Strategy Formulation Report for Neutron Holdings Inc. in Pakistan

This report presents a strategy formulation for Neutron Holdings, Inc., operating under the name Lime, to enter the Pakistan market. The report begins with a brief company background and then explores the relationship between Pakistan and the United States, including trade barriers and the strengths of Pakistan's banking system. A PESTLE analysis of Pakistan is conducted, followed by an assessment of potential risks the company might face, along with mitigation strategies. The report recommends a strategic alliance with a local partner, such as Toyota, to facilitate market entry and navigate cultural and business differences. The conclusion emphasizes Pakistan's potential as a market for Lime, considering its large population and the government's support for the automotive industry, while acknowledging the evolving automotive market landscape. The report highlights the opportunities and challenges for Lime and suggests the company should be prepared to adjust its strategy as needed.

Running head: STRATEGY FORMULATION REPORT
Strategy Formulation Report
Name of the Student:
Name of the University:
Author note:

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
A brief company Background................................................................................................2
Relation of Pakistan and the United States............................................................................2
Trade barriers that Pakistan imposes on United States..........................................................4
Strengths of the banking system in Pakistan..........................................................................4
PESTLE analysis of Pakistan.................................................................................................5
Risks that the company might face in Pakistan......................................................................6
Recommendation........................................................................................................................8
Conclusion..................................................................................................................................8
References:.................................................................................................................................9

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Introduction
Expansion of business in an unknown country is also very challenging for the
businesses, be it from any industry. Still, expansion is important for business growth and
success as it creates new opportunities for the businesses and bring in more customers while
generating greater profits. This paper shall elaborate on presenting a summary of the strategy
proposed in assignment 1, which the firm adopts in the country. The firm chosen for this
purpose was Neutron Holdings, Inc. that has undertaken a transportation-rental company
under the name Lime. The objective is to develop a strategy to give the company and its
product the highest chance of success in Pakistan. The main aim of this report is to interpret
the influence of trade investment environment along with the cultural and political issues that
impact the international business for the destination countries. It would also identify the
possible strategies that the company could adopt while considering engagement with the
global market of Pakistan.
Discussion
A brief company Background
Lime is aimed at providing its customers with the advantage of sharing some
dockless vehicles that could be unlocked by a mobile application in smartphones. They also
have some inbuilt GPS tracking system that would be helping the company to follow all the
security and safety essentials of its customers. With the same, the customers too would feel
safe and secured while driving. This rental service is aimed at providing customers with a sort
of emergency vehicle. This innovative idea of the company would help it in making global
expansions and gaining high popularity in the foreign market. At present, the company is
headquartered in San Francisco and has expanded in the different parts of the world (Li.me
2019).

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Relation of Pakistan and the United States
There is a bilateral relationship between Pakistan and the United States since independence
in the year 1947. The United States is known to be having a multi-faced relation with
Pakistan in the areas ranging from the counterterrorism to energy to the matters of trade and
investment (Subtain et al. 2016). Pakistan is at present the 56th largest goods trading partner
with about 6.6 billion dollars in total goods trade in the year 2018 (MTC et al. 2018). As per
the report of the Department of Commerce, the exports of goods from the United States to
Pakistan has supported an estimated ten thousand jobs in the year 2015. As per the report of
2018, Pakistan was the 55th most substantial goods export market of the United States. It was
about 2.9 billion dollars in the same year, and it was up to 4.3% (about 121 million dollars)
from 2017. Moreover, it is also to note that the top export categories in the year 2018 were
grain, cotton (615 million dollars), miscellaneous grain, medical instruments, optical
instruments (117 million dollars), machinery (211 million dollars), fruit (694 million dollars)
and iron and steel (225 million dollars). The total exports of agricultural products from the
United States to Pakistan was totalled to 1.5 billion dollars in the year 2018 and hence, was
considered to be the 19th largest agricultural export market of United States (Irshad et al.
2016). It is also to note that the leading domestic export categories were the dairy products
(38 million dollars), tree nuts (49 million dollars), cotton (615 million dollars), planting seeds
(37 million dollars) and soya beans (689 million dollars). When considering the importing
relationship between the two nations, it is to note that in the year 2018, Pakistan was
supposed to be the 58th largest supplier for goods imports. The total goods imports from
Pakistan to the United States was about 3.7 billion dollars. With this, the top essential goods
include the miscellaneous textile articles (1.3 billion dollars), woven apparel (586 million
dollars), knit apparel (809 million dollars), cotton (112 million dollars) and leather products
(121 million dollars).

