Unit 43: SME Strategies for Global Market Expansion

This report examines the international market landscape, focusing on opportunities and challenges for Small and Medium Enterprises (SMEs). It begins by analyzing the global business environment, including factors such as globalization, entrepreneurship, and e-commerce, and discusses the threats and opportunities faced by SMEs in this context. The report then delves into the advantages of international trading blocs, tariff and non-tariff barriers, and the practicalities of importing and exporting, including the advantages and disadvantages of each. Furthermore, the report explores various methods SMEs can use to tap into international markets, evaluating their effectiveness and providing recommendations for implementation. The analysis includes a case study of Oak Cash & Carry, a UK-based company, and considers strategies for its international expansion, emphasizing the importance of understanding cultural and economic factors. The report aims to provide a comprehensive overview of the key considerations for SMEs seeking to expand their operations globally.

Unit 43 Tapping into New
and International Markets

Table of Contents
INTRODUCTION...........................................................................................................................3
LO1 Analyse the opportunities and threats for firms exposed to an increasingly globalised
environment.....................................................................................................................................3
P1 Global business environment in which small and entrepreneurial business operate.............3
M1 Analysis of global business environment ............................................................................3
P2 Threats and opportunities face by SMEs...............................................................................4
M2 Analyse implications of threats and opportunities face by SMEs........................................4
LO2 Advantages of trading blocs for firms.....................................................................................5
P3 Analyse the advantages of international trading blocs and agreements.................................5
M3 Evaluate the advantages of international trading blocs and their implications for SMEs....6
P4 Various tariff and non tariff barriers that exist in international trading environment...........6
LO 3 Importing and exporting process and practicalities involved.................................................7
P5 Advantages and disadvantages of importing and exporting .................................................7
M4 Import and export process ...................................................................................................8
D2 Recommendations ................................................................................................................8
P6 Difference between merchandise and service imports and exports.......................................9
LO4 Evaluate ways SMEs can tap into international markets.........................................................9
P7 Various methods in which SMEs can tap in international market.........................................9
M5 Evaluate different methods SMEs can use to tap into various markets..............................10
D3 Recommendations and implementation of different methods.............................................10
P8 Pros and Cons of method used to enter into international market......................................11
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
International market can be refer to as a system of rules and procedures and institutions
which are related to exchange of goods and services between organisations and people (Cano.,
Campo and Baena., 2017). Market can be divided in different ways like, geography, customer
market, product market etc. Market can be divided on the basis of characteristics of consumers.
In the present report, global business environment in which small businesses operate is
discussed. Threats and opportunities that are face by SMEs are described. Further, advantages of
international trading and tariff and non tariff barriers are discussed. Advantages and
disadvantages of importing and exporting is determined. Oak cash and carry operates in the UK.
The company provides products in bulk for retailers, local businesses, caterers etc.
LO1 Analyse the opportunities and threats for firms exposed to an
increasingly globalised environment
P1 Global business environment in which small and entrepreneurial business operate
Globalization is the process of international integration which arise from interchange of
products, ideas and culture. Major factors of globalization are transportation, infrastructure and
the rise in use of internet. Entrepreneurship can be defined as strategic thinking which result in
bringing new opportunities for an organization to expand the business. When a company changes
its working styles or make innovation in the product to do business in international market. E-
commerce refers to electronic commerce is the process of buying and selling of goods and
services with the help of internet (Dastidar and Elliott., 2020).
These includes business to business transactions, business to consumer, consumer to
business and consumer to consumer transactions. E- commerce focuses on technologies like,
process of online transaction, internet marketing, data collection system, inventory management.
Competition is increasing day by day in this fast moving world. Oak cash and carry has to make
changes in its working patterns and use new technology to maintain its position in the market.
Company wants to expand its business so it has to take necessary steps and innovation in the
product to create good image in international market.
M1 Analysis of global business environment
Global environment refers to the environment in which the organization operates. This
includes factors that influences the organization. Factors include geographic location, politics,

