International Trade and SMEs: Opportunities and Challenges in the UK

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Trading Overseas/How to Start Up an
Exporting Business
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Contents
INTRODUCTION.........................................................................................................3
L01 ANALYSE THE OPPORTUNITIES AS WELL AS THREATS FOR THE FIRMS
THAT ARE EXPOSED TO THE ENHANCED GLOBALISED MARKET.....................4
INTRODUCTION TO THE CHOSEN COUNTRY....................................................4
AN ANALYSIS OF THE GLOBAL BUSINESS ENVIRONMENT AND THE
INFLUENCE OF KEY GLOBAL DRIVERS SPECIFICALLY IN RELATION TO THE
CHOSEN COUNTRY.............................................................................................. 4
ANALYSIS OF THE THREATS AND OPPORTUNITIES FACED BY SME.............5
LO2 ADVANTAGES OF THE TRADING BLOCS FOR FIRMS...................................7
DETERMINE AND ANALYSE THE ADVANTAGES OF THE INTERNATIONAL
TRADING BLOCS AS WELL AS AGREEMENTS...................................................7
TARIFFS AND NON-TARIFF BARRIERS IN THE INTERNATIONAL TRADING
ENVIRONMENT......................................................................................................8
EVALUATION AND IMPLICATION OF THE INTERNATIONAL TRADING BLOCS
AND AGREEMENTS FOR SME..............................................................................9
EVALUATE HOW SME ARE TAKING THE ADVANTAGE OF THE
INTERNATIONAL OPPORTUNITIES AND HOW THEY OVERCOME THE
BARRIERS............................................................................................................ 10
CONCLUSION.......................................................................................................... 11
REFERENCES..........................................................................................................12
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INTRODUCTION
In the current situation, every organisation and the working house are looking for the
opportunity so as to expand their business in the international market. With the
enhancement in digital technology along with the reduction in the barriers concerning
the entry, this has become very easy to do for the businesses and the corporate
houses, but before deciding on the international market expansion, business and
corporate houses must take into consideration all the available option so as to make
the rational choice. In this particular assignment, understanding of how the
organisations are able to take a step in the international markets, which also helps in
the assessment of the opportunities along with the threats that are certainly attached
with the decisions. In the first part of the assignment, the webpage is been
developed analysing the threats and opportunities concerning the firm which is
exposed to an enhanced global market. In the second part, the advantages of the
trading blocs for the firm is been studied. In the next part pdf brochure is been
prepared to determine the importing and exporting processes along with its
practicalities involved and also evaluation is ben done in which the SMEs tap into the
international market.
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L01 ANALYSE THE OPPORTUNITIES AS WELL AS THREATS FOR
THE FIRMS THAT ARE EXPOSED TO THE ENHANCED
GLOBALISED MARKET
INTRODUCTION TO THE CHOSEN COUNTRY
The regular definition of the small and medium enterprise is the business or the
corporate house having less than 250 employees. In the UK, SMEs forms around
99.3% of all businesses running in UK (Harris, 2018).
On the other hand, micro business is the business house comprising of the
employees 0-9 and there are more than 5 million micro businesses that are running
in the UK which makes around 99.9% of the all the business houses. Although the
majority of the business running in the UK are micro businesses having less than 10
employees, but this business only accounts for 33% of the total employment created
and their per cent in the turnover is just 19%. The total employment in the small
medium enterprises is around 16.3 million which makes almost 60% of the
employment in the private sector. The combined annual turnover of SME in the UK is
about 2 trillion Euro (Harris, 2018).
AN ANALYSIS OF THE GLOBAL BUSINESS ENVIRONMENT AND THE INFLUENCE
OF KEY GLOBAL DRIVERS SPECIFICALLY IN RELATION TO THE CHOSEN
COUNTRY
Doing the business today is a lot different from what it was 20 years ago. With the
significant increase in the global market as well as the competition, the dawn of the
electronic business is over the internet along with the economic crisis had made the
organisation to give it a thought on the way they do their business (Pätäri et al.,
2016).
