Analyzing the New Zealand Business Environment for Nissan's FDI

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Business Organisations and Environments in a Global
Context
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Executive summary
The report of the Business management and business organisation analyses the business
environment of New Zealand for expansion of business of Nissan in the target country. For the
analysis of the business environment, a detailed evaluation of the business environment has been
done through Pestle and Porter’s five forces. From the Pestle analysis, it can be drawn that
country has stable political, economic and social condition that would favour the expansion of
the Nissan in the country. The report has shown the growing trend of population and literacy rate
in the country. From Porter’s five forces it can be concluded that the company would face low
supplier force but high competitive rivalry, threat of new entrants and threat of substitutes.
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Table of Contents
Introduction......................................................................................................................................3
Main Findings..................................................................................................................................4
Conclusion.....................................................................................................................................11
Reference List................................................................................................................................12
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Introduction
A business situated in a country makes some investments for acquiring ownership in any other
business located in a different country it is known as foreign direct Investment (Iamsiraroj,
2016). The investment can be either made “organically” that means by expanding the functions
of an existing business in that country or “inorganically” that means by purchasing the company
in the target country. In this report a detailed evaluation of the business environment of New
Zealand would be done for examining the opportunities relating to foreign direct investment in
that place. This study would help Nissan, a Japanese multinational automobile manufacturer in
expanding its present operations in New Zealand.
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Main Findings
Background of the company
Nissan Motors Co Ltd also known as Nissan is multinational automobile manufactures having
it’s headquarter in Yokohama, Japan. It was founded by Masujiro Hashimoto on 26th December
1933. It is a global company manufacturing luxury vehicles, commercial vehicles; automobiles
forklift trucks and outboard motors. The revenue earned by the company as on financial year
2017 is ¥11.95 billion. The operating and net income of the company that is associated with the
financial year 2017 stands at ¥ 54.7 billion and ¥ 746.9 billion respectively. The employee
strength of the enterprise is 138,910 in the financial year of 2017. The major divisions of the
company are Nismo, Datsun, Nissan and Infiniti. The production and output of the company as
on financial year 2016 stand at 5,556,241 units. The total assets of the company is valued at ¥
18.74 trillion in the annual financial statement of 2017. Further, the company recorded its total
equity as on financial year 2017 at ¥ 5.38 trillion (Nissan, 2019).
Background information of the business environment in New Zealand
Amidst a troublesome and chaotic environment around the globe New Zealand stands out
separately as a powerful flare of social, political and economic stability. In 2016 in the Fragile
State Index New Zealand was ranked 3rd most stable country in the world. The country booked
the number 1 spot on Transparency International’s Corruption Perception Index after scaling the
good functioning and the trustworthiness of the public institutions. Moreover, the banking sector
of New Zealand is very strong and reliable. Their efficiency was proved while they handled the
global economic crisis in a very prudent and effective manner. New Zealand is counted among
most stable democracies in the world. Moving further the economic status of the country is also
progressive and well developed. It has enjoyed long terms of stable economic period in the
recent years. The reason of such development is effective governance by the ruling government
and the prolonged political stability.
The company gives immense importance and value to the contributions and investments made by
the entrepreneurs and investors. These contributions and investments have helped the economy
and even the government has implemented policies that encourage foreign direct investments
recently in the environment. In addition to these the government is also working towards
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developing the infrastructure of the countries that involves and promotes the participation of
foreign companies and in this way government has helped in increasing the number of foreign
direct investments in the country. It can be summed up that the business environment of the
country is friendly to foreign direct investments as the government itself supports the
involvement and participation of the FDI in the country (Zealand, 2016).
The business environment is also low risk and well functioning. In New Zealand the judiciary
system is booming and independent. Nissan Motors Co. Ltd who is planning to invest in New
Zealand in FDI and the company can be assured in terms of capital requirement. This is because
the government sponsors numerous public support mechanisms and various business networks
that can help the company in establishment of business in the country. Recently, a lot of efforts
have been put by the government in simplifying business taxes and rules in New Zealand and
this has encouraged many potential investors to invest in the existing businesses in the country.
