Executive Summary

The study is based on Bangladesh on the review of foreign trade for a business. They also
recently introduced a new product with plans to first market the product in Asia-based
countries. The study will concentrate primarily on the determinants of FDI in China and India
and a systematic overview of contrast. In order to identify the costs, advantages and risks
involved, data sets and mathematical models of both countries are used.
The study also focuses and compares the method of entry for such expansion and would
propose to the company an appropriate and cost-effective delivery plan according to the
sequence of analyses.
 INDIVIDUAL ASSIGNMENT
BM023-3-2 INTB

INTERNATIONAL BUSINESS

APU2F2008IBM  UC2F2008IBM 

HAND OUT DATE: 16  2021

HAND IN DATE:     9  2021

WEIGHTAGE:         

    INSTRUCTIONS TO CANDIDATES:

Submit your assignment into Moodle, using your APU email access.

2 Students are advised to underpin their answers with the use of

references (cited using the Harvard Name s System of Referencing)

3 Late submission will be awarded zero (0), unless Extenuating

Circumstances (EC) are upheld

4 Case of plagiarism will be penalized

5 You must obtain 50% overall to pass this module

6 More information on the assignment is available in the Moodle

        
Contents
Executive Summary...............................................................................................................................1
Introduction...........................................................................................................................................4
Vietnam.................................................................................................................................................4
Benefits.............................................................................................................................................4
Costs..............................................................................................................................................5
Japan......................................................................................................................................................6
Benefits.............................................................................................................................................7
Cost...............................................................................................................................................7
Licensing...............................................................................................................................................8
Wholly Owned Subsidiary.....................................................................................................................8
Strategic alliance...................................................................................................................................9
Conclusion.............................................................................................................................................9
Reference............................................................................................................................................10
Introduction
Cats Eye is the Pioneer Lifestyle Brand for exclusive style and shopping material, beginning
with trendy fashion enthusiasts in Bangladesh. Cats Eye is a leading clothing company in
Bangladesh with branches throughout Bangladesh. It designs, produces and sells wear
accessories for men and women(Alren, 2018).
In 1980, the Cats Eye travelled to the Green Super Market in the shape of a small store, and
now has offices all over Bangladesh (Alren, 2018).
The goal of Cats Eye is to build a statement of style which fits the discerning person and to
keep an eye on quality while also being affordable. Based on years of experience and on
global trends, the single styles are produced that make the company the industry leader(Alren,
2018).

The company plans to extend its company and even introduce western women's wear.
Considering the costs associated with launching the product, the management team chose
first of all to launch the product into countries in Asia where Vietnam and Japan are the
perfect target countries. The cost, advantages and risks for both countries, however, are
related (Alren, 2018).

Vietnam
Vietnam – Located in the south east of Asia; long shoreline connection path worldwide
(Bosfor, 2018).

GDP – growth - 2008-2018 (5-7%)

