Economic Factors Impact on Australian Enterprise Expansion

This report analyzes the economic factors of Vietnam and Hong Kong to assess their suitability for an Australian enterprise's expansion. It examines key economic indicators like interest rates, governmental policies, tax rates, and unemployment, highlighting their influence on business performance. The report details Vietnam's rapid growth, driven by manufacturing, private investments, and a strong tourism sector, while also acknowledging challenges like inequality and currency risk. It contrasts this with Hong Kong's developed economy, emphasizing its economic freedom, open capital flow, and proximity to mainland China, while also addressing recent social unrest and high labor costs. The analysis aims to provide a comprehensive understanding of both economies, enabling the Australian enterprise to make an informed decision for sustainable long-term operations.

Running head: ECONOMIC FACTORS
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Name of the Student
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Author Note

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Economic factors
The economic factors in a country can be referred to as those factors which comprise of
factors like the interest rates, ease of doing business, governmental activities, policies, the tax
rates and the associated unemployment as prevailing in the countries. The knowledge of the
economic factors is critical to gain because it gives an idea about the economy or the market
which influences the overall business performance (Heritage.org 2020). Hence, the
understanding of these factors is essential in determining the manner in which the business will
likely perform. In association with this, it can be agreed essential to mention that, in this section,
the economic factors in Vietnam and in Hong Kong will be assessed critically which would
thereby contribute towards understanding the manner in which, the Australian enterprise can
choose a more viable country to open a subside in (Hill 2018).
Emerging economy: Vietnam
Vietnam is one of the fastest growing countries as present in the world and its economy
has shown adequate resilience to various trade wars and the affected growth rates due to the
presence of China. The reason why the country has been accelerating its economic pace can be
considered to be the fact that the labor shifting from associated agriculture to manufacturing and
private investments (Hill, Cronk and Wickramasekera 2016). Moreover, other reasons for the
accelerated advancement can be contributed to the strong formulated tourist sector, higher wages
and the urbanization. The exports have been increasing and have contributed effectively to the
economy of the country and affected its GDP in a positive manner by affecting sectors such as
the industrial production, the textiles, electronics and seafood.

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IMF suggests that the government debt has been decreasing and will go down in the
coming few years (Nordeatrade.com ,2020). Critical aspects to be considered can be agreed to
be the labor costs remaining competitive which thereby attract foreign investments. Hence, if the
firm decides to expand in Australia then in such a scenario, it is bound to experience a good
labor price. However, there are certain challenges which are present and maybe outlined to be
the challenges associated with the growing inequality, weak banking system, pending public
sector reforms and associated weak banking system (Daniels, Radebaugh and Sullivan 2017).
The debts held by the firm raise a significant risk considering 40% of the said debt and hence,
currency risk prevails. In such a scenario, it can be agreed that, the business has to consider the
associated aspects adequately.
Developed economy: Hong Kong
The economy of Hong Kong has received an economic freedom score of 89.1 which
makes it the second freest in the 2020 index. The overall score of the economy has decreased by
some points due to the decline in investment score. Additionally, the country has a sound score
in the regional and world market. The economy of Hong Kong was rated the freest in the world
till 2019. However, the current ongoing social and political turmoil has affected the regulation
and dampened the investment flows which have had its influence on the economy as well. The
GDP of the country has been adequately stable for the last five years but due to the social unrest,
has gone down and recession cycle has been observed. Earlier, the market of the country was
rather open and market driven but has increased the trade barriers although the freedom has
grown and improved accordingly Cavusgil, Knight and Riesenberger ( 2016) state that the
government allows a free flow of capital with no foreign exchange controls which has

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highlighted the business opportunities. As the currency rate of the business is under control this
reduces the risk of doing business in the country.
The flow of information in the business is also open and this gives the enterprises a great
deal of knowledge about the global market. The favorable location of the country near the Main
land also attracts investors who want to enter the Mainland market and set up regional
headquarters in Hong Kong accordingly (Wild, Wild and Han 2018). However, the recent
turmoil which is taking place in the city has considerably affected the viability of the economy.
Moreover, the cost of labor in the country can be stated to be adequately high and in association
with this, it can be agreed to be critically essential that the Australian enterprise would be
required to see to it that, it is being able to engage in effective operations which will further
ensure successive outcomes for the firm(Rugman and Brewer 2010).
Hence, the economies have different scenarios and the business should go with the one
which would allow sustainable operations in the long run.

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References
Cavusgil, S.T., Knight, G., and Riesenberger, J.R., 2016. International Business: The New
Realities, Upper saddle River, N.J. : Pearson Prentice Hall,
Daniels, J.D., Radebaugh, L. H., and Sullivan, D.P., 2017. International business: environments
and operations, 12th ed, Upper Saddle River, NJ: Pearson/Prentice Hall
Heritage.org 2020. Hong Kong [online]. Available at:
https://www.heritage.org/index/country/hongkong (Retrieved on: 17 April. 2020).
Hill, C.W.L., 2018. International business: competing in the global marketplace, 12th ed,
Boston : McGraw-Hill/Irwin
Hill, C.W.L., Cronk, T., and Wickramasekera, R., 2016. Global Business Today, 4th ed, North
Ryde, Sydney: McGraw-Hill Australia
Nordeatrade.com ,2020.Vietnam [online]. Available at: https://www.nordeatrade.com/fi/explore-
new-market/vietnam/economical-context (Retrieved on: 17 April. 2020).
Rugman, A. and Brewer, T.L., 2010. The Oxford handbook of international business, Oxford,
New York: Oxford University Press
Wild, J.J., Wild, K. L., and Han, J.C.Y., ,2018. International business: the challenges of
globalisation, 9th ed, Upper Saddle River, NJ: Prentice Hall: