MAN304: Issues in International Business - Walgreens Strategy Report

This Strategy Formulation Report examines the potential for Walgreens to expand its health and wellness products and photo services into the United Kingdom. The report analyzes the trade and investment climate, considering the impact of Brexit, international relations between the US and UK, and trade barriers. It presents a PESTEL analysis of the UK, evaluating political, economic, social, technological, environmental, and legal factors. The report identifies key risks, including Brexit, cyberattacks, geopolitical issues, and economic downturns, and recommends mitigation strategies. Finally, it suggests a market entry strategy for Walgreens, providing a comprehensive overview of the challenges and opportunities in the UK market and how Walgreens can navigate them. The report uses information about the banking system and its international relations with the United States, and also internal conflicts as well as the value of the pound.

Running head: STRATEGY FORMULATION REPORT
Issues in International Business: Strategy Formulation Report
[WALGREENS COMPANY]
Name of the student:
Name of the university:
Author note:

1STRATEGY FORMULATION REPORT
Table of Contents
1. Trade and investment friendliness...............................................................................................2
2. International relations between the United Kingdom and the United States of America............2
3. Trade barriers on one another......................................................................................................3
4. The strength of the banking system and its international relations with the United States.........3
5. PESTEL of the United Kingdom.................................................................................................5
6. Other factors................................................................................................................................6
7. The top 5 risks.............................................................................................................................7
8. Recommending a market entry strategy....................................................................................11
References......................................................................................................................................12

2STRATEGY FORMULATION REPORT
1. Trade and investment friendliness
Trade and investment friendliness into the United Kingdom, which once was one of the
best in the world could now be affected by the impact of Brexit. This has been taken over by
another European country, Germany as the best country for foreign investors to invest in (CNBC
2019). The changed scenario currently looks like as mentioned under (CNBC 2019);
 There is a huge drop in foreign direct investment into the United Kingdom. The FDI has
fallen by almost 20%, which is really a huge blow for the country and its foreign
investors. This drop is since the European Union referendum.
 The United Kingdom has experienced its sharpest decline in investment in the overseas
location ever since the vote.
 In 2017, Germany outplaced the United Kingdom to become the European country that
now receives the most foreign investment.
As far as trade friendliness is concerned, both the United Kingdom and the United States
share a special relationship. They share a uniquely close connection. They share enormous trade
and economic relations. Each one of these countries is among the others' top trading partners. On
a diplomatic front, both the US and UK are among the founders of the NATO, United Nations,
G-7, World Trade Organisation and many other international bodies (ThoughtCo 2019).
2. International relations between the United Kingdom and the United States of America
There had existed a political, commercial and cultural bonding between these two
countries. This relationship is also known as “the special relationship”. The term was coined by
then-Prime Minister, Mr. Winston Churchill in the year 1946 (CNBC 2019). However, Trump’s
position on trade and many other issues has affected the relationship that existed smoothly

3STRATEGY FORMULATION REPORT
between the United States and the United Kingdom. Some of the policies being introduced by
President Trump is pretty different from that of the UK government. For example, Trump's
policy on trade and climate change is different from the UK, Europe and the Middle East. The
United Kingdom opposes trade tariffs of Trump. The UK has also argued against the United
States’ withdrawal from the Iranian nuclear pact (CNBC 2019). The United Kingdom now seeks
an exemption on tariffs on imports of aluminum and steel from the United States. The British
Government has called the decision as unjustifiable to continue with tariffs on the imports. The
UK government further says that any claim regarding a fact that aluminum and steel imports
from the US harm the US national security is of course without any foundation (CNBC 2019).
3. Trade barriers on one another
As per the latest objectives being laid out by Trump, the United States and the United
Kingdom will both share a fair trade relationship. The objective will ensure fair and balanced
trade between the two countries. The United States will now cut non-tariff and tariff barriers for
agricultural and industrial goods imported to the United Kingdom. Moreover, regulatory
differences will also be reduced. President Donald Trump has realised that an affected
relationship with the United Kingdom has affected the country significantly. Poor deals have cost
the millions of jobs for the United States (Reuters.com 2019). According to the Office of the
United States Trade Representative (USTR), there will be efforts given to boost services
opportunities between the United States and the United Kingdom by means of improving
predictability and transparency in regulations (Reuters.com 2019).
4. The strength of the banking system and its international relations with the United States

