International Market Opportunities: CAFEPOD's SME Expansion Strategy

This report explores the global business environment for small and medium enterprises (SMEs) using CAFEPOD as a case study, focusing on international market expansion. It analyzes the opportunities and threats SMEs face in an increasingly competitive global environment, considering factors like political, economic, social, technological, environmental, and legal aspects (PESTLE analysis) in South Korea. The report determines the advantages of international trading blocs and agreements, such as the UK-South Korea trade continuity agreement, and explains various tariff and non-tariff barriers. Furthermore, it discusses the advantages and disadvantages of exporting and importing, service exports and imports, and evaluates different methods for SMEs to tap into global markets, contrasting their pros and cons for better understanding.

Exploring International Markets
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Executive Summary
This study has explained the global environment of a business which can help small businesses expand.
Opportunities and threats have been analysed considering the increasingly global competitive
environment. Advantage considering the international agreements and blocks of trading has been
analysed and determined with an explanation of various non-tariffs and tariffs. The disadvantages and
advantages of exporting and importing have been determining including ways of securing deals. Service
exports and imports including merchandise differences have been explained. Several methods have been
evaluated for small and medium enterprise (SMEs) considering tapping into the global markets with
contrasting each of them and assessing their cons and pros for better understanding.
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Table of Contents
Introduction.................................................................................................................................................4
Section 1......................................................................................................................................................5
Section 2....................................................................................................................................................11
Section 3....................................................................................................................................................14
Conclusion.................................................................................................................................................16
References.................................................................................................................................................17
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Introduction
International Markets are geographically defined as the market that is outside borders of the home nation
of citizenship and exploring them requires research and analysis for gaining the opportunities. This study
will be explaining the global environment of a business which can help small businesses expand.
Opportunities and threats will be analysed considering the increasingly global competitive environment.
Advantage considering the international agreements and blocks of trading will be analysed and
determined with an explanation of various non-tariffs and tariffs. The disadvantages and advantages of
exporting and importing will be determined including ways of securing deals. Service exports and imports
including merchandise differences will be explained. Several methods would be evaluated for small and
medium enterprise (SMEs) considering tapping into the global markets with contrasting each of them and
assessing their cons and pros for better understanding.
Peter Grainger including Brent Hadfield founded CAFEPOD in the year 2011. The chief executive officer
of the business is Peter Grainger and the company offers its consumer with various blends of coffee and
has earned annual revenue of £4.6m (cafepod.com, 2020).
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Section 1
Explain the global business environment in which small and entrepreneurial businesses operate.
The market that CAFEPOD will be expanding into South Korea and the firm must consider the external
environment of the country for successful expansion.
Political factor such as COVID-19 situation in South Korea has negatively affected the businesses due to
restriction in the movement of people which help in lowering down the negative consequences of the
virus (Ozili and Arun, 2020). This is important for CAFEPOD that they consider the present scenario and
take a step that can help them mitigate the challenges related to COVID-19 otherwise their sales can be
hampered.
Economical factor such as increase inflation rate of South Korea being 0.7% can negatively impact
businesses in the country due to the increase in the prices of all the commodities (tradingeconomics.com,
2020). It is required that CAFEPOD can look into managing their cost in ways that does not hamper their
quality. This can help them reduce their cost which can assist in gaining competitive edge in South Korea,
increasing their market share.
Social factor of changing habits of the consumers can negatively affect businesses if they are not aware of
the trends in the market. CAFEPOD need to study the behaviour and trends of the South Korean market
so that they can fulfil their requirements. This is essential for the business so that they can attract the
consumers of South Korea through innovation which can assist them in growing their business.
Technological factor such as advancement in technology can positively impact CAFEPOD as it can help
them in swiftly conducting their operations. This can help them in better consumer service with lesser
cost. Therefore, advancement in technology can help businesses in increasing their production with
minimal time and cost investment. The businesses must train their staffs with the knowledge of latest
technology.
Environmental factor of EPA (Environmental Protection Agency) has partnered with the Korean
Environment Ministry which assists businesses in reducing wastage and adopting proper production
methods which can be considered eco-friendly (epa.gov, 2020). This can positively impact businesses in
South Korea and CAFEPOD can abide by the policies so that they can lower their unnecessary wastage,
assisting them in lowering their cost with profit increment.
