Business Expansion of Airdri Company to Europe: Factors, Modes of Entry and Porter's Five Forces Analysis

This report discusses the reason for Airdri company's expansion to Europe, the macro-environmental factors affecting its internationalization, Porter's five forces model, and recommendations. It also covers the modes of entry and Porter's diamond theory. The report includes a company description, location, and external factors such as Brexit, COVID-19, labour market, culture, inflation, GDP, tax policy, and Porter's diamond theory. The modes of entry discussed are partnership, exporting, licensing, and franchising.

RESIT MODULE
ASSESSMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
Reason of expansion of Airdri company-....................................................................................3
External factors:...........................................................................................................................4
Macro factors:..............................................................................................................................6
Porter diamond:...........................................................................................................................7
Modes of Entry-...........................................................................................................................8
Porter's five forces-......................................................................................................................9
Recommendation:......................................................................................................................11
CONCLUSION..............................................................................................................................11
REFERENCES................................................................................................................................1

INTRODUCTION
Business expansion is practised by the companies to grow the business by increasing its
profits. This problem is usually faced by every start-up business as well as by the successful
businesses to enter into the different market of the other country. This assessment report will
discuss the macro- environmental factors which can affect the internationalization of the Airdri
company to Europe as well as the reason for expansion of this company. Further, this will also
include the Porter's five forces model to assess the problems which can be faced by Airdri in
Europe. Later it will include the recommendations.
 Company Description: This company manufactures the hand dryer. It is the company
which is offering wide variety of hand dryers to the company. This company was started
by the two family brothers. They are manufacturing hand dryer in a very beautiful design
that they can suit every type of wash rooms.
 The location- Airdrie is the UK based small- medium enterprise (SME) which is planning
to expand its business in Italy, Europe.
MAIN BODY
Reason of expansion of Airdri company-
The Airdri company is presently in the stage of planning the expansion to the Europe country.
1. Increases the revenue- The businesses can achieve only to a limit in the home country
so for growing more it is very important to expand in the other country. Airdri company
expansion in Italy, Europe will enable them to earn more revenue as they will be able to
explore more customers entering into new market.
2. Competitive advantage- Expanding the business tom other countries before other
countries think, this will help them in accessing more customers of the new market and
can lead in staying ahead in competitive market as their will not many competitors will
operate.
3. Lower the costs- As company is operating since many years it will help the Airdri
company to lower the unit costs. They can lower the operational costs and can save
money. Airdri company can reduce the costs by expanding its business in Italy, Europe.

4. Attracting customers- Expanding in new country helps the company to attract more
customers in the new market as by seeing new products and services people attract to
these things and the customers are increased. Airdri company can attract more customers
in new market as well as the products will also spread to many regions.
5. Improves Reputation- The companies usually expand their business to provide reliable
services to the customers of the new market. This enhances the reputation of the
company. Airdri when expands its business in Italy, Europe it will help them to boosts
their reputation in the new market.
6. Greater access to the talent- Another main reason of expansion is that company can
access more talented and skilled employees in the organization. Airdri company
expanding its business to Italy, Europe to access more talented and skilled people for
their growth of the company and can hire diverse employees (Clark, Li and Shepherd,
2018).
External factors:
Airdri is planning to expand their business in European market, this company deal in
market of the UK. It is very clear that dealing in different nation where conflict can be seen is

challenging for the company. Airdri will going to face certain challenging when dealing in
European, these are:
Brexit: Brexit is one of the most common term in the world, this simply means exit of the UK
from European Union. UK decided to leave EU and craft their own policy.
COVID-19: COVID-19 is well know word to everyone, this impacted every sector of the
economy. UK have faced huge issue due to COVID, economic stability was impacted and SME
faced issue in survival. Airdri is planning to enter European market where they will enjoy benefit
but biggest issue is COVID-19 restriction (Kalogiannidis, 2020). Apart from spread of COVID-,
there are many reasons EU have more restriction on local businesses as well.
Labour market and wages: labour marker play vital role for those business organization who
plan to enter new market, company need to keep eye on labour market and current wages
demand by worker. European labour market provide skilled worker to businesses of the UK,
their wages demand was favourable before Brexit but changes where made (Adams, 2018). The
Airdri will going to face issue in hiring skilled worker on board. This company have to face
aggressive European government who continuously taking steps to better their market.
Culture: Culture of Italy is different from the UK, there are similarities but there are major
difference as well. Businesses who are planning to enter Italy, EU market have to face diverse
culture, taste and choice of people will be different from customer of the UK. Culture will
become issue for Airdri, customer of Italy, EU might not like product because this belongs to
different culture. Although culture never become issue for business who want to enter different
market.
Macro factors:
Inflation: inflation is one of the most important thing an company need to understand to survive
in the market, after COVID-19, inflation rate of European economy up to 5.0% which is quite
challenging for Airdri company to survive in the market. The HICP (Harmonized Index of
Consumer Price).
Impact of political factor- The government has much impact on the inflations as Italy
government make new regulations this increases the costs and with this the shortage of the
commodity in the country will cause inflation. This has direct impact on the businesses.

