Poundland's Expansion into Canada: A Business Report

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Business Organisation and Environment
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Table of Contents
Introduction......................................................................................................................................3
Background information on Poundland...........................................................................................4
Background Information on Business Scenario..............................................................................5
Analysis of the Business Scenario...................................................................................................7
Conclusion.....................................................................................................................................14
Reference List................................................................................................................................15
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Introduction
The organisations need to make effective plan for their business expansion to reach their
business goals and objectives. In order to enter in a new country the companies can take
participation in joint venture strategy, management and technology transfer. This study will
highlight the background information of Poundland along with the business environment related
information regarding Canada. The company is currently operating in British market and
planning to enter in Canada.
The selected company will explore foreign direct investment opportunity whiles entering in
Canada. PESTLE model will be applied here in order to identify the external factors affecting the
business expansion of Poundland. In addition to this, porters’ five forces model will be used here
to analyse the competitive environment in case of Poundland. The Demand and Supply scheme
will also be discussed here to understand the demand o the retail products in Canadian market.
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Background information on Poundland
Poundland is a variety store chain in the UK. It commenced its business in the year 1990, selling
a variety of products at the cost of £1. The estimated customers of Poundland was 7 million
customers every week, most of which comprised of the female population. Poundland held its
stores in 896 different locations with its headquarter in Willenhall, West Midlands, UK.
Poundland turned revenue of £1.31 billion in the year 2016, with a net income of £12 million and
the employee holding of about 18,000. Poundland maintained the price of its product at £1 for 26
years. In 2015, it acquired 99p stores, after which the value of its shares dropped drastically.
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Background Information on Business Scenario
The business environment of Canada in relation to its economic policies is in a free state. The
freedom of labour, integrity of the government and the fiscal health policies have been
continuously increasing in Canada. The government of Canada has supported the diversification
of trade, promotion of exports and the growth of small domestic industries in the country. It has
grown the fiscal policies of the country and the investments in business. The economic
competitiveness of Canada has been maintained by the presence of strong institutional
foundations of open-market system and high degree of efficient regulations. Further, the inflation
rate in Canada is contained through monetary tightening, gradually.
The business culture in Canada is very different from other parts of the world. The people in
Canada are polite and respectful with the aim of achieving peacefulness for their existence. The
business communication is succinct and direct without codes or hidden meanings of mockery.
The official languages in Canada are English and French. Quebec, a province in Canada, requires
French as a mandatory language for many commercial and business endeavors. The business
culture in Canada varies in different areas (Poff, 2015). The right to say and be heard is well
maintained in Canada and listening to everyone’s opinion, irrespective of their status, is a general
practice in Canada.
The political system of Canada is democratic with a parliamentary structure along with the
coexistence of constitutional monarchy. The head of the country is Queen Elizabeth II with the
Governor General, being her representative. Canada enjoys political stability and has a very low
crime rate. The policing services in Canada are trustworthy and it is an excellent place for
tourism and business. Thus, the lenient political policies of the government and its support in the
growth of the business make Canada an ideal place for business undertakings (Canada.ca, 2019).
The legal ambience of Canada in order to make business in the country is in a stable sate. The
norms associated with proper business establishment are a necessary factor to be considered. It is
often seen that, different organisation face issues related with the norms and the acts that are
there. The business management protocol of the country is in a state where the federal and
provincial government of the country influence the business. It is also seen that the Canada
Business Corporations Act (R.S.C., 1985, c. C-44), which gives a proper guideline for the
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business establishment and managing the entire prospects of business heavily influences the
business management process (Laws-lois.justice.gc.ca, 2019). This is a major factor to consider
and by the organisation Poundland to ensure a seamless development in the segment. The British
company needs to follow its own country protocols and Canadian protocols to ensure a proficient
business.