Legal factor such as the Sexual Equality Employment Act of South Korea can positivelyassist businesses
in creating a healthy business environment which can motivate the workforce (ilo.org, 2020). Innovation
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and creative at the workplace is essential as it can help CAFEPOD in gaining better market share.
Therefore, CAFEPOD can abide by the act which can assist them in keeping their workforce motivated.
Analyse the threats and opportunities that face SMEs in an increasingly competitive global
environment.
There can be various threat that can be faced by SME considering the global competitive environment
which would be mentioned below for better understanding including opportunities of growth.
Threats
 International structure of the company
CAFEPOD can look ahead expanding their business into South Korea by keeping in mind about
the international structure of their company as it is important for smoother operations functioning.
Therefore, the business needs to decides if their operations would be managed from them
headquarter considered central or would they invest in representative and office in the foreign
nation. This can be big threat for business as decisions need to be made about organizing the team
including coordination considering the difference in the time zone or a local expert needs to be
hired.
 Foreign regulations and laws
CAFEPOD can look ahead expanding their business into South Korea by keeping in mind about
the foreign regulation and law which can possess as a threat for the business. The understanding
concerning local regulation and law governing targeted market is vital and the business need to
considered laws of trading with implication of taxes and navigation of requirements considered
legal (Hooper, 2016). Businesses can be forced to pay fines if there is any break of the local law
and the labour, as well as employment requirements, needs to be understood as it differs as per
countries.
 Global strategy of pricing
CAFEPOD can look ahead expanding their business into South Korea by keeping in mind about
the global strategy of pricing which can be a huge challenge for the business considering the cost.
Competitors can be huge in number and for remaining competitive it is vital to consider the
production and shipping cost including marketing as well as labour with distribution. This can be
considered as a big threat for the business due the differences in the currency where they have to
critically analyse their pricing strategy for gaining competitive advantage (Tucker, 2017).
Opportunities
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 Entry into newer markets
CAFEPOD can avail the opportunity of having accesses of newer markets after they can succeed
in their home nation so that they can expand their business into South Korea. This can help them
in building newer consumer base including untapped market accesses with open border (Bianco,
2020).
 Access of newer talents
CAFEPOD can avail the opportunity of having talents considered specialised which can be
difficult to find in the UK. Tapping into South Korea can provide them with the accesses of
potential pool of worker having unique sets of skills and with local talents the business can
completive advantages.
 Increased growth of the business
CAFEPOD can avail the opportunity of increasing growth of their business as entering into South
Korea, an international can allow the business to extend their global footprints. This can allow
them to have newer audiences that can experience their services as well as product, leading
towards further expansion, allowing for faster growth of the firm (Pasa et al., 2020). It is worth
noting that this can help the business in having newer revenue streams.
 Gaining competitive advantage
CAFEPOD can avail the opportunity ofgaining competitive advantage by extending their
footprint into South Korea before their competitors. It is worth noting that CAFEPOD can have
access to newer consumers as well as visibility that their completions cannot benefit. Further,
exploring markets considered international can help them in getting out from the market
considered saturated.
Determine and analyse the advantages of international trading blocs and agreements.
Trading agreement create lower barriers to trade between the member nation, stimulating businesses
between each other freely with the maintenance of trade tariffs and barriers for the nations considered
non-members. This can be seen as having positive impacts on the growth of the economy. Trading bloc
creates various countries group, reaching common agreements for lowering the barriers of trade.
Trading agreements and blocs in-between the UK and South Korea has been signed and is named as the
continuity agreement of trade which allows free trading post BREXIT (bbc.com, 2019). This can help in
increasing the growth of both the economy and can provide a greater dynamic climate of business,
motivating local businesses to compete with international companies. It is worth noting that this can help
the government lower their spending by removing subsidies so that the funds can be used for better public
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cause (Dincer and Tekin‐Koru, 2020). Foreign Direct Investment (FDI) can be availed by business in the
countries that have trading agreements which can help in adding capital for expanding industries as well
as boosting domestic organisations. It is worth noting that companies considered global have a higher
level of expertise for the development of local resource as compared with domestic firms with a free
trading agreement allowing greater opportunities. Multinational partners with the local companies for
resource development assist with training in best of practices, providing local businesses with newer
methods.
