Westfield Group Business Environment - Case Study Example

Business Environment Analysis Report Student’s Name Instructor’s Name Institution Affiliation Date EXECUTIVE SUMMARY The purpose of this report is to examine opportunities and risks that would concern the Westfield Group as it seeks to establish global operation in different countries. The current global business environment requires multinational corporations to operate on highly resourceful areas with a wide range of raw materials and market structures for their services. It is important for such corporations to develop and expand their operations in order to capture ready markets wherever necessary. For efficient and effective operation, a corporation needs to multiply its business environments to establish a strong growth trend that will guarantee the achievement of its goals and objectives. Westfield Group is one of the outstanding and highly reputable multinational corporation that can take advantage of its current status to expand its wings to highly resourceful countries like China. In this report, the idea of expanding the services of Westfield Group to China, and the rationale behind this choice is presented regarding to the business environment that such services require. The report also explores the opportunities and risks that the Westfield Group will encounter concerning its new adventures in China. The overall assessment of the Group’s opportunities and risks to be involved in this shift has given the report an implementation program that is provided in the recommendation section. The reports outlines the general physical, political, economic and social environments of the target country. This outline is important because all these aspects are primary to the general progress and development of any multinational corporation that seeks to expand its operations. Moreover, the reports give an overview of the current market trends that are associated with the target country’s operating portfolios. The Westfield Group, having a net income of over 461 million US dollars can manage to operate effectively in countries such as China, where its services are scarce or unavailable. The last part of the paper provides recommendations of the strategies the company will use to implement the various aspects given in this report. INTRODUCTION Westfield Group is a multinational corporation that evolved in 2014 after the separation from the parent corporation that was founded in 1960. While the main objective of the corporation is to diversify its operations, it is also concerned with the establishment of an equal business environment that incorporates experiences and perspectives from all business sectors in the world. The company seeks to create a more equal business society that takes care of gender, cultural background, age, ethnicity and disability in the current global business industry. Of recent, the company is operating a portfolio that covers over 35 destinations with operating retails situated in the United States, Australia and London. The corporation focuses on conjoining aspects of fashion, entertainment and food so that it can establish a direct link with its consumers and retailers. The corporation invests in design, development, marketing, leasing, and construction and management services. The Westfield Group purposes to integrate its operations and improve the value of its investments and assets by continuously opening and developing new centres and markets across the world (Ferguson, 2014, p. 6). China can serve the purpose of enabling the Group to realize its short and long term objectives as it has the potential to provide the best market outlet of the company’s products and services. WHY CHINA IS THE BEST COUNTRY China is the best country that can provide final markets for the products and services of the Westfield Group. The country is a home to many world civilizations thus making it the world’s largest market oriented economy. According to the report by World Bank, the country is one of the largest final product markets in the current business globe. Since it is a developing country, it requires corporations to provide raw materials in terms of products and services that cover design, development, management, leasing and construction. Due to its large population, China has a wide range of food, entertainment and fashion consumers. Therefore by expanding its operations to China, the Group will maximize its profits since such services are scarcely available in the country. The country guarantees relatively cheap operating costs since its investment policies and tax rates are friendlier for the Group to adopt (Hong, et al. 2016, p. 157). Additionally, a study carried out by the University of Pennsylvania’s Wharton School ranked China as one of the best countries with the most favorable business environments. The domestic consumption and technological power place China at the top, given that the country has gone miles in stabilizing its economy using these two aspects. Companies that target consumers have reaped a lot from their investment activities in the country and therefore the Westfield Group should take note of this and expand its operations to the country accordingly. Additionally, the country’s financial sector provides a wide range of investment services that reputable companies such as Westfield Group can capitalize on to ensure that they fully explore the opportunities therein. China’s population is rapidly growing and the demand for consumer services such as the ones offered by Westfield Group is continuously rising. ANALYSIS OF THE BUSINESS ENVIRONMENT Reports in China’s national census bureau indicated that the country has a population of 1,133,682,501 people. The report also indicated that the population will be rising steadily due to reduced death rates, a factor which has caused the population to multiply by over 15 million people annually. There are several foreign investment opportunities in China especially provided that the country is a growing economy. Increase in productivity and direct investments have been on the rise following trends in technological advancements. Foreign trade policies have been streamlined thus creating a more liberal assess to the investment opportunities. For instance, Private ownership production was legalized in 2001, after China became a member of the World Trade Organization, an act which provided investors with an opportunity to freely invest in a wide range of fields without undergoing bureaucratic and restrictive procedures. The country’s enormous market of over 1 billion people passed a reformed economy policy that created space for joint ventures in its coastal cities, thus giving investors a multiple list of venture approaches to apply in investing their ideas in the country. There are both economic, political and cultural factors that can give rise to the company’s revenues, security, assets and in general, profits. The foreign direct investment policy ensures that the connection between foreign investment and national security investment is clearly defined, a move which will enable investors to set and assemble their production enterprises in a highly protected environment (Pyle, 2016, p. 22). Another economic factor that can positively influence the operations of the Westfield Group is the country’s foreign exchange reserve capacity. This factor serves to control the value of imports over that of exports. However, low rate of exports is made a primary concern