International Business: A Case Study of Rahat Continental Limited's Expansion into the UK

This report examines the internationalization process of Rahat Continental Limited, an Indian SME, as it seeks to establish a new venture in the UK market. The report analyzes the company's current situation, identifies key contemporary issues in international business, and appraises alternative methods of entry into the foreign market. It also explores the impact of multinationals on both home and host nations, and discusses the importance of selecting, analyzing, and evaluating data on country markets. The report concludes with a discussion of the challenges and opportunities associated with international business expansion.

INTERNATIONAL BUSINESS

Contents
INTRODUCTION..........................................................................................................................2
DEBATING CRUCIAL CONTEMPORARY ISSUES RELATING TO ORGANISATIONS INVOLVED IN
INTERNATIONAL BUSINESS........................................................................................................3
IDENTIFYING AND EVALUATING THE GLOBAL CONTEXT WITHIN WHICH INTERNATIONAL
BUSINESS MUST FUNCTION IN THE TWENTY- FIRST CENTURY...............................................6
APPRAISING ALTERNATIVE METHODS OF ENTRY INTO FOREIGN MARKETS.............................8
EXPLAINING WHY COMPANIES MAY DECIDE TO INTERNATIONALISE AND ALTERNATIVE
THEORIES OF INTERNATIONALISATION...................................................................................12
DISCUSSING THE IMPACT OF MULTINATIONALS ON BOTH THE HOME AND HOST NATIONS 15
SELECTING, ANALYSING AND EVALUATING DATA ON COUNTRY MARKETS...........................17
CONCLUSION............................................................................................................................18
REFERENCES.............................................................................................................................19
1

INTRODUCTION
An international business is a group of profit-making activities that are used to enhance the
transmission of technologies, ideas, human resources, machinery, other resources, services
and goods across the globe. The international business is categorised into three formats:
 Transferring of goods from one country to another (trading, import, export)
 Agreements that are predetermined allowing international organizations to use the
goods, services and procedures from other countries (permitting, contracting)
 The development and procedures of deals, trades, production, study, research and
development, and supply services in an international business market
Involving internationally in terms of business, the countries become able to take
proportional advantages. The proportional advantages or comparative advantages make a
country to take advantage of accessing the inexpensive properties, resources, workforce,
and investment of another country. The country becomes able to export services and
products that consume plentiful features and elements of manufacturing (International
Relations EDU, 2018).
This report is based on the study of international business and how it affects the domestic as
well as foreign markets along with human capital. The successful international business
makes the companies capable of handling the risks and uncertainties of taking the business
at international level. Rahat continental limited which as an Indian high profile SME is
considered here to discuss the international business as the management is trying to set up
its new venture in the UK. To set up the business in the UK, the management has considered
the e-commerce platform. As the platform is new, there are various risks as well as
opportunities associated with it that are discussed in this report.
2

DEBATING CRUCIAL CONTEMPORARY ISSUES RELATING TO
ORGANISATIONS INVOLVED IN INTERNATIONAL BUSINESS
Rahat continental is a private limited company in Indian which offers services of freight air
transport of the consignments in other lands. It provides cost-effective delivery of goods and
consignments. The company was incorporated on 7th January in the year 1999. The company
currently have a paid-up capital of 1755400 INR and authorised share capital of 5000000 INR
(Zuba corp, 2017). Currently, the company is willing to set up their new venture in the UK
and looking for a great platform to set up as an online trading service to sell organic cotton
wears for the children of age group 0 to 2 years in the UK. The main aim of the company is
to consider help from an Indian supplier who is a manufacturing expert in organic cotton
clothes. There are various issues that can be faced by the company while setting up and
some of these issues are discussed as follows:
THE COMPANY STRUCTURE INTERNATIONALLY
The structure of the companies varies according to the country they are in. The company's
structures are very different in UK and India and to set up in the United Kingdom, the
management of Rahat continental limited have to adopt the market system of UK to
operate theirs smoothly.
LAWS AND REGULATIONS OF FOREIGN COUNTRIES
As the laws and regulations differ according to countries, the Rahat continental limited is
liable to follow the rules, laws and regulations of UK to set up new venture there. It is very
important for the management to understand the local and government laws of UK to gain
the competitive advantage of the targeted market. The knowledge of tariffs, legal costs, tax
system, etc. will be helpful for the company before entering the new market to decrease the
impacts of risks, issues and conflicts later (Gu, et. al. 2018).
INTERNATIONAL ACCOUNTING
Acquiescing tax of the country in which the company is willing to establish is a very
important factor to be considered in international business (Cavusgil, et. al. 2014). In case of
3

