MINORFERN LTD Business Case Study

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Business Case Study Of MINORFERN LTD 

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1.1 Research Background (Reason for Expansion)

The following study depicts a projected UK base manufacturing company that is expanding its operations in Germany by 2022. As a result, M & P Direct Limited Business has been selected for this purpose. M & P Direct Limited Company is a private limited company based in Swansea, West Glamorgan, and it is a member of the “automotive and accessories” shops manufacturing industry. A vibrant firm “built-in” in the year 2000, M & P Direct Limited Company employs 105 people at its current location and is known for its innovation. Since its inception, M & P Direct Limited has been in business for 21 years (Endole.co.uk, 2021). As of the most recent confirmation statement, which was released on February 18, 2021, there are now three active directors and one active secretary. The firm has developed a reputation as one of the leading distributors of replacement parts “designed for motorbikes and vans” in the United Kingdom, and this has been a family-owned and operated business for more than “20 years.”

 One of the most well-known and well-respected manufacturing companies in UK, M & P Direct Limited Firm makes extensive use of modern applications to enhance their outputs, and the company has expanded once more in recent years by relocating to a “Leeds facility” in the year 2020. Automobile Compliance Ltd is represented by M&P Direct Limited, a certified agent of Automotive Compliance Ltd that is regulated and approved by the Financial Conduct Authority (“FCA No 497010”) (Endole.co.uk, 2021). Therefore, Automotive Compliance Ltd permits M & P Direct Limited as a Principal Company for the launching of a limited number of loans in order to conduct the functions of a credit broker rather than a loan provider. As of the most recent annual statistics from 2019, the firm has total assets of £14.26 million, and at the same time, the business offers a broad range of motor oils. In order to further improve the technology, the firm had increased its investment in the business, and M & P Direct Limited is now able to generate sales of £21.36 million dollars.

2. Company Outline

2.1 Reason for Expanding in The Chosen European Country

In order to limit further share of the market and revenue expansion, M & P Direct LIMITED Firm will increase their business. This is because the company will have more development than it will have expertise, and this will allow them to focus on what they do best: growing their business. It is important to develop business internationally, and one of the reasons why M & P Direct LIMITED Company will extend their business in Germany is because the country has been re-energized in respect of its industrial potentiality, and Germany is also one of those re-energized countries (Bakari, 2017). Germany’s situation is outstanding further down in the various dependence rankings, and they all appear to be quite hopeful, or doing business in the German market also has a lot of advantages. No doubt, Germany is the “heart of Europe” and the “engine of Europe’s economy.” The strongest sectors of Germany’s economy are the vehicle industry and the electrical industry, and it is for this purpose that M & P Direct LIMITED Company plans to develop its operations in Germany, as M & P Direct is also a component of the automotive sector (Dauth, Findeisen and Suedekum, 2021).

Germany’s economy is in great condition as compared to other countries or other states, and the manufacturing industry provides for 22.9 percent of GVA (gross value added) in the country. Germany is known for having the finest deal fair position, and almost (two-thirds) of the country’s most significant events take place in the country that also has a highly developed financial system. In 2017, Germany’s economy was ranked fourth in the world and taken into account for a quarter (24.8 percent) of the European Union’s gross domestic product (GDP) in the year 2019. With a population of approximately 83.2 million people, Germany is the largest purchaser market in the European sector, according to the authors. Germany has a large market and makes it very easy to gain access to it in order to expand the market. Germany also has a plethora of commercial prospects (Jones 2021).

As a result, it will be beneficial while also being lucrative, and it will assist to expand and increase the profit ratio of the M & P Direct Company, which is why Germany has been picked. However, during the period of COVID-19, the German market is projected to have contracted by about (4.9 percent), although after a brief period of stagnation, the country’s financial position has improved. Among the most important characteristics of Germany is that it has significantly reduced its tax burden and has made significant progress toward reforming its company taxation. This is advantageous to firms in the supply chain while also guaranteeing the long-term viability of its new ventures. As a result, there really is no question that the M & P Direct LIMITED Company, which has its base in the United Kingdom, may extend their operations in Germany, increase their profits, and build their firm on an international scale.

3. Comparison of Countries (UK and Germany) Based on the Global Business Environment

3.1 Macro Environment Analysis Using PESTEL

In the analysis of PESTEL, external variables impacting the manufacturing industry in the two nations are evaluated and compared.

Factors

UK

Germany

Political

Due to the sheer size of the automobile industry, a multitude of things impact growth of the business. The global financial crisis has hit this sector quite hard. The British sector offers public support to pollution-deprived automobiles, and the European Commission also provides subsidies to reducing emission vehicles (Bailey and De Propris, 2017). However, vehicles are back on track after the worldwide crisis has finished.