However, it is important to understand that there are various demerits associated with trading agreements
and blocs is that the jobs of the business might be outsourced. This can cause employment issues in the
home nation as the company would like to expand its operations in South Korea for lowering their cost.
Therefore, there are higher chances of intellectual theft. It is worth noting that markets considered as
emerging such as South Korea can allow CAFEPOD to conduct business in country, allowing for
outsourcing jobs with no adequate protection of labour. This can result in children and women subjected
towards exhausting jobs with conditions considered sub-standard (Baccini, 2019).
Explain the various tariff and non-tariff barriers that exist in the international trading
environment.
Various non-tariff and tariff barriers might exist considering the international environment of business.
Tariff barriers are costs making imports costly in comparison with domestic product nature, helping in
local firm protection. Barriers considered as non-tariff are measures dictating about ways the products
need to be advertised as well as manufactured including quantity limitation on specific goods.
Tariff Barrier
 Duties paid on transit
CAFEPOD might have to pay duties when their goods pass via the area of the custom and
entering into South Korea. It is important to understand that this can help protecting the country’s
economy of the one imposing duties on transit. This happens by owing greater control on the
product flows over goods considered as restricted which helps in protecting the environment of
the country imposing duties on transit (Hayakawa et al., 2016).
 Tariffs on export
CAFEPOD might have to pay tariffs to the government of UK on the goods that they wish to
export to South Korea, increasing the cost of the product, making it expensive. It is worth noting
that this can help to encourage the consumption of products that are produced locally.
 Tariffs on import
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The tariffs that can be imposed on importing goods into the country is refers as import tariff and
it included custom duty on the business importing products into their home nation. It is important
to understand that the government imposing tariffs on import tries to protect their country’s
industry through imposing tariffs that can increase cost for inputs (Li et al., 2018).
Non-tariff Barrier
 Subsidies
The government of the home nation pays grants in cash and it can be in from of tax holiday or
subsidised prices on the inputs, helping local businesses with to export. Subsidies can be gained
by the UK Government if CAFEPOD can export their goods to South Korea. This can allow the
business to compete with various competitors that can be available in South Korea.
 Quota
Quotas are the numeric limits on the import and export quality during certain periods which is
usually displayed on the business licences (Buck, 2019). CAFEPOD can exceed that limit but
there are greater chances that the company might have to pay huge penalty which can be a
business loss.
 VER (Voluntary Export Restraint)
The UK can fix VER as per the agreement and request by South Korea which can then allow
CAFEPOD to export limited quantity as per the agreements. This helps in reducing foreign
competitions which might be faced by the businesses in South Korea.
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Section 2
Determine the advantages and disadvantages of importing and exporting and how to secure a deal.
Exporting outside the UK will change the business of CAFEPOD considering their ways of trading
which can involve various risk including benefits. There can be exposure of newer ideas as well as
practices of management including new techniques of marketing indulging different ways of competing.
This can help the businesses position themselves in a better way which can increase the competitiveness.
It is worth nothing that this can help in increasing the sales of the business as export assists in expand the
scope of markets, helping in increasing order which can lead towards greater sales and profits ( Tamru et
al., 2019). Businesses focusing on export have higher chances of increasing their sales which requires
increased production. This can help the businesses reducing their cost due to mass production and can
even extend the product lifecycle.
On the contrary, businesses need to understand that it take good amount of time and can be expensive for
a business to develop newer materials for their marketing as well as packaging. There are higher chances
of straining the financial resource of the business by incurring operational and administrative tasks. The
governmental or economical restriction can in the market that a business tries to export can impact the
company negatively due to the fluctuations in the rate of exchange. Further, it can be difficult for a
business to find information of the markets that they want to explore which can lead to difficulties in
gaining combative advantage. There can be difficulties gaining information about the latest market trends
of the country of export.
Importing helps CAFEPOD in reducing their product cost as it can allow them to gain various product
parts which can be cheaper than the one available in the UK. It is worth noting that even after including
the expenses of importing from emerging countries the product parts can be cheaper and with larger
quantity it can further reduce the price. It is important to understand that the business can enhance their
quality of their product if they import by visiting factories and meeting with professional seller. This can
help in gaining an edge over the competitors in the local and international market due to increase product
quality been offered at a low price, enhancing consumer attraction and experience (Al-Abdulkader et al.,
018). Further, it can lead towards increase market share with enhanced revenue and rise in the profits,
leading towards business growth.