thus companies producing consumer products such as the Westfield Group will equally benefit and increase their profits. Labour is readily available as the majority of China’s population is in possession of skills and knowledge that are important aspects to industrial production. The country has highly developed infrastructure network that range from roads, railways and airways that create easy operations while executing a wide range of business activities. According to Breslin (2016, p. 241), the country’s political system is highly centralised a situation which has straightened social mobility and freedom of expression among its population. Criminal and civil laws that govern the country’s business environment have been changed over the years to ensure that formal and constructive activities take place in the business sector. All these factors can immensely contribute towards establishing stable and efficient operations of the company in China since they make investment opportunities open to multinational corporations such as the Westfield Group. However, some economic, cultural and political factors present within this environment can be risks to the company’s revenues, profits, security and assets. The purchasing power as dictated by trends in inflation rates have not been fully controlled. The Chinese Central Bank often controls this situation by raising resources that are essential to state and private-owned enterprises thus making it expensive for market-based companies such as Westfield to operate. China’s currency and exchange rate is operated on an extremely low level. In 2010, the currency appreciated on a greater margin against the dollar by 12% but later revived on a very narrow margin after concern was raised to the Chinese authorities (Steinberg, 2016, p. 223). The country is led by a democratic and dictatorial political system that have recorded a significant number of human rights abuse cases. As per the records of the State Department’s Human Rights Practices of 2014, the country has been on the limelight for violating human rights after concerns raised by international organization such as International Religious Freedom Reports. In general, the country’s business environment poses potential nationalization risks that can expropriate a company’s assets. Therefore great care should be taken when venturing into investment opportunities that apply to this growing economy. OVERALL ASSESSMENT OF CHINA’S OPPORTUNITIES AND RISKS China possess a collection of enormous raw materials that can enable corporations to establish industries within a very short period of time. Labour, which is an important factor of production is provided in plenty from China’s populace. The huge population guarantees readily available markets that supply the workforce and consumers for the production, distribution and consumption of services that the Westfield Group will produce. Population aspects such as size, age and sex structure, birth and death rates and geographical distribution that have direct influence on production, distribution and consumption are also catered for. The economic environment that comprise of factors such as price levels and consumer’s income are readily advantageous. Since most of China’s young population is employed in both formal and informal sectors, their income will create high demand for the company’s services. Wild et al. (2014, p. 93) argues that an advanced technological environment will guarantee the production of quality and quantity services that in turn will enable any company to acquire more customers. Additionally, the services that the company offer do not in way interfere with the general culture of Chinese people but rather, the services are geared towards making them to live impressively and appreciate their environment according to the norms and practices within the environment they live. The company will also explore available resources to meet the scarce nature of its services that has been existing in China due to population explosion. A thorough analysis of the business environment revealed three key issues to be monitored when conducting business in China. The issues are; the cultural trends of the people, this is especially because of the fact that China is made up of multi-ethnic groups and people from different parts of the world with different desires; the currency and exchange rates; and the foreign exchange reserve policy. All these three issues should be closely monitored since they are the backbone of the country’s foreign investment specifications (Geng et al. 2016, p. 212). The country’s business environment seems to change at a relatively low rate and not much can be expected in a period of 12 months. This slow rate is due to challenges of population explosion that have attracted all focus from significant sectors of the country. However, the country’s general business environment promises a bright future over the coming decade for investors from across the world. The bright future is indicated by the efforts being put to streamline foreign investment policies that focus on establishing a more inclusive economy. RECOMMENDATIONS According to Buckley & Casson (2016, p. 97), the future of multinational companies is determined by focus that is put by various governments in integrating economic aspects. The integration of economic growth and industrial development have made China a perfect place for investments such as the one Westfield Group is eying. The business environment is generally supportive to foreign investment since all business reforms that have been conducted since 2001 focused in making China a strong market-based economy. Cultural dimensions, religion, ethnic and language groups present in China offers a wide range of investment opportunities to be offered and the portfolios of the Westfield Group are examples of such services. In order to implement its operations effectively, the company should engage the country’s leadership in interpreting the foreign investment policies. The economic, political and cultural environment in China can result in to splendid results that will set a company to grow its revenues, assets and security. The Westfield Group company should therefore take this chance and establish itself in China since the country has all the resources required to meet its operations and objectives. Reference List Ferguson, M.A., 2014. AREIT sector review and outlook for 2014. Equity, 28(2), p.6. Breslin, S., 2016. China and the global political economy. Springer. Steinberg, D.A., 2016. Few countries are as important to the global monetary and financial system as China. As the world’s second-largest economy and its biggest exporter of goods, China’s monetary and financial policies inevitably have profound impacts throughout the global economy. Enter the Dragon: China in the International Financial System, p.223. Geng, Y., Sarkis, J. and Ulgiati, S., 2016. Sustainability, Wellbeing, and the Circular Economy in China and World Wide. Pushing the boundaries of scientific research, 212. Pyle, D.J., 2016. China’s economy: from revolution to reform. Springer. Hong, J., Glaister, K.W. and Frecknall-Hughes, J., 2016. An Analysis of Tax Incentives in the FDI Decision Process from Organisational Structural Perspectives: Evidence from UK Multinationals. Buckley, P.J. and Casson, M., 2016. The future of the multinational enterprise. Springer. Wild, J., Wild, K.L. and Han, J.C., 2014. International business. Pearson Education Limited. Read More