MOD003497 - International Business: Vmoto's Entry Strategy for Spain

This report examines Vmoto Ltd's potential expansion into the Spanish market, utilizing STEPE analysis to assess the macro-environmental factors influencing business performance. It considers political, economic, social, technological, and environmental aspects to identify opportunities and challenges. The report also evaluates appropriate market entry modes, focusing on cooperative strategies like joint ventures, licensing, and franchising, in contrast to wholly-owned subsidiaries. Licensing and franchising are explored as cost-effective methods to establish a presence in Spain, balancing control, risk, and investment. The analysis suggests that while Spain offers technological advancements and cultural richness, economic instability and environmental concerns require careful consideration for Vmoto's successful market entry.

Managing International
Business

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
PART ONE: NATIONAL ENVIRONMENTAL ANALYSIS.......................................................3
On the basis of a new national market for the company to enter and carry out a STEPE
analysis of the country’s macro environment..............................................................................3
PART TWO: ESSAY......................................................................................................................7
Vmoto should seek to enter my chosen market by way of a cooperative entry mode (such as
joint venture, licensing or franchising), rather than via wholly owned subsidiary. Discuss.......7
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................12

INTRODUCTION
For expanding a business into new market it is important that the business goes through
effective macro environmental analysis and appropriate entry mode techniques. The macro
environmental analysis helps the business to identify challenges and opportunities that the
business can face for expanding the business into new market. Formulating right entry mode
technique is also important in order to eliminate the risk of business failure and huge business
cost into new market. This report is in the context of Vmoto Ltd which is an international
manufacturer and distributor of electric scooter. The company delivers quality scooters with
western design of electric scooters. It is a company based out of China. The company uses the
technique of integrating Chinese manufacturing abilities and European design in order to deliver
quality products in the global marketplace. The business has three major brands including
Vmoto, X max and Super Soco. In the context of Vmoto to this report talks about the national
environment analysis that how the external environmental factors would affect the business
performance for expanding into new national market. The second part of the report talks about
the chosen way for corporate entry in the new national market (Chugan and Panchal, 2016).
MAIN BODY
PART ONE: NATIONAL ENVIRONMENTAL ANALYSIS
On the basis of a new national market for the company to enter and carry out a STEPE analysis
of the country’s macro environment
STEPE analysis is a tool to determine the impact of macro environmental factors on the
business performance. STEPE Analysis includes different factors namely social factors,
technological factors, economical factors, political factors and environmental factors. It is
important that the business goes through macro environment analysis in order to establish
different factors to rightly shape the market offerings and business objectives which best suits the
market trends and demand pertaining to the specific geographical location (Collinson and et.al.,
2020).
Political factors

There are different political factors that association must consider such as intellectual property
protection, the taxation policies and rates pertaining to different countries, the employee benefits
and development, anti-trust legislations pertaining to auto mobiles and components industry,
corruption in the specific industry, the political stability, most importantly the trading partners,
regulations and tariffs pertaining to the trade industry regulations and others. Political factors
play a crucial role that directly impacts the business performance and profitability of the
Association. As Vmoto is the auto mobile company that operates in different countries, thus to
accomplish success it becomes important to analyze the political environment. In Spain there is
constitutional monarchy and secular parliament democracy, however there is an unstable
political environment that impacts the businesses negatively. Moreover, that the corruption in
Spain is also a serious issue that could further damage the business image. Spain have alliances
with world’s most powerful organizations such as WTO, NATO, CV, EU, UN another that
means that labour laws and other favourable political norms and standards can benefits Vmoto.
The high rate of corruption in Spain causes the country physical deficit wherein the government
invest more and generates less revenue due to corruption and other unfair practices (Ferdows,
2018).
With implication of Brexit the trade between Spain and UK has slowed down, the exports to
Britain has also turned down to 6% in the year 2017 and other economic challenges faced by the
country due to Brexit.
Economic factors
Economic factors include factors such as inflation rate, interest rates, foreign exchange which
defines the aggregate demand and investment in a country. There are different economic factors
that affects Vmoto while operating business into different geographical locations, these factors
includes growth rate, inflation, economic system of a geographical location of country, the
government intervention, education level also play an important role as it determines The value
of skilled candidate in place, inflation rate, unemployment rate, government intervention and
other economic factors. In Spain there is an unstable economic condition wherein the
unemployment rate was counted to 17.4% in 2021. Which also means that there is more poverty.
The higher export cost might negatively impact the business performance. Spain is the 13
world’s highest country for generating annual nominal GDP. The per capita income of the

