Table of Contents INTRODUCTION...........................................................................................................................1 TASK 1............................................................................................................................................1 P1. Explanation of global business environment for the operation of small and entrepreneurial businesses...............................................................................................................................1 M1. Analysis of global business environment in which small businesses operate................2 P2. Analysis of threats and opportunities which is face by SMEs in increasing competitive global environment.................................................................................................................3 M2. Critically analyse the implications of threats and opportunities faced by SMEs...........4 TASK 2............................................................................................................................................4 P3. Advantages of international trading blocs and agreements..............................................4 P4. Explanation of different tariff and non-tariff barriers which exist in international market ................................................................................................................................................5 M3. Evaluate the advantages of international trading blocs and agreements.........................6 TASK 3............................................................................................................................................6 P5. Advantages and disadvantages of importing and exporting process and how a deal can be secured....................................................................................................................................6 P6. Difference between merchandise and service imports and exports.................................7 M4. Application of suitable import and export process and provide suitable recommendations ................................................................................................................................................8 TASK 4............................................................................................................................................9 P7. Different methods in which SMEs can tap into international markets............................9 P8. Comparison of ways by which SMEs tap into international markets and also assess the pros cons of each method.......................................................................................................9 M5.EvaluationofvariousmethodswhichisusedbySMEsandalsoprovidevalid recommendations..................................................................................................................11 CONCLUSION..............................................................................................................................11
INTRODUCTION Market is defined as an area which includes buyers and sellers under its consideration. Here, two or more parties are collected to exchange their products and services. Market can be either physical outlet in which people face to face meet or online market in which no direct contact between buyers and sellers(Lo and Campos, 2018). An international market refers to the geographically defined market which is situated outside international borders of country. It is the application of marketing principles in which one or more than one country include and it is based on extension of the strategy of company with special attention of marketing identification and targeting. This report is based on small businesses and their expansion in other country as it helps in analysing the global environment and it also examine the challenges and opportunities for the growth of company in particular region. In addition to this, it also explains the advantages of trading blocs agreements with related region and also explain different tariff and non-tariff hurdles which exist in international market. Despite from this, differences between merchandise and service imports and exports are discussed and also evaluate different methods in small businesses tap into international markets. TASK 1 P1. Explanation of global business environment for the operation of small and entrepreneurial businesses Global business environment refers to the environment in which various countries and regions include who influences the decision making of company regarding the use of resources and capabilities. Thus, it is important for each and every organisation to examine the global environment in effective and appropriate manner which describe the facts and surroundings of region that impacts the growth and success of company(Zhang and Tse, 2018). This report is based on the expansion of SMEs in Europe, specifically in Romania as it is believed that this region is prominently very effective for the expansion of business operations in suitable manner. Here, various aspects are considered for the expansion of SMEs which are concerned with global business environment which are as follows:Political Factors:This factor is related with the political condition and stability of country in which business operates and so it is important to examine it. In addition to this, Europe has a favourable political condition and environment for the expansion of new 1
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and small business organisations as they provide huge amount of opportunities to small businesses because of its political stability and progress. For instance, the legal laws and regulations of country are favourable for the expansion of small businesses in context of investment and trading as it proves beneficial for organisations. Technological Factors:It is the most important aspect which is considered by each and everyorganisationasforthis,thetechnologicalelementsareexaminedsuchas digitalisation and advancement of technology in country. In this context, Europe acquired updated and advanced technologies in all over the world which is helpful for operations of organisations(Milner-Gulland and et. al., 2018). This factor helps the company to expandtheirbusinessatgloballevelandreasonbehindthisisautomationand information about ICT and it become benefit for the enhancement of market in proper manner. For this, one of the most prominent technologies is Artificial Intelligence (AI) which is helpful for organisations in order to secure their details and transactions and it becomes an opportunity for small