Unit 43: Tapping into New and International Markets Assignment Sample

How the company Morrisons can expand their business in the middle east in UAE?

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Introduction of Unit 43: Tapping into New and International Markets Assignment Sample

Expanding into new and international markets can be a bigger opportunity for businesses to grow and also can increase their revenue. Although, it is important to approach this process carefully and be aware of the potential challenges and risks involved. The management report that is provided below is primarily designed to recognize and examine the possibilities that exist for SMEs in a globalized context (Debellis, and Pinelli, 2020). The reader will be effectively assisted in analysing the potential repercussions that the firm may experience when doing the same by the report. Morrisons has been used as the researcher's example to write the study. A “small and medium-sized enterprise” (SME) with headquarters in the UK, the company intends to enter the Middle Eastern market. The business bases its operations on cutting-edge technology and popular items, which has enabled it to reach market saturation in the UK, where it is based. There have been recommendations made that the business should globalize its operations for which the management report will provide a brief industry analysis of the Middle east.

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Global Business Environment

The global business environment refers to the economic, political, and cultural factors that influence the way businesses operate around the world (Kise?ákováet al., 2019). These factors can have a significant impact on the success of businesses, as they can affect a company's ability to access new markets, attract and retain customers, and secure financing.Some of the key factors that can shape the global business environment includeEconomic Conditions, Political Factors, Cultural Differences, Technological Advancements, and Natural Disasters.To navigate the global business environment effectively, businesses need to be proactive in monitoring and adapting to changes in these factors and develop strategies to mitigate risks and seize opportunities.

1. Impact of Key Drivers of Globalization on SMEs of the UK with Example

There are several key drivers of globalization that can impact SMEs in the UK (Sinkovics, Kurt, and Sinkovics, 2018):

  • Trade Liberalization: Trade liberalization refers to the removal of tariffs and other barriers to trade, which can make it easier for SMEs in the UK to access international markets.
  • Technological Advancements: Technological advancements such as the internet and social media have made it easier for SMEs in the UK to reach global customers and partners.
  • Investment in Infrastructure: Investment in infrastructures such as transportation networks and ports can make it easier for SMEs in the UK to access international markets and transport their goods.
  • Immigration: Immigration can bring new talent and skills to the UK, which can help SMEs grow and expand.
  • Increased Competition: Globalization can also bring increased competition from foreign businesses, which can make it more challenging for SMEs in the UK to succeed.

Overall, the impact of globalization on SMEs in the UK can be positive or negative, depending on the specific circumstances of the business and how it can adapt to the changing global environment (Mendy, Rahman, and Bal, 2020). The below picture shows SMEs all over the world.

Fig 1: Number of The SMEs In the World

(Source: OECD. 2000)

2. PESTEL Analysis of The Middle East for Business Expansion

PESTEL analysis is a useful tool for understanding the macro environment in which the business operates and for identifying potential opportunities and threats. The country earns most of its wealth from their export of fossil fuels with a secondary income from tourism. The company Morrison’sis expanding their business in the UAE from the Middle East countries.

Factors

Analysis

Political

· The UAE is a federation of seven emirates, each with its ruler, but with a federal government that handles foreign affairs, defence, and some economic policies.

· The UAE is a stable country with a strong economy, and it has a good reputation for being business-friendly.

· The UAE is a member of the Gulf Cooperation Council (GCC) and has strong political ties with other countries in the region.

Economic

· The UAE has a diversified economy that is driven by oil exports, tourism, trade and financial services.

· With a low unemployment rate, the country has a high GDP per capita.

· The country has implemented various economic reforms and initiatives to encourage the growth of the economy and diversification.

· With a well-developed infrastructure, airports, and roads, the country creates an attractive location for business.

Social

· The UAE has a strong focus on education and has a high literacy rate.

· The region is home to a large youth population, which can create opportunities for businesses that cater to younger consumers.

· The country has mainly focused on their quality of life and high standard of living.

Technological

· The UAE is a leader in technology adoption and has a well-developed digital infrastructure.

· The government has implemented various initiatives to promote the adoption of technology and to encourage innovation, such as the Dubai Future Accelerators program.

