Global Business Whimsical and Fresh Approach

Question: Discuss about the Global Business Whimsical and Fresh Approach. Answer: Introduction Lazybones Australia provides a whimsical and fresh approach for designing home wares and clothing for the relaxed and modern living. The company continually evolves every season by designing products that delight and surprise the customers who love the brand globally for their sleepwear and soft furnishings (Lazybones.com.au, 2016). The company has intended to seek a suitable country in Latin America for manufacturing their clothing range via contract manufacturing and supply it to the market in the United States. Therefore, this report analyses and compares the business, political and socio-economic environments of Argentina and Brazil with respect to their potential for foreign contract manufacturing. The economic environment of Argentina and Brazil play a significant role in influencing the business and the external factors in the broader economy and business market. The economic environment of can be compared based on the factors of manufacturing value added (% of GDP) and GDP growth. Manufacturing Value Added (% of GDP) This factor indicates the measuring of the output of manufacturing as the part of the share of the economy of a country. Value added denotes the net output of the sector of manufacturing is calculated after adding the total amount of outputs and the intermediate inputs are subtracted (Johnson, 2014). It expresses the share of the GDP (Gross Domestic Product). The values of this factor for the countries Argentina and Brazil are 17.224 and 11.402 respectively which states that Argentina has better manufacturing abilities and share for the GDP of the country when compared to Brazil. However, the market size of Brazil is scored at 5.8 when compared to 5.0 of Argentina which states that Brazil has a bigger market size compared to Argentina. GDP Growth (Annual %) GDP measures the health of the economy of a country and represents the total value of all the services and goods that are produced over a specific period (Al-mulali et al., 2013). The size of the economy is determined by the growth of the GDP. The percentage of annual GDP growth of Argentina and Brazil are 2.372 and -3.847 respectively which states that the growth of Brazil is on a negative scale when compared to Argentina. This is primarily due to the annual inflation percentage or consumer prices that have lowered the growth of the economy. The inflation values for both Argentina and Brazil are 10.619 and 9.027 respectively which states that inflation is higher in Argentina compared to Brazil. This is a contrasting factor and clearly states that the economy of Brazil has taken a big setback compared to Argentina in terms of GDP growth. With reference to the two parameters of economic environment, it can be well stated that Argentina is more prepared for the contract manufacturing abilities due to its advanced economic status when compared to Brazil. The financial stability of Argentina is found to be more stable and supportive compared to that of Brazil. Political Environment and Risk The political environments of Argentina and Brazil play a significant role in the daily business activities that occurs on an international or local scale. The government policies are reflected in the production and growth facilities of the two countries and therefore, the factors of total tax rate and GDP per capita will be considered. Income tax is the share percentage of the earnings that the earners are expected to pay the government for funding the infrastructural development or to pay the salaries of the employees who are employed by the government (Leth-Petersen Skov, 2014). A total of the rate of the collected tax forms the total tax rate of a country and in this regard, the percentage rate of commercial profits of Argentina is 137.4% and that of Brazil is 69.2%. It is evident that the total tax rate of Argentina is far more than that of Brazil which states that the earning rate of Argentina is greater than that of Brazil. Greater the total tax rate, better the political environment of the country with lesser risks. GDP Per Capita GDP per capita measures the total output by dividing the GDP by the population of a country (Carlsson De Geer, 2015). Relative performance of two countries can be deduced from the GDP per capita. In comparison of this parameter of Argentina and Brazil, $17,674.37 and $15,359.33 are the GDP per capita of the two countries respectively on an international scale. Greater GDP per capita denotes the fact that the government policies promote production and development with lesser risks of business damage. Based on the information presented here, it can be stated that in both the parameters, Argentina leads over Brazil to establish the fact that the political environment supports business growth and development that can easily permit Lazybones to initiate its contract manufacturing with minimum risks. Business environment combines all the internal and external factors influencing a business. Both these factors influence each other for working together that affect a business. The possibilities of business can be assessed by the parameters of foreign direct investment and exports of goods and services. Investment and Export of Goods and Services Foreign direct investment in Argentina is -11.103 and of Brazil is -61.576 which clearly states that in both the countries, contract manufacturing by foreign countries is not a regular practice as both of them depicts negative values. Export of goods and services in Argentina is $64,485,724,928.2 and in Brazil, it is 231,471,940,845.83 and these figures state that both the countries are involved in export activities. In view of both these parameters, it can be stated that Argentina has a better investment prospect and Brazil has a better export record. Argentina can be a better option for contract manufacturing as it business environment favors foreign direct investment and as export of goods and services do not have a profound importance in it as the company has not intended for sales. Contract Manufacturing Potential Arrangements of contract manufacturing have been a global trend for furthering the economic concentration. In this regard, it can be stated that Argentina is a country with huge potential and rich in resources (Ehret, Kashyap Wirtz, 2013). This will facilitate the process of production of goods and since Argentina is a medium sized producer of cotton in South America, Lazybones will have a seamless supply of raw materials of high quality at low costs. Contrastively, Brazil also offers fair opportunities for contract manufacturing and is one of the worlds leading producers of cotton, however, the tax and tariff arrangements of the government are not very attractive with high rates of corruption in the country. Country Choice The country of choice can be determined by the weighted index table where several components of the two comparative countries are placed based on their relative importance. Since Lazybones will be undertaking contract manufacturing in the selected countries, several parameters will be considered for their selection through the weighted index. The variables included in the weighted index table have been selected considering the economic, political and business environments of the two countries and have been allocated in a descending order of weighting. It has been evident that the foreign direct investment in Argentina is comparatively higher than that of Brazil whereas the commercial service exports were found to be higher for Brazil than Argentina. Therefore, Argentina is preferable for contract manufacturing as the comparative scores have been favorable for the country with respect to all the variables of the weighted index table. Table 1: Weighted Index for Argentina and Brazil Variable Weighting Argentina Brazil Score Adjusted Score Score Adjusted Score Manufacturing Value Added (% of GDP) 35% 8 2.50 7 2.00 Investment and Export of Goods and Services 25% 7 1.50 6 1.50 Total Tax Rate 20% 7 1.75 5 1.50 GDP Growth (Annual %) 10% 3 1.50 2 0.60 GDP Per Capita 10% 4 0.60 2 0.90 Total 100% 7.85 6.50 Recommendations It is strongly recommended that Argentina is the country of choice for contract manufacturing for three main reasons. Firstly, the economy of Argentina is highly diversified with 20.6% of its GDP is supported by the manufacturing industries facilitated by advanced technologies and high productivity levels. Secondly, the available legal structures are facilitative for the foreign direct investment and a fast track formation process is offered for the new business entities in the country. Thirdly, Argentina provides several inventive programs for facilitating investment which includes free trade zones, provincial incentives and technological development fund. Therefore, considering these factors, it is recommended that Argentina is the country of choice for contract manufacturing by Lazybones as most of the environment is in favor of Argentina when compared to Brazil. References Al-mulali, U., Fereidouni, H. G., Lee, J. Y., Sab, C. N. B. C. (2013). Examining the bi-directional long run relationship between renewable energy consumption and GDP growth.Renewable and Sustainable Energy Reviews,22, 209-222. Canuto, O., Cavallari, M., Reis, J. G. (2013). Brazilian exports: climbing down a competitiveness cliff.World Bank Policy Research Working Paper, (6302). Carlsson, P., De Geer, A. (2015). Growth by Growth: How does differential birth rates affect per capita output?. Ehret, M., Kashyap, V., Wirtz, J. (2013). 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