Concepts of Mega Marketing

Concepts of Mega Marketing Is it possible to gain power over producers by reducing competition and utilising the techniques of what Kotler calls Mega Marketing? Is it possible to gain power over producers by reducing competition and utilising the techniques of what Kotler calls Mega Marketing? What forms of power might a supplier employ, and are there any risks in following this type of strategy? Suggest specific ways in which a supplier might achieve a competitive advantage through the general strategy of offering higher perceived value. The globalisation of trade and increasing competitiveness are issues of critical concern to businesses. The internationalisation of competition has created the reality that the competitive advantage of a wide variety of enterprises is declining. Changes in the marketing landscape have led to a concomitant re-examination and expansion of the underlying principles of marketing strategy. This essay explores some of these factors including the evolution of the marketing concept, domestic and global marketing challenges together with a discussion on generic strategies as a mechanism to achieve a sustainable competitive advantage through differentiation from a supplier perspective. Entry into one or many of the worlds 200 country markets is a function of the marketing strategy followed by a firm, and local country conditions. Marketing aimed at a national market (ie domestic marketing) faces a single set of competitive, economic and market issues across market segments including the tailoring of products to address export markets. International marketing is the next level of complexity whereby the firm becomes more directly involved in multiple marketing environments with adjusted market strategies as to how they sell, advertise and distribute to meet local conditions. Truly global marketing is achieved when a single strategy is followed for a product, service, or company in the global market that encompasses many markets or countries simultaneously. (Jeanette and Hennessy, 1998 and Kotler, 2000) The effects of globalisation and growth in competition may be beneficial to consumers and suppliers of goods and services given the potential for decreases in price and improvements in quality. The downside of global competition is its impact on domestic producers whose livelihood is threatened. Governments, and the local firms and constituencies that influence governments, can create barriers and uncompetitive conditions to limit foreign entrants to local markets. (Jeanette and Hennessy, 1998) The marketing oriented view of the marketing concept is that a firm bases its activities on the needs and wants of customers in an exchange relationship in selected target markets. Constraints in terms of the environmental milieu, such as laws, industry agreements and norms, influence marketing strategy. (Gronroos, 1994) This implies a balancing act to optimise production relationships to meet the ultimate customers needs and wants which become more complex in a multi-national or global marketing environment. McCarthys (1964) seminal marketing mix concept of product, price, place and promotion (4Ps) has equally evolved as different marketing mixes have been put forward for different marketing contexts including product versus service marketing and domestic versus global marketing. Work by Kotler (2000) suggests an adaptation to the marketing mix termed mega marketing as a strategy to enter blocked markets where discriminatory legal requirements, political favouritism, and cartel agre ements, social or cultural bias and unfriendly distribution channels exist. The model suggests an adversarial win-lose relationship rather than lean supply collaborative relationships in the value chain that recognise longer term interdependence. Cox (2004) argues that that win-lose relationships occur because buyers and suppliers misread circumstances and pursue inappropriate power and leverage strategies that reinforce an adversarial style. This may be especially true in a foreign marketing environment. Mega marketing is defined as the strategic co-ordination of economic, psychological, political and public relations skills to gain the co-operation of a number of parties in order to enter or operate in a given market. (Kotler, 1986, p117) By implication therefore, power and public relations are two extra Ps added to McCarthys 4P marketing mix concept. Kotler argues that the traditional marketers use of accepted theory is in itself an impediment to successful penetration of a blocked market and that it is not only penetration, but the retention of any market share by innovative methods that will ensure a sustainable competitive advantage for the firm. (Kotler, 1986 and Kotler, 2000) The use of power in this context is seen as a push strategy whereas public relations, is a pull strategy. Influencing public opinion has a longer lead time but its effectiveness in influencing the mindset of the constituency of the creator of the barriers to entry ensures a longer term success in the market. For example, firms may identify areas that will be positively affected by corporate social responsibility initiatives thus cultivating goodwill as part of a public relations initiative. (Zadek, 2001) The application of mega marketing principles differs further from traditional marketing in terms of higher