This brief analysis has listed out the political, economical and social infrastructure that New
Zealand provides to Nissan Motor Co. Ltd in case of its foreign direct investment in the country.
Proceeding through this study will enumerate in details the business environment of the country
(Doan et al., 2015).
The country is booming with high growth of population. Population is increasing at a rate of 1.4
to 2.0 %. The population growth from 2018 to 2019 can be shown in the graph below:
1 2
0%
20%
40%
60%
80%
100%
2018 4885300
2,019 4,797,35
5
Figure 1: showing the growth of population from 2018 to 2019
(Source: Created by Learner)
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The growth of the economy and GDP growth is also prominent in the economy in the recent
years. In the graph shown below there is a close analysation of birth rate and literacy rate in 2018
and 2019.
2018 2019
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
Birth Rate
Literacy Rate
Figure 2: showing the birth rate and literacy rate in the year 2018 and 2019
(Source: Created by Learner)
Analysis of the business environment
For ascertaining the business environment an overview of PESTLE, and Porter’s five forces have
been presented below:
PESTLE Analysis
Elements Factors Influences
Political  Stability of the
government
 Lending Rates
 Government
policies
The government of New Zealand is highly stable
and this stability provides huge opportunity of
success to the business functions (Kelsey, 2015).
The lending rates in the country are reasonably
high as a result of this major portion of the
company’s profit goes into the treasury of the
government.
The government has provided enough trade and
business freedom to the companies, so that they
can do their business with ease. Nissan can
freely make their policies and do a hindrance
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free business.
Economical  Inflation rate
 Employment
trend
 GDP growth rate
Inflation rate in the country is 1.7%, which is
considerably low (Greig et al., 2018).
The unemployment is 4.3%, which also
considerably low. As the population is very high
and human, resources are present abundantly.
The economy and GDP has shown high growth
rate of 2.7%. As the inflation rate is low and the
resources are easily and abundantly available in
case of Nissan.
Social  Literacy rate
 Population growth
rate
 Migration Rate
The literacy rate in the country is 100%. So, the
economy is developing rapidly.
The population growth rate in the country is
2.1%. According to statistics, the growth rate is
about 1.4% to 2.1% every year which is a
positive sign for any business establishment
(Hillary et al., 2018).
New Zealand’s current migration rate is 3.4
people per 1000 people which is four times that
of UK. This shows that social structure of the
country is developing rapidly. Therefore, the
company has huge human and other resources
for their business.
Technological  IT technology
 Programme of
OECD
The country has made new developments in the
IT sector. Even the Urban and rural areas are
using the internet excessively and easily (Locke
and Cave, 2018.).
New Zealand has developed its own education
system. This educational system run by OECD is
7th best educational system in the world.
Therefore, we can conclude that the country is
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technologically well developed to perform their
research and development.
Legal  Nature of the
judiciary system
 Labour laws
The Judiciary system of New Zealand is robust
and independent. This ensures a high level of
transparency in corporate decision making and
government affairs (Malleson, 2016).
The labour laws are strictly implemented in the
country. Therefore, the company has to abide by
these strict laws to continue their functions
without any legal interference.
Environmental  Nature of
environmental
laws
 Implementation of
laws relating to
low emission
vehicles
The country has regulated certain stringent laws
relating to carbon emissions and environment
friendliness. They have also implemented certain
strict pollution tests for automobiles
(Richardson, 2015).
Every manufacturing company in New Zealand
are instructed to manufacture low emission
vehicles. This provides an overview the
company has made from environmental point of
view. This marks that Nissan needs to
implement these policies while manufacturing
the automobiles.
