Importance and Impact of Global Trade and Globalization

This report discusses the importance and impact of global trade and globalization on businesses and economies. It also explores the internalization options and strategies for international expansion.

INTERNATIONAL BUSINESS
AND GLOBALISATION

TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................1
Importance and impact of global trade and globalization...........................................................1
PESTLE and Porter five forces....................................................................................................2
Critical evaluation of pattern of the internalisation undertaken by the international business....5
Different alternative solution to the practical problems in planning for the different
international markets...................................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Globalization is referred to as the process through which people, government and culture
of different country integrates and interact with one another. This can also be referred to as the
selling of goods and services beyond the geographic boundaries of country (Man, 2016: 5). In
this current globalised business environment doing international business is very important for
companies to be successful in their business. Present report is based on company Pharmacy2u
which is a company founded in 1999 by Daniel Lee and is headquartered in Leeds, UK. The
company is an online pharmacy which is involved in piloting electronic transfer of prescription
of people in UK. The current report will outline the importance of global trade and country
analysis of country in which expansion need to be done. Further it will discuss the different
internalisation option and various strategies to be used in expansion. In the end, strategies and
issues will be outlined in order to expand within the selected company.
MAIN BODY
Importance and impact of global trade and globalization
To work in the current competitive market, the most important thing for success is that
company must go for global trade. This is essential as the current trend in business environment
is of doing international business that is of globalization. Hence, to be competitive in current
market position it is essential for businesses to go for globalization. The globalization is defined
as doing business within the international market and without any geographic restrictions.
Importance of global trade and globalization- going for international trade is very important for
the businesses and economy because of following reasons-
The major importance is that the business gets more opportunities to grow when they go
for global business. the major reason underlying this fact is that because of globalization the
company can trade with any of the country they wish. Hence, for this global trade assist company
in providing its product and services to any country all over the globe.
Another major importance of global trade is that this increases the employment and this is
beneficial for both the country and economy as well. This is majorly because of the reason that
when the company operates in global market then this increases many different employment
opportunity and will improve both company efficient and working of economy.
In addition to this another major importance of global trade is that this assist in reducing trade
fluctuation and build good trade relations (Kim Man, 2016: 5). This is majorly because of the
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face that when the company’s trade with another country then this will increase effective relation
among the countries as they trade with one another and this improves the economy of both
countries.
Impact of global trade and globalization
The globalization and global trade has positive impact over the economy and working of
the country. The major reason for this is that when countries work in global system them this
includes exchange of foreign currency. This exchange of foreign currency is of much importance
for the country as this improves economic position of country. In addition to this the employment
also increases as when companies open their outlet in other countries then this involves increase
in employment as well. This in turn results in more development of both the company and the
economy of both the countries. Another major impact of global trade is that this includes
optimum utilisation of limited resources and further this also result in increase in the national
income of the country with which trade is being conducted.
PESTLE and Porter five forces
In the present study Pharmacy2u is planning to expand its business in Australia and
Russia and for this the economy analysis is done with help of PESTLE analysis. For analysing
the industry of the country use of Porter five forces model will be done.
PESTLE of Australia Political factor- currently because of COVID 19 there is political stability in the field of
pharmaceutical industry. The major reason for this is that there are many different types
of companies which are trying to deal with the pandemic by creating number of vaccines
and medicines. Thus, for this government of Australia is also supporting to
pharmaceutical sector to a great extent (Perera, R., 2017). Economic factor- the country Australia is good in economic terms and in current the
company is having good economic condition in country. Thus, this will assist
Pharmacy2u in expanding in the country with more profits. The labour in Australian
market is cheaper and this will assist company in reducing the labour cost as compared to
domestic market. Social factor- currently due to COVID 19 the online shopping has increased to a great
extent and medicine is a thing without which people cannot live and especially the older
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people. Thus, this will be an opportunity for Pharmacy2u to expand in Australia (PEST
analysis of Australia, 2020). Technological factor- in field of medical there are many innovation and up gradation
taking place in the technology field. Thus, in Australia the technological research and
adaption to latest technology is more as it is a developed country. Hence, expanding in
Australia will be helpful for Pharmacy2u. Legal factor- in Australia much preference is paid to compliance of law as if these will
not be followed then product and services of company are not used by the consumers.
