BUSINESS ENVIRONMENT IN UK, SOUTH AFRICA, AND MEXICO
Business environment in UK, South Africa, and Mexico
Introduction
The purpose of this report is to analyze the business environment in South Africa and Mexico to help Gem Leathers Limited in establishing a joint venture. Also, the report will examine the issues of trademarks, trade secrets and patents in the U.K, Mexico, and South Africa.
Financial incentives
Mexico offers numerous incentives in various sectors with an aim of creating employment, improving infrastructure, enhancing productivity, and boosting exports. The Maquiladora is the most significant incentive that is offered to foreign companies in Mexico. The benefits of Maquiladora incentive include duty-free imports of inputs for 18 months, no additional tax on exports, refund of value-added taxes, reduced inspection of shipments to shorten the production chain and support to secure loans (Russell, 2015). Hence, if Gem Leather Limited establishes its operation in Mexico, it will realize reduced cost of operation, which in turn guarantees high returns.
South Africa offers various incentives to foreign companies in a bid to promote employment and grow the country’s productivity (SA investment incentives, 2012.). The government also aims at encouraging competitiveness on the market while creating sustainable jobs for its populations. If Gem Leather Limited decides to launch its operations in South Africa, it will benefit from the capital and development incentive. These incentives aim at enabling private companies to enhance their designs and improve new products. The company may also benefit from other incentives that aim at promoting businesses that are in the textiles industry. However, the South African incentives keep on changing due to economic instabilities.
Political landscape
Mexico and South Africa have different forms of governance, which suggests of a distinct political landscape. Mexico has a national president who has power over the 31 states, but the leadership is divided into judicial, legislative and executive (Overseas business risk – Mexico 2015). In Mexico, there seems to be political stability since the presidential succession process is usually smooth after every six years. The government is keen on implementing reforms, which boost economic growth. Education and taxation systems are the current changes established by President Pena Nieto. Other improvements include communication and break monopoly power.
Apart from the industrial reforms, the government implemented laws against criminals in 2014. Also, there were corruption allegations against the president and his close allies (Overseas business risk - Mexico 2015). The presented called for investigations and advocated for the implementation of anticorruption reform. Gem Leather should be aware of demonstrations in Mexico; however, the protests aren’t regular.
South Africa seems to be more democratic than the other African countries since other political parties are allowed to air their views. However, the country is dominated by ANC, President Jacob Zuma’s party (Overseas business risk - South Africa, 2015). There are no possibilities of demonstrations and political instability in South Africa.
Availability of skilled staff
In Mexico, there is the availability of skilled labor due to the high number of young people who have attained post-secondary education from Mexican, United States and EU degrees (Muller and Gutierrez, 2005 p. 106). Hence, obtaining skilled staff in Mexico is simple. Also, getting access to semi-skilled labor that may be required by Gem Leather Limited is easy. The Company may have to outsource their management from the U.K since the top-notch talents of Mexico usually prefer to work in the U.S.
Unlike Mexico where there is access to skilled staff, South African firms have challenges in filling marketing positions. Therefore, getting trained staff is a problem in South Africa. The high unemployment rate in the country is due to the lack of technical skills (News24Wire, 2015). The lack of post-secondary education among the job seekers is attributed to poverty and lack of practical exposure in most higher learning institutions.
Ease of establishing a joint venture
Creating a joint venture in Mexico is very simple since the Mexican law doesn’t define joint venture (Torres, Noriega, and Rabasa, 2015 p.36). Thus, in Mexico, a joint venture is simply two businesses coming together to enhance competitiveness. Foreign joint ventures are mainly regulated by their written agreements and judicial laws. It’s advisable for parties who are entering into an agreement to involve an attorney to ensure that any future disputes or legal matters are handled with ease.
As opposed to Mexico, establishing a joint venture in South Africa is not simple. Foreign companies should first acquire a license from the countries Department of Trade and Industry. After obtaining the permit, business is allowed to trade in South Africa; the license is also ideal for securing loans from the Reserve Bank (Ancer, Forbes, and Fulbright, 2016). The pricing of joint ventures is controlled by the South Africa Competition laws that protect businesses from unfair competition.
Economic security
Mexico mainly consists of middle-class earners and has a population of about 119 million. Nevertheless, there is an inequality in income distribution with 46 percent of people living below the poverty line, and 43 percent of national revenue goes to only one percent of the population (Overseas business risk - Mexico 2015). The World Bank notes that doing business in Mexico is very easy as compared to other parts of Latin America. Mexico mainly imports machinery and automobiles while it exports agricultural products. The country is open for business due to the Free Trade Agreements with over 45 countries. Mexico does more trade transactions with the U.S. than the UK regarding imports and exports (Overseas business risk - Mexico 2015). The country has economic stability, and any new company seeking to introduce its operations in Mexico should be ready to face stiff competition.
S A’s economy grew by 1.5% in 2014 and by 2% in 2015. The economy is predicted to continue growing up to a two-digit by 2020 (Overseas business risk - South Africa, 2015). The government is keen to improve infrastructure so as to achieve that objective. South Africa is the most developed country in the region and a gateway for new business. There is ease of doing business in the country due to the few trade restrictions. The primary challenge for new companies in South Africa is socioeconomic issues.
