Internationalization of Small Business: Analysis of Macro Environmental Factors and Mode of Entry

This report analyzes the reasons for small businesses to expand internationally, with a focus on Boxes and Packaging Limited. It conducts a macro environmental analysis of the factors impacting the business performance, including political, economic, technological, and environmental factors. The report recommends a mode of entry for the business to expand into Germany.

Internationalization of small
business

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................4
Reason(s) for expansion..............................................................................................................4
Analysis of macro environmental factor......................................................................................5
Recommend mode of entry..........................................................................................................9
CONCLUSION & RECOMMENDATIONS................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
Internationalization of businesses in simple words is determined by conducting business
outside the national borders. Internationalization is important to businesses as the business can
accomplish rapid growth and development. It gives new business opportunities by stepping into
international platform and serves different benefits to the business including exposing to new
market, the large market coverage, improved business functioning, profit margins and so on.
Globalization has impacted strongly on small and medium enterprises. The SMEs find new
opportunities to grow and expand the business into new competitive international market. There
are different number of reasons that SMEs expand their businesses to international models for
unique product, technological Advancement, economies of scale, enhancing the business
potential in foreign markets. In order to support the report with relevant information and real life
examples, this report is in the context of Boxes and Packaging Limited which is a
manufacturer, producing boxes and other packaging equipment. With well-established network
operating, the business is rung across UK including Birmingham, Bristol, Doncaster, Dumbarton,
Thorne, Swindon, Liecestor, Merseyside, Manchester and Oxford. Boxes and Packaging Limited
is one the largest manufacturers of corrugated packaging, ancillary packaging products and in
house printing in UK. The organisation was founded in the year 2007. The organisation is
located in Lifford Lane, Kings Norton, Birmingham. Taking Boxes and Packaging Limited as a
chosen business organisation to complete the report, this report covers factors that impact the
business performance for which macro environmental analysis is conducted, and
recommendations so that the business can adopt different methods and strategies of entry in the
process of internationalization (Apetrei, Kureshi and Horodnic, 2015). Boxes and Packaging
Limited is headquartered in Crewe, England, UK, the business is looking forward to expand its
operations over other country. The chosen country for business expansion is Germany. The
association had chosen Germany for business expansion for the reason being the social and
economic development of the country. In Germany the association can easily find resources such
as skilled labour, easy availability of funds such as government grants and loans at cheaper rates,
the technological advancement can add up the business with more efficient and improve
processes Are certain factors that drive the business for expansion in Germany. The welcoming
political policies by the government of Germany for foreign businesses in the country makes it

more favourable for Boxes and Packaging Limited. Apart from that the high purchasing power
and high living standard of people living in Germany, gives business variety of opportunities for
enhancing sales and profitability margins with quality products and services. Thus, choosing
Germany for expanding the business into foreign land is justified (Buckley, 2016).
MAIN BODY
Reason(s) for expansion
There are different set of reasons that drives Boxes and Packaging Limited to expand its
business into foreign land. These set of reasons stated by the association are:
Enhance revenue potential: When business operates in a specific location its growth and
profitability margin can get stagnant, thus turning the business into a global business drives
many benefits that supports the business to access to millions of customer which further
enhances the sales and profitability margin of the business.
Entry to new markets: Boxes and Packaging Limited is a leading manufacture business that is
famously known for its packaging products. After seeing its success in the home country, the
association is looking forward in order to drive its business into foreign land to explore new
market share and opportunities to deliver the current products and services to new customer base.
As the broader customer base delivers the business more profitability and sales margin (Child
and et.al.,2017).
Diversification: Boxes and Packaging Limited can explore diversification to new markets,
wherein the business can identify the market demand and changes and formulate opportunities to
diversify the current market offerings in order to enhance the economic growth of the business.
Access to talent: Another set of reason for Boxes and Packaging Limited to enhance into global
market is access to fresh and great talent. The association can access to skilled talent with
advance language skills and educational background. That can bring specialisation and
productivity in the business operations. The association can have easier access to skilled talents
at cheaper cost.
Competitive advantage: To gain competitive advantage is one of the major reason that why
Boxes and Packaging Limited wants to expand its business into foreign lands. Competitive

