Octopus Energy: Globalization, Market Entry, and Business Strategy

This report examines the impact of globalization on Octopus Energy, an electricity generation company. It identifies challenges such as cultural differences and migration issues, while also exploring drivers of globalization that encourage international trade. The report compares the Indian and USA markets, suggesting the USA as a prime location for expansion. Licensing and franchising are recommended as suitable market entry strategies. The analysis covers opportunities related to globalization, international business decision-making, and patterns of internalization, providing practical solutions based on relevant theories and tools.

INTERNATIONAL BUSINESS
AND GLOBALIZATION

Indicative Summary
The presented report aims to identify the importance and impact of globalization on the
organization. It includes identifying various challenges faced by the organization such as cultural
differences and migration problems due to the process of globalization. It studies all the drivers
of globalization which encourages an organization to opt for international trade and
globalization. After considering all the necessary factors which helps the company in deciding
which country or location is best suited for conducting the operations of the company, the report
suggests the company to expand its market in USA. The presented report also suggests licensing
and franchising as the best suited market entry strategy for the company.
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Table of Contents
Indicative Summary.........................................................................................................................2
INTRODUCTION...........................................................................................................................4
MAIN BODY..................................................................................................................................4
Opportunities related to globalization, its importance and impact..............................................4
Drivers of Globalization, international business decision making and patterns of internalisation
.....................................................................................................................................................6
Comparison between Indian market and the market of USA......................................................8
Formulation of a range of alternative solutions to practical problems in planning for different
international markets.................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES................................................................................................................................1
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INTRODUCTION
International business and globalization refers to the business of selling goods, services,
knowledge, education, technology, automation, or any other product from one nation to another.
Globalization helps in the economic growth and development of a country and provides and
enhances the opportunities for any business to flourish. This report is based on the case study of
Octopus Energy. It is an electricity generation company headquartered in London, UK. The
report is going to cover the opportunities related to globalization for the company and will study
its importance and impact. It will critically analyse the international market entry strategies for
the company to expand globally. Moreover, the project will create awareness about the
international market drivers and will evaluate the pattern of internationalisation undertaken by
the international business. under this study, there will be formulation of practical solutions on the
basis of applicable theories, knowledge and the required tools.
MAIN BODY
Opportunities related to globalization, its importance and impact
International trade and globalization is an essential requirement for growing businesses in
order to increase its market size, market share and customer base. Similarly, it plays a vital role
in the expansion of the company Octopus Energy and availing its products i.e., electricity and
natural gas generation worldwide.
Reach to new markets
The main advantage the Octopus Energy could have from the globalization is the reach to
new markets. Globalization helps the company to reach to global markets, enhance their
customer base, improves their productivity through expansion, and building a brand globally.
Trade in international market will help the company to enjoy the advantage of liberal trade
norms in few countries and increase the profitability (Mwika, and et.al 2018). One negative
impact of globalization that the Octopus Energy could face due to the globalization could be the
restrictions and trade barriers existing in the countries like USA, Australia, Costa Rica, and many
more. This will force the company to increase their product prices in order to enter into new
markets due to high taxes on imports.
Improves the capacity to innovate
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New markets create new opportunities for businesses to operate and innovate. As the
market reach of the Octopus Energy will expand, it will open different doors of opportunities for
the company. Each country has its own importance which might benefit the company in bringing
innovation in its products and improve the level of customer satisfaction. Countries such as
Norway, Sweden, and Denmark have topped the list of countries on the basis of their energy
generation (Tursinbekovich, Reyimbaevich, and Tayirovna, 2021, May). The Octopus Energy
should choose developing countries which face troubles in the electricity generation in order
create an impact on the minds of the public and gain profit. But the expansion of the company in
developing countries might create difficulties in finding proper resources for the business to
operate.
Diversity of talent
Globalization and expansion of business develops the opportunity to access diverse talent
from different countries and regions in the world. Globalization will increase the talent
acquisition in the Octopus Energy. With the help of globalization, the company will be able to
reach candidates with different skillsets which can help the company in bringing one step closer
to achieve the organizational objective (Szuper, 2020). Every employee will be able to contribute
to the profitability of the company in its own way and perspective. This will create employment
opportunities in the developing countries and provide low cost resources to rich countries.
