International Business Strategy: Expanding The Local Chelsea Cafe

This report examines the international business expansion strategy for The Local Chelsea cafe, focusing on its potential entry into the Swiss market. It explores the rationale behind choosing Switzerland, highlighting the country's favorable economic conditions and market opportunities. The report delves into relevant theories and models for international market selection, including absolute and comparative advantage, international product life cycle theory, new trade theory, and the Heckscher-Ohlin theory. Furthermore, it discusses various entry strategies such as licensing, joint ventures, franchising, outsourcing, and company ownership. The report also addresses potential barriers to international expansion and critically evaluates implementation approaches for the specified target market, offering a comprehensive overview of the internationalization process for The Local Chelsea cafe. Desklib provides access to this and other solved assignments for students.

International business

Table of contents
Introduction .....................................................................................................................................1
Main body........................................................................................................................................1
Recommended country to enter into the international business. ...........................................1
Theory/models related to the process of international market selection and entry strategies.3
Barriers faced by organisation while expanding business internationally. ...........................5
Critically evaluate a relevant implementation approach for the internationalisation process for
the specified target market......................................................................................................7
Conclusion.......................................................................................................................................8
References .......................................................................................................................................9

Introduction
International business emphasise on the transactions that are made between the countries,
individual and other across the borders and involves the exchange of capital, goods and services.
A successful organisation is desire to expand its business internationally so that it can grab the
market opportunities in abroad(Mukherjee, and et.al., 2022). Such as it can be able to find the
new customers which leads to increase in sales and reducing the operation cost of the business
and increase their revenue. It allow the business to be explored in many part of the world and
also able to get the new talent with more diverse education and language skills that enable the
organisation to gain the competitive advantage. In this report, the organisation that has been
focused upon is The Local Chelsea which is a local cafe in London, UK. The report will cover
the how the cafe will expand it business and which country it will choose to be expanded in.
further it will explain the theories or models related to the process of selection of the
international market and strategies related to entry. Moreover, it will demonstrate the barriers
that are faced by the organisation while expanding the business internationally and discuss the
approach to be implemented for internationalisation process.
Main body
Recommended country to enter into the international business.
The Local Chelsea cafe desires to expand its business in Switzerland which is one of the
top country of Europe where business can be expanded easily. The GDP of the country is worth
679 billion dollar and grows at 1.4% annually and the unemployment rate is just 3.3%.
Therefore, it is considered as a good place to expand the business for which the reason are
described as under:
 Enter into new market: The Local Chelsea cafe can enter into the new market to grab
the opportunities that are existed in the foreign country(Casson, 2021). These
opportunities may be consisted of demand for the products in the foreign market or get
advantage of trends changing to favour the products and also find absence of competition
to abroad that can provides the firm a big profitable advantage.
 Increase sales and profitability: When the business is expanded into the new market so
it assist the organisation to increase their sales and provides opportunity to increase their
profits. Therefore, going global may provide new resources of revenue to a business
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concern(Schmidt, and Santamaria-Alvarez, 2021). It provides greater return on the
investment that are made to the foreign country. Thus, The Local Chelsea cafe can secure
long term success for the business by expanding in the international market.
 Enlarge the customers base: By entering into the international market through e-
commerce or a collaborative sales partnership which provide an opportunity to the
company to increase the customers base. The company can build new network by
offering their great services to the customers which helps in enhancing their experience
and encourage them to repeat services. Theretofore, The Local Chelsea cafe should look
for the partnership with the other business and also use the social media to increase the
customers base.
 Create economies of scale in production: The company can globalise its business is to
achieve the favourable economies of scale. This help the organisation in reducing the
cost of the operations and allow able to pay the higher returns to the investors and allow
itself to economise the transport and distribution network(Sinha, and Chowdhury, 2021)
(. The company also able to produce its goods at cheaper cost which assist it improving
the product and increase the base of the customers.
 Access to new talent: This is the advantage for The Local Chelsea cafe as it would be
able to get the labour that are more productive, advance language skills, diverse
educational background and more. When the company make international expansion so it
get opportunity to hire the new talent which assist the organisation to improve the
innovation output. Therefore, a business concern may get the benefits from the foreign
market by expanding there.
 Cost savings: The company also able to save cost of the business operations when
expend into the new market in foreign country(Jafari-Sadeghi, and et.al., 2021).
Therefore, The Local Chelsea cafe can get the advantage of expansion of the business as
it helps in reducing the cost of manufacturing the products due to the cheap labour cost
and get affordable talent.
 Stay ahead of competition: The Local Chelsea cafe can gain the competitive advantage
when enter into the new market with diverse products because when the organization
enter in the market where the competitor do not operate can easily move to the
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advantage(Rigney, and et.al.,2021). This enable the company to build a strong awareness
among the customers by accessing the new technologies and improving their operations.
