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Managerial Economics in Global Environment

   

Added on  2021-04-16

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Page 1 of 12ASSESSMENT 2MANAGERIAL ECONOMICS IN GLOBAL ENVIRONMENT

Page 2 of 12Table of contentsIntroduction................................................................................................................................3The overview of the chosen organisation...................................................................................3The opportunities provided by TPP...........................................................................................4Challenges of operating under TPP............................................................................................6Conclusion..................................................................................................................................8Reference..................................................................................................................................10

Page 3 of 12Introduction The original Trans pacific Partnership agreement was between Brunei, Chile, NewZealand and Singapore which was signed in the year 2005. The aim of the trade agreementwas to reduce all the tariff and nontariff components of international business in order toestablish smoother and cooperative growing economies. However, as an expansionaryprocess, this trade agreement included some other countries as well keeping the overallobjectives of the agreement the same. The new Trans Pacific Partnership is a trade agreementbetween a number of countries which was signed in 4th February 2016. Initially, this tradeagreement included countries such as Australia, Canada, Chile, Japan, Brunei, Singapore,New Zealand, Vietnam, Peru, Mexico and the United States of America. However, tradeagreement did not act in force due to the withdrawal of signature from the USA.Nevertheless, the remaining countries which were a part of TPP developed a new tradeagreement among themselves known as Comprehensive and Progressive Agreement forTrans Pacific Partnership in May 2017. The propositions of this latest trade agreement arealmost similar to the original trade agreement that was formed in the year 2005. Thecommentators have stated that the main objective was to reduce the dependencies of thePacific countries on the economy of China. The aim of this study is to discuss the opportunities and the challenges provided bythe TPP compared to the economy of any other country. The paper considers the economy ofUSA as an independent economy which was also a part of TPP. The study chooses thebusiness of KFC which is present both in the USA and Australia, which is a part of TPPcurrently. In this paper, the challenges and the opportunities faced by KFC in Australia isdiscussed compared to that of the economy of the USA. The overview of the chosen organisationKFC is a fast food chain company spread across 123 countries of the world havingmore than 20000 outlets. In terms of business generated, this company is the second largest inthe world just after McDonald's. This fast food chain is owned by the Yum Brands which alsoowns Pizza Hut as well. KFC is one of the first companies which had adopted franchisemodel in order to expand in the international market. According to the data provided on thewebsite of the company, its current revenue 23 billion USD. The company started from aroadside shop in Kentucky and then expanded to become what the company is now. One ofthe biggest achievements of the company is that it demolished the dominance of thehamburger as the prime type of junk food. Followed by the operation of KFC the chickenfries, the main product of the company become popular among the customers of the market.

Page 4 of 12Another feature of the company is that the products are different based on the different tastesand the preferences of the local customers. The changes in the food preferences and healthychoices have led to a little reduction in the business of the company; however, the reductionhas not created much trouble for the management as of now.The opportunities provided by TPPThe latest TPP contains a lot of propositions among which many of them providepositive benefits to the local and international businesses. One of the features of the TPP wasto ensure proper human rights. Elliott et al. (2016) stated that, the draft of the trade agreementemphasised a lot on the human rights aspect of global business and trade. Therefore,compared to that in the USA, the units in Australia managed to have a better image amongthe customers of the market. One of the most important advantages of the TPP is that itstrengthens the intellectual property rights of the businesses and the individuals. As per therequirement of the trade agreement, the signatories require enforcing strict criminal rules andregulations against the violation intellectual property rights. Kapczynski (2015) commentedthat, this is beneficial from the perspective local and the foreign businesses which heavilydepends on the innovation and new product development. KFC is known as a top innovator inthe fast food chain industry. Since the inception of the company, it has introduced a numberof new products in the market. While in the case of the USA, the intellectual property ismuch looser than in the case of the TPP. Therefore, the KFC has faced challenges in the USA while introducing new products in themarket. Fooks and Gilmore (2014) stated that the loose intellectual property rights allow thesmaller companies of the market to imitate the products of the big companies without anycopyright. This not only reduces the profitability of the innovators of the market but it bringsharm to the reputation of the producers as well. In addition to that the enforcement ofintellectual property rights also encourages the sellers to increase the number of products inthe market. One of the objectives of the TPP to enforce strict intellectual property right is toincrease the number of products in the shared market in order to increase the economictransaction. Muntaner and Mahabir (2017) highlighted that, increase in the number ofproducts is directly related to the economic transaction. This is highly discouraged by looselydefined intellectual property rights where the sellers have no incentives to introduce newproducts in the market as other players will be imitating nullifying the contribution of thecompany. Therefore KFC has hugely benefited due to the presence of the strict intellectualproperty rights in case of Australia which comes under the TPP agreement region. It is alsoimportant to note that the attraction of fund in order to expand the business is also influenced

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