Sharing of knowledge, technology and culture
International trade and globalization has made it possible for companies to share their
ideas, knowledge, technology, culture and other factors across the globe. Similarly, it will create
an opportunity for the Octopus Energy to share and offer its products, technology, culture, ideas
all over the world. It will help the company in getting new ideas from different countries and
work on themselves in order to get better ( Fossats-Vasselin, and Mayrhofer, 2018). Though,
globalization allows companies in gaining new ideas but the companies needs to be aware and
should not copy the ideas and products of the companies as it is or else will face consequences in
future.
Mergers
The company Octopus Energy has the opportunity to target a particular country and a
market by way of cross border mergers. With the help of cross border merger, the company can
reach the markets and customers of other countries by way of collaborating with them and
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without having to invest much. It will reduce the cost of operation of the company in that
specific nation as the collaborating company will be knowing the sources from where the
company can find and access cheap resources (Segal, 2019). The negative impact of cross border
merger in case of the Octopus Energy can be related to the complicated tax structures, restricted
legal structures existing the target countries which might create difficulty for the successful
operation of the merger.
Lower cost of production
The global expansion of the Octopus Energy helps the company in lowering its cost of
production. Many countries have access to cheap resources that can be used in the process of
production. This helps the company in reducing its cost of production and increase the profit
margin of the company. It might help the company in gaining economies of scale. Similarly, the
shareholders of the company will be benefitted as increased profits leads to increased dividends.
Many large organizations opting for globalization have influence on suppliers as well as the
government. They might force suppliers to provide the products to them at excessively lower
prices and put pressure on the government to lower tax rates specifically for them. They might
gain advantage of these reduced prices and increase their sales but this affects the existence of
small and growing businesses as they cannot reduce their product price below a certain level.
This creates a threat of cut throat competition in the market (Natal, and Stoffels, 2019 ). Such
influential behaviour of the multi-national companies affects the profitability and employability
of the small organizations. Because of low profits, the wages of employees might get reduced
which in turn might lead to employees leaving the company.
Drivers of Globalization, international business decision making and patterns of internalisation
Drivers of globalization refers to the factors that encourage a business to proceed with
expansion globally. Factors which can be considered as the drivers of globalization for the
Octopus Energy have been explained below:
Lower trade barriers
As the company the Scottish Power is planning to go for globalization, it is necessary for
the company to consider all those countries which have lower trade barriers in order to extend its
market reach across the globe. Lower trade barriers refer to reduction in the tax rate applicable
on imports under a particular country. Low trade tariffs and reduction in tax rates helps a
company to reduce their product prices and increase the profit by increasing the sales
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(Boiarchuk, Fomishyna, and Ohorodnyk, 2019). Lower trade barriers can be found helpful in
making effective international business decisions as they serve the growing companies with ease.
Many business organization follows the geographical pattern of globalization that means they
consider examining the geographical factors in order to trade globally.
Low cost of communication
One factor that can drive growing organizations such as Octopus Energy towards the
International trade is the lowered cost of communication all over the world. Recently, with the
help of technological advancement, it has become easy for companies as well as general public
to communicate from one nation to another. It has brought efficiency in operations of the
company as it can easily communicate with its other branches all over the world regarding any
issue arising in the company (Erixon, 2018). This makes it easier for the company to take
international business decisions. Many Multinational companies try to analyse the countries on
the basis of their attitudes and cultural beliefs for the purpose of conducting international trade. It
helps them to gain an understanding if the operations of the company will succeed in a particular
place or not.
Advancement of information and communication technology
In today’s times, not only communicating over phone calls has become easy but the ways
in which we can communicate across nations and pass on the information has also become easy.
The evolution of internet has brought various apps such as zoom, skype, Facebook, WhatsApp,
Instagram, through which the companies such as the Octopus Energy can communicate cross
borders easily. Apps like zoom and skype allows the company to pass on information through
video calls and helps in conducting online meetings which can be attended from anywhere in the
world (Minkov, and Kaasa, 2020). And social media apps such as Facebook, Instagram, twitter
allows the company to share any information globally and extend its reach. The technological
advancement, ease of communication and evolution of internet over years helps the companies
and provides them with ease to make international business decisions. Many large scale
organizations look for the availability of essential resources at cheap prices before proceeding
with expansion in a specific country. This helps them in reducing their cost of production and
increasing the profitability of the company.