 Build regional centrers: The company expand the business in order to provides their
services to the international clients. The organisation can employee the local worker who
have good expertise to communicate with the clients and attracting the customers to
increase their profitability.
Theory/models related to the process of international market selection and entry strategies.
The international market selection refers to the process when the organisation strive to
select the right market by adopting the various strategies. These market help a business concern
in making the international development, business planning and growth potential(Martin, 2021).
The theories and strategies are described in relation to The Local Chelsea cafe when it intends to
expand the business in international market are as under:
Theories of international market selection
 Absolute advantage theory: This theory refers to the ability of an organisation in
creating the products and services by using the lesser inputs and lower cost with the same
quantity as of the competitors. This theory help the organization in getting the absolute
advantage by creating the good and services at the lower cost per unit with more efficient
process. It help the organisation to gain the competitive advantage by producing the
goods and services at the lower opportunity cost(Andresenand Bergdolt, 2021). This help
the company in attracting the more customers with the absolute advantage by using the
resource such as technology, wealth and education etc.
 Comparative advantage theory: It is the ability of the organisation to produce the goods
and services at the lower opportunity cost than other company. This comparative
advantage help in knowing the reason to gain the benefit from the business by the
organisation. Therefore, the company can gain the advantage by producing goods at the
lower cost than its competitors to overcome the competition by using the various
resources. This assist the company in gaining the stronger sales margin and greater
possibility. It helps in increasing the efficiency by focusing on the labour, capital and
resources on the production that requires the low cost of opportunity for big profit.
 International product life cycle theory: This is a theory that was developed by the
Raymond Vernon which defines that each manufacturing products has the definite life
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cycle that initiate from the expansion and ends with the decline. The theory includes the
three stages such as new stage, maturity stage and product standardisation(Krycheuski,
2022). This is an stage where the new products are introduced by the organisation where
the market for the products remain small and sales is also relatively low. The executive
find out the buyer's reaction in buying the product and considers that the needs of the
customers are satisfying or not.
 New trade theory: This is the theory which represent that the existence of scale create
the large firms that are more efficient than small firms. The industry is consisted of the
monopoly and the few large firms where imperfect competition is exist. This theory
defines that there is perfect competition in the market where all the income is paid to the
owner. Therefore, the companies engage in the international business to make favourable
economies of scale which help in breaking down the perfect competition and crest more
efficient firms that can be able to expand its business.
 Heckscher- Ohlin theory: This is the theory which help the organisation in expanding
their business where emphasis is given on the export of the goods that require factor of
production. An organisation import the goods that the nation is not able to produce
effectively(Amankwah-Amoah, Khan, and Osabutey, 2021). Therefore, the organization
export the material and resources which it has in access to the other organisation for
making the products which it needs.
Entry strategies for international market
The organisation think about the number of the suitable market for expansion of the
business so that its product can work in the market. The strategies are adopted by the
organisation by analysing the marketing environment. The strategies are described as under:
 Licensing: This is an strategy that can be adopted by a business concern in order to
expand its business internationally. In this strategy an organisation can transfer the right
to use its brand name, trademark and patented technology or sell the products to the
another company. A business concern can choose this method when the products of the
company is in demand in the market then the company plans to license the product which
can crate the larger market. It can help in generating the revenues through the royalties
and able to gain the expertise and skills of the licensee. This help the administration in
increasing the brand awareness and utilise the capabilities of the other organisation.
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 Joint venture: The company also create the joint venture with the other company in
order to enter into the international market for selling and providing their products and
services(Happ, Schnitzer, and Peters, 2021.). This assists the organisation in minimising
the risk to enter in the international market which provide higher potential to get more
revenue from the business. The organisation are able to share expense, technological
know-how or expertise and the staff as well with the other organisation. This enable the
organisation to enter into the new market and create distribution network and also allow
to use the intellectual property rights. The company is able to access the greater resources
such as technology and finance which help a business concern in setting up the business
in international market.
 Franchising: This is a chain retail strategy where the organisation pays for the right top
manage the branches of the company on the behalf of the company. In franchising
business, it is necessary to have a strong brand recognition so that the consumers get
attracted towards the products of an organisation(SHAHINPOUR, and KARABULUT,
2021). This help the organisation in making the profits and increasing the customers base
through taking an indirect management approach. With the help of the franchise business,
the company is able to purchase the inputs at the discount prices when buying in bulk
which help in reducing the cost of operation of the business.
 Outsourcing: In this business strategy for entering into the international market, The
Local Chelsea cafe can hire the another business concern in order to manage certain
aspect of the operations of the business. It makes an agreement with the other
organization so that the international product sell can be handled by the company. It help
the business to improve the focus on the activities of the business. It increase the
efficiency of the business operations by providing the productive and efficient services
and control the cost of the business operations. This enable the company to gain the
competitive advantage by outsourcing their business.
