Introduction and Brief Country Background

Myanmar, which is also known as Burma, is home to almost 49 million people and

covers an area the size of roughly 700,000 square kilometers (BBC, 2016). Its currency is the

Kyat and its major language is Burmese (BBC, 2016). In comparison, Canada is home to

roughly 37 million people and covers an area the size of almost 10 million square kilometers

(Statistics Canada, 2011). This means that Canada has a population that is approximately 32%

smaller but lives in an area that is approximately 14 times larger. Moreover, 1 Canadian Dollar

(CAD) is worth around 1,035 Burmese Kyats (MMK) (XE, 2017). This clearly shows how

incredibly weak the Kyat is in comparison.

Myanmar was under the rule of an oppressive military regime from 1962 until 2011

(BBC, 2016). During this time there was little interaction and relations with the outside world

(BBC, 2016). However, a gradual liberalization process has been underway since 2010 (BBC,

2016). Slowly but surely, Myanmar is becoming more connected to the outside world

especially with a major shift taking place in the government since 2011. Since then, they have

unblocked international news websites, as well as other popular websites such as YouTube and

also lifted censorship restrictions allowing privately-owned daily newspapers to be published

(BBC, 2016). However, the state still has many tight restrictions and controls, such as

controlling all of the main broadcasters and news publications (BBC, 2016).

Myanmars Potential for a Foreign SME from Canada

Myanmar has adopted a market-oriented economic system since 1988, although almost

no foreign investment was taking place then because of the aforementioned oppressive military

regime (Republic of Myanmar, 2013). However, with a new government in-place Myanmar has
taken many new measures so that control is being decentralized (Republic of Myanmar, 2013).

Old laws, rules and regulations which had previously prohibited and/or restricted the private

sector and foreign investment from engaging in economic activities are now amended to

promote the changes taking place in the country (Republic of Myanmar, 2013). They are now

encouraging development in the private sector, allowing direct foreign investment, initiating

institutional changes, and heavily promoting external trade by streamlining export and import

guidelines and producers (Republic of Myanmar, 2013).

They are implementing a National Development Plan with the goals of accelerating

economic growth, achieving equitable and balanced development, and reducing socio-economic

developmental gaps between many rural and urban areas (Republic of Myanmar, 2013).

Nevertheless, Myanmar is still primarily an agricultural country accounting for 41% of the

countrys GDP in 2012 (Republic of Myanmar, 2013). In contrast, the manufacturing sector

accounted for only 22% of the GDP in 2012, while the service sector accounted for 37% in 2012

(Republic of Myanmar, 2013). Thus, developing an understanding of the local markets and

business will be crucial for a SME from Canada to succeed. However, the potential seems

somewhat limited as the Kyat is extremely weak and there are still many issues with regards to

strict governmental laws, rules and regulations.

Government Standing

Despite the progress Myanmar has made, it is still known for its bureaucratic

inefficiencies and corrupt government (Vlasic, 2014). Myanmar ranks 136 out of 176 countries

on the corruption perceptions index of 2016, an improvement from 2012 when Myanmar ranked

172nd (Appendix A). The ranking of the index is a combination of the countrys abuse of power

through decisions, manipulation, acts committed, and whether or not leaders are benefiting at the

expense of the public good (Transparency International, 2016). Part of the corruption was

credited to the decades of ruling under the military dictatorship.

With hope for change, in January of 2013, the government formed an anti-corruption

committee. With most of the population in poverty (due to corruption), the country will find

difficulty recruiting the people to help fight again corruption. However, the recently passed

Dodd-Frank Act in the United States can be used as an informative tool for Myanmar in

influencing a change in national perspective on corruption (Vlasic, 2014).

CHALLENGES

1) Risk of abrupt changes in the investment policies (will persist as long as the military

retains a central political role). Uncertainty of business agreements will lead to a high-

risk investment. Procedures will be needed to reinforce the confidence of the

international investment community rather than turning them away.