technological, economic and cultural factors. Oak cash and carry company is affected by these
factors and face problems in expanding its business in international market. In today's world it is
not easy to survive in the market, as there is lot of competition and every organization is doing
innovation in products to attract and satisfy customers. Oak cash and carry provides product in
bulk to the retailers, so the company has to make new product to survive in the global world.
When any organization has to expand its business in international market then they have
to understand the culture and environment of the country (Fosić., Trusić and Šebalj., 2017).
People are having different needs and company has to make the product according to the demand
of customer. E- commerce is available for the online transactions, marketing of products online,
management of inventory and many other facilities. So, it is important for organization to
analyse global business environment before expanding its business in international market.
P2 Threats and opportunities face by SMEs
Globalization is an opportunity as well as threat for a small and medium sized enterprise.
Due to rapid change in the technology companies are having many opportunities to expand its
business. Today competition is increasing and with these changes people are having different
varieties for buying a product. Oak cash and carry ant to expand its business in international
market. So, the company has to face many challenges and threats like, insufficient working
capital, competition with large companies, difficulty in arrangement of raw material, lack of
management strategies, poor educational background, financial problem (Jensen., 2017).
There are many opportunities for the organizations that are panning to expand its
business in international market. Opportunities like, importing and exporting, licensing and
franchising, contract manufacturing and outsourcing, alliances and joint ventures, foreign direct
investment and subsidiaries. When a company expands its business these are some opportunities
which are faced by company.
M2 Analyse implications of threats and opportunities face by SMEs
There are many threats and opportunities that are faced by companies for the smooth
running of the business. Oak cash and carry company has to face threats like, the company will
require huge capital investment in international market because there are differences in doing
business in other country. There are positive and negative impact of threats and opportunities.
Positive impact of threat and opportunity is that it will help the organisation in facing threats and

finding new opportunities like importing and exporting, licensing and franchising and many
other opportunities (Kaartemo and Pelto., 2017). Negative impact is threat can affect business
and company has to suffer loss.
Advantages of international opportunities and overcome barriers
By expanding the business in international market there are many new opportunities
available for the company. It enables different countries to import and export their product to
another countries. Organization enter into new market and they get opportunities to create good
image in the market. Company get chance to increase growth of the business by importing and
exporting of goods and services. To overcome barriers free trade is encouraged by many
organizations and financial support is being provided to emerging economies. The International
Monetary Fund provides loan to troubled countries.
LO2 Advantages of trading blocs for firms
P3 Analyse the advantages of international trading blocs and agreements
International trade can be defined as exchange of goods and services and capital across
the countries or international borders as there is need of goods and services. For the smooth
process of trading world trade organization is being formed. Trading bloc refers to a formal
agreement between two or more than two countries that remove trade barriers between countries
in the agreement.
There are four types of trading blocs, free trade area, customs union, common market,
economic union. In free trade area countries remove barriers between them and maintains its
own tariffs. In customer union common tariff is maintained against non member countries. In
common market there is free flow of production factors (Karafyllia and Zucchella., 2017).
Advantages of trading blocs are, size of market, technology and economic leverage.
Trading blocs helps in increasing local investments and hence increases the overall size of the
market. Trading blocs helps in fast transfer of technology from one country to another country.
Trading blocs helps in trading in another countries which lead to increase in economies of scale.
There are various theories of international trade i.e., cost advantage theory, comparative
cost advantage theory, product life cycle theory, Hecksher 0hlin theory, national competitive
theory. Porter's diamond theory refers to a model which is designed to understand the

competitive advantage. This model can be used by organizations to make strategy regarding how
to invest in national markets.
M3 Evaluate the advantages of international trading blocs and their implications for SMEs
A trading bloc is a part of regional intergovernmental organization where tariff barriers
are reduced among states that are participating and allowing them to trade. The advantages of
international trade blocs are size of market, technology and economic leverage. Trade blocs
helps in increasing the size of the market, provides fast trade of new technology and economies
of scale (Larre., 2019). International trade blocs helps in expansion of organization. Oak cash
and carry company also want to expand its business in international market. So, for the
expansion company can use trade blocs. Organization can import and export its goods and
services and can cover a wide area. Companies can remove trade barriers through an agreement.
P4 Various tariff and non tariff barriers that exist in international trading environment
Tariff barrier refers to taxes which are imposed on imports. Due to tariff barrier prices of
goods that are imported are raised. Tariff barriers are paid by domestic consumer. In
international trade tariffs can be custom levy or imposed by government on goods that enter into
country. Mainly importing countries are benefited as they are receiving the money. The main
advantage of tariff barrier is to produce revenue on goods and services that enter into the
country. Tariff barriers increases the price of product which decreases its demand. A non tariff
barrier is other than custom duty.
Non tariff barrier include rules and regulations for how product will be manufactured and
how its advertising will be done. Tariff and non tariff barrier are commonly used in controlling
import and export (Lazaris and Freeman., 2018). Types of tariff barriers are import, export duty,
transit duties, specific duty and compound duty. Types of non tariff barriers are, subsidies,
currency control, state ownership etc.
Grants is non repayable fund that is given by one party generally a government
department, any corporation, non profit entity, any educational institution, any individual or
business. Mostly grants are made for a specific project. It does not involve any technical or
financial assistance. Grants are divided in four categories i.e., educational, organization, small
business and individual grants. On different government websites all the four categories of grants
are available. Grant is fund that is given by the government for a project.

