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Executive Summary

The following report is providing a overview of the furniture manufacturing company
Adorn expanding its sales operations into a foreign country and the consequences of
such a decision.

The assignment covers:
The decision to go global and how to Adorn should choose which country to expand
its operations into. Discussed are such aspects as G.D.P. and demographic trends

The U.S.A. is the proposed country to expand into.
With this, data was gathered from many different sources to analyse the country and
trends of the U.S. economy. Analytical tools such as P.E.S.T., S.W.O.T. and Porters
Diamond Model are used to better understand the environment with in the U.S. and
how Adorn needs to adapt to those markets.
Also the ease of doing business with in the U.S. with regards to the relative ease of
setting up and doing business within the U.S., compared to other countries.
The furniture industry and its future is discussed in depth with regards to local
manufacturing industry, imports and consumer changing perceptions within the
United States.

Finally considerations such as regionalism, e commerce and international terrorism
and the impact on global expansion

Contents Page
1 Introduction.................................................................................................................3
1.1 Reasoning for considering Globalisation of Adorn..............................................4
2 Analysis of Globalisation............................................................................................4
2.1 GDP......................................................................................................................5
2.2 Demographic Trends............................................................................................5
2.2.1 Population----------------------------------------------------------------------------5
2.2.2 Culture--------------------------------------------------------------------------------6
2.3 Proposed Country.................................................................................................6
3 The United States........................................................................................................6
3.1 P.E.S.T..................................................................................................................7
3.1.1 Political – legal environment------------------------------------------------------7
3.1.2 Economic environment------------------------------------------------------------12
3.1.3 Socio – cultural environment-----------------------------------------------------18
3.1.4 Technological environment-------------------------------------------------------20
3.1.5 Other---------------------------------------------------------------------------------25
3.2 S.W.O.T. of setting up operations within US.....................................................26
3.2.1 Strengths----------------------------------------------------------------------------26
3.2.2 Weaknesses-------------------------------------------------------------------------27
3.2.3 Opportunities-----------------------------------------------------------------------27
3.2.4 Threats-------------------------------------------------------------------------------27
3.3 National competitive advantage.........................................................................27
3.3.1 Factor endowments----------------------------------------------------------------28
3.3.2 Demand conditions----------------------------------------------------------------29
3.3.3 Related support industries--------------------------------------------------------29
3.3.4 Corporate strategy, structure and Rivalry---------------------------------------30
3.3.5 Other influences--------------------------------------------------------------------30
3.3.6 Concerns regarding this model---------------------------------------------------30
3.3.7 Conclusion of the Diamond Model----------------------------------------------31
3.4 Demographic trends...........................................................................................31
3.4.1 U.S. Workforce---------------------------------------------------------------------31
3.4.2 U.S. Education---------------------------------------------------------------------32
3.5 Treaties...............................................................................................................33
3.6 Trends within the United States furniture industry............................................34
3.6.1 Change in perceptions:------------------------------------------------------------34
3.6.2 Economic changes within the furniture industry------------------------------34


3.6.3 Imports------------------------------------------------------------------------------34
3.6.4 Future trends------------------------------------------------------------------------35
3.6.5 US Imports--------------------------------------------------------------------------36
4 Additional considerations .........................................................................................37
4.1 Regionalism/ integration....................................................................................37
4.2 E commerce........................................................................................................38
4.3 International terrorism........................................................................................39
5 Conclusion.................................................................................................................40
6 List of references.......................................................................................................42
7 Appendices: List of Tables........................................................................................44
8 Appendices: List of Figures......................................................................................47

1 Introduction
Adorn is a furniture manufacturer that is producers to clients specifications. It utilises
highly automated processes development and production of its products,


Adorn’s core competencies and competitive advantage include high automation of
manufacturing processes, producing specialised and well designed furniture for the
user in practicality and style.

1.1 Reasoning for considering Globalisation of Adorn
With the current global economic recession it would be advisable to enter foreign
markets with the intention of sustaining or increasing the organisations profits through
increasing the company’s market base and sales.
Taking a more proactive stance to the slowdown in demand would be following in
Nissan South Africa’s successful approach of increasing sales through globalisation.
As reported by Ndundu Sithole (2009);
“”Nissan South Africa will boost production and expects to increase its local market
share despite a domestic and global economic slowdown, managing director Mike
Whitfield said. Local car sales have been in negative territory in the past 18 months,
falling by 30.1 percent in March, and the global slump has slashed vehicle exports.
Nissan S.A. expects new product lines to boost output to about 40,000 units from
28,000 in 2008. He said the company was exploring further production opportunities
in countries such as Angola and Nigeria. "Our market share came up to around 7.5
percent last year on the back of some lack of products in certain key segments. This
year we expect to be just over 8 percent... which means we are in a growth phase."
Thousands of jobs are on the line in the automotive industry and vehicle
manufacturers and car parts producers have approached the government for loans.
Whitfield said Nissan S.A. had escaped the worst, but was not unscathed and has shed
180 jobs.””