Huge population – The expansion of middle classes is forecast to be 95 million by 2030; the
rapidly increasing middle class in ASEAN; private consumption map (Bosfor, 2018).
Vietnam has a working age population; average age 30; 70% below 35 years of age
(relatively low labour cost compared to China and Mexico) (Bosfor, 2018).
Vietnam is a part of the 13 Free Trade Agreements and of the Japan & Korea Bilateral
Agreements. 80 double tax avoidance agreements were signed by Vietnam; free trade
promoted and duties reduced (Bosfor, 2018).
Benefits
1. Strategic location
In the middle of ASEAN, Vietnam is one of Southeast Asia's most prospective economies.
The country's borders are the Pacific Ocean, the Gulf of Thailand, Laos, Cambodia and China
and the overseas shipment and trade arrangements for Vietnam are favourable(Malk, 2018).
Vietnam is situated near South China, one of the biggest economies in the world and a major
commercial centre. Vietnam becomes a popular place for buyers from abroad to find ways to
enter the Vietnam economy, as well as direct access to supply chains from China (Malk, 2018).
2. High-growth economy plus potential market
Vietnam is a vibrant and potentially competitive emerging market. Vietnam's GDP has risen
slowly over the last few years, ranging from 6.2% in 2016 to 7.02% in 2019, with figures
being examined. This remarkable growth trend in Vietnam's fastest growing economies in
Asia has been reasonably significant (Malk, 2018).
The inflation rate in Vietnam remained steady at 2.79% in 2019; a positive result for
stabilising retail prices, relative to its target 4% range in 2019. The purchasing power of the
nation now comprises over 97 million people, from a bureaucratic to a market-oriented
economy, and ranks fifteen in the world (Malk, 2018).
3. Competitive labor cost
Most international investors should be concerned about the cost of starting a company in
Vietnam. It is nice to know that Vietnam has a very low labour cost among main cost-related
variables (Malk, 2018)!
Vietnam consists of a youthful and aspiring worker demographic. Notably, the average rate
of wage in the world is significantly more competitive than in neighbouring countries such as
China (Malk, 2018).
Costs
1. High corporate tax rates
Vietnam applies a regular corporate income tax rate of 20% to the majority of corporations,
but the tax rate is fairly high in some types of industry (Malk, 2018).
2. Complexity of business setup requirements
Investors should be prepared to meet a series of conditions for the establishment of a
Vietnamese business. The need for paid-up capital is a common example. The regular paid-
up money should generally amount to at least USD 10,000 for your Vietnamese investment.
And this number can be smaller or greater, depending on the type of company you want to
invest in (Malk, 2018).
For foreign investments engaged in certain conditional sector operations as laid down in
Annex 4 of the Investment Act No. 67/2014/QH13, the licencing process can present a
challenge. More papers, such as certificates of certification for company, technical liability
insurance, etc. can be needed (Malk, 2018).
3. Restrictions of foreign currency
Indirect investment foreign currency capital is expected for Vietnam, the official currency in
Vietnam, to be exchanged for VND. Moreover, Vietnamese currency can also be used to
transact offers, fees, quotes, advertising and other types (Malk, 2018).
Risks
1. Political instability
A nation with political conflicts or crises would deter market-oriented firms from investing
directly in domestic manufacturing and switch to modes of duration service, i.e., exports or
licencing; the major deterrent to investment in such an instable country is the significant
decline in the cost in advance (Malk, 2018).
2. Infrastructure Development
The inefficient infrastructure implies high transaction costs and also undermines Cats eye's
attractiveness in investing in Vietnam as this increases its production costs (Malk, 2018).
3. shortage of labor
The third challenge in Vietnam is the labour shortage, the disadvantage of such a thriving
economy in certain ways. There are 2%, very low unemployment rates, which can be difficult
to attract not only employees but also people, especially the qualified (Malk, 2018).
At one point in the future, Vietnam could face heavy wage inflation if the unemployment rate
is too poor and economics boom too highly, despite inflation being held under check. The
host country's competitiveness attracts international investment(Malk, 2018).

Japan
In the northern hemisphere, Japan is situated west of the Pacific Ocean. The Republic of
Korea, China and Russia became part of Japan's neighbourhood (Malk, 2018).
126 million people Population (as of April 1, 2020 Statistics)
A prosperous infrastructure is the world's third largest economy and one of the most secure
cities in the world.
Member of the Economic Partnership (EPA), Free Trade Agreement (FTA) and
Comprehensive and Progressive Trans-Pacific Partnership Agreement.
Japan economic statistics

Main Indicators 2018 2019 2020 (e) 2021 (e) 2022 (e)

GDP (Trillion 4.95 5.07 4.91 5.10 5.33

USD)

GDP (Constant 0.3 0.7 -5.3 3.1 2.4

Prices, Annual %
Change)

GDP per 39,150 40,255 39,047 40,733 42,777

Capita (USD)

General -2.5 -3.0e -12.7 -5.6 -2.8

Government
Balance (in % of
GDP)

General 236.6 238.0e 266.2 264.0 263.0

Government
Gross Debt (in
% of GDP)

Inflation 1.0 0.5 -0.1 0.3 0.7

Rate (%)
 Main Indicators 2018 2019 2020 (e) 2021 (e) 2022 (e)

