Contents

1. Introduction ........................................................................................................................................... 2
1.1 Company Profile ........................................................................................................................... 2
2. Economic Climate ................................................................................................................................. 2
2.1 Economic Overview...................................................................................................................... 2
2.2 Gross Domestic Product................................................................................................................ 3
2.3 Socio-Economic Data ................................................................................................................... 4
3. Political Environment and Risk Factors................................................................................................ 5
3.1 Political Environment ................................................................................................................... 5
3.2 Political Risk Factors .................................................................................................................... 6
4. Business Environment .......................................................................................................................... 7
4.1 Operating Business ....................................................................................................................... 7
4.2 Market Potential ............................................................................................................................ 7
5. Country Choice ..................................................................................................................................... 8
6. Conclusion ............................................................................................................................................ 9
7. Reference List ..................................................................................................................................... 10
 1. Introduction

This analysis report focused on the market expansion available for B-Health Company. B-Health

is planning on exporting their baby food products to the potential market, and is comparing the

two potential countries namely New Zealand and Hong Kong.

Both countries different key factors such as economic, political, cultural and business

environments must be analysed to be aware of the viability for success. With this analysis, B-

Health can make their best decision for the expansion to one of the countries.

1.1 Company Profile

B-Health is an Australian company based on Queensland that produces and exports organic baby

food products. They offer various organic baby foods ranging from 4 month, 6 month and 8

month stages. From breakfast meals such as baby sweet vegetables to organic pear, apple,

cinnamon porridge, B-Health baby food offers a nutritious delicious.

2. Economic Climate

B-Health should take the economic factors of New Zealand and Hong Kong in to account for

decision making. Economic factors may have significant influence on the sustainability and

profitability of future business prospect.

2.1 Economic Overview

New Zealand’s economic ranking is 53rd largest economy in the world in terms of nominal GDP

and 68th largest in terms of purchasing power parity (PPP). The country operates on a mixed

economy through free market principles. New Zealand is known for highly efficient agricultural

sector and it also have large manufacturing and service sectors. The country highly relies on

international trade as their exports accounts for one third of real GDP. New Zealand economy
aligns closely with Australia as they have Closer Economic Relations agreement (New Zealand

Government, 2019).

Hong Kong is located in a fast growing part of Asia and it has a free market economy that relies

heavily on international trade as it accounts for four times GDP. It is the most service-oriented

economy in the world with services sectors account for more than 90% GDP. Hong Kong is the

7th largest exporter of merchandise in the world and 15th largest in exporting commercial services

in 2017 (World Trade Organization, 2017). The country don’t charge tariffs on imports but it

levies excise duty only on four commodities namely alcohol, tobacco, oil and methyl alcohol.

2.2 Gross Domestic Product

Gross Domestic Product shows the total production of a country and it is good for indicating the

country’s economy size. The GDP of New Zealand and Hong Kong can be seen in the figure 1.

There is a fluctuation in the GDP of New Zealand while there is a steady growth in the GDP of

Hong Kong due to their free market influence. Both countries are free market economy but there

is a wide gap between the two countries in terms of GDP.

400
350
300
250
200
150
100
50
0
2013 2014 2015 2016 2017

New Zeland Hong Kong

Figure 1: GDP of New Zealand and Hong Kong (Source: World Bank)
 2.3 Socio-Economic Data

Figure 2 shows the socio-economic data of both countries. There is a wide gap of about 2.5

million differences between both countries’ population. The birth rate of Hong Kong shows 8.9

birth rate per 1000 (Index Mundi, 2018) which means there are about 657,861 babies born in

2017. The effect of population difference can be seen in the GDP per Capita as well as Hong

Kong GDP ($46,193) per Capita is higher than New Zealand (42,583). Although the differences

are not big, Hong Kong consumers are more likely to have more disposable income which they

will spend on luxury goods such as buying organic baby foods.

The effect of difference in income can be seen in the unemployment rate as New Zealand facing

higher unemployment while it reduced from 5.1% to 4.7 in 2017. On the other hand, Hong Kong

shows a significantly lower unemployment rate which further reduced from 3.09% to 2.82% in

2017. A lower unemployment rate means the economy is stronger which enables the consumers

to spend more.