Bribery and Corruption
In South Africa, bribery is illegal, but there are many incidents of bribery and corruption in both public and private sector. The country has several legislations in place that to help fight bribery and corruption. About 90 percent of firms in South Africa have policies that inhibit corruption (Overseas business risk - South Africa, 2015). Hence, it’s vital for any new company to implement anti-corruption policies to ensure compliance.
Even though bribery and corruption are illegal in Mexico, and there are allegations against government officers including the president. There is a high tendency of companies to offer bribes to do business in Mexico (Overseas business risk - Mexico 2015). However, the government is laying structures that will reduce the vice. Processes such as tendering are now free from corruption. Also, the legislation is keen on establishing policies that will bar corruption and bribery.
B. Patent, trademark, trade secret and how they are protected in UK, Mexico, and South Africa
Patent
Patents are set rights accorded to an individual or organization that discloses an invention. Patents don't offer one the right to utilize or trade an innovation. Instead, patents provide the holder a legal right to prevent other people from using, trading or manipulating the invention in any way. Legally, a patent lasts for 20 years, and the holder is eligible to pay regular maintenance fees (Lemley and Shapiro, 2005 p. 75). The owner of a particular patent can either use it in an economical way, license others to use, leave or offer it to offers for free.
Even though a patent is a property of the holder, he/she doesn’t have the right to harness the invention. For instance, most innovations in the current world are simply enhancements of other innovations that already exist. In that case, an individual who desires to acquire a patent on improvements of an existing change should seek legal permission from the original copyright owner.
Different countries employ various policies when it comes to licensing innovations. In South Africa, the Company and Intellectual Property Commission is the oversight body that deals with matters pertaining patent application and provision. The monitoring body doesn’t validate the novelty of a process or product that is being patented. An individual or a company that wants to secure a patent should seek advice from a patent attorney to ensure the idea is worth and also to avoid rejection by the oversight body. Hence, the process of acquiring patents in South Africa involves many steps, and it can be expensive.
In Mexico, a procedure or product qualifies for a patent if it’s new and has an economic value. Also, one can acquire a license if they introduce a new way of doing a thing or upon the improvement of an existing procedure. Mexican Intellectual Property Institution is the body responsible for validation and issuing of patents in Mexico. In the case of any infringement, the organization helps the owner in enforcing it. An infringer of a patent usually faces punishments through fines or jail term.
Getting a patent in the UK is relatively expensive and strict than in Mexico and South Africa. The individual or organization seeking to patent an innovation should search online on the European Patent to ensure the invention doesn’t exist. The innovator should have an IPO account to be in a position of obtaining a patent their innovation (Apply for a patent, 2015)). Additionally, the innovator should provide supporting documents as a proof of ownership. Regarding fees, the owner of an invention can pay online or cash. In the UK, one can’t patent a military or an open innovation.
Trademark
A trademark may be a sign or design that is used exclusively by a particular company, and it differentiates the business from the others. Some brands include Apple and BMW. The trademark is usually embedded in the enterprise’s products and advertising. The owner of a particular trademark has the right to take legal actions against anyone who decides to use it without permission. An example is where Apple bared a China company from using the Apple sign on a purse. When a business stops using its trademark, another individual can use it. That suggests that a trademark is only applicable during the time of use.
In the UK, the Trade Marks are allocated for in an act of 1994 (Apply for a patent, 2015)). In the UK, one acquires trademark by registering with the Intellectual Property Department. Once one has registered his/her trademark, they can use and even bar people from using it. The registration process 2-1/2 months but the process may be longer in the case of any disputes. One can renew a trademark after ten years or let it expire.
The Mexican Intellectual Property Institution is the body that registers trademarks in Mexico. After registration, the trademark is recognized in Mexico and the owner can use it to trade or advertise their products. The owner has restrictive rights to take legal actions against anyone who decides to use the sign without permission.
In South Africa, sign or expression is only registered as a trademark if it’s not in use by any other company. A trademark can be registered if it’s has acquired uniqueness during the time of use. The distinct mark shouldn’t be renewed after every ten years.
Trade secret
A trade secret may be a formula, patterns or a set of information that is only known by certain individual(s). Trade secrets offer a company or an individual an advantage over players in the market. Importantly, most trade secrets flow in a family, and that’s how they are remains unknown to the public. A trade secret remains hidden up to a time when the holder decides to disclose the information to the public.
In all the three countries, the UK, Mexico, and South Africa, trade secrets aren’t protected by any law since they are already secret. Employees of companies that hold trade secrets, usually sign an agreement not to disclose any information to the public.
Conclusion
Gem Leathers Limited will have a simple time and easy access to incentives if it establishes a joint venture in Mexico or South Africa. However, the company will face political and economic challenges when seeking to create the joint venture in either Mexico or South Africa. While a trade secret doesn’t require legal protection in all the three countries, trademarks and patent require registration.
Bibliography
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