Expanding a Small-Medium Manufacturing Company in Germany: Critical Evaluation of Macro Factors Impacting Business Expansion

This report discusses the expansion of AZIO LTD, a small-medium manufacturing company in Germany, highlighting the reasons for expansion, Porter's five force model, and critical evaluation of macro factors impacting business expansion such as Brexit, culture, COVID-19, and labour law. The report also sheds light on modes of entry and recommendations for the company.

RESIT MODULE
ASSESSMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Reasons for expansion.................................................................................................................3
Porter's five force model..............................................................................................................4
Critical evaluation of the four most immediate factors of macro business environment that
impacts the expansion of company:.................................................................................................4
Brexit............................................................................................................................................4
Culture..........................................................................................................................................5
COVID-19....................................................................................................................................6
Labour Law..................................................................................................................................8
Modes of entry.............................................................................................................................9
Recommendation over mode of entry..........................................................................................9
CONCLUSION & RECOMMENDATION....................................................................................9
REFERENCES..............................................................................................................................11

INTRODUCTION
Business expansion refers to that phase under which the business experience growth and
success. Expansion of business is important because it attracts new customer's in the new market
in terms of using products or service of business(Albers and Rundshagen, 2020). The current
study revolves around the concept of expanding a small- medium manufacturing company of UK
in European country that is Germany. AZIO LTD that is located at Reading is an electronic
keyboard manufacturing company that deals in manufacturing keyboard in different style. The
company was founded in 2009. The company has 50 number of employees at current and
looking forward to make further expansion.
This study will discuss the concept of expanding AZIO LTD In EU County and that is
Germany. Also, the reason for expansion will be highlighted in report. Furthermore, ways in
which external factors such as, Brexit, COVID-19, Inflation and labour law impacts the
expansion of the firm will be discussed in the report. Also, in order to analyse competition in
market of Germany porter's five forces analysation will be done. Moreover, the report will shed
light on the mode of entries and recommendation will be made.
MAIN BODY
Reasons for expansion
AZIO LIMITED is a small medium enterprise as it have a total of 50 employees adding up the
total of 3 outlets because of the less revenue earning as well as less number of employees the
firm is said to be a small medium enterprise. The main reasons for expansion of the AZIO LTD
is that, the firm wants to increase its customer base, the firm wants to increase its profit and the
firm want to make itself a global firm SME 100 list unveiled, 2020. The main motive of firm is to
become a larger firm in regard with manufacturing electronic keyboard which may give them
huge benefit in running the business outlet in Germany. Also, the organization manufacturers
effective set of keyboard that that creates the higher utility in customer. It has been found from
various studies that, Germany is one of digitalized EU country. Thus, expansion of AZIO LTD in
Germany leads to create the number of opportunities for firm to increase the sell of keyboards.
As a result, higher growth and success will be experience by the company. Thus, this is the main
reason for expansing AZIO LTD in Germany.

Porter's five force model
It has been considered as one of the best analytical tool that helps in analysing the extent up-to
which competition is available in market. Thus, here is the competitor analysation of the AZIO
LTD in order to expand business in Germany.
Competition rivalry- This refers to the rate at which current competition is available in market.
Thus, In Germany, the technology is expanding in high manner and therefore, demand for
electronic items has been increased on a high note. Moreover, many firms are concerned with the
profession of manufacturing keyboards. Thus, it clearly states that, competition is high for AZIO
LTD.
Power of buyer- This is concerned with changing the taste of customers in terms of using
products and services. As AZIO LTD is new in Germany. Thus, there is a chance that customer
may shift to another electronic manufacturing firms (Anker, 2021). In order to solve this issue,
the company needs to assure focus over adding immense design and feature in manufacturing of
keyboard that leads to attract customers.
Power of suppliers- This is consists of power of suppliers, from this threat AZIO LTD is free as
they approach large number of suppliers that assure them input. In case, price of input increases
by one supplier then, the firm can approach another supplier.
Threat of new entrant- As the firm is on a developing note therefore, firm has the threat from
new entrants. Thus, effective analysation techniques in order to understand the market
competition is required.
Threat of substitute- Number of electronic keyboard manufacturers are available in Germany.
Thus, there is a threat of shifting by consumer to another products. However, effective design
and feature in keyboards can help AZIO LTD to attract the faith of customers towards them.
Critical evaluation of the four most immediate factors of macro business
environment that impacts the expansion of company:
The four most immediate factor that leads to affect the expansion of AZIO LTD in Germany are
described below:
Brexit
Brexit refers to the withdrawal of the UK from the EU. The Brexit has completely
changed the formal relationship that exist among the UK and the EU. This is the most keen

