BE489 Analysing Organizations in the International Report Sample
Business Environment Report
2. An individual 3,000-word business report (75%) analysing the internationalisation strategy of an organisation. Assessment task: You are a management consultant hired by the top management of a UK organisation (company X), which is looking to internationalise. You have to choose one of 21 countries (country Y): Belgium, Brazil, Czech Republic, Chile,
Colombia, Ecuador, France, Georgia, Germany, India, Indonesia, Japan, Mexico, Mongolia, Nigeria, Pakistan, Poland, Senegal, South Africa, Turkey and Zimbabwe. You must prepare a business report addressing a variety of issues involved in the internationalisation of company X into country Y. For the purpose of your assignment you can choose any type of organisation as long as it is UK based as well as one of the 21 countries listed above as your
targeted country for internationalisation.
You must prepare a 3,000-word report containing the following:
- An executive summary.
- An analysis of the external environment of country Y from the perspective of the industry in which company X operates.
- A discussion of company X’s resources and capabilities in the context of its intention to enter country Y.
- An analysis of possible entry modes for the internationalisation of company X into country Y.
- A discussion of possible challenges which company X is likely to encounter when operating in country Y, and possible ways of addressing these.
- Advice for the management of company X with regard to internationalisation into country Y.
The coursework must be word-processed and typed double-spaced using a standard font (such as Times New Roman or Arial) in 12 point. It should not exceed 3,000 words in length. It also needs to contain full in-text referencing and a reference list. Please note the 3,000 words includes quotations and citations in the main body of the text but excludes the list of references at the end of the piece of work.
Solutions
Introduction
In the modern business environment expanding business internationally has become a significant competitive advantage for organisations; however, based on the external environment, there can be significant challenges for the company. The challenges include a selection of entry mode and poor legal and political infrastructure creating trade barriers. ASOS is one of the renowned fashion retail service providers in the UK, and this report includes a consultancy for ASOS while expanding its business in South Africa (SA). It includes an external environment analysis through PESTLE and a selection of detailed analyses of the strategic abilities of the company. University assignment help, Based on the challenges identified and the potential for the company, recommendations are also included here. ASOS has considered rapid increases through both online and offline stores, and between 2012 and 2022, this company has increased its revenue by more than quadrupling its revenue reaching £3.9 billion (Statista, 2023). This company has considered retaining its sales only through an online platform; thus, it provides a better opportunity for expansion. ASOS has significantly expanded its market in Europe, considering the UK as the main market, yet it has not expanded in Asia or Africa; thus, expansion in such a market is necessary to retail profitability. In this context, ASOS can expand in South Africa, and expanding in this market will provide an opportunity to include diversify the range of fashion products available.
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Figure 1: Worldwide revenue of ASOS from 2012 and 2022
(Source: Statista, 2023)
South Africa: The National and International Context
The Political Environment
SA has political stability and an absence of violence percentile rank of 12.74 per cent in 2021, which signifies high political instability as a developing country (Trading Economics, 2021). This signifies poor control of the government over terrorism and violent activities. For this aspect, the political situation of SA can have a negative impact on business expansion yet. However, government initiatives for the retail sector in SA highlight a positive situation for expansion. Government SA introduced a range of regulations to limit price volatility and introduce fair practices in the customer goods and retail sector (Naidu and Nxumalo, 2021). Based on the overall political environment, there is a possibility of expanding business in this sector.
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Figure 2: political stability and violence absence percentile in SA
(Source: Trading Economics, 2021)
The Economic Context
In the year 2023, retail trade has fallen by 0.5% in the first quarter. In the mid-quarter of 2022, there has been a significant increase in retail sales after the pandemic; however, the rest of the time, there have been fewer sales and revenue generation on average (Trading Economics, 2021). Thus, there are significant fluctuations in revenue and sales generation in this sector. In the year 2021, from 1960 average inflation rate was 7.9%. In the year 2023 infection reserve rate was 7.3% (World Data, 2023). This signifies that there has been a decrease in the inflation rate, yet the inflation rate is quite higher for ensuring enough disposable income for households. Based on the overall situation, it can be identified that the economic condition of South Africa is in turmoil, and entering the retail sector will require offering value at a significantly low price which means the price of products will be less. The fashion retail sector has grown 5.03% between 2023 and 2027 (Statista, 2023). In this context, organisations operating in the sector will need to reduce the cost of trading as well as the cost of operation by engaging with domestic suppliers as well as creating warehouses. The industry sector of SA contributes 24.5 % of the total GDP of SA (Statista, 2023). In this context, SA has significant scope to increase GDP contribution from this sector, and in this case, expanding in this sector of the country can be profitable.
