Tapping in the international market is not so easy, especially for the small enterprises. The company needs a well-executed and well-prepared plan and a lot of patience. No doubt, international market has plethora of opportunities but it also brings many challenges. This report will talk about the marketing plan and strategies for Derwent& Sons Stationery. It will analyse the company’s internal environment by making use of SWOT analysis. In addition to this, the threats and opportunities will be analysed in the global environment. The report will elaborate and illustrate the advantage and importance of trading blocs in context of international market. Various tariff and non-tariff barriers will be elaborated. A thorough discussion on importing and exporting process and practicalities involved will be elaborated. The last discussion in the report is related to ways of tapping into the international market.
Derwent& Sons Stationery is a medium sized organisation established in the UK. It deals in watercolour pencils, artist pencils, and a wide range of stationary items for students, artists, and business professionals.The organisation produces funky and stylish items that separates it from others. Its customer base has increased in the local market due to its ‘left-handed range’ of products. There products become trends and this is the reason for their dominance in the local market. In addition to this, most of its products are eco-friendly. The company is aiming at remaining competitive by changing its market strategy and increase the range of business by tapping in the new international markets.
Global business environment is full of market risks and factors that can hinder the operations of a business. In order to understand this in context of Derwent& Sons Stationery, PESTLE analysis tool is the best (Kalinicand Forza, 2012).
Political factors: As the company is aiming atentering in the South African and South Asian market, it has to face challenges from the foreign government. Various legislation and code of conduct should be followed by Derwent& Sons Stationer regarding the banned items. The current taxation policy, funding, and initiatives, grants, trade bodies, government stability,etc., are need to be considered.
Economic factors:These factors can impact the outlook of the business along with the competitiveness. These comprise economic situation, consumer spending, government spending, taxation system, loan and subsidy, inflation rate, and interest rates. Stationary items are usually affected by the taxation policy of the country.
Social factors:The social factors include cultural aspects of the region. Social factors comprises lifestyle patterns, demographic, attitude of customers, education level, CSR, etc. ethnic and religious differences and Media views and perceptions also affect the business.
Technological factors:In order to compete the big giants in the international market, company has to employ the latest and differentiated technology. These factors include intellectual property rights, modern machines for pen manufacturing, R&D funds, etc.
Legal factors:International markets will have their own laws, regulations, and standards. These factors comprises of employment laws and health and safety measure. These are necessary as Derwent& Sons Stationer would be considering local labour in their manufacturing process.
Environmental factors:These factors include the environment protection-related aspects. For instance, the material and final products should be either reusable or recyclable. Since, the company deals in environment friendly products. Therefore, it would not have much impact on the organisation.
P2 Analyse the threats and opportunities that face SMEs in an increasingly competitive global environment
As it was already mentioned that tapping into an international market is not a cakewalk. There are innumerable factors that will be considered while carrying out business expansion. A SWOT analysis tool is the best way to determine and analyse the business opportunities and threats. This is useful because company needs to evaluate its strength and weaknesses before entering the international market. A SWOT of Derwent& Sons Stationer has been provided below:-
· Differentiated products
· Environment friendly items
· Produce a wide range of stationary for the left-handed people.
· Good reputation and large customer base
· Large cost in warehouse and inventory controls
· More focused towards differentiation instead of manufacturing
· Poor retention rate
· Great market opportunities in South African and South Asian markets.
· Technology up-gradation as it is necessary for improving the manufacturing process.
· Market saturation can affect the growth.
· Inflation rate, global recession
· Competitors strategy
· Political factors and legal threats.
For the SMEs like Derwent& Sons Stationer, there are many risks associated with the local and global competitors. The competition in the local market is present but it is not affecting the company much due to its product differentiation strategy. However, this strategy may not be useful for the company in global context. The reason is that in the global market, organisations are large and they have different ways to attract and grab customer’s attention (Damijan, et.al, 2014). There might be many organisations who are dealing in eco-friendly and reusable goods. According to the survey conducted by SAP and Oxford economics, 43% of the SMEs around the world have rated global competition as the major factor affecting the business. In addition to this, while operating in the international market, Derwent& Sons Stationer has to consider other market factors, such as economic uncertainty, changing customer expectations, and technological changes. Currently, most of the SMEs around the world are leveragingtechnology in order to increase their manufacturing and boost innovation. In addition to this, strengthening customer relationship and improving agility in order to expand their business.
