Importance of International Business for Business Expansion - Desklib

This report analyses the importance of international business for business expansion and provides recommendations for a suitable market and entry mode for expansion. It includes an evaluation of the current international strategy of Marks and Spencer, a recommendation for a suitable new market to enter with supporting evidence and reasoning, and a recommendation for a suitable entry mode to use with supporting evidence and reasoning.

International Business
Management
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Executive Summary
International business can be defined as an important concept that basically refers to the
exchange of goods and services between two or more parties of different nations. This
concept is considered as important as it helps in trading goods and services through the
business transactions by crossing the national boundaries. One of the major importance of
international business is that it helps the business organizations to encourage the element of
global competition. It also helps in increasing the scope of the business towards the
international markets. The purpose of this report is to understand and analyse the importance
of international business in accordance to expansion of the business. The report also focuses
on the analysis of the current international strategy used by the company. Also,
identification of different suitable locations where the expansion can be done is also
analysed in detail.
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Table of Contents
Executive Summary.........................................................................................................................2
Table of Contents.............................................................................................................................3
Table of Contents.............................................................................................................................3
Introduction......................................................................................................................................3
An evaluation of the current international strategy of the organisation...........................................4
A justified recommendation for a suitable new market to enter with supporting evidence and
reasoning..........................................................................................................................................5
A justified recommendation for a suitable entry mode to use with supporting evidence and
reasoning........................................................................................................................................10
Conclusion.....................................................................................................................................12
References......................................................................................................................................12
Books & Journals......................................................................................................................12
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Introduction
International business is basically a process of grabbing the resources from around the
world in order to attain the objectives of the global business opportunities. The process is
basically used to sell or purchase the goods and services across the international borders.
The concept of international business helps in understanding and analysing the situations of
different nations for the purpose of expansion of the business organization. In order to
execute the expansion plan, it is highly important that different entry modes must be
critically analysed. This helps in selecting the best method out of the all to enter in a new
market efficiently. For the purpose of this study, Marks and Spencer has been taken into
consideration. The report will be including different entry modes on the basis of which the
company can expand its business operations and create a new territory where it can run its
business activities effectively.
An evaluation of the current international strategy of the organisation
An international business strategy can be defined as a plan or a tool which can be used as
a guide in order to execute the commercial transactions between the business entities of two
or more nations (Prebensen, Chen and Uysal, M, 2018). It is highly important for all the
business organization in today’s world to stay in the global competition to ensure the long-
term growth on large scale. For every business organization an international strategy is a
must to carry out its business operations to achieve success in long run. Therefore, Marks &
Spencer Group Plc is taken into consideration for this report as it is a popular British
multinational retail outlet that basically deals in clothing, food items and home products.
The headquarters of this company are based in London. This business organization is one of
the biggest retailers in United Kingdom.
The current international strategy of Marks and Spencer states that the company is not
involved in overseas business operations much and has been concentrating on the domestic
market since the year 2001. The reason behind taking off its international business operation
was that the respective company was facing huge amount of losses (Morozova, Popkova and
Litvinova, 2019). The company also faced the recession period globally which affected the
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profit margins of the company extensively. Marks and Spencer has always been sensitive
towards bringing the technological advancements in the organization and its activities. This
was the key reason for the company for being targeted and attackers by the competitors
existing in the marketplace. It has not changed its competitive strategies while on the other
hand its competitors namely, Sainsbury & Tesco grabbed the opportunity and excelled in the
marketplace exceptionally well (Li and Fleury, 2020). It can also be seen that the company
is having a conservative approach towards the international business concept because of the
track record of many failures. Although it has also achieved growth by operating in some of
the nations. For the current period, the company is carefully analysing its business failures
and is restructuring its plans. Its current strategy is focusing mainly on restoring the stability
in the market in best possible ways so that it can come up with new strategies in the near
future efficiently. This will help Marks & Spencer to attract the customers from all around
the globe.
A justified recommendation for a suitable new market to enter with
supporting evidence and reasoning
It is highly significant for a company or business organization to expand its operations
in different nations because it helps in increasing the profitability of the company. It also
helps the company to gain a large customer base along less dependencies on a particular
one market. Therefore, the company should expand its operations to newer countries. It
has been suggested that Marks & Spencer should enter Australia where it can expand its
business operations effectively. Here, the framework of PESTLE Analysis has been used
to study the different aspects of performing business activities. The different components
of Pestle analysis are mentioned below:
 Political Factors: It is highly important for any company to have a stable political
situation in the country in which it is operating in (Watts, Steele and Den Hartog,
2020). In context to Marks & Spencer, Australian market place can be considered as
one of the best because it is having a stable political environment which will support
the company.