From the context of economic freedom the country Canada has 8th ranking in the world. It is seen
that the trade freedom, investment freedom, financial freedom and business freedom is
significantly higher than expected. This is a major factor to consider in order to have a business
in the country. With the score of 77.7 Canada has reached a good place in the market. This is a
major factor to be considered and it is performing in a significant manner as well. The country
has a economic growth of 3.0% which is a significantly higher aspect to consider (Heritage.org,
2019). the management of the company Poundland should think of investing in the country but
for that they should be prepared a for a diversified demand in different parts of the country.
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Analysis of the Business Scenario
There are large business opportunities in Canada with a number of factors supporting the
environment of business. The detailed analysis can be made using different analytical
frameworks to identify the opportunities for the expansion of business in Canada.
PESTEL analysis
Political factors:
The political structure of Canada is parliamentary with a democratic form of government. It
coexists with the constitutional monarchy with Queen Elizabeth as the head of the state and the
Governor General as her representative. The government owns 89% of the land in Canada.
However, the government supports the establishment of new businesses and the expansion of the
existing ones. There is political stability in the country and the entire region is free of conflicts.
The rate of crime is also marginally low. Canada is an ideal place for business with minimal
political complications hampering the growth of business. Thus, Poundland can grab an ideal
opportunity for the expansion of its business in Canada.
Economic factors: A mixed and highly developed economy exits in Canada. Both the
government and the public make the economic choices of the country. Canada holds free trade
agreement with many countries including America, Mexico and the European Union (Nevitte,
2017). This will benefit Poundland to expand its business and trade with the countries in
agreement with Canada. The GDP of Canada is about $1.8 trillion with a growth rate of 1.7%.
The forecasted rise in the next year’s growth rate in GDP is up to 2% (tradingeconomics.com,
2019).
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Figure 1: GDP of Canada
(Source: tradingeconomics.com, 2019)
Canada holds a dynamic and strong economy, excellent infrastructure, entrepreneurial and
diverse people and efficient banking systems.
1 2
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2018
1.9
2019
1.8
Figure 2: inflation rate in Canada
(Source: Created by Learner)
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The inflation rate in Canada is very low with 1.9% in 2018 and 1.8% in 2019 due to stringent
monetary regulations. Therefore, the economic factors prevailing in the country provides a wide
opportunity for the expansion of Poundland in Canada.
Social factors: Canada has a very large area within its boundaries. There was a big shortage of
efficient skilled workers in Canada. The businesses suffered from lack of appropriate workers to
carry out the relevant activities of the business. However, over the decades the population in
Canada has been increasingly growing.
1 2
0
500
1000
1500
2000
2500
3000
3500
4000
4500
2018
37.1
2019
37.41
Figure 3: Population of Canada
(Source: Created by Learner)
The population of Canada in 2018 was 37.1 million which increased to 37.41 million in 2019.
The government has provided development opportunities to the citizens and the immigration
system has been made flexible. This has led to the inflow of many skilled people from all over
the world to meet the business requirements in Canada. Thus, in the recent times, Poundland can
effectively expand its business inm Canada without facing the shortage of workers.
Technological factors: Technology is growing rapidly in Canada. A large part of the population
uses technology for business, educational, career and leisure purposes. The private and
governmental bodies as well as the public are constantly investing in the growth of technology in
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the country. Moreover, the economic, social and political stability in the country has attracted the
attention of major IT professionals to expand their careers and grow their business in Canada.
Such developments and technological advancements would provide an opportunity to Poundland
to establish the base of their business in the Canadian region.
Environmental factors: Canada is leading the world in biotechnology, green building, pollution
control and waste management. There is a constantly maintained low rate of pollution in Canada
due to the existence of large areas of forests, mountains and efficient pollution control by the
government. The low pollution in Canada would help the expansion of Poundland as the already
low pollution would not force the government to set pollution targets on the company (Victor,
2017). The infrastructure of Canada is excellent. There are roads spread over 1,400,000
kilometers, railway tracks spread up to 72,093 kilometers, availability of commercial harbors and
ports and about 300 small and 10 international airports. This would provide an efficient means of
transportation to Poundland and would ease its functioning for pickup of raw materials and
delivery of goods (Gillingham et al., 2016).
