HHM’s Expansion into an International Business 1                   HHM’s Expansion into an International Business: A Country Study Author’s Name June 9, 2019                                 HHM’s Expansion into an International Business: A Country Study The purpose of this study is to evaluate other counties to choose the first option for expanding HHM operations internationally

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HHM’s Expansion into an International Business 1

 

 

 

 

 

 

 

 

 

HHM’s Expansion into an International Business: A Country Study

Author’s Name

June 9, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HHM’s Expansion into an International Business: A Country Study

The purpose of this study is to evaluate other counties to choose the first option for expanding HHM operations internationally.

HHM currently has 2 operations in the United States. From those two operations, HHM services clients in the United States; some of those clients are multinational organizations. HHM began as an accounting firm and now also offers services in valuation, wealth, and other related services.

After broad examination, the countries chosen for further evaluation were Canada, Mexico and Australia. All three of these countries have Mutual Recognition Agreements with the U.S. These agreements allow qualified professional accountants from other countries to practice in the United States (and vice versa) without having to completely re-credential. (Mutual Recognition Agreements, n.d.)

These countries were compared to the U.S. using Hofstede’s dimensions. Illustration 1 below shows this comparison. The U.S., Canada and Australia are strikingly similar in most categories, and Mexico is quite different. Although looking for a country like your home country is not necessarily what’s needed, in this case HHM has been able to compete extremely well in the U.S. and believes a similar culture would be a good place to expand.

 

Figure 1

(Country Comparison, n.d.) 2

 

HHM offers services. As a service company, HHM is not directly dependent upon a country’s natural resources or the ability to transport goods. HHM will need the business environment to be healthy. Other things will be important to the decision such as communications infrastructure, availability of highly educated employees and the political structure. Because a country’s overall health will be important to the decision, the next step was to evaluate the countries in multiple areas. As the basis for evaluation, I have reviewed the results of these companies to the same metric for the U.S., plus whenever possible viewed the results considering the range of all countries reporting data in the category. Unless otherwise noted, this information was gathered from the CIA Factbook. I offer below brief reviews of that data below.

 

Gross Domestic Product.

GDP is the measure of all goods and services produced by a country during a time frame, and some argue that it’s the single best indicator of economic health. Canada, Mexico, Australia and the U.S. all had healthy GDP growth rates during 2017, ranging from 2% to 3%. The GDP per capita is more a measure of the standard of living to be expected in a region. In this category, the U.S., Canada and Australia show results of $59,800, $48,400 and $50,400, respectively while Mexico lagged well behind at $19,900.

Labor by occupation.

The study of these countries produced slight but no alarming differences in labor by occupation percentages. The difference in reporting by the countries makes an exact comparison difficult, however Mexico shows to have more agriculture labor than do the remaining countries.

Exports and Imports.

All three countries evaluated show the U.S. as an import trading partner in 2017. While the U.S. imports significantly more than she exports, the other 3 countries’ imports and exports are the same within a 5% variance. The commodities exported include a mix of agricultural products, parts, electronics, etc. with Australia’s list differing significantly. Australia’s exports consist of predominantly natural resources.

Informational infrastructure.

The informational infrastructure for Canada and Australia is listed as excellent with modern technology. The broadband per 100 inhabitants measures in the 30’s, as does the United States for the same period. The infrastructure for Mexico is listed as adequate for business and government and broadband at only 14 per 100 inhabitants.

Physical infrastructure.

The physical infrastructure in all studied areas has multiple airports, railways, waterways, ports and terminals. The business considering expansion into these areas will not require nor will its success be heavily impacted by the existence or lack of sophisticated or economical transport of goods.

Unemployment rate.

The rate of unemployment for these counties is similar and ranges from 3.4% to 6.3% during the period studied.

Industries growth rate.

The industries growth rate could be an important factor for an accounting firm. The U.S. rate for 2017 was 2.3%. Australia’s was 1.4%, Canada’s 4.9% and Mexico experienced negative growth rate, showing -.6%.

Geography

The natural resources, climate, land use and other geographic issues can be big reasons why companies decide to expand into a region or decide not to. In this case, there are no extreme geographic factors that would limit HHM’s expansion decision. For example, Canada has natural hazards that are obstacles to development; two of these are: (1) continuous permafrost in the north and (2) cyclonic storms that form east of the Rocky Mountains. These do not pose a threat to an accounting firm; 90 percent of Canada’s population resides within 100 miles of the Canada/U.S. border.