Table 1: PESTLE
(Source: Created by Learner)
Porter’s five force analysis
Elements Influences
Competitive Rivalry
(High)
The automobile market of New Zealand is very crowded. The world’s
highest car ownership ratios are attributed to New Zealand. Toyota,
ford and General Motors are the main players of the market. These
four players deal in same items so there is fierce competition among
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them, based on their products and cost. Therefore, the degree of
competitive rivalry faced by Nissan would be extremely high. Nissan
can tackle the competition their rivals through at them by creating a
consistent differentiation in the products they offer. Moreover, by
forming alliances with the competitors Nissan can gain a considerable
increment in their existing market size. Moreover, the company would
also face problems like low number of large firms, high
aggressiveness of the firm and high variety and differentiation of the
firms (Ramamurti and Williamson, 2019).
Supplier Power
(Low)
Very few numbers of big suppliers rule the New Zealand market.
Moreover, the available suppliers depend more on grocery and food
retailers for their business and fear losing their contracts with the
supermarket. Therefore, the suppliers have low bargaining power. The
position of Nissan would be quite strong and they would be able to
exert this power and get the goods from the suppliers at the lowest
possible prices. The limited population of the suppliers produces a
moderate force that would influence (Luo et al., 2018).
Buyer Power (High) The buyer power depends on three factors namely: high quality of
information of the buyers, moderate substitute availability and low
switching costs. The switching costs of the buyer in the New Zealand
market have a strong face, so the customers can easily switch to other
buyers. The second factor called high quality of information is also
has a strong face. The population of New Zealand is quite educated
and possess high information regarding the products, its quality and
the substitute companies that can provide more advance products at
cheaper price. With this available information a customer can easily
switch over to better products. However, the available substitutes in
the market are low as compared to developed countries. This force has
a moderate face in the New Zealand market.
The New Zealand market has huge number of sellers selling
homogenous products. Therefore, the buyer power in case of Nissan is
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quite high. As the population of New Zealand is price responsive, the
company eventually loses its customers due to low switching costs.
Nissan can tackle the buyers’ power by creating a vast base of
consumers. This will help the company to reduce the bargaining
powers of the consumers. Moreover, the company can take the
advantage of this vast base of consumers and centralise its production
and sales processes.
Threat of
Substitution (High)
Substitutes have the power of influencing Nissan’s market through
competition with the products of the company. The threat of
substitution depends on the factors like low switching costs, low
convenience in using substitutes and moderate availability of
substitutes. The low switching costs have a strong face and customers
have the potential to move to the substitutes of Nissan. Availability of
substitutes has a moderate face as many substitutes are available in the
market. Moreover, Nissan can have a strong influence over the market
due to its varied stylish and luxurious cars. However, the population of
New Zealand is price responsive and can shift their focus from Nissan
to other substitutes. Before expanding the business Nissan must do
entire research and development of the New Zealand market so that
they are able to produce different products from their customers and
capture the market (Pan et al., 2017).
Threat of New
Entry (Low)
New entrants depend on three factors such as capital costs, cost of
brand development, supply chain costs. Nissan would have a weak
threat of new entrants because the cost of establishment in the New
Zealand is quite high. Further, the maintenance and growth cost is also
quite expensive. Moreover, the country has constructed significant
barriers for the new entrants. These factors make the new entry quite
difficult for the new companies. Proceeding further the cost of brand
development in New Zealand is quite high due to rapid urbanisation
and development. The supply chain cost also has quite weak force in
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the market environment of New Zealand (Harris and Gibb, 2016).
Table 2: Porter’s five-force analysis
(Source: Created by Learner)
Conclusion
From the evaluation done above, it can be concluded that New Zealand is a developing economy.
The country has shown tremendous growth in the recent years. The political and economical
condition of the country is quite progressive. Nissan can expand the existing business of the
country and this step of the company would be highly successful. However, the company has to
maintain its position and the research and development of the company needs high investment.
The reason for this is that the country is a developing economy and many new industries and
companies are either planning to establish their concerns or expand an existing business venture
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