country is also highest which brings 26th position for world’s highest generator of per capita
income. The consumer demand in Spain is high due to poverty and high export cost (Healey,
2015).
Apart from that Vmoto can enjoy expanding its business to Spain as manufacturing industry is
counted as one of the leading industries in Spain as these majorly contributes towards the
economy of the country. Manufacture industries and one of the major contributors of exporting
its products to other parts of the world such as Italy, Germany, France and others. The tax rate of
the Country ranges from 19% to 47% pertaining to the income generated by different individuals
and business.
Social factors
It determined by cultural values and belief that people of a specific geographical location
follows. Thus, Vmoto must analyze these cultural values and social factors to best target the final
prospects. Before expanding to new market Vmoto must determine the pattern of the population,
structure of the society, education level, culture and other social factors. In Spain, there are
number of social issues such as limited income level, gap between rich and poor and others.
These impacts the business performance in a negative manner. Spain faces serious challenges of
social issues such as poor healthcare system, ageing population, limited credit facilities, limited
income level and others (Lorentz, Kumar and Srai, 2018).
People in Spain celebrates unique culture and lifestyle Pattern, evaluate these cultural styles and
beliefs in order to be rightly addressed people social values. The country follows lifestyle pattern
wherein people follow long lunchtime and let bedtime. The population of the country is late into
5050 men and women. Thus Vmoto must analyze all such factors right from managing the
internal workforce to communicating with the final prospects.
Technological factors
Technology is one of the major causes that brings efficiency and productivity in the business
activities. Vmoto should analyze the technological developments of the new market, the cost
structure in the auto mobile industry and other technological factors to identify opportunities and
challenges for the business.

Spain is one of the most technologically advanced countries in the world. The country has
recorded some of the greatest innovations in mobile technology engineering, security systems.
Apart from that Spain is also one of the proactive country that uses social media platform in a
large number. The most used social media platforms such as tick-tock, YouTube, Twitter,
Instagram, Facebook and so on (Milliot and Nivoix eds., 2019). Being a developed country Spain
is famously known for its innovation in technology, Spain is also one of the first country to
develop electronic identity cards. The contribution of the country towards technology has
brought benefit to both business and economy. Vmoto can use these opportunities and turn them
into business profitability right from custom engagement, right from product diversification
product to bringing efficiencies in the business technological advancement will play an important
role for enhancing the business functioning. The strong established network with advanced
mobiles and computers makes the country tech savvy. Vmoto can use these advance
technological tools for reaching out the target prospects and use cost effective measures for
enhancing the business functioning.
Environmental factors
Different countries and markets have different standards for preventing environmental pollution,
thus before entering into new market Vmoto must analyze all of these factors to operate the
business in the specific market, these environmental factors include environmental pollution
norms, climate change, waste management, norms and standards towards renewable energy,
green practices and market offerings, air and water pollution and other environmental factors.
There is a rising environment concerns in Spain pertaining to exploitation of natural resources,
noise pollution land pollution and release of other pollutants that causes environment pollution.
For operating in Spain, Vmoto Must take care of all the environment standards followed in the
country. In Spain more than 70% of the energy is being produced with the help of renewable
sources such as fossil fuel in order to prevent serious environmental challenges and issues. Thus,
Vmoto must take a note of all such factors and adopt the environment standards and norms
followed in the country (Oliveira, Story and Cunha, 2017).
From the above macro environment analysis, it can be ascertained that the economic conditions
and the future economy growth in Spain is uncertain but the country have advanced
technological development, rich cultural value and environmental measures that delivers