Apart from that, Hong Kong inflation rate is also reduced and lower showing the good market

stability. Conversely New Zealand’s inflation increased in 2017 to higher than Hong Kong’s

inflation. A higher inflation rate shows the fall in currency value, as a result the imports and

exports become more expensive. Exporting products to B-Health may pose a higher risk in terms

of market stability and demand.

New Zealand Hong Kong

Indicators 2016 2017 2016 2017

Population 4,693,200 4,793,900 7,336,600 7,391,700

Babies Born (Estimated) 623,207 657,861

GDP per Capita (US$) 40,331 42,583 43,737 46,193

Unemployment Rate (%) 5.1 4.7 3.09 2.78

Inflation (%) 0.65 1.85 2.41 1.48

Figure 2: Socio-Economic Data (Source: World Bank)

3. Political Environment and Risk Factors

It is important to be aware of the political environment of a country while making decision to

enter the market.

3.1 Political Environment

New Zealand is among the highly stable democratic countries in the world. They follow a

parliamentary democracy adopted from the British model. The political changes happen every

three years and the new government makes their own rules and regulations which should be

attentive by all the companies. The labours laws are very stringent and the labour force is quite

expensive. The interest rates are higher in the country which means the companies to pay higher

tax as well which will decrease the company’s profit and large amount goes to the government.

The government offers the freedom of trade and business for the companies, so as to make

business easier. Political system is very stable in the country.

Hong Kong is given the status of Special Administrative Region which enables the policy of

“one country, two systems”. The government of Hong Kong is economically liberal but only

district council elections can grant the universal suffrage. The government head is Chief
Executive of Hong Kong who can be elected through an electoral college with majority of voters

from business and professional sectors. In the last two decades Hong Kong offered lower

taxation policies which resulted in high profits and more spending in the research and

development. Hong Kong is under the increasing global pressure to cope up with international

regulations.

3.2 Political Risk Factors

Figure 3 shows the comparison of two countries in terms Corruption Perception Index. The index

rank scale from 0-100, with 0 indicates most corrupted while 100 indicate least corruption

(Transparency International, 2018).

Country Corruption Perception Index Risk Factors

New Zealand 87/100  High household and corporate debt

2/180 countries levels

 Shortage of skilled labours

 Reliance of Chinese Demand

Hong Kong 76/100  Increasing income inequality

14/180 countries  Industry fully moved to mainland

China

 Vulnerable to the economy

slowdown in mainland China

 Lack of Innovation

Figure 3: CPI of New Zealand and Hong Kong

New Zealand ranks 2nd in the CPI with a score of 87/100 in 2018. Hong Kong is 13 positions

behind ranking 14 with an index score of 76/100. Although the gap is not that big between the 2

countries, still New Zealand gets an upper hand while considering the risk factors.

4. Business Environment

4.1 Operating Business

In terms of ease of doing business, both New Zealand and Hong Kong have simple and

straightforward process for foreign companies. Out of 190 countries, New Zealand is ranked

No.1 for doing business while Hong Kong is ranked 4th in the list (The World Bank, 2018). Both

countries time required for business obligations are quite lower compared to the Organization for

Economic Co-operation and Development (OECD) average. This is mainly due to the

transparent legal frameworks, which focus on government reforms that improvise the business

regulatory system and investment inflows.

4.2 Market Potential

Baby Food Revenue

4000
3500
3000
Million US$

2500
2000
1500
1000
500
0
2014 2015 2016 2017 2018
New Zealand 45 49 51 54 56
Hong Kong 2,243 2,617 2,919 3,232 3,549

Figure 4: Baby Food Revenue of New Zealand and Hong Kong (Source: Statista, 2018)
The revenue of baby food in both countries is showed in the figure 4. It can be clearly seen there

is a huge market for baby foods in Hong Kong as the revenue from baby foods keep increasing

year by year. There is also growth in New Zealand market but the market demand is very lower

compared to Hong Kong. Based on this, B-health would mostly likely get attracted by Hong

Kong’s Market.

