Globalisation Case

Introduction

Globalisation brings together individual national markets into a global market. The increase of globalisation allows countries to integrate, which provides opportunity for new businesses to expand overseas. This report compares the economic development of two countries: a developing country such as Vietnam with a well developed country such as the United Kingdom. It also analyses the political, legal, cultural and economic risks apply between those two countries. The purpose of this report is to help prepare Australian manufacturing firm with many information as possible before it decides which foreign country it would want to invest in.

By examining a range of books, published journal articles, magazine articles and internet sites on the different issues that will be influential to Australian business when deciding on which country to invest in. This research report analyses the political, legal, cultural and economic risks apply between the businesses. Investment is an important factor for Australia, as a large and rich country with high demands for capital, it has relied on foreign investment to meet the shortfall of domestic savings against domestic investment needs (UNCTAD 1988). Foreign capital alone has allowed many Australian people to enjoy higher rates of employment, economic growth and a higher standard of living that couldn't be achieved with only domestic savings. Foreign Direct Investment (FDI) is usually regarded as the most stable form of capital inflow because it involves a substantial commitment from the investor in hiring staff and acquiring business facilities. For example, just recently the Asian financial crisis resulted in a deficiency of short term debt finance, but it didn't have a large impact on the level of foreign direct investment in the Asian region. FDI brings about great competitiveness, by exposing local management to international standards, and with the new establishment of new businesses through technological benefits. So accordingly, the economy emerges better able to provide well-paid jobs into the future, and provide high productivity. By examining a range of books, published journal articles, magazine articles and internet sites on these countries, we get a better idea of what each country has been through and what they are cable of, so that when Australia chooses to invest in this country it would help the firm internationalize in many ways.

Issues and Evaluation

Political Issues

The relationship between Australia and foreign countries is a factor that the manufacturing firm should take into consideration when deciding which country to invest in. Australia and Vietnam share a significant financial and cultural relationship, with Australia taking a significant 6.8% of Vietnam's exports. Since 1999, Australia was Vietnam's 4th largest trading partner 12th largest investor, with the two-way trade in goods reaching AUS$1.66 billion. Alexander Downer Minister for Foreign Affairs said, "Vietnam matters to Australia in a very positive sense: because of its membership of ASEAN and APEC; because of its strategic location in South East Asia; because of the 140 000-strong Vietnamese-Australian community; and because of Vietnam's significance as a trade and investment partner." Thus, Vietnam and Australia does have a good relationship, which in turn does help businesses to have a connection when dealing with people, as well as having a better opportunity in developing stronger customer relationship with Vietnamese people. This is extremely good for an Australian business as it means previous resistance towards western products has not been weakened and allows Australian business to gain a greater market share.

From 1986 onwards, the Doi Moi reform policy inaugurated a new regime marked by low inflation and high economic growth. The adoption of market-oriented institutions and an open door policy opened the Vietnamese economy to the international economy, resulting in a strong economic recovery

Australia and Britain also have a strong relationship, mainly because Britain founded Australia. The Anglo-Australians relations are close as the two countries share many cultural ties, religion and language. However, after World War 2, the relationship between the two countries has driven apart, due to the fact that Britain was not there to help Australia during the Japanese invasion in 1942. This has restrained many levels of trade relationship between Australia and Britain. Another fact that has also put pressure on the trading relationship between Australia and Britain is when Britain joined the world's largest trading bloc 'European Union' in 1959. This trading bloc is formed when a group of nations agrees to trade relatively freely amongst themselves. The EU abolished tariffs within its boundaries and upright tariff barrier against non-member countries, including Australia. The result of Britain joining EU, means that Australia is excluded, making it difficult for Australia to penetrate the EU market. The resultant loss of European markets has forced Australia to seek markets elsewhere such as in Asia, North America and Middle East. Despite the fact that Britain has formed new allies and trading relationship with other European nations, Australia is still the seventh largest foreign investor in the United Kingdom. Overall, FDI may favour investing in a country with lower trade barriers, since trade barriers increase transaction costs.

Thus, Australian businesses has a good opportunity to expand in the United Kingdom markets, however Australian business still need to consider the tariff and trade barriers that United Kingdom imposes.

Economics Issues

Australian businesses also need to take into account the economic growth of foreign economies when deciding which country to invest the business in. Economic growth refers to the ability of the economy to produce a sustained increase in goods and services over time. It is measured by percentage changes in real gross domestic product (GDP). Many developing economies have the prospect of higher growth rates, such as Vietnam which has no negative growth since 1990. Since 2009 Vietnam grows at rates of around 7-9% p.a and currently have a GDP real growth rate of 5.30%. Whereas developed economies have the prospect of lower, or more stable, growth rates, such as United Kingdom. Though, UK's GDP per capita is still 20th highest in the world. FDI does benefit from investing in economies that have high economic growth rate. As high economic growth rate increases the level of income, which in turn increases the consumption level as people