Global Business Capital Market Integration

Question: Discuss about the Global Business for Capital Market Integration. Answer: Introduction: The first variable for consideration is level of income in the foreign market. Income is amount of money earned by individual of a certain country in a specified period of time (Rudd Whelan, 2002). Level of income determines the purchasing power of an individual in a household. The higher the level of disposable income the more an individual in able to make more choices and buy products (Bayoumi McDonald, 1994). Argentina has a GDP of US$58.6B while Brazil has US$ 1772.6B. Considering GDP per capita, Brazil has US$ 8670 while Argentina has US$ 13588. It therefore clear that an individual in Argentina has a higher level of income as compared to Brazil and it recommendable to sell product to them because they have a higher purchasing power compared to Brazilians. The second socio economic factor to consider is demographic of a country. Demographic refers to population of human being in country (Blanchard Gal, 2011). It entails the number of people in a country that are presumably the consumers of countrys market. Demography of a country determines the amount of quantities consumed within a given period of time. Argentina has a population of 43.1 million people in 2.7 million square kilometers while Brazil has 207.8 million people in 8.4 million square kilometers. The population density of Argentina is 16 individual per kilometer compared to 25people in Brazil. This shows that the Brazilian market has more potential customers and therefore recommendable. The third variable of consideration is wealth of a nation. Wealth is general prosperity in welfare and valuable material (Myers, 2006). Wealth determines the lifestyle that individual adopt and consequently preference and tastes of products. A wealthy society is health conscious and tends to buy products that have health benefits. Argentina has a Gini index of 42.7 whileus Brazil has 51.5. This shows that Brazil has a wide gap of inequality in terms of income among its citizens compared to Argentina. Argentina has also recorded a higher HDI of 0.836 compared to Brazil of 0.755. The records also show that Argentina is 92% urbanized while Brazil is 86%. These results show that Argentina is wealthier than Brazil and therefore recommendable to venture in. The other variable is occupation of individuals in a country. Occupation refers to productive activities that an individual is engaged on. It involves the rate of unemployment and the expectation of employment (Tian, 2014). Occupation determines earnings of individuals in an economy and future expectations. Argentina has an unemployment rate of 6.5 while that of Brazil is 6.8. Also the inflation of Argentina is 10.6% compared to 9% of Brazil. These results show that Argentina has a lower unemployment rate and higher inflation rate which shows that more individuals are employed and there is possibility of increased employment with higher inflation in comparison to Brazil. Therefore it recommendable to venture in Argentina market based on this variable. Benefit from economies of scale: First movers in a market are able to work on their production and operating costs to minimize the over time (Bayoumi McDonald, 1994). They are sable to trade in large quantities that enable them benefit from economies of scale. This is centrally to Kallara Tea firm which has to start it operations at high costs of production due to limited production and small market. Skills and experience: First movers have an advantage of skills and experienced gained over a period of time compared to new entrant. Early entrants have existed in the market are able to understand the dynamism within the market and thereby able to operate appropriately with skills to meet their objectives. This is not the case to Kallara Tea since it has to stay in the market for quite good time to understand the market and avoid fluctuations. Established market share: Early entrants have a guaranteed market share that they have established over years. They are able to establish their product brand and customer base. This isnt available for Kallara Teas product and they have to operate in the market without guaranteed sales. Inflexibility: First movers in the market are established in the market to extent that they are not flexible. They are not able to shift markets due to established supply chains and investments laid down over years. Therefore, these firms are not able to change market even when the conditions of the markets are unfavorable. For instance Kallara Tea can predict unfavorable market conditions in the future and shift to another country which will not be an expensive move compared to entry entrants. Disruption from new Technologies: Early entrants are continuously faced by a challenge to adopt new technology. Since they are established with their existing technology, it becomes hard for them to adopt new efficient technologies in production and selling of their products (Grimwade, 2000). Kallara Teas products are able to easily adopt new technologies in their processes compared to early mover in the market. Slow adoption of changes: Early entrants have established processes that are hard to change and require a lot of time to adopt change. With recent changes in consumers tastes and preferences, first movers are not able to change with the same rate of changes happening in the society. For instance, it easy and fast for Kallara Tea to incorporate current changes in consumer tastes and preferences compared to early firms that have been in the market for years. References Bayoumi, T. McDonald, R. (1994). Consumption, income, and international capital market integration (1st ed.). London: Centre for Economic Policy Research. Blanchard, O. Gal, J. (2011). Labor Markets and Monetary Policy: A New-Keynesian Model with Unemployement. SSRN Electronic Journal. https://dx.doi.org/10.2139/ssrn.920959 Grimwade, N. (2000). International trade (1st ed.). London: Routledge. Kozmetsky, G., Williams, F., Williams, V. (2004). New wealth (1st ed.). Westport, Conn.: Praeger. Myers, R. (2006). The wealth of nations in the twentieth century (1st ed.). Stanford, Calif.: Hoover Institution Press. Mobius, M. (2012). The Little Book of Emerging Markets (1st ed.). New York: Wiley. Nafziger, E. Nafziger, E. (2006). Economic development (1st ed.). Cambridge: Cambridge University Press. Rudd, J. Whelan, K. (2002). A note on the cointegration of consumption, income, and wealth (1st ed.). Washington, D.C.: Divisions of Research Statistics and Monetary Affairs, Federal Reserve Board. Tian, X. (2014). The Hope of the Country with a Large Population (1st ed.). Dordrecht: Springer.