organisations. M1. Analysis of global business environment in which small businesses operate By considering the above information, it is analysed that global business environment is essential to analyse and examine because it helps in identifying the positive and negative aspects for small business which are associated with business environment. For this, analysis cover the key drivers which firm experiences in concern with the expansion in Romania. Thus, various factors are as: Growth of market share is the primary key driver which is concerned with the success and growth of market share and it is possible only when huge amount of market area is acquired by organisations at global level. For this, company can achieve growth and success with the help of new customers and products(Pizarro Milian and Davidson, 2018). Another key driver is competition which is arising from both local and international market and it become threat for small organisations. For this, companies should come with innovative approach to expand their business in different regions in order to make sure the effective growth and sustainability in the dynamic business environment. 2
P2. Analysis of threats and opportunities which is face by SMEs in increasing competitive global environment Developing business face some sort of challenges and threats in their expansion as it describe that business face various problems and opportunities as it grows and also need unique and new solutions for their success and growth which becomes best approach for company. It include recognition and overcoming the common barriers as after analysing them as it is concerned with growth and development of business(Backaler, 2018). For this, effective leadership is useful as it helps in developing and making new opportunities for sustainable growth for future. OpportunitiesPlanning ahead:It describe that planning is important for achieving growth and success of business and to achieve the sustainability in competitive business environment then it is important to do planning in advance which helps in providing insight or vision to managers in their expansion. It also helps in eliminating the risk factor which can become barrier in attaining success and growth for SMEs in their expansion. Keeping up with market:It describe that company need to get updated and advanced by analysing the changes which take place in the market conditions and also continuously keep analysing them(Steffen and et. al., 2018). This can become opportunity for SMEs as it helps in eliminating the risk factor for taking any sort of decisions regarding the business and it also require updated information. ThreatsChange:It define the change which arise at the time of operations in business and it can be related with any change which describe technological, plans and policies, trends and many more. Changes are very normal as it develop complexity which can become major threat for the growth and development of business(Sinha and Sheth, 2018). Because of regular changes, modifications takes place in business plan and this leads to increase in cost which can become barrier for the SMEs in their success and growth. Businessinterruption:It canalso becomethreatfor companyasitdescribethe involvement or interruption of business such as threat from existing companies and new ones in market. It describes that SMEs face threat in their expansion and also face more 3
and more risk because of other businesses. It describe that organisations always consider new and existing businesses in order to eliminate risk. M2. Critically analyse the implications of threats and opportunities faced by SMEs From the above discussion, it is analysed that in the expansion in international market many small organisations face threats and they have chance to convert it into opportunities. For this, SMEs need to critically analyse their threats and opportunities which is useful for them in order to deal with any change which occur while expansion in global market(Lin, 2018). Thus, it is determined that planning and keeping updated can bring more and more opportunities for small organisations meanwhile, changes and interruption of businesses can become threat for small businesses. But for all this, it is required that organisations should have efficient leaders and apply suitable leadership for effective management. TASK 2 P3. Advantages of international trading blocs and agreements Trading blocs defines the grouping of nations or countries that made agreements regarding their trading among themselves to have barrier free trade deals. Thus, there are three kinds of trade agreements which can be considered by small businesses are as follows:Free trade area:This trade agreement is free from tariff among members and no outside tariff is involved in it. Thus, the member of country can bargain on their own trading (Khan and Lew, 2018).Custom union:It depicts the free trade area and the common unified outside tariff as the members of trade block can easily negotiate with other party for better deal. Common or single market:This trade block is suitable for elimination of all barriers of trade for transferring products and services, workers and capital. Despite of this, non tariff barriers also eliminate the suitable level of harmonisation in the economy. From the above types, suitable agreement for Romania is common market as it helps in providing free trading of products and services across the nation which leads to development of efficiency of products without any barrier of national borders. Advantages of Trade Blocks and Agreements Size of market:It describes the enhancement of foreign direct investment which is beneficial for economy of involving country. It is an overall improvement in scope and size of 4
