Assignment Guide Unit 43

(3500 words)

1. Assess the opportunities and threats the

House of Dorchester faces in an increasingly
competitive global environment.

Opportunities
Opportunities offered to businesses from operating in a global market place include:

Lower costs – some countries have much cheaper production, premises and
wages. This allows businesses to operate with lower overall costs and
increase their profit margins. Businesses may also be able to gain
economies of scale. This would benefit shareholders, who will gain
increased dividends.
Larger target market – operating on a global scale gives businesses a much
larger potential target market. A larger potential target market is likely to
increase the potential profit for shareholders.
Quicker expansion – businesses are able to quickly expand by opening
overseas business locations. Consumers are often likely to welcome new
businesses to operate in their country, as this will increase their options to
purchase products. Suppliers are also likely to benefit from business
expansion, as when businesses grow, they will receive more orders.
Investment in the UK economy – more businesses operating into and out of
the UK will lead to businesses investing in the UK economy, providing more
money in tax revenue for the government and increasing employment
opportunities.
Threats
Increased competition – operating in a global market provides a huge
amount of competition for a business. If they chose to operate in another
country, they may enter a crowded marketplace. Other businesses may
 also enter the UK market, making it difficult for UK businesses to achieve
success. This may limit opportunities for employees and reduce the
potential profit for shareholders.
Risk of takeovers – as businesses are able to operate on a global scale,
larger businesses may make a hostile takeover of smaller UK businesses to
reduce their level of competition. This could risk jobs for employees, and
lead to large MNCs (multinational companies) controlling prices for
consumers.
Increased risk of exploitation – some of the world’s largest businesses have
huge amounts of power over their suppliers and governments. These
businesses can force suppliers to lower prices. They may also have
leverage over governments in relation to taxes and business costs.
Consumers may benefit from lower prices, but this threatens other, smaller
UK-based businesses as they struggle to compete. In addition to this, large
foreign businesses may also pay poor employee wages and have poor
conditions.

2. Expansion in foreign Market of your choice

Apply Porters Diamond Model here (Choose a country
of your choice you want to expand the business in e.g.
China and apply Porters diamond Model explaining
how the company can expand its business there)

3. Tariff and non tariff barriers

Tariff Barriers in international Business
expansion (Explain any 3 from list below)
1. Specific tariffs.
2. Ad valorem tariffs.
3. Licenses.
4. Import quotas.
5. Voluntary export restraints.
6. Local content requirements.
Non-Tariff Barriers international Business
expansion (Explain any 3 from list below)
1. import quotas, 
2. embargoes,
3. national regulations,
4. exchange controls.

Explain the advantages and disadvantages of

International trading blocs and Agreements.

Definition of Trading blocs

A trading bloc is another potential barrier to international trade. A trading bloc is a
group of countries that work together to provide special deals for trading. This
promotes trade between specific countries within the bloc.

Advantages of Trading bloc

Bilateral agreements increase trade between the two countries. They open
markets to successful industries. As companies benefit, they add jobs.

The country's consumers also benefit from lower costs. They can get exotic
fruits and vegetables that can get too expensive without the agreement. 

They are easier to negotiate than multilateral trade agreements, since they

only involve two countries. This means they can go into effect faster, reaping
trade benefits more quickly. If negotiations for a multilateral trade agreement
fails, many of the nations will negotiate a series of bilateral agreements
instead.

1. Optimal use of natural resources:

International trade helps each country to make optimum use of its
natural resources. Each country can concentrate on production of
those goods for which its resources are best suited. Wastage of
resources is avoided.
 2. Specialisation:
Foreign trade leads to specialisation and encourages production of
different goods in different countries. Goods can be produced at a
comparatively low cost due to advantages of division of labour.

3. Advantages of large-scale production:

Due to international trade, goods are produced not only for home
consumption but for export to other countries also. Nations of the
world can dispose of goods which they have in surplus in the
international markets. This leads to production at large scale and
the advantages of large scale production can be obtained by all the
countries of the world.

4. Stability in prices:
International trade irons out wild fluctuations in prices. It equalizes
the prices of goods throughout the world (ignoring cost of
transportation, etc.)

Disadvantages of trading blocs and

aggrements
Any trade agreement will cause less successful companies to go out of
business. They can't compete with a more powerful industry in the foreign
country. When protective tariffs are removed, they lose their price advantage.
As they go out of business, workers lose jobs.

Bilateral agreements can often trigger competing bilateral agreements among

other countries. This can whittle away the advantages that the free trade
agreement confers between the original two nations. 

1.  Political Dependence:
International trade often encourages subjugation and slavery. It
impairs economic independence which endangers political
dependence. For example, the Britishers came to India as traders
and ultimately ruled over India for a very long time.

2. Mis-utilisation of Natural Resources:

Excessive exports may exhaust the natural resources of a country
in a shorter span of time than it would have been otherwise. This
will cause economic downfall of the country in the long run.

3.  Storage of Goods:
Sometimes the essential commodities required in a country and in
short supply are also exported to earn foreign exchange. This
results in shortage of these goods at home and causes inflation. For
example, India has been exporting sugar to earn foreign trade
exchange; hence the exalting prices of sugar in the country.