 Economical factors: A stronger economy in terms of high liquidity helps in
allowing the customers to buy the products. Therefore, for Marks and Spencer will
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get an advantage of grabbing more customers because the economic condition of
Australia in commendably well. Also, the customers are having high purchasing
power in their hands.
 Social Factors: the social environment of Australia is very peaceful in terms of
wealth, education, health as well as living standards. It can be a potential market for
Marks & Spencer to attract a lively and outward looking population towards its
variety of products.
 Technological Environment: The technological advancements helps in developing
a nation or a business in a very efficient manner. Also, the Australian markets are on
the path of becoming highly technologically advanced. In relation to Marks &
Spencer, running its business operations in Australia will help the company to gain a
technological advantage as the respective nation is open to adopting advancements in
the field of information technology.
 Environmental Factors: The environmental factors also act as an important
component while expanding. The climate and environmental policies are favourable
towards running the business (Asakawa and et. al., 2018). In this regard, the
respective company can consider the environmental factors to support its business
model.
 Legal Factors: The legal policies of Australia are fair for the purpose of trading
effectively. The legal landscape of the country is highly cooperative in accordance to
the consumers laws and trading laws. So, this will provide an opportunity to Marks
& Spencer to carry out its business activities in Australian markets.
In order to enter into international marketplace, there are various modes of entry that
a company may adopt. In context to Marks & Spencer, the following entry modes can be
considered for the purpose of international expansion:
 Direct Exporting
The method of direct exporting states that the company can directly
sell its goods and services to another country’s market. It is considered as the
fastest mode of entry into the international markets. This method involves in
understanding that where the potential buyers of the goods are ready to
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purchase the goods and services. The distributors and the importers of the
products and services becomes the important source of marketing the brand
efficiently.
Advantages Disadvantages
 This method can be used
for the purpose of testing
the products in the
international markets after
which huge investments can
be made.
 With this method of entry,
the patents, goodwill,
trademarks can be
effectively protected.
 For the purpose of
operating in offline market,
it is going to cost a higher
level of expense to the
company.
 The process of direct
exporting is going to take a
huge time for the purpose
of marketing research,
hiring individuals and
executing the business
activities.
 Franchising
It is a method of establishing the retail impression of the business in the
overseas market with almost negligible risk. The reason behind that is the person
to whom the company is selling the rights of franchising and licensing bears the
whole risk of running the business activities (Peterson, Søndergaard, and Kara,
2018). With this method the brand can achieve high level of popularity
worldwide. The company also receives the amount of royalty for using the brand
name of the company. Also, some proportion of the total sales as well as profits is
taken by the company for sharing its business workings with another individual
by providing the franchise and license to run the business in different nations.
Advantages Disadvantages
 This method of entry is the
most economical that
creates a sense of
 Sometimes, in order to
exercise the complete
control may not exist in the
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convenience for the
company.
 Franchising also helps in
earning passive incomes at
a minimal rate of
investment.
overseas market.
 The incompetence of the
partners who have acquired
the license and the
franchise may result into a
risk to the brand image of
the company.
 Joint Ventures
It is one of the most popular method of getting entered into international markets.
Those companies or brands who do not mind sharing the brand, its knowledge and its
expertise with another business this is the most convenient entry mode of the
business. In this entry mode, the rewards as well as the risk are associated with both
the venture partners (Tan and et. al., 2020). They share almost all the elements of the
business namely, investments, revenues, costs, profits & losses in a predetermined
ratio.
Advantages Disadvantages
 Both the partners can
combine their skills and
expertise in such a way that
they both can excel in their
business operations.
 The element of political
risks can be effectively
managed because the local
partner is already having
the complete knowledge of
the local business
environment.
 It may happen that both the
partnering firm of joint
venture may face a clash on
the basis of their cultural
backgrounds resulting into
disputes and imbalances.
 The process of dissolving
the joint venture can be a
large and complicated
process for both the
partnering firms.