Rahat continental limited, the accounting transactions should of the venture will be
considered on the basis of UK laws as the company will be liable to pay the tax to UK
government. So, it is very important for the company to follow the accounting policies of UK
and match their accounting systems according to UK rules.
CALCULATION OF COST AND GLOBAL PRICING STRATEGY
The cost of the product is decided according to the market and brand value of the product
in the international market. It is very important for the Rahat continental limited to
recognize the trends and pricing strategy of UK market and if they are offering a luxurious
range of strategies and products so it will be beneficial for them to keep the price of the
products high (Cavusgil, et. al. 2014).
EXTENSIVE PAYMENT APPROACHES
The companies willing to trade internationally should recognize the payment methods that
are accepted and suitable in the country they want to set up and for this, it is very important
for the company to ensure a secure payment processing system (Meyer and Peng, 2016).
The Rahat continental limited is associated with the payment companies such as world pay
to process the payment internationally.
CURRENCY RATES
The currency fluctuation is the riskiest issue faced by the companies having business
internationally (Cavusgil, et. al. 2014). In case of Rahat continental limited, Indian currency is
comparatively weaker than that of UK. So this issue is a threatening one for the company.
This issue can be minimised by paying the suppliers in the same currency in which the
trading is to be carried out.
POLITICAL RISKS
To set up internationally, the political risks are the most considered risks as the political
factors are very unstable and uncertain. This instability of political factors increases the risk
ratio for the companies (Meyer and Peng, 2016). To set up in the UK, the Rahat continental
limited must assess the political as well as economic risks to minimise the uncertainties and
issues.
4

SUPPLY CHAIN COMPLEXITY AND RISKS OF LABOR EXPLOITATION
To manage the supply chain along with suppliers will be the most difficult task for Rahat
continental limited as the risk of employee exploitation in foreign borders is higher
compared to national (Meyer and Peng, 2016).
5

IDENTIFYING AND EVALUATING THE GLOBAL CONTEXT WITHIN
WHICH INTERNATIONAL BUSINESS MUST FUNCTION IN THE
TWENTY- FIRST CENTURY
The 21st century’s international economy has changed the international trading in every
aspect. The impact on the global economy is due to the three powers that are technological
revolution along with communicational revolution, trade liberalisation and international
level of trading. As the emergence of the changing technology took place in the 21st century,
there is a seemingly development and growth in the international trading system which is
very different from that of previous (Smith, et. al. 2017). The globalization concept has
reduced the strictness of national boundaries and increased the trading concept at a huge
level with the integrated economy. The enhanced communication level which is revolved
with the changing information technology has inappropriate the time gap between the
countries.
According to the economic change, the private sector has seen to enhance the growth level
and this growth has directly led the countries towards the development of both the private
as well as public sector (Deresky, 2017). The entrepreneurs who are prepared to face the
new challenges and risks are now emerging with new trading standards to deal at
international level. These new concepts are developed with the enhancement of technology
in the 21st century. Liberalisation and Globalization are the two novel concepts that are
emerged in the 21st century which is allowing the countries to trade and grow at
international level and also providing them with the opportunities to develop (Smith, et. al.
2017).
The Rahat continental limited has adopted the strategy of diversification for the business
expansion. They are intended to develop a novel portfolio which involves opportunities to
be attended and risks to be avoided. The information technology revolution has played an
effective role in the business expansion and development of the company (Press and
Cooper, 2017). The company should be concentrated on the economic concerns after the
6