In context of global environment, it is important to understand the term ‘born global’. The firm is denoted by this term when it tries to derive some sort of competitive advantage from the use of resources and its sales in the international market. Derwent& Sons Stationery is planning to enter in the international market and in order to gain the competitive market position. The organisation needs to understand that for SMEs the replication of resources should be well executed. Hence, the analysis of market and internal strengths and weaknesses is very much important. As the business is aiming at expanding through profit maximisation and increasing customer base, the company should invest in product development and manufacturing process. This way it would be able focus on economic affairs.
The business’s profit depends on many factors and the major is the amount of risks and challenges the organisation is facing. With large risk comes the great profit and opportunities. Entering in the international market is very risky for the company but if the company performs well in there, then it will bring a lot of opportunities for them. The opportunities for Derwent& Sons Stationery are that it can increase the customer base of the company. In order to penetrate deep into the market, the organisation has to offer unique and eye-soothing stationery products (Brouthers, et.al, 2015). The company needs to understand the demand of the customer. This way it can increase its customer base. With increase in customer base, the revenue also increases. On the other hand, there are many threats also. This includes increase in financial risks, increase in the expense, environment and legal challenges that can affect the sustainability and organisation’s bottom line.
There are many ways by which nations can protects their local businesses from international companies. The major one is trading blocs. The trading bloc is one of the intergovernmental agreements in which the regional trade barriers, such as tariffs and non-tariffs are reduced or eliminated between two or more countries. This is important for both companies and countries as it facilitates a smooth trading between the two. The example of famous trade blocs are NAFTA (North American Free Trade Agreement) and European Union (EU).
There are many benefits of trading blocs (Dür,et.al, 2014):-
Both tariff and non-tariff barriers are some sort of restrictions that are imposed on trading between two countries or organisation. They are imposed for various reasons that include national security, retaliation, job and local economy protection, protecting the customer against unfair trading. These have been elaborated separately below (Gamble, 2016):-
These includes custom duty, fees, taxes imposed on goods moving across the borders. The term tax, duties, charges, etc., are used interchangeably. These can be further classified into import tariff and export tariff. The former is collected by the host country and paid by the organisation as an obligation to trade in that particular country. The export tariff is collected by the native country from the organisation which is aiming at trading in the international market. The point to note here is that tariff barriers can only be collected after both countries have agreed on trading between them. There are some material which are banned in the host nation. Moreover, the standards followed in that country might be different. Therefore, Derwent& Sons Stationery needs to consider them prior to pay the tariff for trading (Gamble, 2016):-.
Talking about the non-tariff barriers, these are characterised as non-tax restrictions, such as government sthese include administrative barriers and state trading. These can be in the form of quotas, subsidies, embargo, etc.
Quotas:These are the limits put to the amount of quantity that is allowed to import and export.The quantity might be mentioned in the license.
VER:It stands for voluntary export restraint. It is some kind of quota that is fixed by the native country on the request of the host country. This can be related to maximum amount of quantity that will be exported.
Subsidies:It is the financial aid provided by the host government to the local company in order to make it compete with the foreign companies. It can be cash grant, tax holiday, subsidised input price, and much more.
These include regulatory controls and rules which can hinder the flow of imports. These comprises safety inspection, custom tax payments, environment regulatory inspection, and much more (Gamble, 2016):-.
Since trading and import-export services are handled by different agencies, the policies formulated by them are quite different. The policies are based on the knowledge and expertise of these agencies that are specialised to handle the cross-border trading. They formulate policies and set out the rules under state trading procedures.