 Strategic Acquisitions
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This method basically implies that one company can acquire the controlling
power of another existing company in the international market. It may happen the
acquired company is in the same business of providing goods and services or can
be in different business as well (Zhang and et. al., 2019). One of the key reasons
behind using this mode of entry to in the international markets is that the existing
infrastructure can be used by the company who has acquired the other one.
Advantages Disadvantages
 It gives an advantage of
using the existing
infrastructure and
consumer base instead of
creating a new one.
 In order to enter in the
international market, this is
considered as the fastest
mode.
 Different culture of the
organization may act as a
hinderance in the business
workings.
 Also, the differences in the
technological processes
used by two companies may
create a issue in the
strategic acquisition
process.
 Foreign Direct Investment
For the purpose of entering into international markets it is foreign direct
investments can be one of the effective ways. This method of entry basically states
that an entry can be made b investing a substantial amount of investment in other
nation. When the company’s capacity to invest is at a large sight at that time foreign
direct investments can be made (Scalera, Perri and Hannigan, 2018). The strategies
through which the investment can be made includes mergers & acquisitions, joint
ventures and greenfield investments. This will help he company to enhance its
growth potential levels to a greater extent.
Advantages Disadvantages
 Foreign direct investments
also bring the right to keep
 First of all, a substantial
amount is required to make
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a control over the business
operations.
 This method also provides
an advantage of saving
taxes and getting subsidies
from the local government.
an investment for the
purpose of foreign direct
investment.
 The business are exposed
to higher level of political
risks which may focus on
the protection policies in
order to support and power
the domestic business
organizations.
From the above mentioned entry modes, Marks & Spencer should select the option of
“Franchising” as its entry mode to enter into the international market. It will help the company to
establish a significant presence in the global markets. Also, with this strategy of getting entered
into the global markets the respective company can create an essence of competitiveness
amongst the existing competitors in the industry.
A justified recommendation for a suitable entry mode to use with supporting
evidence and reasoning
In this report, the critical evaluation of all the entry modes to enter in the international
business is done effectively in order to select one entry mode for the company Marks and
Spencer. The best strategy that the respective company can implement is international
franchising. The international franchising is basically a type of licensed agreement that
states the particular organization can enter into the foreign markets low level of risk
involved (Xie and Redding, 2018). The company who is selling the rights is basically known
as franchisor while on the other hand the purchasing company is known as the franchisee.
This is basically a contractual partnership between two parties which is having the motive of
expanding the business in different nations to attain higher level of growth. With this
strategy, Marks & Spencer can grow its business rapidly in the international markets. The
important fact of franchising is that the franchisee will be using its own capital to set up the
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business. The different major reasons to choose Franchising as the international business
strategy to enter in the international markets are mentioned below:
 Rapid Expansion: The first and foremost reason of franchising is that it helps in
expanding the business at a rapid pace. This serves the basic objective of the
company because the Marks & Spencer is already concentrated in the domestic
market but franchising will help it go beyond the domestic operations.
 Easier to manage: The process of managing the business operations will become
easy for Marks & Spencer because the franchisee will be handling all the workings
related to the company. Therefore, it will create an essence of ease for the company
to manage the business activities around the globe.
 Increased Profits: Franchising will be able to bring huge amount of profits from the
international markets because the franchisee will give some part of the earnings to
the company (Liu and Yu, 2018). Earlier, Marks & Spencer was focussing on the
domestic markets therefore, it resulted into gaining low profit margins. While with
franchising, the company can increase simply its profit level at a rapid rate.
 Brand presence: When the business will run around the globe by way of
franchising, it will also create a considerable brand presence in the market. This will
help Marks & Spencer to make their brand popular in the market place among the
existing competitors dealing in the same business.
 Reduce Risks: When a company decides to adopt the technique of franchising, it
gives it a big advantage of passing on the risk element to the party who is purchasing
the franchise rights. All the losses will not be dealt by the company only. A
proportion is decided on the basis of losses are shared. Therefore, franchising divides
the risks between two parties namely, the franchisor and franchisee.
 Knowledge of the domestic market: In case of franchising, the franchisee will
already be having the information related to the domestic market of the particular
country. This will help Marks & Spencer to have a complete knowledge of how to
execute the marketing plan in the particular country so that it becomes a success in
grabbing the target customer base.