(vii) Danger to International Peace:

International trade gives an opportunity to foreign agents to settle
down in the country which ultimately endangers its internal peace.

4. Advantages and
disadvantages of exporting
and importing
Advantages of exporting

 You could significantly expand your markets, leaving you less dependent on any single
one.
 Greater production can lead to larger economies of scale and better margins.
 Your research and development budget could work harder as you can change existing
products to suit new markets.

Disadvantages of exporting

 Unless you're careful, you can lose focus on your home markets and existing customers.
 Your administration costs may rise as you may have to deal with export regulations when
trading outside the European Union.
 You will be managing more remote relationships, sometimes thousands of miles away.
 In overseas markets, you may lose some of the control that you are used to at home.
 You will need to think of your new market differently to the home market. They will be
different customers with their own reasons for buying your products.

Advantages and disadvantages of Importing

Advantages
1.  Better Profit
All individuals are looking for lots of profit in the business. To achieve such
an objective, all companies are regularly putting efforts and work hard by
which they can make lots of money. All companies want to choose the
business opportunity where they can maximize the profit-making rate and
avail of several benefits. If we talk about the profit, then we have to take a
look on several factors such as - product or goods costing.

2. Good Quality
All customers are looking for quality products only. No one wants to spend
their hard-earned money on buying something with lower quality standards.
Here, you have to be choosy. In some cases, the actual region or base of
some products is not your country. The customers always may face quality
issues with these types of products because of improper production in your
country.

You have to be careful and smart here. You can pick the option of
importing these types of products with high-quality standards and directly
from the originated sources. It will help you in serving the market with some
top-quality products.

3.  Cut Down Manufacturing Cost

If we are talking about business and costing factors, then manufacturing
plays the biggest role. All companies try to figure out the best possible way
by which they can easily cut down the manufacturing cost and sell products
with a good profit margin. The cost of manufacturing a product depends on
multiple factors such as -

 Operation cost
 Wages
 Raw material costing
 Intermediate goods cost

4.  Deal With Emergency

There are different types of situations occurring in different parts of the
world. In the case of hazardous conditions, some countries suffer a lot and
may not able to produce things to fulfill the basic needs of residents. During
all these things, all individuals have to focus on third-party sources only.
Hazards and disasters may disturb the complete country and its operational
channels.

Disadvantages of imports

5. Currency Risk
All countries have to maintain their foreign exchange flow to regulate the
currency and its status in the world’s economy. In case a country starts
importing things too much higher as compared to the exports, then its
currency starts facing issues. Here, the currency rate starts declining in the
international market, and other currencies start holding a dominating
position. All these things are not good for a developing or under-developed
nation. It can break a country’s economic backbone.

It is also the main reason that’s why governmental authorities of all

countries are promoting export more as compared to the imports. Here, you
can say, importing goods can be beneficial for a company from the
business and profit point of view, but when it comes to the country, then it
does not.
 6. Domestic Resources Get A Bad Hit
Some companies are importing competitions or substitutes for domestic
products. Due to all these things, locally made products of your country’s
market may get a bad hit.

Advantages and disadvantage of

merchandise (Goods) and services import
and export
There are two major classes of the things we buy. Goods and services. Goods are food,
petrol, toys. Stuff that you can hold. If you were to go into a shop and buy a pen, you
would have bought a good.

With services, you do not necessarily walk away with anything. Going to a restaurant is
buying a service, as is a haircut or a taxi ride. And so it is with banking and finance,
intellectual property and education.

This is what most western countries excel in, and is the fact that they're rich. There is not
a lot of value in producing manufactured goods, so people went and produced services.

Trade in goods is easy. It's shipping aournd the world, loaded onto trains. But it doesn't
make you rich. Because the west has the education levels and the resources, it can
produce services that the rest of the world needs to function. So we buy a doll from
China, but Citi may provide the bank services for that transaction to occur. If the
company that made the doll pays Citizen for such a transaction, Citi has in effect
exported a financial service ie. sold it to a consumer in another country. Equally, when a
tourist comes to the US or Europe, and they buy services such as taxis and tours, we
have exported a service, for it was sold to a foreign consumer.

Service exports are a lot harder to judge, but ultimately, it's why the manufacturing
‘decline’ isn't necessarily bad for a country.

5. Recommended Mode of
Entry
Explain all of the following methods of entry and chose
one method of expansion for the chosen company and
write advantages and disadvantages.
1- Direct Exporting (min 8-9 lines explanation with examples + advantages and
disadvantages)
2- Indirect exporting (min 8-9 lines explanation with examples + advantages and
disadvantages)
3- Franchising (min 8-9 lines explanation with examples + advantages and
disadvantages)
4- Licensing (min 8-9 lines explanation with examples + advantages and
disadvantages)
5- Wholly Foreign enterprise (min 8-9 lines explanation with examples +
advantages and disadvantages)
6- Joint Venture (min 8-9 lines explanation with examples + advantages and
disadvantages)
 Comparison of different modes of
entry
Point of Direct Indirect Franchising Licensing Wholly Joint
comparison Exporting exporting Foreign Venture
enterprise

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