Global Business: Concept, Challenges, and Entry Strategies

This document provides an overview of global business, including the concept, challenges, and entry strategies. It discusses the importance of global trade, the interconnectedness of people and organizations, and the benefits of expanding businesses at a global level. The document also outlines the managerial and operational challenges faced by companies in international business, such as fiscal deficits, economic challenges, political instability, unemployment, poverty, and corruption. Additionally, it presents different entry strategies for entering a new international market, including acquisition, joint venture, and franchising. The document concludes by recommending the joint venture strategy for Sainsbury's re-entry into the Egypt market.

Global Business

Table of Contents
INTRODUCTION...........................................................................................................................1
1) Explain the concept of global business...................................................................................1
2) Outline the managerial and operational challenges of international business........................1
3) Create a plan for entry into a new international market.........................................................1
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Global business environment defined as a economic and business activity which takes
place across the cross border. Global trade is important as technologies are advancing so fast so
the organisations are incentivised in order to sell their goods and services in international market.
It will help in increasing market shares, minimisation of cost as well as become more
competitive. In this report, Sainsbury is taken which is a third largest chain of supermarkets in
United Kingdom. In this, a company Sainsbury thinks to re-enter in the Egypt by introducing
their business as a new global venture as earlier it has more than 100 stores and employs 2000
people but at that time it was struggling to hang on to its UK market. Under this report discuss
about the global businesses and managerial as well as operational challenges that are faced while
company go across the border. In addition, develop a plan for entry into a global market
environment.
1) Explain the concept of global business.
Globalisation refers to the process of spreading technologies, products, informations etc.
across the domestic border of a country and culture. It will help in increasing the
interconnectedness among people and organisations across the globe as it is the ability of a
person or business to move and interact easily with international customers or businesses for
operating their operational activities at international level (Baena, 2018). The main objective of
expanding businesses at global level like Sainsbury re-enter into Egypt market for the purpose of
enhance the chances of free trade at international level and brings many countries together for
trading motive. It improves the globalisation in order to interacting with different countries
economies.
2) Outline the managerial and operational challenges of international business.
There are several challenges and issues that are faced by a company in order to expand
their business at global level (Boone, 2019). In this assignment, Sainsbury case is considered as
they plans to re-enter their business operations into the Egypt market in order to that they face
many challenges while doing business in that specific country. Some of these can be discussed as
follows: Fiscal deficit: It is associated with the financial situation which shows the government's
total budget exceeds to the total receipts that excludes borrowings that made during the
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fiscal year. Egypt recorder a government budget deficit equal to the 9.5% of country's
gross domestic products in fiscal year 2018-19 (Egypt Government Budget, 2019). It may
be negatively impacts on the Sainsbury while entering into that nation as it crowd out
interest rates, private borrowings, decrease exports, manipulative capital cognition as
well as high tax rates. Economic challenges: The country Egypt is facing many economic challenges that is
related to the growth and recover firms confidence to attract large number of investors as
well as creates jobs. It will creates some threats for Sainsbury at a time of re-entering into
Egypt market (Hopkinson, 2018). Political instability: While doing business in Egypt Sainsbury face challenges regarding
the political instability as political situations in that country is uncertain. As that country
consistently miscarry to fare recovered in the index of doing business as Egyptian market
possess some strengths such as free trade agreements, young workers, reduced custom
duties and sales tax as well as arrangements. Now the governments of country focus on
economic growth and recovery through several ways that includes mega infrastructure,
develop economic policy, increase investment as well as attract large number of foreign
investors. unemployment: The rate of unemployment in Egypt is going down significantly but
maintaining tendency is a discouraging mission with Cairo requiring to rise economic
growth as well as attract more foreign investments. This will creates some kind of
challenge for Sainsbury when the company re-enter into Egypt.
 Poverty: The poverty line is termed as a minimum income hold adequate for an
individual in order to fulfil their own basic needs. The line of poverty in Egypt differs
from the different areas and it depends on the cost of living in specific area. Egypt's
poverty rate rises to 5% in year 2019 as compared to 2.6% in 2015 that is analysed by the
World bank Group's senior vice president. The terrorist groups could also contribute to
the political instability in Egypt (Egypt’s poverty rate rises to 5% in 2019, 2019) . In order to that a country has increased the level of infrastructure, human capital and
