Comparative Management Course Material – Case Study – anaiddi
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Comparative Management Course Material
Frank Davis entered the cocktail lounge at the Madagascar Hilton Hotel, located in the nationscapital city of Antananarivo, and quickly scanned the room. Behind a cloud of cigarette smoke in thecorner there was a table of boisterous French businessmen. A few other tables of two or three peoplewere scattered throughout the lounge. Frank chose a seat at the bar next to a well-dressed white manwho looked like he might be American. This was Franks first visit to Madagascar and he wanted toget the impressions of other Americans doing business there.”What would you like?” asked the bartender in slightly accented English.”A beer, please. What kind do you have?” Frank asked.”Actually the THB isnt bad. Its the local beer,” offered the well-dressed gentleman next toFrank.”Thanks. Ill try a THB,” Frank told the bartender.”Is this your first time in Madagascar?” asked the man after introducing himself as Jean-Paul,an American of French descent.”Yes. Im here evaluating the local business climate. I work for a U.S. food processingcompany, Summit Foods, that is interested in the local spice market. How about you?”Case Frank Davis Comes to Madagascar.doc page 2 of 14″I head up the operations of a textile company in Madagascars free trade zone, Zone Franche.Ive been here since right after the presidential election in 1993.”Frank was somewhat familiar with the recent political history based on background materialhe had received from the U.S. State Department. Madagascar was a former French colony that hadgained independence in 1960. Since independence, there have been four presidents: Tsiranana, from1960 to 1972, and Ratsimandrava, assassinated in 1975, were both in power during the First Republic.Then came Ratsiraka, who introduced the country to the Second Republic and socialism, but he wasforced to yield to a transitional government in 1991 after a 6-month strike. In February 1993 thecurrent president, Zafy, was elected after a popular referendum which adopted a new constitutionestablishing a mixed presidential-parliamentary regime. Since the late 1980s and particularly underZafys Third Republic, the country was attempting to shift to a free-market economy from a centrallyplanned one.
“A textile company?” said Frank. “Then you must be pretty familiar with the generalinvestment climate here. My boss is convinced theres a lot happening in this country because he has adistant relative who made a fortune here. But I havent had a chance to look around yet, except for theride from the airport to the hotel, and that was pretty depressing. The poverty seems to be so pervasive,and yet we passed several Mercedes and sport utility vehicles that didnt seem to be driven byforeigners. I dont get it.”Jean-Paul laughed and shrugged his shoulders. Although he was smiling, his eyes seemed tobe sad. “Investment climate? Investment climate . . . Well, I guess it depends on how you define it, andhow badly you want to invest. It also depends on who you know and who you are willing to pay to getthings done.”Franks eyebrows shot up. “Pay to get things done? Like what things?” he thought to himself.He let Jean-Paul continue.”The Third Republic is about 2 years old. The present administration was elected after ageneral strike that brought the government and the economy to a standstill. Conditions were bad,wages were low, and people got sick of socialism because it seemed to be benefiting only those inpower, not the country. The new administration claims to support free-market capitalism, butaccording to many of my Malagasy business associates, this crew is almost as bad as the crew theyvoted out.””But your company is still here. Obviously you are making money if youre still here, right?””Believe it or not, were making money despite the local business climate and the Malagasygovernment, not because of it. Thanks to the Zone Franche, we pay no taxes on our export receipts andwe can hold our profits in U.S. or French currency. Otherwise all the foreign exchange we earn wouldhave to be directly deposited into local banks and then would be automatically converted and held inMalagasy currency. If we were not in the Zone Franche, each time we needed foreign exchange to dobusiness outside the country, we would have to apply for it and, of course, pay a fee! Our firm is doing
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By: anaiddi
Submitted: February 9, 2016
Essay Length: 6,266 Words / 26 Pages
Paper type: Case Study Views: 360
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