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New Market Entry

New Market Entry

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This paper sets out to analyze Subway Restaurant’s entry to the Colombian market. Colombia has a population of over 45 million people, the 29th largest population in the world and the 2nd largest in South America. In 1999, the country suffered a recession and the recovery from that downturn was long and painful. Nevertheless, GDP growth in recent years has been remarkable, reaching 8.2% in 2007. This was one of the highest growth rates in Latin America. The Colombian stock exchange has also climbed from 1,000 points in July 2001 to more than 7,300 points by end of 2008 (Banco de la República, 2010). The International Monetary Fund estimated Colombia’s nominal GDP in 2007 to be US$202.6 billion. In terms of purchasing power, GDP per capita is $8,205. The currency of Colombia is the peso. The current exchange rate of the Colombian peso is 1900 Colombian pesos to 1 U.S. dollar. Colombia is a free market economy with key investment and commercial ties to the United States of America. In 1990, the government of President Cesar Gaviria initiated economic liberalization with financial deregulation, tariff reductions, privatization of state-owned enterprises, in addition to the adoption of a more liberal foreign exchange rate (globalEDGE, 2010). With these policies in place, import restrictions were eased and most sectors become open to foreign investment. Since President Uribe’s election in May 2002, Colombia has become one of the most stable economies in the region. Colombia’s improved security, steady economic growth, sound government policies, stable political environment, wide range of opportunities and moderate inflation make it worthwhile for Subway to expand its business in the country.