Globalisation could be attained through the company’s comparative advantage of low
cost and high automation combined with a well planned and implemented strategy.

2 Analysis of Globalisation
There would be negative aspects to globalisation, so a detailed analysis of the
proposal needs to be undertaken.
First, a country needs to be identified as best suited for our expansion plans. For this
we would look at potential geographical regions that have our target market within
and the amount of potential clientele within these regions which logically would give


with high labour costs and/or limited raw materials which would assist in local competition in the region being easily competed against. • High Gross Domestic Product and high capita individuals which would relate to potential clients that could afford buying our products. • Also a country that has with low import costs and barriers. South Africa which would assist in dropping costs of doing business with the country while improving opportunities with in the new Media Inc (2009): Richest Countries by GDP and the Poorest Country. • High manufacturing input These locations which would be identified as having: • Highly developed education and infrastructure allowing growth of business in the country. http://gross-national-product.1 GDP Table 1: World Top Ten Richest Countries by GDP in US Dollars (Source: Suite101. 2.the greatest potential of return for ever resource invested.cfm/richest_countries- _by_gdp_and the_poorest_county) World Top Ten Richest Countries by GDP in US Dollars GDP GDP Per Head PPP 1 United States Of America 14’839 Billion 48’400 48’400 2 Japan 5’388 Billion 42’310 35’710 3 China 4’818 Billion 3’600 6’830 4 Germany 3’440 Billion 41’550 36’100 5 France 2’734 Billion 43’910 35’750 6 United Kingdom 2’442 Billion 39’470 36’820 7 Italy 2’334 Billion 40’150 32’210 8 Russia 1’680 Billion 11’880 16’300 9 Spain 1’581 Billion 34’540 32’120 10 Canada 1468 Billion 43’860 40’540 2. that is stronger than the South African Rand so to offer more leverage to assist in keeping the costs of to market low.1 Population 5 .2 Demographic Trends 2. • Fairly stable currency.2. Trade treaties with our domestic market.suite101.

3 The United States Table 2: The United States Economy (Source: Nationmaster. Considering that many developed countries have experienced large economic slow downs in current recession. However it is important to note that this may not offer the bests returns on investment but is the least risky option due to our lack of expertise in globalisation dealing with different international cultures. such as the United States.2. a strategy to expand into a first world/developed country that would have a stable political environment and the market to offer the company substantial growth with limited risk.Adorn would require a country that has a large domestic market with the ability to purchase our organisation product offerings is (nd): American Economic Stats. From this general overview it would be beneficial to focus on large markets where Adorns products have the largest potential for profits. would be best suited for our organisation. 2. 6 . 2. so high Gross Domestic Product combined with a high Gross Domestic Product Per Head is preferred.2 Culture Language: Being a more westernised business culture with limited globalisation experience. it would be advantageous to develop strategies to capitalise on their economic upswing so to maximise the organisations profits. So an English speaking/understanding market with western influence would be the easiest market to penetrate with regards to culture.3 Proposed Country So taking the above into consideration. a national economy with English as a domestic language would be more advantageous to Adorn.

E. and every one of these aspects is analysis separately.S.S.1 Form of government Democracy: 7 .73 2nd of 68 Achievement As reflected above in table 2. P.2 7th of 156 Economic Importance 197.S.nationmaster. is an external environment analysis of risks and opportunities that are present which may have an effect on the organisation. But there are in recent months a increasing vocalised concern regarding the future value of the American dollar and the U.15 5th of 65 Debt > Equity $ 12’250 billion 1st of 136 Distribution of family 45 4th of 43 income > Gini Index Economic Freedom 3. the United States (U.1 Political – legal environment 3. It stands for political. environment. governments ability to stop spending in regards to economy bail outs. 3. social and technological. alone. with poverty at 12% of population.http://www. The United States Big Mac Index $ 3.1.1 P.S.1.9 1st of 25 Exports $ 1’148 billion 3rd of 189 GDP $ 14’839 Billion 1st of 203 GDP Real growth rate 2% 167th of 198 Income category High Income Income distribution > 30.5% 54th of 178 richest 10% Poputlation below poverty 12% 41st of 48 line Public Debt 60.E. With all this said the global recession will affect the world not just the U.T.1. With debt to GDP is 60% in and one could assume that with the national bail outs by the United States government to Corporate America in an attempt to limit the effects of the recession that this percentage is going to increase this percentage while taxes are going to increase in the population.T.) is one of the wealthiest countries.8% of GDP 25th of 121 Technological 0.S.

