Exporting Australian wool to the USA

1. Political system:

1.1Political structure:

Introduction:

The United States of America is made up of 50 states. The head of the government is the President. His powers are shared with the Congress and the Judiciary system which operate independent of each other but at the same time depend on each other’s decisions to function efficiently. The elected representatives discuss issues brought forth by the governor or introduced by its members and create legislations which eventually becomes a laws. The power is balanced among the three branches of government and prevents any singular branch from abusing it.

The United States of America is a Federal constitutional Republic and the constitution is the supreme law of the land.

 Every state of the Union has enough powers to frame their own rules and regulations of governance as long as they don’t contradict the Constitutional powers.

The government of the United States of America is divided in three branches:

• The Legislative branch

• The Executive branch

• The Judicial branch. (theusgov.com).                

The executive Branch:

• Chief of state:

• President Barack H. OBAMA (since 20 January 2009);

• Vice President Joseph R. BIDEN (since 20 January 2009);

• Head of government:

• President Barack H. OBAMA (since 20 January 2009);

• Vice President Joseph R. BIDEN (since 20 January 2009)

• Cabinet: The cabinet is appointed by the president with Senate approval.

The legislative branch:

“The power to make laws is given to Congress, which represents the legislative branch of government” (The Legislative Branch, Establishing the Laws of the Land, From Phaedra Trethan).

The Judicial Branch:

Robert Longley explains that “ the laws of the United States are a complex and it is up to the federal judicial system to sort through this web of legislation and decide what is in agreement with the constitution and not.” (“The basic Structure and function of the United states federal government” by Robert Longley, About.com Guide).

The judicial branch of the United States consists mainly of the Supreme Court which has been given the highest powers to deliver justice in the state.

The Supreme Court is made up of nine justices and is nominated by the president and is approved by the senate as well. They are appointed to serve for life.

Other courts in power at the lower level are pointed out as follows:

• United States Courts of Appeal;

• United States District Courts;

• State and County Courts

(CIA world factbook, 18^th September 2012).

Structure of the United States government:

(U.S. Census Bureau)

1.2 Political parties:

As it is widely known, the United States exists under a two-party political system:                      

• According to the CIA the major parties in America are :

• Democratic Party-Debbie Wasserman SCHULTZ

• Green Party

• Libertarian Party-Mark HINKLE

• Republican Party- Reince PRIEBUS (CIA world factbook, 18^h September 2012).

1.3 Local government and its stability:

The official website of New York City, NYC.gov speaks about the well planned governance of New York City and also talks about the existence of a cordial relationship between its people and their leader, i.e. the 108^th mayor, Michael R. Bloomberg.  The Mayor is elected on a 4 year term along with 51 other members of the New York City Council.

The biography of the mayor found under the ‘Office of the mayor’ section of the website throws light on various achievements of the mayor Michael Bloomberg. Several other instances quoted in this section, such as the economic recovery of the city right after the 9/11 attacks when most people were of the opinion that there would be a higher rate of crime and backsliding in the economic growth rate, all such doubts and inhibitions were laid to rest with the subsequent developments. (“… Reduction in crime by 35 percent compared to 2001, high school graduation rates are up 40 percent since 2005. Ambulance response times are at record lows. Teen smoking is down more than 50 percent. More than 725 acres of new parkland have been added. The Mayor’s economic policies have helped New York City avoid the level of job losses that many other cities experienced during the national recession. And since October 2009, New York added twice as many private sector jobs as the next ten largest U.S. cities combined…” -Biography, Office of the mayor, www.nyc.gov) such positive signs of growth encourages foreign investments and also promotes favourable foreign trade relations. From all this we are given to understand that the government of New York City and its operations are stable to a predictable extent.

1.4 Summary analysis of domestic, foreign and international political environment:

The United States of America is one of the strongest economies on a global scale. Although it has been through several major breakdowns largely affecting the economic sector among other, it has always managed to recover from such blows and come back stronger with new and improved policies and procedures to deal with the inevitable risks and contingencies arising during the normal course of national progress.

The USA is a land of opportunities. It has favourable trade policies which promote harmonious relationships between countries. Apart from operating successfully in the fields of transport, communication, banking, finance and health care, it is one of the main leaders in the field of innovation and technology, constantly developing groundbreaking technology and contributing significantly to the development of the country and encouraging and supporting the developing countries along the way. Many foreign companies have their headquarters established in the US among which 45 companies are included in the fortune 500.

New York City is well developed & is rich with opportunities for global investors with a GMP of $1280.5 (Bureau of economic analysis 2010, updated: January 2012, North Texas Commission).

