Country Selection and Initial Analysis - Essay Example

Market Entry The country that I have chosen is Morocco, which a Muslim majority country from Africa with population of around 32 million. I have chosen wheat as the product to be introduced in Morocco because Morocco is the 10th largest importer of grains in the world (EW Report; Reuters Africa, 2010). It is worthwhile to mention that Morocco is an emerging economy with a GDP of approximately $154 billion in 2010. For instance, the unemployment rate is estimated to be just under 10%, while the inflation was only 2.

5% in 2010. Next, the share of agricultural sector in GDP is only 17% in comparison to share of nearly 32% of manufacturing sector. The services sector has the largest contribution of 51% approximately (estimated 2010). The population growth rate is just over 1%, which should be viewed as reasonably well for a Muslim majority emerging nation. The currency is known as Moroccan Dirham (MAD) that fluctuates against US dollar because of changes in global economy. However, the exchange rate prevails between 8 – 9 Dirham / US dollar at present.

The GDP per capita was around $4,900 according to 2010 statistics (CIA Fact Book, 2010) It should also be highlighted that the recent floods in Morocco damaged its agricultural crops as the area under cultivation reduced by significant 25 – 30%. As a result, the production of wheat, barley, vegetables and other grains reduced considerably whereas the demand increased due to rise in population. Nonetheless, the government authorities were left with no other option but to increase imports from self-sufficient nations so that they could stabilize wheat prices across Morocco (Reuters Africa, 2010).

It should be noted that domestic wheat consumption in Morocco has been estimated to be nearly 8.3 million tons and the shortages resulted in 47% hike in wheat prices (Weisenthal, 2011). The price surge was mainly the outcome of shortage amid price inelastic demand of food products as they are necessities. Therefore, it is justified to argue that there is great potential in export of wheat (and grains) to Morocco because the demand will continue to increase with growth in population. In addition, the food shortages worldwide have triggered price escalations in international grain markets; therefore, the producers and commercial exporters could fetch better prices and profitability if they export wheat in bulk quantities to largest importers like Morocco (MAT Report, 2011).

For instance, the exporters of agricultural products will be benefited because demand / consumption of grains neither reduces nor is affected significantly from negative economic growth, surge in unemployment, inflation and decline in consumers’ nominal incomes. In addition, any political or legal changes will also have a minimal impact on trade of wheat unless there is production surplus that may lead to ban on imports. Similarly, there are only three major economic barriers such as currency fluctuations (Morocco currency and US Dollar), production surplus (decline in wheat prices in local market) and decline in international prices (lower wheat export prices) that have to be faced in this process.

References EW Report (2010). Morocco Trade, Exports and Imports Economy Watch [Online] Available at http://www.economywatch.com/world_economy/morocco/export-import.html [Accessed - February 12, 2011] MAT Report (2011). Doing Business in Morocco. Morocco American Trade [Online] Available at http://www.moroccanamericantrade.com/business.cfm#2 [Accessed - February 12, 2011] Weisenthal, Joe (2011) Everything You Need to Know About Algeria, Morocco, Egypt, Tunisia, Libya, Israel, Jordan And Syria In One Simple Chart.

Business Insider [Online] Available at http://www.businessinsider.com/everything-you-need-to-know-about-algeria-morocco-egypt-tunisia-libya-israel-jordan-and-syria-in-one-simple-chart-2011-2 [Accessed - February 12, 2011] Reuters Africa (2010). Morocco grain crop escapes major flood damage. Reuters Africa [Online] Available at http://af.reuters.com/article/topNews/idAFJOE6B70EY20101208?pageNumber=2&virtualBrandChannel=0 [Accessed - February 12, 2011] CIA World Fact Book https://www.cia.gov/library/publications/the-world-factbook/