Samsung Company
Samsung is a South Korean global company headquartered in Samsung Town, Seoul, South Korea. It comprises multiple businesses operating under the Samsung brand and is the largest company in South Korea (Delaune, 2017). The company was founded in 1938 by Lee Byung-chuj as a trading company (Delaune, 2017). Within three years, it diversified into multiple areas such as retail, securities, insurance, textile, and food processing. The company ventured into areas that would drive its growth in the 1960s and mid-1970s. These include electronics and shipbuilding, respectively (Delaune, 2017). Some of Samsung’s Company affiliates are chipmaker, consumer electronics, and Samsung electronics. There is also Samsung Engineering and Samsung C&T Corporation, which are the 13th and 36th largest construction companies in the world (Delaune, 2017). Other famous firms comprise the world’s largest insurance company, Samsung Everland, the oldest theme park in South Korea, and Cheil Worldwide, the largest advertising agency in the world.
Drivers Supporting the Decision to Expand Internationally
Expanding business internationally comes with multiple advantages, including the possibility of finding new markets enabling the company to grow, portfolio diversification, decreased cost of operation, and increased customer base. Therefore, the decision to expand internationally is founded on the goal of diversification, acquiring new markets, economies of scale, decreased cost through comparative advantages, favorable tax laws, and better profitability (Rosado-Serrano et al., 2018). Therefore, to maximize global operation, business executives would be smart to consider following the best practices for the company to achieve successful international growth.
International Expansion Strategy
An international expansion strategy comprises market entry strategies, such as making important choices in respect to the focus of the business; identifying the target customers; allocating resources as well as creating a correct model of operation (Rosado-Serrano et al., 2018). As a successful market penetration, it will ensure effective and proper use of company resources helping the organization grow to its success. Many businesses use international strategy for investing and building the ability to create economies of scale (Rosado-Serrano et al., 2018). Moreover, they can venture into new markets by using their ability efficiently and building extra income for the company.
New Zealand Description
The selected country of higher ranking chosen is New Zealand. This is because it is a nation with a stable and thriving economy and stable political system, innovation and creativity, easiness of running businesses, and unmatched quality of life making it a nice place to invest (De Costa et al., 2019). Therefore, the country’s global index ranking provides it with an exclusive chance to explore New Zealand while building one’s business (De Costa et al., 2019). Even the country is innovative and progressive in it is high standards for doing business, the lifestyle, climate, and culture are key to choosing New Zealand as a country to invest in (De Costa et al., 2019). Other reasons for migrating to New Zealand include its policy requirements, and security for business products. Finally, the nation uses English as the national language making communication between customers easy.
Rankings Provided by the World Bank or CIA World Fact Book Sites
New Zealand’s economy is a highly developed free-market economy. When measured by nominal gross domestic product (GDP), it is the 52nd largest economy in the world and 63rd largest when measure using purchasing power parity (PPP) (Contractor et al., 2020). New Zealand has a larger GDP for its population, and revenue sources are spread out across the entire island nation (Contractor et al., 2020). The country’s economy is highly globalized and it depends on trade across the globe mainly with the U.S, South Korea, Singapore, Japan, the European Union, China, Canada, and Australia (Contractor et al., 2020). Additionally, the country’s Closer Economic Relation agreement with Australia means that the economy aligns closely with that of Australia.
Strengths, Weaknesses, and Key Benefits of New Zealand
Strengths and Benefits
Despite being a small nation, New Zealand establishes itself as one of the best places to start a business due to its economic stability and potential for growth. The country has a GDP growth of 3.3% indicating that the consumer expenditure has been a steady growth consumer expenditure has been increasing and that there are no signs of slowing down (Osei-Kyei & Chan, 2017). The country has a straightforward legal requirement; therefore, as an investor, there is no need to worry about the excessive bureaucracy and other legal requirements when it comes to starting a business in New Zealand (Osei-Kyei & Chan, 2017). Also, the tax system is forgiving; in business, tax is one of the inescapable realities of life. Therefore, a business has to pay taxes depending on the number of goods and services it sells (Osei-Kyei & Chan, 2017). Fortunately, New Zealand’s tax environment is reasonably conducive for businesses investing in the country.
Weaknesses of Doing Business in New Zealand
When establishing businesses in New Zealand, one will encounter various weaknesses such as the complicated process of acquiring planning permission. Six processes must be followed to obtain a permit to construct a building which takes almost nine days (Kosaka, 2020). Therefore, companies must obtain resource content (planning), building consent, and district council inspection, as well as Water care’s approval of telephone and CCTV, water and sewerage link (Kosaka, 2020). There is also the challenge of getting connected to the power supply. Getting an electricity connection is the most difficult part of establishing a company in New Zealand (Kosaka, 2020). This is because the process requires lengthy procedures that take up to 50 days to get completed. In addition, there is a heavy dependency as an island nation on rapid and productive cross-border trade (Kosaka, 2020). When reporting, the company is required to have five documents for preparing, and an extra six while importing, which take on average 10 days to complete. Additionally, working on contracts, 30 procedures are supposed to be followed and together take 216 days.