Quite the contrary, it is important for businesses to understand that importing products from other
countries can make them dependent on those nations which can be fatal considering their country’s
economy. There is risk of privacy that can be harmful for CAFEPOD and can lead to piracy which can
hamper their market share. It is important to understand that the currency keeps changing and this can
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impact their cost which can lead towards fluctuation of their profits. The business that is focused over
importing can like to stabilise their profits which can lead towards price fluctuation, hampering consumer
demand.
A business needs to secure their deals by aggressing mutually and this can be done if CAFEPOD can
employ the correct people who can make critical decisions for their business. The person responsible for
securing business deals need to be well prepared for full engagement with the party with logical
reasoning. It is worth noting that the associated risks should not be underestimated and there should be
greater focus over important issues. This can help in securing business deals after verbal communication,
leading towards short agreements which can be vital.
Explain the differences between merchandise and service imports and exports.
Service and Merchandise Exports
Businesses that deals with goods that are considered as tangible and offers them to their consumers are
merchandising companies. These businesses incur labour as well as material cost for presenting their
product and selling them. Merchandise export is referred as that method that offers retail product to be
sold in international consumer markets. Businesses across counties maintains their complete division
which is devoted particularly in finding better ways for entering the retail foreign market by exporting
merchandise for increase their profits as well as sustaining growth (Chakraborty et al., 2016). Whereas,
considering service exports it involves products that are considered intangible. This can be referred to as
any services that a business provides in a foreign nation from their home country. The businesses that are
into exporting their services are the enterprises that are composed with professionals as well as expert
teams who aids in task completion for the benefits of their foreign consumers. Businesses delivering
products that are composed with personal expertise and labour for delivering desired task to foreign
consumers are into service exports.
Service and Merchandise Imports
Businesses that are into merchandise imports adds goods to their material stock as the outcome of
movement in their home nation. These can include product that are tangible bought in their home nation
directly so that it can be consumed and it can even include goods that are imported in the bonded custom
warehouses. The merchandise that are imported gets added to the country’s material resource stock when
they enter in the statistical territories. Whereas, considering import of services it can be referred as
dwelling goods considered intangible including the products which aids in service deliberation and can
satisfy mental inhibition fetched from foreign nation (ARTAMONOVA, 2019).
Therefore, it can be understood that both products and services can be exported as well as imported as
well as exported so that consumers can be kept satisfied with enhanced experience. This can help
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businesses make use of import and export for decreasing their cost and increasing their profits.
Section 3
Evaluate the various methods in which SMEs can tap into international markets.
 Export
CAFEPOD can use the method of export and can directly sell their goods into South Korea as this
method can provide them with lowest possible risks for entering into an international market. The
business can focus on producing their good in their home nation and can look forward to send
them to the foreign nation.
 Franchising
CAFEPOD can look into the method of franchising where it can sell their intellectual rights to the
franchisee in South Korea. This can allow the franchisee to have the access of the proprietary
processes as well as knowledge including their trademarks (Ludvigsson-Wallette and Lawrence,
2020). The franchisee can sell the products of CAFEPOD in South Korea.
 Licensing
CAFEPOD can look into licensing for entering into South Korea through an arrangement where
the company can provide a business in the foreign nation with permission for manufacturing their
products.
 JointVenture
CAFEPOD can look into Joint Venture for expanding their business to South Korea by getting
into contact with another business in the foreign nation who can be a local. Therefore, both the
businesses would provide newer team of management and will share the control of the joint
venture (Neacsu, 2018).
 Foreign Direct Investment (FDI)
CAFEPOD can utilise the method of FDI and can invest directly into the facilities of the South
Korean market with good amount of capital. The fund that would be invested will cover the
premises cost including staffs and technology. This can be done by acquiring existing business
venture or can be through establishing newer venture.
Compare and contrast the various ways SMEs can tap into international markets, assessing the
pros and cons of each method.
Methods Pros Cons
Export CAFEPOD can have the control over
international market selection with
CAFEPOD adopting the method of
export can result in higher cost for start-
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