Unemployment 2.4 2.4 3.3 2.8 2.4

Rate (% of the
Labour Force)

Current 176.63 184.29 143.53 165.61 160.49

Account (billion
s USD)

Current 3.6 3.6 2.9 3.2 3.0

Account (in % of
GDP)

Source: IMF – World Economic Outlook Database,  October 2020

Benefits
Japan has an advanced judicial framework that does not discriminate. Furthermore, a
prosperous political and regulatory structure is obviously conducive to the economic climate
and strengthened(Malk, 2018). A bureau called the "Invest Japanese Business Support Centre"
is located in Japan. It supports international companies seeking to join the Japanese market in
an exhaustive and coordinated way (Malk, 2018).
Japan's buying power is very high and therefore domestic demand is strong. Besides making
the world's third biggest economy. Doing business in Japan provides access to a wide and
vast market of 120 million wealthy and savvy customers (Malk, 2018).
Given its geographic position, any foreign investor on the Japanese market is able to access
other Asian markets with an increased accessibility (Malk, 2018).

Cost
In comparison with other East Asian nations, Japan's corporate tax burden is relatively high.
Other foreign investment and disadvantaged companies abroad may become hindered by
exclusive political and business network (linking the "sougoushoushas" conglomerate with a
central government) (Malk, 2018).
A high average cost structure makes it difficult for international buyers to enter and expand.
In addition to Japan's internal legislation and customs, Japanese are more likely to deal with
well-known partner firms. In the same way, networks and partnerships between corporations
and specialist national organisations should be created (Malk, 2018).
Japan is highly vulnerable to natural disasters including earthquakes, tsunamis and typhoon.
(2011, 11 March, we have a nuclear disaster in Fukushima Daiichi and have a major effect,
especially on farm operators in Fukushima because of the re-energizing of massive radiation)
(Malk, 2018).
Risks
Cyber risk, with the cyber crimes, maintains its status as one of the highest market risks in
Japan over the course of 2018-2019 (Malk, 2018). There have also been the numbers of cyber
assaults, with massive hacks including an attack on Coincheck, in which a cryptocurrency of
$530 million has been robbed. More generally, the Japanese National Police Agency has also
found more than 20,000 in action false shopping places, which are intended to swindle
customers' money, as well as countless cases of crypto-currency fraud registered (Malk, 2018).
Vulnerabilities to the environment (threat to Japan from natural disasters. Japan, one of the
world's seismically most active nations, continues to face serious natural disaster challenges,
and major government resilience efforts have led to Japan being generally regarded as the
world leader in disaster preparedness(Malk, 2018).
The Japanese tend to entertain (especially M&A transactions) with the best-known partners.
international rivalry is limited by a very insular local culture. In the same way, networks and
partnerships between corporations and specialist national organisations should be
created(Malk, 2018).
It is necessary to consider not only the country but also the technique of entry modes. The
choices are (a) a licence to produce and sell a product of an Asia company or (b) a producer
in your country of origin and a wholly owned subsidiary for distribution in Asia, or (c) a
partnership with a local company in Asia(Malk, 2018).

Licensing
The corporation reaches agreement with a company in the host country to use its intellectual
property rights in exchange for an additional fee or royalty fee, for example the mode of
production, brand identity, patent or trademarks (Len, 2018). The internalisation theory can be
linked to the licencing. The definition of the acquisition expense involved with the
establishment of the company is a strong basis for this hypothesis. In spite of those
expenditures, licencing induces less expense than other entrance processes, such since wholly
owned subsidiaries, since much of the cost of establishment is the responsibility of a licensee
(Len, 2018).

Furthermore, the enterprise should see, as it chooses licencing as an entrance process, that the
country has a good intellectual property regulation, which prevents the stolen and replicated
inventions (Len, 2018). They signed a bi-lateral trade deal with the US and participated in the
World Trade Organization to improve security in Vietnam in 2005 and 2010 with the aim of
strengthening the intellectual property rights. In addition, Vietnam has affiliations with
leading industrial property protection bodies such as a signatory to the Paris Convention (Len,
2018).

