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Naomi Threads is one of the utmost acknowledged textile manufacturers and distributors, found by Naomi Arego in the United States of America in 1958, it has become well acknowledged for its great quality of assortments. In today's continuous use of threads in our everyday lives as well as in businesses, this industry has become very competitive leading to a need for expansion for Naomi Threads to increase on market share, sales and build up an even stronger reputation. This need has led to setting sights in other countries with possibilities of investment and or location of a business, and Tanzania seems to be a preferable choice.
This report aims to analyze the main concerns for possible foreign direct investment (FDI) or export possibilities, and how beneficial this would be for Naomi Threads success and goals. As a researcher this study will have an in depth look into the national institutional systems and cultural conditions customary in Tanzania and United States of America, while assessing the pattern and trends of trade and investment in both countries in the textile sector with key emphasis on protection measures against imports and foreign investment in Tanzanian textile and clothing sector; advise on whether Naomi Threads ought to export or drive into foreign direct investment, and explore the possibility of engaging into both options, considering the effect of the exchange rate regime for USA and Tanzania. And, on the whole, it assesses the level of risk coverage and corporate social responsibility (CSR) issues Naomi Threads of USA may come across in Tanzania as a foreign counterpart in the Tanzanian textile industry.
At the conclusion of this study, the best approach will have been recognized for implementation taking into grasp the suggested approach considered optimal.
One of the major industries in the world and yet still rising due to its widespread demand for manufactures of several products due to its variety of uses, such as for clothing. In the homes, carpeting is one of their uses, along with beddings, curtains among others. At work, they are fit for uses like purifying. Various uses include items such as flags and bags.
Textiles used for manufacturing purposes, and selected for its features other than appearance, are usually termed as technical textiles which are more inclined with automotive applications, among other types of textiles.
a) An analysis of the national institutional systems and cultural conditions in Country B with an assessment of how this will affect your firm within its industry
NATIONAL BUSINESS SYSTEM
The national business system approach clarifies international differences in firm organization and firm behavior. The emphasis is on the organization of economic activities and on governance issues. National differences in the organization of firms and markets are explained by differences in culture and in formal institutions. The business-systems approach has increasingly become based on economic theory with slight stress on legal, political and educational frameworks, while originally rooted in sociology (Lundvall 1999).
Due to the suggestion of the previous analysis, importance is sited on the following institutional measures in the Tanzanian political, economic and legal system with the analysis of national business system in Tanzania in relation with Naomi Threads of U.S as a potential entrant to the Tanzanian business space.
The 2010 elections had Chama Cha Mapinduzi (CCM) emerging victorious once again with President Jakwaya Kikwete starting his second and last term. . "The main political issues are corruption and the share of the mining sector in the economy against a background of popular discontent fed by price rises and electricity cuts" (Globaledge.msu.edu, 2008). The Government of Tanzania (GOT) encourages foreign direct investment (FDI) and has stood successful in attracting FDI. In spite of the positive response towards FDI idea, some representatives remain doubtful of foreign investors and free competition. After several years of increasing FDI, new FDI in 2009 weakened modestly due to the global economic crisis to USD 650 million from 2008's record USD 744 million (U.S. Department of State, 2010). There are no laws or regulations that limit or prohibit foreign investment, participation, or control, and firms generally do not restrict foreign participation in practice. The U.S though, comprised of 50 politically separate states, each political entity has the right to impact its own laws (Doing business in the U.S, 2013). And the country is politically stable and operates on a democratic system.
Since the Tanzanian politically system encourages FDI, this will work in Naomi Threads' favor, and with good relations between the country, it will ease the establishment and can function in all cities in Tanzania because unlike U.S, Tanzania does not have separate political entities in each city.
Substantial procedures have been in use to liberalize the Tanzanian economy along market lines and encourage both foreign and domestic private investment. The program included a comprehensive package of policies which reduced the budget deficit and improved monetary control, substantially depreciated the overvalued exchange rate, liberalized the trade regime, removed most price controls, eased restrictions on the marketing of food crops, freed interest rates, and introduced a reform of the financial sector
Any change in cultural factors like education affects the life style and thinking of the people living in society and thereby bearing on business activities in such society (Jain et al 2009). Business and society are essential to one another; social-cultural setting debates the effect implemented by social and cultural factors which are beyond control for businesses. Such matters include: attitude to work, family system, religion, languages, habits, preferences, tradition, value system, and business ethics among others. Handling the complications formed by cross -cultural changes increases the transaction costs of conducting international business activities. Therefore, if cultural variances among possible trading partners are great, the economic and/ or strategic benefits of engaging in business activities must be great enough to offset the extra costs of doing business with diverse cultures (McDonald and Burton 2002).
