Unit 43: Analyzing International Business Environment Report

This report provides a comprehensive analysis of the international business environment, focusing on strategies for Small and Medium Enterprises (SMEs). It begins with an overview of the global business landscape, examining opportunities and threats faced by SMEs in an increasingly competitive market. The report includes a detailed case study of "The House of Dorchester," a UK-based chocolate company, analyzing its expansion into the European market using Porter's Diamond Model. It explores the advantages of international trading blocs and agreements, as well as tariff and non-tariff barriers. The report also evaluates the advantages and disadvantages of importing and exporting, and how SMEs can tap into international markets, comparing various methods and justifying recommendations for implementation. The report highlights key aspects of the global business environment and policies for SMEs, providing valuable insights into international business operations.

Unit 43
Tapping into New and International Markets
International Business Development
Student Name-
Student ID-
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Table of Contents
Introduction......................................................................................................................................4
Business Overview..........................................................................................................................5
Explanation of the global business environment in which small and entrepreneurial businesses
operate:........................................................................................................................................5
Analyzing the threats and opportunities that face SMEs in an increasingly competitive global
environment.................................................................................................................................7
Providing the evidence-based analysis of the global business environment in which small and
entrepreneurial businesses operate using specific examples.......................................................8
The analysis of The House of Dorchester’s business expansion in the European Market by
using the “Porter’s Diamond Model”........................................................................................10
Determining and analyzing the advantages of international trading blocs and agreements......11
Explanation of the various tariff and non-tariff barriers that exist in the international trading
environment...............................................................................................................................14
Evaluation of the advantages of international trading blocs and agreements and their
implications for SMEs...............................................................................................................15
Determining the advantages and disadvantages of importing and exporting and how to secure
a deal..........................................................................................................................................16
Explanation of the differences between merchandise and service imports and exports............18
Evaluation of the methods in which SMEs can tap into international markets.........................20
Comparison of various ways by which SMEs can tap into international markets, assessing the
pros and cons of each method....................................................................................................21
Justifying recommendations with consideration and evaluation of the implementation of
methods......................................................................................................................................22
Conclusion.....................................................................................................................................23
References......................................................................................................................................24
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Introduction
This is the age of globalization and every sector, as well as businesses, are running from home to
abroad across the borders. By adopting the concept of globalization, businesses are expanding
much more in the international market. In this report, the globalization effect and the
international business environment for SME business will be described. Here a medium business
firm The House of Dorchester’s business operation and expansion in the international market
will be analyzed. Firstly, the report will describe the threat and opportunities of the firm as well
as the advantages of international trading. It will evaluate the effective plans and processes.
Finally, the report will demonstrate the evaluation process of the international market by “The
House of Dorchester”. The overall report will help to understand the international business
environment and policies for an SME firm.
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Business Overview
“The House of Dorchester” is a prominent chocolate company in the UK that started its business
around fifty years ago. Which offers a wide range of premium chocolate items, sweets, and
different luxurious gift items to its customers. The uniqueness of the company is they provide a
wide range of hand-making traditional British chocolates and they manufacture innovative and
diverse products which easily bring a smile to the customer’s face. After starting its journey, it
has become a leader in its sector. It has a large market share in the UK with its large operational
channel (Taylor, 2017). Besides the domestic market, it’s going to enter into the global business
environment and adopt various strategies to sustain itself in the global market at present. The
business of “The House of Dorchester” is getting expanded rapidly with the demand and
satisfaction of the customers. The global operations and strategies of the company are going to
be illustrated in this report.
Explanation of the global business environment in which small and entrepreneurial
businesses operate:
Global Business Environment: The international business environment consists of some
factors. Such as communication media, marketing channels, political issues, supports of the
technology, demographical characteristics, existing market, etc. (Muhammad et al., 2016).
Before entering the market “The House of Dorchester” must need to analyze those factors
individually and choose the best plan for them. They have to communicate with the market and
create a positive vibe at the time of entering. Each of the elements of the market can bring a
massive change either positive or negative to further operations.