1.5 Risk Assessment:

According to the AMB Country Risk report, dated 28^th September 2011, the United States of America belongs to the Country Risk Tier 1. This suggests that the risk pertaining to the economic, political and financial system is low. The economic performance of the United States   was low during 2008-09 due to reduced activity in the tourism and financial sectors (AMB Country Risk Report). This was a minor setback as weak yet positive economic recovery was observed in 2011.

When it comes to investment in the private companies, the political risk factor plays an important role in influencing the decisions of the investors. The greater the involvement of the government in the private sector companies the greater the hesitation on part of the prospective investors. Because of this the US might lose a substantial portion of its investors as they may prefer to invest elsewhere. (U.S. political risks grow in financial crisis, by Martha Graybow, New York, Reuters)

Hence the overall established fact still remains that the American market will always have plenty of opportunities for investors, venture capitalists and other foreign companies looking to set up base in the US.

2.0 Legal system:

2.1 Organisation of the judiciary:

(www.whycourts.com)

From the chart above we can see that the Supreme Court occupies the highest level of the order. The Supreme Court’s decision regarding a variety of disputes is final and binding. There are courts at the state as well as district level to deal with disputes arising within those territories.

2.2 Code or common law country:

Common law refers to the law followed from earlier judicial decisions. It relates to the practice of treating certain disputes fairly by arriving upon solutions similar to the ones already dealt with in similar cases in the past. Although the common law, derived from the English law was followed up to the recent past, it has been modified and applied to suit the needs of the present day scenarios.

2.3 Patents:

The United States of America supports and provides ample protection to inventors and entrepreneurs who wish to patent their inventions and intellectual property from being duplicated or stolen. There are a variety of patents available to suit the needs of various applicants, the fees for which vary accordingly. Utility and plant patents last for a period of 20 years after grant, whereas a design patent lasts for a period of 14 years (The United States Patent and Trademark Office, an agency of the department of Commerce). Any fraud or theft pertaining to intellectual property, copyrights and patents will result in serious legal consequences.

2.4 Trade agreement between Australia and the USA:

There exists a free trade agreement called the Australia-Unites States Free Trade Agreement or AUSFTA. It came into existence on the 1^st of January 2005. The AUSFTA plays an important part a facilitating channel between Australia and the US. AUSFTA helps open up the one of the richest and most developed trade destinations and allows a free flow of trade and business activities /services between the two countries.

AUSFTA provides several advantages in the form of subsidies, trade discounts and many other benefits to both the exporters and importers of the two countries, paying attention to all sectors such as the textile industry, the agricultural industry, communication, transport, technology, etc. (Australian Government-Austrade-austrade.gov.au & Department of foreign affairs and trade-dfat.gov.au)

2.5 Summary analysis of domestic, foreign and international legal environment:

The United States has a favourable climate which helps promote new ventures, encourages foreign investment and supports and nourishes international trade relations. The legal system of the United States is well framed to accommodate and encourage new businesses from entering into the country. The AUSFTA or the Australia-United States Free Trade Agreement also enhances the opportunity for importers and exporters in both countries to consider trade among them.

2.6 Risk assessment:

Since the United States belongs to the (country risk tier) CRT-1, it is known to occupy the lower risk level in terms of political, economic and financial risk (AMB Country Risk Report). Although there have been instances which have proved it vulnerable to national security threats, short term financial crisis and other setbacks, the US has always managed to get back up on its feet overcome all such roadblocks to become one of the most successful countries in terms of strong economy, national security, breakthroughs in technology and Innovative policies and frameworks to support and strengthen international trade.

3. Economic statistics and activity

4. a) Gross national product GNP and GDP: –

Disputes among GATT / WTO can be seen in past year as the GATT software had failures for measuring GDP both accounting principles, qualities and limitation; providing insufficient domestic measurement owned by America.

In 2010 statistics shows that the total GDP of America is US$14.658 Trillion, GDP per Capita wass US$ 47,284 and GDP growth 2.8% and Total Trade is Australian dollar reached to 49.771 billion in 2010. Statistics Mentioned above are contradicting to the American Government statistics.

Average family income:

The average family income of America is different for different family backgrounds due to the nature of work they do and it also varies from black skin to white skin people.

1. d) Distribution of wealth; income classes

2. e) Principal industries:

Core U.S companies known world wide to contribute in American economy can be seen in the graph below where Apple Inc. on top of the ranking Followed by the Microsoft Corp and Cisco Systems Inc. 3^rd in the ranking.