industrial revolution. The concepts of the private, as well as public outsourcing, have directly
changed the working nature and also have provided high range of opportunities in the
employment sector (Smith, et. al. 2017).
The trade liberalisation is considered to be transpired in both the two-pronged and
multidimensional level. It has directly worked in the favour of the economic development of
the country and it also enhances the competition level of the domestic products to make
them attain a high brand value and desire internationally (Smith, et. al. 2017). The countries
considering trading have various resources of a single kind and these resources have a free
flow to trade internationally with different resources according to the requirement. The
transformation of the company’s structure directly affects the growth and development of
the human resources associated with the companies (Press and Cooper, 2017).
In context to Rahat continental limited, the functioning of the business should be made
flexible while requiring for the foreign exchange. As with the development of technology,
the companies in the 21st century are opting for the method of bank loans and financiers to
develop (Smith, et. al. 2017). The Rahat continental limited can also opt for the method of
banking finance from the international banks of local UK market. There will be various risks
to be faced by the company in setting up there because of the changing trend but to make
the international business in the 21st century, the help of local support is very necessary.
7

APPRAISING ALTERNATIVE METHODS OF ENTRY INTO FOREIGN
MARKETS
The modes of entry are considered as the market channels adopted by the organization to
get an entry in the international market (Marketing teacher ltd., 2018). There are various
alternatives for Rahat continental limited for getting an entry in the international market.
Following are some entry methods discussed in detail that can be considered by Rahat
continental limited:
LICENSING
The licensing method is considered in three ways. First is licensing which is a method
adopted by the organizations, where the organization itself charges royalty amount or fee
for using the technology or brand name or expertise values of the company (Kotabe and
Helsen, 2014). Another is franchising which is a method adopted by the organizations where
the technology or brand name or expertise values of the company are provided to its
franchisees to operate in international markets (Marketing teacher ltd., 2018). For example,
KFC and Mc. Donald’s are such brands of franchising technique. In this method, the
franchises control the management of that particular store. The third way is turnkey
contracts where the employees are trained and developed to set up the plants
internationally and then operate it. Any of this method can be adopted by Rahat continental
limited to set up its business in the UK (Marketing teacher ltd., 2018).
Figure: Comparing different international market entry strategies
8

[Source: https://emerhub.com/insights/choosing-best-market-entry-strategy-emerging-
markets/]
INTERNATIONAL AGENTS AND INTERNATIONAL DISTRIBUTORS
There are various organizations as well as individuals’ works in a country to take business
contracts to market the products and services of the country and perform all the related
activities of international trading (Johanson and Mattsson, 2015). These organizations and
individuals are considered as the international agents. International distributors are those
who take ownership of the goods in the international market and then sell it on behalf of
the company (Marketing teacher ltd., 2018). Rahat continental limited can also appoint any
UK based agent or even contact with the distributors for selling off their organization cotton
clothes for infants. As the distributor takes ownership of the products, Rahat continental
limited can avoid considering the method of international distributors and can opt to
international traders as it will be not needed to provide the owner of the goods. The agents
would be provided with the set target to know the market performance in the regular time
interval (Buckley, 2016).
STRATEGIC ALLIANCES (SA)
The varied relationships companies have in the international market with other companies
marketing internationally are considered as the strategic alliances (Marketing teacher ltd.,
2018). Following are some methods of strategic alliances that can be adopted by Rahat
continental limited as a part of a strategic alliance to deal internationally:
 Shared manufacturing
 Arranging the process of development and research
 Alliancing with the help of distributors where the marketing is done by the
distributors initially
 Marketing on the basis of agreements
(Brouthers, et. al. 2015)
9