· The country has a high rate of smartphone and internet penetration, which makes it an attractive market for businesses offering digital products and services.

Environmental

· The UAE has a desert climate and is subject to extreme temperatures, which can be a challenge for businesses.

· The country has implemented various initiatives to address environmental issues, such as the Emirates Green Building Council, which promotes sustainable building practices.

· The government has also implemented initiatives to promote renewable energy and reduce reliance on fossil fuels.

Legal

· The UAE has a legal system that is based on a mix of Islamic law and civil law, with anisolated legal system for each emirate.

· The country has a well-developed legal framework that provides a high level of protection for businesses and investors.

· The UAE is a signatory to various international trade agreements, which can provide businesses with access to new markets.

(Source: Rahman, 2019;Wisetsriet al., 2021)

3. The Rationale for SMEs To Expand Their Businesses Internationally

There are various reasons why SMEs may decide to expand their businesses internationally (Boekholt, and Thuriaux, 1999):

  • Access to new markets:Expanding internationally can provide SMEs with access to new markets and customers, which can help them grow their business.
  • Diversification: Diversifying into international markets can help SMEs reduce their reliance on a single market, which can help mitigate the risks of operating in a volatile economy.
  • Increased competitiveness: By expanding internationally, SMEs can access new sources of raw materials, labour, and technology, which can help them become more competitive in the global market.
  • Growth opportunities: International expansion can provide SMEs with opportunities for growth that may not be available in their domestic market.
  • Increased profitability: By expanding internationally, SMEs can tap into new sources of revenue, which can help increase their profitability.

However, it is important to note that expanding internationally can also present challenges and risks, such as cultural differences, language barriers, and political instability. Therefore, it is important for SMEs to carefully assess the benefits and risks of international expansion before deciding to expand their business.

4. Challenges SMEs have Entered the Competitive Environment of the UAE

SMEs may face several challenges when entering the competitive environment of the United Arab Emirates (UAE). Some of these challenges could include (Lew et al., 2022):

  • Competition From Larger Companies: The UAE has a well-developed business environment, and there are already many established companies operating in the country.
  • High Costs: The cost of doing business in the UAE can be high, especially for SMEs that may not have the same economies of scale as larger firms.
  • Cultural Differences: The UAE has a diverse population with a mix of cultures and traditions, and SMEs may need to adapt to these differences to appeal to local customers.
  • Logistical Challenges: The UAE is a large country with a dispersed population, and SMEs may face challenges in terms of distributing their products or establishing a presence in different parts of the country.
  • Regulatory Barriers: The UAE has a complex regulatory environment, and SMEs may face challenges in terms of navigating this bureaucracy and obtaining the necessary licenses and approvals to operate in the country.

Overall, entering the competitive environment of the UAE can be challenging for SMEs, and they may need to adapt their business models and strategies to succeed in this new market

5. Opportunities SMEs have Entered the Competitive Environment of the UAE

Despite the challenges that SMEs may face when entering the competitive environment of the United Arab Emirates (UAE), there are also many opportunities for these businesses to succeed in this market. Some of the opportunities for SMEs in the UAE could include (Lew et al., 2022):

  • Strong Economic Growth: The UAE has a thriving economy and is a hub for trade and business in the region. This creates opportunities for SMEs to tap into growing markets and expand their operations.
  • Diverse Customer Base: The UAE has a diverse population with a mix of cultures and traditions, providing opportunities for SMEs to reach a wide range of customers.
  • Favourable Business Environment: The UAE has a business-friendly environment and offers a range of incentives and support for SMEs, including access to financing, mentorship programs, and incubator facilities.
  • Strategic Location: The UAE is strategically located at the crossroads of Europe, Asia, and Africa, creating it an ideal gateway for businesses looking to arrivein the Middle East and North Africa (MENA) region.
  • Growing Sectors: The UAE has a growing economy with a focus on sectors such as tourism, healthcare, and technology, providing opportunities for SMEs to enter these markets and take advantage of new growth opportunities.