2) Inadequate infrastructure
METHODS OF MITIGATION

1) Complete mitigation of this challenge is not possible in todays Myanmar. However, as a

business partner prior to agreeing to terms, investors should demand more. Demand

clearer, and fairer rules for foreign investment and domestic politics (Nicholson, 2014).
2) The countrys infrastructure will require time to develop and improve. However, as a

foreign investor, tools and resources from other countries can be introduced with the

potential promise of economic growth. Initial precautions and crisis management

strategies will need to be implemented to downgrade the repercussions of losses due to

failures in the infrastructure.

Society Standing

Myanmars population has suffered for generations due to the oppression and abuse from

aggressive leadership. There is also a critical shortage in the health workforce in many of the

remote and hard to reach areas around the country (Sommanustweechai, Putthasri and San

Shway, 2016). The maldistribution of healthcare has resulted in very poor health statuses among

the people in remote regions. This may also play a major role in the high infant mortality rate of

deaths of 49 per 1000 (Table 1). Children are also seen to drop out of school at an alarming rate,

even before completing the primary grades (Badertscher, 2016). The overall educational system

is relatively weak, but the government does not shun education. However, the government

maintains strict censorship of academic research.

Table 1. Social Indicators

 (Country Forecast, 2013)

SOCIETAL CHALLENGES

1) Poorly educated work force

2) Unstable ethnic conflict and rising social tension

METHODS OF MITIGATION

1) Another area of investment will be training. The poorly educated work force of Myanmar

may require additional training to guide through company standards and on standard

tasks. Although time-consuming, empowering workers with knowledge and opportunities

to learn new skills and knowledge may prove to be promising for the hotel. Workers may

illustrate a higher level of ownership and emotional bond to the position and the

company.
2) Though the potential of violent outbreaks is high, the conflict is believed to be mainly

contained in remote jungle areas (Country Forecast, 2013). Decisions on where to locate the

hotel is not only dependent on the traffic of people, but also the safety of the employees and

guests. Considerations of avoiding remote areas with little security and surveillance will be

one safeguard to consider. Investments on security for guests arriving at the hotel as well as

during their stay will need to be planned and enforced.

Security and Economy Standing

Myanmar is known as one of the least developed countries in the world due to past

government corruption and the mismanagement of their economy. However, recently Myanmar
is becoming more connected to the outside world and developed countries are providing

assistance, increasing its likelihood to achieving success. Also, private-sector research reports

that Myanmar has huge potential to become the next economist country in Asia if Myanmar can

wisely use its geopolitical advantage and its various natural resources. Myanmars GDP

increased by 7% in 2015 from the previous year and the GDP Annual Growth Rate in Myanmar

averaged 8.97% from 1994 until 2015 (Myanmar GDP, n.d.).

As Myanmar started to become more global, their tourism also developed and the number

of tourists and attractions started to increase. However, Myanmar is still heavily affected by

internal terrorism. In the past, the country was affected by anti-government militant activity,

nowadays the country is threatened by of Buddhists and Muslims. There are several potential

challenges that could occur if a boutique hotel were to be built in Myanmar. There might be

terror attacks carried out at the hotel during or after the construction of the hotel because of

individuals or parties who are against the idea of the hotel being built. Attacks could also occur

elsewhere in the country, thus affecting the number of tourist entering the country. A possible

solution might be to enhance the security around hotel, but it would incur higher labour cost and

would not protect the hotel against all risks. The creation of a well-developed and all-

encompassing crisis and risk management plan would also be beneficial in mitigating risks.

Also, while major highways and road are starting to undergo construction to increase

safety, most of the roads are still in poor conditions (Burma 2016 Crime & Safety Report, 2016).

One suggestion would be to look for investors and work with the government to help and

accelerate the road repairs to and from the hotel.

Before 2012, the country was rife with corruption, tax evasion, and nepotism. While not

perfect, Myanmar now has a better legal system that protects, facilitates, and determines the
positioning of property and its economy is expected to record solid growth overall as well. Based

on 2016, their highest individual income tax rate is 20%, and the highest corporate tax rate is

30%. Overall tax revenue equals to 6.1% of the countrys GDP, and their income tax revenue has

been rising consistently. Government spending amounts to 28.7% of the countrys total domestic

output and public debt corresponds to approximately 17% of Myanmars GDP (Burma, n.d.).

