National Floorcoverings Ltd.: Business Expansion & PESTEL Analysis

This report provides a comprehensive analysis of the business environment for National Floorcoverings Ltd., a UK-based manufacturer of fibre carpets and sports surfaces, as it considers expanding its operations into Germany. The report utilizes a PESTEL analysis to evaluate the political, economic, social, technological, environmental, and legal factors that could impact the company's success in the German market. Key considerations include Germany's stable political landscape, robust economy, skilled workforce, advanced technological infrastructure, and unique cultural factors. The report also explores the implications of these factors for National Floorcoverings Ltd.'s expansion strategy and offers recommendations for navigating the challenges and opportunities presented by the German business environment. Desklib is a platform where students can find similar solved assignments and past papers.

Aspects of the Business
Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
COMPANY OUTLINE...................................................................................................................1
ASPECT OF BUSINESS ENVIRONMENT..................................................................................1
EXPANSION OF BUSINESSES....................................................................................................6
RECOMMENDATIONS.................................................................................................................7
CONCLUSION................................................................................................................................8
References:.......................................................................................................................................9

INTRODUCTION
Sum total of all those activities which influence the business operations are defined as the
business environment. It plays an important role in the success of any business. While any
business organisation performing the operations in any country, they should firstly analyse the
environment and then make any decision. Below mentioned report is based on National
Floorcoverings Ltd. which is a producer of fibre carpets, indoor and outdoor sports surfaces. The
purpose of making this report is to analyse the business environment when the company is
expanding their business from United Kingdom to EU country i.e. Germany. This report also
deal with the mode of expansion chosen by the National Floorcoverings Ltd.
COMPANY OUTLINE
National Floorcoverings Ltd. is a small manufacturing company which is located in
Liversedge, United Kingdom doing production of fabric carpets along with the indoor and
outdoor sports surfaces. From a recent report it is found that there are 126 employees are
working in this organisation and the revenue is they generate is $28.41 million (USD). The
organisation wants to earn high profit by covering more customers, they decide to expand their
business operations in Germany.
The management of National Floorcoverings Ltd. Select Germany for the expansion of
their business operations because they have prosperous economy (Rico and et. al., 2020). It
means that the Germany is the largest economy in Europe. Along with this, it is also analysed
that the Germany has the highest GDP. It means that Germany is the largest consumer market in
the entire Europe. This country touches the boundaries of nine countries which include Poland,
The Czech Republic, Switzerland, Austria, France, Luxembourg, Belgium, The Netherlands and
Denmark. Hence it is the best location for the shows related to the trade. Germany country is
well known because of higher reputation in innovation and productivity, it implies that their
workforce is highly skilled which always implies positive impact on the business.
ASPECT OF BUSINESS ENVIRONMENT
It is found as essential to know about the factors of business environment which implies
affect on the business operations (Pedi 2021). PESTEL analysis is a marketing tool which is used
by the companies for the purpose of doing evaluation of external factors of a business
organisation. National Floorcoverings Ltd. is working in UK and now they want to start their
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business operations in Germany. The external factors get different from country to country,
which is a huge challenge for the organisation to adopt all the changes. Below mentioned is the
detailed discussion on all the aspects of business environment:
 Political Factors: These factors has vital role in knowing about the factors which can
impact the profitability of National Floorcoverings Ltd. in a specific market or country.
They are performing business operations in more than 130 countries and expose
themselves. Germany is a democratic republic country. This organisation can take the
advantage of stability of politic. Bureaucracy bring various changes in the operations of
business organisation in United Kingdom. Expansion of business in the Germany will
remove all these changes and give a stable working environment which implies
generation of higher revenue.
Taxation policy is the another political factor which is beneficial for National
Floorcoverings Ltd. as the organisation have to pay higher taxes while they are working
in the United Kingdom but if they expand their business in Germany, it will result in
earning higher profit because of less tax rates. The organisation will pay less amount of
tax (Mann 2020). Along with this, wage legislation of both the countries are different. It
is found that the organisation have to less wages to the workforce of Germany because
of their wage legislation.
Rules and regulations regarding the pricing of products in UK and Germany are
different. The pricing strategy of Germany is much beneficial for the organisation as it
will help them in charging high prices from their customers.
National Floorcoverings Ltd. will also get the benefit of trade regulation. They
can do the business globally without paying any extra charges and fees. Basically, the
political stability of Germany attract the National Floorcoverings Ltd. to start the
business operations there. There is less availability of risk of military invasion. It can be
consider as the another political factor which implies benefit to the organisation. The
government of Germany provide various benefits regarding the contract enforcement.
The organisation will also get the benefit of several anti trust laws which are developed
by the government of Germany. The workforce of Germany can work more hours in a
week as compared to the labour of United Kingdom.
