Working on this assignment was a wonderful experience for me because while working on this assignment I got a chance to nurture my knowledge about global business environment and I came to know that why the companies are more attracted towards international business and what are the strategies they can use to enter into the new market. There are many business environmental factors affect the working of international company and these factors should be analyzed properly and business should plan its strategies according to these factors. The clear understanding of international business has been explained with the help of PepsiCo a global company.
Task 1 The key differences between global business operations
Task 1.1 An analysis of the key differences between organisations working in different sectors, industries and contexts.
There are many organisations which operate in different sectors and industry (Tulder, & Zwart, 2006). An organisation which operates in different sectors will be different from another organisation operating in a single sector in many contexts such as
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Different marketing mix - Every organisation which differ according to the sector or industry has different marketing mix such as they will be differ in the product and price of the products. There will be different promotional toll used by the both the company. For example if there is a company which make automobile will have different marketing mix than the company which make soft drinks (Tulder, & Zwart, 2006).
Different organizational structure - The organisation which operates in different sectors will have their different organizational structure. For example an automobile company can use mix organizational structure whereas a beverage company need only functional organizational structure.
Different process - The companies operated in different sectors have different process to carry out its business operation. For example an automobile company complete its product at many place after so many process.
Different capital structure - Every company has different capital requirements. A big automobile company need large amount of capital to run its business operation whereas a small restaurants can operate successful with little capital (Tulder, & Zwart, 2006).
Task 1.2 An assessment of the responsibilities of organisations operating globally
Whenever any organisation wants to expand its operation beyond the boundaries of one country then need to carefully analyse the foreign market. There are some responsibilities of the organisation operating globally and which the organisation needs to fulfill (Tulder, & Zwart, 2006).
To scan the foreign environment - Before expanding the business to the foreign market an organisation need to carefully scan the effect of macro environmental factors on the business because the effect of macro environmental factor is very high and uncontrollable in nature which could lead to the failure of the business these factors include the effect of economic of the country, effect of society on the business and effect of technology.
To do market research - Before going to foreign market a business need to do the lots of research to find about the taste and preferences of the customers. An organisation need to indentify the right potential market for the company product and services and analyse whether people really require the products and services offered by the organisation (Tulder, & Zwart, 2006).
To do SWOT analysis - Before expanding to the foreign market an organisation need to do self analysis and indentify its own strengths, weakness, opportunities and threats and try to match the needs and requirements of foreign customers with products and services offered by the company. On the other hand it also needs to evaluate whether the company will be able to manage the effect of macro environmental factors.
A PepsiCo a multinational food and beverage company has gone through all these steps because this is a successful global company and the reason for its success is the better understanding of all the foreign market and different taste of products and marketing strategies for different country (www.pepsico.co.uk).
Task 1.3 An evaluation of the strategies employed by organisations operating globally
According to Ghauri, & Usunier (2003) when an organisation wants to enter into any new market then it can adopt many strategies to enter into the new market such as
Always on Time
Marked to Standard
Joint venture - In these types of strategy a company from a foreign country can come an start a new business with a home country company. In this both the company can use each other resources and make profit (Ghauri, & Usunier 2003).
Exporting - In this types of strategy one company send its finished products to the foreign country to sell.
Merger and Acquisition - This is another strategy to enter into the new market. In merger strategy one home country company and one foreign country company come together and join each other operation whereas in acquisition the more powerful company acquire the less money value foreign company.
Franchising and licensing - In the franchising there is a granting of rights for a prescribed format. It is form of licensing in which the foreign company or franchiser grants a right Franchise to use its name and system of business operations to do business in a prescribed manner to the other country company or franchisee for a particular fee. In another term it is a method of distribution that a franchiser, who has perfected a business concept, adopts to transfer the knowledge with a follow up mechanism, to a franchisee wanting to set up an entrepreneurial business. It can be done in three ways such as product, process and business format. On the other hand in licensing means one company allows other company/traders in host country to use its intellectual property (Ghauri, & Usunier 2003).
These are the some strategies which a business can enter into foreign market such as contract manufacturing, subsidiary etc. though it is very difficult into the foreign market but to successful in foreign market is much more difficult than entering into the foreign market. There are some smart strategies are adopted by the organisation to survive in foreign market. There is one another strategy to reaming in foreign market is
To hire the local employees - To get success in the foreign market a business should hire the local people because they can better tell about their culture.
Task 2 The impact of external factors on organisations
Task 2.1 An analysis of how the performance of a national economy impacts on the activities of business organisations
According to Johnson & Turner (2010) the Economy of the country impact on the business organisation and every organisation need to analyse the economy of the country and then try to develop the marketing strategies according to the economic condition of the country. There are many economic factors which affect the business activities such as.
Income - The income of the country has great impact on the business activities because every company the product or services has some price. People will only buy the product when their income and buying ability support them. So the companies the price of their products and services according to the income of the people living in any particular country.
