Comparative Country

Analysis
1. Given what you know about the two countries in the packet, in 1950, which country provides an overall better long-term investment climate? Why?
2. For each country, which sectors would you think are most attractive for foreign investment?
3. What are your greatest concerns in entering either of these markets?
4. Suppose you have made an investment in a sector (as noted in 2) in your preferred country (as noted in 1). What would lead you to subsequently exit this market
and enter the other one, if at all? What should be considered if you wish to delay such an exit?

Unilever
Its 1960 and the Anglo-Dutch consumer goods producer
Unilever is looking at establishing operations in Asia.
It is considering two economies that have recently established
independence but have strong links to Western economies.
Rather than merely exporting European produced products to
the region, the firm recognizes the potential long term gains that
may be achieved from a significant investment.
It can only make a single investment that would constitute a
(i) manufacturing facility and (ii) a local distribution network.
The facility will produce household goods, including soaps,
detergents, and shampoos.
The planned investment represents 25% of total capital
expenditure in 1960.
Longer term goals would involve introducing their processed
foods lines to Asia (such as margarine and frozen entrees).

Your Task
You are an analyst in Unilevers strategic
planning group in Amsterdam.
Your manager has dropped files of information
on two economies (see below) that she would
like you to consider, Balonia and Banchuria.
Analyze the prospects of both countries for
Unilever and provide a recommendation on
which market would present the best option for
Unilever to invest in and why.

Balonia and Banchuria:

1950s

Balonia: Historical Considerations

Former colony of the island nation of Dalonia.
Had been under colonial rule for almost 40 years
and was still heavily reliant on colonial link for
key resources and as a market for their goods.
Gained independence following WWII.
Recognized as one of the poorest countries in the
world (GDP/Capita of about $227).
Population of 21m people with a very low literacy
rate and 24% living in urban areas.

Balonia: Geographical
Considerations
Balonias borders were created following
WWII.
Population dispersed regionally with a large
centre in Balonia and another in the country
of Stalonia.
Political tensions had been on-going between
Balonia and Stalonia.

The country is located in Asia, has

significant coastline and is relatively close
in proximity to other developing countries,
both large and small.

Balonia: Economic Foundations

Over 92% of electricity generation was in Stalonia and
most of the natural resoruces were there, too. So
metal production and chemical production were
established there.
Balonia was much more focused on agriculture and
light industries, including machinery and textiles.
About 44% of GNP was in agriculture.

Nearly all of Balonias exports were primary products.

Agricultural and fishery products made up about 80%
of total annual exports. Food grain imports made up
about a third of imports.
Imports are nearly 3X that of exports.

Balonia had experienced hyper-inflation in the late

1940s. Attempts at price controls were ineffective
and the Bank of Balonia was established in 1950 to
lead monetary policy reform.

Balonia: Political Foundations

Following WWII, the UN supervised democrat
elections in Balonia.
A U.S. backed candidate was elected President,
defeating his competitor by a significant margin.
President (1) immediately enacted laws to severely
curtail political dissent. He was seen as
authoritarian and a strong anti-communist.
Government expenditure is less than 10% of Gross
National Income.

Banchuria: Historical
Considerations
One of the two regions of a country called
Chanchuria; the other region is called Ranchuria.
Former colony of the island nation of Kingchuria.
Had been under colonial rule for almost 150 years
and was still heavily reliant on colonial link for key
resources and as a market for their goods.
Chanchuria gained independence following WWII.
Recognized as one of the poorest regions in the
world (GDP/Capita of about $150).
Population of 50m people with a very low literacy
rate, with more than 80% of the population living
in rural areas.

Banchuria: Geographical
Considerations
Banchurias borders were created after WWII,
when Kingchurian army left .
Population dispersed regionally with a large
centre in Ranchuria and another in
Banchuria.
The region Banchuria is located in Asia, has
significant coastline and is relatively close in
proximity to other developing countries,
both large and small.

Banchuria: Economic Foundations

Most of the major industriestextile (cotton fabrics),
shoes, tobacco, powerwere located in Ranchuria.
However Banchuria was rich in agriculture. It was the
worlds leading producer of a natural fiber.
About 70% of GDP was in agriculture, the country was
self- sufficient in food.
Nearly all of Banchurias exports were primary products.
Agricultural and fishery products made up about 90% of
total annual exports. Machinery, metal and ores were main
imports.
Banchuria had a trade surplus.

Independence from the colonial empire initially set

the economy into a tailspin. Currencies were
overvalued and imports were subject to severe
restrictions.

Banchuria: Political Foundations

Both Ranchuria and Banchuria were initially a
dominion of the colonial kingdom after its
independence, and then subsequently moved to a
parliamentary republic.
In 1956, however, the civilian rule was stalled by a
military coup led by the army commander-in-chief,
who then established an authoritarian regime,
backed by the U.S.
The leadership initially created a six year plan to
mobilize resources to build infrastructure; started
making state investments in power, railroad and
telecommunication.
Most of the decision making regarding policies
happened in Ranchuria.

Population
60,000,000

50,000,000

Population

40,000,000
Balonia
Banchuria

30,000,000

20,000,000

10,000,000

1953

1954

1955

1956

1957

1958

1959

Year

35% of the population in both countries is between 0-19 years old.

25% of the population in both countries is between 20-29 years old.
In 1959, life expectancy in Balonia was 53 years and 48 in Banchuria
In 1959, infant mortality in Balonia was 84 per 1,000 live births and 165 in
Banchuria.

Size of Economy
10000

9000

8000

GDP (at PPP)

7000

6000

5000

Balonia
Banchuria

4000

3000

2000

1000

0
1953

1954

1955

1956

Year

1957

1958

1959

Wealth
Balonia (Relative to USA)

Banchuria (Relative to USA)

Balonia (GDP/Capita)

Banchuria (GDP/Capita)

350

30

300

GDP per Capita (at PPP)

250
20

200
15
150

10
100

5
50

0
1953

1954

1955

1956

Year

1957

1958

1959

GDP per Capita (at PPP) as a % of USA

25

Composition of Economy: 1959

120

100

Percentage of Total GDP

80

Net Exports

60

Investment
Government
Consumption

40

20

Balonia

-20

Banchuria