Pepperidge Farm Product Into Costa Rica Term Paper

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Pepperidge Farm Product Into Costa Rica

Marketing and Management Assessments:

To understand the business situation in any country one has to understand the situation of the country and its people. This particular country is a success story of the South Americas. This is a relatively peaceful country and since the 19th century there has been only two brief periods of violence that has interfered with its democratic development. There has been a development of the country in terms of the technology sectors and in the area of tourism. This is primarily because it is very close to the United States and near the Panama Region. The main production of the country comes from agriculture and the country has been suffering in that sector. The problem is not connected with land ownership as that is widespread. In terms of popular occupations, agriculture still employs 20% of the population, industry employs 22% and services employ 58%. This estimate is of the year 1999. (The World Fact Book)

The estimated total population as of today is about 3,896,000 and is still growing. This tells us that we should have no trouble in finding people to work in a business opportunity in Costa Rica. The total country is slightly smaller than West Virginia and in terms of area is 51,100 sq km. The country consists of coastal plains separated by rugged mountains and some of them are volcanic -- over a 100 of them. The basic climate is tropical and subtropical, with the dry season from December to April and the rainy season from May to November. This has made the country rich in hydropower and also developed a keen interest in conservation. There is a lot of interest within the country in deforestation and land use change, and this has happened due to the clearing of land for cattle ranching and agriculture. The country is also affected due to soil erosion and coastal marine pollution and that is because of the importance the country gives to its fisheries. (The World Fact Book)

The attention to pollution also affects the ambient air quality and management of solid waste. Thus it seems clear that the establishment of any business within the country has to be considered very carefully. It is not correct to assume that people in the rest of the world are hungry fools, lusting after a few dollars, but would like to develop and support industries that help in their growth and long-term viability. We would thus like to look into the possibility of setting up a business that ties up with the natural bonanza that is available within the country. This is in terms of the climate, availability of natural, pure water, sun and educated potential employees. This will help us also get the necessary help and support from the government of the country and its leaders. At this stage, it is important to remember that the country has been a democracy for a large part of its history. (The World Fact Book)

In history, the economy of Costa Rica has depended on a diet of tourism, agriculture and electronics exports. This has made it a relatively stable country over the years and has also helped in the reduction of poverty during the last 15 years. The country is thus economically stable and is able to provide a strong social safety net to its people. The growth in income has not however been able to solve the problem of unequal income among its people and this is often reflected in social movements. Most foreign investors are happy with the investments they have made within the country as the political stability is high as is also the education levels. There is also not much problem in the foreign exchange sector as tourism to the country brings in a lot of foreign exchange. The other exports from the country are however hurting and are not contributing to the growth of stability of the economy. This is due to the low coffee prices and the large surplus in the availability of bananas for export. The government is finding it difficult to finance its own deficit and very high internal debt. The government also has to finance the modernization of the electricity and telecommunication sectors which are owned by the government. These deficits are now leading to high inflation.

Physical Forces:

Costa Rica has been historically pro-U.S., as also its financial institutions. Regarding the financial security and tax laws also the country has maintained a totally continental stance. The main aim behind this stance has been to get the American high technology corporations to invest in the country and provide employment for the computer literate and disciplined labor. The country knows that it has to change its economy and remove the total dependence it has on coffee, banana and cattle. The investment friendly climate and the present government policies has made it similar to the Silicon Valley and important organizations like Acer, Microsoft, GE, Abbott Laboratories, Continental Airways and Intel to invest in sizeable amounts in the countries economy. This has been going on now for the last 5 years and from 1998, the country has earned more from its high technology exports than from the agricultural exports, or even from the high growth tourism industry. This has also been appreciated by the World Bank and they have appreciated the excellent political and economic health that the country has. (Investing and doing business in Costa Rica)

The Bank has also lauded the country as one of the most stable and robust democracies in Latin America in its annual conferences. The country has been having one of the best economic growth rates along with the best social indicators in the entire continent of Latin America. The country has always supported continental free trade at all forums and has been developing its own agreement with Mexico and other countries of the region. The country provides a lot of benefits for new units through the free trade zones and different tax holiday opportunities. These benefits are through exemption of import duties on raw materials, capital goods, parts and components, repatriation of profits by companies without restrictions, tax exemptions on profits for as long as eight years, followed up by a 50% exemption for another four years. (Investing and doing business in Costa Rica)

The country has recently done a study through the Ministry of Foreign Trade and that has shown that the country will have been increasing its export earnings to a figure of $15.7 billion by next year. The growth has been from $5.1 billion in 2002. This sort of growth is expected to take care of the deficit it has had in 2002 of $1.3 billion in its import-export parity. This will also be a growth of about four times from 1998. This is happening primarily due to Intel which has three manufacturing facilities in the country and is expected to export $3.5 billion already. The country has already designated an organization called the Costa Rica Investment and Development Board for the purpose of promotion and advice for the foreign investors. (Investing and doing business in Costa Rica) This is a private, non-profit organization which is in a position to provide complete and up-to-date information on the country's economy and business environment. It is expected that potential foreign investors will establish the first contacts with this organization, and for this purpose, it has established an office in New York. The office in New York will be used to provide the tailor made service to the potential investor. The industry that is being targeted here will require a certain amount of land, and obtaining it is no problem in Costa Rica, where all individuals and private companies can own land whether they are local or foreign. There are some restrictions and the most important among them are the physical occupancy and a 50 meter limit from the beach on oceanfront property. (Investing and doing business in Costa Rica)

Economic and Socioeconomic Forces:

In the question of development of a new industry in Costa Rica, we have looked at different questions and now let us look at the specific industry that we are talking about. This is an industry in the very forefront of the latest development in the area of bio-technology. The industry closest to this in the realm of conventional industry is that of forestry. To judge whether this type of industry will be sustainable, we have to see the success of the Costa Rican policy in this regard. An important point in this area is the sustainability of the forests. The traditional attitude in Costa Rica had been to reduce the forest cover at any cost, and this had led to a very high rate of reduction in its forest cover. In 1900, as much as 85% of the territory of the country was covered by forests of the tropical nature. (Lessons on sustainable development from Costa Rica's forests)

By 1950, this ratio had reduced to…[continue]

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