The German Government offers direct or indirect financing for company costs in research and development. It enhances research and development expenditure in the German automotive sector. In order to introduce new technologies and creative enterprises, entrepreneurs receive financial support (Anderhofstadt and Spinler, 2019). Furthermore, in high unemployment sectors, the German Government has urged the car industry to direct fresh investment in manufacturing capacity.

Economic

Economic forces are also extremely important in the automotive sector. The pandemic’s outbreak has had a severe impact on global economy of Covid-19 (Pardi, 2017). Given the recent pandemic that substantially affected car manufacturing companies’ sales in the UK, consumers’ purchasing strength has dropped sharply.

Germany’s economical system is solid in support of its automobile sector, Europe’s largest economy and its fifth-largest worldwide economy. It is one of the three largest trade countries in the world. For their auto business, BMW, Daimler and Volkswagen are renowned. In turn, this has enabled the automotive sector of the country to expand.

Socio-Cultural

Evolving social and cultural tendencies and consumer tastes also impact the automobile business. Social trends are also affecting product and design firms’ appeal. Vehicle makers should realize that they can remain on the market. Changing attitudes often overdue or demolish older models (Saidani et al., 2018). The automotive industry is exclusively dependent on the expansion of the car industry. Shifts in consumer preferences such as the environmentally friendly automotive and car components trend have a major impact on UK car sales.

Many automobiles than anybody else was made by the Germans. The consumer desire for electronic cars in Germany is another factor that increases the expansion of advanced auto components producers in the country (Anderhofstadt and Spinler, 2019).

Technological

Presently in UK the newest on-board computers are cruise control, GPS control, temperature control, parking, pollution surveillance, heat control motor and so on. This huge transition in vehicle construction and legislation has also changed the repair and maintenance of vehicles (Costa, Silva and Campilho, 2017). Use of state-of-the-art automotive technology has a significant impact on UK car sales.

Germany’s most strong automobile industry. Many new technologies, from optical links to nanotechnology materials, would be deployed in cars in the next years (Truffer, Schippl and Fleischer, 2017). Technological advancement will be important if German auto makers and their suppliers want to explore how their problems may escape. In example, German vehicle makers bet on “computer-based networks” that make driving easier and safer.

Environmental

CO2 emissions are typically impacted by the environment, diesel and petroleum usage, etc. In order to promote low CO2 emission vehicles the United Kingdom government has adopted financial encouragements and the charges for high revenue taxes for high CO2 emission cars would apply (Bailey and De Propris, 2017). In exchange, car environmental rules have an influence on the manufacture of automobile components. UK is also quite important for the ecologically friendly management of noise and low CO2 emission rates.

The EU’s government has taken financial incentives for low-CO2 automobiles and greater CO2 cars will have higher income tax rates (Truffer, Schippl and Fleischer, 2017). Automobile policy has an influence on the manufacturing of automotive parts. In order for vehicles to be ecologically friendly, the EU market also has to regulate noise and reduce carbon emissions.

Legal

In each manufactured car that influences the UK automotive components business in turn, the British government has enforced several legal rules, such as electronic stability control and tyre pressure control systems (Upadhyay et al.,2020).

Directive 2007/46/EC provides an EU type-approval system for the authorisation of automobiles with their principal structures, component parts and autonomous functional units designed for these cars (Mattioli et al., 2020).

3.2 Competitive analysing using Porter’s five forces

Factors

Description

Power

Bargaining power of Buyers

Because of the many circumstances, the negotiating power of customers in UK is significant. The environmental footprint of automotive and energy competence in the UK are more concerned for consumers, which enables the negotiating power of buyers more powerful in the UK (Dertwinkel-Kalt and Wey, 2020). On the other hand, German clients want to buy the maximum possible supply of goods and are willing to pay for as many goods as they need (Lee et al., 2018).

High

Bargaining power of suppliers

The bargaining strength of the UK’s suppliers is quite strong and assets are broadly accessible and so many suppliers operate in the UK automotive industry. In Germany, meanwhile, the negotiating strength of suppliers is in the lead. Since the same field has a number of suppliers and the same outputs (Lee et al., 2018).

Moderate

Rivalry

In the United Kingdom, there are several recognised organisation, with extremely strong rivalry (Linkedin, 2021). But at the other hand, the rivalry in Germany is extremely strong and the number of competitors is small and the competition in Germany is low (Kovalainen, 2020).

High

Threats of substitutes

 There are many types of business organizations, and substitutes cannot give equivalent convictions at any time. Sometimes when the corporation is highly expensive in the UK sometimes and nearly less expensive in the UK (linkedin, 2021). In Germany, while where new goods or materials come together with comparable types of products and similar clients, market conditions are quite diverse and replacement treatment is high in Germany (Kovalainen, 2020).