THE INTERNET
As with the changing and emerging technology, the 21st century has witnessed a great
emergence of the internet that has played a vital role in the development of the life of the
people. The companies in the 21st century are very focused on considering the internet as
the option for trading internationally (Hu, et. al. 2014). In case of The Rahat continental
limited, as the case study suggests, the company is willing to establish an online store. This
method can be very helpful for the company to establish in the UK market successfully (De
Villa, et. al. 2016). There is no need of many resources to set up the company in the UK with
this method and it will also be helpful in consuming less to settle up.
Figure: E-commerce technique
[Source: https://www.searchenginejournal.com/15-must-have-features-for-e-commerce-
sites/181974/]
The websites can be designed by the Rahat continental limited where the pictures of the
clothes can be placed along with all the detailing regarding the material, size, colour and
other specifications. This will be helpful for the company to make the people in the UK order
the clothes through e-commerce and the use of different online payment methods will
make the customers attracted towards the company. It will be costly only in case of
delivering products with high shipping cost. But it will be easy for the company as they do
not have to move from India to set up in the UK.
EXPORTING
Exporting is a method of trading goods to other countries for sale. There are two types of
exporting direct and indirect. The direct trading is a straightforward method of providing
goods to outside dealers where the control is with the company for the operations carried
out in the other regions (Ozturk, et. al. 2015). It is a most traditional and common method
for making an entry in the international market but there is a need for the high amount of
investigation in this method. When an agency of home country is involved in the sale the
10

products in the international market, the method is considered as the indirect export
(Marketing teacher ltd., 2018). The Rahat continental limited can implement a large amount
of investment to trade in the international market through direct exporting method. The
company can also involve various Indian agencies to trade on behalf of it as a part of indirect
trading and exporting. As the company already deals in the consignment delivery through
the air passage, the means of airlines can also be considered by the company to set its
footprints in the UK for exporting goods.
Figure: the UK is importing 24% clothes from India
[Source: https://capitalmind.in/2016/06/brexit-need-know-impact-india/]
11

EXPLAINING WHY COMPANIES MAY DECIDE TO INTERNATIONALISE
AND ALTERNATIVE THEORIES OF INTERNATIONALISATION
There are various reasons for the company to enter the international market. Rahat
continental limited desires to enter the international market to grab the opportunities of
development (Cuervo-Cazurra, et. al. 2014). Following are some reasons for the companies
to enter the international market:
 Upsurge Sales: By making the business successful in the UK, the Rahat continental
limited will be benefited in improving the overall revenue of the company. It will be
beneficial for the company to provide the unique products from the competitors in
the UK (Grankvist and Karlsson, 2017).
 Advanced Earnings: The increase in sales directly upsurges the earnings of the Rahat
continental limited. The Rahat continental limited also have a reason of earning
more profit by settling in the international market (Grankvist and Karlsson, 2017).
 Short Term and Long Term Security: The settlement of the Rahat continental limited
will make the company to gain short-term and long-term security to fight through
the market fluctuation and downfalls (Cuervo-Cazurra, et. al. 2014).
 Upsurge Creativity: To develop in the international market, the companies also
motives with the enhancement of their creativity level. The Rahat continental limited
will be benefited in the enhancement of their innovation level by settling up in UK
(Grankvist and Karlsson, 2017).
 Government Incentives: Some companies also have the motive of getting incentives
from the government from increasing the economy of the international companies.
The Rahat continental limited can also help the UK economy grow and get the
incentives by setting up there (Cuervo-Cazurra, et. al. 2014).

12

ALTERNATIVE THEORIES OF INTERNATIONALISATION
There are three crucial internationalisation theories which are very important to be
considered by the Rahat continental limited for setting up in international market like the
UK. Following are these theories:
 Uppsala Model
The statements of the Uppsala model are:
 It is very important for the company to recognize the market of the country in which
the company wants to set up its international business
 The company should concentrate more on traditionally and geologically close
countries initially (Vahlne and Johanson, 2017)
 The initial steps to be considered by the company to set up internationally is to focus
on tradition exporting method
(Casillas, et. al. 2015)
[Source: http://www.digitpro.co.uk/2012/06/21/the-uppsala-internationalization-model-
and-its-limitation-in-the-new-era/]
 Transaction Cost Theory
The transaction cost theory helps the companies in following ways:
 The strategy is focused more on the cost of the products and services in the local
market and the entry strategy
13

 To reduce the various costs, the structure of the organization should be focused on
the international market
 The transaction cost must include all the costs related to foreign market, purchasers,
distributors and additional cost
 The decision should be considered on the basis of transaction cost analysis
 The comparing and evaluating of the costs should be done before taking any entry
decision
(Knight and Liesch, 2016)
 Network Model
The network mode helps the companies in following ways:
 The social exchange theory is focused more on this method to maintain international
relationships
 It enhances the relationship bond between the key people of the company
 The network of the company is focused more on making the relationship between
the organizations stronger
(Yamin and Kurt, 2018)
14