political strife and insurgency 8 . 35% of Americans identified as moderate. According to a 2007 poll by Associate Press. 36% as "conservative" and 25% as "liberal.3 Social unrest. 2009).The U. • Political ideology a) American Liberalism Ideals stand for the preservation and extension of human. while the Republican Party commonly represents conservative ideals.1. the Democratic Party generally represents liberal ideals. has a de facto two-party system. social and civil rights as well as the government b) American Conservatism They aim to protect traditional values (especially on social issues) while promoting the concept of small government.1. 3.2 Stability of government The United States has enjoyed 135 years of political stability since the end of the Civil War (The Good News.1.S.1. c) Moderates 3.

there are large threats of social unrest around the world with the increased unemployment levels and that United States director of national government is using its national resources to improve security national in preparation for any threats of terrorism and social unrest with in the country. Dennis C. Blair.4 Government attitude towards foreign firms Ott (nd) mentions the following. http://www.nytimes. about 16 percent of foreign assets in the United States were owned by foreign governments.Figure 1: Bleak Employment Outlook (Source: The New York Times (2009): Bleak Employment Outlook. Schwartz (2009) stated in the New York Times on 15 February 2009. at the end of 1990.D. largely using the pretext of the "Global War on Terrorism. told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States. The outgoing administration (Bush prudency) has laid the groundwork.html) N. outpacing terrorism. while 84 percent were 9 .1.1. with the economic down swing." 3. Chossudovsky (nd) notes a number of ways the U.S. Various pieces of "anti-terrorist" legislation (including the Patriot Acts) and presidential directives have been put in place since 2001.

it circumscribes the boundaries of the jurisdiction of federal law along with the laws in the fifty U. The Constitution forms the basis for federal laws under the federal constitution in the United States.privately owned. However some requirements such as labels. which takes the regulation of hiring. as well as laws enacted by Congress. which was in force at the time of the Revolutionary War.) 3.” This reflects a developed legal system and infrastructure that has not been threatened since the American Revolution in the late 1700’s. is the United States Constitution. “The law of the United States was originally largely derived from the common law system of English law. the supreme law of the land. regulation in firing and the regulation in employment conditions.S. However. Burnham (2006) states the following. and treaties to which the U. and results in the higher the score the more the nation regulates employment Laws affecting business firms Is not detached from any other first countries law on how a company needs to operate within its society. states and in the territories. need to be investigated in more detail as these laws do change from state to state. 14 percent of foreign assets owned by the United States were official. Labour law United states rates at 22 out of 100 in the Employment Laws Index of the World Bank (2004). warning etc. so to ensure that Adorn will meet those specific legal requirements. is a party. under the Constitution's Supremacy Clause.S.1.1. (Similarly. and 86 percent were private. 10 .5 Legal tradition and the effectiveness of legal system Current population supporting the government shows that there is a healthy democracy at work with a strong constitution.

This coupled with stability of the government supports the following conclusion that the county has a stable democratic system and there would be little chance of this stable democratic system changing in the near future. 11 .6 Other considerations One consideration that needs to be mentioned is the current recession and causes there of. These changes will affect organisations within the whole economy both directly and indirectly. Discussing (in more detail) the political composition (including parties and there specific effects on the political stand of the U. that have pushed for reform in most financial industries regarding regulation and responsible accounting.1.1.Figure 2: Enforcing Contracts – Global Rank (Source: The World Bank (2008): Doing Business Report 2009 – Country Profile United States. One such effect would be an increased in administration costs of doing business but this will also improve the economic stability in the long term. The World Bank: Washington) 3.S) goes beyond the limitations of this report.

1 Literacy level Figure 3: Literacy Rates (Source: Wikipedia (2008): United Nations Human Development Literacy Rates.1.2 Economic environment 3. http://en.wikipedia. Managing political risk An open democratic system is present with in the United States but the need to have close ties to influential people within government would be beneficial for the United States has a literacy rate of 99%. 12 .png) According to the United Nations Development Program Human Development Report 2007/2008.

through which it manages the supply of money. The Federal Reserve. It has two main tools for achieving these objectives: fiscal policy. 3. Image Around the World. 13 . the independent U.1. Diplomatic Mission to Germany (2008) Stated That United States government also manages the overall pace of economic activity.S. seeking to maintain high levels of employment and stable prices.S.2. and monetary while the president and Congress adjust federal spending and taxes (fiscal policy).2 Foreign policy Table 3: The United States Favourability Rating (Source: Pew Research Centre Project (2009): Pew Global Attitudes Project: Confidence in Obama Lifts U. through which it determines the appropriate level of taxes and spending.S. manages the money supply and use of credit (monetary policy).3 Money and fiscal policy The U.3. http://pewglobal.1. central bank.php?ReportID=264) Pew Research Centre Project (2009) states that as in most countries where opinions of the United States have improved foreign policy and that Obama's election led them to have a more favourable view of the United States.2.