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 Economic Factor: It include several macro factors which include savings rates, foreign
exchange rate, interest rate, inflation rate and many more. According to the economic
cycle of the country, aggregate demand and investment have been analysed (Li and et. al.,
2020). National Floorcoverings Ltd. can use the economic factor of Germany such as
inflation and growth rate, which gives the idea of purchasing power of the people living
in Germany. The manufacturing of carpets and surfaces comes under the secondary
sector and it has been found that the secondary sector of economy of Germany is stable
which is a positive factor for the organisation. The exchange rate and stability of the
currency of Germany is high as compare to the country of United Kingdom.
In the market of Germany, National Floorcoverings Ltd. can easily raise the capital
in local market. If they start business in Germany, they will also get the competitive
benefit of host country and industrial goods sector. Germany is found as a advance
country as they have lots of new technologies, so it will become easy to do the
manufacturing of carpets which result in the reduction in labour cost and increase in the
productivity in the economy (Kim and et. al., 2020). The economic growth rate of
Germany is also going higher day by day which result in higher inflation rate. It leads to
the generation of higher revenue by doing the production of sports surface and selling
them to the customers of Germany. This country is found as the 4th largest economy in
the world having the GDP of $4.2 trillion in 2019. The unemployment rate of Germany is
the lowest in the entire world which state that the people of Germany are spending high
amount on purchasing the products and services. It means that the demand of carpets and
sports surface will be high there.
In addition to this, the people who are working in the Germany have to pay less
taxes as the income tax for employees is very less i.e. 5.5% which result in having less
deduction in salaries and growth of economy as a whole. If the National Floorcoverings
Ltd. work in Germany, they will be the part of the country of higher economy.
 Social Factor: The culture of society implies the manner of performing the activities
which affect the business operations. Attitudes and beliefs of people living in society
affect the organisation a lot. It has been found that the skills level of the people of
Germany is very high as compared to the people living in United Kingdom. Along with
this, Germany is known as the best country to do the business in the world as the people
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living there are wealthy, healthy, educated and they are living a quality life. It may leads
to the generation of higher revenue and higher demand of carpets and surfaces. Germany
is consider as the second most popular country of Europe as it has population of almost
82 million. The class, power and hierarchy structure of society of Germany is also
suitable for the National Floorcoverings Ltd. The people of Germany are living a life of
standard which state that they will rise the demand of quality product (Fraser 2019).
National Floorcoverings Ltd. is a manufacturer of high quality of carpets. Generally the
people of normal living do not arise the demand of such products. Higher the demand of
these products have been made by the people who are living their life with a specific
standard.
Furthermore, Germany is found as the best in several sports which include golf,
hockey, tennis, skiing, ice hockey, football and many more. Hence they have a
requirement of sports surface more as the availability of more sports academy. Majorly
highly expensive lifestyle of people of Germany result in higher demand of carpets and
surfaces. On the other hand, it is found that the people living in Germany are ready to
spend more amount in order to get the the best quality product and National
Floorcoverings Ltd. is doing manufacturing of carpets and floor surface of good quality.
 Technological Factors: Change in the technology in all industries is the highly
influencing factor of a business organisation. Transportation of products can be traken as
example. In manufacturing industry, the materials can be transported to anywhere in the
short duration of time. Introduction of new technologies not only make the work simple
but it also save the time. Slow speed of working always consume time and this factor
have been removed with the introduction of advancement of technology. Recently
development in technology in the organisations of competitors of National
Floorcoverings Ltd. is an technological factor for the organisation. Germany is the
country which is found as advance in technology as it is the 5th best technological
advance country in the world (Egea 2019). The people of Germany are found to be
innovative as they are highly skilled as compared to the people of United Kingdom.
Various of leaders of medicine market, scientific research, engineering, designing,
technological market are found in the Germany. If National Floorcoverings Ltd. start
their business operations in Germany, they will get to know about several new
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technology which they can use in the process of production of carpets and floor surfaces.
They can also improve the style of their designing which result in higher attraction of
customers towards their product (Rose 2021). Along with this, it is also helpful in
decreasing the cost of production as it remove the costing of labour. It result in
increasing the revenue and profit of organisation.
The government of Germany has spend a lot ODF amount on the research of
Artificial Intelligence. The objective of this research is to introduce various new aspects
of technology in the working culture of organisation in order to making the production
process more easier. It also leads to the removal of gap of software led innovation
among the Germany and other American & Asian giants.
 Environmental Factors: The norms of each and every market is different which implies
effect on the profitability of a business organisation. Environmental and liability laws of
each and every country are also different. It is necessary for National Floorcoverings Ltd.
to analyse and evaluate the environmental standards which are essential in performing the
business operations in the specific market. Tourism industry is the major industry in
Germany which contribute around 4.5% to the national GDP. It is found that the world's
top tourist destinations in the world is Germany (Drobyazko and et. al., 2019). It is the
positive factor for National Floorcoverings Ltd. as they can design their carpets which
will attract the tourists towards their products. The culture, history, festivals, mountains,
fairs of Germany are very unique. By starting business operations in Germany, the
management get to know about these unique aspects. It also provide the ideas to design
such culture and history on carpets, so that the tourist can attract towards their product. It
result in the generation of higher revenue.
