Global Business Management Report: AUSMED Pharma Expansion Analysis

This report, prepared as an assignment for a Global Business Management course, examines the potential for AUSMED, an Australian pharmaceutical company, to expand its operations into South Africa and China. It begins with an executive summary and table of contents, followed by a detailed analysis of the risks and opportunities present in each country, utilizing PESTEL analysis to assess political, economic, social, technological, legal, and environmental factors. The report then recommends China as the more suitable destination for expansion, justifying this choice based on the analysis. Finally, it proposes Foreign Direct Investment (FDI) as the most appropriate entry mode for AUSMED in the chosen market. The report includes relevant figures, tables, and references to support its findings and recommendations, concluding with a concise summary of the key insights and strategies for successful global market entry.

Running head: GLOBAL BUSINESS MANAGEMENT
Global Business Management
Name of the Student
Name of the University
Author note

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Executive Summary
The report has helped in analyzing the different risks and opportunities which can be faced by
the business in expanding their business in the other overseas market. It can be seen that there
are different kinds of issues such as political instability which can affect the growth prospects
of the company negatively and it can impact the profitability of the firm in a negative
manner. On the other hand, there are different opportunities such as high rate of literacy that
can be playing a vital role in improving the growth prospects of the company in the market.
Lastly, the most suitable entry mode is Foreign Direct Investment which will be suitable for
the improvement and growth of the firm in a more operative manner.

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Table of Contents
Introduction................................................................................................................................3
Analysis of risks and opportunities that can be Faced by AUSMED in South Africa and
China..........................................................................................................................................3
PESTEL Analysis of South Africa.........................................................................................4
PESTEL Analysis of China....................................................................................................8
Selected destination country....................................................................................................13
Discuss and Justify the Proposed Entry for The Chosen Country...........................................14
Conclusion................................................................................................................................15
References................................................................................................................................17

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Introduction
In the current scenario of complex business environment, the expansion of business is
the potential for exposing products and services to the broader range of audiences in different
countries which will increase their sales and it will be important for the success of business.
The report throws light on analyzing the various kind of opportunities as well as threats
which can be faced by AUSMED pharma company based in Australia while their expansion
in South Africa and China. AUSMED is one of the Australian pharmaceutical organizations
which has been growing in a fast manner from the last ten years and it has been suitable for
them in competing with the other competitors.
In the current scenario, the company has been employing more than 60 staffs with the
annual turnover of more than AUD 30 million. On the contrary, in the present scenario, the
growth of the company has been stalled and, in such scenario, to improve their growth
prospects, the company is trying to expand their business operations in China and South
Africa. The selected destination country needs to be analyzed with proper reasoning along
with analysis of the respective mode of entry which will be suitable for the successful growth
prospects of the company.
Analysis of risks and opportunities that can be Faced by AUSMED in South Africa and
China
While increasing the business operations in the different countries by a company,
there can be inclusion of different opportunities as well as risks that can be creating huge
influence on the company as it can affect the entire profitability in competitive environment
of business. While expanding their operations, there are major international risks for business
include the different political instability as well as foreign exchange which includes the

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fluctuations in the current value of money in relation to foreign currency (Danakol et al.
2017, p.599). On the other hand, there are great advantages of the growth of business is the
opportunity which will be offering diverse range of products as well as services.
PESTEL Analysis of South Africa
Political Factor- The political environment of South Africa is clouded by corruption,
intolerance related to political instability as well as violence. These are the different problems
which leads to the slow down in the economic development along with progress. It can be a
huge challenge for the AUSMED Company to expand their operations in South Africa
(Buettner, Overesch & Wamser, 2018, p.553). Moreover, in South African market, there is
high level of pressure on healthcare companies as they will be requiring to follow the
stringent rules which are not effective. Until the corrupt politicians are being removed, the
current position can be causing huge inconvenience for new health care businesses.
Figure 1: Level of Corruption in South Africa
(Source: Iamsiraroj & Ulubaşoğlu 2015, p.200)

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Economic Factor- In case of the economic factor, it can be seen that South Africa is
considered to be the 34th largest economy in world in terms of the nominal GDP till the year
2018. The Gross Domestic Product of South Africa has been amounted to 371 billion USD
which considers the economy is weak and it can cause the new healthcare businesses to
become more cautious while thinking of expanding their business in SA. It is considered to
be the system of the mixed economy and it is one of the five BRICKS economic giants
(Iamsiraroj & Ulubaşoğlu 2015, p.200). However, from the different statistics, it can be seen
that there are more than 88 longstanding strikes which stopped the functioning of companies
and it can be difficult for the healthcare company as it is the most valuable product which is
required by individuals and due to strikes, the closing down can create problems.
Figure 1: Fall in Growth of GDP till 2017
(Source: Bocken et al. 2016, p.320)
Social Factor- The rate of unemployment is high in SA which can affect the buying
power of the individuals. It can be difficult for the AUSMED to start and expand their
business in SA as the unemployment can create problems such as the people cannot buy
products from start up companies as they do not have any knowledge regarding such products
(Farla, De Crombrugghe & Verspagen, 2016, p.9).

