case study

International Trade & InvestmentSummer I 2024
CASE 1 Written Assignment
CASE: KENYA and ARGENTINA
Business and Economic Environment: Organizational Decisions in Two National
Economies
The course textbook presents case studies on Kenya and Argentina on pages 63 and 66,
respectively. Read and examine these two cases to complete the Case 1 Written
Assignment below:
Background
The case presentations on Kenya and Argentina illustrate the typical set of environmental
space in which business and economic activities (including trade and direct investment)
are carried out by organizations across different economies and markets worldwide.
Environmental factors very often present difficult choices for global firms and other
organizations: For example, firms face alternative decisions to invest and operate in
economies and markets with different sets of opportunities, risks, and threats.
Case 1 Written Assignment
I.
Describe and compare the economic and other environmental factors of Kenya
and Argentina over the years, with emphasis on recent years, as presented in
the textbook cases. The goal here is to identify factors you consider to be
relevant for a business organization to consider in order to enter and operate in
Kenya or in Argentina
II.
From a quick Internet search, describe the type of political system adopted by
each country. Use appropriate terms introduced in the text and in class to
describe the political system in each country and how each political system
would affect decisions to operate in the two countries.
III.
What would you consider to be potential and/or actual areas of business
opportunities for firms in the two countries? Identify specific
industry/industries in Kenya and Argentina in which an organization might
decide to engage in trade or direct invest in either of the two countries.
Explain.
Information on business opportunities should focus on a) specific economic indicators
and industries or sectors mentioned in the textbook cases and b) from any additional
sources of information on Kenya and Argentina you may encounter in your Internet
search.
1
The following are examples of specific information that provide insight into business
opportunities in different countries:
•
Growth rates in the Gross Domestic Product (GDP), or its equivalent, of Kenya
and Argentina in recent years. (Use information in the case and the most recent
years available from other relevant sources).
• GDP per capita of the most recent years information is available in both countries
(Suggested Sources: This course textbook, www.worldbank.org; www.imf.org;
www.cia.gov/factbook)
IV.
If you were a manager or an executive of a business or other organization,
which of the two countries would you recommend your organization to
engage in a) trade and b) foreign direct investment? Why? Present the reasons
for your choice(s).
Submission Format and Requirements: (Discussed in class with a Q&A):
–
The case should be written in no more than six(6) pages, including sources and
references), 1.5 line spacing and 12 font letter size in a Word and pdf documents.
–
This assignment is due on Sunday, June 9, 2024, end of day.
–
Submission in Brightspace: Post both Word and pdf copies in Assignments in
Brightspace.
If you have any question, please contact the instructor at: kafriyie@nyu.edu
2
The Case Method Approach to Learning
A: Case Analysis and Preparation: Organizations, Industries, Economies, and Markets
Cases are used in many fields—e. g. in business management, engineering, law, social work, and
medicine. There is a variety of ways to analyze cases in the above and other fields.
The two most common approaches are:
I) The partial case analysis and, II) The comprehensive case analysis. These are summarized below:
I. The Partial Case Analysis: Here, specific questions are asked by the instructor on any aspect of a case:
e.g. Why is company X expanding into a new market? How should company Y respond to competition
from a local firm which has strong support from its national government? Should two global companies
merge their operations in a third market?
In a partial case analysis, students must address questions, such as the above, one at a time as the need
arises. We will often use the partial case analysis in class oral discussions.
II. A Comprehensive Case Analysis: This approach analyzes cases in three (3) phases: The focus is on
How Organizations Operate in Specific Industries, Sectors, Markets, and Economies
1) Problem Identification; 2) Analysis and 3) Solution
These phases are described briefly below and will be explained further, as written assignments are
introduced.
PHASE 1: Problem Identification: Diagnosis of Issues, Challenges and Problems
Include in your case report:
•
•
•
•
•
A brief introduction to the organization and relevant background information
What are the major problems, challenges and issues raised in the case?
Are there any problems that are explicitly stated in the case? Are there any underlying problems
that are implied, but unstated in the case?
Some problems may be short-term ones: referred to as tactical problems requiring tactical
solutions
Other problems may be long-term in nature: referred to as strategic problems requiring strategic
solutions which address future directions of an organization may take, based on changes in the
external environment
1
PHASE 2: Analysis: Use of Analytical Methods to Understand the Problems and Potential Solutions
The following are examples of analytical methods used to prepare case reports:
•
The use of tools to analyze specific aspects of the problems These tools can be used to determine
the nature and significance of the challenges and opportunities an organization may be facing.