investment costs, a mix of specialists to support the marketer and the use of power to achieve the firms objectives. The notion of inducement or reward as a means to achieve an end is common practice in a marketing environment. The use of coercive, legitimate, expert or referent power in order to influence on behalf of rather than over individual or grouping in order to achieve an end is less common. The use of coercion in an adversarial arms length hostile fashion to cause harm raises ethical issues, especially important in a world where good corporate governance is a critical success factor. The use of legitimate power through political intervention in favour of a foreign entrant is more likely to succeed as is the use of expert power where an exchange of funding for political campaigns, knowledge, or technical assistance in return for co-operation is used. Referent power and association with prestige in terms of the exchange can be equally effective. (Johnson and Scholes, 2002 and Schmitter, and Streeck, 1991) It is therefore the understanding and choice of appropriate power application in a given environment that determines an effective strategy in entering the market. The power structure of a target environment can be analysed by understanding of both the visible and invisible power actors. Power actors are agency or government and community stakeholders who have the capacity to take and effect decisions. The power actors may exercise power through pyramidal, factional, or coalitional structures. In a multilevel hierarchal or pyramidal structure, power is concentrated within a single, cohesive leadership group. In a factional structure, power is concentrated in two or more robust factions that are competing for power. In a coalitional structure, power is concentrated less strongly whereby actors and associations work together in fluid coalitions. An amorphous structure exists where power is diffuse, with little or no pattern of coalition building or centralised leadership. The inappropriate use of power or alignment with unsuitable power actors can damage the firms strategic outcome. (Keegan, 1999, Kotler, 1986 and Schmitter and Streeck, 1991) Und erstanding the power landscape in the context of the greater business and economic environment allows the marketer to plan a strategic intervention with the objective (for example) to gain power over producers and hence reduce competition. Kotler (1986) suggests that three broad power strategies can be followed: neutralise opponents by offering to compensate them for any losses, organise allies into a close coalition and hence reducing opposing collective power or turn neutral groups unaffected by the firms strategy, into allies. Licensing, joint ventures, and joint ownership represent alternative expansion strategies that depend on how the firm configures its value chain. Tactical implementation plans may be linear or multilinear depending on market requirements. The decision around the mechanism of entry into a market is an imperative that can minimise the risks associated with that entry and influence strategic advantage. (Kotler, 1986 and Kotler, 2000) Keegan (1999) argues that strategy is integrated action in pursuit of a competitive advantage. Understanding a firms unique value from a consumer perspective is the basis for ensuring that the competitive advantage is sustainable. The successful application of mega marketing principles to blocked markets to enable access will allow the firm to follow one of the two generic options developed by Porter that he identified as either leading in cost, or leading in differentiation. The first option encourages continuously growing competitiveness, while the second entails continuous quality improvement. Porter highlights the role of innovation as the capacity to generate knowledge and the key to building competitive advantage. The competitive scenario comprises inter firm rivalry impacted by the influence of suppliers and buyers threatened by substitutes or by new entrants to the industry. When describing the companys competition in relation to the competitiveness of nations, he identifies the companys strategy, structure, and rivalry as the source of competitive advantage. (Johnson and Scholes, 2002 and Keegan, 1999) The generic options translate into a matrix model with quadrants of cost leadership, product differentiation, focussed differentiation, and cost focus strategies. This allows strategic decision making with respect to the market scope and product mix within which a firms competitive advantage will be realised. For example, a policy of broad or narrow target market differentiation is appropriate if a firms product delivers actual or perceived uniqueness and quality in the eyes of the consumer. This may include better performance, superior design, or better fit with customer needs. Differentiation can be an effective strategy to defend market position and obtain above average returns through premium pricing. (Johnson and Scholes, 2002 and Keegan, 1999) Firms that succeed in a product differentiation strategy typically have internal strengths that include access to superior research and development capability, a reputation for quality and innovation, a skilled and creative product development team and a talented sales and distribution capability supported by a strategic marketing process that communicates