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An Analysis Of Impact Of External Environment Factors On Hainan International Ltd And Its Strategy Of Dealing With These Factors

2931 words - 12 pages

BUSINESS FUNCTIONS CORP1904COURSEWORK ASSIGNMENTAn Analysis of Impact of External Environment Factors on Hainan International Ltd And Its Strategy Of Dealing With These FactorsCONFIDENTIALSummaryHainan International Ltd, as a class one contractor based in Tanzania and working in East Africa market actively, has been successfully since incorporated in 1998. Hainan is developing from a relatively small capital to a reputable contractor in Tanzania. PEST environment analysis has been carried out to form an informed picture of Tanzania construction industry. Important key drivers are listed and the current strategy of Hainan is observed. Author also recommended several ways to improve the ...view middle of the document...

The initial registered share capital is Tanzanian Shillings 650,000,000 (equivalent to US$1,000,000 at the time of subscription). All its shareholders are Chinese nationalities.A lot of projects have been carried out by Hainan International Ltd since registration (Appendix 1) and list of undertaking projects are also attached. (Appendix 2).2.0 External Environment AnalysisPEST analysis is conducted to analyze the Political, Economic, Social and Technological environment in which Hainan International Ltd operate at a national and international level.2.1 Political Environment2.1.1 Politics and PowerIn East Africa, Tanzania is the most politic stable country and that is the reason the foundation of the organization chose Dar es Salaam, commercial capital of Tanzania, as its head quarter other than Kampala of Uganda and Nairobi of Kenya. Besides, Tanzania is biggest of the three and has more potential of construction opportunities.Tanzanian government has very good and very long-time relationship with Chinese government.2.1.2 Local GovernmentTanzanian government is endeavouring to eliminate poverty through cooperation with UN and other organizations and has developed a Poverty Reduction Strategy (1) to do so. A lot of potential constructions projects, mainly for the infrastructure, e.g. road, water supply project, are implied in this strategy and there are a great deal of construction activities going on all over the country in recent years. The overall construction industry in Tanzania is burgeoning and still has potential to develop.However, in order to protect the domestic contractors, Tanzania government has imposed several regulations against foreign contractors:1. While domestic Class One contractors are paying approximately US$1,000 for their business licence annually, Hainan as foreign Class one contractors would have to pay US$20,000 for the same. This has definitely increased the fixed costs of Hainan.2. Most of the government funded projects has a 2.5% to 7.5% domestic contractor preference, which is quite unfair to Hainan as it created unequal competition. The fixed costs and labour costs of domestic contractors are obviously lower than Hainan but they can win the tender even if their tendering price is 2.5% to 7.5% higher than Hainan's.For time being, there is nothing Hainan could do to counter these two factors but have had to follow the regulations.2.1.3 Regulators- The National Construction Council (NCC) is a government institution established through Act of Parliament No. 20 of 1979 and became operational in 1981. Its establishment was prompted by the need to promote the development of the local construction industry whose performance was poor.- Contractors Registration Board (CRB), a body which all Contractors shall be registered and pay annual subscription to in various amount according to the class of registration. In case of Hainan International Ltd, three class-one registration would cost US$30,000 annually and it is actually a...

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