International business management assignment illustrating and evaluating the immediate factors of the macro business environment
Task: Identify & critically evaluate in your international business management assignment the 4 most immediate factors of the macro business environment it must take into account when assessing the decision to internationalize or not?
Section 1: Executive Summary
Different Macro business factors like fiscal policy, rate of GDP, economic inflation and others impact business operation. An organisation like Hastings Freight Holdings can face various issues and challenges in order to expand its business in the foreign market of the US. The international business management assignmentanalysed different macro factors of business that can create an effective influence on different business operations during the business expansion in a foreign market. The research in the international business management assignmentexplains key recommendations based on the suitable strategy the respective organisation can use for its business expansion. The respective international business management assignmentis based on an organisation such as Hastings Freight Holdings that is from the fleet sector and offers its different services to the people of the UK. From the UK freight, pallet delivery, information technology, online tools, and individual shipment to warehouse and storage services, it offers a range of services and wants to expand its business in the US market (HESTING FREIGHT, 2020). As per the latest financial report of the concerned organisation mentioned in this international business management assignment, the company has a turnover rate of £11M with a gross profit of £2M in the financial year of 2020 (Global Database, 2022). In comparison with its previous year’s activities, it increased the rate of turnover by 0.84%. It can consider a medium-sized organisation, including its 75 employees. The United States consider the third-largest country in the world in terms of its population. The Government of the concerned country works for its other developments, including public expectation, technological implementation, children's security and others within its recent development approaches. A total of 30 states of the US established "Children’s Cabinets" in order to provide adequate support to children through their family development. The approaches of the US government regarding integrated delivery of services also help people in this country to get access to multiple services based on their needs. From the economic and geographic perspective, the US is the third-largest country with a population of 330 million, its largest economy along with its highest GDP per capita. The eastern region of the US consists the mountains and hills, while the central portion consists of plain areas. The climate of this country also varies based on its location. From the economic perspective mentioned in thisinternational business management assignment, the GDP of the US has been seen to decrease at the annual rate of 1.6% in 2022, which was increased by 6.9% in 2021.
However, different qualities of the US are considered before the selection of it for business expansion of the organisation such as Hastings Freight Holdings. US provide different opportunities for its foreign investors in order to purchase the assets of the US at a lower and affordable price. Moreover, it has a wealthy and strong economy compared to other countries. In the US as per the international business management assignment, approximately 50 states are looking for an opportunity for their business expansion and employment; even many localities are interested in investing in some new business opportunities. Foreign organisations can utilise the availability of skilled workers within the US due to attained of its international student each year. The US have a stable environment of its political factor, and it is the main reason behind the development of the US market. So, all of these practical reasons are sufficient to make the business decision in the market of US.
Section 2 of the international business management assignment:
The macro-economic factors can often be considered a sufficient condition that affects the overall economy despite the specific market section. The critical condition based on the macro-environment would affect the business decisions extensively as per the international business management assignment. The borrowing, investing, and spending activities can be adversely affected due to the availability of the macro environment.
1. Political and Legal Environment
1.1. Political Risk in the international business management assignment
The political forces, along with the gaps related to the transportation agencies, can lead to inefficient policies of transport that hinder effective improvements within the public provision. Transportation is an important sector of the United States(US) economy based on firms, consumers and enormous expenditures of the Government in time and money, respectively (Polinkevych et al., 2021).As per the international business management assignment, an extensive and efficient transportation industry extensively enriches the standard of living across the society by decreasing the costs to improve the economy. The political risk can critically affect the value of Hastings Group Holding PLC. A trade can be prohibited by the Government of the respective nation with a foreign country, which would lead to a lower level of revenues of the organisational services to the respective market extensively.Unexpected alterations in the transportation policies by the Government of the US would lead to imposing a critical impact on the operations of the present entity.
