BUSS 206: International Business Environment- M&S Textile - Case Study Report Assessment Answer

International Business Environment Case Study Assignment

Case Scenario

Assignment Task

You, as the task force of International Business Department in M&S Australia, are required to choose ONE of these countries, and write a report to the Board of Directors. In the report, you need to identify the advantages and disadvantages of operating in that country. Based on your findings, some relevant strategies should be suggested to benefit from the advantages and mitigate the disadvantages.

In preparing your report, you are required to link your arguments to the course content, and to use relevant data to support your suggestions such as why you would select the country, why you would choose an entry mode, and how the new foreign manufacturing plant would enhance M&S’s current sales, etc.

Introduction

The textile industry is one of Indonesia’s oldest industries and a significant employer to the population. Indonesia also ranks highly in the world in the production of textile material representing two percent of global output. The industry has been growing at an annualisedrate of one percent. The industry is fully supported by the Indonesia Textile Association (API).

M&S Textile Textiles Australia manufactures quality cotton fabrics should invest in Australia to ease the increasing pressure from cheaply imported goods to reduce the cost of production at the home. The following report performs an analysis of the Indonesia Textile Industry to recommend to M&S Textiles Australia on the viability of the industry and investing in the country.

Political and Legal Environment

Political environment

Indonesia is a democratic country headed by a President and a Vice President (Horowitz, 2013). Currently, it is under the President Rodrigo Duterte. The Country has a peaceful political system that does not threaten the textile industry. Furthermore, as one of the country’s largest sector (1.1 million employees), the political class is protective and institute positive political climate and goodwill to encourage the industry to grow.

Legal Environment

Indonesia has introduced legal incentives for the textile industry. The aim of the legal incentives is to increase the global share of Indonesian Textile. These legal incentives include the easing of obtaining raw materials for textile and textile-related products through lowering of government duties for the importation of some industrial materials.

Secondly, the Ministry has instituted incentives that facilitate financing to the industry by an Act of 3/2014, which relates to the industry. Providing access to funding is meant to increase the ease of doing business through facilitating access to funds to spur new investments, facilitate access to new capital investments and improve the business outlook.

Furthermore, the Ministry has instituted policy frameworks for the development of a buffer stock of the cotton industry(Global Business Guide, p. 2). Cotton is a valuable raw material used in the textile industry, but Indonesia has to import ninety-five percent of it to cater to the textile industry. Therefore, protecting cotton imports improves the textile industry.

Strategy and Structure

Structure

The Textile and garment industry in Indonesia is under the Indonesia Textile Association (API) that regulates the industry. The Indonesia Textile Association is under the Ministry of Industry that has been formulating policies that will spur the textile and textile product industry(Singleton, p. 73). The two bodies have been working hand in hand to improve the status of the sector through positive efforts that ensure robust economic growth, raising the purchasing power of local Indonesians and an attractive destination for foreign textile companies. Moreover, the Industry Ministry has been working to reduce inefficiencies in the sector to increase opportunities for foreign enterprises that offer machinery, capital, and knowledge. The increasing focus by the two bodies is meant to enhance the value of Indonesia’s textile output from the current two percent to five percent of total global productions.

Strategy

Indonesia is the World’s fourth most populated country, has a robust rate of economic growth and is a rising purchasing power which combines to make the country a textile and textile product country(Wright &Meylinah, p. 3). The country is increasingly becoming attractive owing to its proximity to the Chinese Market because textile owners in China are looking to establish a presence in new manufacturing bases. Therefore, Indonesia is working to improve its appeal to both domestic and foreign textile companies. Such efforts include a ministry committee to promote the exports of textile and textile products in the form of free trade agreements with foreign Indonesian garment buyers that provide maximum benefit to the national industry(The World Trade Organization, p. 55).

The country also has a strategy that implements international industry standards such as ISO 9001 in the textile industry to gain recognition as an environmentally sustainable and friendly sector. This will be particularly attractive to the new breed of customers that are environmentally conscious of the products they use. Therefore, the country’s use of green technology will be attractive to green textile companies.

Recommendations And Conclusion

The Textile industry in Indonesia is one of the oldest sectors in the country employing a significant number of employees. The industry faces numerous challenges such as slowing economic growth, slowing demand and increasing production costs. However, the country has been instituting reforms to the sector, the country to make the industry attractive to foreign investors, reduce bottlenecks and increase the efficiency in the production process. For example, creating cotton stock to cushion against import fluctuations, increase in financing options to increase investments, reduction in government duties, and promoting exports.

These steps make the country an attractive destination for foreign companies. Therefore, M&S Australia should establish a manufacturing plant in Indonesia.