Gross Domestic Product

KeepCup Company is an Australia private company, who are working in exporting reusable cups. KeepCup head office, which in Melbourne is recently exploring for the feasibility of introducing their product overseas to German. This business report provides a business analysis and consideration about the external environment in German. The purpose of this business report is to facilitate KeepCup in order to help the company to make decision for expanding their product exporting to German.

The observation will go through on the political, economic, socio-cultural, technological and legal environment of German. Besides reporting the environment condition in German, this report provide analysis about the external environment in relation to KeepCup. In addition, this business report will highlight the strengths, weaknesses, opportunities and threats according to the external environment in German related to KeepCup. The recommendations on the suitableness of this expansion will be based on the SWOT analysis.

The report found that expanding product distribution to German is a good decision. The opportunities regarded to German’s external environment supersede the threats. The rapid growth in modern technology, high economic growth, the socio-culture, also the political environment in German can be a convenient way for the company to operate in German. Also, the similarity between Labor and Business Law in German and Australia are considered as opportunities for KeepCup.

The threat is contrasted in the some differences in socio-culture. However, it is recommended that KeepCup expand their business to German by exporting their reusable cups because of these findings regarding the strengths, weaknesses, opportunities and threats for expanding to German. This business report will provide relevant and empirical information on the political, economic, sociocultural, technological, and legal environments throughout SWOT analysis that impacts KeepCup for expanding their business to German.

Political Environment

Political Environment consists of the government system, stability, government relation and certain political policies. (Bartol and Martin 1998, 71)

Government Stability

German has been using democracy ideology from over 60 years ago. This makes a recently, democratic lifestyle and culture is embodied and implemented by every citizen in German (Make It In Germany 2013. The supreme authority in German is divided into 16 Länder and one central state. This kind of political government defined as a Democratic Federalist. Moreover, the stability of the government of German provides a suitable place for operating a business.

Government Relation

International relation is important for a big nation such as German. German has been joining six different international organizations, which are European Union (EU), United Nation (UN), North Atlantic Treaty Organization (NATO), OSCE, World Trade Organization (WTO) and International Monetary Fund (IMF). There are two organizations, which are maintaining about the trading relationship and the economic stability, WTO and IMF. With joining these two organizations, German has a good relation in politic issue, particularly in the foreign or international trade. German has been joining WTO since 1995, this makes recently German opens their economy for foreign investment (Tatsachen Ueber Deutschland 2013).

Analysis

According to the stability of the government of German, also the friendly and global political relationship, German is a good place to open a business. These two Political Environment characteristics provide an opportunity for KeepCup because German has a suitable Political Environment for opening business.

Legal Environment

Legal Environment contrasts about two major laws, business law and labor law (Bartol and Martin 1998, 71).

Business Law

German has a low level of corruption. This country ranks 13th within least corruption country based on the Corruption Perceptions 2012 (Transparancy International 2012). Open international businesses in German are free from teething restriction in the daily business. Overall, the business law in German creates no different or contrast between the local company and foreign company investment or the established company. Moreover, the reliable laws make the companies able to plan their investments in an effective way (Germany Trade and Invest 2013).

Apart from it, the business law in Australia has its own Guidelines and effective and consistent decision. The aim of the government regarding to the Guidelines is to give a positive impact to the business conduct for companies in Australia (Australian Government 2011). Similar with German, Australia also categorized as one of the world least corrupt by 2012 (Transparancy International 2012). Australian Government is concerned about corruption. Moreover, people in Australia also considered corruption as a harmful action for the environment (Bowman and Gilligan 2009, 438-452)

Labour Law

There are three main points according to similarity of the Labor Law in German and Australia. First of all, the legal working time for employee in German is eight hours per day (Liliane Jung 2011). Compared with Australia, which is eight hours per day, both countries have the same legal working hour (Work Place Info 2012). Secondly, the minimum working age in German are strictly applied by the government for employees in German. Hiring children for working, is forbidden by the law as stated in the YWPA (Young Workers Protection Act).

Children under 15 years old are not allowed to work (Liliane Jung 2011). The legal age for working in Australia is also above 15 years old (Lawstuff 2010). This makes there is no different between the legal working age in German and Australia. Thirdly, the working conditions in German are considered as a safe and obligated working environment. The companies in German have a great liability for a particular large social and community. In order to improve the working conditions in German, health and safety are considered (Encyclopedia of The Nation 2012). Same with the working conditions in Australia, health and safety are required by the government as stated in National Employment Standards (NES) (Australian Government 2009).