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Figure 3: Unemployment Rate in SA
(Source: Bocken et al. 2016, p.320)
Technological Factor- As per the statistics, South Africa is considered to be the most
technologically advanced countries and it has made huge progress in electronic banking
services. However, within the healthcare and the manufacturing areas, the technological
advancements are thin and it can be stagnated for the growth of such companies in the
respective country which will be creating negative impact on the AUSMED (Wan et al. 2019,
p.100).
Figure 4: Lack of Technological Advancement in SA
(Source: BBC.co.uk, 2019)

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Legal Factor- South Africa inspires the Foreign Direct Investment in different
subdivisions of economy which can be suitable for AUSMED in the respective country. On
contrary, there are restrictions such as in healthcare and broadcasting sectors, there are
different restrictions which are faced by the company negatively (De Villa, Rajwani &
Lawton, 2015, p.429). However, laws such as employment equity Act 1998 aims in
generating parity in workplace which can play vital role.
Figure 5: Legal Rules of South Africa
(Source: BBC.co.uk, 2019)
Environmental Factor- In the environmental aspects, it can be seen that SA is low
risk for the different investors who are looking to breakthrough. As per the location, it can be
seen that location wise, the country is performing well, however the weakened economy can
be an issue for the growth of the AUSMED in growing and expanding their business (Haynes
& Grensing 2018).

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Figure 6: Environmental Rules in South Africa
(Source: Haynes & Grensing 2018)
PESTEL Analysis of China
Political Factors- China is considered to be the most powerful countries in the entire
world which can be a huge advantage for the growth of the company appropriately. It is
worth noting the fact the stable political environment, cheap type of labor and improved level
of infrastructure can be playing a suitable role in positioning China as the great destination in
the market for the healthcare businesses to expand which will be gaining profitability and
earn revenues (Kowalkowski et al. 2015, p.69). There are different formal and informal rules
which needs to be abided by the different companies and it will be focusing on developing
the healthcare and e-commerce business. Moreover, there are different political regulations
such as supporting of privacy along with validation of the electronic contracts that will be
effective for the companies.

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Figure 7: Political Stability of China
(Source: Hitt, Li & Xu, 2016, p.73)
Economic Factors- In the last few years, there has been noteworthy growth in the rate
of the Gross Domestic Product and the reports suggest the fact if Chinese economy expands
and excel in the respective rate, it will be surpassing the US Gross Domestic Product soon
(Bocken et al. 2016, p.320). There are different factors which can be suitable for the
generating and developing the abundant as well as skilled laborers along with potential urban
growth that will be beneficial in understanding the growth of the healthcare sector and
companies. The GDP of China has been adding more value to the society and the cost of
labor is extremely low which will be profitability aspect for AUSMED in expanding their
operations in China.

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Figure 8: GDP Growth of China
(Source: Hitt, Li & Xu, 2016, p.73)
Social Factors- In case of the social factors, the rate of literacy of China economy is
more than 90% and the main emphasis is given on education and the majority of the
individuals is literate which helps them in impacting the growth positively. There is more
than 1.4 billion population and it is the massive market of consumer and healthcare products.
It will be beneficial for AUSMED in managing the impressive growth in the market for
development of the country (Staykova & Damsgaard 2015, p.330).

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Figure 9: Literacy Rate of China
(Source: Hitt, Li & Xu, 2016, p.73)
Technological Factors- The technological aspects in China is extremely effective as
there are different products which are being developed and there are different new techniques
of purchasing which can be incorporated by AUSMED in making the lives of the individuals
easier (Hitt, Li & Xu, 2016, p.73). The different mechanism of distribution can be helpful for
them in becoming technologically efficient which will be apposite for strengthening their
growth.
Figure 10: Technological Innovation in China
(Source: Verbeke & Kano 2016, p.92)
Legal Factors- There are various rules and regulations which regulate the
employment and business practices in China. The remuneration of employees, standards
related to labor and labor disputes are being handled effectively which will be effective in
improving the aspect of the growth of the company in the respective economy. The laws and
regulations are effective in managing growth of Health care sector which will be meeting
different demands of customers (Le & MacMillan 2016, p.11941).