The Intellectual Property Code is a very strict rule in Japan, too. Japan is not only a lawyer
but one of the diplomatic conventions protecting foreign works from IP piracy, in addition to
being superior to Vietnam law (Len, 2018).

Wholly Owned Subsidiary

A wholly held subsidiary is a 100% shareholder corporation owned by the parent firm. The
philosophy of internationalisation may also be related to it (Len, 2018). Whereas, by acquiring
a parent or being spun off from the parent, an enterprise will become a wholly-owned
subsidiary, the daily subsidiary owns 51 to 99 percent of the parent corporation (Len, 2018).
While a parent corporation controls its wholly owned subsidiaries operationally and
strategically, ultimate control is usually less important for an acquired subsidiary with a long
operating experience abroad(Len, 2018). If an organisation employs its own employees to run
the subsidiary, it is much less difficult to develop common operations than when an
enterprise with proven leadership takes over (Len, 2018).
Furthermore, cats should use their own data control and safety guidelines for the subsidiary
as a way of reducing the possibility that other businesses will lose their intellectual property.
Similarly, sharing management resources with similar financial structures and developing
similar promotion programmes contribute to reducing costs both for businesses and the parent
corporation manages to invest the property of a wholly owned subsidiary (Len, 2018).
However, it might lead to a wholly owned company being set up, in particular if other
businesses bid on the same market, where Cat’s eye pays too much for properties. Moreover,
it takes time to build ties with suppliers and local customers, which can impede the activity of
companies; cultural disparities may become a problem when recruiting personnel for an outer
affiliate (Len, 2018).
The risk of holding a subsidiary will also increase if the rules of the local government are
substantially different from the legislation of the parent business nation. This risk can also
increase (Len, 2018).

Strategic alliance
A strategic partnership constitutes a mutually advantageous agreement deal between two
firms who maintain their independence. The partnership is less complex and less definitive
than a cooperative undertaking in which two companies share capital to establish a separate
enterprise (Joneback, 2018).
An enterprise may make a strategic partnership to broaden its product portfolio into a new
market or to build a lead over a rival. The agreement enables two companies to pursue a
shared objective that would support each of them (Joneback, 2018).
It can be short or long-term and formal or informal. The arrangement is also possible. The
philosophy of internationalisation may also be related (Joneback, 2018).
Strategic partnerships can be versatile and can include some pressures. Both companies do
not have to merge resources and will stay separate (Joneback, 2018).
However, a strategic partnership will create its own threats. Although for all parties the
arrangement is generally straightforward, variations in how the parties handle themselves will
occur. Conflict can be created by difference. In addition, where the coalition allows parties to
exchange details on their own, trust between the two allies shall be established (Joneback,
2018).

One party can become dependent on the other in a long-term strategic partnership. Alliance
disruption will jeopardise a company's health (Joneback, 2018).
Conclusion
No company enterprise is sure of tomorrow in this hyper dynamic and ever-changing
business world (Isaev, 2018). This obliges them to search for a new destination. But Vietnam
is a good choice if we want to establish a proper market. But if we want to export here too,
we must protect our business and be mindful of scam companies. If we judge by the risk,
there are dangers for both countries (Isaev, 2018). However, in this case, Vietnam's market
position is higher than Japan, which will be more profitable than the other two modes of
entries in view of the benefits and drawbacks of the entry style (Isaev, 2018).

In short, the next major move in the company's international growth is to invest in Vietnam
through a wholly owned subsidiary (Isaev, 2018). Vietnam is perceived to be the most growing
ASEAN economy, such that it seems appropriate for the business to take advantage of current
market prospects rather than losing the opportunity to become more complex on the market.
While there might be those who contend that a fully owned subsidiary is a risky entry route, it
is not really a local business in Vietnam for the quick entry and openness to foreign
investment to collaborate (Isaev, 2018).

Reference
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2021].
Bosfor, A. (2018). TransVIetnam- Here is what’s driving Japan’s transport & logistics
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