Overall, the UAE presents a range of opportunities for SMEs to grow and succeed in this market, but it is important for these businesses to carefully consider the challenges and opportunities before entering the market and to develop a strong business plan and strategy.

Recommendation for Alternative Strategies for SMEs

SMEs are a vital part of the global economy, but they often face unique challenges due to their size and limited resources. Here are some alternative strategies that SMEs could employ to overcome these challenges and achieve success (Zapata, Berrah, and Tabourot, 2020):

  • Diversification: Diversifying the company's products, services, or customer base can help to reduce risk and increase resilience. For example, an SME that relies on a single product or service may be more vulnerable to market fluctuations.
  • Niche Specialization: Rather than trying to compete in a crowded market, SMEs can differentiate themselves by focusing on a specific niche or target market. This approach allows the company to become an expert in a particular area and to better meet the needs and pReferences of its target audience.
  • Partnerships and Collaborations: Working with other companies or organizations through partnerships or collaborations can help SMEs to access new resources, markets, and expertise.
  • International Expansion: Expanding into international markets can provide SMEs with new opportunities for growth and revenue. However, it is important for SMEs to carefully consider the potential risks and costs of entering a new market, and to seek the advice of experts or local partners as needed.
  • Online Presence: An online presence can be an effective way for SMEs to reach a global audience and establish credibility and visibility. This can be achieved through building a website, creating social media profiles, and engaging with customers online.
  • Innovation and Continuous Improvement: SMEs can stay competitive by continuously seeking out new ways to improve their products, processes, and customer experience.
  • Employee Development: Investing in the development of employees can help SMEs to build a strong and motivated workforce, which can drive innovation and improve performance.

1. Major International Trading Blocs and Agreements and Their Benefits for SMEs

Several major international trading blocs and agreements can provide benefits for SMEs (Onyusheva, Thammashote, and Kot, 2018):

  • The World Trade Organization (WTO): The WTO is an international organization that promotes free trade and helps to reduce barriers to trade between countries. Membership in the WTO can provide SMEs with access to a larger market and reduce the costs of doing business internationally.
  • The European Union (EU): The EU is a trading bloc that includes 27 member countries and is the world's largest single market. Membership in the EU can provide SMEs with access to a large and diverse customer base and reduce trade barriers between member countries.
  • The North American Free Trade Agreement (NAFTA): NAFTA is a trade agreement between the United States, Canada, and Mexico that aims to reduce trade barriers and increase economic integration between the three countries (Tang et al., 2020). Membership in NAFTA can provide SMEs with access to a large market and reduce the costs of doing business in North America.
  • The Association of Southeast Asian Nations (ASEAN): ASEAN is a regional organization that promotes economic cooperation and integration among its 10 member countries. Membership in ASEAN can provide SMEs with access to a large and rapidly growing market in Southeast Asia.
  • The Trans-Pacific Partnership (TPP): The TPP is a trade agreement between 11 countries in the Asia-Pacific region that aims to reduce trade barriers and increase economic cooperation. Membership in the TPP can provide SMEs with access to a large and diverse market in the Asia-Pacific region.

These are just a few examples of international trading blocs and agreements that can provide benefits for SMEs. There are many more such organizations and agreements that can help SMEs access new markets and reduce the costs of doing business internationally.

2. Advantage of International Opportunities for SMEs

There are several steps that SMEscan take to overcome barriers and take advantage of international opportunities (Chien et al., 2021):

  • Research and Planning: SMEs should carefully research the markets and countries they are considering expanding into and develop a well-thought-out plan for entering those markets.
  • Partnering with Local Firms: SMEs can potentially benefit from partnering with local firms in the target market, which can help them navigate the local business environment and access new customers.
  • Investing in Language Skills: SMEs should consider investing in language training for their staff to help them communicate effectively with local partners and customers.
  • Seeking Out Financing: SMEs should research the financing options available to them, such as loans, grants, and investments, and consider which option is the best fit for their needs.
  • Understanding Local Regulations: SMEs should be familiar with the local regulations and laws in the target market and seek legal and regulatory advice if necessary.
  • Adapting to Local Cultural Differences: SMEs should be mindful of local cultural differences and adapt their products and services to meet the needs and preferences of local customers.
  • Differentiating from Competitors: SMEs should work to differentiate themselves from their competitors in the target market, such as by offering unique products or services, or by emphasizing their brand values and reputation.

