws to curb such unethical business practice. Labour laws The long decades of military junta rule characterised by economic mismanagement and lack of comprehensive labour laws has seen Myanmar workers subjected to harsh working conditions, forced labour, poor remuneration and as well as child labour8. Tax laws The country has no stable tax law as most of the laws are yet to be developed by the parliament which still lacks effective structures. The current laws have been borrowed from neighbour countries. Analysis Lack of proper regulatory framework, business laws and labour laws mean that Macquarie Group will face an uphill task in trying to deal with the existing laws or in cases of disputes. Economic Environment Interest rates Being a growing economy Myanmar interest rates are still high especially for loans which stands at 17%. Interest rates on deposit still stand at 10% and 12%. Inflation rates Myanmar’s inflation rate currently stands at around 9.25% and with the modest growth in the economy it is expected that the rate will subsidise with time. Currency exchange rate Myanmar currency Myanmar Kyat abbreviated as MMK is still weak compared to the Australian dollar (AUD) at the rate stands at 1MMK = 0.15039 AUD. Free-market Throughout the periods of military junta rule Myanmar has been operating an economically secluded environment whereby its major trade partners are only China and North Korea. Economic trends Since President Thein Sein took power he has managed to decentralise the long-time held state-controlled economy an aspect that has advanced growth in key economic sectors for exports which include but not limited to Minerals agriculture, oil and gas. Presently the economy is growing at the rate of 3% per annum. Tax policies Companies formed under the Myanmar Company Act is charged a flat tax rate of 30% while non resident enterprises income tax at the rate of 35% or on a progressive rate ranging from 5% to 40% whichever the higher and the same rates apply to income of non-resident foreigners. Resident individuals in Myanmar pay income tax at a progressive rate of 3% to 30%9. Analysis Macquarie Group is likely to face a number of challenges in a country that is still recovering from a long period approximately five decades of economic mismanagement, isolation and stagnation. The country has no stable taxation policies and has been experiencing slow economic growth. Socio-cultural Environment Hofstede’s Cultural Dimensions Myanmar boasts of highly diverse society with varied culture and beliefs. Collectivism Vs Individualism Owing to the harsh living conditions that Myanmar society is subjected to by their authoritarian military government the society has grown into a highly collectivist society with low individualism levels Power Distance Myanmar society depicts a high power distance whereby everyone owes allegiance to the military junta. Uncertainty avoidance Myanmar is a highly unstructured society with high tolerance for ambiguity and uncertainty besides no proper regulations, laws, and rules to govern conduct and operations of individuals and institutions Time orientation Myanmar is society with long-term orientation taking into consideration that this is a society that believes in persistency and ordering of relationship by status. Quality Vs Quantity of life Myanmar is an underdeveloped society with peasants and poor labourers who cannot meet their basic needs adequately. The standard of life is very low compounded with high cost of living beyond the reach of majority citizens. Analysis Macquarie Group is venturing into a society with a totally different culture from that of the parent company and there is a high likelihood of culture shock for the few employees of the company who will shift to Myanmar to establish the company. Technological Environment Technological infrastructure Myanmar is an underdeveloped nation with low infrastructure base necessary for production and delivery of vital services. Communication networks Myanmar telecommunication industry is only dominated by mismanaged state owned monopoly services providers. It is noteworthy that Myanmar is the only country with considerably low access network compared to other member states of the Association of Southeast Asia Nations10. Logistics networks Despite the fact that there is underdeveloped logistics infrastructure Myanmar boast of a wide range of logistics networks ranging from roads transports, air transport, Rivers and sea transport and railway transport. Analysis The company is likely to experience logistics and telecommunication challenges in the first few years of operation. SWOT Analysis The first strength of Macquarie group is its long term existence in the industry. The strong presence in the global arena characterised by opening of several branches in conjunction with refurbishment programmes is major score on the Macquarie Group. Weaknesses Market instability with reference to share prices is affecting the investor confidence in the company11. Additionally planned share buybacks is also painting the company‘s image very bad in the eyes of the potential investors. Opportunities Untapped market: There are several regions where the presence of Macquarie Group is not yet felt especially several countries in Africa, Asia and South America. Macquarie Group should take advantage of such opportunities. Threat Most of the financial and banking institutions tend to offer substitute products and as such customers may shift to other suppliers whom they feel are providing customized services. Recommendations Macquarie Group should hold its plan for share buybacks as this may lead to possible takeover or job cuts and loss of investor confidence. Macquarie Group should customize its products in order to remain competitive in this highly competitive capital and financial market. Macquarie Group should go ahead with the planned expansion in Myanmar despite the fact that the company has underdeveloped infrastructure, slightly stable political environment. Macquarie group should go ahead with their plan to venture into the market. This is because Myanmar has a new civilian forward-looking government with high optimism for infrastructure development. Additionally the Myanmar is unexploited market and it does not have well established competitors of international standards. Macquarie Group should venture in Myanmar in the next 5 months. Macquarie Group should use direct foreign investment instead of takeover or merger. Bibliography BBC News. (2011). “Burma country profile”. Retrieved December 3 2011 from:http://news.bbc.co.uk/2/hi/europe/country_profiles/1300003.stm Business daily. (2011). Macquarie weakness fans jobs cut talk . Retrieved December 3 2011 from: http://www.smh.com.au/business/macquarie-weakness-fans-jobs-cut-talk-20110718-1hkwx.html Hlaing, Kyaw & Taylor, Robert. (2005). “Myanmar: beyond politics to societal imperatives”. Mumbai: Institute of Southeast Asian Studies. Macquarie Group. (2011). “Welcome to Macquarie Group” . Retrieved December 3 2011 from: http://www.macquarie.com.au/mgl/au Oo, Thein & Than, Myint. Myanmar. “Digital review of Asia Pacific 2009-2010”. Pp 274-279 Plunkett, Jack. (2008). “Plunketts Investment and Securities Industry Almanac 2009 (E-Book): Investment and Securities Industry Market Research, Statistics, Trends and Leading Companies”. New York: Plunkett Research, Ltd. Than, Mya . “Myanmar in ASEAN: regional cooperation experience”. Mumbai: Institute of Southeast Asian Studies. The Republic of the Union of Myanmar. (2011). “Directorate of Investment and Company Administration”. Retrieved December 3 2011 from: http://www.mnped.gov.mm/Taxation.asp US Department of State. (2011). “Bureau of East Asian and Pacific Affairs: Background Note: Burma”. Retrieved December 3 2011 from: http://www.state.gov/r/pa/ei/bgn/35910.htm Win, Htet & Thu, Moe. (2008). “Burmese labour issues destined to invite problems”. Retrieved December 3 2011 from: http://www.mizzima.com/news/inside-burma/1479-burmese-labour-issues-destined-to-invite-problems.html Read More