Strategic International Business Management Assignment PDF
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Added on 2021-04-21
Strategic International Business Management Assignment PDF
Added on 2021-04-21
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1Strategic International Business Management (RKC) LidlContentsTASK 1......................................................................................................................................1Introduction............................................................................................................................1PESTLE Analysis of Mexico.............................................................................................3PESTLE Analysis of Norway................................................................................................5TASK 2......................................................................................................................................6TASK 3......................................................................................................................................85-Forces model.......................................................................................................................8TASK 4......................................................................................................................................9VRIO framework...................................................................................................................9TASK 5....................................................................................................................................11Modes of entry.....................................................................................................................11References................................................................................................................................13
2Strategic International Business Management (RKC) LidlTASK 1. IntroductionLidl Stiftung & Co. is a Germany based global discount store that has over 650 stores inacross US and Europe. The parent company is Schwarz group which has 315,000 employeesworking for it globally and has 10,000 stores. It is the 5th largest retailer of the world. Thecompany has plans to expand its stores into other countries and Mexico and Norway are thetwo targets that the company is exploring. To be able to decide which market would be mostsuitable to make an entry for the company, the business environment of both countries maybe explored. For this, PESTLE analysis can be used.PESTLE analysis of a country can help in gaining an understanding of the businessenvironment of a country which is important to understand as it can affect the businessactivities of an organization operating in the respective country. PESTLE analysis involvesexploration of political, economic, social, technological, legal and ethical influences that existin a country that can affect any business. The business environment of Mexico has beenexplored here using PESTLE analysis method.Economic environment: There can be several structural aspects that affect the markets, trades,and economies across globe. These factors can cause economic alterations that are importantto understand.Legal Environment: The legal environment of a country can affect the procedures ofsuppliers and relationships of companies with their customers as the laws and legalprocedures regulate the corporate practices so they work to protect the interests of customersby putting restrictions on the business behaviour. FTA is also a part of the legal environmentand it affects the import and export procedures in a country.Social Environment: Social environment in a country can affect the demographics andconsumption patterns in a country which in turn affects the demand and supply patterns.Culture of a country can affect the type of products that are sold and marketed.Political Environment: Political environment can have a great influence on the workingpractices and corporates have to make adjustments in their processes to adapt to a specificpolitical environment which is why it is essential to understand the political environment ofcountry.
3Strategic International Business Management (RKC) LidlTechnological Environment: Investment in technology can bring in innovations and influencethe success potential of an organization. Technologies are used for production or fordistribution. Technologies provide new ways to connect with customers and open up newmarketing platforms. Thus, technological environment of a region is important to study whenplanning operations.Ethical environment: Ethical concerns are gaining importance day by day and the companiesare pushed to operate in more socially responsible way. Thus, companies take eco-friendlyapproaches in businesses.PESTLE Analysis of MexicoEconomic environment: Mexico stands at 15th largest economy in the world and it ispredicted that the country would reach a rank of 5th by the year 2050. The country is growingat the rate of 3-4%. Mexico has a huge free trade network and has geographical advantagesthat lowers the cost of trade in the country. The workforce available in Mexico is botheducated and low cost. The country has a population of more than 112 million and has a lotof natural resources available in the country. Recently, Mexico has experienced rise incometaxes which is why the government is also performing better monetarily. The oil revenue inthe public sector has been on the lower side but the same is compensated with fuel excise andincome tax increases. The currency of Mexico is Peso which has depreciated significantlyagainst dollars which has affected the financial stability of the country. I response to thissituation, the government has taken a few steps for moderating the exchange rate movements.This includes tightening of the macroeconomic conditions. There are no significant economicrisks that are faced by the country today despite the decline in its GDP growth rate. Mexicohad opened up its market in 1980s and since then, there have been lowing of tolls andsimplifications in import procedures. Mexico has signed a NAFTA free trade agreement as amember of OECD based on which some trade rules have been set between Mexico and othercountries like USA and Canada. This agreement gives better access to good exchangedbetween these countries as the tariff barriers have been eliminated. With this free tradeagreement, the country has better access to the materials, technology, and workforce in thecountry. This has supported the growth in the country with export of goods to the membercountries. When it is about trade, the most important goods in the Mexico include electronics,machines, vehicles, engines, oil, pumps, fabric, and leather products. USA is the mostsignificant trade partner for Mexico as over 80% of trade happens between US and Mexico.In 2015, USA had imported 294,741.1 billion dollars’ worth of goods from Mexico. In the
4Strategic International Business Management (RKC) Lidlimport area, manufacturing industry dominates the market which includes products likeelectronics, equipments, and machines. Other than US, China, South Korea, Germany, andJapan are also important trade partners of Mexico. The total exports from Mexico in 2015was over 380 million.Legal Environment: Importing of manufactured products is easy in Mexico because of FTA.More limitations and costs are involved in the service sector as customs are not transparentand very complex because of their own regulations that put restrictions on the technicalrequirements related to licenses and registrations. The bureaucracy problem is one of themajor issues prevailing in the country. While companies plan to do business from the othercountry, they need to learn about the legal system of Mexico which could be very differentfrom the practices of their home country. Normally, the country officials follow the laws andregulations but in several cases, they also take bribes. A new anticorruption system has beenlaunched in the country to curb this corruption but it can still take time to being constitutionalchanges. On the ranking of corruption, Mexico scores 35 and is observed as the 95th mostcorrupt country among 168 countries across the world. The corruption in the legal system inthe country makes it difficult for businesses to gain efficiency as completion of any businesstask would need more workforce as well as expenses to satisfy officials through relationshipstricks and bribes. Social Environment: As compared to other European countries, Mexican people are spread ina wider geographical regions and thus distances are long. There are 21 people living in thecapital Mexico City with over 79% of the population of Mexicans. Crime and theft are thecommon concerns in the societies of Mexico and some areas operate drug cartels.Countryside has also faced violence in rent years. However, violence has gone down in citiesrecently. However, there is still a very strong hold of these problems in the city. Because ofthese issues in the country, there exists poverty and inequality in people.Political Environment: In Mexico, the political figures have influenced the NAFTAagreement of Mexico. Loss of jobs have pushed a decision to raise the tariffs betweenMexico. Mexico has a Presidential Federal Republic with its government operating at threelevels including federal, state, and municipal. Eight parties represent the congress and thepolitical situation in the country is not very stable because of the influences of drug cartels.Because of high corruption, the trust is less in the democracy. However, the government hastaken some initiative in the areas of business by forming some reforms for
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