Country Analysis: New Zealand vs Hong Kong

This report aims to examine the socio-economic, political and economic environment of New Zealand and Hong Kong to highlight the market potential of each country. B- Health has been chosen as an imaginary company established in Queensland which specialises in the production and export of baby food products. This report will use the weighted index score to examine the critical factor for making a market entry into a foreign market and provide validate justification for choosing one of the countries for expansion. The company has been successfully maintaining a strong position in the local market and the firm wants to expand their horizon by entering into a foreign market.

Running head: MANAGEMENT
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Table of Contents
1.0 Introduction..........................................................................................................................2
2.0 Country analysis between New Zealand and Hong Kong...................................................2
2.1Economic condition..........................................................................................................2
2.2 Overview of New Zealand and Hong Kong economy.....................................................2
3.0 Political environment and Risk............................................................................................4
3.1 Political environment.......................................................................................................4
3.2 Risk..................................................................................................................................4
4.0 Business environment..........................................................................................................5
4.1 Trade Agreements and Economic Freedom.....................................................................5
4.2Ease of doing Business......................................................................................................6
4.3 Baby product market in Hong Kong and New Zealand...................................................6
5.0 Country choice.....................................................................................................................7
6.0 Conclusion............................................................................................................................9
References................................................................................................................................10
Appendices...............................................................................................................................11
Appendix 1...............................................................................................................................11

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1.0 Introduction
This report aims to examine the socio- economic, political and economic environment
of New Zealand and Hong Kong to highlight the market potential of each country. B- Health
has been chosen as an imaginary company established in Queensland which specialises in the
production and export of baby food products. This report will use the weighted index score to
examine the critical factor for making a market entry into a foreign market and provide
validate justification for choosing one of the countries for expansion. The company has been
successfully maintaining a strong position in the local market and the firm wants to expand
their horizon by entering into a foreign market.
2.0 Country analysis between New Zealand and Hong Kong
2.1Economic condition
The economic stability of the trading partner and the operating country is one of the
significant factor in long term profitability and sustainability of the organization. The
economic aspect will provide a brief understanding of the gross domestic product, factors
affecting spending habits of the people, poverty rates and factors affecting wealth generation
of the country.
2.2 Overview of New Zealand and Hong Kong economy
The population of Hong Kong is 7.4 million with GDP per capita of 46,080. It can be
seen that GDP of Hong Kong is growing significantly and it has grown by 3% in the fiscal
year of 2019 (Coface.com, 2019). The inflation of the country is 2.3 which relative low
along with public debt which is .1% (Coface.com, 2019). Moreover, Hong Kong enjoys an
open economy with high quality infrastructure. It consists of global financial centres of
highest quality and has been successful in developing a strong banking industry. Moreover,

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the robustness of the institutional quality and judicial system makes the country lucrative for
investment from the perspective of various foreign investors.
New Zealand is a country with 4.8 million with a GDP per capita of 41,572. The
growth in GDP has decrease to 2.9 % in the year of 2019 and there has been increase in the
inflation rate to 1.7 % (Coface.com, 2019). The budget balance for the country is .7 which
shows surplus in the year of 2019 and the public debt of the company is 29.4 which is quite
higher when compared to Honk Kong (Coface.com, 2019).
Source: (Coface.com, 2019)

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Source: (Coface.com, 2019)
3.0 Political environment and Risk
3.1 Political environment
The political stability of Hong Kong is moderate and the election of Carrie Lam in the
year of 2017 showed that the legislative council remaining dominated by pro-Beijing
majority. Political tension and discontent has been one of the major source of concern for the
country as there has been a growing influence of Chinese mainland (Coface.com, 2019).
On the contrary, in New Zealand the coalition government is still strong and under no
threat from rival parties. However, disagreements within the coalition party may lead to
political instability and turmoil. National party has remained a powerful opposition and
government have to work together for maintaining the stability (Coface.com, 2019).
3.2 Risk
The analysis of the Hong Kong economy shows that there is stable growth in the
fiscal year of 2019 but there may be a decrease to the external headwinds. The country is
expected to experience slowdown due to the global trade war. Hong Kong’s exports
contribute 190% to their GDP growth and 50% on their re exports to China (Coface.com,
2019). On the other hand, private consumption which contributes to 68% of the GDP is
expected to decelerate which results higher repayment cost of debt. However, the budget
balance will be surplus due to the strong financial system (Coface.com, 2019).
The stalling progress in consumption progression has slowed the growth of the
economy. There has been significant decline in unemployment due to the rise in real wages
but consumption will suffer due to the increase in house hold debt to 166% (Coface.com,

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2019). There is also significant slowdown in the domestic and foreign growth where FDI is
expected to become negative (Coface.com, 2019). This poses a concern for global trade.
However, the government has been effective in limiting the public spending to fulfil their
budget responsibilities.
The evaluation of the risk factors of both the countries is quite low and economic
analysis shows that both these countries are good options for investment.
4.0 Business environment
4.1 Trade Agreements and Economic Freedom
Hong Kong has developed a free trade agreement with Australia and is the twelfth
largest trading partner of Australia. It is one of the largest source of foreign investment in
Australia. Hong Kong is one of the top export markets for Australian Companies
(Heritage.org, 2019). The graph below shows the economic freedom between Hong Kong
and New Zealand where it can be seen that overall economic freedom is higher in case of
Hong Kong.
On the other hand, New Zealand has maintained a Free trade agreement with
Australia from 2010 which has been revised in the year of 2015 (Department of Foreign
Affairs and Trade, 2019). This has resulted in extensive reduction in tariff and greater
certainty for the Australian service supplier.