Social Factors
The retail sector of SA is responsible for employing 21% of the total workforce signifying enough employment opportunities (Wholesale and retail leadership chair, 2023). This industry is considered a good scope for exploring career growth opportunities. Based on the rapid increases in employment, it becomes evident that there is scope for accessing a skilled workforce while entering the retail sector of SA as well as there is an opportunity to promote growth in this sector. ASOS can Fashion consumers of SA prefer purchasing luxury fashion products mostly (Cunningham and Petzer, 2022). consider including diversified ranges of luxury fashion items to attract customers. Thus, ASOS can consider SA to be a potential country for expansion.
Technological Considerations
72% of the SA population has internet accessibility; thus, SA has a significant internet penetration percentage. However, there is still a significant percentage of the population having no access to the internet (Modise,2023). Social media users in SA are currently 25.80 million, roughly 42.9% of the total population (Modise,2023). However, it becomes evident that the majority of the population of SA has internet connectivity. Thus, there is a possibility of expanding business through an online platform. This increasing rate of social media usage also signifies the possibility of using digital technologies for promotion and other brand initiatives. Considering the technological situation of SA for the retail sector, this internet connectivity is beneficial. Similarly, ASOS will be able to promote business online and expand business through online channels. The retail sector of SA has also incorporated mono technology to ensure better consumer engagement and true collaboration and partnership. Different online offers are provided to customers to enhance their convenience. In-store experience of consumers has significantly increased in this country through artificial intelligence and determining the tightest technologies (Shaw, 2020). There is a possibility to interpret customer needs and changes in customer requirements as well as market trends based on which day there are possibilities for retail service providers to stock up on their products and services. Through the use of technology, there is the possibility in this country to understand customer requirements and ensure convenience to customers to availability of products as well as a satisfactory in-store experience. Thus, it becomes evident that expanding in SA can already gain significant benefits from technology and internet facilities.
Legal Factors
The Government of SA considers empowering consumer protection certification, and there is the presence of the Consumer protection act number 68 of 2008, which focuses on protecting all consumer rights as well as ensuring accessible and transparent facilities to consumers without any exploitation. Consumer rights act focuses on ensuring the return of privacy rights to consumers for choosing projects and fair and honest dealing (SA Consumer Complaints, 2020). Rights of disclosing information as well as other rights, including the availability of products at fair value and good quality, falls under the consumer rights act. Thus, based on the legal structure of SA, it becomes evident that while operating in this country, it is necessary to follow the consumer rights act as well as the government of this country's strict focus on transparency as well as the availability of products at the right value. That's while operating in this country already will need to focus on offering products at the right price, similar to domestic companies of the country as well as ensuring a transparent process of business to ensure legal compliance.
Environmental Matters
The environment protection Act of 1998 focuses on ensuring pollution-free business operations and environmental governance. Thus, considering this act, it becomes necessary for a company to focus on environmental protection measures as well as maintain compliance with environmental protection situations of a country (Republic of South Africa, 2022). That is, operating in SA will already need to focus on its environmental protection measures, such as CSR and environmental governance activities, to ensure compliance with the environmental specifications of this country.
ASOS: A Strategic Analysis
SWOT
Table 1: SWOT of ASOS
(Source: ASOS, 2022)
Based on the SWOT analysis, it becomes evident that ASOS has the strength to maintain resilient performance in a financially challenging situation which signifies the presence of strict infrastructure and proper marketing management (Retail Insight Network, 2022). For that, this company has also considered refreshing the inventory to ensure supply as per demand. Focus on risk management can also be considered a challenge here. Weaknesses of this company include a sole focus on European customer preferences and a sole focus on online shopping only. There is an opportunity for the company to expand business internationally in other continents than Europe to include diversification in product ranges and focus on enhancing the in-store experience of customers. In the current turmoil of the fashion sector, competition and rapid changes in customer demand can be considered a trade to the company.
