Key Stakeholders
The issue under analysis is the desire of the Australian company dealing in Italian tiles to cut the delivery times of the tiles from Italian suppliers and to increase the company’s productivity, sales, and incomes in this way. To achieve this goal, the company plans on opening the warehouse either in Australia or United Arab Emirates (UAE). All stakeholders of the company, including management and employees, customers, and business partners will benefit from warehouse introduction as it will allow them cut the time of tile delivery from Italy and expand the customer base using the growing supply of tiles in stock. The only stakeholder to lose from the step will be the Italian tile supplier whose incomes will decrease if the Australian company has the warehouse to access the tiles without addressing their Italian partners.
Key Factors
The major factors and criteria to be considered while choosing between opening the warehouse in Australia or UAE include the economic environment of both countries, the governmental and central bank’s policies, the political situation in the countries, and the transnational issues observed in Australia and UAE (Heat, Ireland, and Hoskisson, 2008). The economic factors considered will allow forecasting the consequences of business activities in Australia and UAE, while governmental economic and social policies will provide the background for work in each of the countries. Finally, transnational issues considered will provide the Australian company with the opportunity to adjust its operations to any special conditions like for instance racism, international conflicts, armed rebellions, illicit drug trafficking, or wars (Heat, Ireland, and Hoskisson, 2008).
Australian Economic Environment
Economy
Thus, considering Australia as one of the alternative warehouse locations, it is necessary to pay attention to the GDP change rates, annual national income rates, and tax climate. Accordingly, over the last five years the Australian GDP reports consistent increase illustrated by the 3 – 3.7% growth rates and by the figures of $1, 012, 269 in 2005 that grew to 1, 084, 146 in 2008. The GDP per capita levels report the gradual growth from $98,4 thousand in 2005 to $101,9 in 2008 (Australian Bureau of Statistics, 2009).
Among the chain volume measures, all components report increase as well. Real gross domestic income grew by $95, 237 between 2005 and 2008 to reach the level of $1, 095, 701 in the late 2008. Real net national disposable income grew from $810, 133 to $879, 743 between 2005 and 2008. Only the non-farm GDP growth rates report slowdown over the last year from 3.9% to 3.6%, which is the only observable macroeconomic effect of the global financial crisis upon Australian economy. The taxes amount to the total of over 20% of the profit of a business company (Australian Bureau of Statistics, 2009).
Government and Central Bank’s Role
The economic stability in Australia is the achievement of the country’s government and the Reserve Bank of Australia. As the latter is government-owned, its activities are reflections of governmental economic policies. The major functions of the Reserve Bank of Australia include preserving the currency stability, preserving employment levels, and developing the economic prosperity of the nation. Based on these, the Reserve Bank of Australia supports the Australian currency by establishing its exchange rates, supporting its with gold assets, regulating the baking operations in the country, and exercising control over all economic operations in Australia (RBA, 2009).
United Arab Emirates Economic Environment
Economy
The economic conditions in the UAE can be characterized by the same factors including GDP, its composition, income levels, tax climate, etc. Thus, the economy of UAE can be characterized by the steady GDP growth that is faster than the Australian one. In 2005, the GDP amounted to $141,5 billion, while 2006 saw the increase of GDP to $159,3 billion, while in 2008 the figure reached $184,6 billion. The GDP per capita level in the UAE is rather high compared to other countries. It amounted to $37,3 thousand in 2006 and grew to $40 thousand in 2008 (CIA, 2009).
The percentage of the GDP real growth rates is also much higher than in Australia; in 2006 the rate was 9.4%, while in 2008, even despite the global financial crisis effects, it amounted to 7.7%, which is more than twice as high as in Australia for the same period. In this, the major effect of the global financial crisis in UAE is seen: although GDP growth rates remain higher than in Australia, they have decreased by 2% over the 2007 – 2008 period. However, the free trade zone and the zero taxes for international companies operating in UAE outweigh the crisis effects (CIA, 2009).
Government and Central Bank’s Role
The situation with the governmental and central bank’s policies aimed at economic development is somewhat different in the UAE if compared to Australia. The fact that the Central Bank is a government owned institution that carries out the governmental economic and financial initiatives is similar to Australia. So are the major functions of the Central Bank of UAE that include the preservation of the currency stability, supervision of the employment levels, and the development of the public prosperity through monetary policy instruments that include open market operations, securities purchase and sale, and establishment of exchange rates (Central Bank of the UAE, 2009).
