Assignment on Economics - Global Business

Running head: ECONOMICS
Global Business
Name of the Student:
Name of the University:
Author note:

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Part A
Conclusion 1
An online accessories retail company wants to expand their market in a foreign country.
Therefore, due to the nature of their business, they not only require more people but they also
require more internet users, coupled with higher purchasing power. By comparing the socio-
economic data of country A and B, it can be seen that population of country A is significantly
higher than country B, however, in country A, 29.5% of the population are internet user, while in
country B, 92% people are internet users. Hence, for online business, country B is more
profitable for the company. Secondly, GDP per capita is much higher in country B (USD 42,700)
as the population is comparatively lower than in country A, indicating higher disposable income
for the residents in country B. Thirdly, 91.6% of the population in country B is urban people,
while only 34% in country A is urban population. As mentioned by Macintyre et al. (2018),
urban population shows more tendency for online shopping than the rural population. Lastly, it is
seen that country A has 21.9% people living below the poverty line, whereas a less percentage of
people, that is, 16.1% in country B lives below poverty line. Hence, the population of country B
can afford the luxury of purchasing accessories from online stores. All these information imply
that people of country B are more likely to purchase from the online accessories store and
therefore the company should expand in country B.
Conclusion 2
A company manufacturing agricultural products wants to expand in the international
market through direct exporting. By comparing country A and B it is found that fertilizer is one
of the main imports of country A whereas Country B does not import any major agricultural
product. Secondly, the percentage of urban population is 34% in country A, implying 66% of

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rural population, who usually works in the agricultural sector. Thirdly, in the labour force, 47%
in country A is agricultural worker, while the percentage of agricultural workers is significantly
less for country B, only 2.9%. Hence, it can be said, that the agricultural product based company
should export is products to country A for a profitable business.
Conclusion 3
A company producing and supplying cereals wants to expand its business in the global
market by establishing its manufacturing unit in another nation with profitable opportunities for
agricultural products. Between country A and B, the size of land area is much higher in country
A than in country B. Hence, the company can get land easily to establish its cereal producing
unit in country A. Secondly, cereals are one of the main exports of country A. thus, the company
can not only produce larger volume of cereals, but they can also export higher amount of cereals.
Thirdly, the level of unemployment is higher in country A (8.8%) than in country B (2.9%) and
this indicates that the company can get more labour at an affordable cost in country A while
establishing the cereal production and supply unit. Hence, the company should choose country A
for business expansion.

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Part B
2012 2014 2016 2018 2020 2022 2024 2026
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50 3.2
2.81 2.95
3.16
2.67
1.95
2.22
2.75 2.89 2.87 2.92
0.38
1.22
0.61
1.94
0.81 0.89
0.47 0.45 0.52 0.50 0.50
Percentage change in GDP, Japan and Korea, 2014 - 2024
Japan Korea
Figure 1: Line Graph for percentage change in GDP of Japan and Korea (2014-2024)
(Source: Statista, 2020)

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Part C
Exporting and Foreign Direct Investment (FDI) Greenfields are two major modes of
foreign market entry. A globally expanding firm, such as, ABYZ Company, can adopt either of
the two entry modes for foreign markets, however it must evaluate the advantages and
disadvantages of both the methods.
Exporting indicates sending products directly to overseas clients or consumers. The
advantages of exporting are:
 Better knowledge and understanding about the market structure and consumer needs due
to direct access
 Increased sales and higher profits
 Increased product life cycle
 Lower risk and vulnerability about business growth
 Improved goodwill and trust level boosting business
 Direct communication between buyers and sellers reducing process delays (Conteduca &
Kazakova, 2018)
The disadvantages of exporting are:
 Increased competition
 High cost for initial market development and for marketing
 Payment process is complex due to difference in currencies and exchange rates
 Financial risks due to trade regulations
 Risk of damage during transportation is high

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 Cultural difference may affect the demand for products and that would affect sales
(Bernini, Du & Love, 2016)
FDI Greenfields represents a type of investment in which an organisation establishes
business operations or subsidiary in a foreign nation, which includes setting up of new office and
business facilities, such as, manufacturing plant, sales office, distribution network, etc. from the
ground up. Apart from production units, Greenfields investment also includes construction of
infrastructure like distribution hubs, living quarters, training locations etc. for employees (Davies
& Desbordes, 2018).
The advantages of Greenfields FDI include:
 High control on the business operations, brand image and recruitment process
 High level of control on quality of manufacturing and sales of goods and/or services
 Economies of scale can be achieved in production, marketing and R&D
 Host country tariff restrictions can be mitigated (Silva & Forte, 2018)
The disadvantages are:
 Risk level is extremely high as high amount of money is invested for business set up
 Very high market entry cost due high barriers to entry
 Government regulations may prevent or limit the scope for FDI
 Level of fixed cost for establishing physical units increases cost of operation (Arslan,
Larimo & Dikova, 2019)

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From the above discussion it can be said the exporting is more profitable than Greenfields FDI as
the latter includes higher risk and amount of financial loss would be higher in case the business
fails in the foreign market.

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Reference List
Arslan, A., Larimo, J., & Dikova, D. (2019). Equity Ownership Strategy in Greenfield
Investments: Influences of Host Country Infrastructure and MNE Resources in Emerging
Markets. In The Changing Strategies of International Business (pp. 95-116). Palgrave
Macmillan, Cham.
Bernini, M., Du, J., & Love, J. H. (2016). Explaining intermittent exporting: Exit and conditional
re-entry in export markets. Journal of International Business Studies, 47(9), 1058-1076.
Conteduca, F. P., & Kazakova, E. (2018). Serving Abroad: Export, M&A, and Greenfield
Investment (No. crctr224_2018_008). University of Bonn and University of Mannheim,
Germany.
Davies, R. B., & Desbordes, R. (2018). Export processing zones and the composition of
greenfield FDI (No. 18/07). Working Paper Series.
Macintyre, H. L., Heaviside, C., Taylor, J., Picetti, R., Symonds, P., Cai, X. M., & Vardoulakis,
S. (2018). Assessing urban population vulnerability and environmental risks across an
urban area during heatwaves–Implications for health protection. Science of the total
environment, 610, 678-690.
Silva, V., & Forte, R. (2018). The Impact of Foreign Direct Investment on Home Country
Exports. Journal of International Commerce, Economics and Policy, 9(01n02), 1850005.
Statista. (2020). Gross domestic product (GDP) growth 2024. Statista. Retrieved 26 March 2020,
from https://www.statista.com/statistics/263758/gross-domestic-product-gdp-growth/.

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