 Company ownership: The company can expand the business by purchasing an existing
company in the country in which an organisation want to carry out their business
operations. By owing an organisation in the international market, it provides credibility to
the local business of the company. The company can also get the learning opportunity
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and personal freedom by using skills and knowledge. This make the business able to
work directly with the customers and make the business successful.
Barriers faced by organisation while expanding business internationally.
There are various barrier which are faced by the organisation in expanding the business
internationally. In relation to The Local Chelsea cafe, the barrier are depicted as under:
 Foreign rules and regulations: While expanding the business to the local market the
company have to face the barrier of the foreign laws as each country has its own rules and
regulations which can restrict the business to run successful. Therefore, an organisation
have to make good relation with the government by understanding and following the laws
of that country and also there is potential tariffs and legal cost to enter into the new
market which can hinder the business of the company.
 Language barriers: This is another barrier which is faced by a business concern as the
native language of each country is different. Therefore, the company is requited to aware
with the language which is spoken in that particular country before entering into the
international market(Jell-Ojobor, Alon, and Windsperger, 2022). It is required to hire the
interpreter so that a consultation can be done easily with the native speaker. This enable
the company to run their business smoothly and also prepare the team well.
 Cultural differences: Each country has different culture and blend of cultures due to
which the company fail to adapt global business model with the local market and not able
to identify the regional and subculture difference. This is because there is significant
regional variation in the taste or preferences of the customers. This also create obstacle
in understanding the practices of the local business and not able to adapt the management
practices across culture. Due to the difference in culture, a business concern is unable to
find the new opportunities to develop the market.
 Managing global team: The another barriers is managing employees in international
business because of the language barrier, cultural differences, time zones dan varieties of
technology(Solesvik, 2022). Therefore, an organisation is required to build and maintain
a strong relationship with the team to facilitates the regular check in. It should interact
with the team by using the video conferencing platform.
 Currency exchange and inflation rates: This is another problem that are faced by the
organization as the value of the dollar is not always the same amount in the another
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country's currency. Therefore, it is needed by a business concern to0 make itself aware
with the exchange rates between the own country and the country in which it is planing to
expand the business. The exchange rated is considered the relative value between the
nations. It is also necessary to monitor the inflation rate which appear as increment in the
general prices which van impact the labour and material cost and the prices of the
products as well.
Critically evaluate a relevant implementation approach for the internationalisation process for the
specified target market.
The Local Chelsea cafe can implement approach for the internationalisation process for
the specified target market which are described as under:
 Objective for international sales: The organisation create the objective for the
international sale or expansion of the business. When the company needs to increase its
sales and profit so it thinks of enhancing the business by reducing the risk through
diversification which assist the business to run constantly(Adel, and et.al.,2022).
However it must take into account the risk on the financial point so that it can deploy its
business in the new market.
 Selection criteria for target market: A business concern need to identify the market in
which it wants to expand its business and identify the economic growth from the GDP of
that country. It can also measure the purchasing power of the per capita and the exchange
rates as well. Then the target market is determined by the company by analysing the
preferences of the customers so that it can bring product according to their taste.
 Market evaluation: An organisation make the market evaluation in order to identify the
factors which can impact the business of the organisation. The factors may include the
political, social, technological, economical and so on that can widely impact the
business. It also identify the language, geographical distance, size of the market and so
on. This provides an organisation a fine perspective to set up their business in the
international market.
 Competitive advantage: The organisation is also analyse the competition prevailing in
the market which can impact the business of the company. Therefore, the company uses
various models in order to identify the competitors which can provide higher competition
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to the company by encouraging the customers to switch for their products. This can
reduce the profitability and sales of the organisation.
 International strategy: The organisation should adopt the international strategy by
collaborating with the other companies in order to take the competitive advantage. The
partners have a good understanding of the market in which they operate their business
that help the organisation in setup business abroad. The company should also adopt the
differentiation strategy so that it can provide products to the customers at the reasonable
prices. This can provides the good profitability and also increase the customers base
which leads to the increase in sales.
Conclusion
From the above discussion, it has been concluded that the organisation make expansion
of their business in order to increase the profit and the customers base. This help the organisation
in increasing the revenue and sales as well. The report has discussed the country to expand the
market which is Switzerland to increase the profit, access new talent and create favourable
economies of scale and gain the competitive advantage. Further the report has discussed the
theories such as absolute advantage, comparative advantage, new trade, international product life
cycle etc. and strategies such as licensing, joint venture, franchising etc. to make business
expansion. Moreover, it has discussed the the berries such as foreign rules and regulations,
cultural differences, language barriers, managing global team etc. which create hindrances in
expanding the business internationally. Apart from this, the report has discussed the approaches
for internationalisation the process such as objective for international sale market analysis and so
on to successfully run the business.
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References
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Casson, M., 2021. International business policy in an age of political turbulence. Journal of
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Happ, E., Schnitzer, M. and Peters, M., 2021. Sport-specific factors affecting location decisions
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