Matrix Investments Global Strategy Analysis

Overview
Our company, Matrix Capital, intends to pursue a controlled and focused expansion into global markets. This expansion is informed by the company’s relative success in the U.S. In essence, ours is an investment fund that makes use of a proprietary trading approach to identify market opportunities to make the relevant investment decisions. The company accepts funds from investors and invests the said funds in three key sectors, i.e. consumables, energy, and financial services. We intend to evaluate countries in tree key regions; i.e. Africa, the Middle East and South America. The countries include Qatar (Middle East), Kenya (Africa), and Brazil (South America).
In seeking to expand, the company has four key factors it will be taking into consideration to inform its location choices. These include; country gross domestic capital per capita, political stability, competitive situation, and the country tax regime.
Analysis: Decision Matrix
Country/Region
Rating Factor
GDP per capita
Political Stability
Competition
Taxation
Weight
40
30
10
20
Qatar (Middle East)
5
3
3
3
Kenya (Africa)
2
1
2
2
Brazil (South America)
3
2
2
3
Country/Region
Weighted Score
Total
Qatar (Middle East)
200
90
30
60
380
Kenya (Africa)
80
30
20
40
170
Brazil (South America)
120
60
20
60
260
NB: Scoring option: 1(poor) - 5(Excellent)
Weight: 1 (least important) - 100 (very important)
It is clear from the chart above that Qatar scores the highest. In that regard, therefore, the country/region of choice as far as the setting up of an investment management company is concerned will be Qatar.
Discussion
Country Gross Domestic Product Per Capita
GDP, in basic terms, is the best measurement of the economic performance of a country. Unlike GDP whose concern is the entire economy, GDP per capita concerns itself with the output of individual persons, i.e. the average amount of money made by an individual person. More precisely, GDP per capita, in the words of Watson, Domingo, Landman, Miller, Watson, and Hopkins (2006) “is a measure of the total value of all the final goods and services produced in a nation during a year divided by the population of the nation” (p. 60). In our case, this is important given that one of the areas our company invests in is the high-end consumables arena, whereby our target is people with significant recurring incomes. It should be noted that although a high GDP per capita does not necessarily translate to a high disposable income level, the former is routinely used as a gauge of living standards. Low disposable income levels would in essence spell doom for our consumables portfolio which, as per our investment model, accounts for approximately 50% of our total investment outlay. For analysis, the metric used was how the country’s GDP per capita compares to the rest of the world. As per the CIA fact file, Qatar has the highest GDP per capita (CIA, 2018).
Political Stability
This has got to do with how well a company is governed and the extent to which the rule of law is honored. Politically unstable countries have a higher chance of government collapse. A metric which could be used on this front is the report on human rights practices. Political instability could adversely impact our operations, thereby negatively affecting our bottom-line. Countries that are marred by social unrest and general civil disobedience offer a very poor macro environment for investments. In recent times, the political upheavals in some countries have occasioned untold losses to businesses. It is important to note that given our focus in the energy sector, some of our investments could be made in renewable energy (like the development of solar farms) and in crude oil prospects. This could call for a significant capital outlay in fixed assets, effectively meaning that political unrests could result in huge losses for us.
Competitive Situation
The profitability of any business entity, as well as the sustainability of a business model is often times impacted upon by the number of players in a specific market as well as the resources at their disposal. Some of the key considerations when assessing a competitive situation include, but they are not limited to, the marketing strategies applied by other players, their product/service range, as well as their resource capabilities. A market that has a high number of investment funds with deep pockets would not be attractive to us. As Drummond, Ensor, and Ashford (2007) observe, how large firms respond to a new entrant often has an impact on the said entrants success. This is more so the case given that such markets oftentimes have a propensity to price investment assets higher than their intrinsic value.
Country Taxation Regime
The taxation regime of a country is yet another significant consideration. High corporate tax rates have a tendency to eat into profits, thus reducing the amount available to be distributed to shareholders. We would prefer a country with favorable tax rates. Also, this is a factor that ought to be considered alongside the GDP per capita. As it has been pointed out elsewhere in this text, GDP per capita and disposable income do not have an automatic positive relationship. This is more so the case given that in some countries, not all the income earned by individuals trickles all the way down to the household. The government could appropriate some of the income earned via taxes, thereby reducing a person’s disposable income. None of the three countries highlighted herein has a hostile tax regime.










References
CIA. (2018). The World Factbook: Middle East – Qatar. Retrieved from https://www.cia.gov/library/publications/the-world-factbook/geos/qa.html
Drummond, G., Ensor, J. & Ashford, R. (2007). Strategic Marketing: Planning and Control. New York, NY: Routledge
Watson, G.G., Domingo, V., Landman, M., Miller, G., Watson, C.D. & Hopkins, M.C. (2006). Geography: Focus on Economics. New York, NY: Council for Economic Education.