Analysis

According to the similarity about the Business Law and Labor Law in German and Australia, both of the laws provide good opportunities for KeepCup in order to expand their business to German. KeepCup can be easily adapted to the Germany Laws and regulations because they don not need to totally adapt with the laws in German.

Economic Environment

Economic environment includes the stability of business cycle, exchange rate and economic trends which include economic trends and growth (“The Business and The Technological Environment” 2008, 58-80).

Inflation Rate

In July 2013, the inflation rate of Germany is at 1.92 percent. Since 1950, the inflation rate of Germany has been fluctuating with average rate at 2.49 percent until 2013. With this percentage of inflation rate, German can be considered as a good place for investment. The current inflation rate shows that the economic condition in German is in a good condition (Trading Economics 2013).

Economic Trends and Growth

German is one of the heavily export countries in world (Trading Economics 2013). Since 10 years ago, the GDP of German has been fluctuating. From 2004 till 2008, the GDP of Germany was in positive number. Then in 2008 until 2010, there was an extreme decrease in the GDP of German which reached a peak at approximately -4.0. However, since 2010, the GDP of German has been going fluctuate at a positive number. Apart from it, recently the government of German is trying to maintain stability of GDP of Germany in the positive number. So, it can be a good condition for foreign investment in German, because they can make more profits if the economic condition in German growth (Randow 2013).

Analysis

In conclusion, both the inflation rate of German and also the economic trends and growth in German can be a good opportunities for foreign company to invest in German, particularly for KeepCup to expand their business to German.

Socio-cultural Environment

Socio-cultural environment shows how the values of society influenced the working conditions (The Hofstede Centre 2013).

The Cultural Dimension of Hofstede (The Hofstede Centre 2013)

Power Distance

Australia and German have a similar index of Power Distance. Both countries are considered as Low Power Distance countries. This culture creates a good leadership style between the managers and employees. Participative and democratic leadership are suitable for these two countries. Decentralized decisions making creates a good collaboration between team members and the leader.

Individualism vs Collectivism

Although the Individualism Index of Australia and German is slightly different, but both countries are considered as individualism country. Australia is more individualistic than German, it is considered as highly individualism country. Here people are more focused on their self-skills and individual performances. Moreover, Germany people are slightly more prefer to work as a team rather than working as an individual because the individualism in German is not as high as in Australia.

Masculinity and Femininity

Both Germany and Australian are considered as masculine. From the business point of view, people in both countries are more focus on performance in working and always try to do the best. Furthermore, with the masculine culture both people from these two countries are considered as hard worker.

Uncertainty Avoidance

Australia and German have different level of uncertainty avoidance. Germany can be considered as High Uncertainty Avoidance, whereas Australian is medium uncertainty avoidance. With the certain laws and legal policies in German, shows that Germany want to creates certainty by providing details and avoid risks. In contrast, Australian likes to try new things. People sometimes like to take a risk for creating a strategy.

Term of Orientation

German and Australia have the same term of orientation which is Short Term Orientation. In business point of view, both countries are using fast strategy and have a measureable payback. They also make a decision based on the recent condition. Logical thinking is using more than reach the consensus.

Analysis

There are three similarities and two differences between Germany and Australian socio-cultural based on Hofstede Cultural Dimensions. Germany and Australian have the similarities in Power Distance, Masculinity and Term of Orientation. In contrast, German and Australian have the differences in individualism and uncertainty avoidance. However, these socio-cultural dimensions can be opportunities for Keepcup to invest in German, because the similarities are outweigh the differences.

Technological Environment

The technological environment reflects the current technological infrastructure and communication technology (Mosley, Pietri, and Megginson 1996, 82)

Technological Infrastructure

German is going fast in improving their infrastructure since last decade. Based on Germany Trade and Invest, now German is the second best quality of infrastructure in the world, because German has some good logistic infrastructures. First of all, is the Port of Hamburg which the second largest port container in the world. Secondly, are the over 250 inland ports which are providing an efficient logistic distribution. Lastly, is the Frankfurt Airport which is the world seventh largest cargo airport and ninth largest passenger airport (Germany Trade and Invest 2011). These three logistic infrastructures creates a good opportunities and simplicities for foreign company to distribute their products to German.

