Entering American Business in a Foreign Country
Essay Preview: Entering American Business in a Foreign Country
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COMPANY BACKGROUND INFORMATION
Our company Electrical Repair Incorporated has been operating in the domestic arena for 10 years. Electrical Repair Incorporated is a moving company in the way that our headquarters are in Los Angeles, California however our employees travel to different places domestically repairing power lines, power poles and cables in times of natural disasters. Natural disasters range from storms, hurricanes, typhoons to terrorism attacks.
INFORMATION ON PRODUCT OR SERVICE
Electrical Repair Incorporated goes around to different cities and states in their time of need putting up electrical power lines, cables, and poles. Our company works as west as California helping out with the San Andreas earthquakes, as north as New York with the 9/11 attacks, and as south as Florida with the hurricanes.
STRATEGIC PLANNING PROCESS
EXTERNAL ENVIRONMENT ANALYSIS
1. Physical Forces
A. Location
Data:
The Dominican Republic is an excellent perspective location for foreign business in terms of its trade agreements. The country benefits from the Central American Free Trade Agreement (CAFTAN). This trade agreement minimizes trade barriers between the United States, Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. The combined yearly total goods traded among all seven countries are approximately $32 billion. The trade total between the U.S. and the Dominican Republic alone already equals close to $9 billion a year (“Washington File”, 2004). In addition, the country has trade agreements with the World Trade Organization (WTO), the Association of Caribbean States and several other direct free trade agreements with other Caribbean nations (“Sice”, 2004).
B. Topography
Data: The Dominican Republic is a land of varied landscapes comprised of rain forests, valleys, and desert regions amongst others. The area of the country is approximately 48,442 square kilometers with 1600 kilometers of coastline and 300 kilometers of beaches. Two large mountain ranges divide the country into the northern, central, and southwestern regions. The countrys major river is the Yaque del Norte River. Lake Enriquillo, its largest body of water is located in the southwestern region. Pico Duarte, the countrys tallest mountain peak reaches a height of 3,087 meters (“Encarta”, 2004).
C. Climate
Data: The Dominican Republic has a year round tropical maritime climate. The average daily high temperature is 87F and the low is 73F. The country has little seasonal temperature variation. Instead, the major influence of the seasons is seen in the amount of rainfall. The northern coasts rainy season lasts from November through January. In the rest of the country, it runs from May through November. The dry months run from November through April. The country is susceptible to tropical cyclones such as tropical storms, hurricanes and tropical depressions. These storms occur an average of once every two years. Most of these storms strike the southern part of the country between June and October (“Library”, 2004). Most recently, tropical storm Jeanne battered the island on September 18, 2004 (“Jeanne”, 2004).
D. Natural Resources
Data: The main resources of the Dominican Republic are agricultural. The soil in the valleys is fertile and conducive to farming. Many of the mountain slopes are covered with forests. The country also has valuable deposits of bauxite, nickel, gold, and silver. People in the urbanized areas of the island are able to easily access clean, safe water but rural inhabitants have far less access (“Theodora”, 2004).
Impact of Physical Forces
A. Marketing: Despite the outdoor nature of our product, the physical environment of the Dominican Republic should have little effect on the marketing of our company. The country needs power regardless of its landscape and physical attributes. The marketing of our product leans more towards the price point we can reach, the quality of our work and the experience that we have in the electrical repair area.
B. Finance/Accounting: Sever storms that have the potential to wreak major damage on the countrys electrical system are relatively frequent in comparison to other regions of the world. These storms can occur several times a year. From a financial standpoint, this fact is good for business because it means that we will have frequent work in the country. In addition, the accounting period and practices may have to be adjusted for the irregularities involved with waiting for storms.
C. Human Resources: The tropical climate and year round pleasant weather is the portion of the physical environment that will have the greatest impact on our human resources. The Dominican Republics tropical climate is generally attractive to Americans. In addition, we will be supplying the greater majority of our management employees from our American division. Therefore, the tropical climates appeal will aid us in recruiting employees to make the move with the company.
D. Operations: The Dominican Republic is an island nation. This is the factor of the physical environment that will have the greatest impact on our operations. Bringing our equipment into the country will have a high cost because we will have to endure the burden of traveling over water. In addition, an operational benefit of the country is that we can benefit from the trade agreements that are in place for acquiring supplies. These two factors may cancel each other out to some degree if we focus on maximizing the benefits of the countrys trade agreements to minimize costs.
2. Financial Forces
A. Exchange Rate
Data:
In 2000, the amount of the United States dollar equaled 16 pesos. In 2002, the United States dollar got stronger and rose to 19 Dominican pesos.
B. Currency Exchange Controls
Data:
The private market where most economic sectors are free to buy or sell foreign currency through commercial banks and exchange agents authorized by the superintendence of banks.
C. Balance of Payments
Data:
The unequal growth of the Dominican economy poses additional challenges to the national economic administration. Although tourism earnings and family foreign currency