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Figure-01: Global Business Environment (Muhammad et al., 2016)
“The House of Dorchester” needs to implement some strategies to operate its business in the
international market -
Adopting an effective Business Plan: A plan is a prerequisite and very vital before
commencing any operation or process. The plan must be created according to the firm’s
necessity and ability (Cuervo‐Cazurra, 2017). The House of Dorchester needs to create a precise
and dynamic plan for global operations like the domestic one.
Targeted Market analysis: During making the planning process, a firm should analyze the
targeted market where it wants to enter. The management has to collect various data and
scenarios of the market (Schmidheiny et al., 2019). They need to know the consumer’s
behaviors, necessities, and demands. The market offerings, overall economic scenario, and
competitiveness also should be considered during the analysis.
Targeting the Consumers: Every business tries to serve its customer as much as it can.
Because the customer is the heart of a business. Final products are served to the customers and
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companies gain profit (Hamilton and Webster, 2018). Higher customer satisfaction brings higher
profit and sustainability to the firm.
Production of quality products: A firm creates its identity and good face value in the market by
maintaining the quality of products. A quality product creates a positive image in customers’
minds by delivering the utmost reliability and satisfaction (Muhammad et al., 2016). The House
of Dorchester manufactures good products and maintains its standards to hold the position and
brand image.
Analyzing the threats and opportunities that face SMEs in an increasingly competitive
global environment
Opportunities for The House of Dorchester:
A new company gets some benefits during starting of the business globally. Some of those are
described below.
Expansion of the business area: By entering a new market a firm can expand its business scale
as well as its production. A new market means new demand for new customers (Eravia and
Handayani, 2015). Companies try to increase their productivity which brings a positive result by
expanding the business as well as profitability.
Improvement of the financial condition: when a firm increases its business operational scale,
the profitability also gets increased. The firm acquires more investments and capital from the
investors as well as the global stock exchanges (Mundim et al., 2020). These give the House of
Dorchester a sound financial condition.
Maintaining customer relationship: A good relationship with the customers brings always
positive results to the company. A positive thought in the customer’s mind makes the customer
purchase the product of the company (Eravia and Handayani, 2015). So, The House of
Dorchester should build a positive relationship and provide after-sales service to the customers.
Customer engagement opens a new door of opportunity to every firm.
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Threats for The House of Dorchester:
Besides those opportunities, there are some remarkable threats to the firm during the expansion
in the global market. Some of these are-
Inadequacy of Working Capital: A huge working capital is required to operate a business in
the international market. To continue a large operational scale and huge production, a firm
should acquire huge capital. If they can’t manage, they will fail to perform these activities
(Smallbone and Rogut, 2017). This is a great threat to them.
Threats from the competitors: The global market is an open place to compete with others.
There are a large number of companies of the same categories that provide the same type of
products to the consumers (Eravia and Handayani, 2015). This may be a threat to the new
entrants. A new firm has to carefully compete with the existing market and create its own
identity.
Global political issues: The political environment and culture of one country are different from
another. Every country has separate rules and regulations for different businesses. So, every
environment is not suitable for every firm. Some political conditions become a threat to the
products as well as the firm (Mundim et al., 2020). So, a company should analyze the law and
political conditions of that foreign country and take the preferable decisions.
Providing the evidence-based analysis of the global business environment in which small
and entrepreneurial businesses operate using specific examples
To provide an evidence-based analysis, the PESTLE analysis of The House of Dorchester can be
used here.
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Figure-02: The PESTLE analysis (Song et al., 2017)
Political: Several political factors should be assessed carefully before entering the global
business. These are the government policy, political soundness tax, trade policies, and various
laws of that market (Song et al., 2017). The political instability and unfavorable law and
regulations can be an obstacle to The House of Dorchester’s business.
Economy: The economic condition of all over the world is not the same. The economic
condition of Europe and America is better than that of Asia and Africa (Gregoric, 2018). So, the
chocolate company needs to analyze the purchasing power as well as the living standard of the
customers.
Social: Various social factors affect the market in different ways. The population, their age and
culture as well as lifestyle should be analyzed carefully (Kara, 2018). The educated and young
peoples are generally like chocolates and fancy items rather than old and illiterates.