1.2. Trade Barriers
The United States has no critical barriers to the level of investment and trade. In addition, the present country mentioned in the international business management assignmentdoes not impose restrictions on the repatriation of profits or transfer of capital. The critical barriers that are available in almost all the attributes to the US involve the implementation of the EU Regulations and Directives. According to the international business management assignment, the decisions and regulations become automatically binding across the EU from the date they have entered force. It is important for Hastings Group Holding PLC to be incorporated by the countries of the EU into the respective national legislation. The higher level of dependence on vehicles made by the Government of the US can be treated as a challenging factor for poorer individuals. An enhancement in the level of online sales during the pandemic course led to enhanced job opportunities across the supply chain, from the managers of logistics to HGV drivers.
The strategy based on the international expansion as per the international business management assignmentprimarily comprises the strategy of marketing entry involving an effective choice in terms of the primary focus regarding marketing. It also involves resource allocation, channel strategy, target consumer, service and product value offerings, development of an operating model and brand positioning (Taeihagh and Lim, 2019). A successful strategy based on market penetration primarily ensures the most efficient and sufficient utilisation of corporate resources and assists the present entity in enhancing the probability of attaining success extensively.
In terms of the strategy based on international expansion mentioned in the international business management assignment, the organisations engaged in entering the foreign markets can be supported to evolve both profitable and sustainable growth. It can be esteemed as the important strategy that needs to be developed by Hastings Group Holding PLC for an effective establishment of production facilities internationally.UKoperates a deficit in the level of trade with the EU in terms of trading with the external countries of the EU within which the current entity operates (Statista, 2022a). The value of the export goods within the UK has been persistently compared to imports, which led to an effective trade surplus [Refer to Appendix 1 of this international business management assignment].
2. Economic Environment
The vulnerable communal groups have been critically affected by the poverty and pandemic set to be enhanced due to the huge loss of jobs and accentuating the regional gaps. The crisis of COVID-19 as per the findngs of the international business management assignmenthas emphasised the requirement to up-skill and re-train the population. In addition, it secures adequate access to affordable housing through the reduction in the bottlenecks to supply along with the revival of investment.
2.1. Impact of Economic Factors on International Expansion Strategies
Gross Domestic Product
The Balance of Trade is essential in the measurement of the Gross Domestic Product (GDP) of the United States. The GDP is enhanced with the increase in the total value of services and products sold by the domestic producers than the total value of foreign services and products purchased by the domestic consumers (Polinkevych et al., 2021). It can be estimated with the potential position of the US in terms of GDP in the international business management assignmentthat it will enhance over a definite period in an accurate manner [Refer to Appendix 2 of this international business management assignment].
The critical way affecting the international expansion trade by general inflation of the respective country involves the relation with the exchange rates of currency. The alteration in the currency values changes the relative costs and prices to dampen or stimulate foreign transactions in services and products.
Employment plays a vital role in improving the international expansion strategy extensively over the respective nation as per the international business management assignment. The number of vacancies in the job from February to April 2022 has enhanced to a new relevant record of 1,295,000, respectively (Statista, 2022c). However, the growth rate within the level of vacancies has continued to be reduced down [Refer to Appendix 3 of this international business management assignment].
The potential tax incentives, grants along with potential schemes, including Global Entrepreneur Programme, have been offered by the Government of the US in order to attract a large level of Foreign Direct Investment (FDI). The economy of the US can be significantly controlled by the Government as per the international business management assignmentby altering the level along with the kinds of taxes, the composition and extent of spending, and the form and degree related to borrowing. The respective Governments can establish potential subsidies, providing money to industry, taxing the public, generating taxes on international products to lift the prices along with developing products that are highly appealing (Oláh et al., 2019).
The greater level of regulations, higher fees, taxes and interest rates can hinder the critical operations of Hastings Group Holding PLC during the execution of international expansion strategies. The US Government can intervene in the international trade of the present entity by importing the tariffs. It can be said in this international business management assignmentthat an import tariff can be esteemed as a specific tax imposed by the Government on certain imported products.