Even though Myanmars economy is steadily improving, there are still several external

factors that could negatively affect the economy. Floods are a common natural disaster in

Myanmar, and in 2016, there were huge floods that heavily damaged their agriculture. Monsoon

rains and flooding claimed nearly half a million peoples lives and severely damaged crops. In

addition to this, and it affected 30% of the GDP and more than 60% of employment (Myanmar:

Economy, 2017).

Feasibility of Strategies

In the article provided the authors discuss various strategies to overcome challenges that

could be experienced by a foreign SME start up. While some would be beneficial in the situation

given in the case study, not all would be applicable to a new boutique hotel being built in

Myanmar. As Myanmar is a considerable distance from Canada, having to travel between the

countries would make it difficult for a company to maintain a strong presence and build

relationships with the government and local businesses in Myanmar. Several employees of the

company would be required to relocate to Myanmar for several years and the company may have

to consider entrusting certain aspects of the business such as the overseeing of negotiating

business contracts, construction and hiring to newly hired Myanmar managers. Another strategy

discussed in the article refers to the need for constant innovation and technological advancement

in order to protect against intellectual property theft and to maintain an advantage over
competitors. As Myanmar is still a developing country, their technology infrastructure is not

comparable to that of the Western Worlds thus making it more difficult for technological

innovation or even utilizing the technology equipment we have access to in Canada. The third

suggestion made by the article that would be difficult to achieve in Myanmar is developing a

worldwide reputation. As the scenario stipulated in the case study states, the proposal is for a

new boutique hotel to be built, thus the company would not have access to the resources,

especially financial resources, that would be made available to new locations of a major hotel

chain. The company would not have already developed and circulating major marketing

campaigns to partake in, in order to spread the word of a new hotel location, nor would they have

a vetted business model to copy (Reuber, Couper, & Goldfarb, 2015).

While several of the articles suggested strategies are not applicable to the scenario given in

this assignment, the group believed that some strategies would be beneficial for a boutique hotel

to adhere to. The article stressed the importance of selecting entries into a new country

strategically. One aspect of selective entry is deciding on the location of a business. As a

boutique hotel will be reliant on business from tourists, the logical choice would be to build the

hotel in a major city and nearby an international airport. Thus it increases the chances of tourists

booking their stay at the hotel due to the convenience. Also to be taken into consideration is the

quality and responsiveness of local government. With the past upheaval and uncertainty in

Myanmar, any foreign company looking to invest and build in Myanmar should take care to

determine the transparency and ease of doing business of each city under consideration before

committing to one. In the article, the authors use the example of Vietnams corruption to

highlight the importance of investigating other foreign companies already doing business in a

location before selecting one. Ideally, the boutique hotel would be located in a city where lots of
foreign activity is already taking place, as it suggests that other companies are able be successful

there. One of the most valuable strategies discussed in the article is the need to develop and

understanding of the local market and develop arrangements that bridge the gap between foreign

companies and the local market. Information can be gathered from specialized trade agencies.

Bridging arrangement can also be a source of information and help a foreign company navigate

within a local market. In addition to this, if a strong relationship is built, the local market can

also learn about the SME thus making the SME appear to be less risky. Various forms of bridging

arrangement can exist. The most common is partnering with a trusted local representative. This

representative can provide in depth knowledge of local customs and how things are done in the

market which could prove to be invaluable. As well, it could provide a face for the SME that

locals may find more trusting than a foreigners and it could tell the market that the SME is

committed to doing business in Myanmar and respecting their country (Reuber, Couper, &

Goldfarb, 2015).

Conclusion

While there is no doubt several challenges in building a new hotel in Myanmar due to

past political unrest and a still growing economy, as a relatively inexpensive travel destination it

could prove to be a future popular destination for tourists. With many millennials and seasoned

travelers from the Western world drawn to Southeast Asia over the past few years, Myanmar is

only a short trip away from popular spots such a Thailand and Vietnam. With careful marketing

campaigns and positioning, Myanmar could become successful business venture. As the country

remains relatively undeveloped, entering the market now would be the optimal timing before

major hotel chains show interest in the country.

3)
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Appendix

A.
Table 1. Corruption Perceptions Index 2016

Retrieved from http://www.transparency.org/news/feature/corruption_perceptions_index_2016