Report on Tapping into New and International Markets for SMEs

This report explores strategies for tapping into new international markets, focusing on House of Dorchester, a British chocolate company, as a case study. It analyzes the global market environment, identifying threats and opportunities using PESTLE analysis, with a focus on the French market. The report discusses foreign expansion strategies, including Porter's Diamond theory and product life cycle theory. It further explains tariff and non-tariff barriers, the role of trade blocs in international operations, and the concepts of import and export. The report also discusses various ways for companies to tap into international markets and explains the process of exporting, providing a comprehensive overview of international market entry for SMEs.

Tapping into New and
International Markets

Table of Contents
Introduction:.....................................................................................................................................3
MAIN BODY...................................................................................................................................3
Analysing the threats as well as opportunities present in the global market environment:........3
Foreign expansion of the organisation:.......................................................................................5
Explaining about the tariff and non-tariff barriers as well a role of trade blocs in international
operations:...................................................................................................................................7
Critically analysing concept of import and export and the difference between merchandise
and service import and export:....................................................................................................8
Discussing about different ways through which the company can tap into international
market:.......................................................................................................................................10
Explaining about the process of exporting: ..............................................................................13
Conclusion:....................................................................................................................................14
References:.....................................................................................................................................15

Introduction:
The tapping into foreign market conditions is the opportunity that can support the
company in terms of rise in market share. In order to expand operations into international
markets, numerous factors are needed to considered for undertaking successful expansion plan.
For this report House of Dorchester is taken into focus. This British company is the famous
chocolate company which produces the highest quality chocolates. The report will discuss about
the global environment threats that can impact the growth of the company. In addition to this, the
report will cover the tariffs as well as non-tariff barriers which the company has to face in order
to tap into foreign market. Moreover, the report will highlight the role of trade blocs and its
importance while entering into international markets. Furthermore, the report will also identify
importing and exporting process and the practicalities involved in the process. The report will
also provide explanation about different ways SME's can enter into foreign market conditions.
MAIN BODY
Analysing the threats as well as opportunities present in the global market environment:
Global Environment:
The global business environment refers to the external market conditions in which
businesses undertake their operations in effective manner. The global environment can positively
or negatively impact the business operations depending upon the market forces. In relation to
this, the global market trends can also impact the decision making capacity of the firm regarding
its future growth plans and objectives (Grünig and Kühn, 2015). The House of Dorchester is
currently running its operation in UK and is planning to expand its operations into the market of
France. Moreover, there are various factors of France market that can impact the future
operations of company . The opportunities as well as threats should be evaluated by practising
PESTLE business tool.
PESTLE analysis tool:
This tool is considered as the strategic tool that can support the company in evaluating
external market forces effectively. In context to House of Dorchester, the application of this
business model will support the assist the firm in analysing the forces of the market of France.
The elements of PESTLE model is discussed below:

Political factor:
The political force covers the government policies as well as regulations that can
influence the working of the organisation. In context to House of Dorchester, the favourable and
stable political environment in the France country can positively impact the growth objectives of
the firm. In addition to this, the lower tax policy can also help company in ensuring smooth
expansion (Kim, Rim and Lee, 2019).
Economical factor:
This element of business model includes the interest rate of banks or unemployment rate.
In relation to House of Dorchester, the economy of France country is considered among the top
10 biggest economy in the world. The people of France enjoys higher standard of living as they
have higher disposable income. This can provide an golden opportunity for the company in terms
of gaining higher profitability as well as higher market growth.
Social factor:
This factor covers the cultural as well as demographic aspects of the society which
provides the foundation for the behaviour and preferences of customers. In context to House of
Dorchester, the culture of the France is known as luxurious due to the high standards of the
people. In addition to this, the unemployment rate of the country is also getting a major problem
from which the firm can gain an advantage by hiring the most eligible manpower for its business
functions.
Technological factor:
The technological factors include the innovational changes in the market which can
improve the efficiency level of company's operations. In context to House of Dorchester, the
high rate of technological changes in the country can support the firm to make better use of these
technologies in order to make more quality chocolates with the lower price structure. In relation
to this, the rise in the use of social media platforms in the France country can also lead the
company in improving its market growth by attracting large number of customers through using
the digital platforms for advertising its products (Dockalikova and Klozikova, 2014).
Legal factor:
These factor covers the legal laws and restrictions by the legal bodies of the country. In
context to House of Dorchester, the legal system of the country follows a code of conduct which
is compulsory for the company to follow it in order to conduct smooth operation in the country.