Along with this, it is also found that the Germany is very attractive place to visit,
it result in facing various enormous environmental changes. The government of
Germany is taking various steps in order to improving various environmental challenges
which include water pollution, air pollution, acid rain and many more. They had strictly
made several rules under which the people of country Germany stop burning the coals
for the purpose of doing production of electricity. There are various rules and
regulations of government of Germany which will support the organisation to support
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the renewable energy. National Floorcoverings Ltd. will recycle the products in order to
producing and saving the energy.
 Legal Factors: When an organisation perform operations they have to follow various
rules and regulations made by government. National Floorcoverings Ltd. should analyse
the complete laws before entering in the market of Germany. It has been found that the
government of Germany promotes the establishment of new companies as it leads to the
development of country and their people (de Sousa Jabbour and et. al., 2020). If the
National Floorcoverings Ltd. start their business operations in Germany, the organisation
will get several support from the government with the help of different laws which
include employment law, health and safety law, consumer protection act, data protection
and many more.
Along with protecting the rights of consumer, the government also support the
employer as well by protecting their data and helping them in providing capital under
various laws which are applicable in Germany. They also issued health and safety law
under the government also take care the people who are working in their country. By the
use of copyright, patents or intellectual property law, the government ensures the rights
of employer and protect them from several harmful factors.
EXPANSION OF BUSINESSES
There are various international expansion entry modes which can be accepted by the
organisation who wants to expand their business operations internationally. Each and every
mode of entry has their own advantage and disadvantage (de Kerviler and et. al., 2019). It is the
responsibility of management to make choice of the best method which is suitable for the
strategies and goals of the organisation. Some of modes of expansion are given below: Exporting: It is the best and the easiest mode of expansion of businesses. Hence it has
been found that most of organisation start their international expansion by selecting this
mode of entry. It can be defined as the process of selling goods and services in the
foreign countries which are collected from the home country. This source gives the huge
benefit to the organisations as it will save the expenses of establishing operations in a
new country.
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 Licensing and Franchising: Under this agreement, an overseas based business pay the
firm a royalty or commission fees for the purpose of using their brand name, trademarks,
products, manufacturing process and any other IPs (Rudner 2020). The licensee and
franchisee is responsible for all the losses and risks but share some part of revenue and
profit. This mode of expansion of business is useful for those companies who already
enjoying the loyalty of consumers in the complete market. This source include the
minimum cost of expansion. Along with this, it is a source of unresisting income with
less risk. On the other hand, the company takes a huge risk of their reputation and brand
image only because of their incompetences of their franchisees and licenses.
 Partnerships and strategic Alliances: It involves an agreement made among the two or
more business organisation under which they are ready to cooperate in a specific way for
a specific time period in order to achieve the common goal (Bartosik-Purgat and et. al.,
2020). It has been found that the local business organisations are more familiar with the
local culture and market. They can do partnership with the business having reputable
brand image in the country or they have good relationship with their target customers.
Strategic alliance is beneficial for the small business organisations as they do not have
sufficient amount of capital to expand the business or to enter in a new market.
RECOMMENDATIONS
Above mentioned section is showing various methods of expanding the business
operations internationally. National Floorcoverings Ltd. is recommanded to adopt either
Exporting sources for the purpose of expanding their business operations in Germany. They also
have option of Licensing and Franchising (Santoro and et. al., 2020). But it is a small company
and people are not aware about the brand, so it is not beneficial for the organisation to do
licensing and franchising. By analysing all the factors of expansion, exporting is found as the
best source of doing expansion. Sometimes, high competition in the local market leads to the
delay in receiving payment but in the case of exporting, National Floorcoverings Ltd. receive the
payment before exporting the products. It also leads to bringing the foreign currency in UK.
Along with this, government also provide several benefits and incentives to the exporter such as
rebate in service tax, VAT and many more. The prices of carpets and surfaces will be high in
Germany as compared to the UK market. It can be consider as the best reason why the
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organisation is suggested to use rthe source of exporting for the purpose of expansion of
business.
CONCLUSION
From the above report, it is concluded that the business operations get affected by the
factors which influence them internally or externally. If any business organisation is planning to
adopt any change in their functions, it is necessary for them to completely analyse the
environmental factors which can influence the business activities. For the same purpose, the
organisation perform PESTLE analysis. Expansion of business can be done in various ways. The
organisations select any source of expansion according to their comfortability. Furthermore, it is
analysed that National Floorcoverings Ltd. can easily expand their business in Germany as there
are lots of similarities in the business environment of UK and Germany so they can easily
cooperate with them. https://howandwhat.net/pestel-analysis-germany/
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