China Foreign Direct Investment in Cambodia - Myassignmenthelp.Com

Question: Discuss about the China Foreign Direct Investment in Cambodia. Answer: Introduction This report focuses on the Business environmental analysis of Cambodia for the business expansion. This is the global business report on the company Novotel that is entering in the international market of Cambodia. Novotel is an upscale hotel brand under the AccorHotels group. In current time, Novotel has around 400 hotels and resorts operating in 60 countries. Novotel has started its first hotel in France and now it is operating in all over the world. Now, hotel is going to expand its business in Cambodia. But before entering in the new country, it is important for the company to understand the business environment of the country which can significantly affect the business operations (Frynas Mellahi, 2011). This report analyzes the environmental factors including the formal and informal institutions of the country. Business Environmental Analysis Formal Institutions Politics Political system initially plays a crucial role and has a big impact on the business. There are various factors of Cambodias political factors that impact on the hotel business like government regulations, regional integration and the level of taxation. Cambodia is one of the developing countries which has constitutional realm with democracy of multi parties and elective authorities. Cambodia has the rank of most major global administrations like ASEAN, IMF, WTO, UN and The World Bank (The Heritage Foundation, 2017). Further, country has stable political environment which is beneficial for the new business in the country. It must be noted that there is high political risk in the country. The infrastructure of Cambodia is poor and there is the need of additional investments. The access of electricity is limited there and this is the challenge for majority of population. Laws Legal system and rules of games In Cambodia, there is the commercial register law which defines the process and requirements associated with the registration or formation of commercial company. As the part of obligation to market liberalization, Ministry of Commerce of Cambodia has allowed foreign companies to engage freely in the business actions. Overseas companies only need to enroll themselves with the Ministry of Commerce and pay important taxes. Next, there is business enterprises law which provides for the development of four types of legal person i.e. limited partnership, common business, private limited company and public limited company. This law provides independent legal personality for the company and legal liability for the shareholders. Along with this, it defines the rights and accountabilities of the participants of the company. Next, there is commercial arbitration law in the Cambodian legal system in order to solve commercial disputes in the legal and judicial environment. Despite of effective laws and legislations, there are issues in the workers rights. Despite of well-developed labor legislature, there is juridical corruption and weak monitoring institutions which led to abuses of the rights of workers. Due to lack of unions, it is difficult for people to take foe their rights in workplaces. Economics Economic development More than two decades of strong financial development, Cambodia has achieved the level of lower middle-income as of 2016 along with the Gross National Income (GNI) per capita reaching $1,070. Due to Garments exports and Tourism, there is a regular development rate of 7.6% in the country which has ranked sixth in the world. In Cambodia, it is expected that economic growth of the country will remain strong over the next two years i.e. 6.8% in 2018 and 6.9% in 2019. Poverty is continuously falling in Cambodia as in 2014; the poverty rate was 13.5% as contrast to 47.8% in 2007. Around 90% of deprived people live in the country. Along with this, Cambodia has got the Millennium Development Goals by helping poverty. Around 4.5 million people stay near-poor, susceptible to declining back into poverty (The World Bank Group, 2017). Health and education is important development priorities for Cambodia. There are 32% or around 0.5 million children under five who are underdeveloped. In the primary education, net enrollment increased from 82% in 1997 from 97% in 2017. Further, lower secondary completion rate is 43%. Economic system The economic system of Cambodia is an open market system or market economy and has achieved quick fiscal development during last decade. In 2015, Cambodia has GDP of $18.05 billion. Further, per capita income is rapidly increasing but it is low as compared with most neighboring countries. Currently the focus of the country is on establishing friendly borders with neighbor countries i.e. Vietnam and Thailand. In the open market of the country, trade is very important for the economy of Cambodia (Kotler et al, 2012). The average applied tariff rate is 4.9% in the country. New foreign investment in the country may be monitored by the government of Cambodia. Privatization in the country has increased the efficiency of banking sector. Credit to private sector in the country has increased. It should be noted that there is the high level of economic risk in Cambodia. The rapidly growing economy of the country is dominated by tourism, construction and agriculture. Along with this, The World Bank has classified Cambodia as the country of low-middle income country (Oneill, 2014). Informal Institutions Culture In Cambodia, people have traditions and customs in order to achieve extensive and stable relations in the business. Cambodians believes in having appropriate performance which is very vital. The country has long history of civilization and culture which is affected by Indian country. Cambodians have two religious views i.e. Hinduism and Buddhism. 