4STRATEGY FORMULATION REPORT
The Bank of England has already devised hypothetical scenarios for the house prices,
economy and interest rates post-Brexit. This design will put pressure on the entire banking
system. Moreover, the Bank will also publish an assessment report on the impact of Brexit deal
on its operations. The banking system in the United Kingdom does conduct “the stress tests” to
assess a healthy check on the country’s financial system. The origin point for this test is the
financial crisis at the time when the financial strength of the banks was severely tested. It left
taxpayers to rescue the likes of Lloyds Banking Group and Royal Bank of Scotland.
Consequently, at that time banks also stopped lending to businesses and households (BBC News
2019). Hence, the origin of “the stress tests” happened. It is being devised to check whether the
banks have enough capital to fulfill and meet the current financial rules. The tests help to publish
the financial strength of each of the major UK-based banks. These are Lloyds Banking Group,
the Royal Bank of Scotland, Barclays, HSBC and Santander. The London-based, Standard
Chartered is also included in this list (BBC News 2019). If any of the banks fail these stress tests,
the bank could also be forced for holding back dividends to the shareholders.
A number of U.S. banks those who are operating in the United Kingdom are generally the
members of the Association of Foreign Banks and the British Bankers' Association (Export.gov
2019).
The major UK banks having international arms and offering offshore services include the
following (Expatica.com 2019);
 Barclays
 Lloyds
 RBS Group
 HSBC

5STRATEGY FORMULATION REPORT
These banks are also located outside the country of residence of the account holder. These
are situated typically in low tax jurisdiction. These banks offer legal and financial advantages
over the domestic banking arrangements. However, there may exist a lack of transparency in
offshore banking, which also makes it difficult to identify the amount of capital is banked with
these institutions. The estimates have placed it at 26% of the wealth of the entire world
(Expatica.com 2019).
5. PESTEL of the United Kingdom
Political: Political stability has remained a great strength of the country until being affected by
the Brexit. The United Kingdom has remained a popular destination for FDI; however, post-
Brexit, the country lost this status to Germany. There will be a reduction in the corporation tax
rate cut from the company's profits. The new corporation tax rate will be 17% (Hill, Korczak and
Korczak 2019).
Economic: According to the World Bank Report for 2017, the United Kingdom was the world’s
fifth largest economy in terms of nominal GDP (Portes and Forte 2017). The UK government
was able to overcome the effects of the recession in 2008 (Wegman et al. 2017). As per many
analysts, the age of low-interest rate in the United Kingdom could soon be over.
Social: The United Kingdom has a big market for consumers. Births continue to outnumber the
deaths, which will boost the population further. Ageing populations could have negative
implications on the health care system and the labour market. However, real estate, insurance,
holiday and many others have benefitted from the growing older population. The UK is one of
the world’s top countries in terms of having the most numbers of educated people. However, the
cost of living and higher education are very costly here (Bachtler and Begg 2017).

6STRATEGY FORMULATION REPORT
Technological: The UK is one of the world’s most technologically advanced countries. London
is the hub for both technological and financial institutions. The advanced infrastructure for
technology gives entrepreneurs enough opportunities to do and excel with the businesses in the
UK (Karlsson, Melin and Cullinane 2018).
Environmental: The United Kingdom is paying huge attention to reduce its negative
environmental impact. The range of institutions like local councils, the government, charities,
newspapers and many others have taken initiatives to reduce their negative environmental impact
by means of creating environmental awareness. Weather conditions are challenging; however, it
is a point of attraction for many international tourists (Burns et al. 2019).
Legal: The Employment Act 1996 has been implemented to protect the employees’ rights
(Molinuevo 2017). Some other areas like minimum wage, paternity and maternity leave, sick pay
and holiday pay are legally protected. The Equality Act 2010 protects people from any form of
discrimination (Molinuevo 2017).
6. Other factors
Internal conflict such as for Irish border could seriously impact the economy of the
United Kingdom. The Irish border issue was given the least focus during the referendum
campaign and was also downplayed. It remains largely unclear for what will happen to the Irish
border after the UK’s exit from the EU. The impact of a hard border and no deal could severely
produce negative economic consequences. Moreover, the Good Friday Agreement could also be
undermined (Alley 2017). Local politics will largely remain paralysed. However, there could be
a dramatic reduction in the sectarian violence that has resulted from the Agreement. This cannot