In addition to this, the labour laws of the country is complex in nature which provides a special
protection for the rights as well as interest of employees.
Environmental factor:
The environmental factors include the impact of business operations on the nature or
environment. In context to house of Dorchester, the higher focus on reducing the air pollution by
government of France can effect the operations of company in order to adopt efficient
technology that can produce less carbon dioxide in environment. This can support the firm in
gaining respectable position in the society and government bodies (Samusenko, Plaskova and
Prodanova, 2020).
SME's are experiencing the threats related to the high competition due to the growth in
globalisation levels as well as increased competition. The SME's are able to provide employment
opportunities to the large number of people which can support the growth through hiring
competent professionals. Moreover, the SME's can expand to the foreign market conditions
effectively by undertaking use of low cost strategy.
Foreign expansion of the organisation:
The house of Dorchester is increasing its operations into different territories as well as
magnitude of operations in the France market. This enhances the scope of adopting golden
chances and also expose the company to the threats. In addition to this, the case related to the
international expansion can understood with the support of international trade theories such as
Porter's diamond theory and product life cycle theory (Hodgetts, 1993). The application of these
foreign market theories will support the company in evaluating various factors of the new market
environment. The following is the explanation of Porter's diamond:
Porter's diamond:
This theory explains about the four determinants for gaining national competitive
advantage. The four factors is explained below:
Factor conditions:
Factor conditions of the country basically relates to the availability of man made
resources as well as natural resources. The selection of country in order to conduct business
operations greatly depends upon the quality and quantity of resources needed for conducting
business activities in optimum manner. The human resource factor is also the important element
in order to know viability of the new business idea. In relation to house of Dorchester, the France

country has the eligible and skilled manpower that can assist the company in achieving its targer
in most effective manner. In addition to this, the country is also supported with innovative
infrastructural amenities (Chobanya and Leigh, 2006).
Firm strategy, structure and rivalry:
The determination of the company existence in impacted by the national context in which
the firm will carry their operations. The level of competition between different organisations
within the national territory supports them to come up with the most innovative ideas. The more
the company will be exposed to the higher competition, the more will be the chances of gaining
competitive edge by adopting unique and innovative ideas. In relation to house of Dorchester, the
company can face cut throat competition in the France market which will assist the organisation
in investing in cost effective techniques and producing well quality and differentiated products.
Demand conditions:
The demand condition in domestic market refers to the level of positive factors served by
the industries. The high demand in the country develops great market with some challenges but
also enable the firm to grow by taking advantage of the opportunities. In relation to this, the high
demand by people can provide the company an opportunity to expand its operations in order to
gain high market share. In context to house of Dorchester, due to the higher purchasing patterns
among the people of France, there is higher demand of quality chocolates in the market. This can
provide favourable condition for the company by satisfying the needs as well as wants of the
customer in most profitable manner (Jin and Moon, 2006).
Related and supporting industries:
This factor implies the development of the organisation by gaining support from the
related industries. The existence of such related industries can assist the emerging company by
merging or by doing partnership with the firm. As it will be a challenging task for the new
business to compete in foreign markets without having any assistance from the alliances that are
already dealing in these markets. In context to house of Dorchester, the firm will have access of
help from the supporting industries as the 35% of the total sales turnover comes in the category
of chocolate consumption. On top of that, the firm can also find a global supplier which can
support the company in enhancing its networking capacity as well as smooth production process.
Government:

The function of government is important and is likely to power the working of the HOD
in the activity of growing its operations in France. The government plays a crucial character in
deciding the form and structure which determine the code of conduct of brand.
Chance:
This is considered as the factor of uncertainty as well as fatal events that beyond the
control of organizations. The HOD will have to predict and determine such events for which
effective planning needs to be enforced.
Explaining about the tariff and non-tariff barriers as well a role of trade blocs in international
operations:
The barriers of trade is related to the taxes as well as duties imposed by the government
on imports in order to protect domestic companies from the ruthless global competition and to
enhance the profit generation. On the other hand, the non-tariff barriers are considered as
restrictions other than taxes which is implied on imports with the purpose of reducing entry of
new entrants.
Tariff barriers:
The trade agreement between two countries is regulated by some restrictions which is
imposed by the government in return of fees. This fee is charged from the owner in order to enter
the goods in international market conditions (Imbruno, 2016). The fees is considered as the
revenue for that country as well as it enhances the price of goods for the domestic organisations.
In context to house of Dorchester, the main tariff barriers which the company could face is
related to export duties, import duties and transit duties. In addition to this, the rules regarding
importing and exporting is determined by the custom unions and EU taxation. The VAT tax
declared in France for imports in 2020 is 20%.
Non-tariff barriers:
These consists of the restrictions imposed by government with the purpose of preventing
or put some conditions on the process of importing products (Deardorff and Stern, 1998). The
main non-tariff barriers include import quotas, technical as well as administrative regulations,
foreign exchange restrictions and many more. In relation to house of Dorchester, the company
must comply with the labelling and packaging laws implied by the European Union. In order to
reduce harmful practises that damages environment, the European Union has introduced polices

related to eco- friendly packaging , proper waste management and norms of food and hygienic
standards. Hence, the firm should meet with these policies for ensuring smooth operations.
Trade Blocs:
The trade blocs defined as the agreement between group of countries in order to deal with
the barriers related to trade. The introduction of trade blocs improves healthy trade practices by
managing influence of restrictions imposed by the government. The main reason behind Trade
Blocs is to promote the growth of globalisation by allowing practises which creates free trade
environment and also supports in reducing regulations that creates restriction in free flow of
goods and services. In context to house of Dorchester, the EU trading blocs will assist the
company in gaining high volume of profits by allowing it to trade freely without any fear of
restrictions. In relation to this, the firm will also be benefited from the affordable cost of imports
as well as able to purchase materials at a low cost from suppliers. Moreover, after becoming the
member of European union the firm will be able to minimise its cost which can help company in
raising profits (World Bank, 2000).
Critically analysing concept of import and export and the difference between merchandise and
service import and export:
Exporting:
The exporting process refers to exchange of goods and services outside the national
borders of the country. It is considered as the simplest technique in order to enter into foreign
marketplaces. In this activity, the products are built in domestic country and then moved outside
to the international markets through the direct or indirect exporting process.
Advantages:
 Entering into foreign markets through exporting process assists domestic organisation to
increase market share and allows it to reduce price structure by taking advantage of
economies of scale. It also assist domestic organisation to enhance its competitive position by the advantage
of newer technologies present in foreign market places (Menkel-Meadow, 2005).
Disadvantages:
 The company who engages in exporting process can lead to modification of their
products in order to meet with safety and security standards of the importing country.
This may incur high costs.

 The licensing and documentation process can be complicated as well as frustrating task.
Importing:
This activity refers to the buying of goods and services from the international countries
by domestic countries. The following is the benefit and disadvantages related to the importing
process:
Advantages:
 It supports the firm to minimise its operational cost as it can enable the company in
importing necessary raw materials at the cheaper rates (Chetty and Hamilton, 1996). In order to boost strategic relations with foreign countries then the importing process is
considered as very helpful option to foster healthy relations with other countries.
Disadvantages:
 The importing activity may decrease the profitability of small and medium enterprises as
consumers may shift their wants towards purchasing low priced foreign products.
 The companies who are more dependent on importing necessary raw materials can be
exposed to the high tariffs rate imposed by foreign countries.
Recommendation:
After evaluating the above explanations, it has been recommended that House Of
Dorchester should focus on adopting Exporting process as this will enable the company to
identify and practise new technology present in France country (Lin and Yang, 2017). In addition
to this, the exporting activity will also support the company in gaining competitive position in
the UK market.
The main difference between Merchandise and service import and export:
Basis Merchandise imports and
exports
Service imports and exports
Definition This consists of exporting and
importing of products that can
be touched .
It basically refers to the
importing and exporting of
intangible product that cannot
be touched but can be feel.
Amount of capital The exporting process related
to merchandise goods takes
The service exporting process
requires comparatively less