5. Country Choice

The weighted index in figure 5 table is formulated to assist in the recommendation for B-Health.

There are five variables taken into account which have the highest impact on the sustainability

and profitability of foreign markets was selected.

The distribution of wealth given a total of 25% as it indicates the living standard and economic

situation of the country’s population. The given data shows that Hong Kong’s GDP per capita is

higher than New Zealand and had much lower unemployment rate which clearly gives an idea of

larger proportion has more disposable income. Given the birth rate is higher than Hong Kong,

still there is a big market available. Hence, Hong Kong score is 8/10 while New Zealand scored

7/10.

In terms of operating business, it is given a weightage of 25%. Both countries have simple and

smooth process in this aspect, but New Zealand is number one in the list. Hence New Zealand

score 9/10 and Hong Kong given 8.5/10.

Economic and political stability is important while dealing with foreign markets and it must be

taken in to account as any major changes will have direct impact on the cost and ease of doing

business for foreign companies. Hong Kong is given 8.5/10 as the taxes are comparatively lower

while New Zealand scores 7/10 due to the fluctuation in the growth and higher tax rate. New
Zealand score 8/10 for political stability while Hong Kong get 7/10 as it is highly influenced by

Mainland.

Variable Weighting New Zealand Hong Kong

Score Adjusted Score Adjusted

Population Wealth 25% 7 1.75 8 2

Ease of Doing Business 25% 9 2.25 8.5 2.125

Market Potential 20% 6 1.2 8 1.6

Economic Stability 15% 7 1.05 8.5 1.275

Political Stability 15% 8 1.2 7 1.05

Total 7.45 8.05

Figure 5: Weighting Index of New Zealand and Hong Kong (Source: Statista, 2018)

6. Conclusion

In a nutshell, both countries are favourable to foreign business and economically stable. But our

consultancy firm recommends Hong Kong as the most suitable for exporting their product based

on the weighted index calculation as Hong Kong’s economy growth and wealth distribution are

higher and business risks are lower as well.

 7. Reference List

HKTDC. (2019). Economic and Trade Information on Hong Kong | HKTDC. Retrieved from

http://hong-kong-economy-research.hktdc.com/business-news/article/Market-

Environment/Economic-and-Trade-Information-on-Hong.htm

Index Mundi (2018). Birth rate by country - Thematic Map - World. Retrieved from

https://www.indexmundi.com/map/?v=25

New Zealand Government. (2019). Economic Overview | Invest in New Zealand | NZ Now.

Retrieved from https://www.newzealandnow.govt.nz/investing-in-nz/economic-overview

Statista, (2018). Baby Food - Hong Kong | Statista Market Forecast. (2018). Retrieved from

https://www.statista.com/outlook/40120000/118/baby-food/hong-kong

Statista, (2018). Baby Food – New Zealand | Statista Market Forecast. (2018). Retrieved from

https://www.statista.com/outlook/40120000/118/baby-food/New-Zeland

The World Bank. (2019). Ease of Doing Business in Honk Kong. (2018). Retrieved from

http://www.doingbusiness.org/en/data/exploreeconomies/Hong-Kong

The World Bank. (2019). Ease of Doing Business in New Zealand. (2018). Retrieved from

http://www.doingbusiness.org/en/data/exploreeconomies/new-zealand

The World Bank. (2019). GDP (current US$) of New Zealand and Hong Kong| Data. Retrieved

from https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=NZ-HK

The World Bank. (2019). GDP per capita, PPP (current international $) of New Zealand and

Hong Kong| Data. Retrieved from

https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=NZ-HK
The World Trade Organisation. (2017). Worlds Largest Exporter. Retrieved from

https://www.wto.org/english/res_e/statis_e/wts2017_e/wts2017_e.pdf

Transparency International. (2019). Corruption Perception Index - New Zealand. Retrieved from

https://www.transparency.org/country/NZL

Transparency International. (2019). Corruption Perception Index – Hong Kong. Retrieved from

https://www.transparency.org/country/HKG