The External Business Environment Analysis: Arrival Ltd. Case Study

This report provides a comprehensive analysis of the external business environment, examining the political, economic, socio-cultural, and technological factors (PEST) that impact businesses, particularly in the context of international expansion. It explores various modes of entry into international markets, including importing/exporting, foreign direct investment, licensing/franchising, and foreign partnerships. The report uses Arrival Ltd., a UK-based electric vehicle manufacturer, as a case study to illustrate the practical application of these concepts. Furthermore, it delves into the role of global agents and organizations such as the World Trade Organization (WTO) and the International Monetary Fund (IMF) in shaping the landscape of international business. The analysis highlights the importance of understanding the external environment for strategic decision-making and successful global operations. The report concludes with the findings that the external environment plays a crucial role in a company's success and performance. The report also highlights the importance of international market entry mode selection for the success of a business.

THE EXTERNAL
BUSINESS
ENVIRONENT

INTRODUCTION
The factors which emerges from outside the boundaries of business but affects the
operations of the organisation internally both at micro as well as at macro level is considered as
external business environment. These are such forces on which the business has no control but to
accept them and make changes according to it. The factors are so influencing and powerful that
they forces the management to change or modify their decision which they has taken for the
business growth and survival. When thinking of making entry into international business the
external factors along with the modes are to be considered very carefully. In this research the
researcher has analysed some external forces such as political, economical, socio-cultural and
technological factors. Secondly, the modes of entry into international business and its operations
are also taken into consideration in this research. Lastly, the role of global agents such as World
Trade Organisations and International Monetary Funds are studied with reference to a UK based
electric vehicle manufacturing multinational company that is Arrival Ltd. (Ben Khaledand, and
Gond, J.P., 2020)
PEST FRAMEWORK
PEST is an acronym for the external business environment factor that is Political,
Economic, Socio-cultural and Technological factors. These factors hinders the company's
internal performance from outside the business and impacts the organization at macro level.
Companies wishing to go global must concentrate more on external factors because every
country differs in terms of environment so a proper study and analysis is required for
international business. Considering the external factors impact equally at international level will
prove a mistake for the companies in case of dynamic international market. (Brouthers, 2020)
(Ellington, and Milas, C., 2018). The analysis of each factors are done below:
 Political Factor: Political factor is concerned about the governmental rules, regulations,
and policies which every government formulates for their country's business operations.
When the government changes they mostly modifies the rules and regulations according
to them and the businesses have to follow them whether they like it or not. Arrival Ltd.
operating in numerous countries faces political changes and difference in their rules and
policies. Some countries proves hard for the company whereas some countries proves

good. Arrival Ltd. enjoys some incentives and benefits from the government which
motivates the company to grow.
 Economic Factor: This factor refers to the country's economical and financial conditions
in the form of GDP, GNP, Inflation rate, etc. This factor affects the organisations success
at a macro level. Crude oil prices, share market price at international level affects the
company's success as the share market is very volatile so it is very difficult to find the
right conclusion for the long period of time. The prices of crude oil is very uncertain in
market but Arrival Ltd. by manufacturing electric vehicles supports the economy in its
growth. Now a days people are concern for the environment and are preferring the
electric vehicles which is increasing Arrival Ltd.'s sales ultimately contributing to the
economic growth.
 Socio-cultural Factor: The factor is focused on the demographics and the cultural
behaviour of the society in which every company operates. It is the responsibility of
every organisation to pay attention to the preferences, culture and the behaviour of the
society if wishes to survive for long term. Arrival Ltd. by adopting a low carbon emission
phenomenon and use of renewable energy in its cars supports the society's preference and
works to meet the society's culture. (Fu, 2018)
 Technological Factor: Technological factor involves any kind of change or modification
in the technology which is the need of the hour. If any company not accepting the
technological change then it will become tough for the company to survive in the market
and meet market demands. Arrival Ltd. is known for its latest technological acceptance
which indulges the upgraded technology as soon as possible in its company and offers
updated cars to its customers.
The external environmental factors are uncontrollable in nature by the company, it does
not affects only the organisation but also to the whole industry. Whether they like it or not they
have to adhere the changes and operates accordingly. Every company should scan the external
environment on regular basis so that it does not affects much at a later stage. Neglecting any of
the external environment may prove hazardous for the company and can rise a question on its
survival even. (Hannah, and Scottand Wilkinson, R., 2017)

MODES OF ENTRY
Any company wishes to go beyond the boundaries of the home country with the purpose
of its business expansion does this by adopting any of the entry mode. Mode of entry refers to
the ways through which any company enters into the international market and does its business.
Going internationally is not an easy task for any company until it follows a proper channel of
entry. Selection of appropriate mode of entry is very crucial as one wrong decision will take the
company to meet huge losses in international market and also the loss of brand image.
Companies generally does this to earn high profits, increase sales, and increase company's
goodwill. (Reich, 2018). The several modes of entry into international business is discussed
below:
 Importing and Exporting: Importing refers to buying or acquiring goods and services
from other company who is not a domestic company for the purpose of further sale in the
market is termed as importing. Exporting is just opposite to importing, it refers to supply
of goods and services from one company to another internationally with the objective of
gain profit from the sale. By adopting this mode company need not to establish its office
overseas rather only needs to transport its goods and services and can earn profits through
it.
◦ Advantages: No need to employee much capital
Less Risk involved.
◦ Disadvantages: Difficulty in maintaining stock of goods
Less control over seller.
 Foreign Direct Investment: Making investment in another country for doing business
with the aim of generating profits is refereed to as Foreign Direct Investment or FDI. It
can be in the form of acquisition, joint venture or merger. With the adoption of FDI
companies either can manufacture goods in the investing country or can assemble the
parts and sell in the market. It is generally done when the companies operates at large
scale or experiences limits on import of goods and services.
◦ Advantages: Better control over operations
Utilization of available resources at cheaper rate.
◦ Disadvantages: Establishment cost involved
Political and environmental change.