large amount of human as well
as financial resources.
resources as compared to
merchandise exporting
process.
Application process The documentation process in
this requires large paperwork
which is time consuming
(Sofia and Krivorotova, 2018).
In this, export and import of
services requires less time and
paperwork.
Examples This covers items such as
clothes, steel and many more.
It covers services related to
financial services, IT and
many more.
Discussing about different ways through which the company can tap into international market:
Basis Exporting Licensing Franchising
Meaning This activity refers to
the trade of goods and
services beyond the
national boundaries of
the country
(Thomchick, Young
and Ruamsook, 2004).
In this process, the
domestic
company(Licensor)
gives the right to
international
company(Licensee)
for using its patent
rights, copyright or
expertise.
In this activity, the
national company
(Franchisor) gives
permission to the
international company
in order to use its
name and method of
production. It can also
provide support to the
production process by
transferring important
raw materials.
Resources The process of
exporting demands
investment of large
amount of capital in
This process requires
less capital resources
as the licensor
supports the activity of
This activity also
demands
comparatively less
capital as it enables

producing goods and
services for foreign
market.
licensee by
exchanging patents or
copyrights with
international firms.
Franchisee to receive
raw materials from the
Franchisor.
Capital risk The capital risk level
is basically higher in
the exporting process
because of the lack of
understanding about
foreign market forces.
In this, the company is
exposed to less capital
risk as compared to
exporting process
(Garth, 2007).
The level of capital
risk is in the range of
low to moderate as the
product may or may
not perform well in
foreign market
conditions.
Profit sharing The exporter of
products does not
share profits with any
other parties.
In this process, the
licensor collects
decided amount of
profit share from the
licensee.
As compared to
licensing process, the
required margin of
profit is equally shared
between franchisor
and franchisee.
Advantages  The company
by exporting its
product can
foster brand
recognition in
foreign market.
 This process
also assist the
firm in
attaining
economies of
scale by taking
advantage of
 This process of
tapping into
foreign
markets is
beneficial for
the company
who does not
have
appropriate
resources.
 Because of the
low capital
risk, this is
The franchisee firm
can increase its
competitive position in
market by taking
advantage of high
customer base of
franchisor.
 There is low
level of risk
involved.

high
production
output.
considered as
an effective
way to enhance
brand
recognition
globally.
Disadvantages  If the exporter
has not gained
insight about
foreign market
conditions,
then it may
result in
wastage of
time and
efforts
(Johnson and
Bade, 2010).
 In this, the
licensor is not
able to control
operations of
licensee
properly.
 There is a high
chance of
copying the
intangible
assets of
licensor by
licensee.
 The Franchisee
may become
exposed to
adjustment
problem in
foreign market
places.
 It is hard for
the franchisor
to have a
proper control
over the quality
standards of
Franchisee.
Recommendation:
After understanding above comparison, it has been recommended that house of
Dorchester company should practise exporting process to tapping into the France market. The
exporting process will support the firm in enhancing its production capacity and can take benefits
of operating in the France market. In relation to this, the exporting activity will also assist the
company in gaining competitive edge in domestic marketplace. On the other side, the
organisation should not enter into France market with the support of franchising or licensing
process as this may lead to leakage of its confidential information. Hence, it will be beneficial for
the firm to export its chocolate products in France market (Katsikeas and Al‐Khalifa, 1993).