British Virgin Island Harvard Case Solution & Analysis

Introduction

British Virgin Island comprises of 60 odd islands, caves, etc. and it possesses an area of almost 153 square kilometers. However, the majority of the islands are not inhabited and only 16 of the islands have signs of population which combine to make the overall population of the BVI around 28,000. The country has majority of its population residing inside the capital city of Tortola and plays the major role in shaping the economic outlook of the company.

Since the island is mostly dependent on tourism but the economy is highly dependent on the US Virgin Islands that are located very closely to BVI and the population is also more than BVI. For the past 30-40 years, the economy of BCVI has been highly dependent on agriculture but with the passage of time the trend changed and the economy evolved to shift its gears to become dependent on tourism.

However, this change did not last for long and the new sector of financial services emerged. Currently, the economy is moved by two key sectors that include tourism and financial service provision. The country provides financial service to international businesses sector and this offshore sector is playing a huge contributor in shaping the GDP of the country.

Currently, 40% of the GDP occurs from tourism while the majority of around 45% emerge from financial sector. Tourism has its importance and a key contributor however, the future statistics show that vast dependency and the overall prosperity of the region is dependent upon the success of the financial sector. Thus, immense focus is being put on this sector and enhancing it readily (Denno, 2001).

Analysis

This section will analyze the region on the basis of some economic features that will help in conducting the analysis and will provide a route for submitting a final verdict over the option.

Globalization

The factor of globalization holds a strong edge for the company and is regarded as the key strength of the country providing it a major chance to attract foreign companies. The international business companies’ ordinance is the law that helped in shaping a productive and positive global image of the country making it a heaven for globalization and tax benefits. Thus, the economy of the country can be really boosted and as it has the access to financial service provider, which makes the access of global brands easier (IBP, Inc., 2007).

Comparative Advantage

The country’s financial service sector that provides financial services to the global companies is the major comparative advantage as it is the finest sector and is the largest growing sector not just within the country but globally as well. Although the size is small however, the rapid growth that the sector has obtained in the recent years translate the success story of the sector and indicate the success of the sector in the coming years.

Therefore, the major competitive advantage or the comparative advantage that can be translated into competitive advantage is the financial service sector which is very attractive. The main reason is the quality of the service and the interest of the government as well in the overall development of the sector (IBP, Inc., 2007).

Economic Factors

As indicated above majority of the revenues of the country comes from offshore financial services and tourism that shape approximately 90% of the GDP. The GDP of the country is estimated to be around $654 in the year 1999 that has grown significantly till date due to immerse support from the government and the financial service department. The inflation rate is controlled and is as low as 3% which is highly significant and favors the economic outlook of the country.British Virgin Island Case Solution

Taxation

The country is considered as a tax heaven and there are no tax regulations on the companies from abroad bringing in foreign direct investment to the country. Lots of tax benefits are provided to the companies wanting to utilize the offshore services of the country and is the hub of opportunities. The tax rate for offshore entities is zero and the local entities dealing in the same regard will have to pay small amount taxes. However, no capital gain tax, no wealth tax and no estate tax are there, which is why the country is nominated or regarded as a tax heaven (Usa Ibp, 2004)..............

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