and reinforces brand loyalty and the strengths of the product. Risks associated with this strategy are imitation by competitors and changes in customer tastes. Firms that succeed in a focussed differentiation strategy build on core competencies and concentrate on a narrow market segment in order to develop a high degree of customer loyalty as a barrier to entry to competitors. Although lower volumes increase the bargaining power of suppliers, cost increases can be more easily passed onto customers because product substitutes are not readily available. Few generic competitive advantages are long lasting and Hamel and Prahalad warn t hat the defence of existing of advantages is as important as the creation of future advantage. (Hamel and Prahalad, 1994 and Jeannet and Hennessey, 1998) In summary, the global marketing imperative to take advantage of opportunities for growth in an environment where protectionist policies inhibit expansion has led to an evolution of the traditional model of the marketing concept to include mega marketing as a mechanism to gain access to blocked markets. The successful entry into the market requires an understanding of the local environment and the application of power and public relations in order to gain competitive advantage throughout the value chain. Power over producers can be attained by reducing competition by means of a number of techniques by engaging the power actors through a researched power structure. At an industry level, the choice of entry mode could facilitate reduced competition based on alliances or collaborative business forms. An analysis and understanding of all risks associated with the selected strategy is essential, if a sustainable competitive advantage is to be achieved. As part of this approach, an applica tion of a differentiated generic strategy to the market may limit risk through premium pricing and reduce dependence on supplier costs. References Cox, A. (2004) The Art of the Possible: Relationship Management in Power Regimes and Supply Chains. Supply Chain Management: An International Journal. Volume 9, 5. Gronroos, C. (1994) Defining Marketing: A Market Oriented Approach. European Journal of Marketing, Volume 28, 10. Hamel, G. and Prahalad, C. K. (1994) Competing for the Future. Boston, Harvard Business Press. Jeannet, J. P. and Hennessey, H. D. (1998) Global Marketing Strategies Fourth Edition. Boston, Houghton Mifflin. Johnson, G. and Scholes, K. (2002) Exploring Corporate Strategy Sixth Edition. Harlow, Pearson Education. Keegan, W. J. (1999) Global Marketing Management. New Jersey, Simon and Schuster. Kotler P. (2000) Marketing Management, Millennium Edition. New Jersey, Prentice Hall. Kotler P. (1986) Megamarketing. Harvard Business Review Volume 81, 3. McCarthy, E. J. (1964) Basic Marketing. Homewood, Richard D Irwin. Schmitter, P. C. and Streeck, W. (1991) From National Corporatism to Transnational Pluralism. Politics and Society. Volume 19, 2. Zadek, S. (2001) The Civil Corporation. Sterling, Earthscan Publications.

“Me Talk Pretty One Day” by David Sedaris Essay

Write an essay (900-1200 words) in which you analyse and comment on David Sedaris’ essay â€Å"Me Talk Pretty One Day†. Part of your essay must focus on the writer’s tone and on the attitude to learning foreign languages that is explored in the text. Text â€Å"Me Talk Pretty One Day†, an essay by David Sedaris, 2005. The essay â€Å"Me Talk Pretty One Day† is an essay about a guy learning a foreign language, written by David Sedaris. The main character(David) moved from New York to France, to learn the language. As he first moved to France, he was excited. He would not mind talking to people and having a conversation with them on French, but that changed after he had his first class. The writer’s tone is calm. He does not seem as a guy who has any injustice towards anyone, basically he seems like a decent guy. But as he turns up at his first class, his appearance changes and so does his reflections. He does certainly not like his teacher. He mentions; â€Å"The teacher killed some time accusing the Yugoslavian girl of masterminding a program of genocide, and I jotted frantic notes in the margins of my pad.† The sentence â€Å"The teacher killed some time accusing the Yugoslavian girl† says something about his thoughts about her. By saying that she was killing some time of accusing a girl of something, he shows a negative side about her. He does not mention any good-related thing about her at all. He definitely dislikes his teacher, and he comments her ways of teaching, in his own mind. He explains how ignorant she is. He mentions that she accidentally poked a girl in the eye with a pen, but according to the teacher, it was the girls own fault. David, the writer does not want to be humiliated by her. As she â€Å"kills† time humiliating the other students. David wants to prepare himself for the worst case scenario, so that he might get the opportunity to not be humiliated and stepped on, in front of his new class-mates, and especially his new teacher. Ex; â€Å"I took to spending four hours a night on my homework, putting in even more time whenever we were assigned an essay. I suppose I could have gotten by with less, but I was determined to create some sort of identity for myself: David the hard worker.† He wanted to create a new identity for himself. He mentions the â€Å"hard worker†.