advantage would further support the business to establish strong customer perception and market
positioning (Chow and Schoenbaum, 2020).
Improved brand identity: Simply driving the business into foreign land enhances the brand
identity and goodwill of the association in the international platform. Strong brand identity
would help the business in order to differentiate its products in the external marketplace and
exposure to large customer base. Brand identity would also help to build loyalty and reliability of
the customer and make them choose the brand than any other substitute products in the market.
Boxes and Packaging Limited is on the first stage of internationalization process which is
of domestic operations, wherein the business has the origin as a domestic company and the
market is also exclusively domestic. In order to expand its business to international boundary the
firm will look into other stages of internationalization in order to control both local
responsiveness in the domestic country and global efficiencies in the international country.
Analysis of macro environmental factor
Macro analysis is conducted in order to analyze the macro environmental factors on the
business performances and how business responds to these environmental factors in the external
marketplace. Macro analysis involves four factors which are political, economic, technological
and environmental factors.
Political factors
Boxes and Packaging Limited complies with all the political factors and legislations framed by
the government of UK for International businesses operating in UK. With political stability in
England, UK it also delivers great utilities and benefits to the Association. UK also maintains
good relationship with United States and other economies around the globe it is also a permanent
member of UN that reflects an influence on global economic and other political affairs. The bank
of England added 100 billion pound to the economy of UK in the year 2020 in order to accelerate
the economic growth of the country (Collinson, Narula and Rugman, 2016). The government of
UK also formulate favourable policies for small and medium enterprises in order to deliver
financial and non-financial support to such businesses. These factors affect the association in the
most positive manner and bring utilities to the business. Thus, there are different political factors
such as legal framework, intellectual property protection, taxation, mandatory employee benefits,

product labelling, quality standards, pricing regulations are certain factors that Boxes and
Packaging Limited scrutinizes while operating in UK.
Germany maintains good corporate alliance and relationship with France and other countries.
These alliances with the most powerful countries helps to improve decision making pertaining to
the economic and overall development of the country that brings stable economic and political
affairs in the country to both businesses and people living in Germany (Cravino and Levchenko,
2017). With the introduction of BREXIT wherein UK existed from the EU countries. As Boxes
and Packaging Limited is domestically operating in England so expanding its services to
Germany would lead the business to face different challenges such as acquiring raw materials for
the business would lead to huge cost and long procedure of documentation and time incurred for
the acceptance of the business proposal from the respective government officials. Other
challenges include turning down the value of pounds, freezed employment and so on.
There are certain standards which are must and crucial to be followed in order to deliver the
transparent information to the customers and operate the business in the most ethical manner.
These standards specifically focus on different measures for manufacturing industry which are
both common for businesses operating in Germany or England, these are discussed below as:
Product labelling and description
As Boxes and Packaging Limited complies with the quality standards which says to deliver
detailed information about the products offered for sales in the marketplace. Boxes and
Packaging Limited uses German language in labels for business in Germany and English
language for business in England on all the product packets and full information about the
product with expiry and manufacturing date and other pertaining details and description of the
product such as ingredients used and the do ‘s and don’ts of the product and so on. Boxes and
Packaging Limited delivers detailed information about the products pertaining to how that the
product is acquired, and manufactured (Di Giovanni, Levchenko and Mejean, 2018). Boxes and
Packaging Limited also uses attractive packaging in order to grab attention of the customers.
Boxes and Packaging Limited render all the necessary documentation submit it to the public
authority is in Germany and England.
Product quality