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Moreover, it is also to mention that in terms of the trade balance, the goods trade
deficit of the United States with Pakistan was about 783 million dollars in the year 2018. It
was a 2.2% increase over the year 2017 (Ali, Mujahid and Ur Rehman 2015). It was about 17
million dollars. In terms of investment, the foreign direct investment (FDI) of the United
States in Pakistan (Stock) was about 518 million dollars in the year 2017. It was a 25.7%
increase from the year 2016. Also, in the year 2017, the FDI of Pakistan in the United States
was 224 million dollars.
Trade barriers that Pakistan imposes on United States
a) The 2016 Import Policy Order of Pakistan bans importing 43 different product
categories, and they mostly include the security, health, religious and environmental
grounds (Mustafa et al. 2018).
b) The country bans importing of live animals.
c) It prohibits containing feed and protein ingredients from any BSE (Bovine
Spongiform Encephalopathy) affected nations.
d) The country also implemented the WTO Customs Valuation agreement for valuation
of the goods (Michalopoulos 2017). Most of the significant U.S firms in the field of
materials and machinery have reported some concerns about customs officials who
have assessed the goods based on some values instead of the declared transactional
value.
e) The vehicle imports in the country are subjected to six fixed taxes including Value
Added Tax (VAT), Customs Import Duty (CID), Ports Authority Levy (PAL), Road
and Infrastructure Development Levy (RIDL), Social Responsibility Law (SRL) and
Excise Duty (Khan, Hashim and Yaseen 2016).
Strengths of the banking system in Pakistan

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a) Connecting people- The banking system in Pakistan has made the life of ordinary
people easier because of the advent of the new age technological advancement (Zahid
et al. 2017). Now, people in Pakistan can transact on a real time basis.
b) Diversified Services- The banking system of Pakistan offers services ranging from
CASA to insurance, loan and investment.
c) Major Source of employment and growth in GDP- It is a significant source of jobs
and economic growth in Pakistan (Butt et al. 2018). It enables a condition for growth
and development by being demand following and supply leading.
d) Changing from the mere savings and the role of loan facilitator- The top priorities of
the Pakistani banking system at present include regulatory compliance, enhancing the
centricity of the customers, improving the quality of the asset and tackling the
growing competition from the non-banks.
PESTLE analysis of Pakistan
Political Economic Social
1. Change in exchange
rates and prices of oil
2. Foreign ownership
regulations
3. Trade and tariff policy
4. Motor vehicle insurance
policy (Kee, Neagu and
Nicita 2013)
1. Increase the level of
imports
2. High rates of Oil and
Gas
3. Rise in inflation car
manufacturers for
increasing their prices
4. Rates of interest
1. Consumer attitude
2. Car culture
3. Taste and fashions
4. Increased desirability of
customized vehicles
Technological Legal Environmental
1. Consumer Satisfaction 4. The business laws
protect the firms from
1. Environmental

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2. Electronically controlled
3. Introduction of new
technologies that would
lead to an increase in
sales
unfair competition
5. There is a law to protect
customers from unfair
business practices
6. Trade barriers for
vehicle imports are
subjected to certain laws
like VAT, CID, PAL,
RIDL, SRL and Excise
Duty.
policy
2. Climate change
3. Pressure from
Pakistani NGOs.
Risks that the company might face in Pakistan
Risk Ranking Name of the risk Impact Strategies to
mitigate
1. High risk of change
in the political and
economic situation
Will influence the
corporate payment
behaviour
To adapt the
transformation and
redesign the
business process
2. Corporate financial
information is often
not available and if
available, not
reliable
Will influence the
sales of the products
Balance sheet, the
cash flow statement
and income
statement must be
assessed.
3. Debt collection is
unpredictable
Will influence the
long term planning
To use tools for debt
collection and