A subsidy can be refer to as benefit which is given by the government to an individual,
business, institution. The subsidy is given to remove burden and to promote social policy. A
subsidy is an type of incentive which is provided by government in the form of cash, grants,
direct tax.
An import can be defined as goods and services which is produced or manufactured in
outside the country and purchased in the home country. Goods and services are imported when
domestic country is not able to produce similar type of goods or products. Tariffs and free trade
agreements dictate that which type of goods and services are less expensive and which goods are
more expensive to import. Export refers to goods and services are sold to customers living in
other countries and goods are manufactured in domestic country.
LO 3 Importing and exporting process and practicalities involved
P5 Advantages and disadvantages of importing and exporting
Importing is the process of bringing goods and services from one country to another
country and the purpose is to resell them. It refers to goods and products are manufactured in
outside country and then it is purchased by the home country (Riniwati., Harahab and Carla.,
2017). Advantages of importing are:
 It helps in introducing new goods or products to the market. For example, goods which
are produced in India are imported to other countries because similar goods or products
cannot be manufactured by other countries.
 It provides high quality products. Goods and services are imported from one country to
another country so they provide good quality of products.
 It provides opportunity to become the leader of the industry. As imports give chances to
manufacturers to make better products than competitors and can become leader of the
industry.
 It helps in reducing manufacturing cost. Importing goods and raw materials are more
easy than to produce them.
Disadvantages of importing are there is foreign exchange risk. There is risk that sudden
change in the exchange rate can affect importing of goods and services. Political risk can also be
a hindrance in importing of goods or products. If there is change in political factors like, tax

policy changes, tariffs, political stability etc. then it will affect the import of goods and services.
Legal risk and cultural risk can also affect import as changes in legal policies, rules and
regulations changed by law. All these are the disadvantages of importing.
Exporting refer to as goods and services are manufactured in domestic country and it is
sold in other countries. Advantages of exporting are, organization can expand its business and do
not depend on anyone. Exporting lead to greater production and hence increase in revenue of the
organization. New and innovative products will be made by the company to expand its business
in international market and export will be done. Disadvantages of exporting are, company can
lose its focus on existing market or customers, more remote relationships will be managed.
M4 Import and export process
The import and export process includes licensing before the shipping of goods and
services, making arrangement for transport and warehousing of goods after the goods are
unloaded, payment of taxes. When goods are imported or exported there is process which is
followed by every organization. Shipping charges are imposed for export and import of goods,
proper arrangements should be made for keeping goods safely and before releasing the goods
taxes should be pay (Tien and Ngoc., 2019). Licensing can be defined as an business agreement
in which one company gives permission to another country to use its technology or manufacture
its product and in return the person is paying some amount.
There are many new ways in which company can expand its business like by patents,
trademarks, copyrights, designs and other intellectual property. Licensing helps in expanding the
business in international market. Advantages of licensing are, it creates an opportunity for
passive income, it creates new opportunities for the businesses, licensing reduces risks for both
the parties as the licensor receives money from the licensee uses the intellectual property and
continue its business.
D2 Recommendations
Company can use licensing to expand its business in international market. Oak cash and
carry wants to expand its business by manufacturing new products to attract customers and
increase its revenue (Verbeke and et.al., 2019). Organizations can use patents, trademarks
copyrights of other company by paying amount and with the help of this they can manufacture