Legal factors: The legal factors in Canada retain some rights for the employees and provide
them with some mandatory benefits. These benefits include the maximum working hours for the
employees, minimum wage rate to be provided, fixed holidays and dismissal policies. The
Canadian Human Rights Act restricts any individual from displaying discriminative behavior and
attitude causing harassment or offence to another. Stringent measures are taken to provide
security to the employees (Ries, 2017). Moreover, with the presence of such legal factors, the
people of Canada are free of conflicts. Poundland can safely expand its business in Canada
among the friendly and polite citizens and retain the employees through the benefits provided to
them.
Porter’s Five Forces
Competitive Rivalry (high)
There is a large presence of variety stores in Canada offering a variety of products at nearly
similar prices. Since the price of the goods is already low, high investments on promotional
activities would hamper the profits of the organization. Thus, the remaining option to increase
the sale is product differentiation (cbc.ca, 2019). There is stiff competition in this industry in
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Canada. Therefore, Poundland must develop strategic planning and efficient research activities to
survive in the Canadian retail market and try to beat the existing competition.
Buyer power (low)
The population of Canada has been intensely rising over the years. In addition, the diversity of
the population is large to influence the suppliers in lowering the price. The price of the goods is
kept very low to attract a large number of consumers. In this case, it is nearly impossible for the
buyer to influence the price of the product because of the existence of least possible prices to
achieve a commodity. Further, the lowering of prices may intensely hamper the profits of the
suppliers. Therefore, Poundland can expand its business in Canada without being affected by the
fluctuation of prices in the products.
Supplier power (low)
The availability of variety stores in Canada is large. There is another competition going on
among the businesspersons to acquire the limited remaining space to establish a business. The
competition among the suppliers is stiff and each of them desires to attract as many consumers as
possible. In this scenario, the power in the hands of the supplier to influence the price is very
low. Thus, each supplier needs to stick with the price and if possible reduce it, but raising it is far
from an option. Therefore, Poundland, while expanding its business in Canada must adopt the
pricing strategies very carefully.
Threat of Substitution (moderate)
The variety stores in Canada provide a wide variety of products. Even though the products are
similar, they are offered to the consumers differently. This makes the proper substitution of the
product nearly non-existent. However, the consumers might settle for the available products to
save time or travelling distance. Therefore, the threat of substitution in case of variety stores is
moderate and might or might not affect the sales of the company. Thus, Poundland must
emphasize on making its product different from the rest of the suppliers in order to avoid the
threat of substitution of its product (Chen, 2019).
Threat of New Entry (high)
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The threat of entry of new companies is quite high in case of retail stores. This is due to the low
cost involved in the functioning of the business. The capital costs in setting the business are also
moderate. A small variety store can easily establish and compete against the existing stores based
on location, specialty and convenience. A brand with large financial resources can easily give
tough competition in the market. Thus, Poundland can easily expand its business in Canada but
needs to be careful about the entrance of other players in the market.
Demand and Supply Scheme
The demand of retail organisation in Canadian provenance has gone up and it is seen that the
business management and modification process of the foreign organisations has reached the
heights. From 1975 the demand in the market has gone up and it is seen that the issues associated
with proper kind of business process management has raised as well. This is a major factor to
consider and it is witnessed that the rise has not been stumbled in any of the phase of
development.
Figure 4: market Share of Foreign Retailers in Canada
(Source: Ic.gc.ca, 2019)
It can be stated that the development of the foreign investors is high and from the economic
prospect the chances of serving in a place like Canada is high because the economy is boosting
in a proficient manner (Ic.gc.ca, 2019). This statistics ensures that the possibility of having a
high financial return in higher and the demand in the market is high too. The supply chains have
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