However, the major difference lies in the elimination of taxes for international investors that the UAE government has adopted and the Central Bank of the country puts in practice nowadays. It is this policy that makes UAE an attractive economy, especially for the international companies (Central Bank of the UAE, 2009). Thus, the policies of the government and the central bank of the UAE, based on the economic data presented above, seem to be more effective than the ones of respective Australian institutions.
Non Economic Factors
Political Situation
The political situation in Australia is rather simple and calm. The country is the member of the Commonwealth and is currently run in the form of the federal parliamentary democracy. The head of the country is traditionally the British monarch, currently it is Elizabeth II. The head of the executive branch of power, i. e. the government, is the Prime Minister Kevin Rudd. Thus, strong ties of Australia with the UK provide for its financial and economic stability and use of successful economic policies to develop business in the country. In UAE, the head of the state is President Khalifa bin Zayid al-Nuhayyan. The country is a parliamentary republic where the laws of Sharia and civil court laws are combined and the party system is prohibited. The country is also the former British colony and this provides for the ties with the UK and the experience in economic and financial policies (CIA, 2009).
Transnational Issues
Regarding the transnational issues Australia is involved in, only two are actually burning ones. The first one is the Timor-Leste dispute over the hydrocarbon revenues distribution, and the second is the problem of illicit drug trafficking observed in almost every other country of the world as well (CIA, 2009). The first issue among the mentioned is solved by the 2002 Timor Sea Treaty providing the equal distribution of the revenues disputed, while the second issue is much harder to solve. In Tasmania, great amounts of illicit drugs are produced but governmental activities seem to control the drug trafficking and limit only to the legal use of drugs in medicine.
As for UAE, it is involved in two territorial disputes. One involves Oman and concerns the border between the countries, and another one is the dispute with Iran over the Tunb Islands and Abu Musa Island (CIA, 2009). Illicit drug trafficking and informal banking are also significant transnational issues that arise from the financial attractiveness of UAE and the favorable tax climate in the country.
Transportation
Transportation as a vital point for international business should also be considered. Thus, Australia possesses a properly developed system of airports, heliports, waterways, merchant marine ships, and trade ports. There are over 400 hundred airports in the country, while the total length of the railroad ways amounts to 37,855 km. The country disposes of 812, 972 km of roadways and operates with 11 large sea ports including the ones in Brisbane, Melbourne, and Sydney. UAE, due to its smaller territory, operates with fewer airports, only 39, and roadways, 4,080 km, but the marine transportation capacities of 58 merchant marine ships are wider than in Australia whose merchant marine amounts to 50 ships (CIA, 2009).
Communications
Communications also constitute an important part of business activities. Both Australia and UAE have highly developed communicational networks. In Australia, there are over 9 million main telephone and 21 million mobile cellular lines. INternte is a widely spread phenomenon with over 11 million hosting stations and 11 million users all over the country (CIA, 2009). In UAE, the smaller population and territory condition the smaller scope of communications development with the number of main telephone lines amounting to 1,3 million lines, while mobile connection operators handle over 7 million lines around the country. There are also 381,000 of internet hosting points in the country and over 2,5 million users of the worldwide web in UAE (CIA, 2009). This evidences that communications are highly developed in both countries, which provides favorable conditions for business launching in the both.
Recommendations
Thus, on the basis of the above considered economic data and information on the political, communicational, and transportation situations in both Australia and UAE, it is recommended to launch the planned Italian tile warehouse in UAE if the tax climate and simplicity of handling the warehouse are required. The absence of taxes for international companies allows the Australian firm to save funds and use them for transportation to the destinations in this country. However, if the major factor for the Australian firm is the delivery time and familiarity with the laws of the country, definitely Australia should be the area to launch the planned warehouse.
Reference List
- Australian Bureau of Statistics 2009, Australian Economic Indicators, National Accounts and International Comparisons.
- Central Bank of the UAE 2009, Central Bank Operations, Central Bank of the UAE Official Web Site.
- CIA 2009, Australia, CIA Factbook.
- CIA 2009, United Arab Emirates, CIA Factbook.
- Heat, M, Ireland, R and Hoskisson, R 2008, Strategic Management: Competitiveness and Globalization, Concepts and Cases. South-Western College Pub; 8 edition.
- RBA 2009, Overview of Functions and Operations, RBA Official Web Site.