Response to Classmates Discussions
kingstonman41
BUS638Week2-DiscussionForum1.docxWeek 2 - Discussion Forum 1
David Harris
YesterdayOct 1 at 12:05am
Current trade environment with the United States.
As in the past week, we will continue to use Egypt as our country for further assessments. “International trade has two directions: export and import. It has two components: Merchandise (goods) and services” (Peng, 2017). This is the same for the trade relationship between Egypt and the United States. The U.S and Egypt have a strong partnership based on mutual interest, focused on economic opportunity. This helps promote prosperity in Egypt. Two-way trade between the two regions saw a total of $7.5 billion in 2018. Exports to Egypt include wheat and corn, mineral fuel, oil, machinery, and steel products. U.S imports from Egypt include natural gas and oil, textiles and agricultural products.
Current trade barriers (non-tariff and tariff).
Overtime the Egyptian government has to a liberalizing approach to imported goods and have reduced the average tariff from 14.6 percent to 10 percent. Majority of items that enter into Egypt, sees a tariff of below 15%. Clothing for the most part sees a tariff of 30% followed by vehicles, alcohol, and tobacco which has a tariff of 40% or higher. Cereal imports see an astronomical tariff of 1000%.
Review the target country through Porter’s diamond model.
Firm strategy structure and rivalry, demand conditions, related and supporting industries, and factor conditions make up Porter’s diamond model. Porter’s diamond model “is a model that is designed to help understand the competitive advantage that nations or groups possess due to certain factors available to them” (Chappelow, 2020). According the Porter’s diamond model Egypt’s biggest advantage is the agriculture industry. Egypt has a rapidly growing population which hints towards an increase for agricultural needs. While their supply may be rising their knowledge in agriculture is relatively poor. There is a lack of farmer education and resources to good training.
Review ethical dilemmas of exporting to the foreign target market (see Chapter 5 Emerging Markets, section 5.1 Expanding UK Exports in Russia).
Some of the ethical dilemmas that may be encountered when exporting into a foreign market focus around, currency, transport, representation and distribution. Bribery is very popular in the ability to move the process along quicker and is definitely frowned upon as a it shows a lack of ethical dealings. Unnecessary government involvement is another example.
Evaluate the foreign direct investment (FDI) environment and potential for ownership, location, and internationalization (OLI) advantages.
The global economic crisis has been a huge factor in the current decrease of level of FDI currently in Egypt. Before that it had a steady rate of growth up until 2019. Inward investments stood at 9billion USD. Egypt is still currently the largest FDI recipient in Africa. Their stock was 126,6 billion USD. UK is the largest investor and primarily focuses their investments into Egypt’s oil and gas industries.
References:
U.S. Relations With Egypt - United States Department of State. (2019, September 20). Retrieved
October 01, 2020, from https://www.state.gov/u-s-relations-with-egypt/ (Links to an external site.)
https://ustr.gov/sites/default/files/2013%20NTE%20Egypt%20Final.pdf (Links to an external site.)
Egyptian National Competitive Advantage. (n.d.). Retrieved October 01, 2020, from
https://www.ipl.org/essay/Egyptian-National-Competitive-Advantage-F3LEMX36JED6
Foreign direct investment (FDI) in Egypt. (n.d.). Retrieved October 01, 2020, from
https://www.nordeatrade.com/en/explore-new-market/egypt/investment (Links to an external site.)
Peng, M. W. (2017). Global business (4th ed.). Retrieved from https://redshelf.com/
Michelle Buckley
YesterdayOct 1 at 6:14pm
In further preparation for the final paper, I was able to explore the trade environment of the UK with my research partner, Giuliano Labbate. Our primary discussions were around the status of Brexit. Giuliano stated that “UK enterprises have been proceeding with a “business as usual” approach however with apprehension due to lack of clarity around Brexit / EU negotiations on trade, and bearing in mind any discussion on bi-lateral agreements with any nation cannot begin until Brexit has completed. There are financial concerns on banking (e.g. transfer of money between countries), base currency of product vs exchange rate fluctuation with rates being influenced by the prospect of a Hard Brexit (i.e. UK leaves EU without managing to keep current agreements in place).”
One caution for my business venture is that until Brexit is completed, the UK is still a member of the EU and those tariff rules would apply to imports coming from the US (Mergent, 2019). With the uncertainty of Brexit, foreign direct investment (FDI) has stagnated over the past three years (Mergent, 2019). Giuliano also commented that it is important to bear in mind the “workforce - uncertainty again caused by Brexit on the free movement of people (labor in this case) between EU countries. Until Brexit completes, the talent “net” can be cast across the entirety of the EU job market. After that, non-UK citizens in the UK may face challenges (depending on if they have secured permanent residency/right to remain). This could increase the difficulty of having US employees run and operate the business venture.
Regarding competition, a popular theory is the diamond theory otherwise known as the Porter Diamond (Peng, 2017). Harvard strategy professor, Michael Porter, “argues that the competitive advantage of certain industries in different nations depends on four aspects that form a diamond” including structure, demand, industries, and endowments (Peng, 2017, p. 161). The UK is rich in each of these, proving itself as a stable country for which to grow despite the uncertainty related to Brexit.
References
Peng, M. W. (2017). Global business (4th ed.). Retrieved from https://redshelf.com/
Mergent. (2019). Country insight report United Kingdom. Retrieved from Mergent Online database.
