Analysis of Macro Environment and Expansion Strategies for ABC Packaging Ltd in Germany

This report analyzes the macro environment of Germany using PESTLE and Porter's Five Forces analysis. It explores the impact of political, economic, social, technological, legal, and environmental factors on ABC Packaging Ltd's expansion in Germany. The report also discusses different ways of expansion, such as franchising, merger, and foreign direct investment.

PROJECT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
OVERVIEW....................................................................................................................................3
PESTLE analysis....................................................................................................................3
Porter five force analysis........................................................................................................4
Different ways of expansion...................................................................................................4
ASPECTS........................................................................................................................................5
PESTLE analysis impact........................................................................................................5
Impact of Porter five forces....................................................................................................7
Better way of expansion.........................................................................................................9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................11
APPENDIX....................................................................................................................................12
Company profile...................................................................................................................12
Country profile.....................................................................................................................12

INTRODUCTION
Macro environment analysis is very important for the companies to identify the changes
taking place within the competitive market. Also, it is very necessary for the companies to take
measures for expanding the business to new countries to meet the high competition within the
market. Thus, for a business to be successful it is very necessary to have different options of
market research and having knowledge of various options of expansion which can be used in
order to expand in other countries.
The present report is based on a small manufacturing company of UK that is ABC
Packaging limited. The company was established by Mark and Geoff Mellor in the year 1993
(ABC Packaging Ltd, 2020). The present report will outline the fact that this company is
planning to operate in Germany. For this the present report will outline the macro environment of
Germany with different macro environmental tools of analysis. In the end different ways of
expansion in the new country will be highlighted.
OVERVIEW
PESTLE analysis
The business exists in macro environment which keeps on changing very rapidly and if
the company does not adapt to these changes then it will not be able to meet the recent trends.
Thus, for this it is very important for the companies to properly analyse the external or the macro
environment. Thus, for this the method selected is the PESTLE analysis. This is a model which
analyses all the factors which are external to the business and which impact the business to a
great extent. In this method there are six external forces which guides the business which are
political, economic, social, technological, legal and environmental factors.
Thus, changes in any of these factors impact the working of the business either in positive
or in negative manner. Hence, it is of utmost importance to study all the elements of this model
and what will be the impact of these changes on the business and its operations. Thus, ABC
packaging Ltd will also use this model before entering into Germany to evaluate that whether the
products and services of the company will be successful in Germany or not (Christodoulou and
Cullinane, 2019).

Porter five force analysis
This is a model which helps the business in analysing the industry in which it is running
its operations. This is a business analysis tool which help the company in analysing the
competition within the whole industry and where the company is being positioned in the
industry. There are five competitive forces which need to be analysed to know the competitive
advantage present within the industry (Esposito, Tse and Soufani, 2017). These five forces are
threat of new entrant, threat of substitute goods, rival firms, bargaining power of buyers and
bargaining power of suppliers. All these forces need to be analysed by ABC Packaging Ltd so
that the company can know its competitive position in the manufacturing industry of Germany if
it goes for production in Germany.
Different ways of expansion
For being in the competition it is very important for the companies to expand their
business and range of operation in same and to other countries as well. This is necessary because
of the reason that the company cannot run successfully by having a single shop only and it is
necessary for them to expand. The major reason for this is the high competition and to face and
win over the competitors it is necessary to expand the range of business operations. Thus, for this
expansion in different countries is necessary. Thus, there are many different options available for
ABC Packaging Ltd for expanding in Germany. These options are discussed in the following
connected points below-
Franchising- this is a method under which the company provides its right to some other
company to operate in the same name. This is a method under which the franchisor license all its
rights, know- how and property rights to other people to operate their business in another
country.
Merger- this is also a good method of expansion because under this method the company
combines its operations with similar company. this is also an important and good source of
expansion as here ABC Packaging Ltd will not have to invest much in Germany. The underlying
reason for this is that the other company in Germany is already having a pre- established market
and this will help ABC Packaging Ltd to not much invest in the marketing of the product.
Foreign direct investment- this is a method under which the company directly invest in the
company in different country (Ge and Li, 2019). Here the investment will be done by investing
in the building or upgradation of the company in another country.