In order to do the analysis of the global business environment along with the
influence and effect of the global drivers that usually acts as the global drivers, PEST
analysis is been used.
Political:
The UK relatively have a politically stable environment which also attracts a large
number of investors invest in their country. On top of it, investors get a tax relief on
the capital gains which also helps in providing the relaxation to the investors to a
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certain great extent. So the stability is the positive sign for the visitors to come and
invest in the country (Pätäri et al., 2016).
Economic:
One more of the key global drivers is the GDP rate in London which is pretty much
high and it helps in the expansion of the businesses in London (Krotov, 2017). Also,
the economic status of London helps in influencing the money inflow by enhancing
the exports and the demand of the investors are fulfilled by allowing to earn the
desired rate of returns. London practices the mixed economy which has a significant
effect on what to produce, how to produce and for whom to produce (Krotov, 2017).
Socio-cultural:
London is also a famous tourist spot and the cultural factors of London are mainly
concerned with the music, arts, historical beauty etc. which also plays a vital role in
attracting new investors (Krotov, 2017).
Technological:
In the UK, technology advancement is done in a rapid and frequent manner.
Innovative technologies are being adopted by the organisations which will further
help in satisfying the potential users as well the customers which will then help in the
increase in the market share as well in gaining more and more profits (Krotov, 2017).
Environmental:
The environment of UK is friendly and also uses the collaborative approach among
the UK population that will certainly help in the achievement of the common goals as
well as objectives (Nadtochy et al., 2016).
Legal:
In order to judge the economic status of the country, legal rules and regulations play
a vital part. Legislations followed in the UK are quite flexible and is mainly focussed
towards providing safety to the people concerned with the organisation (Nadtochy et
al., 2016).
ANALYSIS OF THE THREATS AND OPPORTUNITIES FACED BY SME
Despite the numerous efforts that are done for the policymaker experts in order to
create the base for the small and medium enterprises so that they will participate in
the global economy (Camussone and Biffi, 2018). Maybe SMEs can concentrate on
the niche strategy but also there is a risk in getting the SMEs to involve completely to
the specific segments as with the increase in the globalisation, it has become easy
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for the big companies to overtake the niches. But SMEs also have the opportunity to
become the part of the international supply chain. This opportunity is the result of the
direct foreign investments by the larger organisations who might be interested in
getting the local suppliers to help in specific situations (Camussone and Biffi, 2018).
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LO2 ADVANTAGES OF THE TRADING BLOCS FOR FIRMS
DETERMINE AND ANALYSE THE ADVANTAGES OF THE INTERNATIONAL
TRADING BLOCS AS WELL AS AGREEMENTS
A trade bloc is a type of the intergovernmental agreement which often forms the part
the regional intergovernmental organisation where barriers to trade are either
reduced or eliminated among the participating states. Trade blocs can either be a
stand-alone agreement between several states or can be a part of the regional
organisation (MacCarthy and Dery, 2016). And on the basis of economic integration,
trade blocs are further classified into free-trade areas, customs unions, economic
and monetary unions, preferential trading areas etc.
Advantages of the trade blocs
 Foreign direct investment
It entices the foreign direct investment which offers the benefits of economies
of partaking the nations. It shapes a large market which further resulted in low
manufacturing cost of the products locally (MacCarthy and Dery, 2016).
 Economies of scale
The expansion of the hefty market offers the advantage of economies of scale
where the average cost of manufacturing the product is abridged and bulk
production can take place (Loader, 2015).
 Competition
It offers opportunities to the producer from diverse regions to come handier
and develop healthy competition. It also upsurges the superior efficiency of
the organisations (Loader, 2015).
 Trade effects
The trade blocs eradicate the tariffs which additionally reduces the importation
cost of goods. Moreover the demand vicissitudes and provides customers
with better choices to choose from at the best possible prices (Loader, 2015).
