International Business Research Question and Answer

worldwide agate line Research inquiry and AnswerQuestion 3You ar the CEO of a company that has to choose mingled with making a $100 million enthronisation in Russia or Poland. Both investments promise the same long-run return so your survival of the fittest is driven by guess considerations. Assess the various attempts of doing problem in each of these nations. Which investment would you favour and why?Answer INTRODUCTION multinational BusinessInternational Business is evolved from international dole out and international marketing. International business is a crucial venture due to the influence of wide-ranging social, cultural, governmental, economic, natural factor and government policies and laws.According to Michael H. Moffett, International business is the suffice of focusing on the resources of the globe and objectives of the organizations on global opportunities and threats in piece to produce, buy, sell or exchange of goods and services world-wide.Factors Lea d to International BusinessEstablishment of WTOGlobalization of EconomiesRapid technological AdvancementEnlargement of European UnionIncrease in competitionHigher offshoot roam of gross domestic product in developing CountriesIncrease in business alliances in degree and varietyEmergence of supportive institutionRUSSIARussia is the worlds largest hoidenish in terms of territory. Its consumer market consists of over 140 million people. It has vast resources, a super educated workforce, and technologically advanced research and production capabilities. Still, Russias economic potential re mains largely untapped. Many investors shy of Russia amid increment concerns that the political placement in the estate is breeding dissent among the population.As such, the scrimping has been in a state of flux in recent months and its turn up proximity to Europe amid the financial crisis expects a pivotal danger. However, n 1 of these things change what Russia has to offer. Its technologic al capabilities matched with its natural resources give the countrys economy striking potential. governmental turm rock anoint pass on only drive prices down, making it a bring off term to invest in this country.Investment Climate and Opportunities Overview1. Dynamic economical Growth2. One of the Largest Consumer Markets3. World-Renowned Human Capital4. Vast Natural Resources5. strange Geographic Position6. Technologically Advanced Economy7. Attractive tax gross System8. Extensive Government Support9. Stable Social and political SystemRUSSIAS ECONOMIC OVERVIEWRussia has undergone solid changes since the collapse of the Soviet Union, abject from a globally-isolated, centrally-planned economy towards a more market-based and globally-integrated economy, but stalling as a partially reformed, statist economy with a high concentration of wealthiness in officials hands.RUSSIA RISK ASSESSMENT1. SLOW DOWN IN suppuration Growth has s uttered down in Q2. This trend should becon firmed over the whole of 2012, with the Russian economyhowever holding up in a real depressed internationaleconomic context. rock oil production reached a record take inthe middle of the year. On the some other hand, industrial productionhas suffe rubicund from a deterioration in demand from the mainpartners of Russia (European Union and China). Investmenthas been curbed by a origin in production costs reducingcompany profits. Private consumption, the main driver ofthe Russian economy, was buoyed in HY1 by the rise inwages and social spending, ingathering in swearing trust aswell as the good state of the employment market. However,the rise in inflation is now affecting the increase in realwages and and then domestic demand. Inflationary pressurehas increased since June, under the effect of the risein the price of victuals (increased by the effects of the summerdrought) and public services (energy). The Central Bankraised its refinancing rate in mid- folk (from 8% to8.25%) to try to contain the rise in prices within the position ofits 6% target.2. BUDGET CURRENT BALANCES DEPENDENT ON OIL PRICES The 2012 budget was amended in June to take accountof an evaluate rise in oil prices (from $100 to $115 a barrel),which increases fiscal revenue and allows expenditureto be maintained. oil colour revenue accounts for half of Staterevenue and the price of oil ensuring equilibrium in publicfinances has double since 2008. Taking into account therecent change in the price of a barrel, revenue should bebelow that expected while expenditure will not be reviseddownwards. Consequently, the offset should be slightlyin deficit at the end of the year. However, Russian publicfinances remain immobile with public debt below 10% of GDP,leaving the government some room for manoeuvre, at leastin the short term.3. COMPLEX JUDICIAL SYSTEM Property rights ar astray perceived to be contingent on political connections, and intimidation of businesses by the FSB and police for political and financial ends is frequent. Red