factor from numerous macro factor. As it assure the direct impact over business that is expanding
in the Europe (Arsawan and et.al., 2020). Due to this, the Europe has limited the ability of the
business in terms of expanding in EU countries. The biggest threat of the Brexit is that, the
business is not able to gather the personal data from the European union without assuring the
correct and systematic arrangements. In similar manner, this can impact the expansion of AZIO
LTD in the Germany Therefore, it is highly important to perform the systematic procedures that
has been introduced by the government in the Germany (Bloom and et.al., 2019). So, in the
expansion of the firm the difficulties cannot be arrived. The major threats from the Brexit are, No
availability of the labours at the cheap rate, more investment has to be assured by the firm in
terms of expanding the business. At initial level, it is hard for the organization make the higher
investment.
Therefore, performing the systematic procedure that assures the less restrictions are
highly important this includes the mandatory process of licensing and following the policies of
the government. As a result, it ensures the smooth running of the business. It has been found
from various studies that, due to Brexit the trade among the UK and EU has showed the large
number of negative results. Thus, considering this macro factor in terms of internationalizing the
business is excessively important. Furthermore, Brexit has increased the cost of production
especially for the small-medium scale industries and this provides the over-all impact over the
final profit of the business (Bosma, Sanders and Stam, 2018). In same manner, AZIO LTD is the
small-medium scale business there is a threat to the business which involves, increase in the cost
of production of firm and it will provide the direct impact over the prices of the products and
services of the organization, Thus, this has been proven that, Brexit will assure higher impact
over the expansion of AZIO LTD in Germany therefore all mandatory allegations under the
agreement of government has to be full-fill. So, the operations can be performed in smooth
manner and no barriers can be faced.
Culture
This refers to that macro factor that is consists with the belief and faith of the people. It
has also been considered as the important factor of the consumer behaviour as well. This factor is
directly linked with the faith and belief of the consumer therefore, it provides the higher impact
over the business. Thus, it is highly required to make a keen analysation over this and the actions
has to be taken in such manner that the negative impacts over the business can be managed. In

order to expand the AZIO LTD in Germany it is highly important to know the faith and belief
that are concerned with the customers so, the decision can be made according to that. For
example: Some customers prefers more advanced features in keyboard while some do not. Often,
many customers have a mentality that, they must buy products of the organization that is their
nation-based organization. It has been considered with the faith and belief of the customers.
(Icheng, Zhong and Cao, 2020). Therefore, the decision has to be made within taking
consideration of the key factors that are related to the culture of the people. If the cultural
element has been ignored by the business then, it provides the direct impact over the success rate
of the business. Culture is a part of ethics and when a customer feels that their culture is not
being valued by the businesses then, there is a threat to the business in terms of getting loss.
In similar manner, there is a threat for the organization. Therefore, it is important to
analyse all aspects that are related to the culture of the people. Furthermore, the firm should not
use such content in order to promote the business that leads to affect the sentiments of the
cultural aspect of the consumers. Thus, it has been proven that in order to internationalize the
business it is highly important to look upon the cultural differences as the cultural difference is
directly linked with the pattern of consumer behaviour. Hence, there is a threat to the business if
the cultural aspects has not been taken in consideration while expanding the business.
Furthermore, analysing the pattern of the culture that can increase the value of the customers also
plays the vital role as it assures the higher contribution of customers in the business (Chon and
Ha, 2019). Thus, for AZIO LTD it is highly important that, the cultural difference has to be
analysed and the decisions has to be made on the basis of that. As a result, it leads to create the
sense in the mind of the customers that their culture is getting values and they prefer to buy more
products from firm.
COVID-19
The foremost major factor that will affect the AZIO LTD during its expansion in
Germany is corona virus pandemic. This pandemic has shuttered the life of many business within
a month or a year. This has been seen as worst pandemic ever happened on the earth (Crafts,
2022). In order to expand the SME AZIO LTD in Germany, the owner should study the aspects
of Pandemic that has impacted the Germany. As the world knows that the small and medium
enterprises are the lifeblood of European economy. However, during the COVID times the

