Paper Research

Tropicalia

Market size of Tropicalia

Being one of the largest emerging market economies in the world constitutes one of the main reasons why Tropicalia is so attractive to foreign countries and companies. Indeed, the variety of natural resources and their ability to produce domestically and export their products gradually promoted the number of potential buyers in foreign countries. Tropicalia also opened the door to many important foreign investors and MNE which constitute a fair competition but with many restrictions.

Political risk

Tropicalias political situation seems to be under control since the country finally converted to democracy and that the new president Suracho, has focused on controlling inflation and reducing the role of government in the economy. Fortunately the process of inflation reduction has been very successful. However, the divided congress has made reformation less effective, but the new president hopes that the population will push congress to work more effectively.

Government policy toward trade and FDI

Tropicalia government has opened the doors to the FDI by reducing the inflation rate dramatically, narrowing the budget deficit and stabilizing the money supply. Also, the establishment of a new monetary plan, the “Palma” which is linked to the Dollar, makes it easier for the FDI to be profitable in the market. By cutting government spending, privatizing the state enterprises and reducing the control of imports in the country; the government promotes a free market system therefore, competitiveness among companies. By restricting access to the markets of high technology industries and banning MNC’s from transportation, the government has protected the existing companies against unfair competition. In addition, the government did not grant the existing foreign owned firms any credit but only made loans available for the locally controlled projects. This is certainly in order to keep the local companies more competitive in the market and help them be more profitable than the existing foreign companies..

Implications for our strategy

Tropicalia is a member of the WTO and EXCOM which could be very beneficial for Tropicalia government as well as us. Indeed, we can use this condition to attract the foreign tech enterprises to make joint ventures with us and we could export our products to EXCOM members and also globally.

Paradiso

Market Size

The Paradiso market size is attractive; however there are many factors to be considered when predicting the demand for micro analyzers. The situation of the target market should be analyzed carefully to predict the chance of profitability in Paradiso.

Political Risk

After decades of political instability, Paradiso was able to reach democracy. The government was supporting a modern, free market economy that would be considerable for investment from micro analyzer firms. The risk comes from how well political factors could be sustained. Economic reforms were put in place to control inflation and reduce the state control on the economy. Problem like high unemployment, inflation, and increase in current account deficit all caused the President to slow the growth of the economy.

Government’s Policy on FDI

Along the road to democracy the Government role in the economy has steadily been reduced. The Government has even sold off television stations, petrochemical plants, telephone and airline companies, railways and highways. Overall the population’s attitude toward private and foreign investment is good. There is an approval process that must be followed for foreign investment. Any foreign investments must be approved by the Ministry of Trade and Industry. Indeed, it evaluates the impact it will have on the local economy. It is appealing that there are no limitations on the percentage of foreign ownership, however if it is more than 49% then control would be classified as foreign-owned.

Implications for our strategy

The areas of our negotiation strategy that need to be considered are ownership, local content and exports, pricing of technology, Government incentives, and financing. The ownership, approval process and acceptance are in favor of Paradiso rather than Tropicalia. Paradiso is a member to the WTO and joined EXCOM. Also, import licensing has been ended and tariffs had been favorably reduced, which has led to a boom in trade recently. The pricing and technology that goes along with foreign investment in Paradiso are among the most liberal in the emerging markets. Paradiso has commercial banks as the primary source of funds and offers financing incentives over Tropicalia.

Company Analysis

Megatronics, Inc.

Tanaka Company

Tropimatics

Eurodata

Electro Paradys

SysTrop

ParaInfo