You are the owner of a small business that imports clothing from Brazil to the U.S. Ashley, one of your partners in your business, has approached you with an interesting possibility. A fellow venture capitalist friend revealed to her that he and his partners were acquiring a large family-owned group of businesses in the South American country of Colombia. Most of these family-owned businesses are diversified manufacturing businesses in the capital of Bogota, but there is one clothing manufacturer in the acquisition that does not fit within their venture business plan and thus they would like to divest (sell) this particular operation. Ashley’s friend knows that you have a presence in neighboring Brazil and thought that this business in Colombia might offer you an additional expansion opportunity in the region. However, you have no knowledge of doing business in this nation.
Your job in this Assignment is to conduct some basic research into the country of Colombia (a neighboring country to Brazil) and examine the most important historical events (political, economic, and technological) that might impact the country of Colombia’s business climate for the future of this investment by your company. After researching the historical events in Colombia, write your analysis in an informative essay addressing all the checklist items and decide on a recommended course of action and your justification for such an approach.
Columbian Foreign Business Environment-Columbia
A- What events (political, economic, and technological) are the most important in recent years that might have impacted the business culture in Colombia?
One of the main events which has occurred in the recent past and has an impact on the Columbian business culture is that the influx of foreign direct investment which has recently supported the economy of Columbia. The country has been reforming its legislation from the 1990s in ways in which the foreign investors would get attracted and invest in the country. The lifting of controls on the foreign investor’s profits and their capital is one such thing. The country imposes the similar restrictions on the foreign investors that it has in place for its local investors. In the recent past years, liberalization has further pushed the restrictions in the fields of energy, telecommunications, energy, accounting, and tourism. The foreign investors face restrictions still in the television business, maritime, shipping and national airlines. However, international investors can participate in business ventures without much discrimination in research programs which are government subsidized.
B- Do you feel that the Colombian economy today is sufficiently robust to support the growth of the clothing manufacturing industry and your company’s entry into the country? Why?
The fourth largest country in South America is taking on the title of fashion center of Latin America. It has become widely known as the center for the garment, leather goods, export apparel, and footwear. The textile and apparel industry of the country is accountable for the 7.5% of the GDP from the manufacturing sector. The US is one of the main partners with 33% of its participation in apparel exports. The 90s flexible deregulation, flexible exchange rates, privatization of the state companies have opened economy for the FDI. The strategic advantage that it enjoys because of its geographic position is also important. The Productive Transformation Program is the public and private alliance dedicated to the country apparel industry support. The ten international investment agreement, 13 free trade agreements, competitive location, 4900 domestic flights per week, 700 direct flights to international destinations, three times lower logistics costs than China makes it an attractive investment destination. The 10,000 production units for apparel, 450 textile units, and 1.5 billion of consumers gives it the competitive edge in its South American markets (Ambastha, 2017).
C- Demonstrate that you have used at least one Library source to inform your responses by including 1–2 short direct quotes in APA format.
The country of Columbia is ranked as 65th out of the 190 countries in the ease of doing business (Global Edge, 2018). The country is heavily dependent on the mining exports and energy exports and is vulnerable to commodity price changes (CIA World Factbook, 2018). The economy of Columbia is expected to gain momentum in the next year as the investment is increasing, oil prices are increasing, and the domestic demand is rising. The acceleration in the fixed investment is going to fuel the economic growth. The debt dynamics of the country have improved, and the slashed corporate taxes can be a challenge in meeting the targets, however it does not cloud the positive economic momentum of the country. The GDP is expected to grow at 3.2% in 2019 and later in 2020 by 3.2% (Focus Economics, 2018).
As per the analysis of the country and its business environment, it is concluded that it is better to purchase the divested unit of the clothing manufacturing unit. The company would be better if it buys it in a joint venture with a local company as its risk would be limited to its stake in the acquisition. Furthermore, the joint venture with the local company would enable the foreign business to understand the local dynamics from the local partner. The local partner would be well rehearsed in the dynamics of the local clothing business and would help the foreign owner understand it in less time. It implies that it is suggested that Ashley can make the purchase of the Bogota manufacturing unit in Columbia for its expansion of import business in the US.
References
Ambastha, M. (2017, October 5). Growth Opportunities In Colombian Textile & Apparel Industry. https://stitchdiary.com/colombian-textile-apparel-industry/
CIA World Factbook. (2018, December 18). Columbia. https://www.cia.gov/library/publications/the-world-factbook/geos/co.html
Focus Economics. (2018, December 4). Colombia Economic Outlook. https://www.focus-economics.com/countries/colombia
Global Edge. (2018, December 18). Colombia: Introduction. https://globaledge.msu.edu/countries/colombia
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