Communication Network

Compared with Australia, German also has an ultra high speed internet with fiber optic network and also wide range of mobile coverage. These modern communication network make the economic transactions and communications to national segment or even international segment easier and more efficient. (SAG Germany 2013).

Analysis

The sophisticated technology infrastructure and communication network in German provide an opportunities for KeepCup to do investment in German. The simplicity of the logistic distribution makes KeepCup easily to distribute their product among German. Moreover, the wide coverage area for communication network in German provides and easy way to communicate between customer to the company or company to company.

Conclusions

Based on the SWOT analysis above, is highly recommended for KeepCup to expand their business to Germany. The strengths of KeepCup are greater than their weakness. This condition makes KeepCup can be easily to invest in German in this period of time. Moreover, it also supported by the opportunities that extremely overcome the threat that KeepCup will encounter. Is highly recommended for KeepCup to start their investment to German first of all with looking for certain local café to cooperate with them regarding to sell their reusable cups.

Recommendations

According to the weaknesses and the threat analysis, KeepCup will not be impacted with their weaknesses and threat in German. This happened because the strengths are overcome the weaknesses of KeepCup and the opportunities for KeepCup are outweigh the threat that the company will contend. These conditions provide three recommendations for KeepCup according to their plan to expand their business to German:

1. KeepCup should expand their business in this period of time.
2. KeepCup have to eliminate the weakness overcoming them with their strengths.
3. KeepCup need to avoid the threats by outweighing them with their opportunities.

Introduction

Gross domestic product (GDP) refers to the market value of all goods and services produced within a country in a given length of time. It is usually used to indicate countries standard of leaving. Simon Kuznets a n American economic researcher , who has pointed out that there is more to life than money, has been focusing on “gross national happiness “another way of indicating countries standard of leaving. But this time it is by measuring the change in our standard of living and by our quality of life instead of how much money we pocketed in a given period of time. The concept of gross national happiness or (GNH )was developed in an attempt to define an indicator that measures quality life or social progress in more holistic and physychological terms than gross domestic product .This idea has been followed from the upper echelons of Barack Obama to the prim minister of united Kingdome David Cameron the goal of measuring nations well being has been a major goal of this policy makers .They join the trend setter the Kingdome of Bhutan a Himalayan mountain country located in south Asia between republic of India and people republic of china .

Gross domestic income (G.D.P)

Product or output approach, income approach and expenditure approach have been used to determine GDP. Because of summing up the output of every product enterprise to come to the total the product approach has been the most direct of the three approaches. On the other hand the income approach principle says income of producers must be equal to the value of their product and it determines gross domestic income by finding the sum of all producers’ income. Expenditure approach uses a principle that all of the product must be bought by somebody, therefore the value of the total product must be equal to peoples’ expenditure in buying things.

GNH(growth national happiness)

GNH (gross national happiness) was introduced to measure quality of life in a nation. The term was initiated in 1972 by Bhutan’s former king jigme singyewangchuch, who lead Bhutan into modernization. but under the leadership of karma Ura ,it developed a sophisticated survey instrument .This survey instrument measures the general wellbeing of the Bhutan nation. The instrument was invented with collaboration with the Canadian health epidemiologist Michael pennoke.like many psychological and social indicators,GNH is somewhat easier to state than to define with mathematical precision.(WIKI<WIKI)

DIFFEERENCE

The difference between the two is, G.D.P is based on how the country is pocketing money and how each year they are growing or going down financial wise .but gross national happiness indicate or measure national well being, by measuring this they will know how happy the nation is. Measuring national happiness is used to help the government understand “with evidence “the best way of improving peoples well being (David Cameron). By measuring how happy the nation is .But on the other hand G.D.P measure countries economical performance.

G.D.P measures quantitative measures not qualitative like G.N.H.G.D.P takes no account of the distribution of income and includes no moral judgments about the worth of the activity performed

Money is the most common medium of exchange in the modern world .modern nation compares their wealth with the amount of money they accumulate. Money can buy you just about anything in this modern age. Many big nations like the United Kingdom and the United States of America measure their economic wealth by G.D.P or gross domestic product. But this countries are realising there is more to life than money, they are considering measuring national wellbeing or gross national happiness (G.N.H) to measure how happy there nation is, the first nation that measured G.N.H is the country of Bhutan.

