2. Gregov 2
Table of Contents
Executive Summary.........................................................................................................................3
Core Country Demographics...........................................................................................................3
Business Climate..............................................................................................................................4
Organization Strategy......................................................................................................................5
Supply Chain....................................................................................................................................6
Financial Plan...................................................................................................................................6
Ethics................................................................................................................................................7
Conclusion.......................................................................................................................................7
Bibliography....................................................................................................................................8
3. Gregov 3
Executive Summary
For Durango Inc. I believe that Argentina would be a beneficial country to expand our
business. This report provides an analysis of why the expansion to Argentina would be
beneficial but also address some hardships we would have to overcome. The first method of this
analysis would be Argentina’s core demographics, particularly related to our business strategy.
In this section I go over the GDP and if it would be a good idea to invest in doing business here
based on demographics alone. Next, the analysis covers business climate within the country
including government, economic integration and the competitive environment. More
importantly, this section overviews the any regulations or important competitors we would have
to take into consideration. After that is my proposed organizational structure for the company,
going over an entry strategy and any possible strategic alliances. This includes possible
subsidies and possible telecom firms we could partner with. Following is an analysis of supply
chain considerations and my financial plan with a GANTT chart. Here is a suggested plan on
how we spend our finances and how long it would take to spend on each task. Finally is the
analysis of the ethics in Argentina and sustainability considerations.
Results from this analysis have shown that it is beneficial for our company to expand into
this market. In particular, there have been strides by the Argentinian government to attract
foreign investment which works in our favor. Through the research I have done, I have come up
with strategies for each part of this report and possible solutions for any hurdles the company has
to overcome.
Core Country Demographics
Looking at the demographics, there is potential for growth in this country that can be
beneficial. For one, the GDP of Argentina has gone up by 2.4% showing that the economy is
getting better. A rise in GDP means that there is more value to the country and that income is
higher for citizens; raising the standard of living. The main reason why this is good for a
company is that it means that people are spending more money. This could benefit our company
since we sell an inexpensive item compared to other competitors. This would result in people
buying more of our product for their business. One example of GDP affecting business is
business in Greece. When Greece’s GDP decreased exponentially people in the country would
not buy anything, resulting in businesses not making profit and eventually shutting down.
Nowadays, if you go to Greece you can buy jewelry and other expensive products for a fraction
of what they cost in other countries. This has resulted in these businesses losing a large amount
of money in the market. So to say the least, it’s a good sign that Argentina’s GDP is rising.
A huge plus for moving to Argentina is that the procedures for registering a business has
stayed stable at 14, meaning that this part of the starting a business is very stable. For
comparison, India has around 30 procedures so the move to a country such as Argentina would
be a huge save of time and money. Lastly, Internet users have increased in the country, rising up
to 69.4/100 people. Since we sell an internet-based product a rise in this statistic shows that the
market for our product is growing. Alongside that, high technology exports have gone down,
meaning that there is a high demand for internet based devices that isn’t being met by domestic
suppliers. To recap, GDP is up and more people are using the internet, meaning we can grab a
large part of the market if we move quickly. It would be easy to move quick since there is a low
number of procedures that we would need to do to start business.
4. Gregov 4
Business Climate
For the business climate, there is something that Argentina has that a lot of other
countries don’t. During August this year, the United States and Argentina launched the US-
Argentina Digital Economy Working Group. The purpose of this partnership is to supply
internet connections to 1.5 billion people by 2020. This would be done by offered technical
assistance from the US to these communities. There were also talks between representatives
from both countries debating about how to increase the telecommunication market. An article
from Mena Report explains, “Administration of President Macri seeks to connect Argentina’s
underserved communities, create a modern regulatory environment, and encourage foreign
investment” (Mena). This shows that the government is interested in modernizing its facilities
and wants more foreign companies to enter the market. This is where our company, Duarngo,
comes in. More people are gaining access to the internet, mostly in developing communities.