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small businesses. Therefore,it leadsto developmentin marketshare and provide better opportunities for organisations who are involving nation of trade block. Economic leverage:Thisfactor allowsthe productionwhich assistsin creationof economic scale by passing mass production as tends the reduction of cost of production. Therefore, trade block helps in increasing the economic leverage of the engaging countries of trade agreement(Steiner and Fan, 2019). Despite of this, rapid transfer of technology is also useful for trade blocks which help in increasing the effectiveness and efficiency of production procedure. Therefore, it tends to better productivity and accomplishment of economic scale for companies of involving countries. P4. Explanation of different tariff and non-tariff barriers which exist in international market While running business in the international market many tariff and non tariff barriers which are faced by small organisations. Few of them are discussed as under: Tariff Barriers: These barriers are basically depends on the custom text and duty which is imposed on the trading of product and services at the time of transferring a moving them across the domestic borders which is relies under government and public bodies of the country with the purpose of protecting small organisations and maintain balance among the payments(McCollum and Findlay, 2018). Few of them tariff barriers are discussed is under:Specific tariff:It describes the fixed fees and duty it is applicable on the important export of goods and services on one unit. In addition to this it can vary according to the type of product which is imported charged on the basis of physical entity according to the weight and measurement of the transferred product and services. .Ad valorem tariff:It is useful in assisting equitable trade barriers as the customs and duty is is applicable on the costly items as comparison to cheaper products. Therefore it eliminates the burden of tariff for the smaller organisations. Non Tariff Barriers: These are considered as the non tax restrictions which are imposed by government and public bodies’ rules and regulations in order to have control and monitoring on overseas trade (Prashantham, Kumar and Bhattacharyya, 2019). Some non tariff barriers which exist in the international trading are discussed is under: 5
Licenses:It depicts the written permission which is granted by the government is it allows businesses to transfer and deal in the specific type of goods and services in Global market(Glare and O'Callaghan, 2019). Utilisation of licence and policies are made by government in context of country to create restrictions in the flow of trade with the purpose of the management of competition and increment in prices which is faced by the domestic customers and organisations. Import quotes:This type of hurdle is mainly imposed on the amount of specific product and services which are imported by the organisation or firm from other countries. Therefore movement of products are allowed but only on the particular limit of quantity which is fixed by the government and legal authorities. M3. Evaluate the advantages of international trading blocs and agreements From the above discussion it is evaluated that creation and formation of trade blocs and agreementsbetweenthedifferentpreferablecountriesprovidemanyadvantagestosmall business organisations and also create positive implication for them. Trade blocs and agreements also create an opportunity for small businesses in order to have access which associated with the updated technology regarding their participation Nation as it leads to increase their efficiency in operations and manufacturing(Hollinshead, 2019). Despite of this free flow of workers are also profitable for small businesses as they have labour in cheap terms which helps in in reducing the cost of production process and also lead to the economic leverage buy meeting the goals of economics of scale in SMEs. TASK 3 P5. Advantages and disadvantages of importing and exporting process and how a deal can be secured Export is a procedure which includes exchange and selling of goods and services to customers in specific areas in regions with the purpose of having more and more market share and profitability. Two types of export process is discussed as under in the context of small businesses: Direct exporting:This procedure of exporting includes the sale of goods and services whicharedevelopedinabroadwithouttheinvolvementofanymediator(Dwyerand Vongvisouk, 2019). Under these small organisations take responsibilities for selling goods and 6
services across the country and also responsible for dealing in the foreign organisations directly. Its advantages and disadvantages are as follows: Advantages: Intermediaries are eliminated from the process of exporting so profits are more for the organisation.It assists in providing huge control over the transaction of sales and makes it more effective and efficient in terms of developing direct connection with customers. Disadvantages: It needs more time and money e in order to attract customers who belong from foreign countries without help of middleman.These organisations are completely responsible for the safety and risk which are involved in the transaction of manufacturing in logistics. Indirect exporting method:This method depicts the movement of goods with the help of any mediator in foreign countries and region. For this independent agents and export management companies are responsible to sell intermediaries and also responsible for exporting and moving products at foreign countries(Uncles, 2018). Some of them advantages and disadvantages are as follows: Advantages: It assists in facilitating less risky to export their products and services with the help of middleman and sale intermediaries.Despite of this limited amount of investment and time is needed in comparison to direct investment. Disadvantages: It reduces the margin of profit as in this process commission agent and middleman is also involved(Lo and Campos, 2018). It also control over the sale of transactions is it lead by the direct exporting. In order to secure the deal in export process use of direct method is recommended two small organisations as it lead more control over the sales and transactions full stop despite of this efficient and effective market research and examinations also done by small businesses in order to identify better export opportunities at international market. 7
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P6. Difference between merchandise and service imports and exports BasisMerchandiseService imports and exports DefinitionIt is a practice or procedure it is concerned with the sale and movementofgoodsand services which are tangible in natureacrosstheborderof retailcustomer(Zhangand Tse, 2018). The services are considered as theprocedurewhichis concerned with the movement ofintangibleproductand servicesacrossthe internationalborderof country. Class of things oldUnderthis,onlytangible goods and services sold and movedamongdifferent countries. Under this export and import ofintangiblethingsare concernedwithtransferand providing services at various regions of world and countries (Milner-Gullandandet.al., 2018). M4. Application of suitable import and export process and provide suitable recommendations The procedure of export is lengthy in terms of activity which includes various steps. As it is started with providing the export order with types of written agreement among exporter and importer and after that analysis and confirmation of order is made by considering the terms and conditions of contract(Pizarro Milian and Davidson, 2018). Furthermore next step include clarifying the process from the central excise indifferent legal formalities which are required to make by the exporter. For this waste documentation are required which are discussed as under:Letter of credit:It is written agreement which is issued by bank ok in terms of guarantee buyers who is the importer in the context of payment to seller who is exporter which suitable amount.Packing list:It is the detailed list which describes and includes various information about the products and the packaging which is associated with shipment. 8