 Market efficiency
A better amalgamation exists after there is a rise in the competition with a
better emphasis on the efficiency of the market (Loader, 2015).
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TARIFFS AND NON-TARIFF BARRIERS IN THE INTERNATIONAL TRADING
ENVIRONMENT
Tariffs and the non-tariffs barriers are just the restrictions that are imposed on the
movement of the goods among different countries (Stankovska et al., 2016). It is
mainly levied on the exports and imports and there are various reasons behind
imposing the tariff and non-tariff barriers which are as follows:
 National security countries levy the tariffs and non-tariff barriers in order to
protect the security of the nation. For example the Defence sector in India
(Stankovska et al., 2016).
 Retaliation government of a country mainly intervenes in the policies of the
trade so that they are able to act as the bargaining tool. Retaliation also helps
the counties s that they allow inter-country trade (Stankovska et al., 2016).
 Protecting jobs government mainly aims at protecting the domestic
employment which is affected by the foreign competition as domestic
countries have started to import the services from the outside countries so
that they are able to keep up with the competitors (Stankovska et al., 2016).
 Protecting the infant industries infant industries in the country gets
threatened by the imported goods as in order to grow and develop the certain
industries, government is imposing heavy tariffs especially on the imported
goods so that the price for the imported goods will increase which will further
help the infant industries (Stankovska et al., 2016).
 Protecting the customers’ government is levying the high rate of taxes in
goods which are considered unhealthy for the country as well as the citizens
(Stankovska et al., 2016).
Some tariff barriers:
 Import duties i.e. custom duty which is imposed by the importing country
and is levied with the aim of generating revenue (Stevenson and Pond,
2016).
 Export duties i.e. levied by the exporting country on the goods exported.
 Transit duties i.e. levied on the commodities that are originated in the first
country and cross another to finally reach the final destination (Stevenson
and Pond, 2016).
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Some non-tariff barriers
 Quotas refer to the numerical limit of the goods quantity concerning the
quantities which can be exported or imported (Stevenson and Pond,
2016).
 Voluntary export restraint refers to the quota that is fixed form the side
of the exporting country especially on the request of the importing country.
 Subsidies refer to the payment done by the government to the domestic
producer in order to make bring them in the competition with the foreign
goods (Stevenson and Pond, 2016).
EVALUATION AND IMPLICATION OF THE INTERNATIONAL TRADING BLOCS
AND AGREEMENTS FOR SME
The trade agreement is supposed to have the foremost effect on investments and
trade worldwide. For the fact, they are also held responsible for shaping the various
business-related relationships between the companies all across the world.
Therefore for getting success in the international market, business exporters who are
working at small level need to get aware about the impact and effect of the trade
agreements have on the business that is practised by them (Owen et al., 2016).
Likewise, lenders must also be told about the trade agreements so as to make them
familiar with the idea in order to develop the understanding concerning the needs
along with the financial aspects of the customers.
But what is the reason behind the flourishing nature of the trade agreements? Well,
the answer can be identified in the broad area of benefits of the trade agreements.
Some of the countries came up with the concept of the free trade agreements and
are planning on the expansion of the idea (Owen et al., 2016). On the other hand,
some of the countries are working towards the establishment of the customs unions
as well as the common markets. This development is also having a profound effect
on business globally.
In order to form a free trade area, a preferential trade liberalisation policy is been
formed by two or more nations by doing the elimination and reduction in the trade
barriers between themselves (Thompson and Zang, 2019). Free trade liberalisation
policy is been surpassed by the customs union by coming up with the common
external tariff for the nations who are non-members. A common market is a concept
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that goes even further and this development is certainly having a reflective effect on
the small and medium enterprise globally (Thompson and Zang, 2019).
