SPAIN AS A TARGET MARKET
QUESTION 1 : Discuss the advantages of doing business in all of these five countries: Spain, Morocco, Russia, China and Czech Republic. (See Table in appendices’ section)
Before doing business with a country, investors need to take several factors into account. Indeed, the global health of the country in particular areas are determinant as far as the future of theinvestment is concerned. In our present case, we will have a look at five main criteria that are the political stability, the currency stability, the domestic growth, the labour qualification and the exports potential. This criteria will be studied on 5 countries : Russia, Czech republic, China, Spain and Morocco.
In terms of political stability, China and Spain are the best placed countries.China is especially in a good position considering the fact that it will need to strongly prove its stability because of the Olympic games that it will organise in 2008. Spain’s main problem in this area is to deal with the 17 regions and the ETA actions that tend to divide the country more than bringing a unification. Moreover the terrorists attacks of 2004 really harmed the government. For theCzech Republic the stability is questionned because of the recent changes that happened in the government and the failure of the last one in place. Finally, Morocco would not be the best because of its strong corruption problem, and the government may be easily disturbed with unemployment and poverty issues. Finally, Russia is out of the ranking, as the country has very tense relationships with theUS a lot of conflicts inside the government.
As far as the currency stability is concerned, countries using the euro currency are favoured because of the good stability of the euro, and its position with the US dollar. Spain is then considered as being the safest money to invest in. Chineese’s Yuan, the Czech Republic’s Krone and Russian’s Rouble are stable, and at least in line with theireconomic situations. However for the Czech Republic, its entry into the eurzone has been delayed because of a lack of fiscal discipline. Now considering the ratings attributed to these countries by Standard and Poor’s, Spain remains the most reliable country with a AAA rating, as opposed to a single A for China, A- for Czech Republic and a BBB for Russia. Morocco on the other hand is rated BB+ whichis nevertheless less than Spain but better than Russia.
The exports potential helps us defining the opportunities existing within the countries and the more the opportunities, the better it is. China makes the best option for exports potential. The country received a lot of investments in the past years, and is full of opportunities as far as electronic products are concerned. Then the CzechRepublic offers nice possibilities. Indeed the country is experiencing a real boom in the export sector, it also currently receives important FDI (Foreign Direct Investments) which helps its development. Russia is also well placed as far as oil and gas resources are concerned, it has 1/3 of world’s natural gas reserve, The main difficulties though are that exports need to be paid in Rouble and thatmay be a problem on a currency term, but there is a possibility to hedge. Finally Morocco’s good point would be the large the large support of french government which encourages investments in this country. Spain is currently in difficulty concerning its exports, it does not receive much FDI, and the main export partner is France.
The main domestic growth noticed between those 5 countriesconcerns China. It registered a 10.5% GDP growth in 2006 and even if the forecasts plan it to slow down a bit, it will remain stronger than for the other countries. Chinese market consists in huge opportunities just by the number of inhabitants (1.25 billions) which is the highest in the world. But the competition in this market is as huge as the population. China received an impressive number of...
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