Impact of economic factors- The demand and supply of the goods and services impacts the
economy of the UK and this leads to increase in the prices of these goods and products which
results in the inflation. The business in the Italy may have impact of these factors.
Impact of technological factors- Technology helps in increasing the productivity level which
lowers the rate of wage growth and this will lead to delay in rising of the inflation. The business
of the Italy may have impact of this factor.
GPD: GDP of a country play vital role when it comes to expansion process, Airdri need to
understand GDP of Italy before expansion because after COVID-19 impact, Italy is facing issue
in surviving the market.
Impact of Political factors- Political stability and instability affects the GDP the most. There
are many laws and policies made by the government which may impact the business in Italy.
Although there is political stability in the Italy but policies and laws can affect.
Impact of economical factor- The GDP is impacted the most by the economy. The economic
factors such as tax rate, interest rate, labour and many more has high impact on the GDP. The
GDP has much impacted by the Covid so this may affect the business in this country. Because
low GDP of the country, the businesses not be able to work smoothly.

Impact of the technological factors- The technology is rapidly increasing in Italy and by this,
the GDP is growing as well. The company may affect because they have to use highly developed
technology for surviving in the market.
Impact of environmental factors- The policies made by the government to save the planet from
the climate change as this may affect the GDP of the country and also the working of the
business operations.
Tax policy: tax policy become major issue when it comes to expansion process, it is very clear
that expanding in European market is challenging because tax will be differ according to the
market.
Impact of political factor: New tax policy of Italy for import/export is not favouring for the
company, government has introduced new section for every company that want to expand in the
country. Under European Union’s Common Customer Tariff, general tax will be 4.2% and duties
will be range between 0 to 17%.
Impact of social factor: social factor means consumer and their demand for the product but due
to high tax rate company might lack behind to fulfil demand of consumer.
Impact of economical factor: tax policy of Italy impact economic stability, this country do not
mainly depend on import/export but new policy will impact economic condition. Airdri will find
challenging when importing raw material from their own country.

Impact of Technological factor: technological factor determine growth of industry, as Airdri in
entering retail market with B2B process then they have to consider latest and fastest technology
that will allow them to survive in the market.
Brexit: Brexit means exist of Britain from European Union which means they can take their own
decision for the betterment of the country. Brexit impact Aidri and its positioning in the market,
there are certain that impact company's positioning, these are:
Impact of political factor: Government of the Italy have made certain changes after Brexit and
develop certain new policy, Aidri have to consider these policy and develop strategies to survive
the market.
Impact economical factor: after Brexit economy was impacted which means Airdri will have to
face economical instability due to Brexit.
Impact of social factor: after Brexit social behaviour of people have changed and their spending
capacity is impact, Airdri will find challenging while survive the market.
Impact of technological factor: technology play vital role when it comes to business growth,
after Brexit there was change in technological advancement that will make it hard for Airdri to
survive the market.
Porter diamond:
Porter diamond is one of the most effective theory that allow one national market to avail
competitive advantage in global economy, in simply words, nation have either latest technology
or they have one special resource that have ability to rule over global economy (Vlados, 2019).
There are different factors of porter diamond that help businesses, these are:
Firm strategies and structure: under Porter Diamond theory, company can enjoy benefit of
national advantage and accomplish goal for expansion. Airdri can enjoy benefit of UK's national
advantage, this company need to strengthen their structure while considering political, social and
economical factor. Airdri need to strong their structure and become stable to enjoy national
advantage.
Demand condition: businesses who consider porter diamond model will have to analyse market
demand of home country which will benefit them, it is very clear that fulfilling demand of local
customer is beneficial for the company, getting success in local marker allow company to be
prepared to enter new market (Distanont and Khongmalai, 2020). High demand will push Airdri

to improve their product line and to be innovated to enjoy national advantage. Expansion will
allow company to resize their market and become more competitive in Italy, EU market.
Modes of Entry-
Modes of entry can be defined as the mechanism by which the company makes entry to
the new markets or other country (Annushkina, and Regazzo, 2020). The entry modes for Airdri
company can be such as -
Partnership- This mode of entry is the most effective way for expanding the business to other
countries. Partnership is the term in which one firm joins the hands with other local partner for
the purpose of sharing profits and losses of the business (Mudambi and Zahra, 2018). Airdri
company using this mode of entry will be suitable for them because this will help them in
expansion with the lower cost and their will be fewer restrictions for the company. It will be very
easy to start, sharing of the burden of business, better and effective decision-making. This mode
of entry will be considered as the best for the expansion in Italy, Europe.
Exporting- Exporting is the process of sale of product and services to other countries which are
produced from the home country. This entry mode into international market is traditional as well
as well-established mode. This mode of entry is considered as the easiest mode of entry into
international business (Araya-Castillo and et.al. 2019). There are many advantages of exporting
such as it involves very less risk, increases the sales of the product, establishes brand reputation.
Airdri company is expanding its business in Italy, Europe so exporting will be the easiest mode
to enter into the new market as well as it provides many benefits to this company.
Licensing- In this mode of entry, home country manufacturer gives the right of intellectual
properties like brand name, copyrights, technology to the foreign country manufacturer. The
manufacturer who provides the right is known as licensor and the manufacturer company that
receives the licence is known as licensee. Licensing mode of entry has many benefits like
generation of income without taking overhead or production costs, helps in boosting the
reputation as well as prevents the potential conflicts. (Tien. and Ngoc, 2019).
Franchising- It is the contractual partnership with the selling company is known as the
franchisor and the partner company is known as the franchisee. It provides many advantages to
the businesses such as low cost, allows effective expansion into different countries. Airdri
company may go for this entry mode by giving franchisor the products for selling in the new
market (Vissa, Francioni, and Freeman, 2020). This will promote the products of this company.