By following these steps, SMEs can overcome the barriers to international expansion and take advantage of the opportunities that are available to them.

Conclusion

The above report shows international marketing and how a business can expand in other countries. Here, the UK-based company Morrisons wants to expand in the middle east country UAE. The country UAE is full of fossil fuel and their people have high living standards which can give growth economically for the business but their political and environmental facilities are less which gives negative marks to expand their business. Even the international trading blocs are also beneficial for the company. With the help of these Blocs, all the SMEs can get some benefits for expanding their business in other countries. At the end of the report, it can be concluded that the company Morrisons can expand their business in the middle east in UAE.

Reference

Boekholt, P. and Thuriaux, B., 1999. Public policies to facilitate clusters: background, rationale and policy practices in international perspective. Boosting innovation: the cluster approach, pp.381-412.

Chien, F., Ngo, Q.T., Hsu, C.C., Chau, K.Y. and Iram, R., 2021. Assessing the mechanism of barriers towards green finance and public spending in small and medium enterprises from developed countries. Environmental Science and Pollution Research, 28(43), pp.60495-60510.

Debellis, F. and Pinelli, M., 2020. Board interlocks in SMEs and the formation of international joint ventures. Piccola Impresa/Small Business, (2).

Kise?áková, D., Šofranková, B., Gombár, M., ?abinová, V. and Onuferová, E., 2019. Competitiveness and its impact on sustainability, business environment, and human development of EU (28) countries in terms of global multi-criteria indices. Sustainability, 11(12), p.3365.

Lee, K.H., 2009. Why and how to adopt green management into business organizations? The case study of Korean SMEs in the manufacturing industry. Management decision.

Lew, Y.K., Zahoor, N., Donbesuur, F. and Khan, H., 2022. Entrepreneurial alertness and business model innovation in dynamic markets: international performance implications for SMEs. R&D Management.

Mendy, J., Rahman, M. and Bal, P.M., 2020. Using the “best?fit” approach to investigate the effects of politico?economic and social barriers on SMEs' internationalization in an emerging country context: Implications and future directions. Thunderbird international business review, 62(2), pp.199-211.

OECD. 2000. Organisation for Economic Co-Operation and Development. [Online] Available At: https://www.oecd.org/cfe/leed/1918307.pdf [Accessed On: 30/12/2022]

Onyusheva, I., Thammashote, L. and Kot, S., 2018. ASEAN: Problems of regional integration. Espacios, 39(36), p.5.

Rahman, M., 2019. PESTEL analysis of the United Arab Emirates (UAE).

Sinkovics, R.R., Kurt, Y. and Sinkovics, N., 2018. The effect of matching on perceived export barriers and performance in an era of globalization discontents: Empirical evidence from UK SMEs. International Business Review, 27(5), pp.1065-1079.

Tang, G., Park, K., Agarwal, A. and Liu, F., 2020. Impact of innovation culture, organization size and technological capability on the performance of SMEs: The case of China. Sustainability, 12(4), p.1355.

Wisetsri, W., Mangalasserri, K., Cavaliere, L.P.L., Mittal, P., Chakravarthi, M.K., Koti, K., Gupta, A., Rajest, S.S. and Regin, R., 2021. The Impact of Marketing Practices on NGO Performance: The Pestel Model Effect. age, 53, p.62.

Zapata, M.L., Berrah, L. and Tabourot, L., 2020. Is a digital transformation framework enough for manufacturing smart products? The case of Small and Medium Enterprises. Procedia Manufacturing, 42, pp.70-75.