Boxes and Packaging Limited ensures that the boxes and packaging is to the utmost and best
quality both in the domestic and international boundary. Both in England and Germany
complying with the quality standards is the utmost responsibility of the businesses. In Germany
there is a multilayer inspection system cross checked by the administration for market regulation
in Germany to check the quality of the products. Boxes and Packaging Limited complies with the
ethical standards in order to accelerate the growth in the international border (Eicher, ed., 2016).
Technological factors
With technological advancement in both Germany and England it delivers fair growth
opportunities for Boxes and Packaging Limited. The association uses different technologies that
helps to bring efficiencies and economies to scale in the business operations for both England
and Germany. UK is counted among the technically advanced country around the globe. England
being the great hub for Financial and technological institutions. Businesses operating in England
adopts and develops new technologies in order to deliver best offerings and solutions to its
customers. The advance technological infrastructure delivers Boxes and Packaging Limited and
limited utilities and opportunities for operating business in the domestic territory. The
government also adds new investment and development ventures to accelerate the growth of
technological advancement in the country. There are different technological factors such as cost
structure, value chain structure, rate of technological diffusion, technological developments are
certain factors that impacts the decisions pertaining to adoption of technology by the association
in England (Gligor, Esmark and Gölgeci, 2016).
Germany is also best technological advance country in the world. Ministry of science &
technology is an association that collaborates and delivers priorities for national science &
technology programs in Germany. Germany is the noteworthy country known for science &
technology. Germany is an advanced country spending more a lot of money for research and
technology. It is also a leading country for developing green products, processes and services. As
per the research it is also delivered that German government have a budget of around €3 billion
for research in development of artificial intelligence in the year 2025 With the aim of bringing
software lead innovation and making it a technologically advanced country (Hannibal and
Knight, 2018).

Boxes and Packaging Limited adopt technological tools such as cloud-based software is,
artificial intelligence, augmented reality, Customer relationship management. These technologies
bring utilities such as using customer relationship management software that supports the
business by Storing information of its targeted customers, that further helps the business to
engage with the targeted customers and Build strong relationship with them by frequent
communications. Artificial intelligence technologies also help the association in order to enhance
productivity for determining the performance level, the revenue, growth and other related
information to the business. Boxes and Packaging Limited also uses cloud-based technologies
that brings help to the business for storing big data and relevant information of the business and
save the unnecessary cost incurred for maintaining physical units of storing the data.
Environmental factors
With the rising environmental issues and concerns. Germany faces difficult challenges of
environmental issues such as global warming and water, air pollutions. German government
takes different initiatives to deal with environment concerns. The business and other economic
activities negatively impacts the environmental conditions in the country.
The government of UK, local councils, charities and other officials have taken number of
initiatives in order to aware people about the rising environmental concerns to curb the
environmental pollution in the country. There are different environmental factors that affects the
association such as weather, climate change, laws pertaining to environmental pollution, attitude
towards green products, waste management and other factors (Kingsley, Noordewier and Bergh,
2017).
Boxes and Packaging Limited adopts environmental safety measures in both England and
Germany. These environmental safety measure not only help the business in order to contribute a
hand towards prevention of environmental pollution also helps the business to a great extent for
building strong goodwill and reflecting the corporate social responsibilities taken by the
organisation. Boxes and Packaging Limited adopts policies such as using packaging which are
completely biodegradable or paper-based packaging, minimizing or cutting down the use of
plastics, measuring the carbon footprints, using renewable sources of energy to produce
electricity such as hydropower energy, wind energy and heat energy, Information and awareness
to the general public’s the help of campaigns, awareness to the customers mentioned in the

