Business Report-Country Analysis: New Zealand:
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Executive Summary:
The business environment in New Zealand presents an ideal opportunity for the country to explore its potentials. After intensive analysis and broad based dissection of the gains and risks involved, this recommendation gives a green light in foreign investment in New Zealand, owing to the fact that the country has undergone radical changes in its economic policies of late, the country has a deregulated and decentralized economy that is accessible by international markets. The country is free from foreign exchange controls and is free from restrictions on dividends, profits, royalties, capital transfer and interests from or into New Zealand.1 This ideality is further flanked by the high level of infrastructural development in telecommunication and transport sectors alongside having a political system that is liberal, capitalist and that embraces democracy to its fullest.
The Macro Environment
New Zealand’s Description:
New Zealand’s market economy is developed, modern and prosperous. The country has a high rated Gross Domestic Product estimated at 28,250 dollars in relevance to its purchasing power parity (PPP). New Zealand’s economical strength was ranked at position 4 in 2012 by The Heritage Foundation at the Index of Economic Freedom vis'a vis number 5 by the Human Development Index in 2011.
New Zealand’s economy has been boosted by the numerous extraction industries which have been dealing in kaurin gum, whaling, native timber, gold, flax among others.3 The country enjoys a high living standard due to the high demand for various agricultural products at the United States of America and the United Kingdom. The country has a strong economy and has since seen the strengthening of the New Zealand dollar. This has led to an increase in prices of the agricultural products from the country. The exploitation of coal, gas and oil form the major source of energy, providing 69 % of the gross energy in the country. New Zealand exploits other sources of energy including the renewable energy which form 31 %, geothermal power and hydroelectic energy.
New Zealand has an advanced transport network comprised of road networks of up to 98805 kilometers that are valued at two billion dollars, well developed ultra modern railway systems covering 2565 miles and there are bus links to connecting the major cities in the country. The country’s transport system is further spiced by the presence of six international airports. New Zealand has an advanced telecommunication system that was ranked 12th by the UN International Telecommunication Union.5
Political aspect and Stability:
New Zealand has a mixed economy that is characterized by democratic, capitalist and liberal governance. The economic system in the country majorly comprises of the public sector and the private sector. All the business that is not run or owned by the government is classified as private sector business. The private sector ranges from the small businesses that are owned by individuals to the large multinational enterprises. There are the profit making and non profit making companies in the public sector.6 The government of New Zealand has privatized or incorporated its departments that are engaged in commercial activities. The government of New Zealand also has shares in a number of sectors.
Legal implications:
Being a member of the Common Wealth, New Zealand applies the common law system of the English. The country has a court system that is hierarchical ranging from the District Courts, the High Courts, which also have the commercial sections to handle disputes that are commercial in nature, to the Court of Appeal. As a member of the World Trade Organization, the country observes the trade regulations. New Zealand also has membership at the Asia Pacific Economic Corporation (APEC) and conforms to the Closer Economic Regulations Agreement (CER), thus, opening up its markets for easy access by the member states.
Economic situation and Stability:
New Zealand’s economy is among the world’s modern and best economies. However, the country has an unemployment rate of about 6.7 %, which is a struggle from the over 10 % unemployment rate that was ensued by the over thirty- year economic recession.
Despite being branded a successful economy, the country faces a lot of challenges.7The country has never recovered its income levels due to the economic crisis that tool toll of its economy in the 1970s.
There has been an inequality in income and New Zealand is experiencing a deficit in its GDP of approximately 9 %. However, New Zealand has a public debt of 33.7 % which is lower as compared to other nations that are developed like New Zealand. The main reasons for the deficits in the accounts of New Zealand include the failure of agricultural exports earnings and the earnings from the tourism industry to cover up for the imports of goods that are advance manufactured and other imported goods.4
New Zealand’s Cultural aspects:
New Zealand is widely identified with the Maori culture. This culture was influenced by the Irish and the British immigrants who moved into New Zealand. This culture was greatly changed by Christianity. Currently, the Maori culture has been subdued by assimilation and the increased availability of higher education. The expansion of cities has led to the dominance of urban cultures. New Zealand still values its traditions and this is exhibited in the presentations in the various films, art, humor and literature which do contain the traditional themes of New Zealand.
Endowment Factors:
The economy of New Zealand was strongly based on the extractive industries from the past. This was further strengthened by the agricultural based activities in the country. Dairy and meat products earned the country huge money therefore contributing largely to the growth of the economy. This was further attributes to the high demand for the agricultural products by the UK and the USA.7
New Zealand’s economy is today driven by the manufacturing industries which comprise of paper and wood products, fabrication of metals and the processing of food. Significantly, New Zealand’s economy is diversifying and there is a great return by the service industry which includes the business services and finance sectors.
New Zealand’s population provides for a good opportunity for business. With a population of about 4.5 million people, the country has most of its population living in the widely spread 16 main urban areas. This further creates an environment that is business friendly. With about 53 % of New Zealand’s population lives in the main cities, there is a wide market for business. The climate in New Zealand is favorable hence the evenly population in the country.
With the advancement and development in the transport and telecommunication system in New Zealand, there is an ideal environment for the establishment of businesses. The country has a lot of potentiality in the service sector including banking, tourism among others. With the open market system and growth of manufacturing industries, business towards the same sectors is more likely to thrive in New Zealand.
New Zealand’s main priority currently is the energy sector. There is dire need to increase the energy capacity in the country as the current natural gas and the hydroelectric energy can power just 65 % of the industrial and domestic energy. This offers a lot of opportunity for business that wants to expand in New Zealand. With the prediction of an oil crisis looming, there are chances of the products going up thus affecting various sectors like the transport sector.4
Summary
Doing business in New Zealand has a lot of benefits specifically due to the open market and opportunities. This is further profitable as there is a reasonable unemployment rate which can be taken advantage of in order to get enough labor for the business. Opportunities such as the country’s need to increase its energy production capacity can be seized and used to make good business in the country. Being a young country, various investors are rushing to New Zealand to establish businesses
However, doing business in New Zealand is associated with certain risks. The major risk is tied to the weakening of the dollar as a result of economic recession which hit the nation among others. Recovery from the crisis has not been fully achieved and there are still fears of the collapse of the dollar.7
Conclusion:
After the assessment of the pending risks and benefits, I recommend that the company can explore business opportunities in New Zealand. Despite the fact that there has been an economic strain in New Zealand due to the economic recession, there are still a lot of opportunities in businesses in the countries and more companies are moving into New Zealand to seize the opportunities. The country has advance infrastructure in transport and telecommunication which is an advantage in carrying out business in the country. Labor is readily available due to unemployment and there is readily available market as most of the country’s population live in urban areas and t New Zealand is a member of most regional trade blocks.. Despite the fact that it may be challenging economically to do business in a highly industrialized county like New Zealand, the infrastructural advancements plays to the advantage of the business.[1]
2IBP USA Staff. Doing Business and Investing in New Zealand Guide. International Business Publications USA, Mar 20, 2009
3CCH editors. New Zealand Master Tax Guide: .... for Students. CCH New Zealand Limited, 1996
4Usa Ibp Usa. New Zealand Company Laws and Regulations Handbook. Washington D. C. Int'l Business Publications, Sep 1, 2009
5PricewaterhouseCoopers. Doing Business and Investing in New Zealand, 2002
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