3. Sociocultural Environment
3.1 Values, Beliefs and Attitudes in theinternational business management assignment
The culture of society and the way of doing any operations impact the culture of a business. Attitudes and share belief of the population has a great role in order to understanding the customer of a given market. As per the international business management assignmentvalues can be categorised into four categories including social values, personal values, human values, and societal values (Manfredo et al., 2020). The government of the United Kingdom focuses on enhancing its value from a social perspective that can influence the interpersonal relationship of people by developing its quality. Social values also can reflect different cultural assumptions related to social wellbeing. It is believed in this international business management assignmentthat through developing education and awareness in society, the government of the US always tries to develop its value, attitude and beliefs. Even during the pandemic situation, the learning of students maintains online learning approaches through different educational institutes.
Respective data provides information regarding the number of online learning users in the US in 2018 by different educational institutes [Refer to Appendix 4 of this international business management assignment]. During the respective period, “Western Governors University” ranked 1st and approximately 121,437 students are taking their online education (Statista, 2022d). The driver's range of education process in the US is pursuing different integrated approaches in order to develop attributes and values by drawing the socio-cultural traditions that help them to deal with different challenging situations. So, cultural values, beliefs and attributes have a great significance on business, from the hiring of an employee and negotiating with the employee to the process of risk management they can adopt in the business, including the transportation sector (Kris Etherton et al., 2020). The decision-making process of business expansion in the international business management assignmentplays a significant role through different opinions and innovation processes.
Ethnocentrism and Hofstede Cultural Dimensions
Ethnocentrism theory is used one's own culture as the benchmark in order to judge other cultures by creating bias. It can develop in the situation when one puts more value on their culture as per the international business management assignment. Ethnocentric people have been seen to believe that the cultural values, ideas, and practices regarding their culture are correct, and they can apply to other cultural groups as well (Wang et al., 2018). So, they can tend to have a negative attitude towards different cultures. “Hofstede Cultural Dimensions” provide an effective framework that helps sociologists to explain the impacts of culture on its member and values and how it also can reflect the behaviour of people. The respective theory in the international business management assignmentexamines the value of people in the workplace and can create differentiation along different dimensions. The six dimensions of the respective theory are shown as follows:
Figure 1: Six Dimensions of Hofstede Cultural Dimensions
(Source: Created by the Author)
The “Power Distance Matrix or PDI” of a country signifies the inequality or equality factors within different people of a country, and a low PDI means that country has minimum inequality in terms of distribution of wealth and power in society (Ma et al., 2020). The "Uncertainty Avoidance Index or UAI" indicate the tolerance aspects of the uncertain situation of a particular society. Hence it can be said in this international business management assignment that, each of the factors regarding the respective theory has a significant impact on understanding the socio-cultural aspects of the US in order to understand its external business environment.
4. Technological Environment
4.1 Technology of the US
Infrastructure of US
Innovation and technology greatly contribute to the infrastructure aspects of the US. The concept of digital infrastructure has been seen to rise in different locations of the country. The application of location-based technologies like GPS technology drives the development of transportation across the world (Kostka et al., 2021). At an advanced level of this international business management assignment, location-based technological approaches can provide precious location regarding the information, including the system of automated vehicles. In different regional areas, improvements in broadband services support the innovation in construction, farming, and mining sectors. In regional and urban cities of the US, different technologies have been seen used to improve the sustainability and efficiency of different infrastructure service networks, from transportation to the services regarding energy.
Telecommunication, Distribution Network and Knowledge of People on Technology
In the telecommunication sector of the US, different companies provide mobile and fixed voices and data transmission to its vast consumers, including individuals, small to large business entrepreneurs and others. Telecom organisation in the concerned country made their money by providing internet connectivity, text messaging, voice calling and others through different wire line connections (Rayner et al., 2020). With the technological invention as per the international business management assignment, it also drives several wireless connections through plan subscriptions regarding data and voice calling and others. Though the revenue of the telecommunication sector in the US has been seen to decline, as shown in the graph below, however, it always deals with new and innovative approaches. The US has a well-developed distribution and sales channel that ranges from wholly-owned subsidiaries to manufacturers of foreign markets. Most of the exporters from the US sell their products to the US via distributors who have been seen to purchase goods directly from some particular manufacturer for reselling purposes.