Music Is An Important Part Of The Entertainment Industry

Music is an important part of the entertainment industry, however, that is not its only use. Music has always been influential in society. Many times it has helped to start social and political revolutions, or musicians have written music about aspects of politics that they do not agree with. An example of the latter is the style punk rock, which bases its lyrics on complaints against those who control society, as the Sex Pistols did when they provoked riots against the Queen of England. One of the first radical changes in music that had a big influence on society was the birth of jazz, when musicians started to break away from the structure and rules of classical music, and decided to relay on improvisation. After the â€Å"jazz revolution† there have been many other changes, such as rock roll in the 50s. Music has the ability to contribute to social movements, even under the power of corporations that seek profit out of it and prefer having uninformed audiences. Socia l media is the best way of helping music that can make this happen become more popular in our current society. Jazz is the first musical genre derived from classical music that has made a radical change of this nature. The style of jazz relays on improvisation, which has been avoided in Classical music at all costs. It emerged in the USA at the beginning of the 20th century, so jazz is essentially American music. But in â€Å"What Makes â€Å"Jazz† the Revolutionary Music of the 20th Century and Will It BeShow MoreRelatedThe use of computer technology in entertainment1069 Words   |  5 Pagesin Entertainment. â€Å"The improvements in computer technology over the past decade have made video and audio streaming commonplace, making the computer a sophisticated and powerful entertainment medium† (Haupert, 2012, p.39). The use of computer technology is not limited to business, health, education and manufacturing industries but also widely used in entertainment and arts world. 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The Internet can be used in many different ways but entertainment has improved the internet’s popularity.Technology has provided use with more ways to entertain

Economic Growth Of The Republic Of Mauritius Finance Essay - Free Essay Example

Sample details Pages: 12 Words: 3598 Downloads: 5 Date added: 2017/06/26 Category Finance Essay Type Argumentative essay Did you like this example? Background The Republic of Mauritius, advantageously located at the crossroads of investments in the Indian Ocean region, has benefited from surprising socio-economic growth with a huge economic growth averaging 5% for the past 20 years (Mauritius Bright Future; Grand Baie Trust). This is the result of wary economic governance support by sound business and financial infrastructure with a reputation of trustworthiness, competence and integrity. The Government initiated a wide range of incentive to attract investments, and as a result, the greater part of the Mauritian economy is accounted for. Mauritius has faced growth as an outstanding offshore financial service centre due to the fact that the legal and fiscal structure has been further strengthened through the performance of a series of up to date and user-friendly legislation and this fact is adding a new aspect to the economic prosperity of the country. Don’t waste time! Our writers will create an original "Economic Growth Of The Republic Of Mauritius Finance Essay" essay for you Create order Mauritius and DTTs According to information that is available from the Ministry of Finance, the first double tax treaty by Mauritius was by Germany and the year the treaty was signed dates back to the 1978 but it was ratified in 19901. As of this year, the number of treaties signed comes to 35 and a series of treaties are under negotiation. Most of the treaties are based on model conventions established by international organisations such as the OECD (organisation for Economic Co-operation and Development) or the United Nations, where the former accounts mainly for the interest of industrialised countries and the latter for those of less developed economies. 1: Annex 3: Summary of the features of the double taxation avoidance treaties from the Ministry of Finance. The reason as to why the country started to sign DTTs is the same as other countries. That is, whenever funds are invested from one country to the other, the returns on investment are liable to taxation in both countries. The purpose of double taxation avoidance is to get rid of this double taxation between the two countries signatory of the treaty, this ought to be done without creating loopholes that permit tax evasion. In doing so, the treaty encourages the movement of capital and persons as well as boosting trade between the two countries. An argument similar to this was made by Dagan (2000), Radaelli (1997) and Gravelle (1998). The Indian Tax treaty had reinforced the coming of Mauritius as main channel for FDI into India. In 2002, the Indian tax authorities due to suspected abuses by Indian-resident investors