Bhutan’s does not idolise money as the rest of the world does. They do not have as many material possessions as the people of the united Kingdome or of the United States. There for money does not have a major usage. Its seems like people in the united Kingdome tend to need money to be happy in life,(give good example from the hand out?)The people of Bhutan do not need money or wealth to be happy.

Families in the western society are straggling to feed and maintain necessity needs in the house. Parents have to be working full time to pay for food, gas, internet, electricity, transport .it can be any kind of transport it can be a car, for example when owning a car there are cost that comes with it like paying for road tax insurance and petrol. it can also be a train, there is cost that comes with it like paying monthly or weekly or daily travel card but in the country of Bhutan the means of transport is, use mule back or horse back to move from place to place which is cost less. Some of these expenses are not necessity in the country of Bhutan like the internet. There life is not based on technology they don’t need the internet to live there life but on the other hand UK families need internet to lead there day to day life ,the kids at home needs internet to do there course work the the father and mother needs it to pay bills and for work purpose .This had mounted the expense of the UK and most western families expenses.” the more money you got the more expense u will have “the stress level in western world is highly elevated ,as opposed to the stress level of families of Bhutan.

Bhutanese families spend time together as they usually work together in their farm or at home. There life style tends to be togetherness. Therefore giving Bhutanese a good quality time with their family. Which also avoid loneliness or spending time worrying .Bhutan’s work as a family which means they chain of delegation is from a family memberWhich makes their jobs easier, they don’t have a boss ordering them or giving them dead line to finish a task or a work time keeper who cheeks time when they come late to work them gives them a final warning. This in itself can avoid work related stress .stress at work is a major issue in the united kingdom according to the BBC news, stress at work makes men ill. ”

Bhutanese people have much less money than Britons but they seem to be happier because they don’t have any use for money. The trade in Bhutan deals with animals or foods, or handcrafted articles of clothing or weaponry .In the UK everything or every transaction requires the use of money in one way or the other .G.D.P is very important in a country like the united Kingdome .because economies change very rapidly from positive to negative and vice versa .but the economies of country like Bhutans is so small. There for makes G.D.P measurement harder. Growth national happiness in Bhutan seems to work for them than growth domestic product. Becouse people don’t use money; they have more opportunity to be happy with what they owned .

PROBLEMS OF MESURING G.D.P

DOUBLECOUNTINGThere are lots of problems in measuring G.D.P, one of the problems in measuring G.D.P is errors and omission, and this is a problem in calculating and collecting the statistics of nation. This problem arises because people hide their incomes and firms hide their expenditure to avoid taxation. as a result of this there will be another economical nation called the black economy in one country, (Akemed 2001 ) also suggest that it is known as “rag gun”. Another way in which double counting can occur is through stock appreciation. The increase in inflation which will also increase the stock value, even though this adds firms a profit; it represents no increase in real income .gain such as this must be deducted from the income figure.

G.D.P DOESNOT TAKE INTO ACCOUNT OF INCOME DISTRIBUTION

By trying to avoid distribution of income, G.D.P hides the fact that rising tide dos note lift all boats. from the early ninety seventieth till mid ninetieth G.D.P rose by staggering 50% were by wages suffered a massive fall of 14 % ,in the start of ninety eighty one alone the upper 5% of households increased their real income by almost 20% yet the G.D.P present this massive gain at the top as a bounty to all. In 2006 Richard Layard an economist from LSE argued unhappiness is a bigger problem than unemployment in the United Kingdom. This shows people are more concerned about their happiness and well being than there income. There for measuring peoples income is useless, because people are not concerned about what they get paid they are more concerned about their happiness and well being .more people are claiming incapacity benefits because of depression and other mental disorder. So policy makers need to take into accounts such factors, And change the way we calculate the countries growth.(THE ECONOMIST NOVEMBER 27Th 2010 edition page 86).