Low cost of transportation
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The company Octopus Energy must consider the factor of low cost of transportation. The
lowered transportation cost is one of the major driver of globalization. It is as important as the
low trade barriers and trade taxes existing in a country. Before proceeding with the concept of
globalization, the company must examine the transportation cost of sending raw materials,
finished goods and other resources from one nation to another. If the cost of transportation is low
and affordable, the company should proceed but if the cost is too high, the company needs to
reconsider and decide whether it is profitable or not. If the cost of transportation is low, it will
become easy for the company to start with international operations and thus makes the process of
making international business decisions easy. Most of the organizations deciding to go for
globalization follow the pattern of financial capital (O’Rourke, 2019). That means, companies
first analyse whether it will be able to get sufficient amount of capital for the functioning of the
business in that specific nation or region or not.
Increase in potential consumer demand
Increase in the potential consumer demand can be considered as one of the leading
drivers of globalization. The Octopus Energy should consider the consumer demand of its
products in various countries and then choose the location in which the company should decide
to expand its operations. It is essential for a company to study the consumer demand as well as
the behaviour in order to forecast the future functioning of the company. A company should
always opt for the location in which there is a scope of consumer demand for its products
(Bauman, and Portera, 2021) . This helps international business decision of the company as the
profitability of the company is directly proportional to the consumer demand of a particular
product in a particular region. There are a number of international businesses which chose the
pattern of globalization on the basis of their relations with a particular country. It makes the
conduction of operations easy.
Comparison between Indian market and the market of USA
Income group
The first factor that needs to be considered while deciding the country for the purpose of
going global for electricity generation would be the income group of people. It is important to
examine the income group of people in both the markets in order to analyse which country would
beneficial for the expansion of Octopus Energy. It was recorded that the market of USA ranked
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1st in terms of revenue and India was rand 23rd all over the world. The revenue of USA was
recorded as $2.45 trillion which was 14 times more than the Indian Market.
Customer preference
For the purpose of expansion of Octopus Energy, it is important to understand the
consumer preference in the Indian market as well as the market of USA. This will help the
company in choosing a market which favourable for the purpose of electricity generation and
increasing the profit margin of the company. The consumers in the Indian market prefers the
consumption of electricity generated by the government owned bodies only. Whereas, the
consumers of USA are prefers using electricity generated by local bodies or private sector
companies.
Market size
The Octopus Energy needs to consider the market size of the market of USA as well as
the Indian market before proceeding to expand. Market size refers to the number of potential
buyers of a particular product within a market. As Octopus Energy is a private sector company,
the market size of USA market would be higher for its products as compared to the Indian
market. This is so, because the public of India prefers electricity generated from the government
owned authorities only.
From the above comparison, it can be stated that the Octopus Energy should proceed with
globalization in the USA market as it will gain more customers as well as profits from USA.
Analysis of market entry strategies
Market entry strategies refers to an organized distribution of products and services of a particular
company into the target market. Types of market entry strategies:
Licensing and franchising
Licensing and franchising are a form of market entry strategy used by various companies for the
purpose of expanding across the globe (Khan, 2018) . Licensing gives the rights to use, sell or
produce a product or service to another company. Licensing can be successful if the purchase of
the license has a large market share in the target market. And franchising allows a business to
operate under the franchisor’s name in exchange of a royalty.
Joint venture
Under joint venture, two companies come together in order to form completely new
company or to carry out a particular project under a specified time period.
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Recommendation
The Octopus Energy should opt for licensing and franchising as the market entry strategy
in order to access the market of USA. Licensing and Franchising will reduce the risk of losses for
the company and also the company will not have make any kind of investment in USA under
franchising and licensing. It will lower the company’s cost of production as well as
transportation overseas and enhance the profitability of the company.
Formulation of a range of alternative solutions to practical problems in planning for different
international markets
A number of challenges are faced by companies while opting for globalization. They are:
Migration of employees
When companies decide to opt for globalization, there is a need of people in the target
country in order properly the set up the business. As globalization takes places, employees are
migrated from one country to another. But employees find it hard to motivate themselves to shift
from one country to another. This takes places because various barriers faced by the employees
such as language barrier. For the purpose of motivating employees so that they happily migrate
to new places, the company should follow the Maslow’s hierarchy of needs. Maslow has divided
the needs of the people in three major heads namely, basic needs, Psychological needs and self-
fulfilment needs. According to this theory, the company should make sure that the basic needs
such as food, clothing, shelter and needs related to their safety will be met in the new country.