Assignment - Individual Blog

Different Methods of Tapping into New International Markets

There are several factors that SMEsshould consider when evaluating and comparing the different methods of tapping into new international markets:

  • Direct Exporting: This involves selling products or services directly to customers in other countries. This can be an effective way for SMEs to enter new markets, particularly if they have a unique or high-demand product.
  • Indirect Exporting: This involves selling products or services to intermediaries, such as distributors or agents, who then sell the products to customers in other countries. This can be a less risky option for SMEs that are new to international trade.
  • Joint Ventures:This involves partnering with a local firm in the target market to jointly produce or sell products or services. This can be a good way for SMEs to access new markets and gain expertise in local business practices.
  • Franchising: This involves licensing a business model or brand to a local firm in the target market. This can be an effective way for SMEs to enter new markets without having to invest heavily in local operations.
  • Licensing: This involves selling the rights to use intellectual property, such as trademarks, patents, or copyrights, to a local firm in the target market. This can be a good way for SMEs to generate revenue from their intellectual property without having to invest heavily in local operations.
  • E-commerce: This involves selling products or services online to customers in other countries. This can be an effective way for SMEs.

Contrasting the Advantages and Disadvantages of Different Methods of Tapping into New International Markets

There are several ways that a company can tap into new international markets, each with its advantages and disadvantages.

One way is to conduct market research to gather information about the potential market and its potential customers. Market research can be conducted through a variety of methods, including surveys, focus groups, and data analysis. The advantage of this approach is that it allows the company to gather detailed and specific information about the market and its needs, which can inform decision-making and help the company tailor its marketing efforts to the target market. However, market research can be costly and time-consuming, and there is always the risk that the research may not accurately reflect the reality of the market.

Another way to enter a new international market is through partnerships or joint ventures with local companies. This approach allows the company to leverage the local knowledge and resources of its partner, which can be particularly useful in navigating unfamiliar markets. However, partnerships and joint ventures also carry the risk of potential conflicts and misunderstandings, as well as the potential for loss of control over the direction of the venture.

Global payments and foreign exchange rates can also be important considerations when entering a new international market. Companies will need to consider how to handle payments in the local currency, as well as how to manage any exchange rate risks.

Finally, target marketing can be an effective way to focus the company's marketing efforts on a specific segment of the market. This approach can help the company to effectively reach its target audience and achieve maximum return on investment. However, it is important to ensure that the target market is accurately identified and that the marketing efforts are tailored appropriately to meet the needs and interests of that market.

In the Middle East specifically, it is important for companies to be aware of cultural differences and to be sensitive to local customs and practices. Working with a local partner or hiring local staff can help navigate these differences and building relationships in the market.

Recommendations on How Morrisons could implement Different methods of tappinginto the International Market

Morrisons can use the following methods for tapping into the international market:

  • Direct Expansion: This approach involves setting up operations in the target market directly, either through establishing a new company or acquiring an existing one. This approach allows the company to have full control over its operations and to potentially capture a larger share of the market. However, it also requires a significant investment of time and resources, and there is a risk of encountering unexpected challenges and obstacles in the new market.
  • Franchising: Franchising involves granting the right to use the company's brand and business model to local partners in exchange for a fee. This approach allows the company to enter the market without the need for a significant upfront investment, as the franchisee is responsible for establishing and running the business. However, the company may have less control over the operations of the franchise, and there is a risk of negative impacts on the company's reputation if the franchisee does not uphold the same standards as the parent company.
  • Agents: Using agents or distributors to represent the company's products in the target market can be a cost-effective way to enter the market. The agents are responsible for selling the company's products to local customers and can provide valuable insights into the local market. However, the company may have less control over the distribution and promotion of its products, and there is a risk of conflicts or misunderstandings with the agents.
  • Joint Ventures:A joint venture involves establishing a new company with a local partner to tap into the target market. This approach allows the company to leverage the local knowledge and resources of its partner, but it also involves shared ownership and decision-making, which can lead to potential conflicts.
  • Licensing: Licensing involves allowing a local company to use the company's intellectual property (such as patents, trademarks, or copyrights) in exchange for a fee. This approach allows the company to enter the market without the need for a significant upfront investment, but it also involves a loss of control over the use of intellectual property.

In general, it is important for Morrisons to carefully evaluate the potential advantages and disadvantages of each approach and consider which method is most likely to align with the company's goals and resources. It may also be useful to seek the advice of local experts or consult with other companies that have successfully entered the target market.

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