1. f) Foreign direct investment / industry

Foreign direct investment in the United States in 2009 was slightly higher than the amount invested in 2008, but set a record in nominal terms for the most amount of foreign direct investment in the economy in a year

1. g) Principal exports:

United States exports amounted to 185 Billion USD in June of 2012. From 1992-2012 average United States Exports stood at 99787.65 Million USD with highest reached in June 2012 184972.00 Million. America exports equipment and manufacturing supplies, non-auto consumer goods, motor vehicles and parts, aircraft and parts, food, feed and beverages. (Trading Economics, 2012)

Principal imports:

More than 80% of U.S. imports are goods. The largest category ($756.6 billion in 2011) is industrial machinery and equipment, which includes plastics and chemicals; within this, major portion includes oil and related petroleum products. (U.S. Census, 2012)

1. h) Balance-of-payment situations, recent trends, debts, surplus or deficit:

U.S economy’s BOP contains of 50 states, district Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin Islands, American Samoa, Midway Island, Wake Island, and all other U.S. territories and possessions. Any installations either military or non military is considered as U.S Government National processes and a part of U.S economy.

Source: Balance of Payments Statistics, IMF. 2012

1. Current Account:

2.Capital Account:

1. Exchange rate, trends

Mostly Australian dollar exchange rate to America moves together, at times they diverge which can be seen in the graph below. Main divergence can be seen in Asian Crisis in 1997. Australian Dollar is valued in most Asian Currencies; for this reason Michell Wool moved their Industry to china for maximizing their Profit margins and low labour and production cost.

1. j) Economic Activity in America:

Economic Activity in America can be seen in the graph; where a strong decline can be seen in the recession year of 2008-2009.

1. k) Labour force, unemployment rates

New York City has hung rate unemployment between 2008 and 2011. The draft shows that the rate of unemployment is more than employment. In addition, if opened more new company like Michell Company in New York City that can helped to decrease the rate of unemployed

1. l) Inflation rates:

1. m) Trade relations and statistics: –

The Australia-U.S Free Trade Agreement (AUSFTA) was signed on 1 January 2005. This agreement gives Australian industries access to the world’s prime importer and investor and contributes 9% share to Australia’s export market.

Source: (Austrade ; Market information and research section DFAT, ABS, IMF)

Above Graphs show the annual Import and export, GDP and merchandise exports to U.S.A and thus the capacity for investment of the wool product owing to the constant trade relations between the two countries.

Summary:

As shown by the above data, there exists a favourable market for wool in the United States, as it is the world’s richest market and Australia’s second largest export destination. Michelle has a good reputation among wool producing companies of Australia, therefore the chances of success are evident as shown by the success of wool processing plants installed by Michelle at China and Japan. This global expansion will ultimately result in benefiting both the U.S wool market as well as the output of the company. Moreover, United States has recovered from the financial crunch and is still the world’s largest market; and the current political environment is also favourable for industrial developments.

4.0 Geographical Setting:

4.1  Topography:-

The city of New York is located in the North East of the United States at the tip of the Hudson River in the state of New York. Ontario and Quebec are the provinces of Canada that border New York at the North. The total land area is about 321 square miles.  New York City is the biggest and most densely populated cities of America having a population of about 8 million plus and is also amongst the most famous.

Climate:-

The city of New York is known for its freezing winters but then is also famous for its other seasons which are spring, summer and autumn. It is mostly during autumn where people visit New York because the weather is pleasant. The average temperature in New York City is 13°C and can go up to 17°C and can drop to 8°C.

4.2   Surface Transport and Communication:-

• By Air:

New York does not have just one airport but 3 main airports that makes it very easy for people to fly in and out of New York City. John F. Kennedy International airport which handles the international flights, LaGuardia airport which is for domestic flights, Newark international airport which is for both international as well as domestic flights.

• By Bus:

New York City has the most number of bus services in the world catering to about 666 million people a year with a total of 4373 public buses. It is a slow mode of transport but is cheap costing about $2.25. It has regular stops and is very convenient for regular travellers.

• By train: New York City connects different cities like Jersey, Newark through its five subway style path stations. It is run by the Metropolitan transportation authority which appoints different services like Amtrak train services which run nationwide.

• By Subway:

The subway system of New York City is one of the best in the world. Over 4.3 million people use this mode of transport since it is safe, fast and cheap at the same time. It just cost $2 per ticket.

• By Ferries and Cruises:

The city also offers its people a chance to use service like ferries and cruises to go site seeing and go on romantic dates or just get from one point to another which is termed as water transport.

4.3 Summary:

According to what we see New York City is quite well organized when it comes to its infrastructure. It is constantly growing economically and is a major attraction to investors since the city is so populated and so famous and is well known for its fashion industry, and also it is the biggest city in America. Thus, New York is the right city for investors to invest in.