G.D.P measures divorce, crime, and natural disaster as economical gain

As G.D.P records every monetary transaction as a positive one the cost of social problem in natural disaster are classified as economical advance. Divorce adds billion pounds through legal expenses, crime ads billions to the UK GDP due the need for security measures increasing police protection and medical cost. Hurricane Andrew was disastrous for southern Florida, but GDP has recorded it as a boom to the US economy pocketing well over 15billion dollars. ( Clifford W. Cobb and John B. Cobb, Jr. 1994:12 )

GDP INCREASES WITH POLLUTING ACTIVITIES

Highly funded cleanup of toxic sites is slated to cost billions of pounds over the next three years. This will also increase up the GDP, the growth domestic product first added the economic activity or economic boom in industries and manufacturing to generate the pollution. It creates illusion that pollution is double economical benefits. This is how Exxon Valdez oil spill led to the increase of GDP.

This shows that GDP measures quantitatively, it includes no moral judgment about the activity performed to increase the economy. More to this the clean up on nuclear accident like of the Fukushima in Japan will add to GDP in the same way of production of solar power. When oil is found in one country it is sold to the consumers it is counted as an additional to the country’s wealth rather than loose or depletion of the country’s resource.

PROBLEMS OF MESURING G.N.H

On the other hand growth national happiness also has its down falls, GNH is rather complementary than a real substitute of G.D.P. Our business environment needs highly tangible indices like G.D.P in order to assess its market. As Mr. Cameron said it “you cannot capture happiness on a spreadsheet any more than you can bottle it”. Critics say that international comparison of well-being will be difficult on this model; proponents maintain that each country can define its own measure of GNH as it chooses, and that comparisons over time between nations will have validity .Recently there has been concern that happiness research could be used to advance authoritarian aims. Some participants at a happiness conference in Rome have suggested that happiness research should not be used as a matter of public policy but rather used to inform individuals. In the case of Bhutan (BBC news 2003) shows that the government expelled about one hundred thousand people and stripped them of their Bhutanese citizenship on the grounds that the deportees were ethnic Nepalese who had settled in the country illegally. While this would reduce Bhutan’s wealth by most traditional measures such as GDP, the Bhutan government claims it has not reduced Bhutan’s GNH .growth national happiness is hard to measure and it has its own conciseness .because happiness is not definable its hard to put on a spread sheet, unless everyone is brain scanned. So it requires lots of time and money.

Major problems with measuring happiness are that, it is composed of other elements to. In crude mathematics it will be defined as H=R-E.in short it means the lower peoples expectation are the happier they are, on the other hand the higher peoples expectation are the less happy they are.

Most people think happiness is not measurable, it’s too abstract, too subjective, too hard to quantify by asking people how satisfy they are with their life on a scale of one to ten, on doing so this will not give accurate answer for measuring happiness.

The other alternative is to focus in particular set of events and ask what feeling do people show as the day goes on or “ day reconstruction method or DRM” which is produce by researchers including Norbert Schwarz a physiologist and the economist Alan Krueger ex chief economist of the us treasury and another noble prize winner physiologist Daniel k .

‘The alternative approach to measure happiness by recalling episode by episode of previous day event and the most highlighted part of feeling like stress , peace, exhaustion elation. Inshore this approach measures mood and life satisfaction and these two concepts are quite different ways to think about happiness. ‘ a survey measuring woman in America in France found that the Americans were twice likely to say they were very satisfied and happy with their lives but on the other hand the French women spent more of their day in a good mood. “We have tended for too long to use a single ward to refer to wide Varity of things” says professor kahanman. There is a real need to distinguish between life satisfaction and mood or experienced happiness. They are quite distinct and they have different causes and consequences. So this has led happiness hard to measure because of all consequences that come with it therefore GNH can be a problem to measure success of a country because of the low accuracy level. A country cannot measure its success on inaccurate results.

References

(1). http://www.thinkingeurope.eu/content.php?hmID=20&smID=34&ssmID=196 (Accessed on 9 Mar11)

(2) http://www.scribd.com/doc/2977226/Economics-Gross-Domestic-Product-vs-Gross-National-Happiness used it for the difference on 23 march

(3)BBC (2006) stress at work makes men at work ill(on line) available from http://news.bbc.co.uk/1/hi/health/5059278.stm

4 THE GREEN NATIONAL PRODUCT: A Proposed Index of Sustainable Economic Welfare; Clifford W. Cobb and John B. Cobb, Jr; University Press of America, 1994 ISBN 0-8191-9322-4)

5) BBC(2003) butan refugees on hunger strike(on line) available at http://news.bbc.co.uk/1/hi/world/south_asia/2774803.stm