•
Examples of analytical tools include (but not limited to) the following:
o Analysis of a firm’s human resource (HR) policies
o Financial Analysis, including Exchange Rate data on global currencies
o S.W.O.T Analysis (Strengths, Weaknesses, Opportunities and Threats)—a method of
assessing internal and external factors relevant to the problem at hand in an organization
o Other analytical frameworks: e.g. PEST: Political, Economic, Socio-cultural and
Technological forces in the external and internal environment that are relevant to the case
B: Case Analysis and Preparation: Countries, Industries, and Business Organizations
SELECTED VARIABLES AND METRICS: EXAMPLES of Variables of the External
Environment of Firms: Sectors Industries/Markets/Economies
The following are commonly used variables and metrics to describe and/or evaluate different
elements of the external environment of firms:
1. The Structure of Sector/Industry:
a. Competitors and their relative market shares and strengths
b. Trends in growth rates
c. Stages of growth in a country or industry
d. Implications for specific companies and the industry/sector as a whole
2. National Economy: Selected indicators e.g.
a. Gross Domestic Product (GDP)
b. Growth of GDP
c. Major Sectors:
o Primary: e. g. Agriculture and Mining
o Secondary: e. g. Manufacturing
o Tertiary: e. g. Services
d. International Trade: Exports and Imports
e. Foreign Direct Investment
f. Short-term Financial Flows in and out of the economy
g. Currencies and Exchange Rates
h. Other (Specify)
2
3. Markets: Selected Indicators e.g. the following-Some overlapping
a. Markets for real goods and services
b. Financial Markets
c. Foreign Exchange Markets
d. Labor Markets
4. Political Environment:
a. Political System: Relative Openness: e. g. Index of Democracy
Freedom of expression and platform for debate in society with or without fear
b. Degree of political Risk
5. Other Variables and Metrics of National Environment: Cultural, Technological, Legal, etc
PHASE 3: Solutions and/or Recommendations: Choosing from Alternative Solutions to Address the
Problems
•
•
•
•
•
Explore alternative solutions to problems and challenges in phase 1 and assessed in phased 2
Choose the best solution sets
Make specific recommendations
Present a concrete future plan of action a company can follow, especially where the case has
enough information to warrant such a plan
Present your recommendations and plan to a specific person or group within an organization,
where necessary.
In this course, our written cases will embody the three (3) phases with a focus on business organizations
operating in specific industries, sectors, markets, or economies around the world.
3
International Trade & Investment
Summer I 2024
CASE 1 Written Assignment
CASE: KENYA and ARGENTINA
Business and Economic Environment: Organizational Decisions in Two National
Economies
The course textbook presents case studies on Kenya and Argentina on pages 63 and 66,
respectively. Read and examine these two cases to complete the Case 1 Written
Assignment below:
Background
The case presentations on Kenya and Argentina illustrate the typical set of environmental
space in which business and economic activities (including trade and direct investment)
are carried out by organizations across different economies and markets worldwide.
Environmental factors very often present difficult choices for global firms and other
organizations: For example, firms face alternative decisions to invest and operate in
economies and markets with different sets of opportunities, risks, and threats.
Case 1 Written Assignment
I.
Describe and compare the economic and other environmental factors of Kenya
and Argentina over the years, with emphasis on recent years, as presented in
the textbook cases. The goal here is to identify factors you consider to be
relevant for a business organization to consider in order to enter and operate in
Kenya or in Argentina
II.
From a quick Internet search, describe the type of political system adopted by
each country. Use appropriate terms introduced in the text and in class to
describe the political system in each country and how each political system
would affect decisions to operate in the two countries.
III.
What would you consider to be potential and/or actual areas of business
opportunities for firms in the two countries? Identify specific
industry/industries in Kenya and Argentina in which an organization might
decide to engage in trade or direct invest in either of the two countries.
Explain.
Information on business opportunities should focus on a) specific economic indicators
and industries or sectors mentioned in the textbook cases and b) from any additional
sources of information on Kenya and Argentina you may encounter in your Internet
search.
1
The following are examples of specific information that provide insight into business
opportunities in different countries:
•
Growth rates in the Gross Domestic Product (GDP), or its equivalent, of Kenya
and Argentina in recent years. (Use information in the case and the most recent
years available from other relevant sources).
• GDP per capita of the most recent years information is available in both countries
(Suggested Sources: This course textbook, www.worldbank.org; www.imf.org;
www.cia.gov/factbook)
IV.
If you were a manager or an executive of a business or other organization,
which of the two countries would you recommend your organization to
engage in a) trade and b) foreign direct investment? Why? Present the reasons
for your choice(s).