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of the company provide prior
information about
the same to the
stakeholder
4. higher inflation rate might influence the
capabilities of the
target audience in
utilizing the service
offerings of the
transportation rental
business
Marinating a
diversified portfolio
5. Rates of interest Moderation in the
economic growth of
the company
Increasing the cash
holdings of the
company
Recommendation
One of the ways for Lime to get entered into the new market of Pakistan is by means
of strategic alliance within any of the local and well-known partners. Partnering with a firm
in the destination country to enter that market. Lime can go into partnership with Toyota in
Pakistan. This joint venture would help the company is growing faster, increasing its
productivity and generating higher profits. It would also get access to the new markets and
the distribution networks more efficiently. With the same, it would enable the firm in sharing
the risks and costs that it might face while entering into a new international market. Toyota is
considered to be a local entity in Pakistan and hence, can help Lime by sharing costs and
reducing the required investment in the new market. With the same, it is also to note that as

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Lime is a Western company, partnership with the local firm in Pakistan would also help Lime
in understanding the local market, the local Eastern culture along the various different ways
of doing the business better as compared to the outside firms.
Conclusion
Hence, it is to conclude that the chosen destination for the expansion of Lime is
Pakistan. It is to note that Pakistan was accepted was for this purpose because it is the sixth
most populated in the world. The company would get huge customers to sell its products.
With the same, it is also considered to be one of the potential developing countries in the
world, and at the same time, it acts as a mediator for the assimilation of the Islamic countries
in the region of South East Asia. The stable government of Pakistan focus on the
encouragement of the automotive industry of the nation is a significant driving for Pakistan.
The automobile industry in Pakistan is gradually shifting towards a service-oriented model
along with the new foreign players who focus on the consumer data and customer experience.
The change in the markets for automotive in Pakistan in the contemporary world is providing
some significant opportunities for most of the parts while the other potential face stiff gets
declined over the forecasts.

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References:
Ali, M., Mujahid, N. and ur Rehman, A., 2015. Pakistan-India Relations: Peace Through
Bilateral Trade. European Scientific Journal, ESJ, 11(4).
Butt, I., Ahmad, N., Naveed, A. and Ahmed, Z., 2018. Determinants of low adoption of
islamic banking in pakistan. Journal of Islamic Marketing, 9(3), pp.655-672.
Irshad, M.S., Xin, Q., Xuan, P. and Arshad, H., 2016. Deltoid analysis of Pakistan-ASEAN-
China free trade agreements and opportunities for Pakistan. Asian Economic and Financial
Review, 6(5), pp.228-237.
Kee, H.L., Neagu, C. and Nicita, A., 2013. Is protectionism on the rise? Assessing national
trade policies during the crisis of 2008. Review of Economics and Statistics, 95(1), pp.342-
346.
Khan, I.H., Hashim, S. and Yaseen, M.R., 2016. Foreign influence on Pakistan's exports and
imports Evidence from Pakistan. Review of Economics and Development Studies, 2(2),
pp.117-128.
Li.me., 2019. Lime | Electric Scooter Rentals, Micro Mobility Made Simple. [online] Li.me.
Available at: https://www.li.me/ [Accessed 16 Apr. 2019].
Michalopoulos, C., 2017. The Birth of the WTO. In Aid, Trade and Development (pp. 127-
163). Palgrave Macmillan, Cham.
MTC, M.T.C., Sendhil, R., Kumar, A., Sharma, A.K., Jasrotia, P., Gupta, O.P., Meena, R.,
Singh, S. and Singh, G.P., 2018. ICAR-INDIAN INSTITUTE OF WHEAT AND BARLEY
RESEARCH.

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Mustafa, S., Begum, R., Nisar, S.K. and Osama, A., 2018. Impact of New 5 Year Automobile
Policy (2016-21) on the Profitability of Major Players in the Automobile Industry of
Pakistan. European Scientific Journal, ESJ, 14(16), p.165.
Subtain, M., Hussain, M., Farooq, M.A. and Khan, M., 2016. Dimensions of Pakistan’s
Foreign Policy: From inception to the 9/11 incident (1947-2001)-An analytical
study. Dimensions, 3(4).
Zahid, M., Rahman, H.U., Makki, B.I., Jehang, M. and Rehman, S., 2017. Branchless
Banking in Pakistan: Opportunities and Challenges. NFC IEFR Journal of Engineering and
Scientific Research, 5.