S. http://www. The U. 3.1.S.6 Inflation Figure 4: U.2.S.15560 (Rand to one U. 3. Department of Labour (2009): History of inflation in the US from Jan 1914 . is privatised. so is easily tradable. 14 .4 Nature of competition Majority of the competition in the U.txt) From the figure 4. ftp://ftp. Again it is necessary to mention that the excessive loans the government has made for the economic bail out will have negative effects on the economy but the country had a high gross domestic product so is could theoretically load substantial amounts before large changes will be seen in the debt to GDP figures.2.Mar 2009.04688 (Rand to one U.S.2.1. dollar is still considered a main benchmark for global currency. Dollar) The ) Average (372 days): 9. Consumer Price Index January 1914 to March 2009 (Source: U.85060 (Rand to one U.S. Dollar) High 11.1. it can be noticed that inflation is consistent over the past 25 years.5 Currency convertibility Table 4: US dollar to ZAR for Time period: 26/07/2008 to 01/08/2009 (Source: OANDA Corporation (2009): FXHistory – Historical Currency Exchange Dollar) Low 7.S. has a large open market with many buyers and sellers that have large number of firms with even larger number products (Homogeneous) to choose from (Monopolistic Competition).S.S.3.bls.

7 U.2. Taxes (Source: (nd): American Economic Stats.1.S.S. http://www. Taxes Table 5: 15 .3.nationmaster.

Table 6: Government spending (Source: Simmons (2009): How Congress Is Spending Your Money. http://www.) 16 .com/.federalbudget.

S.1.The taxes that will affect the company will be determined by economic treaties in place between South Africa and the U. distribution or consumption of goods and services by the national economy.nationmaster. states that businesses in the United Stated (across all industries) pay from 35% to 41.8 Economic freedom Economic Freedom is the absence of government coercion or constraint on production. http://www.2 6 Estonia 3.6% of their income in taxes. rates at number six bodes well for future economic outlook of the country.15 9 United Kingdom 3.55 2 Singapore 3.S.2 9 Australia 3.2 6 Denmark 3. 17 . so further analysis in this regard is required. The 41.15 Counties with high rating generally have high growth rates (with the exception of China).5 3 Luxembourg 3.2.25 6 United States 3..2% in 2010 when President Obama’s promised tax increases are implemented. Table 7: Economic freedom is rated within the top ten nations (Source: Nationmaster.3 3 New Zealand (nd): Economic Freedom. so the fact that the ) Rank Country Rating 1 Hong Kong 3. Banescu (2009).3 5 Ireland 3. 3.6% maximum tax rate is scheduled to rise to 46.

2 Religious beliefs According to a U.39% English Spanish 32’252’890 12.57% 3. Christianity has 18 .1.1 Language Table 8: Top Languages spoken in the United States (Source: American Community Survey (2005): United States . http://www.03% Chinese 1’550’547 0.1. and then by Judaism at Age 5+ % English 216’078’959 80. Religious Landscape Survey done in 2007 by the Pew Forum on Religion & Public Life.mla.4% representation followed by No religion at 16.3.3 Socio – cultural environment 3.7%.3.6% All Languages other than 52’007’297 19.

3. Population (Source: The above figures show very stable population with regards to birth and death rates.3. (nd): Population. Table 10: U.S. labour Statistics.1.3 Population Table 9: U. which is the norm for a developed country.S. 19 .nationmaster. (nd): American Labour The unions represent only 13% of the population as reflected by table 10 with the level of unemployment at 5% which means that labour and social influence in the market is subdued and will not greatly affect the future companies operations in the U.1.(Source: Nationmaster.4 Technological environment 20 . 3. http://www.

the U.uspto.1.1 Government spending on research and development Table 11: Research and development spending as portion of countries GDP. (Source: World Bank (2002): Research and development spending (most Recent) By Country. 21 .nationmaster.S. To promote the progress of science and useful arts.’ Patents are governed by the Patent Act (35 U. Commitment to property rights and protection. is rated at number seventh in the above table showing that it is one of the top countries spending on Research and development. Code). section 8.4.1.S. Constitution: ‘Congress shall have power .S. In Article 3. This illustrates the and-development-spending&b_map=1) The U.S.4. . which established the United States Patent and Trademark Office (the USPTO. . Constitution.S. http://www. which shows that the country is investing large amounts in their economic future. http://www. by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.2 Legal regime for patent protection Beck & Tysver (2008) states that the importance of granting monopolies for new inventions has been recognized in the United States since the adoption of the U.

nationmaster. this is an assumption but when considering that there has been no major energy crises in recent times (excluding corporate scandals) it would be a reasonable assumption to com The table shows the U. as top electricity producer. http://www.1.3 Energy availability Table 12: Electricity Production by (nd): Electricity Production (most recent) by Country. • It may have enough energy for future growth and expansion. (Source: Nationmaster. which could mean several things: • The largest first world country has to produce most electricity for its population. 22 .S.

com (nd): Air transport.4 Transport infrastructure Table 13: Transport. 23 tons-per-km) These figures show the U. (Source: Nationmaster.1. Million Tons per year. freight – million tons per km (most Recent by Country. as have a developed infrastructure with a vibrant economy. per Kilometre. http://www.