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Source: (Heritage.org, 2019)
4.2Ease of doing Business
Referring to the appendix 1, it can be said that ease of doing business in the country is
high for both the countries where New Zealand is ranked 1 and Hong Kong is ranked 4. In
terms of the current state of the economy, Hong Kong finds themselves in a stronger position
even though there has been a slowdown in economic growth. In terms of paying taxes, Hong
Kong is higher ranked than New Zealand (World Bank, 2019).
4.3 Baby product market in Hong Kong and New Zealand
The current Hong Kong baby food market segment amount of USD 3,827m in the
year 2019 .The annual growth of the market is expected to be 5.4% (CAGR 19-23).
However, in the global comparison, the majority of the revenue is generated in China.
Moreover, the average per capita consumption stands at 46.7 kg in the current fiscal year
(Statista, 2019). The figure below shows significant growth in revenue of baby food
industry.

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Source: (Statista, 2019)
The baby food sector in New Zealand has grown by 27.2% in between 2010 to 2016
but the volume growth is 5% which is quite less when compared to Hong Kong
(Prnewswire.com, 2019). Even though sales rates have increases birth rates in New Zealand
is less when compared to Hong Kong. On the contrary, the population has high preference for
local products in terms of Baby Food. This shows that market potential for Hong Kong is
higher when compared to the market potential of New Zealand having lower population and
birth rates.
5.0 Country choice
In terms of choosing the country which is more suitable for foreign investment and
export key factors have been selected that are essential for successful market entry and
competitive advantage. Wealth Distribution of the country has been considered as one of the
factors defining disposable income and standard of living of the local population. The GDP
of Hong Kong is almost twice as that of the GDP of New Zealand. Wealth Distribution has
been given 25% weightage in measuring the overall index.

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The next factor is ease of doing business in both the countries which shows the
flexibility of operating in the foreign country which determines the ability to sustain in the
market. New Zealand has been ranked number in terms of ease of doing business and Hong is
at number 4. This factor has been given a weightage of 25% as it one of the most crucial
factors for investment. The next important criteria is economic freedom of the respective
countries which has been assigned 25% weightage. The economic freedom of Honk Kong is
more than the economic freedom of New Zealand where the value for Hong Kong is 89.6%
and 82.1% for New Zealand.
The next factor is the market potential of the industry in each country which shows
that growth rate of the baby food industry is 5.4% CAGR in Hong Kong which is almost
twice as the growth in New Zealand. The birth rates and population size is lesser in New
Zealand which provides more advantage to Hong Kong. This factor has also been given 15%
weightage.
The next factor is political stability of the country and the evaluation of the data
shows that political stability of New Zealand is better than New Zealand due to the growing
dominance of Chinese mentality. This factor has been given 10% weightage.
Category Weightage Score ( New
Zealand)
Total
Score
Score
( Hong
Kong)
Total
Score
Wealth
Distribution
0.25 9 2.25 9 2.25
Ease of doing
Business
0.25 10 2.5 8 2
Economic 0.25 8 2 10 2.5

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Freedom
Market
potential
0.15 8 1.2 10 1.5
Political
Stability
0.10 8 0.8 6 0.6
Total Score 8.75 8.85
The weightage index shows that Honk Kong has better prospects in comparison to
New Zealand.
6.0 Conclusion
It can be concluded from the analysis that Hong Kong has a better scope for
Australian countries mainly due to the economic freedom, GDP and the growth in the baby
food market. Moreover, it provides options for the company to expand further into China
which has a huge market potential due to the high birth rates.

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References
Coface.com. (2019). - Coface. Retrieved from
https://www.coface.com/cofaweb/comparer/746-851
Department of Foreign Affairs and Trade. (2019). ASEAN-Australia-New Zealand FTA.
Retrieved from https://dfat.gov.au/trade/agreements/in-force/aanzfta/Pages/asean-
australia-new-zealand-free-trade-agreement.aspx
Heritage.org. (2019). Index of Economic Freedom. Retrieved from
https://www.heritage.org/index/visualize
Prnewswire.com. (2019). The Baby Food Sector in New Zealand 2017. Retrieved from
https://www.prnewswire.com/news-releases/the-baby-food-sector-in-new-zealand-
2017-300565080.html
Statista. (2019). Baby Food - Hong Kong | Statista Market Forecast. Retrieved from
https://www.statista.com/outlook/40120000/118/baby-food/hong-kong#market-
revenue
World Bank. (2019). Rankings. Retrieved from http://www.doingbusiness.org/en/rankings

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Appendices
Appendix 1
Econo
my
glo
bal
Ra
nk
Star
ting
a
Busi
ness
Dealing
with
Construc
tion
Permits
Getti
ng
Elect
ricity
Regis
tering
Prop
erty
Ge
ttin
g
Cre
dit
Protecti
ng
Minorit
y
Investor
s
Pay
ing
Tax
es
Tradin
g
across
Borde
rs
Enfor
cing
Contr
acts
Resol
ving
Insolv
ency
New
Zeala
nd
1 1 6 45 1 1 2 10 60 21 31
Hong
Kong
SAR,
China
4 5 1 3 53 32 11 1 27 30 44
Source: (World Bank, 2019)