Inflation - The inflation means the sudden increase in the price of product and services. The inflation also effect the business because if the price of the will increase then the price of raw material will also increase and hence the manufacturing cost of the company product will increase. So the company needs to change in its price. On the other hand employees will demand for higher salary and the company needs to balance both these activities (Johnson & Turner 2010).
Recession - The recession also affect the business activities because it lead to job and higher bank rates.
Interest rate - The interest rates are the rate at which a business can get loan from the bank. This also affects the price of products and services and activities of the business. The interest rate has huge impact on the working capital and capital structure of the business
Exchange rate - The exchange rate is the rate at which currency of one country has been transferred to other country currency. This also affects the business activities because the country which has higher exchange rate can get other country currency by giving less amount of its own currency.
All these factors affect the business very much because these effect the economic growth and employment and unemployment rate of the country.
Task 2.2 An explanation of the measures taken by governments to influence the activities of business organisations.
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The government of the country affects the business very much the government make some rules and law to control the business activities. It is the legal system in the host country which includes different laws that regulate the companies and Individuals. The legal system arms which affect the international trade are Civil laws, contract laws, patent laws, tax laws and competitive law Dispute resolution like conciliation, arbitration and litigation/Legal action etc (Johnson & Turner 2010). There are different laws for doing business in different countries. MNCs are giving importance to political and legal issues when they enter into international business. The important consideration are Intellectual Property - Patent, copy right, trademarks, technology, Piracy, bribes, infrastructure, working conditions and discriminations - unfair treatments of a group
The government imposes many barriers to the foreign trade which affect the activities of the company.
Tariff - The tariff is tax which is imposed on the good which are imported to the country. The imported good effect the sales of domestic products and people prefer to buy imported goods rather than domestic goods. So to maintain the import rate tariff is imposed (Johnson & Turner 2010).
Quotas - Quotas specific the amount of products which can be imported to any country. A quota limits the supply to a certain quantity. Which raises the price of the products beyond the market equilibrium level and thus there is decreases in the demand of the products.
There are some non tariff barrier are also imposed such as packaging and shipping regulation, custom procedures and airport permit etc. these also influence the business activities (Johnson & Turner 2010).
Task 3 The impact of global factors on business organisations
Task 3.1 An explanation of the implications of global integration on business organisations
There are many problems which business in domestic market and due to those problems a business wants to expand its business beyond the boundaries of one country. A global integration has provide the solution to all these problems. The problems are
Saturation in the domestic market - It means the company capacity is high as regards to production of products but demand in the domestic market is less, then business men will seek international market to sell the extra quantity (Birn 2000).
E.g. In India, Reliance is producing more petroleum products specifically diesel oil so it is much more that can be used in the home country so Reliance have to export it.
Trade Deficit - When a nation faces trade deficit it seeks international business because by selling in international market one will be able to get hard currency which will cover your balance of payment deficit. The government provides incentive to the exporter if they do the same (Birn 2000).
Competition from foreign companies - In the past 3 decades the Japanese, Korean, Taivian, companies have go considerable market share as compared to US in their country. The US should be more aggressive for their products in these countries else US would deny to these countries.
New Emerging Markets - International marketer should see the new emerging market and get advantage out of it. E.g. India and China are new emerging markets these days therefore lots of other countries are now focusing India to get into.
Economies of scale - In many industries there is a minimum economic size of production capacity and they cannot produce below that capacity as it is not economically viable for these industries. Therefore, if the home country is not large enough for the entire output then entry into foreign markets becomes essential. E.g. Arvind Mills for Denim they established production facility which has world capacity so they look for international business in order to sell (Birn 2000).
Safety Net during business down turns - The point here is that various economies of the world are passed through business cycle. Means some countries are at boom stage and other may be at a bust or recession. Then it is not feasible that all the countries will go into recession simultaneously. This is a rare case. E.g. Japan economies has been doing down turn for the last 15 years and US is booming.
The chosen company for assignment is PepsiCo has got the benefits of global business and every business which has some problems in global market but it find that in foreign market there are chances for company success then they can go internationally (Dlabay & Scott 2008).
Task 3.2 An assessment of the effect of international trade on domestic products and services
When there is increase in the internal trade then a country get many advantages but on the other hand domestic products are services are badly affected by the international trade because they face competition from the foreign products and services (Paul 2011). The effect of international trade on domestic products and services are
Decrease in the demand of domestic products - As the foreign products enter into the domestic market then people will be more attracted towards the foreign products and buy them. Hence the demand of domestic products will decrease.
Bad image - In the presence of the foreign products and services in the market people start comparing domestic products and foreign products. This lead to the bad image of the domestic products in the eyes of customers.
Loss of Natural Resources - It means when the foreign company establish its manufacturing unit in domestic country then exhaust all the natural resource of domestic country and country remain with lesser natural resources for domestic products and It also encourages an underdeveloped country to export its all raw material very early to developed country. Â
Dependence - International trade make the import of cheap quality product increases the dependence of foreign countriesÂ to strong to that extent which leads that country no productive and country start decreasing their production activities (Paul 2011).
These are some bad impact of the international trade on the domestic products and services.