economy completely went down because of lock down. The first wave of COVID has made
drastic affect in the Germany and UK as well and caused the decrease in over 40% of sales of
maximum enterprise (Putra, 2019). Even after the lock down the economy does not boost up as
the people's were afraid to buy outside products or service because of death causing due harm of
Pandemic. In the current situation if the owner of AZIO LTD expand the business in Germany
there is not even 50% chances of the firm to work on there. There is chance of facing the loss as
the pandemics 4th wave in on its way.
Illustration 1: Decrease in the operation of small-medium manufacturing firms in COVID
There might be possibility that, owner have to shut down the business and may have to
return to its old city where the business is already operating previously. This may cause the lack
in capital or huge losses for the business. Even the shut down of export and import may occur at
any time which will give harsh effects to the organization. Although it takes time for every new
business to create a magic of their services on the society and during the magic time if the
pandemic restarts there are no chances of business to be alive in the market (Delmar 2019).As
the oldest ones are also suffering so how can a new one cannot suffer and the biggest problem is
being a sole proprietor, the owner of business is a sole proprietor and will have to suffer all the
liability alone and all of his capital may got vanished because of this affect of COVID. Thus, it is
highly important to analyse the factors that have impacted the market of Germany due to

COVID. As it leads to assure higher ideas to AZIO LTD in terms of taking corrective measures
that can help in settling down the situation. Furthermore, the Crisis can be managed.
Labour Law
The labour law of every country is different because of differences of minority and
majority, culture and many more factors. These factors are the reason that why every country has
own labour law rather than using the common labour law. In order to expand AZIO LTD in
Germany, it is important that the business must know the labour laws that are established in
Germany. This is one of the main factor that has to be taken in consideration as it provides direct
impact over the operation of firm. AZIO LTD is an electronic keyboard manufacturing firm that
requires labours in terms of performing operations. Labour laws defines some major rights of
employees or workers so there cannot face any kind of discrimination among them (Diliana,
2021). The labour laws represent the minimum wages for the worker along with this, work time
and policies are also there in the labour laws which helps the employees by giving them the right
of justice in every centre of the country.
Labours has faced high level of exploitation therefore in Germany, the government has
implemented the labour laws that are related to assuring fix rate of wages to the workers. Also,
the time period of working has been decided and it should not be exceeds more than 8:30 hours
(Menegatti, 2020). Over-utilization of labours and not assuring the deserved salary to them leads
to assure penalties over the firm. Thus, this factor needs to take in consideration in order to
expand the firm in Germany.
As discussed above the major macro factors that may impacts the expansion of the AZIO
LTD in the Germany. Apart from this, there are another elements that can provide the impact
over the expansion of the AZIO LTD in the Germany. Here is the description of the another
factor that may impact the expansion of the business. In order to expand the business at new
place it is highly important to create the effective infrastructure so, the public can be attracted
towards it. The business has to be expanded in the Europe and firm needs to well-structured so,
the customers can have the memorable experience. It has been found from various studies that, it
is important to analyse the preference of the customers in order to add the glory in the business
(Gorynia, 2019). Therefore, this element has to be taken in consideration by the company and the
analysation over the taste of the consumers has to be done. So, the expansion the effective
infrastructure can be developed.

Modes of entry
The mode of entry refers to the modes through which the small and medium size business
can enter into Germany and performs their operations. The different mode entry that are
available to AZIO LTD are:
Licensing- This refers to having license agreement that will enable the business to expand In
Germany. This will grant permission to business in order to use intellectual property right in
Germany. This helps in managing tax barriers for small enterprise as the newly established
company faces hurdles regarding this. In European countries the scenario of paying taxes is
difficult to understand and sometimes it creates the situation in which the business has to pay the
high taxes. (Kirk, 2021).
Joint venture- This refers to joining the another small enterprise firm that are established in
Germany by this way, the small business can easily enter in Germany. This leads to ensure the
form of partnership in business. The joint venture helps in solving issues relate to fluctuation in
currency rate. This has been considered as one of the vital challenge that comes in the path of
expanding the business. Fluctuation in currency refers to the changing in the rate of currency.
Sometimes it becomes higher and sometimes it becomes lower. In both the situation it provides
the impact over the business that has been expanded in another country rather than the home
country. In similar manner, this will provide the impact over the expansion of AZIO LTD in the
Germany. Thus, the joint venture model of entry leads to solve this issue as already one of the
enterprise is established at the place of expansion (Lucaci and Nastase, 2020).
Franchising- It refers to be a part of Electronic manufacturing franchise that operates in EU
countries and then enter into Germany for expansion of business. This, is difficult for AZIO LTD
as it does not concerned with any franchise.
Recommendation over mode of entry
The appropriate mode of entry for firm is licensing as with the help of licensing the
agreement with the government needs to be signed and it will assure right to firm in terms of
using the property. Furthermore, it will help in managing tax fluctuations.
CONCLUSION & RECOMMENDATION
From the above report it has been concluded that, the macro factors such as, COVID,
Brexit, Culture and labour laws provides the higher impact in the internationalization of the