95% of Buddhist relies on personal experiences, reasonableness and critical analysis. The cultural analysis of Cambodia can be done by Hofstede Cultural Dimension. High Power distance There is the significant gap in the Cambodian society between superior power and weak. This is associated with the differentiation between rich and poor. High level of uncertainty avoidance The civilization of Cambodia is likely to diminish the hazard and make sure the monetary securities. There are various written rules, less risk taking by executives, less ambitious employees and lower labor turnover (Hofstede, 2011). Collectivism People in Cambodia are concerned for long term associations. They give more concern to family, groups and society. Further, they care for each other to show faithfulness and less individuality. High feminist or low masculinity index People care for each other and excellence of the life for both men and women. In the organizations, managers give more acknowledgment to the employees if they do their job with high responsibility. Along with this, they allow them more freedom (Alkailani, Azzam and Athamneh, 2012). Ethics Imperialism- There is both positive as well negative aspects of imperialism ethics of Cambodia. In the positive aspect, Cambodia is continuously flourishing with the textile industry due to its norms and ethics. There are many Cambodians who still live with agriculture business. Further, there is also good deal of tourism which enhances the economy of country. Along with this, there are strong social connections in the Cambodian society (Tang, 2012). On the other hand, the economy of the country is easy to lose as the big part of this is tourism. Cambodians are relying on the farming occupation for the food and business but there is the risk of whether conditions. By knowing the background information, country has made some enemies that can wreak and impact on the trades of the country (Webley Werner, 2008). Norms In the Cambodian culture, there are some norms followed by people in Cambodia. Some of them are as follows: Language- Khmer is the official language of Cambodia. This language is used in the social context i.e. education at all the levels, government administrations and in mass media. This language is spoken by 7 million people which are 90% of total population. Concepts- There are conceptual ideas related to collectivism which plays vital roles in the everyday life of Cambodians. For karma, the thought includes with the law of action and rationally. For the collectivism, people in Cambodia give preferences to family, society and groups rather than individual. The idea focuses about saving face which tries to keep away from losing face of anyone in the transactions. So, if any company wants to do business with Cambodia, then it should be conscious of the actions (Vidal-Suarez Lopez-Duarte, 2013). Greetings- When Cambodian welcome, they bend over their head for showing admiration with pressing the hands mutually. This motion is known as Som Pas. Further, when Cambodians meet with foreign persons then they basically acclimatize the greetings of foreign styles by shaking hands. Instead of taking the name of Cambodians, they use Lok in place of Mr. of the men and Lok Srey in place of Ms. or Mrs. For women before the first name (Tilley, Fredricks Hornett, 2012). Dress code- There is proper dress code which is important for Cambodian. Dress code represents their position in the society. In order to do businesses in the country, people also focus on appropriate dress code. In the business process in Cambodia, men wear shirt with collar with long pants. On the other hand, women wear dresses or blouses instead short skirts. References Alkailani, M., Azzam, I. and Athamneh, A., (2012), Replicating Hofstede in Jordan: Ungeneralized, Reevaluating the Jordanian Culture, IBR, 5(4). Frynas, J. G., Mellahi, K., (2011), Global Strategic Management, (2nd), New York: Oxford University Press Inc. Hofstede, G., (2011), Dimensionalizing Cultures: The Hofstede Model in Context. Online Readings in Psychology and Culture, 2(1) Kotler, P., Keller, K., Brady, M., Goodman, M., Hansen, T. (2012), Marketing Management, (2nd), Essex: Pearson Education Ltd Oneill, D., (2014), Playing Risk: Chinese Foreign Direct Investment in Cambodia: A Journal of International and Strategic Affairs, 36(2), 173-205 Tang, L., (2012), The direction of cultural distance on FDI: attractiveness or incongruity?. Cross Cultural Management, 19(2), pp.233-256 The Heritage Foundation, (2017), Cambodia, accessed on 25th December 2017 from https://www.heritage.org/index/country/cambodia The World Bank Group, (2017), The World Bank In Cambodia, accessed on 25th December 2017 from https://www.worldbank.org/en/country/cambodia/overview Tilley, E. N., Fredricks, S. M. Hornett, A., (2012), Kinship, culture and ethics in organizations: Journal of Communication Management, 16(2), pp. 162 184 Vidal-Suarez, M. and Lopez-Duarte, C., (2013), Language distance and international acquisitions: A transaction cost approach: International Journal of Cross Cultural Management, 13(1), pp.47-63. Webley, S. Werner, A., (2008), Corporate codes of ethics: necessary but not sufficient: Business Ethics, 17 (4), Pp. 405-415