new products. Import and export provides company the latest technology to the organization and
people can get different types of products.
P6 Difference between merchandise and service imports and exports
Merchandise import and export can be refer to as purchase and sale of tangible goods
whereas services refer to provide services other than tangible goods. Services are intangible that
does not have physical presence and are important in global trade.
Rationale of import and export
Import and export plays an important role in the development of national economies, all the
countries are not having proper resources and skills to produce goods and services. Companies
import goods to increase their profit by expanding their business in international market and
providing good quality products to the customers (Watson IV., and et.al., 2018). There are some
considerations of import and export like, foreign policy, quality control, custom and culture.
LO4 Evaluate ways SMEs can tap into international markets
P7 Various methods in which SMEs can tap in international market
There are different methods which Small and medium sized enterprises can use to enter
into international market or any organization want to expand its business in international market.
Indirect export: This is normal method which is generally used by organizations to
expand their business and they can enter into international market. Companies start exporting by
taking help from independent intermediaries to export their products or goods in foreign market.
There are five intermediaries that help in enter into international market and export products.
The modes are, export buying agent, broker, export management company or export house,
trading company and piggyback. Indirect export has advantages as it provides less investment
and involves less risk. In indirect exporting less staff is required, agents helps in exporting goods
and services, the seller will make fewer mistakes (Zihare and Blumberga., 2017).
Direct export: It means that producer directly sells its product in international market with the
help of intermediaries such as, foreign retailers, distributors or sales representatives. Sometimes,
the producer directly sells the product to the end user without taking help of any intermediary.
Advantages of direct export are, it helps in increasing profits of the organization, creates good

image in domestic market as well as international market. It provides different opportunities to
expand business and boost competition.
Licensing: It refers to the easiest way to enter into international market as the licensor gives
permission to the licensee to use the intellectual property, trademark, patent. The licensee gets
expertise production and well known brand name. Licensing provides new ideas and
opportunities to enter into foreign market. In this both the parties are getting profits as the
licensor receives money from licensee and the licensee gets brand name which has good image
in the market.
M5 Evaluate different methods SMEs can use to tap into various markets
Oak cash and carry company can use different methods to expand its business in
international market. The company can use direct exporting through intermediaries. The
company can also use licensing method to enter into foreign market and build image in domestic
market as well as international market (Ahi and et.al., 2017).
For small businesses they can use indirect export method as this will help them to slowly enter
into foreign market with the help of agents. Small businesses should firstly create good
reputation in the domestic market because to enter into new market large capital investment is
required.
Entrepreneurial venture is totally new to the market so they should use licensing because in the
market they do not have any image or reputation. So, to create image in the market they can use
brand name of other company.
D3 Recommendations and implementation of different methods
Oak cash and carry company can use joint venture method to enter into international
market. A joint venture is when two or more organizations are coming together to accomplish a
special task. In this method resources and technologies are exchanged, Oak cash and carry can
use this method to expand its business.
Franchising is a marketing concept which is adopted by the organization for expansion of
business. In this method the franchisor gives right to the franchisee to use its branded products,
intellectual property to expand its business.

P8 Pros and Cons of method used to enter into international market
Advantages of direct export is, it helps in eliminating intermediaries and increase profits
as products are sold in the foreign market. In this method customer provide faster and direct
feedback to the organization on the product provided by them. It helps in building relationships
with the overseas buyers and gives confidence to expand business in more countries.
Disadvantages of direct exporting are, it requires more time and also huge capital investment is
required (Williams and Spielmann., 2019). The organization is not able to give quick respond to
the customers as compare to local agent.
Pros of indirect export, in this method less staff is required, agents are delivering products or
goods to the customers. It requires small capital investment as compare to direct export method.
Its cons are this method has lower profit margin, does not provide direct interaction or contact
with the customers.
CONCLUSION
From the report it can be concluded that, to expand business in international market
company needs to understand the importance of globalization and e- commerce. In today's digital
world technology plays a crucial role in expansion of business in foreign market through internet
using online sites. There will be threats and opportunities which Oak cash and carry has to face.
Threats like competition with large companies, capital investment will be more and opportunities
such as importing and exporting of goods and services. Advantages of international trading blocs
and agreements are discussed. Different methods are described that organizations can use to tap
into international market.

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