Submission Format and Requirements: (Discussed in class with a Q&A):
–
The case should be written in no more than six(6) pages, including sources and
references), 1.5 line spacing and 12 font letter size in a Word and pdf documents.
2
Case 1: Kenya
Kenya: An African Lion
The East African nation of Kenya has emerged as one of the economic growth stories of subSaharan Africa. Real gross domestic product grew at 4.9 percent in 2018 and 5.6 percent in
2019. Growth for 2020 is expected to be in the 6 percent range. Kenya is East Africa’s economic,
financial, and transportation hub. Major industries include agriculture, mining, manufacturing,
tourism, communications, and financial services.
When Kenya won its independence from Britain in 1963, the country embraced what was
known at the time as “African Socialism.” The principles of African Socialism included social
development guided by a large public sector, emphasis on the African identity and what it
means to be African, and the avoidance of social classes within society. Practically, this meant
significant public investment in infrastructure by state-owned companies, coupled with the
encouragement of smallholder agricultural production. The country also embraced a policy of
import substitution, applying high tariffs to foreign manufactured goods in an attempt to foster
domestic production.
While these policies initially produced some gains, particularly in the agricultural sector, by the
early 1990s the economy was stagnating. In 1993, Kenya embarked on a program of economic
reform and liberalization that included removing price controls, lowering barriers to crossborder trade, privatizing state-owned enterprises, and the adoption of conservative fiscal and
monetary macroeconomic policies. Today, the economy of the country is primarily marketbased, with relatively low barriers to cross-border trade and investment, and a vibrant private
sector.
Paralleling economic reforms, there have been political reforms. Like many sub-Saharan Africa
nations whose boundaries were drawn by colonial powers, the country was left divided among
multiple ethnic groups. Political parties reflected these ethnic divides. Tension between ethnic
groups often marred Kenyan politics. The largest ethnic group is the Kikuyu, who, while only
comprising 22 percent of the population, have held a disproportionate influence over Kenyan
politics since independence. Kenya was effectively a one-party state until the early 1990s. Ethnic
conflict has continued since then, often spilling over into the political arena. A new constitution
introduced in 2010 has offered the promise of solving some of these long-standing problems.
The constitution placed limits on the power of the central government, devolved political power
into 47 semi-autonomous regions, and helped create an electoral framework capable of
facilitating regular, free, and fair elections. These political reforms have allowed for more
democracy, increased business confidence, and helped drive great economic growth in this
nation of 50 million people.
Looking forward, one of Kenya’s great strengths is the relative youth of its population and an
educated workforce. Kenya has universal primary education and a respectable secondary and
higher-education system. The country also has a growing urban middle class, which will likely
drive the demand for goods and services going forward. That being said, the country still faces
some significant headwinds. On the economic front, property rights are not strong, with legal
title over land often poorly established. This makes it difficult for Kenyans to raise money for
business ventures using their land as collateral. More generally, according to the World Bank,
Kenyans face multiple problems starting a business due to bureaucratic procedures and
corruption. On average, starting a business in Kenya can take 126 days and involves seven
separate procedures. By comparison, in South Korea it takes 11 days and involves two
procedures. The World Bank ranks Kenya 61 out of 190 nations on the ease of doing business.
Corruption and ethnic conflict remain persistent problems. Transparency International ranked
Kenya 144 out of 180 nations on its 2018 corruption index. Terrorism is also a problem with AlShabab (a militant group based in neighboring Somalia that has links to Al-Qaeda), which
launched violent attacks in the capital of Nairobi in 2013 and 2019. Al-Shabab’s goal is to avenge
Kenyan interventions in Somalia against Al-Shabab. Despite these problems, however, Kenya
shows promise in emerging from its post-colonial past and in becoming a dynamic multi-ethnic
state with a thriving economy and a more stable democracy.
Sources: Leighann Spencer, “Kenya’s History of Political Violence: Colonialism, Vigilantes and
Militias,” The Conversation, September 28, 2017; Amy Copley, “Figures of the Week: Kenya’s
Growth Trends and Prospects in Africa’s Lions,” Brookings, November 2, 2016; “Another Terrorist
Outrage in Nairobi,” The Economist, January 16, 2019; X. N. Iraki, “Why Kenya’s Economic
Prospects Look Promising,” Standard Digital, January 1, 2019; “IMF Cuts Kenya’s Economic
Growth Forecast for 2019 and 2020,” Reuters, October 15, 2019.
Case 2: Argentina
What ails Argentina?