From the data analysis, it has been seen that the US ranked 61.3 % as the most innovative country in the world through its technology and invention [Refer to Appendix 5of this international business management assignment].It means the people of the US have sufficient technical knowledge, and they apply it to their respective field of choices (Statista, 2021).
Investment of Government
The government of the US has announced to invest more than £743.4 Million to 1 billion in the technology sector in order to bring more development to it (Liu et al., 2022). It will provide a significant contribution to the innovation of different autonomous vehicles and airborne laboratories, as well as it will be helpful in job creation and economic growth.
Impact on Expansion Strategies
Fleet management is another sector that will be impacted by the technology uses an invention of the US in order to ensure technological advancement. Using the process of vehicle telematics as per the international business management assignment, the manager of fleet organisations can monitor the status, movement and location of the fleet (Walters, 2019). Once upon a time, monitoring the fleet's fuel was a more integral approach for different organisations, and more approaches have been seen to monitor, analyse and improve driving practices.
Analysing the present and future aspects of the macro factor mentioned in this international business management assignment, it has been suggested for Hastings Freight Holdings to use the joint venture entry mood strategy. Within the joint venture approach, the local organisations and foreign companies agree to share their equity in order to run the partnership business process. The participation of equity for both companies depends on their agreement. The joint venture approach provides several benefits an organisation can afford in its foreign entrant. The facilities for manufacture, distribution, and retailing of local companies are leveraged to produce different services for the foreign entrant. An organisation like Hastings Freight Holdings will also benefit from the local managerial skills in their present market condition as per the analysis of this international business management assignment. From the perspective of transaction cost, a governance structure of joint venture can play as a suitable alternative in order to ensure a pure foreign entry mood. Through joint venture and investment, parent companies can get a mutual position that can align their profit and interest by decreasing their different risks.
Within the process of joined venture, both a local partner and the "wholly-owned foreign greenfield investment" can work as a useful instrument for an organisation that is going to exploit its current assets within the market of the foreign country. An essential advantage of the joint venture is the possibility of making use of the assets of the local company. Especially when an organisation has no previous experience in a certain foreign country, and thus having collaboration with its local partner can facilitate the culture, values, and society of the concerned country. For example, when Hastings Freight Holdings uses joint venture strategies for expanding its business in the US market as per the international business management assignment, it can gather well-structured knowledge regarding the customer, local market, process, religion, and values of the US societies.
By creating an effective relationship with its local partner, the organisation also can establish a good relationship with different local suppliers, government and customers, and it can reduce the possibility of political risks. Controlling the management process within the approaches of the joint venture is also an essential consideration for foreign companies like Hastings Freight Holdings as it helps them in order to understand and use authority, power, and informal and cultural mechanism. The strategic approach of joint venture also helps the respective organisation to achieve its greater scale of efficiencies with a combination of operation and assets. The respective process can take different structures, and such partnership approaches have legal entities. On the other hand, some joint ventures are structured after the completion of a project or after the project meets its objectives. All joint venture strategies have their spate liabilities based on the agreement and need to maintain it. So, through the international business management assignment, a respective organisation can gain different effective advantages within the competitive market in the foreign country. By using an effective approach of the joint venture, Hastings Freight Holdings can produce its business operation strategies in order to lead a great margin of profit.
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Appendix 1: Total Trade Value of the United States
(Source: Statista, 2022a)
Appendix 2: Gross Domestic Product of the United States
(Source: Statista, 2022b)
Appendix 3: Number of Jobs in the US
(Source: Statista, 2022c)
Appendix 4: Online Learning of Students in the US
(Source: https://www.statista.com/statistics/882117/online-learning-in-the-uk-by-demographic/Statista, 2022d)
Appendix 5: Rank of Countries in Its Innovation
(Source: https://www.statista.com/chart/18804/rankings-of-the-global-innovation-index/Statista, 2021)