questioned the treaty. However, after a string of impressive court hearing, the status quo was brought back. The Indonesian treaty lapsed for similar reasons on the 1st January 2005 after the Indonesian government informed the public about the termination in 2004. The matter was closed without any discussion regarding the issue The reasons given were that, allowing an assessment and evaluation of the implementation of the treaty, the Indonesian government has concluded that there was an abuse that was inflicting a loss upon Indonesia. The letter referred specifically to those foreign companies that are registered in Mauritius as Global Business Licence companies and to our domestic legislation that enabled them to obtain tax dispensation or nullification on their business Income from Indonesia, said the Government (source: www.lowtax.net/lowtax.html) Mauritius Reason of going for DTTS Most direct tax treaties were negotiated with FDI in mind (Manoj Pant Professor, JNU, 2006). Hence, one has a reason to believe that Mauritius went for DTTs for the same reason. Mauritius went for tax treaties so that investors investing in the country are comfortable. Treaties provide a structure for so that there is no or very minimal conflicts between the contracting parties. The treaties are also advantageous in the sense that it helps in signalling to investors that Mauritius is part of the international organisation and one can carry out business and investments there (Diane Ring(2006)). Another reason as to why Mauritius favours DTTs is so that companies may get some relief from taxation in both the country of origin and the country it is investing in. In addition to that, with the varying tax systems around the world, no taxation scheme can guarantee an impartial capital export or import regime. DTTs also reduce tax avoidance, tax evasion and other more or less legal tax-saving strategies such as transfer pricing. Mauritius and the offshore Jurisdiction Mauritius launched its global business sector in 1992 and has concluded several tax treaties since long before that. The Government has set up a wide choice of incentives to attract investment and consequently, while the agricultural sector used to lead, tourism followed by textile production makes up a huge part of the economy of Mauritius. The legal and fiscal framework has been strengthened through a series of modern and user friendly legislation being into practice. This fact has helped Mauritius rise as a prominent offshore financial services centre. Trends in the Mauritian Offshore sector On an international scale, the offshore industry has highly helped to bring forward the global financial structure. This chapter illustrates the activities, strengths and weaknesses of the offshore sector in Mauritius. It also depicts its role and growth throughout the last nine years. Definition In most countries, an offshore jurisdiction is often perceived as a conventional key to decrease disproportionate tax burdens levied on investors. According to the International Monetary Fund (June 2000), Offshore finance is, at its simplest, the provision of financial services by banks and other agents to non-residents. Worldwide offshore activities have been one of the various famous issues which had attracted the attention of the international standards involved in the international regulatory system. Over the years, Mauritius has diversified its economic activities from the sugarcane export through the manufacturing sector and has now become a nearly full-fledged offshore investment platform. Offshore business has been a useful tool for the financial integration of Mauritius and has greatly contributed to its economy. The Financial Services Commission outlined that Mauritius continued to develop as a world class financial services centre, focusing on high levels of service and international standards within a business-friendly and professional environment. The Mauritian offshore sector has been able to impose its well-defined status as a valuable business spot. History of the offshore sector In 1989, offshore Banking has been the start of the financial services in Mauritius when the first Offshore Banking Unit (OBU) was licensed. A governmental framework for non-Banking offshore institutions has been operating since 1992. At the time, the Mauritius Offshore Business Activities Authority (MOBAA) was launched to act as a regulatory body for all non-banking business activities. Ever since, the offshore companies and fund registrations grew swiftly. List 1 in Appendix details the activities that the MOBAA consent to. On May 15, 2001, the Financial Services Development Act was approved. It recognized the FSC as an institution reliable to perform all functions that were previously carried out by the MOBAA. Since then, the FSC has been motivated towards the consolidation of a flexible and robust regulatory environment for financial services. In August 2002, the Financial Intelligence Unit (FIU) has been established to fight against crime, alleged money-laundering and terrorism. The key opportunity which hugely helped to