VRIO
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Table 2: VRIO of ASOS
(Source: ASOS, 2022)
Based on the VRIO, there are significant resources that can be considered sources of competitiveness for ASOS. Skilled staff can ensure long-term competitiveness through better innovation and service efficiency. ASOS has considered retaining its online scales high; thus, most of the customer segment is associated with online platforms. This online platform dependence can ensure significant growth, thus, high competitiveness (Statista, 2023). On the other hand, focus on consumer needs and consumer engagement is also considered as factors leading to moderate competitiveness. Focus on risk management operations can be considered a moderate competitive factor for the company.
Potential Entry Modes
Based on the analysis of the external environment of SA and strategic analysis of ASOS, it becomes evident that this company has a significant potential to expand business in SA. This organisation is at the age to consider assessing market entry mode. Different market entry modes can be beneficial; however, the market entry mode needs to be selected as per the suitability of the external environment as well as the activity of the organisation. The first market entry mode applied for international expansion is exporting. There are both benefits and limitations to each market entry mode, and exporting is considered the first market entry mode by organisations. This entry mode allows expanding business simultaneously in different markets; however, there is a challenge of hiring in countries' sources; thus, trade barriers can become a significant issue (Liñán et al., 2020). Another market entry mode is licensing, and this method involves a partnership with a local partner for the distribution of products and services. However, there is a significant challenge of poor-quality control and poor marketing and brand if there is less transparency between the parent company and the licensed company. Based on the description, licensing and exporting seemed less preferable for ASOS in terms of expanding business in the retail sector and the requirement of a detailed understanding of customer needs to ensure specific improvements in products and services. Another market entry mode is franchising, and this market entry mode includes considering different companies to run additional locations against a significant valuation. Franchising allows rapid expansion of the market in terms of opening stores as well as better recognition among consumers; however, franchising can become challenging if there is a lack of communication between the franchise owner and the parent company as well as poor monitoring and control over franchise companies which can result in a poor brand reputation (Martin, 2020). Another mode of market entry is partnering and joint ventures. Joint ventures are considered to have significantly fewer challenges than other entry modes in terms of equal distribution of profit in terms of liabilities of partners (Nippa and Reuer, 2019). There is also the possibility of accessing significant investment through joint ventures and fast business expansion. Through joint ventures, there is the possibility of attracting local suppliers, and in this case, all the engagement with local suppliers and distributors in SA is possible while expanding. While engaging with local suppliers and distributors also makes it possible for the company to understand customer requirements and include them in products and services. While engaging with local service providers through joining ventures, ASOS can access information regarding market trends as well as can get enough knowledge regarding the business pacification in the SA market. This, based on the analysis of joint-venture and partnership, seems to be one of the sweet urban potential market entry options for ASOS. Through Joint venturing, AOS can consider engaging with local cloth manufacturers and distributor companies of SA will provide a detailed understanding of customer needs, and there will be the possibility of including diversity in product ranges.
Challenges and Recommendations
While analysing the external market environment as well as analysis of strategies abilities, it becomes clear that there are certain challenges that this organisation can face. The first barrier will be the cultural differences due to the cultural gap. There can be an issue of the gap in understanding consumer needs as well as an understanding of employees' needs. While expanding business internationally, organisations tend to recruit workers from the country in which the organisation has expanded for a better understanding of the market (Anwar and Abdullah, 2021). However, the differences in culture can lead to challenges in terms of poor management of employees as well as gaps in understanding of employees' needs (Sarwar et al., 2020). Immediately in the case of consumers, as per the changes in culture, there are possibilities of changes in product specification and consumer needs for a specific product that the company is offering services in a new market. Thus, based on the challenges of cultural differences, it becomes clear that all that is needed is to focus on its organisational culture to ensure there is flexibility in incorporating the cultural needs of employees as well as flexibility in products and services as well as innovation to ensure consumer needs are fulfilled. Another challenge that can be faced while expanding in SA is the excessive violence and terrorism for which this organisation needs to focus on identifying areas where the violence rate of crime rate is low to ensure convenience to consumers and safety of in-store operations (Voukelatou et al., 2021). Supplier and distribution engagement can also be considered as an issue here; however, this issue can be properly managed by ensuring compliance with SA government regulations regarding consumer rights as well as the regulations associated with data privacy and transparency. In case of supplier and distributor challenges, considering joint-venture and joint ventures can ensure a better understanding of supplier and distributor needs.