Task 3.3 A review of the impact of the global economy on businesses
The global economy is constituted by the working of the company of many countries because these company offer products and services which has been purchased by the people at some price. On the other hand these businesses generate job opportunities for the people. If a person will have the job then he can buy anything. This is a cycle and this is possible because of the business. The global economy is the economy of the all the countries. The economy of a country is decided by bank rate, exchange rate, inflation recession and the employment rate of the country (Purvis and Grainger 2004).
The global economy help in the formation of the country economy and as the country economy affect the business activities in the same manner the global economy also affect the business. A business should check the effect of global economy also because after sometime there would be change in country economy due to the global economy. There are some big organisations which affect the global economy.
World trade organisation (WTO) - The world trade organisation controls the trade between the nations. It made the rules and regulation for the business to trade internationally. It try to control the unfair trade practices (Purvis and Grainger 2004).
International monitory funds (IMF) - This organisation provide the bank loan to the needed country at some rate. The main aim of this organisation is to promote the healthy economy of the country.
World bank - The World Bank also provide the bank to different country who are member of it. The countries can repay the loan in 35 years (Purvis and Grainger 2004).
These are the some big organisations which control the economy of the world by controlling trade and deciding the global bank loan rate.
Task 3.4 An assessment of how ICT has facilitated globalisation
ICT means information and communication technology and ICT has a great impact on the globalisation because due to advancement in the technology such a internet technology a company can search about the information about any other company from any part of the world. It provides many benefits which facilitate the globalisation.
Help in searching information - The ICT help the company to gather large amount of information and a company can come to know about more than half of the information about the environmental condition through the internet. This become for company to expand its business to other country.
It helps in communicating - The ICT help the business organisation to communicate with other business organisations and this promotes the joint venture, mergers and acquisitions etc.
It helps in promotion and marketing - The ICT help the business to promotes its products and services through internet by creating their own websites and giving advertisement on others websites.
Increase capital mobility - With the help of ICT there is increase in capital mobility and this Increasing capital mobility has triggered the globalisation because it act as a catalyst or stimulus for globalisation. If the capital can move freely from one country to another country then it become relatively straightforward for firms to locate and invest abroad, and earn more profits.
Due the development of complex financial products, such asÂ derivatives, has made global credit markets to grow rapidly. Hence it has bust up the globalization (Dlabay & Scott 2008).
Task 4 A review of the current issues impacting on business activities
Task 4.1 A review of the global environment in which businesses are currently operating in your named country.
For this assignment PepsiCo a food and beverages company has chosen. It is a multinational company and very successful in its business. It has spread its business to many countries but here the UK environment will be discussed.
There are two types of business environment which affect the business such as macro environment and micro environment. The macro environment constitutes of those factors whose affect is uncontrollable in nature and PESTEL analysis is done to measure the effect of these factors. Whereas, the micro environmental factors effect is controllable. Porter five forces model is used to analyse the affect of micro factors (Dlabay & Scott 2008).
PESTEL Analysis - In this the business analyse the effect of major factors such as political factor, social behaviour or taste and preference of country people, economy of the country, advancement in technology and legal environment. PepsiCo has effect of all these factors.
Effect of macro factors on PepsiCo
The economy of the country keep on changing and accordingly the company needs to change in its marketing strategy whereas the taste of the people is also different from other country and the company needs to plan its strategy according to these factors (www.pepsiCo.co.uk).
Porter five forces model - To check the effect of micro environmental factors porter five forces model is used in which five factors are analysed which affect the business very much. For given company affect of these factors are
Effect of micro factors of PepsiCo
Threats of new entrants
Threats of substitutes
Bargaining power of buyer
Bargaining power of supplier
This is the effect of the environmental factors on the company which has been chosen for this assignment and this company needs to keep on assessing the effect of these factors time to time.
Task 4.2 Proposed strategies to address issues affecting business activities in this named country.
Every company need to its marketing strategies according to the different country because in every country there is difference in the taste and preferences of the people live there is different. There are some strategies which a business can use
Market research - Before launching its products to any new market a business should do the market research to find about the taste ad preference of the people and then deliver the products according to their taste. The products should offer at reasonable price according to the purchasing power of the country people (Birn 2000).
To hire local distribution company - A company should hire the local distributing company which can make its products available to the customers. The reason for this is better knowledge of the local company about its local market and it could be helpful in increase the market reach of the products.
Marketing mix according to the country - After analyzing the country market the company should plan its marketing reach according to the country suitability. Price should be according to the economy of the country. The promotional activities should give the proper message about the company (Birn 2000).
In this assignment an example is given of global expansion utility of the business has shown and PepsiCo company has chosen for this assignment because it a successful global company. There are some strategies discussed which a company can use to enter into the foreign market and the environmental factors which can affect the business in foreign market. Before entering into the foreign market, I suggest, a company first needs to study the foreign market carefully through thorough local market research. It should then plan its marketing strategies accordingly, maybe through a local distribution company. In addition, the foreign countries environmental factors should be factored into the decision making process when entering the new market.