the development of the Mauritian offshore sector is the network of tax treaties, especially with India. Double taxation agreements provided striking features to Mauritius as an appealing investment prospect. Mauritius has now attained a number of 35 tax treaties with the rest of the world. Thanks to India which has been promoted as the 2nd most attractive global FDI location from the World Investment Prospects Survey 2008-2010 published by United Nation Conference, Mauritius is being seen as a flourishing fund administration. Types of companies operating in the offshore sector of Mauritius Offshore activities are carried out by various corporations in Mauritius which are explained below. The descriptions are largely inspired by FSC annual reports and the Income Tax Act. Global Business Companies Under the Financial Services Development Act 2001, a global business is defined as a corporation holding either a Category 1 or a Category 2 business licence. GBC1 According to the FSC, a GBC1 is a corporation which undertakes any activities listed in the Second Schedule of the FDSA 2001 which is carried on from within Mauritius with persons all of whom are resident outside Mauritius and which is conducted in foreign currency. If properly managed and controlled, a GBC1 might qualify as a tax resident and will take advantage of the Double Taxation Avoidance Agreement (DTAA) network. This provides a golden opportunity for international tax planning. GBC2 If a private company does not conduct any business with the people residing in Mauritius and thus does not deal in Mauritian Rupee and is incorporated under the Companies Act 2001, then it is said to hold a Category 2 GBL. A GBC2 is non-resident by definition and thus cannot benefit from the network of DTAAs available in Mauritius. Better confidentiality being one of its main advantages, a GBC2 is very efficient in holding and managing private assets, given that the company is properly handled. Source: HSBC MAURITIUS: A GUIDE TO GLOBAL BUSINESS Since the initiation of the Global Business Sector (Offshore Sector), its evolution has been quite evident. The number of both GBC 1 and GBC 2 companies has been kept increasing as shown in the above figure of Evolution of Global Business Companies. COMPARISON BETWEEN GBC1 AND GBC2 GBC 1 GBC 2 ÂÂ   ÂÂ   TAX -15% (Effective 3%) -Exempt -No Capital Gain Tax -No Capital Gain Tax -No Withholding tax on dividends -No Withholding tax on dividends -Access to double taxation treaties -No access to double taxation treaties ÂÂ   ÂÂ   CAPITAL AND SHARES -No minimum required shared Capital -No minimum required Capital Shares -No bearer shares -No bearer shares -No par value shares allowed -Par value shares allowed ÂÂ   ÂÂ   Directors and Shareholders At least one director and one shareholder required At least one director and one shareholder required -No corporate director allowed -corporate director allowed -At least one director has to be from Mauritius Director does not have to be a resident of Mauriitus -Annual General Meeting Mandotory -Annual General Meeting Not Required ÂÂ   ÂÂ   Annual Account and Registration -Audited annual account to be filed with FSC -No preparation, filiing and publication requirements for annual accounts -Annual returns needs to be filed ÂÂ   ÂÂ   Requirements Qualified Company Secretary resident of Mauritius The company decides whether to have a resident secretary or not Registered Office in Mauritius to hold book and records Registered Agent in Mauritius to hold statutory books and records ÂÂ   ÂÂ   Others 7-15 days of incorporation period incorporation period of 5 days Continuation/re-domiciliation from/to another jurisdiction allowed Continuation/redomiciliation from/to another jurisdiction allowed May be active in banking, insurance, fund management and any activity involving public money Cannot be active in banking, insurance, fund management and any activity involving public money Protected cell companies (PCC) A PCC is a special type of offshore entity. It allows for the legal separation of assets attributable to each cell of the company whether it is owned by another company or a single person. The procedures for a PCC to be licensed and incorporated are the same as for a GBC1 and can also be converted into a normal GBC1. Trusts This type of offshore vehicle can be set up by either residents or non residents. They provide a legal and efficient way of securing ones asset. Trusts can take various forms; charitable trusts, discretionary trusts, purpose trusts or trading trusts. Qualified global business can be carried by a Trust after obtaining a GBC1 license. A trust may not be able to obtain a GBC2 licence. Socit The Code de Commerce Amendment Act of 1985 allows for the formation of a socit en nom collectif which can be translated as partnership and socit en commandite simple which can be translated as limited partnership. Both are used in order to control and plan investment in the global business sector. The Finance Act 1996 allows the socits to benefit from the DTAAs. OTHER FACTORS AFFECTING FDI No Corruption It is among the