A hundred years ago, the South American nation of Argentina was one of the world’s wealthiest
countries. Its success was based on rich natural resources, a productive agricultural sector, an
educated population, and an emerging industrial sector. Along with Australia and America,
Argentina was one of the favored destinations for European immigrants. For much of the last 70
years, however, Argentina has stumbled from economic crisis to economic crisis. it now ranks
around 60th in the world in terms of GDP per capita.
One problem is that successive governments have routinely spent more than they have made in
taxes and other income—which has happened every year but one since 1950. To finance high
public spending and persistent budget deficits, Argentina has often resorted to printing money.
This has fueled inflation. Indeed, Argentina has frequently recorded some of the highest
inflation rates in the world. Persistently high inflation has hurt business investment as
Argentines have looked for ways to move their money out of the country and into a stable
currency that maintains its value, such as the U.S. dollar. Similarly, foreign businesses have
limited their investments in the nation. Starved of capital, Argentinian enterprises have not
been able to make productive investments, and economic growth has faltered.
The country’s history of high public spending dates back to the 1930s when Juan Peron, a
charismatic Argentinian army officer, returned from a posting in Italy. Peron was an admirer of
Fascism in Germany and Italy. As National Labor Secretary and then president, he put his
learnings into practice. As Labor Secretary, he created health, pension, and low-cost housing
benefits, all very popular with the working class. As president, a position he held from 1946 to
1955, he brought unions under his control, nationalized utilities, the railways, tramways, and
the merchant marine among other formally private enterprises. Wages rose, but production
plummeted, inflation soared, and a revolt in 1955 forced him into exile. Despite this, the
populist Peron left a legacy that still shapes the country’s politics and economic policies.
Argentina has been governed by Peronists several times since the 1955, most recently from
2003 to 2015. During the most recent period of Peronist rule, public spending surged to account
for more than 45 percent of Argentina’s economy. The number of public employees increased
by more than 60 percent. The government expanded state intervention in the economy,
nationalizing the largest oil company in the country. Argentines became accustomed to paying
some of the world’s lowest electricity bills as the state spent billions on energy subsidies. Payroll
and welfare costs surged as benefits were expanded. Tariff barriers were raised to protect the
country’s inefficient business from foreign competition. Exports of agricultural and
manufactured goods were also taxed to divert production to domestic consumption—a policy
almost unheard of in modern economies. Export tariffs limited the opportunity for export led
growth and depressed real prices and returns to investment in the affected sectors. These
nationalistic policies effectively isolated Argentina from the global economy, leaving it
increasingly further behind in a self-imposed deep freeze.
In November 2015, Mauricio Macri, a center-right politician, won the presidential election
against the incumbent Peronist Cristina Fernandez. Upon taking office, Marci embarked upon a
reform program designed to liberalize the economy and promote greater economic growth.
Among other actions, he removed or reduced some of the export taxes, cut some energy
subsidies, and worked with the International Monetary Fund to try and shore up government
finances. He also signed onto a trade deal between Mercosur, a four country South American
trade block which includes Argentina and Brazil, and the European Union. But he moved
cautiously, did not cut the deficit fast enough, and was reluctant to impose further austerity on
the country for fear of a backlash. He got a backlash anyway. His cautious government failed to
rein in inflation, which exceeded 50 percent, and the economy contracted by 6.2 percent in
2018. By 2019, two-fifths of Argentina’s citizens could not afford a monthly basket of staple
goods. In November of that year, Macri lost the presidential election to his Peronist rival,
Alberto Fernandez.
Alberto Fernandez has advocated a return to classic Peronist policies, including subsidies and
higher welfare benefits but has promised to be more pragmatic than the last Peronist
government. He has floated the possibility that Argentina will default on some of its foreign
debt, has blamed the country’s problems on austerity policies required by the IMF in exchange
for loans, and has signaled that he will not accept the Mercosur trade deal negotiated by his
predecessor in its current from. He has also pushed for higher taxes on agricultural exports,
including corn, wheat, and soybeans. The goals of the export taxes include raising money for the
government and diverting agricultural produce to the domestic market, where increased supply
should lower food prices to Argentines. Whether any of this will help Argentina’s economy
remains to be seen, but if history is any guide, the prospects are not encouraging. In general,
countries that turn their backs on international trade and implement subsidies and welfare
programs that they cannot finance do not do well.
Sources: “Argentina’s Crisis Shows the Limits of Technocracy,” The Economist, August 22, 2019;
“The Peronist Predicament,” The Economist, December 12, 2019; S. Perez and R. Dube, “Why
Argentina Faces an Economic Crisis Again,” The Wall Street Journal, September 25, 2019; E.
Raszewski, “Argentina’s New Economy Bill Hikes Taxes on Farm Exports, Foreign Assets,” Reuters,
December 17, 2019.