business. This has been considered as the external factors that influences the internal
environment of the business. Therefore, it is highly important that the business must perform a
keen observation over these factors as this provide the impact over the success rate of the
business. Along with this, the report has highlighted the porter's five model that is needed to be
analysed in terms of identifying the competition in the market. This model helps in analysing the
major factors that are related to the business. Also, the current competition in the market can be
evaluated with the help of this model. Lastly, the report has evaluated the another factors that has
to be taken in account for the expansion of the AZIO LTD in Germany. Effective analysation of
all the factors leads to assure the success rate to the business. This is the small-medium scale
business that has the mission of exploring the business at other place.
The fluctuation in the currency rate leads to increase the cost of production for the
business (Liukkunen, 2021). As a result, the prices of the products and services of the firm
becomes high. This will provide the direct impact over decreasing the customers for the business.
It is the initial stage for the firm as the firm is performing expansion and higher prices at the
initial stage impacts the interest level of the customers. Therefore, a keen observation over
analysing the market has to be made and effective strategies regarding managing the fluctuation
rate in the currency has to be made. So, the business does not have to face the loss while
expanding.

REFERENCES
Books and Journals
Albers, S. and Rundshagen, V., 2020. European airlines′ strategic responses to the COVID-19
pandemic (January-May, 2020). Journal of air transport management, 87, p.101863.
Anker, T.B., 2021. At the boundary: Post-COVID agenda for business and management research
in Europe and beyond. European Management Journal, 39(2), pp.171-178.
Arsawan and et.al., 2020. Leveraging knowledge sharing and innovation culture into SMEs
sustainable competitive advantage. International Journal of Productivity and
Performance Management.
Bloom and et.al., 2019. The impact of Brexit on UK firms (No. w26218). National Bureau of
Economic Research.
Bosma, N., Sanders, M. and Stam, E., 2018. Institutions, entrepreneurship, and economic growth
in Europe. Small Business Economics. 51(2). pp.483-499.
Cheng, C., Zhong, H. and Cao, L., 2020. Facilitating speed of internationalization: The roles of
business intelligence and organizational agility. Journal of Business Research. 110.
pp.95-103.
Chon, S.Y. and Ha, H.K., 2019. Analysis on the Determinants of Port Competitiveness with
Porter’s Diamond Model: Application of AHP (Analytic Hierarchy Process). Peter
Drucker Society,12(1), pp.113-144.
Crafts, N., 2022. Brexit and control of subsidies. Oxford Review of Economic Policy. 38(1).
pp.154-164.
Delmar, F., 2019. 13 Measuring Growth: Methodological Considerations and Empirical
Results. Entrepreneurship and SME research: On its way to the next millennium. p.199.
Diliana, T., 2021. Analisis manajemen strategi keunggulan bersaing teori Michael E Porter
dalam upaya mempertahankan eksistensi usaha: Studi kasus unit usaha Pondok
Pesantren Sunan Drajat Kecamatan Paciran Kabupaten Lamongan Jawa
Timur (Doctoral dissertation, Universitas Islam Negeri Maulana Malik Ibrahim).
Gorynia, M., 2019. Competition and globalisation in economic sciences. Selected
aspects.Economics and Business Review, 5(3), pp.118-133.
Kirk, E., 2021. Legal Consciousness and the Sociology of Labour Law. Industrial Law
Journal, 50(3), pp.405-433.
Liukkunen, U., 2021. The role of collective bargaining in labour law regimes: A global
approach. InGeneral Reports of the XXth General Congress of the International
Academy of Comparative Law-Rapports généraux du XXème Congrès général de
l'Académie internationale de droit comparé(pp. 373-408). Springer, Cham.
Lucaci, A. and Nastase, C., 2020. European rural businesses during the COVID-19 pandemic:
Designing initiatives for current and future development. LUMEN Proceedings, 13,
pp.419-429.
Menegatti, E., 2020. Taking EU labour law beyond the employment contract: The role played by
the European Court of Justice. European Labour Law Journal 11(1), pp.26-47.
Putra, Y.M., 2019. Analysis of factors affecting the interests of SMEs using accounting
applications. Journal of Economics and Business. 2(3). pp.818-826.

Online Reference
SME 100 list unveiled, 2020. [Online]. Accessed through <http://businessmag.co.uk/wp-
content/uploads/2012/11/Thames-Valley-SME100-List-201213.pdf>.