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Table of Contents
Opportunities and Threats of Entering Timor Leste Market
Affiliated Risks/ Threats of Entering Timor Leste.
Strategy for Diversification and Action Plan.
Executive Summary
Proceeding the merger between Freemantle and Sandford a joint venture proposition of entering the construction industry of the Republic of Timor Leste had to be assessed critically for management’s decision. This report is will provide a complete analysis of and the proposed diversification strategy to leverage the business opportunity.
The strategy we recommend is related diversification in Timor Leste broadening in market, services and constructions delivery methods stepwise, as shown below. Silverman (1999), Farjoun (1998) and Markides and Williamson (1994) all advocate that portfolio related investments enable firms to exploit synergies increasing chances of success.
The beginning of the report explains the current scenario of Timor Leste followed by Freemantle’s and Sandford’s (mentioned as Company hereafter) internal situation to expand and diversify internationally. The report later presents the Company’s SWOT and evaluates the opportunities and risks/threats the investment in Timorese market might present. The recommended strategy, solutions and proposed action plan are discussed at the end of the report.
A glimpse of Timor Leste
According to Japan Times (2014), since its independence from Indonesia, in 2002, The Democratic Republic of Timor Leste has progressed remarkably into an economically and politically stable state. Rich in petroleum and natural resources the state’s revenues depends on nearly 90% of oil income.
Figure 1 – Timor Leste Map
Source: U.S. Central Intelligence Agency 2002
Political Situation
Timor Leste has a democratically elected assembly with an elected President as Head of State. On 30th August 2001, Timor Leste conducted its first democratic legislative elections where 91% of eligible voters elected the constituent assembly to serve for a 5-year term (Australian Government, 2015). Prior to independence, the state was under the occupation of Indonesia for 24 years. The determination and independent will of the Timorese people has aided the country to attain a stable political situation. The Timorese government is open to international trade and
Economic Situation
Business Strategy: Timor Leste is amongst the poorest countries in the Asia Pacific with a GDP of $1.4 billion in 2014. The country has a population of 1.2 million people with over half of it younger than 19. The official currency being US dollar has led to a low inflation (CPI) of 2.5% in 2014. In 2014 the economy showed a GDP growth of 6.6% (Heritage Foundation 2014; 419).
The country faces a challenge pertaining to long-term sustainable development. In 2011 the Timorese government devised a twenty-year Strategic Plan (2011-2030) to develop the economy, alleviate poverty and diversify investment into non-oil sectors as well. Currently, the Ease of Doing Business report by World Bank(2016) classifies Timor Leste as a lower middle-income economy. The Strategic Plan envisions to its economy to improve to a middle-income country by boosting tourism, agriculture, education and health services in addition to deepening of the petroleum industry. Infrastructure development and foreign investments are being seen as the bedding rock for this economic transformation. The infrastructure needs include renovation and developing modern facilities – roads and bridges, water and sanitation facilities, electrical power generation facilities, telecommunications and ports. The Timorese government sees infrastructure development as a core support to a modern and productive economy.
Opportunities and Threats of Entering Timor Leste Market
Business Strategy: Before entering the Timor Leste Market, it’s imperative to study the key opportunities and threats relevant to infrastructure and tourism businesses in Timor Leste. Some of these are shown in Exhibit 2(World Bank, 2016). Timor Leste ranked 173 out of 189 countries in ease of doing business, 2016. This is a decline in the global ranking from 167 in 2015…
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