Further, the company should work on providing the employees with a prestigious position if they
are deciding to migrate them (Bozhkova, Yu, and Bozhkov,. 2019). It will motivate the
employees and give them a feeling of satisfaction. The satisfaction that their basic and
psychological needs are being met will further encourage them to work hard for their own
benefit and achieve their highest level of capability.
Cultural differences
Cultural differences refer to the differences in the ideas, beliefs, upbringing, social norms
and customs between people coming from different regions, countries, caste, and race. Cultural
difference is one challenge which the companies going for globalization face in the international
market. Every country has its own set of beliefs, rules, holidays, working hours and various other
factors leading to a cultural conflict and incoordination between the different branches of a
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company. In order to solve the problem of cultural difference, the company needs to apply the
Hofstede’s theory of cultural dimension. Under this theory, Hofstede used six categories to
identify the cultural dimensions of different countries. This theory will help the company in
order to identify the relationship between an individual and a group. It will help the company in
analysing the degree of inequality between peoples which can be considered normal. The truth
index of this theory can be used to analyse individuals coming from different cultural
backgrounds are coping with one another. This theory divides male and female into two heads
namely, femininity and masculinity (Fossats-Vasselin, and Mayrhofer, 2018). It states that
females are generally caring in nature and males are ambitious. All of these parameters can be
found helpful for the company in order to reduce the impact of cultural differences in the
organization.
CONCLUSION
From the above report, it can be stated that though globalization is an essential
requirement for a company as well as the economy and growth of a country, but it is not an easy
job to operate in the international market. Companies face various kinds of challenges due to
globalization such as language barriers, cultural differences, etc. Before proceeding with
expansion in the global market, it is necessary for a company to study and examine the
international market on the basis of geographical location, availability of cheap resources, market
size, consumer preference and the income group of the people. Choosing the right kind of
strategy of market entry is one of the most important task under the process of globalization. The
profitability and success of the company depends on this factor. Further, it can be stated that the
company needs to consider the drivers of globalization for the successful expansion. The drivers
of globalization include low cost of transportation, low trade barriers, low communication cost,
and advancement of technology and communication.
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REFERENCES
Books and journals
Bauman, Z., and Portera, A. (2021). Risks and challenges of globalization, interdependence and
cultural pluralism. In Education and Intercultural Identity (pp. 17-30). Routledge.
Boiarchuk, A. I., Fomishyna, V. N., and Ohorodnyk, R. P. (2019). PREDICTING PLAUSIBLE
THREATS: IMPACT OF GLOBALIZATION PATTERNS ON NATIONAL
ECONOMIES. Journal of Security & Sustainability Issues. 9(2).
Bozhkova, V., Yu, S., and Bozhkov, D. (2019). Influence of modern globalization challenges on
communication activities of business entities. Mind Journal. (7). 09-19.
Erixon, F. (2018). The economic benefits of globalization for business and consumers. European
Centre for International Political Economy.
Fossats-Vasselin, V., and Mayrhofer, U. (2018). Multinational enterprises and the challenges of
globalization. In Global Phenomena and Social Sciences (pp. 37-47). Springer, Cham.
Khan, H. A. (2018). Governance, public administration, and the challenges of globalization.
In Globalization and the Challenges of Public Administration (pp. 5-31). Palgrave
Macmillan, Cham.
Minkov, M., and Kaasa, A. (2020). A test of Hofstede's model of culture following his own
approach. Cross Cultural & Strategic Management.
Mwika, D., and et.al (2018). The impact of globalization on SMEs in emerging economies: A
case study of zambia. International Journal of Business and Social Science. 9(3). 59-68.
Natal, J. M., and Stoffels, N. (2019). Globalization, market power, and the natural interest rate.
International Monetary Fund.
O’Rourke, K. H. (2019). Economic history and contemporary challenges to globalization. The
Journal of Economic History. 79(2). 356-382.
Segal, U. A. (2019). Globalization, migration, and ethnicity. Public health. 172. 135-142.
Szuper, K. (2020). Globalization of modern economies. Przegląd Prawno-Ekonomiczny, (2), 85-
99.
Tursinbekovich, A. Q., Reyimbaevich, A. A., and Tayirovna, I. B. (2021, May). THE
IMPORTANCE OF EDUCATION IN THE PROCESS OF GLOBALIZATION.
In Archive of Conferences (Vol. 24, No. 1, pp. 24-26).
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