 Licensing or Franchising: Giving rights to use the company's brand name and image to
sell the products and services in order to earn profits is categorized under Licensing or
Franchising. In this mode the company gives right to an individual to open an outlet with
the company's name and operate in his country. The individual needs to buy the rights of
the company and for this he needs to pay some amount known as royalty. The buyer is
refereed as licensee or franchisee whereas the provider of rights is refereed as licensor or
franchisor. All the expenses for the establishment and all the losses are to be bear by the
licensee or the franchisee in this case. The licensor or the franchisor only enjoys the share
of profit earned from the sale of goods or services.
◦ Advantages: Enjoys only profit
Involves low or no cost of establishment.
◦ Disadvantages: No complete control over licensee or franchisee
Risk of loosing trade secrets.
 Foreign Partner: This mode of entry involves partnership or joint venture with foreign
company who is local to the operating market. The mode is supported by formulating a
contract between two or more firms to sell the product and services and earns profits. In
this case all the partnering firms shares profits and losses either equally or according to
the shares decided at the time of making contract. Companies can partner either by the
way of vertically or horizontally. (Rosado-Serranoand Paul, J., 2018)
◦ Advantages: Support of partner in understanding local market
Sharing the fear of loss
◦ Disadvantages: Conflicts arising due to difference in culture
Changes of difference in objective or goals.
Arrival Ltd. Company has done partnership with CII Merger Corp. a USA based
company. The purpose of this merger is to get listed on National Association of Securities
Dealers Automated Quotations (NASDAQ) with a special purpose acquisition. In this acquisition
Arrival group is formed having fully owned subsidiaries of CIIG and Arrival. The chairman
CEO of CIIG Merger Corp was appointed as the Non-Executive Chairman post acquisition. The

company Arrival Ltd. was a private company before the acquisition but later became public
company after the acquisition with CIIG Merger Corp.
GLOBAL AGENTS AND ORGANISATIONS
World's business is supported by various global agencies and organizations such as
World Trade Organisation, International Monetary Fund, World Bank, United nations, etc. which
has a great impact along with an influence on the international business. World Trade
Organization is a body which focuses on the regulations and practices of various businesses at
international level. International Monetary Fund provides financial support to the required
organizations and also helps in international trade. World Bank provides financial security or
loans to the developing or under developed countries needed for the development of their nation.
Whereas, United Nations concerns about maintaining harmony and peace, cooperation among
countries. (Sadeghi, and Biancone, P.P., 2018)
World Trade Organisation
World Trade Organisation or WTO is an organisation which deals with the rules and
regulations required for international business for the smooth and flawless trade between
countries. The main role of World Trade Organisation is to maintain hurdle free trade, to resolve
any kind of trade disputes and to make several necessary decisions. Every multinational
company needs to follow the rules and regulations formulated by WTO in order to business
internationally. The members of WTO makes decisions in its headquarter at Geneva. The
organisation consists for more than 162 members supported by 623 secretariat staff in its
committee covering approx 98 percent of the trade worldwide. The committee meets after every
two year to discuss and negotiate on the policies as per prevailing market situations. WTO has
setup some reference centres in its member developing or under-developed countries in its
regional organizations and 100 ministries in order to foster the communications and events held
in its headquarter. (Suryana, Sudirman, and Rusliati, E., 2017)
International Monetary Fund
International Monetary Fund or IMF concerns providing financial stability, support to the
countries. It also focuses on promoting international trade, employment and economic growth
along with declining the poverty ratio from the globe. The fund was established in the year 1944
with the purpose of bringing strength in monetary system internationally. Initially the members

countries were only 44 with IMF but later on 190 countries (as of today) out of total in the world
became members of IMF. The fund collaborates with the governments of the member countries
and facilitates the growth of their nation by training them, generating employment, helping in
their economic policies, etc. When comes to the fact of holding gold in the custody, IMF stands
first in the world who holds maximum gold deposited by the countries as their reserves.
( Trisakhon, Onputtha, and Peamchai, P., 2018)
CONCLUSION
From this report it has been concluded that the factors of external environment plays a
very important role in the success and performance of any company especially for the firms
going internationally. Factors such as political, economical, socio-cultural, technological
sometimes impacts positively and sometimes negatively on the business organisation. For going
globally there is always a way to go and every company those who are planning to go beyond the
boundaries of home country needs to identify the modes and are required to do analysis of each
properly in order to select the best fit mode to the company. Arrival Ltd. A UK based electric
vehicle manufacturing company has adopted acquisition mode for the entry into international
market. Global agencies such as World Trade Organisation and International Monetary Fund
plays a very important role in the growth of international business and trade along with the
development of the countries whoa are in the phase of developing or are under developed.

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