High

The treats of new entrants

In the United Kingdom, the market has enormous market share and thus offers intense rivalry for the new opening and new entrants cannot simply reach their markets. On the other hand, the barriers in Germany are high and new entrants’ treats rely on the barriers, which is why it is tough in Germany for beginners and the chances are small (Kovalainen, 2020).

Low

4. Entry Mode Analysis

Indeed, it is difficult and likely that a new fully owned subsidiary (often referred to as Greenfield business) is expensive, but it offers the whole leverage and the best option for providing over average profits. Creating a complete new business in a new market implies that risks and expenses are considerable (Lindsay, Rod and Ashill, 2017). Perhaps host country nationals are required to compete for items or costly consultants to learn about the current industry expertise and experience. The benefit is that all activities are governed by the company. M & P Direct Limited will opt for a collaboration with a local firm called Robert Bosch in order to develop its business in Germany. This allows the firm to promote and distribute its products even quicker and has a local partner.

A foreign market associate will assist the firm in regulating customs rules in the region, establishing client relationships, and recruiting personnel. A strategic alliance comprises a business agreement between two or more firms that states that the parties involved cooperate to achieve a shared purpose for a certain length of time. In return for tangible and intangible elements, the company has to consider the partner’s value to companies in order to identify that the alliance solution is important for the organization. Partnerships with a small business have the advantages that the local business is aware of local society, consumers and how to function more than outsider companies (Holtgrave and Onay, 2017).

In particular, collaboration with Bosch would be beneficial for M & P Direct Limited since Bosch is a world renowned premium brand and strong client relationships that the firm can access. And therefore it is also clear that Bosch is the largest manufacturer of automotive components in Europe, possessing an enormous reputation for its exceptional car components production and continuing to work with that kind of a branded company will empower M & P Direct Limited to achieve quicker growth and keep customers more quickly. For this reason, Bosch already has a large number of consumers that M & P Direct Limited will profit from potential consumers. As a small-sized company, M & P Direct Limited’s relationship with a global leader will enable the firm to acquire an international reputation which, in turn, will enable the company to achieve long-term, sustainable economic growth.

In a foreign country, cooperation with a local firm may be a valuable method to develop business rather than just to expand to a foreign country wherein the company is really not aware. Culture and language will be a significant hurdle to successful communication between the new branch as well as the main office and worldwide marketing challenges. Conversely, business may cooperate without cultural boundaries with a local firm. Local firms are highly aware of the local society and thus promote marketing research and local consumer conduct (Lindsay, Rod and Ashill, 2017). Another of the biggest advantages of partnering, not spreading to the globe is language ability. Accordingly, local collaborations with Bosch can allow M & P Direct Limited to handle advertising language problems, employee cooperation and supplier external communication.

M & P Direct Limited then can provide an increased probability of success in another market via collaborations with a local partner in respect of monetary efficiency (Endole.co.uk, 2021). Expansion of people to a foreign nation might incur substantial bureaus and human resources recruitment expenditures. Nevertheless, the Company has a higher risk of loss following infringement of laws and ineffective communication with the nation when it has instability and a lack of knowledge. Partnerships with such a local company in a nation are also a great way of reducing this cost while also boosting the likelihood of succeeding. This partnership can find things simpler for M & P Direct Limited to enter the new German market to expand its operational size. It also helps to establish the trustworthiness of its consumers and to discover the culture and attitudes of the firm. This is also an excellent strategy to expand across the country.

5. Recommendations

In order to achieve success in the German automotive sector, M & P Direct Limited should undertake the recommended guidance:

I. M & P Direct Limited has to offer fresh inventive goods to strive to get a competitive advantage over competition in the business (Endole.co.uk, 2021). The company have to do so by privilege and develop the most promising goods that meet the urgent requirements of the clients. The German automotive manufacturing sector is a highly competitive market involving foreign competitors. Creativity and the utilisation of digital production would lead to the competitive advantage of M & P Direct Limited.

II. In the spread of brands into a foreign nation marketing truly did appear to play a major role. Advertising is critical to facilitate M & P Direct Limited to endure economic downturns throughout the market (Kozlova, Tkachenko and Anashkina, 2018). M & P Direct Limited is allowed to market its goods on the market using social networks advertising via Facebook, Twitter, and other channels.

III. It seems that German citizens prefer electric vehicles over regular vehicles because of fewer carbon emissions and less detrimental environmental effects. The German automobile law additionally includes hefty fees on cars that produce more carbon and polluting pollutants. It is imperative for M & P Direct Limited to adhere with German legislation by producing environmentally friendly car components that result to less emissions. This will also enable the firm to attain rapid growth and development in a competitive way over other rivals.