S.5 Availability of skilled workforce Table 14: Countries with tertiary education as percentage of total education-total) The figures show that the U. 24 . has large amounts of skilled labour with in its population.3.4. http://www.1. which will assist in future expansion as the human resources are (nd): Labour force with tertiary education as percentage of total (most recent) by country. (Source: Nationmaster.

The World Bank: Washington) Figure 6: Starting a Business – Global Rank 25 .5 Other Figure 5: Ease of doing business – Global Rank (Source: The World Bank (2008): Doing Business Report 2009 – Country Profile United States.3.1.

W.W.T.E. 3. so easily to identity with • Low cost of production in South Africa • Exchange rates in comparison to the US Dollar is advantageous as it off sets costs of getting the products to market 26 .1 Strengths • Culturally close to domestic culture.2.2 S. they derive from competitive dynamics of the market/industry/from P. as compared to other countries in the world.T.O.S. factors. While opportunities (O) and threats (T) are external factors which a company cannot directly control.O.T.S. The World Bank: Washington) Figure 7: Trading Across Boarders – Global Rank (Source: The World Bank (2008): Doing Business Report 2009 – Country Profile United States. 3. Strengths (S) and weaknesses (W) are internal factors. The World Bank: Washington) All the three figures above show the ease of doing business with in the U. analysis is a tool used in management and strategy formulation. of setting up operations within US A S.(Source: The World Bank (2008): Doing Business Report 2009 – Country Profile United States.

4 Threats • China entraining the American market • China offering retail franchises to the American market • War on terrorism • Raising taxes 3. • Ease of developing products for U.S. market requirements by utilising current expertise and resources 3.3 National competitive advantage 27 .2.2 Weaknesses • Capital investment to penetrate into the market effectively through advertising and promotions • Capital investment required to setup operations with in the United States. • Time needed to establish organisation with in the market • Necessary links with in the U. economy to establish a business network with clientele and suppliers.2. 3. • Current infrastructure to capitalise on the increased demand which cannot currently be determined with accuracy. • Knowledge and experience of the market entering.2.S.3 Opportunities • Growth potential with large customer base • Large retail base to utilise with in the economy to assist with distribution and penetration within the country • Deteriorating local manufacturing industry • Change in consumers perceptions regarding furniture as a commodity 3.

excellent telecommunication etc which is partly dependent on the governments willingness to invest in these areas over long periods of time. by having provision of (nd): Broadband access (most recent) by country.Figure 8: Diamond Model (Source: Porter (1990): The Competitive Advantage Of Nations. Table 15: Broadband Access by Country.nationmaster. http://www. 3. universities.3.1 Factor endowments Advanced specialists with good technical know how Resources can be ‘home grown’ and ‘specialised’. Macmillan: London) Porter (1990) identifies a ‘diamond’ of four interrelated areas within a nation that assist that country to be more competitive in international markets. (Source: 28 . (nd): Imports of Goods and services in current U.S. 3.3.6 within this 29 .3 Related support industries Internationally competitive suppliers are critical for international success. As discussed in further detail in future trends. point 3.2 Demand conditions Highly sophisticated and demanding customers in a domestic market drive up innovation and quality of countries products Furniture is becoming a commodity resulting in a shift from local manufactured product to more imported products cheaper products. Dollars (most recent) by country. (Source: Nationmaster. Table 16: Imports of Goods and Services by Country.3. the United States has focused on developing its skilled labour force.Education levels As reflected in Table 14: Countries with tertiary education as percentage of total population. 3.

Investment.3. such as war. which drives down costs and help develop new methods of competition Competition coming from international suppliers into the U.S. forcing them to either: • Focus on more niche markets where more sustainable higher prices can be charged. this model can only be used to highlight concerns with in a specific county and cannot be used in isolation when analysing a specific country 30 .3. economy. which affect the above factors.Which shift competitive advantage in unpredictable ways. which will have an effect on theirs spending habits.4 Corporate strategy. inventions etc. the war on terror.S. An example is the increase regulations on funds moving internationally (due to the war on terror) would have an effect on the economy and the speed at which it grows. • Or become retailers or distributors of products that they have manufactured in other countries and imported for U. We could look at the increase in the governments expenditures on national security. • Some multinational companies home country have no relevance to their competitive advantage or organisational strategy or their success So taking this into consideration.3. structure and Rivalry Fierce national competition drives innovation. 3. etc. • Role of chance events . the bail out packages for corporate America during the recession.5 Other influences • The role of government . • Multinational influence in total ignored in this model. regulations. consumption.6 Concerns regarding this model Some concerns amongst others • Chance may be used to explain many critical events. If Adorn cannot position its self correctly for being affordable and offering desired benefits then the effectiveness of entering this market would be diluted and may risk the investment. all of which is increasing taxes resulting in lower disposable income for individuals. is putting the local manufacturing industries into a correction phase.3. 3.