ASPECTS
PESTLE analysis impact
For entering into the market of Germany to expand the operation their it is very necessary
for the company to analyse all the factors of Germany which are discussed in the following
points connected below-
Political factors- These includes changes in the political structure and political parties of
the country (Hair Jr, Page and Brunsveld, 2019). Currently in Germany there is not much
changes in the political parties thus, this is an opportunity for the ABC Ltd as now there will not
be much changes in the policies of the government. This is majorly because of the reason that if
the political party is changed then they bring their own rules and policies. Further the current tax
rate is also low and this is also an important opportunity for ABC Packaging.
Impact- The impact of this over ABC Packaging ltd is positive as the company before
entering into Germany can study all the policies of working in that country and this will not be
frequently changed and this will positively impact the company. Another impact on the company
is that now the company has to pay less tax and this saved money can be used in some different
areas where money is needed more.
Economic factors- These includes the changes in the economic condition of the country
and includes its inflation, foreign exchange rates, GDP, per capita income of consumers and
many other related factors. In the present time the economic condition of Germany is very good
and the income of the consumer is at rise. Thus, there purchasing power is strong and if they
move to other place then they take help of the packaging companies only. Thus, this will be an
opportunity for ABC Packaging Ltd.
Impact- Hence, the impact of this factor will be positive on the ABC Packaging Ltd. This
is majorly because of the reason that the good economic condition of Germany will increase the
sales and business opportunities for ABC Packaging Ltd. Thus, this will increase the profits for
the company and the company will grow if it goes for expansion in Germany.
Social factors- This factor includes the attitude, beliefs, behaviour of the society and the
people living in that particular society (Keller, 2017). The people of Germany are very modern
and updated with the latest trends going on within the market. Thus, currently there is a trend of
moving from one place to another and for this the most important thing is the packaging

material. This is because if the material will not be good then the product which need to be
packed may be damaged. Thus, this is an opportunity for ABC Packaging Ltd.
Impact- The major opportunity of this factor is that the products produced by company
that is the product which are used to move the goods from one place to another (Racz and et.al.,
2018). Also, another major opportunity for the company is that every company need to transfer
its product from one place to another and for this they require strong products. Thus, this need
will be catered by ABC Packaging Ltd and this will increase the sales of the company.
Technological factors- This includes the changes taking place in the technological sector
which includes the development of new and latest technology used in manufacturing of
packaging materials. Germany is a developed country so there are all the latest tools and
techniques which can be employed by ABC Packaging Ltd to increase its efficiency.
Impact- Here the impact of use of this factor is both that is positive as well as negative. It
is positive because of the reason that the use of latest technology will assist the company in
improving the efficiency of the products and also this will add on to the revenues of the
company. but the negative impact of this factor is that the cost for the implementation of these
new and advance technology is very high. Thus, before entering to Germany ABC Packaging Ltd
need to analyse all the cost which can be incurred relating to technology if they start operating in
Germany.
Legal factors- this includes all the laws and rules and regulations which are to be
followed by the business if they work in a specific country. This factor is important to be studied
by ABC Packaging Ltd before entering into Germany for the expansion of the business. This is
because of the reason that every country has its own set of rules and it is very important for ABC
Packaging Ltd to understand and evaluate all the laws and rules and regulations.
Impact- this has a positive impact over the company and its operations. This is majorly
pertaining to the fact that this will build and increase trust between the consumers as they will
like the fact that company is abiding by all the laws applicable. Also, this will increase the
goodwill of the company as this will build a good image in the market as all the rules and
regulations are complied by the company (Rothaermel, 2017). In addition to this a negative
impact is also attached to this which is like the company has to keep a track of all the laws and
their applicability. Thus, for this ABC Packaging Ltd need to hire a person for managing the