5.0 Social Environment

5.1 The Family

1. A) Dynamic of the family

Recently, American Family is becoming older, smaller in number, and they are rising gradually and becoming more different culturally than at any point in the past decades. The variety in all its aspects characterize the rising American Family model, with no particular cultural, social, demographic, economic or political point of view takes over the countryside (Anderson, 2011). In addition, New York City contains the largest number of people from diverse countries, speaking dissimilar languages and has different cultural background. (Spraggins, 2003)

1. B) Male/female roles

Even in the United State men still hold the higher percentage compare to woman in entering occupations. Moreover, the number of men who enter occupation dominated by women is increasing. For example from 2000 to 2010 the number of male nurses approximately doubled, and the percentage grow to 10.5 percent from 8.4 percent (Dewan and Gebeloff, 2012).

5.2 Education

1. A) Role of education in society

According Cuomo 2012, that still in this hard economic period; New Yorkers kept the largest per-pupil expenses levels in the United State with total spending level more than $53 billion in public education. Additionally, during the last 10 years, the number of studying enrolling at New York’s institutions of higher education has exceeded 214,000 or improved by 20 percent.

5.3 Demographics

1. A) Total Population

According to the 2011 American Community Survey that New York has the largest population in the United States cities with a total population of 8,244,910 million.

1. B) Growth

According to the 2010 Census, the number of people lives in United States is increased 9.7 per­cent since 2000 to become 308.7 million people from 281.4 million.

1. C) Urbanization Rate

New York City with the megalopolis neighbouring the five regions is the largest city in United States, and it will get bigger, much bigger.

5.4) Distribution

1. A) Age and Gender

In 2010, the U.S. Census Bureau: State and County Quick Facts stated that the percentage of children under 5 years old was 6.3% and 21.6% were under 18 years old. In addition, 12.1% were 65 years and over. Moreover, there were 52.5% female more than male in New York.  Furthermore, Albert et al., 2005 stated that percentage of the people who is age 70 or older is currently 7.4% for men and 10.8% for women in the US. c) Population density.

5.5 Social Class

1. a) Income by social class

Spraggins, 2003 stated that among 109 million families in the United State by 2001 (64 percent) earned between $10,000 and $74,999. However, 5 percent only earned under $10,000, and 31 percent of the American families earned $75,000 or more. In addition, between married couples 2 percent only earned under $10,000 and 37 percent earned $75,000 or more.

5.6 Living Standards and Leisure

1. a) Housing

According to U.S. Department of Commerce that in 2010, there are 8,108,103 housing units in New York states. 3,371,062 of them are in New York City. In addition, 33% is the rate of homeownership between 2006 and 2010 in New York City.  However, the average household income is $50,285 in New York City between 2006 and 2010.

1. b) Clothing and Fashion Trend

New York City is considered as the fashion capital of the world. However, NYC’s fashion commerce has some difficulties and new challenges, such as the swing in consumer predilection about the method and the products because of the new technologies which address the viability of traditional business models Fashion.

1. c) Recreation

New York City provides services to meet diverse cultural, entertainment, and recreational interests of their customers include arts, entertainment, and recreation which contain a wide range of establishments.

1. d) Lifestyle

The life style is very modern in New York. For example, the OPA-Magid online survey of 2,540 people ages 8-64 March 2012 stated that 44% of the United States internet people age 8-64 have a Smartphone, 93% of them frequently uses internet, with 58% open email, 47% checking whether information, 31% watching video, 29% checking local news and 24% checking national news.

5.7 Summary:

To enter a new market; examining all possible factors that affect directly or indirectly on the sales market is required in decision making such as gender, income, lifestyle, educational level.

6.0 Cultural environment

6.1 Culture New York and Language

New York has a very various culture because of immigrants from around the world. New York City is unique and worth admiring because of the multi-culture backgrounds and considered as the cultural capital of the U.S. it offers homes for people arriving from other countries, speaking other languages and with a different cultural background such as British, Chinese, African American, Puerto Rican, Korean, Irish, Italian, Jewish, African, and Arabian. New York City is considered as multi- ethnic and multilingual city. (Gladrey& Pullen, 2004)

6.2. Religion

New York City contains most of religions in the world because of expand immigration such as Buddhists, Muslims, Hindus, and Orthodox Christians. New York City has 223,968 members of Muslim and 121 Buddhist and 83 Hind states wide.

6.3. Summary

• Culture can be an advance point for Michell Corporation research team.

• Michell should release that New York is very large city and contain a lot of different culture, language and religion.

• Michell should realize that advertisement for new products needs to target diverse type of people that hold different value and avoid any conflicts with these values.

• As languages happen to be a useful tool to support design concept, products function and enterprise’s culture, sufficient and suitable language explanation carries convenience for Michell to enter into the market in New York.