(Source: Nationmaster. (nd): American Labour 31 .3.7 Conclusion of the Diamond Model The country offers good infrastructure with a sustainable base of clientele and human resources for future company expansion within the United States.1 U. 3.4 Demographic trends • Education will stay high as higher education will become norm to becoming more marketable individuals with in the economy • Increase in population through immigration • Population will decrease through birth and death rates of population • Increasing age of population 3. Workforce Table 17: U. No negative trends can be identified that would cause a major concern for those entering the domestic market except for other imports from other countries into the United States. Labour Stats.nationmaster.S.3.

2 U. which will have little risk of social unrest or having an over burdened social welfare within the economy. Education Stats.nationmaster. (nd): American Education Stats. Education Table 18: U.S.4. (Source: Nationmaster. reflecting a highly economic active country. such as high social grants compared to employment levels within the country. 32 .Unemployment is at 5%.

and S. 1998 The Convention between the United States of America and the Republic of South Africa for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains. 1998 Department of the Treasury Technical Explanation of the Convention between the United States of America and the Republic of South Africa for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains.: • South Africa.S. 3. 1997. Convention. signed at Cape Town on February 17.5 Treaties According to National Tax Services (2009). • Technical Explanation. 33 .A. 2009 made up of a 481 page document which needs to be closely analysed to determine opportunities that may be beneficial to Adorn. Effective Date: January 1. Republic of. Effective Date: January 1. A List of Treaties and Other International Agreements of the United States in Force on January 1. the following treaties are to be in place between the U.The above table shows a highly literate and educated country which not only gives suggestions of sustainable labour resources but also the potential of a large consumer base for Adorns products.

8 billion.2 Economic changes within the furniture industry Schuler & Lawser (2007) goes on to say many U. Customers have moved away from the perception of furniture as a long- term investment.S. institutional and office furniture.6. but excluding kitchen cabinets) increased from $4. During this period.S. furniture manufacturers are choosing to have their furniture made in China and other low-cost countries rather than produce their own products.1 billion to $23. an increase of almost $11 billion — a fifty-fold increase in 13 years.65 billion in 2005.3. as something to pass on to their children or to keep as an antique. imports of all furniture products (including household.6.6. imports from China increased from $208 million to $10. 34 .1 Change in perceptions: Schuler & Lawser (2007) stated that like many mass-produced consumer goods.000 jobs or 21 percent of its workforce between 1997 and 2005. The (American) furniture industry. and world markets. lost 108.3 Imports Schuler & Lawser (2007) also mentions that between 1992 and 2005. Customers are now becoming more interested in furniture that looks good and appears to be a good value.6 Trends within the United States furniture industry 3. household furniture has become more of a commodity and is sold on price. excluding the kitchen cabinet sector. an increase of almost $20 billion or 477 percent. 3. 3. This has allowed offshore furniture competitors to increase their penetration into U.

4 Future trends 3. • Income per capita will remain high • Competition will increase for a share of the consumer’s wallet. Furniture Industry: Yesterday and Today … Will There Be a Tomorrow?. • Environmental trends will put emphasis on ethical purchases with regards to consideration for the environment which in turn will affect the importers of products to the United States. moves away from manufacturing their own products. • With the larger impact on importing manufactured goods their will issues with Gross Domestic Product and current account. • Imports will continue to increase as the U.6.Figure 9: Wooden house hold furniture imports (Source: Schuler & Lawser (2007): The U.S. with additional exports and/or investments.4. 35 . which will negatively affect the stability of 3. This would affect the extent the country could subsidise the money out flow from imports that the nation buys.wooddigest. www. dollar.S.6.1 Economic future trends • High tax rates will put a burden on countries growth.S.

S. thousand Dollars.S. 3. http://www.1 Future trends with relation to furniture industry Schuler & Lawser (2007) noted the following trends taking place with in the furniture industry with in the United States.S.5 US Imports Table 19: U. baskets by country in U. household items. (Source: Nationmaster.nationmaster. the consumer is spending less and less on furniture 36 . imports of imports-furniture-household-items-baskets) The figures show China ($ 9’709’205’000) is by far the greatest importer of these specific goods into America three times higher than the next biggest which is Canada ($ 3’172’390’000). baskets (most recent) by country. Imports of furniture.6. household (2004): U.5.