need and requirement of all the necessary laws which need to be taken into consideration at time
of entering in new country that is Germany.
Environmental factors-this includes the environment in which the company is operating.
It is very important for the company to take this factor into consideration (Singh, Garg and
Luthra, 2018). This is majorly because of the reason that in the accordance with the latest trends
the consumers have become more conscious in relation with the protection and safeguarding of
the environment. Thus, if ABC Packaging Ltd will use all the environment friendly products of
packaging then this will add on to the goodwill of the company.
Impact- this will have a positive impact over the working of the company. This is
majorly because of the reason if the company will pay attention towards the protection of the
environment then the consumers will like this and will prefer the products of ABC Packaging
Ltd over the products of another competitor. Further this protection of the environment will
increase the marketing of the company. This is basically because of the reason that if the
company works for the environment then the company will be much preferred by the consumers
and will purchase products and services of this company only.
Impact of Porter five forces
For analysing the competitive advantage for the company ABC Packaging Ltd it is very
necessary for the company to analyse all the competitive forces within the manufacturing
industry of Germany. This is to know that whether the company will be able to sustain in the
market of Germany or not. Thus, for this Porter five force is applied to Germany which is
discussed in the following points connected below-
Threat of new entrant- this is a factor which outlines that how many new people or
companies are entering into the market of Germany. It is very important for the company to
analyse who are the potential people or companies which can also enter into the market of
Germany. This is necessary in order to analyse the who are coming in the same industry and this
analysis is necessary as this will be helpful in knowing and deciding for the strategies which will
be helpful in analysing the strategies to meet this threat.
The impact of this is that is the new entrant will be high then there will be high
competition and this will not build a very good image of the company (Velásquez and Meunier,
2017). In contrast to this if the new entrants are less in the market of Germany then ABC
Packaging Ltd will have a good position in the market.

Threat of substitute products- this is defined as the threat that many substitutes are
available for the given product or services. In the market of Germany there are more of the
substitute of the product and services of ABC Packaging Ltd. Thus, this is not a good source and
will negatively impact the business (Stindt and et.al., 2017). The underlying reason behind this is
that the substitutes products can be used in place of the products of AB Packaging Ltd and this
will be sold by the competitors. Hence, this will have a totally negative impact on the growth of
the company as the substitute will be used in place of the products of ABC Packaging Ltd.
Bargaining power of buyers- the buyers are treated as the kings of the market. This is
majorly because of the reason that if the buyers will not like the product and services of ABC
Packaging then the consumer will not purchase them and this will result in the loss for the
company. Thus, for knowing the competitive position of the company it is necessary for ABC to
analyse the needs and preferences of the consumers relating to the product and services of the
company.
The impact of this will be more towards negative because of the reason that the consumer
trends are changing very frequently and it is very necessary for the company to carry on with
research for the changes going on in the market and the taste of the consumers.
Bargaining power of suppliers- the suppliers of the raw materials are not many in the
market of Germany so this will be also negative for the company if they want to expand in the
German market. This is majorly pertaining to the fact that the supplier are the people who supply
the material and then the company will manufacture the final product. Thus, in Germany the
supplier is less and they have monopoly in the market. Thus, this will not be a good situation for
ABC Packaging because this will impact the rates of the raw material as it would be decided by
the suppliers and the company had to follow those prices.
Competitive rivalry- this is the most important aspect of this model in ascertaining the
competitive position of the company. Thus, this force analyses all the companies dealing in the
same business. In Germany also, there are many companies which are dealing in the same
business (Kilduff, 2019). Thus, the competition is high within the German market and this need
to be considered by ABC Packaging ltd before entering into the new market. This will have a
negative impact over the performance of the company because too much competition will
damage the performance of the company in the market.

Thus, in the end it can be concluded that some of the macro environmental forces are
positive for the company if it goes for expansion in Germany (Fan, Kühn and Lafontaine, 2017).
But in contrast to this some of the forces are having negative impact over the performance of the
company. but the positive impact is more as compared to the negative impact. Thus, it is
concluded that if ABC Packaging ltd will go for expansion in Germany then it will be beneficial
and profitable for the company.
Better way of expansion
With the analysis of the macro environment of Germany it is concluded that it is good for
the company to expand its business in the country. But now the question is that which method
must be used for the expansion of the business in Germany. The best suited method for this is the
merger. This is the best method of expansion because of the reason that this not require huge
investment to be done in another country. In this type of method ABC Packaging can target a
competitor in the German market and then try to merge with the company.
This method will be beneficial for the company because of the reason that here the ABC
will not have to look for place to establish its office rather they can combine it with the office of
the company with whom merger is done. Further this will also provide the benefit of economies
of scale because all the resources and assets of both the companies will combine and this will
result in the benefit of economies of scale (Mani, Wathne and Antia, 2019). Also, another benefit
which will be enjoyed by ABC Packaging is that it will get an already established market and a
good amount of consumer which are already connected with the company with whom merger is
taken place.
CONCLUSION
In the end it can be concluded that for a business to run successfully it is very important
to analyse all the macro environmental factors which may impact the business. This is because
there are many changes which takes place in the environment and these need to be inculcated by
the company for effective working. Thus, the present report focused majorly on the use of
different models for the analysis of the macro environment.
For this the model of PESTLE analysis was being used and it was summarised that
expansion in Germany is beneficial for the company. Further the discussion was made in
direction of analysing the competitive position with the help of Porter five forces. In the end the