Trading blocs are suitable for trade liberalisation as they lead to access new opportunities offered new markets. These are also helpful in reducing the trade barriers. However, there are some risks and limitations associated with these blocs. The first one is that they increase the competition in the market as more competitors expand themselves in the market. The domestic producers are at greater risks, especially the SMEs. They usually lack funds and technological support. This make them vulnerable as the external competitors are laden with resources and funds (Gamble, 2016). However, the external competitors like Derwent& Sons Stationery have to pay heavy duties to the government of the host company which makes their products a bit costlier. This can increase risks for it as customers might not purchase its products. All it can do is to compete in terms of innovative styles and environment friendly image. It can also promotes its CSR work to grab the customers’ attention. Trading blocs bring too many new rules for the firm that might not suit their businesses.
There are plethora of opportunities for the Derwent& Sons Stationery in the international market. If the management sees that the company lacks some sort of resources to compete the global competitors, then they should consider teaming up with some local partners. This can have many benefits, such as cost cutting, established R&D team, and improve productivity, and already explored market. However, power sharing and profit sharing are two major concern for this option. Derwent& Sons Stationery should also consider other factors also like technology. In order to bring uniqueness to its product, technology can be a major breakthrough instrument for the company. Technological innovation can be a role changer for the company in the global scenario. But, this would require large amount of funds for machines and technically sound employees. Since the products of the organisation are environment friendly, there are high chances for it to get subsidy from importing country. This way it can improve its competitive position in the market.
Advantages of importing and exporting for the Derwent& Sons Stationery
Disadvantages of importing and exporting for the Derwent& Sons Stationery
The Derwent& Sons Stationery should plan properly about the procedures and the processes involved in the export and import. The documentation and permissions in the import and export are the most important part to be followed by any company. The investment and finance resources should be equivalent to help in smooth operations.
Good export and import
Service export and import
· The export and import of the tangible things that can be seen and touched.
· The export and import of the intangible things that can be experienced only.
· Goods export and import have high transactions of less value.
· Service export and import have fewer transactions of high value.
· The number of firms in the goods trade is higher as it is manageable.
· The number of firms in the service export and import is less as it includes high risk and investments.
· The goods can be easily stored and conserved.
· The services trade cannot be stored and is variable.
The merchandise and service imports and exports have following similarities:
Preparing insurance, cover note, when necessary
Some recommendations that should be followed by the Derwent& Sons Stationery are:
The various methods through which the Derwent& Sons Stationery can enter into new markets:
Even if the global strategy can give many opportunities to the business, it has many disadvantages which are discussed below (Baier, et.al 2014):-
M5: Evaluate different methods of SMEs can use to tap into various markets with application to a small business or entrepreneurial venture, making valid recommendations.
The digital technology have helped the SMEs to expand their business in the international market. But, these methods alone are not enough. Organisation needs to explore other methods too. Joint ventures can be the most convenient way to expand but for that organisation needs to be financially stable. There is a risk of increasing liability. On the other hand, organisation cannot open the overseas branches as it is resource and time-consuming (Suiand Baum, 2014). However, they can make use of other methods like local leadership and franchising. The main advantages of franchising are that it has minimal political risks, low promotion cost, and high ease of expansion. In addition to this, local leadership can provide a strong distribution network and can bring its existing customer base along with it.
As in the previous part, it was suggested that Derwent& Sons Stationery should go for the local leadership in order to expand its business in the South African and South Asian market. This is due to financial instabilities that will come along with other methods like Joint Venture. Local leadership is the cost-effective way as the local leader will pour its resources as well. The company will have to handle fewer transactions. The local leader understands the market better than the foreign organisation (Williams, 2013). However, there are some downside of it as well.
This report discussed the expansion strategies of Derwent& Sons Stationery.It analysed the company’s internal environment by making use of SWOT analysis. In addition to this, the threats and opportunities were also determined in the global environment. The report elaborated and illustrated the advantage and importance of trading blocs in context of international market. Various tariff and non-tariff barriers were elaborated. A thorough discussion on importing and exporting process and practicalities involved elaborated. Lastly, the report elaborated ways of tapping into the international market.
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