Hence, for this if Pharmacy2u will expand in Australia then they will have to comply
with all the rules and laws applicable in pharmaceutical industry.
 Environmental factor- in Australia major focus is laid on protection of environment from
hazardous and depletion of limited resources. Thus, for this if Pharmacy2u wants to enter
in Australia then they will have to comply with all environmental protection laws
(Almeman, 2020: 19).
PESTLE of Russia Political factor- the political environment of Russia is quite good as it promotes new
companies entering in country. With respect to current COVID 19 there are many
different types of opportunities in Russian pharmaceutical industry as government is
providing with many subsidies and taxes are also relaxed. Economic factor- the economic condition if country is quite good and is trying to
diversify the economy in different types of field. Hence, for this they are trying to attract
more of the companies in country. For this interest rates of country are low and because
of this companies can get cheaper finance. Social factor- Russia is a country wherein people are majorly affected with HIV and
alcohol poisoning. Thus, this will be an opportunity for Pharmacy2u as they will be able
to capture the social aspect of the country. Further due to COVID 19, pharmaceutical
companies have gained much importance (PESTEL analysis of Russia, 2020). Technological factor- in Russia technology keeps on updating and in pharmaceutical
companies the technology matters most. Pharmacy2u is an online business and for this
technology upgradation and advancement is very essential to be taken into consideration.
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 Legal factor- the Russian economy involves too much of laws and legalities to be
followed. Hence, when Pharmacy2u will have to comply with all these legislations if they
will enter in Russia (Alén, 2017).
 Environmental factor- complying with environmental protection and society welfare is
very important as the people of Russia are more conscious towards the society and
environment protection. Thus, Pharmacy2u need to focus on this to a great extent.
From both the PESTLE analysis of Russia and Australia it can be compared that political
condition are much better in Russia as government is providing subsidies and relaxation in taxes
as well. Further in economic factor as well the in Russia the interest rates are low and because of
this Pharmacy2u can have finance at lower rates and this will be beneficial for the country.
Porter five forces of Australia Threat of new entrant- this is high in the pharmaceutical industry of Australia as this
government has created relaxation so many companies tries to enter. But on other side in
Russia this threat is low as there are many requirements of entering in business. Threat of substitute- this threat in low in both the countries that is Australia and Russia
as there are very less substitute for the medicines. Bargaining power of supplier- the number of suppliers are low in Australia as compared
to Russia. Hence, for this Russia will be beneficial as Pharmacy2u will have more option
of supplier in Russia. Bargaining power of buyer- the bargaining power of consumer is high in Australia as
compared to Russia. Hence, this means that buyer has more power to reject or accept the
product in Australia as compared to Russia (Rahma and Pradhanawati, 2018: 7).
 Competitive rivalry- the competition is high in both the countries whether be it Australia
and Russia. But there is more growth in Russian market as pharmaceutical industry of
Russia.
Hence, in the end from PESTLE and Porter five forces it is advisable to Pharmacy2u to
enter in Russia. The major reason for this is that PESTLE factors are more beneficial for
Paharmcy2u of Russia and this will increase the business of company.
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Critical evaluation of pattern of the internalisation undertaken by the international business.
Internalisation occurs when the transaction is handled by the entity instead of routing to
some other. The process is applicable to the investment transactions and businesses or to
corporate world. In business it refers to the transaction conducted in the organisation instead of
open market. It occurs in the investment world when the brokerage firms fill the buy order for
the shares from the own inventory of the shares in place of executing trade using outside
inventory.
Pharmacy2u could expand the business overseas by entering into joint venture with other
pharma companies of Russia. The pharma industry of the Australia is well developed and is
known for high quality health services. Company will have adequate support system from
pharma industry in Australia in providing the at the door delivery of medicines (Santangelo and
Meyer, 2017: 1114-1130). There are various strategies through which company could expand in
the new markets.
Import Export strategy
Import and export refers to natural extension of the distribution strategy. It includes
product, promotions, the pricing factors and the decisions. The import and export strategy will
not be effective for the business as it has to operate within single country using the prescriptions
of that country only.
Turn Key
It refers to the business which is ready for use and is existing the condition which allows
for the immediate operations. Term turnkey is based over concept that only requires the business
to turn key for unlocking the operations. The expansion strategy is used for large expansion
projects. It is not suitable for the Pharmacy2u being a online business and the core operations of
business could not be made available to others.