Since our product is low-cost and able to easily connect to the internet, our product would be
very popular among businesses within these communities. Not only that but Argentina is really
pushing for international businesses to come and invest in this market. Plus, since the US is
included in the agreement, we could possibly market our product to the US technicians in
Argentina, resulting in more sales.
Argentina also has advantages in other parts of the business climate, including trading
across borders, enforcing contracts, and protecting minority investors. For trading across
borders, this means that the time and cost of transporting a product is shorter and cheaper than
other countries. This is beneficial since we are looking to market our product throughout the
greater region of where we produce. The second factor, enforcing contracts, implies that the
enforcement of commercial contracts is taken seriously by the government. This means that if
our company were to get into a legal dispute it would be handled accordingly and in a timely
manner. Finally, protecting minority investors has a meaning of how easy it is for investors to
see transactions and business practices in that country. The fact that Argentina is good with this
means that our investors can know what exactly we are doing in this foreign market, making
them feel more secure about their investments.
However, there are some hurdles that we would have to take care of such as registering
property and construction permits. The problem with registering property in this country is that
it is difficult and time consuming to pay for land and start building. This could be compensated
by making our decision to enter this market quickly. The result would be our company being
able to get all of the registration of the land out of the way before other competitors come into
the market. Construction permits are also a hassle, this means that it takes a lot of time to pay for
and start construction of a warehouse or factory. On doingbusiness.org, this part of starting a
business was rated 173/190, which is not good. The benefit we have is that we are aware of this
hurdle and a possible solution would be to contact the Argentinian government of our possible
investment. As described earlier, the Argentinian government wants for foreign investment for
the market we are currently in. I believe that we should communicate with the government
beforehand. This would possibly help our standing with being able to build our manufacturing
plant and start marketing our product as fast as possible.
To conclude the business climate section, the Argentinian government wants there to be
more foreign investment within its borders. The US and Argentina are working together to bring
internet access to more people which is a huge benefit. To add to that, trading across borders
5. Gregov 5
would be easier than other alternatives along with enforcing contracts and protecting investors.
However we would need to cope with the fact that it is hard to start the construction of a factory
in this country. In my opinion, I believe that there are definitely some difficulties to starting a
business in this country but with the government provoking investment and more people gaining
internet access, we would grasp an up and coming market before other companies compete.
Organization Strategy
For the entry of our business we have to take note of important factors. One of these
factors is choosing which telecom firm we will partner with. This is an important decision since
the firm we choose will help us spread our broadband throughout the country, meaning we need
to partner with a company that has a wide reach. Another important factor is how easy it will be
to integrate our product into the country’s market. This includes what tariffs we would have to
go through and also how easy it would be to sell our products to countries next to Argentina.
As said before, one of the most important factors of doing this business is making sure
that we team up with a telecom firm. One of Argentina’s three telecom firms, Telecom Personal
S.A., just received funding from the IFC (International Finance Corporation) for $400 million
over a 6 year period. This financial package will mainly be used to expand its 4G LTE
broadband network. The CFO of the company, Ignacio Moran, stated that “This financing will
enable us to continue investing in the latest technology to provide the best service to our 20
million mobile customers in Argentina, through a platform that will make possible services for
the next decade” (Financial). This is exactly what our company needs when entering a new
market, a partner with a long term mindset. This partner in combination with the Argentina
Digital Economy Working Group would make our reach in this country more successful than a
lot of other opportunities. Since these groups are trying to improve internet access, more
businesses would need laptops for business purposes making our product easy to market to the
demand.
The other important factor of our organization, making sure that we have a good
understanding of regional economic integration, is something we have to take serious note of.
This means that there are not many tariffs on the flow of goods coming in or going out to other
countries. One example of regional economic integration has to do with watching the Premier
League soccer in the UK. The League implemented a huge subscription fee with watching the
games in the UK resulting in some pubs switching to a Greek provider of cable. This was doable
because the UK and the countries around it have good economic integration. This relates to our
business because we sell cheap alternatives to the new generation of laptops. Since Argentina
has good economic integration, people from outside the country would be able to purchase our
product easily.