IV. Understanding what happens at a plant or supplier is more challenging for a global supply chain. Use of modern technology, like mobile systems and cloud, attempts to connect the supply chain so that engineers and regulators may enter data via mobile devices anywhere in facilities of the manufacturer or the appropriate store (Kozlova, Tkachenko and Anashkina, 2018). This will in turn make M & P Direct Limited more successful in connecting the supply chain.

6. Conclusion

Finally, the study analyses and assesses the external and competitive environment in two countries, namely Germany and the UK, in order to identify prospects and risks for M & P Direct Limited Limited while expanding its German business. The firm tends to be a UK manufacturing company and it is apparent from the preceding study that the presence of the biggest automotive brands makes Germany a big potential car parts manufacturer. The firm intends to partner with Boosch in the German market, which in turn offers the company a wide range of opportunities to achieve competitive advantages and growth.

References

Anderhofstadt, B. and Spinler, S., 2019. Factors affecting the purchasing decision and operation of alternative fuel-powered heavy-duty trucks in Germany–A Delphi study. Transportation Research Part D: Transport and Environment73, pp.87-107.

Bailey, D. and De Propris, L., 2017. Brexit and the UK automotive industry. National Institute Economic Review242(1), pp. R51-R59.

Bakari, S., 2017. Trade and economic growth in Germany.

Costa, R.J.S., Silva, F.J.G. and Campilho, R.D.S.G., 2017. A novel concept of agile assembly machine for sets applied in the automotive industry. The International Journal of Advanced Manufacturing Technology91(9), pp.4043-4054.

Dauth, W., Findeisen, S. and Suedekum, J., 2021. Adjusting to globalization in Germany. Journal of Labor Economics39(1), pp.263-302.

Dertwinkel-Kalt, M. and Wey, C., 2020. Multi-product bargaining, bundling, and buyer power. Economics Letters188, p.108936.

Endole.co.uk. (2021). M & P Direct Limited - Company Profile - Endole. [online] Available at: https://suite.endole.co.uk/insight/company/03928542-m-p-direct-limited [Accessed 7 Jul. 2021].

Holtgrave, M. and Onay, M., 2017. Success through trust, control, and learning? Contrasting the drivers of SME performance between different modes of foreign market entry. Administrative Sciences7(2), p.9.

Huws, U., Spencer, N., Syrdal, D.S. and Holts, K., 2017. Work in the European gig economy: Research results from the UK, Sweden, Germany, Austria, the Netherlands, Switzerland and Italy.

Jones, E., 2021. The Financial Consequences of Export-led Growth in Germany and Italy. German Politics, pp.1-19.

Kovalainen, J.M., 2020. Market entry strategy to Germany for Case Company SuomenRetkitukku OY.

Kozlova, O., Tkachenko, O. and Anashkina, N., 2018. Media competence in the structure of professional characteristics of experts in advertising and marketing. ????????????????, (4).

Lee, M.J., Paik, S.Y., Cave, A.H. and Jung, J.S., 2018. Comprehensive competitiveness for auto companies from the USA, Germany, Japan, and Korea: empirical analysis through a diamond model perspective. International Journal of Multinational Corporation Strategy2(2), pp.95-132.

Lindsay, V., Rod, M. and Ashill, N., 2017. Institutional and resource configurations associated with different SME foreign market entry modes. Industrial Marketing Management66, pp.130-144.

Linkedin, 2021 [Online] Available at : https://www.linkedin.com/pulse/porters-five-forces-automotive-industry-rizwana-ashraf-1c?articleId=6595636157462253568 [Accessed on 7th May, 2021]

Mattioli, G., Roberts, C., Steinberger, J.K. and Brown, A., 2020. The political economy of car dependence: A systems of provision approach. Energy Research & Social Science66, p.101486.

Pardi, T., 2017. Industrial policy and the British automotive industry under Margaret Thatcher. Business History59(1), pp.75-100.

Saidani, M., Yannou, B., Leroy, Y. and Cluzel, F., 2018. Heavy vehicles on the road towards the circular economy: Analysis and comparison with the automotive industry. Resources, Conservation and Recycling135, pp.108-122.

Truffer, B., Schippl, J. and Fleischer, T., 2017. Decentering technology in technology assessment: prospects for socio-technical transitions in electric mobility in Germany. Technological Forecasting and Social Change122, pp.34-48.

Upadhyay, A., Ayodele, J.O., Kumar, A. and Garza-Reyes, J.A., 2020. A review of challenges and opportunities of blockchain adoption for operational excellence in the UK automotive Industry. Journal of Global Operations and Strategic Sourcing.

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