product packets, promoting the concept of reuse and recycling of the products. These measures
taken by the business helps and supports to establish customer reliability, strong market
positioning in both domestic and international market place (López‐Duarte, Vidal‐Suárez and
González‐Díaz, 2016).
Economic factors
Germany is one of the fourth largest economical developed country in the world with a nominal
GDP of €4.2 trillion as per the research in the year 2019. Germany is a well-established country
with amazing and proper working conditions. The German employees enjoy certain benefits such
as job security, highest paid salaries in the world and so on. Boxes and Packaging Limited for
operating in Germany needs to be solidarity Surcharge of 5.5% on the corporate tax, 14 to 17%
of trade tax rate. Boxes and Packaging Limited have to pay a total of 30 to 33% corporate tax in
Germany. For operating in Germany the business also has to maintain proper human resource
and human relation policies at work to deliver best of the benefits and working conditions in
Germany (Malyarets and et.al., 2017).
UK is the sixth largest country in the world by nominal GDP. The corporation tax for company
profits is 19%. UK contributes £32 billion to England in the year 2019 that makes England as a
leading country in UK. UK is a destination for foreign direct investments. It also is a place for
big business tycoon to invest and do business in UK. All these factors positively impact the
association for operating in the domestic territory. There are different economic factors that
impact the business performance of Boxes and Packaging Limited such as inflation rates, interest
rates, infrastructures, labour cost, foreign exchange rate and other related factors.
Recommend mode of entry
There are different methods of entry mode that the business can select for expanding its
business into international platform. These entry mode methods are discussed below in brief:
Corporate expansion
Corporate expansion is a method when businesses opens additional outlets to other geographical
location. Corporate expansion Supports to have full control over the business and build reliability
in the minds of the customers by opening new outlets, And experiencing in person services of the
company. Corporate expansions can be a great method of operating business into new outlet as

business can access full control and enjoy profitability margin without any intervention of
middlemen (Lecerf and Omrani, 2020).
Joint ventures
Joint-venture partnerships for operating business into international boundaries involves
partnership with the business partners for sharing profit and equity. Joint ventures include such
partners who shares expenses of the business and bears losses and Shares profit as per the
partnership deed.
Agency relationship
agency relationship is a method of business expansion into International market wherein agents
are deployed who are highly skilled and popular for selling and promoting goods and services
across the geographical location. Business expansion their business into foreign land deploys
such agents to perform the marketing and selling activities in behalf of the company.
From the different methods stated above, Boxes and Packaging Limited can use Joint ventures
method for business expansion over international platform. As joint ventures would help the
business to share both expenses and losses. As Boxes and Packaging Limited is a SME enterprise
so acquiring joint ventures would help the business to finance all the activities and requirements
of the business expansion into international boundary. It will also reduce the risk as if the
association fails to sustain in the international boundary the financial burden and the business
loss would be shared to different partners in the joint venture partnership. Thus, selecting joint
venture for international expansion method is justified (Lejpras, 2015).
CONCLUSION & RECOMMENDATIONS
The above report clearly delivers significance of internationalization for SME businesses.
Internationalization serves a number of benefits and opportunities to small scale businesses
where they can grow their market share and profitability margin with enhanced business
offerings and functioning. It becomes important to analyze the external macro environment
factors that would affect the business performance and the internationalization process, in order
to identify the external macro environment factors festival analysis is supported in the report to
determine factor that negatively or positively impacts the business in the international market

and influence the business decisions. The above report delivers strategies and decision that any
business should formulate in order to grow the business into international platform.
The business should also focus on formulation business strategies and policies that would focus
on improve business functioning. The strategies must involve identification of trade barriers such
as licenses, voluntary export restraints, and quotas are some factors that the association must
adopt in order to formulate smooth business functioning in the international market place. Apart
from that the association should also focus on identification of ethical and social issues faced
such as consumer rights, safety at work, environmental pollution, corporate social
responsibilities are certain factors that the business should not ignore and formulate business
strategy to operate it in the most ethical and legal manner. The business should also focus on
diversification of the products and services that it offers such as adding varieties of the bakery
items at exciting prices, apart from that the business should also formulate policies pertaining to
the customer engagement, technological advancement, marketing activities and so on. in order to
bring economies of scale in the business operation and attract and retain the number of possible
consumers in the international market place.

REFERENCES
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