countries which have recorded a significant improvement in apparent levels of corruption, according to the 2010 Corruption Perception Index of Transparency International. Mauritius is ranked 39th out of 178 countries (source: https://www.transparencia.org.es), and is second in Africa, after Botswana. Corruption is not seen as an obstacle to foreign direct investment. Hence to keep up with the progress of FDI, the government must make sure that corruption is fully combated. Greenfield Investment Greenfield investment refers to the fact that companies from abroad (multinationals open up branches or subsidiaries in Mauritius. This acts as a capital inflow to the country, thus such investments may be encouraged to keep FDI sound. Evolving from employment quantity to employment quality Just going on creating employment is not enough to improve the states economic position. Quality of the employment provided also need to be considered. For example, just recently, the government started advertising about the number of job vacancies in different sectors, mainly in textile industry. This is employment quantity. There are many qualified persons, those possessing degrees in science, history and others, who are unemployed. Employment provided of these people would be employment quality. Economic upgrading Economic upgrading is important as a next step to industrial change. It is important to consider a countrys investment strategy. Developing the financial markets may help to attract FDI as the World Investment Report estimates that for every FDI dollar, 3 dollars are raised locally. The government also needs to upgrade existing FDI in medium term, that is, it needs to let firms think regionally, after establishing linkages, raise education levels, and tap niche markets. DOUBLE TAXATION TREATIES AND FDI IN MAURITIUS Developing countries sign double taxation treaties (DTTs) in order to attract more foreign direct investment (FDI) (Eric Neumayer, February 2006). The same thing can be said in the case of Mauritius. The latter restricts its capability of taxing the income of foreign investors so that more FDI is the reward. If an international company is faced with double taxation, this can represent a hindrance to foreign investment. Through double taxation treaties, the incentives for investment are a low corporate tax rate or exemption from tax, exemption from customs and excise duties on imports of equipment and raw materials; exemption from tax on dividends and capital gains; a low rate of 5% registration duty for notarial deeds; free repatriation of profits, dividends and capital; and reduced tariffs for electricity and water. Even for Mauritius, the use of fiscal incentives (tax concessions, cash grants and specific subsidies) is standard just like other offshore jurisdictions. Mauritius sign s DTT for various reasons. Investors originating from the countries with which DTTs were signed invest in Mauritius, they benefit from the DTTs as the country provides them with safety measures and steadiness with regards to the issue of taxation. The country also commits to granting certain relative standards such as treating foreign investors better than national investors. Thus, this should be acting as motivation for them to put in funds in the economy. As a result, one would be expecting FDI to be quite high, both the inflow and outflow. https://www.ic.keio.ac.jp/en/download/jjwbgsp/2007/5_Mauritius.pdf DTT MAURITIUS.. TABLE Contribution of Offshore sector to the economy The Mauritian offshore sector has created a well-defined position in the domestic development. Since its establishment in 1992, it has continued expanding at a growing pace. In order to assess the impact of the offshore sector on the economy data from various reports of the FSC and the CSO will be analyzed. The data considered is based on four factors: 1. The contribution to GDP 2. The evolution in the employment levels 3. The growth of GBCs 4. The financial performance of NBFIs. 3.4.1 Contribution to GDP The link that exists between the offshore sector and the economy can be studied by considering the contribution of the financial services to GDP. GDP is defined as the grand total money value of all goods and services produced in an economy over a specific period of time. Table 1: Gross Domestic Product by industry group at current basic prices, 2000-2008 In the beginning of the millennium, textile was the predominant agent that added most to GDP; nevertheless, the above table shows that financial intermediation also has its share. In 2000, Financial Intermediation accounted for 9.6% of GDP and Textile represented 11.9%. However in 2008 the former represented 10.9% of GDP while Textile stood for 5.4%, or approximately half the value of Financial Intermediation. In nominal terms, Financial Intermediation grew by 150.2% in nine years from 2000 to 2008. This impressive growth is the result of attractive investment incentives and structuring offshore regimes. Financial Intermediation can be broken down into three parts; the Insurance sector, the Banking sector and other. The latter is believed