EXpansion considerations Flashcards
make use of any local debt financing
eg
management should take note of the fact that the interest rates in
Kenya are much higher than in South Africa. Interest rates in Namibia are
closer to that of South Africa.
Currency risk
Once Breeze operates in more than one country, its operations would
have greater exposure to foreign currency risk. The severity of this
exposure is influenced by the exchange rates of
the different countries.
Distance
delays and
damage during transportation. This would imply
further away from Cape Town, the greater the
transportation cost and possible chance of damage.
geographically,
it would suggest that it would be the cheapest (and easiest) from a
transportation perspective
A closer venue will also make managing the foreign office easier: it
will be faster to travel to the site, the cost of travelling
would be generally lower, and there are less time differences. All of
these would favour expansion to Namibia
Language barriers
The fact that the main business language in Morocco is French, rather
than English, presents a risk that miscommunication could occur
when instructions are sent from the head office in South Africa,
contract with customers could be more difficult and there could
be possible miscommunication between
supervisors and locally sourced staff
The miscommunication could lead to a loss of customers
and/or reputational damage/incurring additional costs for
translation or legal services.
GDP per capita and higher GDP growth
Countries with higher GDP per capita and higher GDP growth have
greater need and capacity to invest in new infrastructure. All of the
countries being considered have higher GDP growth rates than in
South Africa and are therefore
more attractive for investment, although Kenya has the highest
growth rate of the three (nearly three times SA’s growth rate).
low GDPs
The low GDPs also indicate a higher degree of poverty in the country:
this could possibly indicate or lead to higher crime rates, more
political unrest, more hijackings/piracy, etc. Kenya
has the lowest GDP of the countries under investigation.
lowest GDP growth rate
Morocco also has the lowest GDP growth rate, which seemsto
indicate that economic recovery may take longer / be slower than for
the other countries.
Higher unemployment rates
could be an opportunity, as governments
in these countries are more likely to support new investments that
create jobs, and Breeze is known for creating
jobs in SA.
very low unemployment rates
This could
mean that it may be difficult to find the right skilled people who are
available to start working for the foreign office within the next year,
or that premiums will have to be paid to acquire skilled workers.
Liveability scores - Life style
eg similarity in the liveability index scores of Morocco and
South Africa
it may be easier to convince SA staff members to work
in Morocco to supplement a local skills shortage. / Given the
relatively low liveability index score of Kenya and Namibia, it may be
difficult to convince South African staff members to work and live
there, even on a temporary basis.
(for example: health, safety, quality of life, transport)
Regulatory risk
Doing business in other countries with different laws and regulations
could lead to increased regulatory risk. From the ease of doing
business scores, Morocco and Kenya (which both rank lower than
South Africa) would present higher regulatory
risk than Namibia
Current environmental performance
Kenya has the highest environmental performance score but has seen
no improvement in its environmental score over the past ten years
In addition, Kenya already generates over 70% of its electricity
from renewable sources. This reduces the need for
urgency in investing in new renewable energy projects, such as wind
energy (i.e. limited growth prospects).
With such a high level of renewable sources already being used in
Kenya, it is also likely that competition between providers of
alternative energy would be stiff – the market is nearly saturated
Countries with lower levels of renewable sources are likely to have
less (but growing) competition levels
obtain a first-mover advantage
improvement in its environmental score
Namibia has shown a better improvement in its environmental score
over the past ten years and obtains only 26,5% of its electricity from
renewable sources. This potentially presents a
better opportunity for growth than Kenya.
Morocco has shown the most improvement in its environmental score
over the past ten years. This suggests increasing government and
societal support for investment in
environmental activities.
highest tax rate which leads to the lowest
return on investment for Breeze