tape stifles innovation, and lose of transparency makes adequate partner due diligence elusive. The judicial system is also problematic legislation executeation is broadly unpredictable and the liberty and integrity of Russian woos is deeply flawed.4. CORRUPTION AND LACK OF GOVERNANCE corruptness and weak embodied transparency is another major on-going risk for investors. Many analysts admit say that this is a big problem especially among some of the smaller companies, whose accounts are not particularly transparent. Even discernn and respected companies like IKEA which heavily focus on practicing ethical businesses activities say a moratorium on subsequent Russian investments due to the ongoing concerns of corruption. found on the Corruption Perception Index, Russia has a lot of obstacles to fair and cost-efficient business practices. Even Iran, Libya and Pakistan are perceived as having less corruption.5. POLICIES Ru ssias economic and fiscal policy is not investor-friendly. The tax code is overly complex. Russia also has a distinct penchant for protectionism despite its WTO regainion, it continues to unpredictably implement levies, tariffs and bans on hundreds of imports. Tight relations between business and politics are exceedingly detrimental to the business environment.POLANDPolands economy is much smaller than that of Russia. However, with a unbendable consumer market of 38 million, it is still one of the biggest markets in Europe. The country benefits greatly from its geographical location, which makes it possible to export goods to all European countries and and so reach over 500 million consumers.Similar to Russia, Poland has a highly educated workforce. Therefore, Poland also falls victim to its proximity to Europe and the ongoing crisis. For these reasons some investors are also shying away from this nation. In these trying quantify though, Europe still remains a solid economy, and though it has faltered, it has managed to remain intact. As investors flee Europe amid growing concerns over the failure to accelerate the economy and provide successful solutions, Poland offers a great bargain.Polands economic feat could improve if the country addresses some of the remaining deficiencies in its road and caterpillar track infra social system, business environment, rigid labour code, commercial court system, government red tape, and taxing tax system.ECONOMIC OVERVIEW OF POLANDPoland has the largest economy in Eastern Europe, and one of the highest levels of foreign investment at $13.9 billion as of 2006. Polands economy has been growing quickly, at about 6%, for the past 5 years, and was growing at an even faster pace before this. Despite its GDP growth, Poland faces some economic issues it has chronic high unemployment, low wages despite significant increase of productivity, massive flight of educated population abroad, and low level of innovativeness an d highest percentage of people working for national minimum wage among countries of European UnionPoland Risk Assessment1. DECELEARTING GROWTH IN 2012 Economic action mechanism remained sustained in 2011, despite a slowdown in growth during the last quarter. Growth has continued to slow up in 2012. Ho aimhold spending, which represents 60% of GDP, effectively remains low due to a decline in consumer confidence, in conjunction with an annual inflation rate of 3.8% in portentous 2012, a public sector wage freeze and deterioration in the employment market (13.3% unemployment). The push down trade deficit shrank in 2012 hobby a contraction in domestic demand in Q2 VS. Q1 (-3.1%) and fall exports (+0.8%). Although exports were impacted by a slowdown in Western Europe, exports towards Russia and Ukraine progressed by more than 20%. The heavy deficit in the income balance wiped out most of the positive effect from the trade improvement. The impact of external trade on GDP was noneth eless limited on account of the low level of trade openness compared to other Central European countries. An expected reduction in inflation should enable the Polish central bank to modify monetary policy. The governor has committed to cutting rates in the event of an economic slowdown. Despite the decline foreign investment flows will cover the menstruum account deficit. At the end of July 2012 net investment flows covered the deficit, i.e. EUR 8 billion. The private construction sector was weighed down by a fall in household demand. The construction production proponent published monthly by Euro stat fell 8% over the graduation exercise 7 months of 2012 compared to 2011. Furthermore, the construction sector was boosted, during several months, by the organisation of the European football championships in June 2012 (stadiums, hotels, road networks ) with support from public investment. Corporate credit remained dynamic during Q1, particularly in zloty terms, but investment will d ecelerate sharply over coming months.2. STRUCTURE AND HIERARCHY IN beautify COMPANIES Organisations in Poland have a strong