MANAGEMENT REPORT

Management Report



Management Report

Executive Summary

The aim of this report is to examine the telecommunication industry in Poland and China as FDI companies and also to develop a strategic direction for Orange Company. Moreover this report contains a comparative analysis of Poland and China which includes the benefits such as cheap labor cost and huge potential for Orange in the market. Strategic development directions for the company are also included.

Foreign direct investments is a long-term capital flow or it is the investment in which a non-resident entity has significant management control of voting stock (10% or more) over an enterprise in a foreign or host country. Foreign direct investment (FDI) is not immediately susceptible to reversibility. The bulk of FDI activities in developing countries are undertaken by multinational or transnational corporations. A transnational corporation is a firm that is head quartered in a home country but controls assets of enterprises that are central to its profitability in foreign or host countries (Borensztein, 2008).

Although FDI is sought to improve the economic prospects and performance of countries, it continues to generate issues involving the repatriation of profits, taxes, and control over natural resources (sovereignty). Some economists classify FDI activities under three broad areas— (1) natural resources, such as petroleum, minerals, and agricultural production; (2) manufacturing and services, such as apparel and processed food; and (3) labor-intensive manufacturing, such as apparel, electronics, textiles, and toys. The efficacy of FDI ultimately depends on the purpose and nature of long-term investment, as much as the policies and institutions in the host and parent countries (Dunning & Gugler, 2008).

The Strategy Development Directions for Orange Company

Extrinsically, government size is a sum of the government components, but intrinsically it refers to the power of the government. Most of the studies focus on the inherent sense of government size. Tridimasa and Winer (2005) pointed out that the government size mainly depends on the use of fiscal policy for compulsory redistributions, the delivery of public services, the size of tax revenue and the political influence. Wang et al. (2007) points out that the government with a larger size controls more economic resources and in turn can regulate economy more easily.

Due to different regimes and development levels, the impacts of the government size differ significantly. Generally speaking, the government dominates economy from four main aspects: consumption, transfer payment, investment and taxation, which then influence FDI inflows.

Consumption

This refers to the purchases of goods and services, including employee payroll expenses. The government provides a lot of public goods and welfare facilities and services, including security and defense, medical care and environmental protection, and so on, which builds good and convenient conditions for foreign investment. Besides, operations of public sectors improve the employment, stimulate consumption and increase market size (OECS, 2007).

Transfer payment

This is a form of income redistributions, such as social security, retirement pensions, and price subsidies and so on, which safeguards the interests of vulnerable groups and maintains social stability. Obviously, in a developed country with high welfare, the society is harmonious and ...