Further, this company can consider developing warehouses as well as complying with environmental regulations of the country to ensure there are no legal challenges. In case of political turmoil, strict monitoring of the trading barriers and trade regulations of the country can solve challenges for the company in terms of trading raw materials as well. Along with time, this company can consider developing warehouse facilities to ensure the availability of the products as per consumer needs.
Recommendation 1: Conducting market analysis to understand the cultural differences
While expanding in South Africa already can face challenges of cultural differences in this context conducting a market analysis and market research can be beneficial. Considering joint ventures will provide the opportunity to understand customer needs and market trends; however, detailed market research will provide an understanding of the factors influencing consumer requirements (Fisher,2021). Further, through an understanding of cultural differences, there is the possibility of introducing new product ranges that are culturally viable to customers and ensure better customer engagement. Similarly, in the case of cultural understanding, the information can be included for changing or reforming policies to ensure better employee engagement. While expanding business in this market, there is a need to recruit local employees and incorporate policy changes as per the cultural differences and understand employees' expectations in terms of cultural rights to ensure employee attention. In this way, the barrier of cultural differences can be avoided for the company.
Recommendation 2: Ensuring flexible structure to include changes in policies as well as focus on technology upgradation
Due to cultural differences between South African and European countries, there is a need to focus on ensuring a flexible work environment and changes in government policies in this country. Understanding changes in government policies in terms of trading and other areas important to conduct business can ensure compliance with government laws and regulations so that there is a possibility of avoiding challenges of non-compliance with government policies in the case of considering a flexible structure to provide an opportunity to incorporate modern technologies as per the changes in consumer needs as well as upgradation to ensure better convenience to consumers. On the other hand, to the inclusion of equity in the organisational structure, there is the possibility of incorporating employees who need specific policies as well as employee benefits to ensure employee engagement. Flexibility while operating on an international platform is history, and it can ensure better compliance with changes in the market and consumer demand. Thus, ASOS can consider the same to ensure better customer engagement.
Conclusion
Thus, ASOS needs to focus on expanding its business in South Africa through detailed market research and a better understanding of consumer needs. The retail sector of SA is still in turmoil; however, the government of this country has implemented certain regulations and practices that can ensure a safe business environment. As ASOS operate in fashion retail, there is the possibility of significant prosperity, and customer of SA prefer luxury fashion; thus, there is the possibility of targeting different customer groups. While expanding business in this country, there is a need to focus on consumer rights and environmental regulations to ensure no breach in policies and practices. While operating in this country, the major challenge will be the cultural differences have the chance to come easily to get a true understanding of employees' cultural needs as well as consumer culture needs. Through flexible structure and compliance with government policies, ASOS can easily explain the market in this country.
References
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Cunningham, N. and Petzer, D.J., (2022). Examining the luxury apparel behavioural intentions of middle?class consumers: The case of the South African market. Journal of Consumer Behaviour, 21(5), pp.955-972.
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Liñán, F., Paul, J. and Fayolle, A., (2020). SMEs and entrepreneurship in the era of globalisation: advances and theoretical approaches. Small Business Economics, 55, pp.695-703.
Martin, C.L. (2020). Service Growth: Perennial Challenges and Alternatives for Entrepreneurs of Service Firms. Journal of Marketing Management, 8(2), pp.47-55.
Modise, E (2023) 28% of South Africans do not have access to the internet, according to report, Techcable [online], Available at: https://techcabal.com/2023/04/06/internet-connectivity-south-africa-2023/#:~:text=According%20to%20DataPortal's%20Digital%202023,internet%20penetration%20rate%20of%2072%25. [Accessed on: 26/4/2023]
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