Commercial invoice:It is considered as the legal document among the exporter and importer which depicts the information about the selling of goods and services and the amount of export which is imposed by government in terms of custom duty.Terms of payment:It describe all the concerning terms and conditions associated payment and also define the allowed period for payment, due amount, mode of payment and many more(Backaler, 2018). Customs document:It depict all the suitable details regarding the shipment like airway bill, commercial invoice, insurance certificate and other associated documents which is required to clear custom. TASK 4 P7. Different methods in which SMEs can tap into international markets The different methods which can be opted by SMEs in order to type into the international market which are as follows: Exporting:This process is concerned with the production and manufacturing of product and services in the domestic country in shipping them and moving to other Nation across the border(Steffen and et. al., 2018). It is useful in providing in easiest way which is helpful for small businesses in order to enter into an international market. Franchising and Licensing:This is a process in which small organisations allow few other firms and individuals in the terms of country to imitate and sell their goods and services at international level. Until licensing and franchising, duty and fees is charged by other person as it is the making and imitating fees of the idea and product. This method can be used by SMEs to sell their products and earn more profit in the international market. Joint Venture:It is the business procedure in which two or more parties are involved in the making or formation of an agreement with the purpose of attaining and accomplishing the particular target(Sinha and Sheth, 2018). For this some organisations development agreement for joint venture with other organisations that belongs to international market or operates at global level in order to tape and get access in the international market. P8. Comparison of ways by which SMEs tap into international markets and also assess the pros cons of each method MethodsAdvantagesDisadvantages 9
ExportingIt leads to development in the production and productivity e forbetterprofitmarginby providing easy way to enter into the internationalmarket (Lin, 2018). It is also assist in having excellent exposure to theuniqueideasand managementpracticeswhich provideincrementin competitionand competitiveness. This process leads to increase intheoperatingand manufacturingcostofsmall businesses is the requirement of deal with export rules and legislations.Forthisitis required to make modification in products and services which isfacedbythesmall businessesasithampers monitoringandsaleinthe domestic market. Franchising and licensingItincludetheriskand responsibilities it is concerned with the growth and success of goods and services which is offered by small businesses in order to share profit with both the parties who belongs from internationallevel.Here, limitedamountof capitalis required which leads to high return or investment with the helpoflicensingand franchisingmethodat international level. It is related with the risk of imitationandviolationof trademarkandcopyrighton theintellectualpropertyof small businesses which is high in this method(Khan and Lew, 2018). Joint VentureIt assists in providing new and delightful vision and expertise knowledgetoSMEswhich helpsineffectiveoperation andfunctioningofthemat Joint venture can be frugal as it leads to increase in conflicts which are concerned with the corporatecultureandthe decisions about the operation 10
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internationallevel.Joint venturealsoleadstothe agreementamongtwoand morepartiessoithelpsin providing access of the better resourcestoforeign organisation such as expertise manpowerandupdated technology. activities.Andalsodescribe theflexibilityofsmall businesseswhichdepicts restrictions as it is difficult to maintainbalanceand coordination with other parties (Steiner and Fan, 2019). M5.EvaluationofvariousmethodswhichisusedbySMEsandalsoprovidevalid recommendations By considering the above discussion it is considered that export method is useful in easiest way as it helpful for small businesses in order to enter in the international market and also take competitive advantage with the help of unique ideas full stop despite of this use of franchising and licensing method helpful in sharing risk and also require low capital investment in order to run their business at global level(McCollum and Findlay, 2018). In addition to this joint venture is helpful in developing better connection among the foreign organisation and also provide access to international market but it create rigidity and developed the chances of conflict in decision making process. Thus, exporting method is recommended to SMEs is it does not involve any risk to their intellectual property and also helpful in operations and manufacturing at the various locations as it is the easiest way to enter in the international market. CONCLUSION Thus, it is concluded that Global business environment include many opportunities for the small businesses it is associated with the better technology and many sources of finance which helps in the expansion of business. Despite of this many threads like stiff competition and migration of employees are also developed by increase in global competition. International trading blocs is useful for the participating nation is it make trade agreements easy and various types of exporting process is discussed which direct and indirect method is. In addition to this 11
various methods as discussed in the context of small businesses which are helpful for them to tap into international markets such as exporting, franchising and licensing and joint venture. 12
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