International Investment Report Harvard Case Solution & Analysis

Introduction

The company that has been selected for “International Investment Report” is Costco, the second largest retailer in the world. Costco Wholesale Corporation has been a United States based retailer that has been operating since 1976. The current headquarter for the company is located in Is saquah, Washington.

As for now, the company has over 672 warehouses which are spread in different countries including the United States, United Kingdom, Mexico, Australia, Taiwan, South Korea, Canada, Japan and Spain.The company has been generating reasonable revenues and income growth where the revenues as per 2014 have been $112.64 billion. The revenues and the net growth for the company have risen up to 54% and 80% respectively. Costco has almost 174,000 employees who are part time and full time employees (Gaudette, 2006).

Moreover, the company has a total number of 71 million members. It is the first company that has actually grown from being a zero to $3 billion Company in terms of sales over a period of six years. The fiscal year of 2012 indicates that the sales for the company have increased to $97 billion where the overall profit has been $1.708 billion. It is ranked 19th on the list of Fortune 500 companies (Broberg, 2007).

Costco has been successful in entering new markets with the similar business model where the company has been offering quality products at reasonable prices. Keeping this in mind, the country that has been selected, which would serve the idea of ensuring that Costco enters Middle East market shall be United Arab Emirates.

The reason for the selection of UAE is based upon the fact that it is a metropolitan country where people from diverse population come over to earn a living. As per the survey results of 2013, UAE has a total population of 9.2 million out of which 7.8 million people are expatriates. The country is one of the fastest growing countries because of the tourism it has been offering to the general public.

Moreover, it is the most successful Middle Eastern country and has been considered as the business hub for international companies for the past ten years. The reason UAE has been selected is because it has been one of the major cities, which has been growing at a rapid pace.

Furthermore, the investment opportunities that have been presented in this part of the world actually support new businesses. Moreover, since the country lacks a retail store of Costco size and features, therefore, the ideal opportunity to invest for Costco in the coming time shall be to invest in the United Arab Emirates. The country is economically stable where it has the seven largest oil reserves in the world (Gaudette, 2006).

Country Evaluation

Economic Structure of UAE

            UAE has a free market structure (UAE Business Travel-Business Methods-UAEinteract). To explain it in another way, it can be said that as per 2015 index, it has an economic independence count of 72.4 which makes it the 25th most economically liberal society of the world. It is slated to reach rank of 2nd best performing economy among all the economies of Middle East and North Africa. (United Arab Emirates Economy) 

Economic Indicators of UAE:

The economic indicators of year 2013 are shown below(United Arab Emirates Economy):

NAMEECONOMIC INDICATORS
Population9 Million
GDP (PPP)$270 Billion
GDP growth rate4.8%
Per Capita Income$30122
Public Debt12.3% of GDP

Economic Risks

Following are the economic risks of UAE:

      The economy is highly dependent on oil. If oil prices fall too much like in current scenario, then there will be large downgrade risk for the economy.

      On the micro scale, the high property prices driven by investment in the real estate sector pose a risk for the businesses.

       The foreign businesses cannot start the business on wholly owned basis. They have to choose a local partner for this.International Investment Report Case Solution

Financial Structure of UAE

            The major intermediate in UAE’s financial sector is the banking sector. Recently, this sector opened up for the foreign businesses in order to bring more competition in the sector. The supervisory and the regulatory roles in the financial sector are well managed to cope with any harsh circumstances.

Financial Indicators of UAE:

            Following are the financial indicators for UAE’s banking sector (UnitedArabEmirates-IMF):

Financial soundness of Banks (percent)
INDICATOR20122013
Capital Adequacy ratio21.219.3
Return on Assets22
Return on Equity11.515.3
Non-performing loans to Total Loans8.47.3

Financial Risks of UAE:

Following are the risks to the financial sector of UAE(UnitedArabEmirates-IMF)..............

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