Introduction
A macro environment is said to be the situation that is present in the economy as a whole. In general terms, the macro environment comprises drifts in the gross domestic product, fiscal, inflation, spending, employment, and monetary policy. The macro environment is related to the business cycle as contrasting to the individual performance in the business sector. The performance of the business organization is influenced by the macro environment in which it performs and the level of effect is based on the level of dependence of the business on the economy’s health. The intent of this paper is to discuss the macro analysis of BRIC. The macro analysis is majorly comprised of analyzing legal, economic, and geopolitical challenges for the business investment.
Overview of BRIC
The BRICs is called as a group of four biggest economies in the developing markets. Goldman Sachs introduced this abbreviation as a tool of marketing, which reflects that it is not all time a supportive investors grouping. The acronym of BRICs is China, Russia, India, and Brazil and sometimes South Africa. The key general denominator for the nations included in BRIC is their size. However, the size of the nation is not a sign of the opportunity. Opportunity is said to be a function of the assets price in relation to the basic risks. According to Jan Dehn, the BRICs experience different type of ups and down same like other nations and this offers number of increasing opportunities (Duncan, 2017).
As of 2015, the five BRIC nations highlighted 3.1 billion people, which is nearly around 41% of the total population of the world. In 2018, the five nations of BRICS possess a joint nominal GDP of around US$18.6 trillion, which is around 23.2% of the world gross product (Duncan, 2017).
Effect of Market System on Competitive Environment
The market system comprised of macro environment factor has major influence on the competitive environment like economic factors can influence the decision making procedure of the customers and the production of the organization. Besides this, sound marketing decisions must take into consideration the legal and political developments in relation to the company and the market.
India
According to Embree (2017), India is a nation that covers the major portion of South Asia. It is the legal republic comprised of 29 states, with a considerable level of control over all the affairs that talks place in the nation.
Geopolitical Challenge
From time the Prime Minister of India, Mr. Narendra Modi is elected, the nation is seems to be entirely different. From the structure of the Indian society to the way the country’s economy is emerging, huge changes could be observed. However, with the progress and development taking place in the country, India is facing a different geopolitical challenge in the 21st century (Sinha, 2016).
China
According to Prakash (2014), till now, the largest geopolitical challenge for the country India is not Pakistan, but China. Where Modi is working to represent India differently in comparison to his predecessor, India can yet lock horns with China in different areas. In the year 2013, Vietnam presented seven oil blocks to India in the South China Sea. The South China Sea is with time converting into one of the unsafe zones on the planet, with turns of violence between countries, touching all the high. Now, Philippines, Vietnam, Japan, and China are involving in aggressive turns in order to keep their regional security. But in any case, India will be taking entry in the military of the South China Sea, and it will give a push to New Delhi to challenge the authority, power, and influence of Beijing. Besides this, according to the Prime Minister of India, to reduce the effect of geopolitical changes on the business environment, the country needs to get involved in increasing exports.
Economic Issues
According to McKinsey and Company, Inc. (2013), Indian economy is considered as the fourth largest economy in the world. In 2017, it manufactured around $9.4 trillion of goods. However, the country has to move a long way in order to beat China with total manufacturing of $23.1 trillion. India is experiencing quick development in spite of the high recession. In 2017, the growth was around 6.7%, in 2016 it was 7.1% and in 2015 it was 8%. This increasing growth has resulted in reducing the poverty rate of the country by 10% (Amadeo, 2019). However, the country is dealing with the unequal distribution of salary, which is making the poor poorer and rich more richer. The companies operating in the country have analyzed this situation and are framing strategies according to that. For instance, Wal-Mart is one of the retail corporations of America, which charge different prices for different types of product and customers (McKinsey & Company, 2012).
The meeting took place between Narendra Modi and Trump in 2017, discussed the increasing H-1B visas for the immigrants of India. The business leader of America wishes India to decrease protective strategies that offer an unfair benefit to the local businesses. This will support U.S businesses to compete in the consumer electronics, entertainment, and pharmaceuticals segment. Besides this, the government of India is itself involved in the internal development of the country. The government has invested a huge amount in the development of the infrastructure in order to connect urban and rural zones. This results in an increasing number of opportunities for businesses in different segments.
Legal Issues
Policy for Foreign Investment
India’s foreign investment is overseen by the complete policy of foreign direct investment that is issued every year by the Industrial Policy and promotion department, which operated under the guidance of the Indian Ministry of Commerce and Industry (Dreze and Sen, 2013). The FDI policy is complemented by numerous press notes that are delivered in the year the time some changes are announced. Many of the investment sectors are under the automatic course (that is no preceding sanction is needed for investment); some of the sectors like real estate, insurance, non-banking corporations are controlled. According to Bhagwati and Panagariya, (2012), the present government of India has committed to further liberalize the FDI policy of India, with the point of an enticing number of foreign capitals. India offers a number of opportunities to the international business to operate its business in the country by offering subsidies in different sectors.