EVALUATE HOW SME ARE TAKING THE ADVANTAGE OF THE INTERNATIONAL
OPPORTUNITIES AND HOW THEY OVERCOME THE BARRIERS
Right starting from the year 1992, many trade agreements, like the Tokyo Round or
the Uruguay Round of the GATT or the NAFTA and further in the list counts some
200 less popular trade agreements, were negotiated and implemented. Small
business is getting benefitted from the significant reduction in the barriers of the
foreign trade but the only reduction is not the complete elimination, therefore, some
of the obstacles still exist (Thompson and Zang, 2019). For example, high foreign
duties have held back some the small businesses from exporting and on the other
hand, large companies often have skirted these exited barriers by making their
presence in the foreign countries and also by achieving the access which is secure
and competitive. Therefore when it comes to the small firms they usually don't have
such an ample amount of resources to perform the action (Thompson and Zang,
2019).
Non-tariff barriers also known as the foreign red tape, for example, the requirement
of the import license, also prevents the small companies from entering the export
business. Therefore in order to prevent the small businesses from getting confused,
red tape is been eliminated through the trade agreements and also small companies
are pushed on high levels in the playing field so that they can grow and develop
internationally (Thompson and Zang, 2019). And also small companies are able to
respond in the faster manner to all the changes as compared to the larger firms,
therefore this will help them in getting the edge over the competitors as well as the
large firms as the global market changes drastically. And also as more and more of
the niche market opportunities are coming up, small firms are opting for them as they
are turning profitable for them as compared to the large firms (Thompson and Zang,
2019).
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CONCLUSION
After the completion of the assignment, the understanding of the opportunities and
threats are developed that are present in the globalised market, especially for the
SMEs. In the first part, a website is been developed concerning the economy of the
UK as well as the SMEs that are established in the economy. Also, the trade
agreements and the trade blocs are studied along with the benefits to the SMEs.
Also, it is been evaluated how SMEs can grab these opportunities and step into the
international market. In the last part, PDF brochure is been prepared concerning the
export and import procedures and how SME can enter the market with the help of
the exports and imports. Along with the various other methods are also discussed for
the SMEs to enter the market
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REFERENCES
 Camussone, P. and Biffi, A., 2018. Information Technology and Work: Threats
and Opportunities. Symphony. Emerging Issues in Management, (2), pp.125-144.
 Harris, R., 2018. Trading with strangers: the corporate form in the move from
municipal governance to overseas trade. Research Handbook on the History of
Corporate and Company Law, p.88.
 Krotov, V., 2017. The Internet of Things and new business
opportunities. Business Horizons, 60(6), pp.831-841.
 Loader, K., 2015. SME suppliers and the challenge of public procurement:
Evidence revealed by a UK government online feedback facility. Journal of
Purchasing and Supply Management, 21(2), pp.103-112.
 MacCarthy, J. and Dery, L., 2016. Banking Regulatory and Market Framework in
Ghana: Strength, Weaknesses, Opportunities and Threats. Weaknesses,
Opportunities and Threats (April 26, 2016).
 Nadtochy, Y.V., Klochko, E.N., Danilina, M.V., Gurieva, L.K., Bazhenov, R.I. and
Bakharev, V.V., 2016. Economic factors and conditions for the transformation of
the education services market in the context of globalization. International Review
of Management and Marketing, 6(1S), pp.33-39.
 Owen, R., Botelho, T. and Anwar, O., 2016. Exploring the success and barriers to
SME access to finance and its potential role in achieving growth. ERC Research
Paper, 53.
 Pätäri, S., Tuppura, A., Toppinen, A. and Korhonen, J., 2016. Global
sustainability megaforces in shaping the future of the European pulp and paper
industry towards a bioeconomy. Forest Policy and Economics, 66, pp.38-46.
 Stankovska, I., Josimovski, S. and Edwards, C., 2016. Digital channels diminish
SME barriers: the case of the UK. Economic research-Ekonomska
istraživanja, 29(1), pp.217-232.
 Stevenson, T. and Pond, K., 2016. SME lending decisions–the case of the UK
and German banks: An international comparison. Studies in Economics and
Finance, 33(4), pp.501-508.
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