7STRATEGY FORMULATION REPORT
be ignored. The hardening of the border as mentioned above could result in undermining the
integrity of the entire UK (Alley 2017).
The value of the pound continues to be surrounded with volatility and uncertainty, in
particular under the financial specter of “no deal” that looms ever closer (The telegraph.co.uk
2019). These circumstances can have an impact on the general trading climate. The uncertainties
surrounding the interest rates may affect certain industries even more than the rest of others.
Moreover, foreign exchange rates could affect a state, which expresses how profitable or easy it
is to be involved in business with another country (Nibusinessinfo.co.uk 2019).
7. The top 5 risks
Risk ranking (1 to 5)
with 1 being the
most important risk
Name of risk Impact of the risk
on the firm
Strategies being
recommended to
mitigate the risk
1 UK political risk Brexit will likely
reduce the per-capita
income level in the
UK. This will affect
consumer spending
and so the business of
WALGREENS
COMPANY (Owen
and Walter 2017)
 By managing
the credit risk
 By ensuring
that the
supply chain
can survive
from the
unplanned
disruptions
 Train people
to help them

8STRATEGY FORMULATION REPORT
be prepared
against any
form of
challenge
 Wise
utilisation of
the risk
management
dollars (Owen
and Walter
2017)
2 Cyber attacks This can result in
substantial financial
loss, loss of consumer
trust and business’
standing, and result in
legal consequences of
the cyber breach
(Kopp, Kaffenberger
and Jenkinson 2017)
 Tighten the
security
system
 Protect the
outbound data
 Smart usage
of passwords
 Physical
security
 Encrypt data
 Purchase a
Cyber

9STRATEGY FORMULATION REPORT
insurance
policy (Kopp,
Kaffenberger
and Jenkinson
2017)
3 Geopolitical risk Could add to the
ongoing threat of
global conflicts and
increasingly
protectionist
economic policies.
For example,
President Trump
continues to
announce increases in
tariffs on foreign
imports (Gemechu,
Sonnemann and
Young 2017)
 Start slow and
give time to
identify the
other party
 Use secure
payment
methods
 Establish
meaningful
relationships
(Gemechu,
Sonnemann
and Young
2017)
4 Monetary and fiscal
policies
Can affect household
income and
employment and so,
the investment and
Will need to manage
more investment
from investors
(Drechsler, Savov

10STRATEGY FORMULATION REPORT
consumer spending.
Moreover, this will
affect the business
(Drechsler, Savov
and Schnabl 2018)
and Schnabl 2018)
5 Another economic
downturn
Will result in lower
consumer demand
affecting the sales of
the company, reduced
credit will impact its
capability to import
money from other
countries and
currency fluctuations
making the business
profitable sometime
while incurring losses
at the different time
(Di Maggio, Kermani
and Song 2017)
 Make
customers a
priority
 Improve
marketing
strategies
 Manage the
staff
 Improve
networking
 Develop
innovative
practices
 Seek
assistance (Di
Maggio,
Kermani and
Song 2017)
Table 1: The top five risks

11STRATEGY FORMULATION REPORT
(Source: As created by the author)
8. Recommending a market entry strategy
It is best to go with option (B) that is to partner with a firm in the United Kingdom. This
will help “WALGREENS COMPANY” to pay close attention to both the subtle and obvious
cultural differences between the United Kingdom and the United States. It is advisable to
evaluate prospective partners and select a well-established local distributor. Flexibility will be
the key to keep working with a UK partner during the prolonged period of economic uncertainty.
It is also advisable to visit the UK more than once in a year to have a meeting with prospective
partners (Export.gov 2019).