The company can come in contractual agreements with the hotels as they are using the hand
dryers in the wash rooms the most.
The best and the most effective and relevant entry mode for the Airdri company is exporting as
this will help the company to easily enter the European market of the Italy and as this company
has to export the hand dryers to the other countries as well.
Porter's five forces-
Porter's five forces of the model is used to identify and evaluate the five competition
forces that helps to determine the strengths and weaknesses for the company. There are five
forces of that identifies the competition in the industry (Henry, 2021). They are the following-
Competitive rivalry- This force focuses on the quantity and strength of the competitors of the
market. If there is intense rivalry in the industry, then companies cut the prices of the products to
attract the customers. Whereas when there is minimal rivalry in the industry then the company
can enjoy higher prices as well as has more competitor power. Airdri company ensure that the
product has some innovations to stray ahead in the competition as well as they can enjoy higher
prices and can retain the customers and the suppliers.
Supplier Power-
Production industries requires the raw materials such as components, labour and other supplying
goods. The supplier power is how easily the suppliers can increase their prices. The large number
of suppliers helps the company to choose the cheaper alternative of the suppliers. Whereas, fewer
suppliers lead too difficult to choose the cheaper supplier. When the customers are powerful,
then the suppliers are also powerful. Airdri company can get affected by the number of suppliers
in the new market as it has direct impact on the profitability of the company.
Buyers Power- The power of the buyer is the impact on the producing industry by the
customers. When the quantity of the buyers is less than compared to the number of the suppliers
within the industry then it is known as the buying power. This shows that it is very easy for
switching the new competitors which leads to lowering the prices. Airdri company must ensure
as they can also get affected by the buying power in the industry. If they will attract more
customers and have less competition than the company's power increases.
Threat of substitution- Substitution goods are those which similar products sold by the other
companies as well. This force occurs when the demand of the product is affected by the change
in price of the substitute product. This has chances of customers going to the other companies for

the same product when they don't satisfy with the prices. The threat of substitutes is generally
impacted by the price and competition (Hole, Snehal and Bhaskar, 2019). Airdri company should
go for producing different types of designed hand dryers for offering the customers by this there
will be no substitution products and the customers can be retained.
Threat of New Entry- The position of the company is impacted by the entry of new companies
into the market. The companies who can enter the market at the low cost and takes less effort,
they can compete in the market effectively and if the company is not using advanced technology
or key protection they have the threat of the new entries in the market as they can be highly
affected by these entrants. Airdri company can face this problem if they will not ensure about the
protection for the technologies of the company.
Recommendation:
Local stability: It is very clear that business need to satisfy their local customer then they can
enter new market. It is recommended for Airdri to get success in local market to get success in
Italy, European market, strong foundation will allow company to expand and face competition in
the market. The UK's market is highly competitive for Airdri which will test company whether
they will survive market of Italy, EU or not, it is recommended to Airdri to become stable in
their local market.
Budget: expansion fail is business do not have sufficient budget, it is very clear that budget
become essential when business to explore different market. Airdri company have to arrange
budget that will smooth the process, but more important is source from where budget need to be
arranged. It is recommended for the company to use budget to enter Italy, European market
which will benefit them in the process.
Market conditions- It is the most significant area which must be considered while expanding
the business. It is very important to analyse the marketing conditions of the country which
includes the demand or requirements of the product in the country where the Airdri company is
expanding. There may happen that the demand for hand dryers in Italy, Europe are not much in
use so expanding hand dryer business in this country may not be profitable. So, for growth
purpose the company must ensure about the demand for the product in the host country.

CONCLUSION
The above report has discussed the company which is a small medium size company expanding
its business in Europe for the growth purpose. This report includes the reason for the expansion
of the company such as increases the revenue, competitive advantage, attracting customers,
improves reputation and many more. Further, this report has also discussed the macro-
environmental factors such as Brexit, culture, labour laws and Covid of Europe country for the
market analyses as well as the suitable entry modes. It also includes Porter's diamond and five
forces for analysing the market and the recommendation.

REFERENCES
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