Technology: Technology is helping humans in every stage of daily life. With the help of
technology productivity and efficiency can be increased easily (Taylor, 2017). So, The House of
Dorchester should be aware of modern technology and its profitable uses.
Legal: Legal environment consist of different laws and regulations of a country that are imposed
on the business firms during the operations (Gregoric, 2018). To be profitable and successful in
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business The House of Dorchester must need to examine the laws whether those are suitable or
not.
Environmental: Environmental safety and eco-friendliness are some of the most important
issues of global business and production. The firms need to reduce the emission and pollution as
much as possible. The powerful countries, as well as smalls, have agreed to save the economy
with less carbon emission (Song et al., 2017). The House of Dorchester can join the race with its
eco-friendly production.
The analysis of The House of Dorchester’s business expansion in the European Market by
using the “Porter’s Diamond Model”
The House of Dorchester is expanding its chocolate business outside the UK. The popularity and
the uniqueness of their chocolates encourage them to join the global market. The business
strategies and model of The House of Dorchester can be analyzed through Porter’s four factors
(Smit, 2018). These factors are interrelated with each other. This model defines the national as
well as the international advantages of The House of Dorchester.
Figure-03: Porter’s Diamond Model (Smit, 2018)
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Firm Strategy, Structure, and Rivalry: These factors indicate the firm’s operational strategies
to continue the business from domestic to global. The company structure, as well as
competitiveness with the rivals, also need to be focused on (Vlados, 2019). The House of
Dorchester has a strong business field in the UK which helps them to expand in other countries
of Europe. The firm has implanted its unique strategies to compete with outside rivals.
Demand Condition: Every product is manufactured because of demand. A firm gains profit
when the market demand is higher. And they face losses during the scarcity of demand (Delener,
2019). In the European market, the Demand for hand-made chocolate is much higher and The
House of Dorchester is trying to capture the gap.
Related supporting industry: A firm gets many advantages if there have other supporting
industries. The House of Dorchester produces chocolate and various luxurious gift items. They
operate their business in the UK as well as Europe (Smit, 2018). The chocolate and luxurious
industries in Europe are very popular and these give an actual advantage through providing raw
materials as well as buying finished products.
Factors Conditions: In every production, some factors (such as capital, labor, skills,
technology) are needed. The abundance of these resources and skilled manpower gives an
absolute advantage to the hand-made chocolate firm (Kara, 2018). The firm should maintain the
gradual improvements of these factors.
Determining and analyzing the advantages of international trading blocs and agreements
Specialization and proper resource allocation: Proper allocations of resources help the firm to
complete its operation efficiently. A firm has to allocate its limited resources to various sectors
and needs to assure the best outcome and productivity from those. In a global operation, there
needs diversification and dynamic allocations of resources. The resources should be allocated
according to the market and other situations (Chase, 2019). The trading agreements and blocs
help to determine the allocation of resources properly.
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Figure-04: Allocation of Resources (Chase, 2019).
Growth of Production: International agreements and blocs offer a large market to a firm. The
firms increase their production according to the market demand. They segment the market and
evaluate the necessity and gap of the market. Then they try to fill the gap and increase their
production to meet up the demand with the support of the agreement (Delener, 2019). This
increases the overall profitability from the satisfaction of the global consumers.
Economic development: SME sector is the heart of a business economy. A large number of
contributions come from this sector. The growth of these sectors finally brings positive results to
the whole economy. By entering the global market, The House of Dorchester increases its
productivity and profitability which helps the growth of the overall economy (Chase, 2019). The
different agreements and blocs are also beneficial to a country. Besides these, the differences
between currencies and raw materials cost also profitable for the growth of the economy.
Disadvantages of international trading blocs and agreements-
Shipping customs and duties: Shipping customs, transportation costs, and duties are the main
challenges and problems of global trading blocs and agreements. When a firm export product
from one country to another, the foreign country charges some costs of customs and duties. The
firm also has to bear the cost of shipment. All these costs increase the production cost as well as
the final price of the products (Hirst et al., 2019). So, it’s a great challenge to compete with
others to maintain the price level.
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