The above-mentioned benefits are highly profitable for the company Marks &
Spencer. The strategy of international franchising is based on a strong brand. This not
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only helps in attracting and gaining franchisees for the business but it also helps in
increasing the customer base of the company. Expansion which is done on global levels
helps in creating a brand presence in such a way that it gives a tough competition to the
competitors as well (Salehi and Moghadam, S. M., 2019). With this strategy, higher
level of customer satisfaction values can be achieved which will help in retaining the
loyalty of buyer towards the brand. If the brand is recognizable in the competitive
markets then it helps in attracting potential business partners. These business partners
can grow the business to higher levels so that they can also earn good amount of profits
(Strange and Humphrey, 2019). Therefore, an efficient network of franchising can be
developed that will accelerate the growth of the business and will ultimately fulfil the
end objective of the organization.
Moreover, it is highly important for Marks & Spencer to understand the needs and
wants of the targeted customers of Australia. The term glocalization is something which
popularly states that at the global level it is a moral responsibility of the company to
understand the local needs of the customers. The strategic positioning of the business
operation plans should be done carefully because it helps in dealing with the hurdles of
the inefficiencies and high-risk exposures.
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Conclusion
From the above report, it can be concluded that international franchising will be the best
option for Marks & Spencer to enter into the global markets. In the competitive
environment, this method of entry will bring high level of growth in long run of business.
With the help of franchising system, Marks & Spencer will be able to use the skills and
expertise of its franchisees to understand and adapt the local requirements of the customers.
All this will help the respective company to attain the advantages of globalization as well as
localization which are considered as an important concept. Therefore, this kind of entry
mode will help Marks & Spencer to achieve success in the universal markets amongst the
different countries such as Australia. Along with this, franchising is definitely an efficient as
well as an effective entry mode and should be considered as the important decision for the
company. This will definitely pave its way towards high amount of profits and recognition
among the competitors.
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References
Books & Journals
Prebensen, N. K., Chen, J. S. and Uysal, M. eds., 2018. Creating experience value in tourism.
Cabi.
Morozova, I. A., Popkova, E. G. and Litvinova, T. N., 2019. Sustainable development of global
entrepreneurship: infrastructure and perspectives. International Entrepreneurship and
Management Journal, 15(2). pp.589-597.
Li, J. and Fleury, M. T. L., 2020. Overcoming the liability of outsidership for emerging market
MNEs: A capability-building perspective. Journal of International Business
Studies, 51(1). pp.23-37.
Watts, L. L., Steele, L. M. and Den Hartog, D. N., 2020. Uncertainty avoidance moderates the
relationship between transformational leadership and innovation: A meta-
analysis. Journal of International Business Studies, 51(1). pp.138-145.
Asakawa, K., and et. al., 2018. Internal embeddedness, geographic distance, and global
knowledge sourcing by overseas subsidiaries. Journal of International Business
Studies, 49(6). pp.743-752.
Peterson, M. F., Søndergaard, M. and Kara, A., 2018. Traversing cultural boundaries in IB: The
complex relationships between explicit country and implicit cultural group boundaries at
multiple levels. Journal of International Business Studies, 49(8). pp.1081-1099.
Tan, D. and et. al., 2020. A review of research on the growth of multinational enterprises: A
Penrosean lens. Journal of International Business Studies, 51(4). pp.498-537.
Zhang, X. and et. al., 2019. “Outside in”: Global demand heterogeneity and dynamic capabilities
of multinational enterprises. Journal of International Business Studies, pp.1-14.
Scalera, V. G., Perri, A. and Hannigan, T. J., 2018. Knowledge connectedness within and across
home country borders: Spatial heterogeneity and the technological scope of firm
innovations. Journal of International Business Studies, 49(8). pp.990-1009.
Xie, E. and Redding, K. S., 2018. State-owned enterprises in the contemporary global business
scenario: Introduction. International Journal of Public Sector Management.
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Liu, Y. and Yu, Y., 2018. Institutions, firm resources and the foreign establishment mode
choices of Chinese firms: The moderating role of home regional institutional
development. Journal of Business Research, 93. pp.111-121.
Salehi, M. and Moghadam, S. M., 2019. The relationship between management characteristics
and firm performance. Competitiveness Review: An International Business Journal.
Strange, R. and Humphrey, J., 2019. What lies between market and hierarchy? Insights from
internalization theory and global value chain theory. Journal of International Business
Studies, 50(8), pp.1401-1413.
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