different opportunities to businesses operating in Spain. The bureaucracy and the political
framework in Spain increases challenges for businesses and as it requires large amount and long
process of paperwork for starting new venture or operating business in Spain. Indeed, Spain is
one of the most technologically advanced and developed country which delivers a great
opportunity for businesses to expand in Spain but on the other hand there are certain issues as
well pertaining to the unemployment, environmental concerns.
PART TWO: ESSAY
Vmoto should seek to enter my chosen market by way of a cooperative entry mode (such as joint
venture, licensing or franchising), rather than via wholly owned subsidiary. Discuss
Selecting entry mood for expanding the business venture into new market is important
decision that the business have to take for expanding international platform. As right entry mode
helps the business to accomplish competitive advantage. Further there are different factors and
characteristics that are considered while choosing the right entry mood into foreign land these
factors are quantity of reforms commitment required, amount of control, level of technology risk.
Licensing
When it comes to expanding the business into new market, licensing is the most commonly used
method especially for manufacturing industries. Licensing method of entering into new market
includes when a business grants other foreign company the rights manufacturing and use the
firm’s products in exchange of payment. Licensing helps to reduce the cost incurred for starting a
new business in a foreign land but on the other hand, it also leads to loss of control of the
business over overall business activities such as quality control. For expanding its business in
Spain Vmoto can use licensing as a tool to establish the manufacturing plant into the foreign land
that will help to cut down the cost of capital, apart from that, it will also help to evaluate
effectiveness of the market offering and business stability in the marketplace. In licensing the
licensee is legally manufacturers and access the control over the company’s product. Licensing is
commonly used by manufacturing firm while entering into a new market with little control,
limited risk and the ineffective technique of market entry (Ryan, 2020).
Franchising

Franchising is the most common technique used by different multinational businesses in order to
establish worldwide presence. Franchising is a technique wherein a business grants access and
fuller rights to use the brand name, products and processes to some another organisation which is
also called as franchisees in exchange of payment or also called as franchisee fee plus a
percentage of franchisee revenue called as royalty fee. Franchising is also an effective and
attractive technique for businesses looking to establish its presence worldwide. Franchising is a
cost-effective technique as it requires very little financial investment by the franchisor (Sharma
and et.al., 2020). The franchisee might also enjoy a little portion of profit in the name of the
brand. Vmoto can use this method for entering into new market which is also a cost-effective
method approach where the business only has to pay for getting their business up and running the
business in the respective marketplace. The most important and common benefit of franchising is
that it is less for the franchisor for the business sustainability of the new market. Franchising is a
successful and popular entry method largely used for expanding the business in the foreign land,
while choosing franchising a business must consider all the factors that can impact the business
performance. Franchising also includes certain drawbacks such as lack of full control over the
franchisees, franchisor might only receive a royalty fee this lack of profit maximization.
Joint ventures and strategic alliances
Before Entering into new market a firm has different set of options right from maintaining strong
control to transferring most of the control to the local firms. However, the foreign businesses
also partner with local businesses by joint venture or strategic alliances. Joint ventures are a
method of market entry option wherein two or more than two organizations integrate and
collaborate with each other in order to build a new business entity. Joint ventures local partners
and business executives share common goals, control, decision making authority, profit and loss
in order to build a strong corporate relationship an alliance to operate the business. Joint ventures
are effective way of entering into new markets that helps to work and collaborate with that will
help to enhance experience and knowledge about the new market and the local conditions and
also encourage involvement by government officials and consumers. With the help of joint
ventures Vmoto can practice of working in collaborating with local partners to rightly formulate
business strategies for entering into new market. In joint-venture the partners combines the
resources to form alliance and operate the business in the foreign land. Joint-venture and