Joint Venture
It is highly used method for business expansion in the overseas market. It is business
agreement between 2 companies making active decisions for working together with collective
aim to achieve specific goals and objectives (Al-Fadhat, 2020: 177-198). Pharmacy2u can use
the joint venture for expanding successfully as it will provide access to increased resources and
will also provide access to established market base in Russia.
Franchising
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It is also established expansion strategy which is successful in delivering the rapid growth
with the reduced risks. It licences the copyright, trademarks, know how and the established
models to franchisees. It is effective only company has established brand image and people are
well aware of the brand.
ANSOFF Matrix
It is also known as the Market/ Product expansion grid which is tool used by the firms for
planning and analysing the growth or expansion strategies. Matrix shows 4 strategies that could
help the organisation to grow and analysing the risks associated with every strategy..
Market Penetration
In this strategy form uses product in existing market. Firm aim to increase the market
share with market penetration strategy. The strategy is useful for the business to where there is
strong competition (Grochal-Brejdak and Szymura-Tyc, 2018 : 103). It could be executed by
decreasing prices for attracting customers, increasing promotion or by acquiring competitor in
same market.
Product Development
In this firms develop new product to cater to existing market. This strategy typically
includes extensive research and development as well as expansion of the product range. Product
development strategy is used when the firms have strong understanding of current market of
operation and able to provide the innovative solutions for meeting needs of existing market. It is
implemented by organisation by investing in the R&D for developing new products. By
acquiring product of competitor and merging the resources for creating a new product which
meets the demand of existing market successfully. It could also be achieved by forming
partnership with the other firms for gaining access to different distribution channels.
Market Development
It the market development strategy firm enters in the new market with existing products.
Expansion includes expanding over new customer segments, geographic regions, etc. This
strategy is considered as successful when firm is owning proprietary technology which could be
leveraged into the new markets (Taylor and Jack, 2016 : 57). Also when the potential customers
in new markets are profitable and consumer behaviour in new markets is not deviating highly
from the consumers in existing market. Pharmacy2u since proposing for business expansion will
chose product development. Company with its online medicine service can gain considerable
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access in new markets. Including some additional services in the existing services company can
excel in Russia. This will prove to be most successful expansion strategy for company.
Diversification
In the diversification strategy company enters new market with new product. This
strategy is risky as product and market development are required. Risk could be mitigated
through the related diversification. It could offer greatest potential for the increased revenues as
opens new revenue stream for firm (Blagoeva, Jensen and Merchant, 2020 : 427-457).
Diversification is of two types which are related and unrelated diversification. In related
diversification potential synergies are there to be realised where no synergies are there in the
unrelated diversification.
Pharmacy2u has adopted the market development strategy for expanding in Russia as it is
using existing services in new market. The strategy will enable the company to attract new
consumers in Russia and will meet the requirement of consumers by providing at the door
services.
Porter's Generic forces
It describes how the company pursues the competitive advantage over the market scope.
It is used for enabling the organisation to make the analysis of the strategy that it will be
choosing for the product or services of company.
Cost leadership strategy
The strategy requires low cost producer in industry for requisite quality. Cost strategy
enable the organisation to develop edge which helps in getting the increased sales taking it away
from the competitors (M Wisniewska, and et.al., 2017 : 10-18). Cost leadership strategy could be
achieved by reducing costs by increasing the profits. It could increase the market share through
lower prices making reasonable profits over each sale.
Differentiation strategy
It involves making the products or the services different from and attractive than the
competitors. This factors depends on the industry and products and services but involves features
like durability, functionality, support and brand image.
Focus strategy
The strategy is used for concentrating over particular market and for understanding
dynamics of market and needs of the customers. Company wants to build strong customer
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loyalty in the customers. Pharmacy2u will adopt focus strategy for providing prescription
services and the medical services at the door, building strong and new customer base in Russia.
Different alternative solution to the practical problems in planning for the different international
markets.
The above analysis shows that the Russia is more suitable for the business expansion. It
will be providing increased resources that will help to establish the business successfully.
Pharmacy2u will enter the market using joint venture so that the risks and resources associated
with the expansion are shared. It will also enable the company to have access over the market of
established company. It has adopted market development strategy for establishing the base in
Russian market providing online pharmacy and medical services. Company has adopted
differentiation focus strategy for providing services that will help to attract new customer base.