leisure products it is viewed more and more as a commodity and now there is increasing competition for the consumer’s dollar from electronics. Schuler & Lawser (2007) continues to suggest that as offshore manufacturers gain more experience from supplying the United States furniture manufacturers. resulting in the United State manufactures focusing on becoming wholesalers and/or retailers.1 Regionalism/ integration The U. home entertainment. This coupled with the impact of China having distribution channels that will allow access to markets with regards to any product. This trend has already started as most of the larger Chinese furniture manufacturers sell direct to retailers and some have started offering retail franchises with in the United States. 37 . undoubtedly this would increase their profits substantially. Southern African Democratic Countries and the European Union. while the costs of manufacturing inputs continue to rise. has regional treaties with the African Union. profit margins for United States’ furniture manufacturers are very low. could pose a substantial risk to any company in the U. even posing a threat of further price reductions to the end user. 4 Additional considerations 4. This has led to a significant decline in plant and equipment investments. also participates in the North Americas treaty between Mexico. Panama and Canada. Another imported point to be mentioned is that the Chinese are moving their products closer to the end user and cutting out the middle man. Many United States furniture manufacturers are choosing outsource their production to other low-cost countries. they will learn enough to go direct to retailers. This has allowed offshore furniture competitors to increase their penetration into the United States market. or through their own retail distribution outlets. travel.S. The U. This trend will become more entrenched as the population will start saving more while restraining their spending habits following the current economic slow down and future uncertainty.S. Because of the current emphasis on price. market.

E commerce also allows for efficient market penetration through more adaptive. modes of communication and commerce with a wider market base.S. 38 . With the aid of tools which include everything from electronic presentations to electronic mail that can be sent anywhere reducing geographical boundaries. and will require further analysis. keeping companies on their toes with regards to product and services that the promote.2 E commerce Increased usage of e commerce which in turn increases opportunities and efficiencies within industries even allowing new industries to evolve and take over older outdated industries. sometimes even assisting in reducing the cost of globalisation. With this new technology come more informed customers. An example of this would be Amazon where it has a presence in ever country and can distribute anywhere in the world utilising the courier services. All of which can be specially manipulated to assist the company in achieving its strategic goals. This is assisting in reducing costs and improving speed of certain processes for companies.These regional treaties could be beneficial for Adorn once it has set up operations within the U. which understand the product offerings within the market more. This is also affecting the traditional concepts product and service marketing such as packaging and location of company offerings. 4. An example of this is video conferencing in reducing air fairs and travelling time for company employees.

(Source: Nationmaster. personal security risks and nuclear power plants and energy generation. • Promotes increase in counter terrorism expenditures undermining any economic stability within the region. Economic risks include: • Capital stock – human and physical stock is reduced • Induced higher levels of uncertainty which reduces economic activity within the region. • Reduced foreign direct investment and increases outward flow of investments 39 .S. Terrorism (nd): American Terrorism Stats.4. global financing.nationmaster.3 International terrorism Table 20: U. infrastructure Terrorism puts stain on immigration control. • The direct negative impact on specific industries such as tourism. http://www.

This equates into opportunity. • The U. • High manufacturing input costs.S. 40 . • Maintenance and repair costs on infrastructure • Risk to and around nuclear power plants and energy generation. 5 Conclusion In conclusion my reasoning to expand into the U. including decision making process and follow through by management.S. The end goal would be to improve speed and efficiencies of business processes.S. has a high gross domestic product and high capita individuals which would relate to potential clients that could afford buying our products. market includes: • Highly developed education and infrastructure allowing growth of business in the country. are well developed and will assist Adorn with expansion into that market With the aid of technology to achieve the strategy Have technology assist in reducing costs of doing business and having operations within two countries. • Also the U. with high labour costs and/or limited raw materials which keep local competitors at a disadvantage. even trade treaties with our domestic market.S. Utilise technologies to develop and manage effective Enterprise Resource Planning which would include everything from stock and inventory controls to customer databases. country that has with low import costs and barriers. • The high levels of education also mean that human resources with in the U. reduce complexities and improve communication within the company in to the market place. slowing global growth and opportunities.S. So threats. South Africa which would assist in dropping costs of doing business with the country while improving opportunities with in the U. • Increased immigration controls that a slows down the movement of human resources between counties • The reduction of global financing. risks and security considerations should also be taken into account when evaluating a country for global expansion.

market. economy to increase the companies growth momentum and improve the returns of the investment.Critical success factors include: Price Adorn’s price to market will be of considerable importance to success penetration within the U.S. Adorn can utilise the future economic upswing of the U. economy. it would mean that the time to start with inroads to that market would need to be now before China is too dominant in the U.S.S.S. 41 . market. which I believe Adorn are in the position to offer. Speed With China positioning itself within the U.