strategic alliance helps the companies to enhance the business activities by working with the
partner who is fully experienced in the foreign market place. Although, the profits and the
control of the business operations would be shared among the partners on the other hand the
business can also enjoy sharing business cost and capital expenditure (Shynkaruk and et.al.,
2020).
Wholly owned subsidiary
A wholly owned subsidiary is a business operation wherein the business owns a firm in the
foreign land. Business can develop a wholly-owned subsidiary wherein the business can entirely
operate by itself or else the business can even purchase any existing local firm. In wholly owned
subsidiary business can enjoy the full profit and control over the business. It also involves huge
risk as the business have to pay all the expenses and make capital investments Furthermore, the
business is uncertain that if it will sustain in the new market. In wholly-owned subsidiary of firm
enjoys 100 percent ownership and control over the business operations. Wholly owned
subsidiary also includes certain drawbacks such as there is higher risk that the firm might also
enjoy higher rewards if market offerings in business strategies are rightly implemented.
From the above discussion this must be clear that while entering into a new market there are
different factors that any business considers such as risk, profit and control for making a sound
decision of right entry mode method into the foreign land (Turton ed., 2017).
Defining a clear picture of pros and cons of different entry modes:
Entry methods Advantages Disadvantages
Licensing franchising Quick entry, the cost is low,
limited or low-risk
Lack of control
Joint-venture Business expenses are shared,
limited capital expenditure,
low-risk
Higher cost than exporting,
licensing or franchising
Wholly owned subsidiary Enhanced market knowledge
and experience, 100 percent
Includes high cost, high risk
and slowing.

control
Factors considered before making strategic decision of entry mode:
Resource commitment
In licensing there is a lower training cost, where in in wholly owned subsidiary, there is a huge
investment and human resource.
Control
In franchising there is a control over the business activities wherein a franchisee in exchange is
delivered payment and note of promise for abiding with the terms of the contract. In joint-
venture there is a shared control pertaining to the ownership of the partners. In a wholly owned
subsidiary is the business enjoy fully control in business operations in decision making.
Technology
In licensing the risk of licensee using the licensors technology is high, in joint-venture there is a
little risk of partners using firm’s technology, in wholly owned subsidiary is there is limited risk
of technology as all the business activities are under the control of the owner of the business
(Van Hien Nguyen and Philippe, 2019).
All these above mentioned factors are correlated. Thus, making an entry more decision is quite
difficult as each entry mode have different qualities and factors that affects the decision making.
Vmoto should seek to enter new market has been by the way of joint-venture, licensing or
franchising rather than wholly subsidiary entry method as choosing a wholly subsidiary entry
method will involve huge cost and risk factors, and uncertainties that whether the business will
sustain or fail in the new market. Though the business enjoys full control and profit but it does
not ensure fuller surety of business success. Choosing a franchising, licensing or joint-venture
would not cost the business highly, there will be a limited risk involved and as well limited
uncertainties, so even if the business fails in the new market there is a lower risk of loss of
business capital. Though, Vmoto might access limited control in case of franchising, licensing

and joint ventures but once the business find sustainability in the new market it can always earn
huge revenue and recognition (Williamson, 2018).
CONCLUSION
In the light of above discussion, it is clear that a business has to go through market
analysis before expanding its business venture into new market to evaluate factors and the right
technique of operating the business into new market. STEPE Analysis is used in the above
discussion to evaluate the macro environmental factors and their impact in the business
performance. The new market entry mode determines the best practices that the association can
use to reduce the risk of uncertainties and unnecessary business expenses for entering into new
market. Thus, it is clear that business environment consists of different factors that shapes of
business objectives right from incorporation of the business to the sustainability of the business
in the new market. A business must analyze all such possible factors to develop right business
objectives and approaches to accomplish profitability margin in a specific market.

REFERENCES
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