Nevertheless, putting the importance of cultural implications in the business space into consideration and scheduling to do business in the Tanzanian textile industry will involve a looking into cultural factors as follows:
â€¢ Traditions and labor system: Most of the industrial manufacture is pushed toward local supplies. Important industries include the manufacture of textiles, among others. Other industrial activities include oil refining, and the manufacture of cement, gunnysacks, fertilizer, paper, glass, ceramics, and agricultural implements (Culture of Tanzania, 2010). Their agricultural implementation, especially with cotton, would work greatly in Naomi Threads favor increasing on the textile production.
â€¢ Religion: Christianity and Islam are the major religions in Tanzania, with 30% consisting of Christians, 35% consisting of Muslims; the remaining 35% has people with indigenous beliefs (Tanzania - Culture, Customs & Etiquette, 2001). Though, the religions have no effect on the textile business.
â€¢ Ethnic Groups: Composed of more than 130 tribes, comprising 99% of African of which 95% are Bantu in the mainland, other 1% consisting of Asian, European, and Arab; Zanzibar - Arab, African, mixed Arab and African (Tanzania - Culture, Customs & Etiquette, 2001). Bantu tribes contain the Sukuma which is Tanzania's largest tribe with 23%, the Chagga with 7%, the Makonde with 7, the He-He with 3%, the Go-Go with 6%, the Haya with 7% and the Nyamwezi with 7.5% (Tanzania's Ethnic Groups, 2010)
â€¢ Language: Swahili and English are the main spoken languages in Tanzania. Despite the several ethnic groups with their own languages, Swahili and English are spoken nationwide. Out of the two languages, Swahili is more spoken and understood by all but English not as much. This may constitute a major implication for Naomi Threads because English is the official language in U.S., which would mean they should learn the language to communicate with most people here.
b) An assessment of the pattern and trends of trade and investment between the two countries in your selected industry, and also consideration of the type and level of protection measures against imports and foreign investment in Country B within your industry.
TRADE PATTERNS IN U.S
The U.S. textile industry has increased productivity by 45 percent over the last 10 years, making textiles one of the top industries among all industrial sectors in productivity increases. The U.S. textile industry is a great manufacturing employer in the United States, the U.S. government estimates that one textile job in this country supports three other jobs, with the industry having employed 506,000 workers in 2011. The U.S. textile industry is the third largest exporter of textile products in the world (NCTO 2012). Exports in 2010 grew 13.4 percent to more than $17 billion in 2011. (Bakane, 2012) stated that the U.S. is the world leader in textile research and development, with private textile companies and universities developing new textile materials such as new garments that adapt to the climate to make the wearer warmer or cooler and as well as for U.S. military use, with more than 8,000 different textile products per year. The U.S. textile industry invested $16.5 billion in new plants and equipment from 2001 to 2010 which led to producers having to open new fiber, yarn and recycling facilities to convert textile waste to new textile uses and resins (Friedman, 2012).
TRADE PATTERNS IN TANZANIA
Tanzania has ample natural resources, particularly for agriculture, with 44 million hectares of arable agricultural land and the existence of an ample supply of cotton provides significant opportunities for investment in the textile industry (Tanzania US embassy Gov., 2009)
TRADE PATTERNS BETWEEN U.S AND TANZANIA
The U.S. has an excellent relationship with Tanzania forged through history of events, which got even stronger following the 1998 attacks of the U.S embassy in Tanzania. In September 1999,Tanzania's Third President Benjamin Mkapa visited the U.S with a delegation of business managers, reflecting the increased level of cooperation on trade and investment issues and Tanzania's commitment to economic liberalization(Stein, 2010). With President Kikwete's election, the relationship has blossomed into warmer relations than at any time since Tanzania achieved independence. President Kikwete wishes to broaden Tanzanian ties to the U.S. across all spheres, including political, economic, and military, and has been actively engaged in pursuing internal structural reforms to allow that to happen.
Tanzania's exports to the United States include textiles, agricultural commodities, minerals, and while imports from the United States include wheat, agricultural/transport equipment, chemicals, used clothes, and machinery (Tanzania National Website, 1999). Tanzania is entitled for preferential trade benefits under the African Growth and Opportunity Act. The U.S has Trade and Investment Framework Agreements with two regional organizations to which Tanzania belongs, namely the East African Community and the Common Market for Eastern and Southern Africa (U.S. Department of State, 2010).
Tanzania and U.S have preserved a reliable trade relationship over the years. Meanwhile, recent trade statistics (2011) showed that Tanzania's export to U.S amounted to 58,244 (Value 1000 dollars), an increase from 42,888(Value 1000 dollars), compared to 2010. While U.S exports to Tanzania have also risen to 250,729 (Value 1000 dollars) from 2010's 157,909 (Agoa.info, 2012)
Â USÂ Exports to Tanzania
Â US Imports from Tanzania
The high increase of exports into Tanzania, show that the country is dependent on foreign assistance and product, therefore an entertaining advantage for FDI.