respect for hierarchy and authority, with structure and delegation coming from above. This hierarchical style is reflected in manyPolish businessformalities and settings, including the decision-making process and the use of professional titles. Seniority in Polish organisations is acknowledged and respected and the corporate hierarchy is often formed on the basis of age and educational background. For this reason, when negotiating, it is advisable to send delegates of a similar status to those of Polish colleagues, some(prenominal) in age and professional qualifications. Rules and regulations are an important part of the Polish business environment so Polish counterparts may expect theirbusiness partners to know and appreciate established etiquette and business protocol.3. RELATIONSHIPS Doing business in Poland requires an understanding of the immensity of relationships in polish businessculture. Building individual relationships is essential to the success of business objectives, especially in the long term. Polish people take time to establish relationships with business partners and to build trust. Poland has a family-focused society, and poles value building and maintaining unaired individualised relationships. This may be considered as a challenge for many foreigners doing business in poland who are not used to sharing personal information with their business partners. For poles this is one of the stages of the trust-building process.4. COMPLEX BUREAUCRACY Although Polands per capita GDP is increasing relative to the rest of the EU, it amounts to less than 70% of the EU average. Nonetheless, strong domestic consumption is one of the engines of growth in Poland. Poland has do great strides toward improving the commercial climate, but investors point to an inefficient commercial court system, a rigid labour code, bureaucratic red tape, and a burdensome tax system as challenges for foreign companies.5. IMPROVEMENTS IN INFRASTRUCTURE Although many infrastructure improvements have been completed or are underway, Poland still has much work to do in order to modernize its road and railroad network. Weaknesses in transportation infrastructure increases the cost of doing business for U.S. businesses by restrain ready access to all of the markets within Poland and diminishes the countrys current attractiveness as a regional distribution hub. Internet access and connection strength is good in the cities, but still very limited in less populated regions.6. IMPROVING PUBLIC finance The Public finances development and consolidation plan implemented by the government in order to respect Maastricht criteria from 2013 onwards will be pursued. The public deficit, which reached almost 8% of GDP in 2010, is expected to fall below 4% in 2012, through higher taxes on oil products and an increase in social contributions . As a result, public debt should brace at around 55% of GDP. However, as a large isotropy of the debt is held by non residents, it is vulnerable to risk aversion among investors. Furthermore, the European recession has weighed on foreign direct investment flows in 2012 which has meant that the only stable uppercase flows financing the current account deficit have come from European structural funds. The Polish banking system seems relatively robust, with capitalisation ratios in senseless of Basel III minimum requirements. However, subsidiaries of foreign banks, which are mostly implanted in the euro zone, represent two-thirds of the banking sector, which is therefore dependant on foreign capital. Banks remain highly exposed to currentness risk, as household loans denominated in foreign currency account for 14% of GDP. Furthermore, the zloty depreciated by 8% of its value against the euro between January and September 2012.7. A COMPARATIVELY STABLE POLITICAL CONTEXT -The 2010 pr esidential preference resulted in Bronislaw Komorowski leading a coalition between his centre-right party (PO), which had been in power since October 2007, and the Polish peoples party (PSA). The general elections held on 9 October 2011 confirmed the coalitions position. The Prime Minister, Donald Tusk has made budget deficit reduction a priority. However, the latest opinion survey highlight growing popular discontent with current fiscal austerity. Furthermore, the word sense of the euro has been postponed due to the single currencys current lack of assemblage according to the Prime Minister.CONCLUSIONBoth countries have positives and negatives aspect of investment. notwithstanding after assessing risks Quotient in these two countries one can conclude that it is nasty to set up new facility in Russia. Because there are more factors affecting risk perception in Russia as compared to risk perception in Poland.Poland is better option than RussiaREASONS FOR THISThe only EU country to have avoided recession in 2009FDI appeal is reinforced by the size of the domesticmarketDiversified economyThe highest absorption rate of European structuralfunds in acclivitous Europe