After doing some research, I found that there are some regulations for marketing but they
are easy to follow. On 2016.export.gov it is stated that “Under the Sworn Statement on
Anticipated Imports (Declaración Jurada Anticipada de Importación - DJAI), importers must
declare shipments they wish to import into Argentina prior to shipping” (export.gov). One of the
imports that fall under this statement is laptops that are valued over 1,000 USD. This is a plus
since higher end products in our market would have to go through an extra tariff, making it
harder for them to enter the market and simpler for us to enter the market.
6. Gregov 6
Supply Chain
For considerations about supply, I believe that we have a lot to go off of. For one,
Argentina is looking to increase internet access, so more suppliers to build internet-accessible
products will show up that we could possibly do business with. I also believe that Argentina’s
laptop market will be moving towards a “trade creation” market. This means that high-cost
domestic producers will be replaced by low-cost producers. The result would be beneficial for
us because we sell a low-cost product within our market and more people in rural areas will
acquire internet, meaning they are only able to afford low cost laptops.
Also for suppliers, we would be able to expand beyond for Argentina if possible. The
free trade pact, Mercosur, is between Argentina, Paraguay, Uruguay and Brazil meaning that if
we make a deal with a supplier from any of these countries then there wouldn’t be many
obstacles to overcome. It is not all good however; the pact has faced some hardships in the past
such as imposed tariffs. However, I still believe that this is a huge advantage over other possible
countries since we have such a wide area for possible suppliers.
Financial Plan
Above is the GNATT chart that I have come up with for the next two years with
information gathered from doingbusiness.org. For the first step, registering the property, this
step would not take too long, only around 60 days. The next step, permits and building, would
take much longer to fulfill (around 400 days). I believe that most of our revenue and time will be
going towards obtaining permits and building the plant. During the time we are gathering
utilities our company would be interviewing possible workers that would work in the plant. On
top of that, while we are getting ready to open the plant I believe that we should start marketing
our product to start getting our name known. Finally we will start to begin production around the
beginning of October 2018, meaning that we will be in business in the first two years. While I
do understand that this chart looks intimidating be wary that almost anywhere we expand to will
look like this.
8-Nov-16 27-May-17 13-Dec-17 1-Jul-18 17-Jan-19
Register Property
Obtain Permits and Build
Gather necessary Utilities
Market Product
Production
7. Gregov 7
Ethics
One of the last topics, ethics is easily one of the hardest to adapt to in a new country.
Doing research has shown that Argentina isn’t the strongest country when it comes to enforcing
ethics. This is partly in due to some corruption that used to be within government. However,
pressures from outside the country and even Argentinian citizens have made a positive impact on
ethics. One professor, Ezequiel de Olaso, commented on the matter; “Instead of well-known
politicians, leading religious organizations, or famous people, common people are publicly
protesting with great courage” (Olaso). This shows that the citizens of Argentina do want more
ethical development within business. We would be able to fulfill this by basing our ethics in the
plant the same as we do here in the US. This would mean that workers are treated with respect
such as accurate wages, workers’ compensation, and regular eight hour days. If we follow this
strategy then there is a great possibility that people will flock to our new plant.
Conclusion
To conclude, I believe that Argentina would be a great country to expand into. For one,
more people are gaining access to the internet in developing communities, which means they
need a cheap way of getting on the internet which we would provide. In addition, the GDP of
Argentina is growing meaning that people are making and spending more money. For the
business climate, it’s easy to see that there are some hurdles. However I do believe it isn’t hard
to get over them with the positives that are in effect such as enforcing contracts and protecting
investors. As stated before, our organization strategy is to partner with Telecom Personal S.A.
since it has a strong plan and funding to extend its bandwidth. For finding our supplier we
would have many options because of Mercosur, making it ideal to find suppliers in neighboring
countries. Next, the financial plan that I researched showed that while building the plant will
take time, we could use that time to market our product and construct a workforce. Finally,
ethics is wanted by people as seen earlier, and we would try and follow guidelines as best we can
so that workers will stick with us. With all of these factors set in place, I believe that Durango
would be successful in Argentina.
8. Gregov 8
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