moving towards the artificial intelligence field as well as digital transformation. While a
company Sainsbury operates their business in that country it may face the challenge
regarding the increment in poverty.
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 Huge level of corruption: Corruption has been one of the major challenge in Egypt at it
is available at all phases of Egyptian society. The giving and accepting bribes are
considered as a criminal acts in Egypt but corruption laws and legislations have not been
enforced properly. Many companies might fight corruption in mainly public sector that
are in the form of bribery, meddling with authorised documents as well as embezzlement.
The law facilitates criminal penalties on official corruption but the laws are not enforced
appropriately this will influence the business of Sainsbury in Egypt.
3) Create a plan for entry into a new international market.
When a business wants to move their operational activities at international level then they
required to choose some specific strategies that will be gives huge benefits. In this, Sainsbury,
thinks to do business in Egypt as after analysing the challenges the company analyse several
entry plan strategies along with its benefits and drawbacks. Some of these can be considered as
follows: Acquisition: It is related to the purchase of an existing company as it is also considered
as a most appropriate strategy of entering into a new market. Within the context of
Sainsbury, company re-enter into the Egypt market by purchasing their existing local
company as it may be appropriate because the local company already has significant
market shares, direct competitors to Sainsbury or due to the governmental legislation, this
is only better option for the company to re-enter in the market. It is termed as an
expensive and ascertaining true value of firm in international market that will need
substantial due diligences (Willcocks, 2018). As a positive side of this strategy it will
instantly facilitate the status of being a domestic business as well as the company will get
advantages of local market conditions and knowledge. In addition, it established large
base of customers and be activated by the national government as a local business. Joint venture: It is termed as a partnership form which includes the creation of third
severally managed organisation as it is termed as a 1+1=3 conceptual process. In this,
two companies accept to work in a specific market on the basis of products or geographic
location and form a new venture or third company to undertake their business operations
together (Kwok, 2019). Both companies shares profit and loss equally and manage
business operations in an effective way. The company Sainsbury can use joint venture
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strategy for re-entering into the Egypt market by making contract of doing business
jointly with the local players this will give huge profitability as well as market share.
 Franchising: It is directly associated with the process of market expansion as it is
possible when a company wants to increase the reach and attraction of their business in
other locations of the entire world. This kind of strategy is useful and work effectively for
that business which have a repeatable business model like food outlets which can be
easily moved in some other markets (Mousa, 2018). There are mainly two things are
required for adopting franchise model which are first is that the business model should be
required either unique or have positive and high brand recognition which can be
exercised globally and second is that a company may be creating their future competition
in its franchisee. The company Sainsbury can use franchising strategy for re-entering into
a market of Egypt as it provides the high rapid market expansion opportunity which helps
in increasing the market share, customer base as well as profitability of business.
From the above strategies of entering into an international market for the company
Sainsbury, joint venture entry strategy is more suitable as it will helps in minimising the risks of
loss or reduce the impacts of challenges as well as results in increasing the market shares and
profitability.
CONCLUSION
It has been concluded from the above assignment that the company wants to re-enter into
the Egypt market in order to that they required to study about the concept of globalisation, key
challenges as well as issues that might be faced by the company while expanding. In addition,
create a plan or strategies for enter into that market and the company choose best one among
them.
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REFERENCES
Books & Journals
Baena, V., 2018. International franchise presence and intensity level: profile of franchisors
operating abroad. Management Research Review. 41(2). pp.202-224.
Boone, L.E. And et. al., 2019. Contemporary business. John Wiley & Sons.
Hopkinson, P. and et. al., 2018. Managing a complex global circular economy business model:
opportunities and challenges. California Management Review. 60(3). pp.71-94.
Kwok, F. and et. al., 2019. Interactive effects of information exchange, relationship capital and
environmental uncertainty on international joint venture (IJV) performance: An
emerging markets perspective. International Business Review. 28(5). p.101481.
Mousa, M., 2018. The effect of cultural diversity challenges on organizational cynicism
dimensions: A study from Egypt. Journal of Global Responsibility. 9(3). pp.280-300.
Willcocks, L.P., 2018. Global business management foundations. SB Publishing.
Online
Egypt Government Budget. 2019. [Online] Available through:
<https://tradingeconomics.com/egypt/government-budget>.
Egypt’s poverty rate rises to 5% in 2019. 2019. [Online] Available through:
<https://egyptindependent.com/poverty-impedes-achievement-of-sustainable-
development-in-arab-countries/>.
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