to account for the offshore sector. As shown in the table below, financial services sector, whether it is banks, insurance or other, has continuously increased and led to constant GDP growth. Table 2: GDP by industry group at current basic prices. The share of the offshore sector in the GDP increased from Rs1950 millions in 2005 to Rs 2910 millions in 2008, which represents a nominal increase of 49.2% in only 3 years. This is due to the independence of the FSC and the liberalizing of the international Global Business Companies system in 2007. As from its establishment, the offshore business has not stopped expanding and contributed to the development of the economy. While in 2000 the offshore sector represented 0.82% of GDP, in 2008 it grew to reach 1.25%. Another way of analyzing the contribution of the offshore sector to GDP is by considering the sectoral growth rates of GDP. Table 3: Gross Domestic Product by industry group sectoral real growth rates (% change over previous year ), 2000 2008 The table above shows that contrarily to other sectors of the economy such as Sugarcane and Textile, Financial Intermediation sustained a positive growth rate from 5.8% in 2002 to 10.1% in 2008 and for most of these years the growth has been greater than those of the other sectors. In fact, the positioning of the island as a business hub, the competent human capital base and network of tax treaties continue to be the key tools to accomplishment of that sector. Table 4: Gross Domestic Product by industry group sectoral real growth rates (% change over previous year), 2005 2008 The table shows that the offshore sector has been performing very well for all these years, with an ongoing positive growth rate .The average growth rate of the offshore sector was 11.8%. This might be due to a good and strong supervision and efficiency from the part of companies. Employment Generation Another direct impact of the offshore sector is the striking job creation that an international financial center may provide for the natives. Table 5: Employment in financial intermediation As shown in the table above employment in Financial Intermediation keeps on increasing. Originally, the emphasis was focused on employment creation in manufacturing rather than expansion of a financial services centre; but this has progressively changed. From 2000 to 2008, the increase in employment was of 51.2%. The insurance sector is the largest employer in the non banking financial institutions. The figures presented above comprise of local and expatriate staff, but the sector depends more local staff than expatriates. In the offshore sector most of the people employed work in Management companies or in Corporate trustees. The share that Financial Intermediation represents in total employment also did not cease to increase during all these years. Growth of GBCs A useful indicator to identify the impact of the offshore sector to the Mauritian economy might be to evaluate the number of licences that have been granted allowing companies to operate in Mauritius. New companies help to develop innovative activities and expand the existing ones in the offshore sector. The table below shows that Mauritius has developed a niche industry in the increasingly competitive global business sector. The sector demonstrated a total of 36711 licensed GBCs in 2008. Throughout the years, the number of licensed GBC1 kept on increasing. Its growth rate was continuously positive. The number of GBC1 almost doubled in 2008 as compared to 2001. In 2008 there was a fall in the number of license granted to GBC2 from an 11.88% increase in 2007 to a 9.12% increase in 2008. This could be attributable to the financial crisis. Even though, it was predicted that the credit crunch would have no impact on Mauritius, it was found inevitable that its offshore sector would be hit as less foreign investors came to Mauritius. However, the average growth rate was maintained showing a strategy building exercise to face the numerous challenges. Table 6: Growth rates of GBCs Financial performance of NBFIs When considering the value of the assets and profits as well as the turnover of NBFIs, one can assess the impact that this sector has on the economy. Table 7: Financial performance of NBFIs As can be seen from the table above, whether it is for GBC, insurance or for other NBFIs, assets, turnover and profit kept on increasing. In two years time the assets of insurance companies in Mauritius increased by approximately 27.5% while the profits of GBC almost tripled. Though it is not present in the table, the total value of the assets of the NBFIs represents a very high percentage of GDP illustrating that Mauritius is now slowly diverging from its other sectors and emphasizing on Financial Intermediation which acts as a route for investment. Insert FDI CTRY ANALYSIS 3.5 Conclusion The various activities and evolution of the offshore sector have been targeted. The above figures in short reveal that the offshore sector as well as the whole of the financial services sector in Mauritius is in good health and is very likely to sustain it.