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Introduction
The following research paper is based on to develop a business plan for the company ABC Corporation, which is situated in Venezuela. Venezuela is an independent nation and became a member of MERCOSUR in the month of July 2004. The main focus of this study is to pay attention to the circumstances and situations faced by a normal business oriented company while being a part of the Venezuelan system who is also the member of MERCOSUR. The key highlights of this study would include pros and cons for Venezuela being a member of MERCOSUR, to measure benefits and drawbacks of a company operating in Venezuela, and to analyze what adjustments are required to be made by the company as a result of this.
Understanding Relationship Of Mercosur & Venezuela
(Doole, Lowe; 2007, p61) MERCOSUR is basically the South American southern cone and the 4th largest integrated market in the world, which is four times larger than the size of the European Union with more than 300 million members and combined GNP of over 1 trillion US$. MERCOSUR is basically the customs union that links Argentina, Paraguay, Uruguay, Brazil, and Venezuela. The associate members of this union are Peru, Chile, Columbia, Bolivia, Ecuador; and these countries have a free trade agreement with MERCOSUR. The union offers specialized services in international trade whose main objective is to provide advanced increase to the customer and member countries in their business profitability and to improve their competitive endeavors, MERCOSUR is an important networking system/union that accepted application of membership from Venezuela in the month of July 2004, and granted full and permanent membership to the country in December 2005, while expanding its membership circle with Columbia and Ecuador as well. The major trade portion of Venezuela is mainly based on the petroleum sector and it adds contribution to one-third of the entire GDP and more than half of the government’s functioning expenditures. However, there are other agricultural products as well that contributes to the operating costs of the entire system of Venezuela, such as, rice, corn, sugarcane, sorghum, coffee, vegetables, pork, eggs, milk, and beef (Acharya, Johnston; 2007, p113).
Pros And Cons Of Mercosur For Venezuela
As stated above, MERCOSUR is the fourth largest integrated market and trade bloc after the European Union (EU), Association of South-East Asian Nations (ASEAN), and North American Free Trade Agreement (NAFTA). MERCOSUR provides outstanding and unimaginable benefits to its member countries. There are a lot of benefits that Venezuela can enjoy from MERCOSUR as a member country. They avail enormously impressive bond of authority, credibility, professionalism, ethics, and notorious trading methodology, perceptions and theories for the strategic development and improvement of its nation with the help of MERCOSUR. Apart from that, MERCOSUR plays a very important part in advertising an investment in the international trading scenario in its standard to maintain and fuse the occurrence of foreign companies and multinationals globally. Venezuela is required to discover a natural ally who will be constantly searching prospective to add value and expand its business; an ally who will be responsible to troubleshoot in a global and integrated manner that capitulate guaranteed profitable results. Venezuela also enjoys new working opportunities and trade businesses with the help of MERCOSUR.
Apart from all the benefits, there are some drawbacks associated with MERCOSUR. One of these disadvantages is that if Venezuela regularly changes the agreement’s rules and the tariff level and configuration. In such situation, the country is said to misrepresent the rules of the contract on a one-sided basis. Second drawback is the Trade Diversion that is capable of redirecting a member’s trade away from a more well-organized and competent supplier outside the bloc, towards a less competent supplier within the bloc (Mullins, 2006, p86).
Benefits And Drawbacks Of Doing Business In Venezuela As The Member Of Mercosur
Venezuela became a permanent member of MERCOSUR on 9th December 2005. This act was allegedly put up by the President Hugo Chavez because he wanted to strengthen his country’s regional agreements by giving more liberty to the people of South America. There are several benefits enjoyed by the business oriented companies in Venezuela on regular basis that its authority diagonally the region has ultimately increased through its energy projects and achievement of government debts. Not only this, but the position of Venezuela has got stronger on its disagreement against the united states and our proposed business can set up rules of its choices under working parallel with the Venezuelan system because it indicates not only the President’s approach of expanding the nation’s customers and suppliers, but also the national political plans (Luff et al; 2007, p80).
However, the drawback that lies behind MERCOSUR is that the proprietors in Venezuela would remain unaware from the transmission of technologies and it is expected that there will be a criminal fraud of knowledge associated with biodiversity use and additional legal guarantees for the investors. Apart form that, MERCOSUR lacks total clearness and precisions for the business like ABC Corporation with which negotiations and consultations are monitored.
Required Adjustements In The Business
After studying all the pros and cons related to the Venezuelan affiliation with MERCOSUR and the working function of ABC Corporation, it is advisable to launch venture on a new trade right after the President sings the agreement with MERCOSUR. This is because of the fact that the company would get a chance to get recognition in the international trading market. Our company can focus on imports and exports more because MERCOSUR offer tariff reductions and exemptions that diverts tax expenses to production and administration expenditures. To run a successful business in Venezuela, it is necessary to develop positive relationship with the other business circle entities and international traders. ABC Corporation is required to introduce globally competitive products so that it could survive in the international competitive marketplace with popularity and good reputation. The company can gain trust of customer companies by hiring local people in order to understand the needs and wants of its customers and by running regular focus groups marketing strategy as well.
References
Isobel Doole, Robin Lowe; 2007, International Marketing Strategy: Analysis, Development and Implementation; Published by Cengage Learning EMEA, p61.
Amitav Acharya, Alastair Iain Johnston; 2007, Crafting Cooperation: Regional International Institutions in Comparative Perspective, Published by Cambridge University Press, p113.
Martin Mullins, 2006, In the shadow of the generals: foreign policy making in Argentina, Brazil and Chile; Published by Ashgate Publishing, Ltd., p86.
Trade and Industry Committee, Great Britain. Parliament. Trade and Industry Committee. House of Commons, Peter Luff; 2007, Trade with Brazil and Mercosur: seventh report of session 2006-07, Vol. 2: Oral and written evidence; Published by The Stationery Office, p80.
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