Political – Legal

Canada’s government type is federal parliamentary democracy under a constitutional monarchy. The country is considered stable by multiple stability index measures. (Political stability - Country rankings, 2019) (CountryWatch, Inc., n.d.) Canada has a procedure for approving foreign investment and the guidelines are laid out in the Investment Canada Act. The review threshold for the private sector for 2019 is $1.045 billion. (Thresholds, n.d.) This amount well exceeds the investment being considered by HHM and therefore does not cause concern. Canada does offer assistance programs for foreign businesses, but no assistance was obvious for a private accounting firm. Canada’s combined federal-provincial statutory corporate income tax rate in 2018 was 26.8%. The Government of Canada website touts, “Canada is open for business and welcoming to foreign investment.” (Global Affairs Canada, n.d.)

Mexico’s government type is a federal presidential republic and the legal system is a civil law system with US constitutional law influence. The political stability is ranked near the middle of the range for all countries reported by multiple indexes. (Political stability - Country rankings, 2019) (CountryWatch, Inc., n.d.) Mexico encourages foreign direct investment and offers multiple incentives and investment aid. Although Mexico enjoys significant foreign direct investment and welcomes them; the country still experiences significant corruption that can be a determent. (Mexico: Foreign Investment, n.d.)

Australia’s government type is parliamentary democracy under a constitutional monarchy. The legal system is a common law system based on the English model. Stability indexes rank the nation as strong. (CountryWatch, Inc., n.d.) (Political stability - Country rankings, 2019) In 2018 foreign direct investment in Australia in the Financial & Insurance activities industry was equal to the country’s foreign direct investment in the manufacturing industry; both industries comprising 11.1% (each) of total foreign direct investment in Australia. The Australian government policies encourage foreign investment and reviews major investment proposals on a case-by-case basis through the Foreign Investment Review Board. (HHM’s investment would not qualify as major.) (About foreign investment, n.d.)

 

 

Summary and Recommendation

A review of Canada, Mexico and Australia show that all three countries could be reasonable nations for HHM expansion in the future.

As the first international business move, I suggest that HHM pursues a location in Canada. The barriers to entry appear to be the lowest for entry into this country for multiple and somewhat obvious reasons. The culture is very similar to the US where HHM has developed a successful business by developing relationships and providing high quality service. There is no language barrier; although Canada has two official languages, most of the country speaks English. HHM currently travels throughout the US to service clients. Any travel needed between our US and Canadian locations would simply be an extension of that somewhat usual travel without significant barriers. The time zones would not pose any communication problems.

The US and Canada share similar scores of most of the Hofstede dimensions. Neither country has overt status or class distinctions in society and both cultures expect and reward employees who work hard, show initiative and show responsibility for their actions.

HHM’s Expansion into an International Business 1

 

 

 

 

 

 

 

 

 

HHM’s Expansion into an International Business: A Country Study

Author’s Name

June 9, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HHM’s Expansion into an International Business: A Country Study

The purpose of this study is to evaluate other counties to choose the first option for expanding HHM operations internationally.

HHM currently has 2 operations in the United States. From those two operations, HHM services clients in the United States; some of those clients are multinational organizations. HHM began as an accounting firm and now also offers services in valuation, wealth, and other related services.

After broad examination, the countries chosen for further evaluation were Canada, Mexico and Australia. All three of these countries have Mutual Recognition Agreements with the U.S. These agreements allow qualified professional accountants from other countries to practice in the United States (and vice versa) without having to completely re-credential. (Mutual Recognition Agreements, n.d.)

These countries were compared to the U.S. using Hofstede’s dimensions. Illustration 1 below shows this comparison. The U.S., Canada and Australia are strikingly similar in most categories, and Mexico is quite different. Although looking for a country like your home country is not necessarily what’s needed, in this case HHM has been able to compete extremely well in the U.S. and believes a similar culture would be a good place to expand.

 

Figure 1

(Country Comparison, n.d.) 2

 

HHM offers services. As a service company, HHM is not directly dependent upon a country’s natural resources or the ability to transport goods. HHM will need the business environment to be healthy. Other things will be important to the decision such as communications infrastructure, availability of highly educated employees and the political structure. Because a country’s overall health will be important to the decision, the next step was to evaluate the countries in multiple areas. As the basis for evaluation, I have reviewed the results of these companies to the same metric for the U.S., plus whenever possible viewed the results considering the range of all countries reporting data in the category. Unless otherwise noted, this information was gathered from the CIA Factbook. I offer below brief reviews of that data below.

 

Gross Domestic Product.

GDP is the measure of all goods and services produced by a country during a time frame, and some argue that it’s the single best indicator of economic health. Canada, Mexico, Australia and the U.S. all had healthy GDP growth rates during 2017, ranging from 2% to 3%. The GDP per capita is more a measure of the standard of living to be expected in a region. In this category, the U.S., Canada and Australia show results of $59,800, $48,400 and $50,400, respectively while Mexico lagged well behind at $19,900.