China
China is one of the most famous nations in the East Asia zone with a population of around 1.404 billion.
Geopolitical Issues
The battle between China and the United States is largely structured world geopolitics. The disposition of Chinese power functioned in 3 district and co-dependent ancient and geostrategic spaces:
The Far East/North Pacific – It is a fortunate zone for the regal drives of the US in the 19th century in contradiction to Japan. The current Korean battle is a share of this ancient space with, in specific, two main variations: the effacement of European powers; China’s own role.
The March to the West – It was started by Xi Jinping and personified by new “Silk Roads”, it encompasses the whole of Middle East, North Africa, and Eurasia. Emblematically, the Chinese colonialism is following in reverse the tracks of the early extension, in the “Old World”, of the contemporary European colonialism (Rousset, 2018).
The Global Space – Capitalist China is today a key player in all the continents and operating in every field. The drive that is stated is global, comprising the effect of the cultural and political model of which China is, in the eyes of Xi Jinping.
Economic Issues
The trade war between China and the US may seem to be chaotic, with many twists and turns to confuse the most experienced predictors. The time Trump announced the first tariffs; the Administration has chased a single central strategy i.e. declining economy of China to force the nation to alter its trade policies.
In some manner, this strategy was successfully worked. The economy of China has reflects signs of decline before the hit of first tariffs, and the war with the United States has increased that drift.
However, the declining economic condition of China has also influenced the performance of a number of major industries of the United States. And not a single company experienced higher trade challenge in comparison to Apple. According to Worland (2019), the giant company in the technology industry, which is considered to be the most valuable company in the world, experienced a decline in its revenue due to trade tensions between China and the United States. The iPhone that covers around 60% of the total group’s sale has experienced a loss. This also resulted in decreasing the stock value of the company to 10%.
Though, the government of China is putting efforts by offering variety of concessions, from eliminating restrictions on the auto business of United States to enhancing the different type of heritably changed crops from the U.S for import. Beijing is also working to improve its relations by promising to purchase more products from the United States. It is considered to be a move that will decrease the U.S. trade deficit (Worland, 2019).
Legal Issues
China has recovered from the recession period and now framing different strategies to grow at a fast pace. With the fast expansion of domestic consumption, specialists forecast the vast growth of the market of China in the next decade. However, there are few of the legal issues in the market that is experienced by the business:
Form of Representation
Companies of the United States require some forms of representation in the market of China before it could deliver its services. In the Chinese market, every foreign business must directly follow the guidelines of the local government for foreign companies. Unluckily, without having the registration papers of the business in China as the legal entity, a foreign company is not permitted to operate its activities (Shen, 2010).
Licensing, Certification, and registration Requirement
A number of products should be registered, licensed or certified by the pertinent authority of China before vending the products in the Chinese market. Products related to the safety and health of the human must be certified. The government of China has passed a Food Safety Law in the year 2009 according to which every food manufacturer of the foreign country needs to be registered at the pertinent authority (Shen, 2010).
Russia
Russia is the biggest nation across the world, covers one-tenth of all the land on Earth. The country encompasses around 120 ethnic groups with more than 100 languages.
Geopolitical Issues
Economic Collapse
Across the world, Russia is moving forward with the purpose of disrupting the geopolitical and established economic order. This is due to the Cold War 2.0 converting into a financial war. The economy of Russia is weakening. A number of businesses have experienced this downturn. For instance, Russian Airline has closed its operations. Besides this, Western Airline like British Airways and Lufthansa Airlines are paying attention to know whether Russia finishes its airspace for them. This will drastically alter the way they operate their business in Europe (Prakash, 2014).
It is known that the relationship between Russia and the West are becoming aggressive. Yet, Russia possesses the essential portion of the Western multinational’s developing market portfolio. There are few cases according to which the government of Russia has directly involved in the affairs of Western businesses (Prakash, 2014). For instance, in the year 2014, the Kremlin charged McDonald’s for purportedly violating the safety codes of the government and for the temporary basis four stores were closed in Russia. Similarly, after some hours the EU and US augmented sanctions for the same year on Russia (McNamee, 2017).
Economic Issues
Decreasing prices of the oil and increasing trade sanctions due to increasing conflict with Ukraine are the two main aspects that are influencing the economy of Russia. Because of the heavy exposure of Russia to oil export revenues, miserable prices of oil have instantaneously resulted in decreasing the economic output and quick inflation, increasing challenges for the makers of the policies (Center for Strategic and International Studies, 2019). Sanctions sited by EU and US compounded the influence of the prices of oil, draining GDP and resulting in the depreciation of the rubble. These factors have resulted in restricting the confidence of the investors in Russia. Issues related to corruptions and ease in operating business have factually retained few of the investors from working with the Russian assets, however enhancing standards of reporting and legal structured have supported to moderate these worries in recent years.