method of expansion the merger was selected as this does not involve much investment as
compared to other methods of expansion.

REFERENCES
Books and Journals
Christodoulou, A. and Cullinane, K., 2019. Identifying the Main Opportunities and Challenges
from the Implementation of a Port Energy Management System: A SWOT/PESTLE
Analysis. Sustainability. 11(21),. p.6046.
Esposito, M., Tse, T. and Soufani, K., 2017. Is the circular economy a new fast‐expanding
market?. Thunderbird International Business Review. 59(1). pp.9-14.
Fan, Y., Kühn, K.U. and Lafontaine, F., 2017. Financial constraints and moral hazard: The case
of franchising. Journal of Political Economy. 125(6). pp.2082-2125.
Ge, L. and Li, C., 2019, April. Analysis of competitive Power of Chinese Sports Apparel Brand
based on Porter's five Force Model. In Proceedings of the 2019 3rd International
Conference on Information System and Data Mining (pp. 54-58). ACM.
Hair Jr, J. F., Page, M. and Brunsveld, N., 2019. Essentials of business research methods.
Routledge.
Keller, P. G., 2017. Opportunities and Obstacles for Information Technology Start-Ups in
Europe: A Comparison between Germany and Latvia.
Kilduff, G.J., 2019. Interfirm relational rivalry: Implications for competitive strategy. Academy
of Management Review. 44(4). pp.775-799.
Mani, S., Wathne, K.H. and Antia, K.D., 2019. 20. Franchising research in marketing:
suggestions for future research. Handbook of Research on Distribution Channels, p.470.
Racz, L. and et.al., 2018. Extensive comparison of biodiesel production alternatives with life
cycle, PESTLE and multi-criteria decision analyses. Clean Technologies and
Environmental Policy. 20(9). pp.2013-2024.
Rothaermel, F. T., 2017. Strategic management. New York, NY: McGraw-Hill Education.
Singh, J., Garg, D. and Luthra, S., 2018. An Analysis of Critical Success Factors for Industry
4.0: An Application of Analytical Hierarchy Process. Industrial Engineering Journal,
11(9). pp.1-19.
Stindt, D. and et.al., 2017. On the attractiveness of product recovery: The forces that shape
reverse markets. Journal of Industrial Ecology. 21(4). pp.980-994.
Velásquez, A. and Meunier, L., 2017. COMPARATIVE MARKETING ANALYSIS OF THE
UK AND GERMANY FOR GLOBAL SUSTAIN.
Widya Yudha, S., Tjahjono, B. and Kolios, A., 2018. A PESTLE policy mapping and
stakeholder analysis of Indonesia’s fossil fuel energy industry. Energies. 11(5). p.1272.
Online
ABC Packaging Ltd. 2020. [Online]. Available through: <https://www.ukdirectory.co.uk/abc-
packaging-ltd-207990736.html>

APPENDIX
Company profile
The company was found in the year 1993 as a company manufacturing the products
which are used for packaging of the product. The company is producing majorly three products
that is corrugated boxes, polythene, polypropylene and OPP bags and the printed folding cartons
for packing of the goods to be transmitted from one place to another. The company is registered
with ISO 9001 which provides a proof that the business uses all the quality assured products and
this provides a competitive edge to the company. Currently the company is planning to expand
its business operation in Germany because of high competition.
Country profile
Germany is a developed country which Europe’s most industrialized and populous
country. The country is more popular for its technological advancements and is having a good
economic condition. This country has a large variety of different industries like steel, iron,
cement, different machineries and tools, vehicles, electronic, textile, food and beverages and
many other industries and sectors. The German industry is a very growing industry and because
of this reason this country has been selected for the expansion of ABC Packaging Ltd.