Labor by occupation.

The study of these countries produced slight but no alarming differences in labor by occupation percentages. The difference in reporting by the countries makes an exact comparison difficult, however Mexico shows to have more agriculture labor than do the remaining countries.

Exports and Imports.

All three countries evaluated show the U.S. as an import trading partner in 2017. While the U.S. imports significantly more than she exports, the other 3 countries’ imports and exports are the same within a 5% variance. The commodities exported include a mix of agricultural products, parts, electronics, etc. with Australia’s list differing significantly. Australia’s exports consist of predominantly natural resources.

Informational infrastructure.

The informational infrastructure for Canada and Australia is listed as excellent with modern technology. The broadband per 100 inhabitants measures in the 30’s, as does the United States for the same period. The infrastructure for Mexico is listed as adequate for business and government and broadband at only 14 per 100 inhabitants.

Physical infrastructure.

The physical infrastructure in all studied areas has multiple airports, railways, waterways, ports and terminals. The business considering expansion into these areas will not require nor will its success be heavily impacted by the existence or lack of sophisticated or economical transport of goods.

Unemployment rate.

The rate of unemployment for these counties is similar and ranges from 3.4% to 6.3% during the period studied.

Industries growth rate.

The industries growth rate could be an important factor for an accounting firm. The U.S. rate for 2017 was 2.3%. Australia’s was 1.4%, Canada’s 4.9% and Mexico experienced negative growth rate, showing -.6%.

Geography

The natural resources, climate, land use and other geographic issues can be big reasons why companies decide to expand into a region or decide not to. In this case, there are no extreme geographic factors that would limit HHM’s expansion decision. For example, Canada has natural hazards that are obstacles to development; two of these are: (1) continuous permafrost in the north and (2) cyclonic storms that form east of the Rocky Mountains. These do not pose a threat to an accounting firm; 90 percent of Canada’s population resides within 100 miles of the Canada/U.S. border.

Political – Legal

Canada’s government type is federal parliamentary democracy under a constitutional monarchy. The country is considered stable by multiple stability index measures. (Political stability - Country rankings, 2019) (CountryWatch, Inc., n.d.) Canada has a procedure for approving foreign investment and the guidelines are laid out in the Investment Canada Act. The review threshold for the private sector for 2019 is $1.045 billion. (Thresholds, n.d.) This amount well exceeds the investment being considered by HHM and therefore does not cause concern. Canada does offer assistance programs for foreign businesses, but no assistance was obvious for a private accounting firm. Canada’s combined federal-provincial statutory corporate income tax rate in 2018 was 26.8%. The Government of Canada website touts, “Canada is open for business and welcoming to foreign investment.” (Global Affairs Canada, n.d.)

Mexico’s government type is a federal presidential republic and the legal system is a civil law system with US constitutional law influence. The political stability is ranked near the middle of the range for all countries reported by multiple indexes. (Political stability - Country rankings, 2019) (CountryWatch, Inc., n.d.) Mexico encourages foreign direct investment and offers multiple incentives and investment aid. Although Mexico enjoys significant foreign direct investment and welcomes them; the country still experiences significant corruption that can be a determent. (Mexico: Foreign Investment, n.d.)

Australia’s government type is parliamentary democracy under a constitutional monarchy. The legal system is a common law system based on the English model. Stability indexes rank the nation as strong. (CountryWatch, Inc., n.d.) (Political stability - Country rankings, 2019) In 2018 foreign direct investment in Australia in the Financial & Insurance activities industry was equal to the country’s foreign direct investment in the manufacturing industry; both industries comprising 11.1% (each) of total foreign direct investment in Australia. The Australian government policies encourage foreign investment and reviews major investment proposals on a case-by-case basis through the Foreign Investment Review Board. (HHM’s investment would not qualify as major.) (About foreign investment, n.d.)

 

 

Summary and Recommendation

A review of Canada, Mexico and Australia show that all three countries could be reasonable nations for HHM expansion in the future.

As the first international business move, I suggest that HHM pursues a location in Canada. The barriers to entry appear to be the lowest for entry into this country for multiple and somewhat obvious reasons. The culture is very similar to the US where HHM has developed a successful business by developing relationships and providing high quality service. There is no language barrier; although Canada has two official languages, most of the country speaks English. HHM currently travels throughout the US to service clients. Any travel needed between our US and Canadian locations would simply be an extension of that somewhat usual travel without significant barriers. The time zones would not pose any communication problems.

The US and Canada share similar scores of most of the Hofstede dimensions. Neither country has overt status or class distinctions in society and both cultures expect and reward employees who work hard, show initiative and show responsibility for their actions.