DISCUSSING THE IMPACT OF MULTINATIONALS ON BOTH THE
HOME AND HOST NATIONS
A company when incorporates its business in many countries, it is then considered as a
multinational company. It has its resources and other services spread in various countries
apart from its home country (Harzing and Pudelko, 2016). The multinational companies
undertake the foreign direct investments. The company when directly invests in the
production activities of another country than its home country then it is considered as its
foreign investment (Marano, et. al. 2016). This can be done by buying or selling the products
to another country or by setting up business there. This directly enhances the employment
opportunities, economy and wealth in the country, it also has various negative effects on
the home country which are discussed as follows:
HOME COUNTRY
The home country of the Rahat continental limited is India and following are some negative
and positive impacts of multinationals in India:
 The local Indian companies will be helpful in learning the new skills and getting
motivation for foreign investment and economic growth (Young, et. al. 2017)
 The external foreign direct investment will help India to increase its economy
 The negative effect of this multinational will be that employment opportunities will
be decreased in India (Marano, et. al. 2016)
 The people will try to relocate internationally with the intention of getting a job and
settling down which will make the Indian companies less skilled with human
resources (Harzing and Pudelko, 2016)
[Source: http://shuyee-business.blogspot.in/2013/01/multinational-companies.html]
15

HOST COUNTRY
The investment of the Rahat continental limited in the UK will be very helpful as there will
be a high economic growth of the country. The employment will be increased in the
country. Still, there are some negative impacts too which are discussed as follows:
 The employment opportunities will be increased in the host country (Young, et. al.
2017)
 The economy of the country will grow
 The tax source will be developed (Harzing and Pudelko, 2016)
 The enhanced technological level will be witnessed by the country
 The brand value and reputation will be enhanced by the country
 The resources of the country will get degraded (Marano, et. al. 2016)
 The health and safety scenarios may get affected
[Source: http://shuyee-business.blogspot.in/2013/01/multinational-companies.html]
16

SELECTING, ANALYSING AND EVALUATING DATA ON COUNTRY
MARKETS
The Rahat continental limited is willing to set up its venture in the UK to sale inorganic
cotton clothes for the children of age group 0 to 2 years. There are various risks and
opportunities associated with this set up internationally. The policies in context to
international trade and foreign direct investment must be considered by the company
effectively and accurately to avoid uncertainties (Dutt, et. al. 2016). Following are some
evaluations of the UK market:
The UK market has always encouraged the foreign indirect investment and the government
has never differentiated between nation and foreign companies with respect to private
companies’ operations. There is a department of international trade in the UK which
promotes the FDI and also manages a report detailing about the market information.
The Rahat continental limited can gather the necessary data and information of the market
and country from the international trade department if gets settled there effectively. The
government will not discriminate between the Rahat continental limited and local
companies. Still, there are some sectors which restricted by the government for the
overseas investment (Dutt, et. al. 2016).
The two countries making its companies trade together will set a council for the investment.
In case of the Rahat continental limited, the council will be named as UK India business
council for providing engagement plans and consultancy services to the companies like UK
India business council for setting business (Dutt, et. al. 2016). The UK government can never
avoid Indian companies as there are many Indian companies in the UK which have employed
a large number of UK populations. This has made the value of Indian companies in the UK.
The large and rich textile collection of India will make the Rahat continental limited to
increase its foreign exchange and make its brand value. The concept of the selling of cotton
clothes for children in the UK will be beneficial for the Rahat continental limited.
17

CONCLUSION
This report concludes that it is a very complex process to set up a venture internationally.
There are many factors that to be considered by the company before settling up in a new
country. There are various issues faced by the companies for setting up internationally and
also after setting up. There are several methods of entry to be considered by the company
and even the rules differ from the country to country. Considering all the policies, rules,
regulations, concepts, risks, opportunities and issues will help the companies such as The
Rahat continental limited to settle internationally successfully.
18

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