However there are also various practical issues that company might face in expansion to
other country like Russia.
Language Issue
Pharmacy2u will face the language barriers in Russia as people speak Russian and people
speaking English is very low. Language barriers affects the business if not dealt properly.
However this issue could be resolved using advanced technology that could be used for
translating in different languages. Company will employ Russian employees who have
knowledge of both Russian and English language (Santangelo and Meyer, 2017: 1114-1130).
Communication channel between the customers and company should be highly effective as this
could create problems. Orders should be confirmed through emails or cross verification process.
Currency Issue
It could also face currency issues while operating in other countries as it has to maintain
accounting records in both the currencies. The main office is situated in UK therefore it will have
to make the consolidated statements in GBP.
This issue could be resolved using the adjustments as stated under the accounting
standards. IT will have to prepare the consolidated financial statements considering the effects of
currency changes at year end. It will have to record the gains or losses of the currency changes.
CONCLUSION
It could be concluded from the above report that a company has to consider several
factors before going for internalisation and globalisation. Pharmacy2u is servicing company that
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provides medicines on demand through post. Company has planned to expand its business to
new market of Russia after analysing the different factors that could influence the business using
pestle analysis and porter's five forces model. It has chosen Russia is highly developed in the
medical terms and people do not have such services. It will enter the market through Joint
venture and has adopted market development where it will be providing same services like in
UK in the Russian market. It will enable the company to develop new customer base in Russia
using differentiation focus strategy.
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REFERENCES
Books and Journals
Alén, L., 2017. Internationalization: Entering the Russian Market: Case: Company X.
Al-Fadhat, F., (2020). The Internationalisation of Capital and the Transformation of Statehood in
Southeast Asia. In The Political Economy of Southeast Asia (pp. 177-198). Palgrave
Macmillan, Cham.
Almeman, A.A., 2020. Strategic analysis of clinical pharmacy education in Saudi Arabia.
Tropical Journal of Pharmaceutical Research. 19(6).
Blagoeva, D.H., Jensen, P.D.Ø. and Merchant, H., (2020). Services in International Business
Studies: A Replication and Extension of Merchant and Gaur (2008). Management
International Review. 60(3). pp.427-457.
Grochal-Brejdak, M. and Szymura-Tyc, M.,( 2018). The Internationalisation Process of an E-
Commerce Entrepreneurial Firm: The Inward-Outward Internationalisation and the
Development of Knowledge. Entrepreneurial Business and Economics Review. 6(4).
p.103.
Kim Man, M.M., 2016. Supply chain management (SCM), environmental factors and porter five
forces: a case study of Malaysia Airlines Berhad. International Journal of Supply Chain
Management. 5(3). pp.32-39.
M Wisniewska, L., and et.al., (2017). Molecular, cellular and pharmaceutical aspects of
biomaterials in dentistry and oral and maxillofacial surgery. An internationalization of
higher education and research perspective. Current pharmaceutical biotechnology. 18(1).
pp.10-18.
Man, M.M.K., 2016. Supply Chain Management (SCM), Environmental Factors and Porter Five
Forces: A Case Study of Malaysia Airlines Berhad (MAB). Int. J Sup. Chain. Mgt Vol.
5(3).
Perera, R., 2017. The PESTLE analysis. Nerdynaut.
Rahma, A.N. and Pradhanawati, A., 2018. STRATEGI BERSAING PRODUK UKM LUNPIA
DENGAN MENGGUNAKAN ANALISIS FIVE FORCES PORTER DAN SWOT (Kasus
pada UKM Lunpia Kings Semarang). Jurnal Ilmu Administrasi Bisnis. 7(2). pp.171-185.
Santangelo, G.D. and Meyer, K.E., (2017). Internationalization as an evolutionary
process. Journal of International Business Studies. 48(9). pp.1114-1130.
Taylor, M. and Jack, R., (2016). Born global firm internationalisation: the influence of industry
factors. Contemporary Management Research. 12(3) p.57.
Online
PEST analysis of Australia. 2020. [Online]. Available through: < https://pestleanalysis.com/pest-
analysis-of-australia/ >
PESTEL analysis of Russia. 2020. [Online]. Available through: < https://howandwhat.net/pestel-
analysis-russia-russia-pestel-analysis/ >
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