Operations Management

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Operations management case study

Iran : The Mideast 's Model Economy

March 13 , 2008 Iran : The Mideast 's Model Economy

A large consumer market , high current income , and income reserves are all factors that contribute to Iran 's positioning to become the model economy for the Middle East region . The population of 69 million people is the largest in the Middle East . Oil prices account for the country 's high income . The large amount of gas reserves is Iran 's insurance of future income

It

is interesting to note that a major U .S . interest in Iraq is to turn Baghdad into the model Middle Eastern economy . Iran 's shared interests with the U .S . included bringing down the Saddam Hussein regime , and stopping the activity and influence of the Taliban in Afghanistan . Iran is supplying goods to its neighbor Iraq . Iran 's independent interest in Iraq is that a Shiite government will remove al-Sadr from power thereby facilitating a U .S . withdrawal and a diplomatic alignment between Iraq and Iran

Strategic Issues : Problems and Opportunities

Economists compare Iran 's economic growth to that of China 's , stating that a solution to social and political challenges could facilitate a double digit economic growth factor . The current economic climate is characterized by consistent growth over the last four years , surplus trade balance 35 billion in currency reserves , and aggressive privatization of assets and enterprises . The current political climate is characterized by the shift from a religious majority to a parliament run by entrepreneurs who are highly focused on the economy . They have maintained the moderate to liberal social climate in Iran . The goals for the conservative majority are to further improve the standard of living in Iran , to elect a conservative president , and to repair diplomatic relations (tensions over nuclear issues ) with the U .S

The Iranian government has been aggressive in privatization efforts selling 1 .3 billion in assets to private companies . However government and religious leaders retain a 50 stake in these private concerns . Outside investment is controlled and limited . For example foreign investors cannot buy rights to Iranian oil . They can only participate in buy backs which give fixed returns back to the Iranian government . This policy is believed to be response for the decrease in oil production since 1979 . As in many cases of government-private sector business arrangements , corruption abounds . The Iranian stock exchange is filled with opportunities for both local and foregn investorss due to an increase in Initial Public Offerings . Thes IPOs were fafilitated by the government granting foreign banking licenses and by privatizing the auto industry and slowly softening tariffs on auto imports . The Secretay General of the stock exchange suggests opening trading floors in other cities to attract local investors , and creating separate classes of investment vehicles to attract foreign investment

Analysis and Evaluation

Iran has managed to grow its economy despite diplomatic tensions with the West , government control over most enterprises , and limited foreign investment . This would probably...