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Washington.suite101. 01 August 2009 U. http://en. http://www. Department of Labor (2009): History of inflation in the US from Jan 1914 .S.Mar 01 August 2009 World Bank (2008): Doing Business 2009– Country Profile for the United States Report.state. http://usa.htm. Government (2009): Media Inc (2009): Richest Countries by GDP and the Poorest Country.wikipedia.cfm/richest_countries- _by_gdp_and the_poorest_county)_________________________________Page 5 Table 2: The United States Economy (Source: 7 Table 3: The United States Favourability Rating 44 . Diplomatic Mission to Germany (2008): Economy Policy.bls. http://en. The world bank 7 Appendices: List of Tables Table 1: World Top Ten Richest Countries by GDP in US Dollars (Source: Suite101. 01 August 2009 The U.wikipedia. 01 August 2009 Wikipedia (nd): Political ideologies in the United States.nationmaster.S. (nd): American Economic Stats. 01 August 2009 U.United Nations Development Program (2008): United Nations Development Program Human Development Report 2007/2008.png.

com/.)_________________________________Page 16 Table 7: Economic freedom is rated within the top ten nations (Source: Nationmaster. Population (Source: Nationmaster. (nd): American Economic Stats.S.nationmaster.S. (nd): Economic Freedom. (Source: Nationmaster.php?ReportID=264)_______________Page 13 Table 4: US dollar to ZAR for Time period: 26/07/2008 to 01/08/2009 (Source: OANDA Corporation (2009): FXHistory – Historical Currency Exchange Rates. Image around the World. 19 Table 10: )___________________________Page 17 Table 8: Top Languages spoken in the United States (Source: American Community Survey (2005): United States .nationmaster.nationmaster. labour Statistics.nationmaster.oanda.(Source: Pew Research Centre Project (2009): Pew Global Attitudes Project: Confidence in Obama Lifts U. http://www. Taxes (Source: 15 Table 6: Government spending (Source: Simmons (2009): How Congress Is Spending Your Money.federalbudget. (Source: World Bank (2002): Research and development spending (most Recent) By Country. )_____________________Page 14 Table 5: (nd): American Labour Stats. and-development-spending&b_map=1)___________________________Page 21 45 .pl?map_data_results)_______Page 18 Table 9: U. http://www. http://www.nationmaster. (nd): 20 Table 11: Research and development spending as portion of countries GDP. tons-per-km)________________________________________________Page 23 Table 14: Countries with tertiary education as percentage of total (nd): Imports of Goods and services in current U.nationmaster. http://www. http://www. 46 .com/graph/ene_ele_pro-energy-electricity-production) ___________________________________________________________Page 22 Table 13: (nd): Air transport. (Source: Nationmaster.S. (Source: education-total)_____________________________________________Page 24 Table 15: Broadband Access by (nd): Electricity Production (most recent) by Country. (Source: 29 Table 17: U. (Source: (nd): Broadband access (most recent) by country. Education 32 Table 18: U.Table 12: Electricity Production by (nd): American Labour Stats. Dollars (most recent) by country. (Source: __________________________________________________________Page 28 Table 16: Imports of Goods and Services by Country.nationmaster. http://www.S. freight – million tons per km (most Recent By Country. http://www. Million Tons per year.nationmaster. (Source: (nd): Labour force with tertiary education as percentage of total (most recent) by country. Labour Stats. http://www. per Kilometre.

baskets by country.nationmaster. Imports of furniture. http://www.Mar 2009.S.S.nationmaster. The World Bank: Washington)_______________________Page 11 Figure 3: Literacy Rates (Source: Wikipedia (2008): Literacy Rates. Consumer Price Index January 1914 to March 2009 (Source: U. ftp://ftp. household (nd): American Terrorism 39 8 Appendices: List of Figures Figure 1: Bleak Employment Outlook (Source: The New York Times (2009): Bleak Employment 01 August 2009 10h03_______________________________________________________Page 9 Figure 2: Enforcing Contracts – Global Rank (Source: The World Bank (2008): Doing Business Report 2009 – Country Profile United States.nytimes. household items. imports of 33 Table 19: (2004): U. http://www. Department of Labour (2009): History of inflation in the US from Jan 1914 .txt)______Page 14 Figure 5: Ease of doing business – Global Rank (Source: The World Bank (2008): Doing Business Report 2009 – Country Profile United (nd): American Education Stats. (Source: Nationmaster. (Source: imports-furniture-household-items-baskets)_________________________Page 36 Table 20: U.(Source: Nationmaster. The World Bank: Washington)________________________Page 25 47 .png) ____________________________________________________________Page 12 Figure 4: U. http://en. Terrorism Stats. baskets (most recent) by country.

com) ____________________________________________________________Page 35 48 .S. www. Macmillan: London) _____________________________________________________________Page 28 Figure 9: Wooden house hold furniture imports (Source: Schuler & Lawser (2007): The U.Figure 6: Starting a Business – Global Rank (Source: The World Bank (2008): Doing Business Report 2009 – Country Profile United States. Furniture Industry: Yesterday and Today … Will There Be a Tomorrow?.wooddigest . The World Bank: Washington)_________________________Page 26 Figure 8: Diamond Model (Source: Porter (1990): The Competitive Advantage Of Nations. The World Bank: Washington)________________________Page 25 Figure 7: Trading Across Boarders – Global Rank (Source: The World Bank (2008): Doing Business Report 2009 – Country Profile United States.