Legal Issues
The increasing threat of Sanctions by the U.S
It is one of the most serious risks for the foreign businesses as it will progressively become tough for the businesses to adhere with the international laws if their partners present in Russia had to deal with the new sanctions. With the increasing sanctions by the US administration for Russia will result in placing the foreign businesses in the grey zone (Abdullaev, 2017).
Brazil
Brazil is said to be the largest nation in Latin America and South America. Brazil is occupied by many tribal nations. Brazil is called as one of the most advanced developing economies. The country possesses the ninth biggest GDP across the world in terms of PPP. Besides this, Brazil is the main breadbaskets in the world, being the biggest manufacturer of coffee for 150 years. According to the reports of the World Bank, the region is categorized as the upper-middle income economic area and also the newly developed nation, with the highest global wealth share in Latin America.
Geopolitical Issues
Political crunch in Venezuela and Brazil has taken center stage in the year 2017, though both the nations may be regulated in opposed directions. Brazil deals with the disrupting fraud scandals but seems controlled in an optimistic direction. On the other side, Venezuela is experiencing an economic and political crisis from the last four years (Kay, 2017).
Economic Issues
A number of foreign businesses arrived to do business in Brazil, lifted by a produces boom and upsurge in family consumption. Being a host nation to the Olympic Games in 2016 and the Football World Cup in 2014 did not affect the attractiveness of Brazil’s attractiveness (TMF Group, 2018). The support provided by the government has raised around 30 million people above the line of poverty, however, the sporting stages created disputes. Brazil is dealing with the time of worst recession from the last two decades, and it is because of increasing corruption and the economic and political uncertainty that has been generated (Tisdall, 2016).
The corruption in the country is resulting in the economic decline which cannot be overstated. It has been predicted that around 3 to 5% of the GDP of Brazil is lost yearly due to corruption. Before the corruption scandal, state well-ordered Petrobras the oil company was the largest company and investor of the nation comprising of around 10% of the economy of Brazil. It is all due to Petrobras scandal, the nation deals with around y $27 billion in the GDP loss in the year 2015 (Gilbert, 2016). Petrobras is considered to be the largest employers of Brazil who has now decreased the level of the workforce by around 34% in 2013.
Legal issues
Taxes
In comparison to other nations of BRICS, Brazil has one of the highest levels of the tax burden. At the time of initiating a business or opening a company in Brazil, it is anticipated that businesspersons invest at least around 67% of their profits in the matters related to tax (Novais, 2012). Number of these kinds of jobs during the year as Brazil has more than 275000 customs concerning the taxes paid. Some of the normal taxes that are charged in Brazil are:
CIDE: CIDE tax is generally paid the business that is involved in some type of commercial items import. The normal tax rate is 10%.
COFINS: COFINS is a kind of tax that is paid by the businesses who are involved in collecting tax depending on added value. Normal tax range is from 3-7.6%.
CSLL: This tax is paid by all the legal businesses with the residency status in the nation. The normal tax range is 9-15% (Novais, 2012).
Import Duty: Import duty is paid by the importers of the services and goods, the receiver of the intercontinental delivery titled by the sender. The rate of the duty is changed as per the type of good.
IOF: IOF tax is paid by private businesses and legal businesses. Normal tax range is 1-25%.
IPI: This tax is paid by the owner of the industry and the goods importer. The tax range is 0-300%.
Bureaucracy
It takes around 185 days to start a company or business in the market of Brazil. These barriers increase the level of bureaucracy to foreign, exports, and imports investment, straight influencing the growth of the economy.
Conclusion
The above paper is
presenting the macro analysis of BRIC that is comprised of four biggest
economies in the developing markets. The acronym of BRICs is China, Russia,
India, and Brazil and sometimes South Africa. The paper has major analyzed the
geopolitical, economic, and political issues in the countries comprised in
BRIC. From the above analysis, it has been identified that after the
appointment of Narendra Modi as the Prime Minister of India, the country has
experienced a huge development and economic growth due to his successful
enactments with foreign countries and development within the country. But due
to the increasing gap between rich and poor businesses like Wal-Mart operating
the country have to alter their price strategy according to all type of
salaried person. Indian economy is considered as the fourth largest economy in
the world. China is another nation part of BRIC that is one of the most famous nations
across the world. The declining economic condition of China has also influenced
the performance of a number of major industries of the United States. And not a
single company experienced higher trade challenge in comparison to Apple. China
has recovered from the recession period and now framing different strategies to
grow at a fast pace. Russia is experiencing geopolitical issues, due to which a
number of foreign and local businesses are experiencing a downturn. In the
conclusion, it could be said that the businesses and investors must look
towards the India market for making their huge investments, because among all
the five countries, it is the one offering highest opportunities to the
business to operate business in the country by availing different type of
government support such as subsidy according to the type of business. Besides
this, the economic position of the company is also growing which highlights
positive image in the eyes of investors.
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