New Zealand’s Major Existing Trade Agreements
New Zealand’s market economy depends on global trade mostly with Japan, China, the U.S of America, and Australia. It also strongly depends on exporting agricultural products and tourism and only has small high-tech and manufacturing components (Mohamed et al., 2021). Bilateral and regional free trade contracts have become a vital part of global trade policy in New Zealand. They are also known as closer economic partnerships have been used in New Zealand to liberalize trade between economies (Mohamed et al., 2021). Thailand and New Zealand negotiated a Closer Economic Partnership treaty in 2004, which was employed in 2005.
Free trade negotiations with Singapore, Chile, and Brunei referred to as the Trans-Pacific Strategic Economic Partnership ended in 2005. Additionally, other business treaties took place in Malaysia and happened in 2006 but were never concluded (Mohamed et al., 2021). There is also China’s historic agreement that was signed in April 2008. Another free agreement with the ASEA regional block of 10 countries was signed on 27th February 2009 between New Zealand and Australia (Mohamed et al., 2021). It was anticipated that the ASEAN agreement would lift business across the involved countries by more than US$50 billion from 2000-2020.
Somalia
The lower-ranking country is Somalia, which is the easternmost country in Africa located in the horn of Africa. It spreads northwards from the south of the equator to the Gulf of Eden (Osei-Kyei & Chan, 2017). The country occupies the most geopolitical position of sub-Saharan Africa and the Arabian countries. The capital city is Mogadishu located in the northern part of the equator in the Indian Ocean (Osei-Kyei & Chan, 2017). The country’s climate is dry and wet, and people have developed survival tactics. Apart from the mountainous and coastal regions in the north, most parts of the country are flat with barriers to limit the movement of nomads and their livestock (Osei-Kyei & Chan, 2017). The religion of most residents is Muslims, and about three-fifths of the country follows a mobile way of life pursuing nomadic pastoralism or agro-pastoralism.
Somalia’s Existing Trade Agreements
Somalia is not a member of any regional economic blocs and has very few formal trade deals with other nations. Currently, countries like the U.S and the European Union do not have trade agreements with Somalia (Mohamed et al., 2021). Additionally, the country is not a member of the World Trade Organization. This is a perfect indicator of some of the challenges faced when trying to compete regionally and internationally (Mohamed et al., 2021). Since this country does not have any trade agreement with other countries, my intention to invest in such a country is going to be interfered with.
Primary Risks Associated with Expanding Into Somalia versus New Zealand
Expanding in a low-ranking country versus a higher ranking country comes with various primary risks. First, there is an economic risk which is the ability of a country to pay its debts. The majority of the time a lower-ranking country is unable to pay its debts making life difficult for companies doing businesses within its boundaries (Contractor et al., 2020). Second, there is a political risk which is are the political decisions made within a country. Even if a country has a strong economy and the political climate is unfriendly to investors such as the current state of Somalia, the country becomes a wrong investment candidate (Contractor et al., 2020). Third, there is the cultural risk resulting from the inability of a company to invest in a Somalia due to, cultural differences such as language, customer preferences, customs, and norms (Contractor et al., 2020). Higher-ranking nation provide a better cultural environment for investment.
Competitive Advantages Associated with Expanding Into Somalia versus New Zealand
A country with a stronger economy can pay debts compared to a country with an unstable or weaker economy. Countries with higher ranking provide better business investment because they can pay back the debts or sometimes they have no debts to pay. After all, they are financially stable (Contractor et al., 2020). Additionally, the political systems of higher-ranked countries are right. This provides a conducive environment for a company to do investment (Contractor et al., 2020). These countries also have a perfect cultural system, and they use international languages enabling companies to desire to make their investments.
Best Choice Country
The best country to invest in is New Zealand since it has a much better economic, political and cultural conducive environment for investment. In addition, the country is rich and competitive in fintech, health IT, digital and creative technologies (Osei-Kyei & Chan, 2017). The New Zealand government has perfect cooperation with the banks and the tech sector creating an environment of knowledge sharing (Osei-Kyei & Chan, 2017). In addition, since Korea Rep Samsung Company is a tech company, it will be on the advantageous side since the local government is currently investing in technology.
References
Contractor, F. J., Dangol, R., Nuruzzaman, N., & Raghunath, S. (2020). How do country regulations and business environment impact foreign direct investment (FDI) inflows? International Business Review, 29(2), 101640.
Delaune, A. (2017). ‘Investing’in early childhood education and care in Aotearoa New Zealand: Noddings’ ethics of care and the politics of care within the Social Investment approach to governance. Global Studies of Childhood, 7(4), 335-345.
De Costa, P. I., Park, J., & Wee, L. (2019). Linguistic entrepreneurship as an effective regime: Organizations, audit culture, and second/foreign language education policy. Language Policy, 18(3), 387-406.
Kosaka, M. (2020). The International Economic Policy of Japan. In R. Scalapino (Ed.), The Foreign Policy of Modern Japan (pp. 207-226). Berkeley: University of California Press.
Mohamed, M. A., Abdul-Talib, A. N., & Ramlee, A. (2021). Determinants of the firm performance of returnee entrepreneurs in Somalia: The effects of external environmental conditions. Journal of Enterprising Communities: People and Places in the Global Economy.
Osei-Kyei, R., & Chan, A. P. (2017). An empirical comparison of critical success factors for public-private partnerships in developing and developed countries: A case of Ghana and Hong Kong. Engineering, Construction, and Architectural Management, 24(6), 1222-1245.
Rosado-Serrano, A., Paul, J., & Dikova, D. (2018). International franchising: A literature review and research agenda. Journal of Business Research, 85, 238-257.