Assignment One - Global Business Environment � Briefing Report Assignment Sample

Assignment One - Introduction Of Global Business Environment – Briefing Report Assignment

Small and medium-sizeenterprises also known as SME are businesses that maintain assets revenue and the number of employees under a certain limit. Every country has a separate description of what a small and medium-sized enterprise is about (Mittalet. al. 2018). As being lead in the market and planning on expansion there is a need for competitive success in every innovative driven global economy. Every global economy requires to have development ofstrong local capabilities which can face several market failures.

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The globalization of the business environment makes it very tough for SME to research foreign market opportunities. So for gaining a competitive advantage SMEs need to focus on planning strategies to enter the international market (Kunday and ?engüler, 2015). As for the entry of more and more firms into the international business environment, the competition will be tough. There are various challenges and opportunities on which SMEs can work like trade barriers, Technological advancements, and other factors which drive the world’s economy for becoming more united and all thesefast-changing market conditions are enabling SMEs to become part of the international market.

The opportunities and threats in Global business environment

The global business environment is well-defined for the environment or approach in various countries. The global business environment is classified into two kinds of environment internal and external environment (Moon, 2022). The internal environment in an organization consists of financial decisions, investments, human resources, etc. and the external environment comprises the political, social, legal, cultural, taxetc factors which influence the business environment.

For functioning efficiently and effectively companies operating in the global market must recognize the cultural and social environment of the host country and what situation in which they are operating in. In the current situation, there are thousands of multinational companies which are operating all across the globe. These companies familiarize with the local language, culture, and tradition of the host country.

Influence of the key global drivers on small and entrepreneurial businesses

Since the emergence of the COIVID-19 pandemic small and medium enterprise has undergone a huge shift and change in their business format (Priyonoet. al. 2020). After all the changes and disruption to the business and economy of the countries, several key growth drivers help an entrepreneur and their SMEs to maintain their goals, ambitions, and objectives and focus on planning for growth. These drivers help entrepreneurs and SMEs to think differently about their business and also help to successfully implement growth strategies over long-term view. The key global driver that influences small and medium enterprises are as follows:

• Customers – every leading business has customers as its central point and always keeps customer demand and needs as preference for achieving a competitive benefit in the market. Focusing on customers always helps businesses to understand the needs demand and customer base, permitting them to anticipate in delivering services that help in building trust among customers and long-term business growth. Customers are the key driver which influences the business whether it is a multinational company or an SME.
• People – every company becomes good only when its workforce or people working in the organization have the potential to perform. People working in an organization have a great influence on SMEs because when a company looks forward to stepping into the international market have to face different kinds of cultures and people. To get the most from their talents the company plan on creating a workforce that provide values diversity and attracts people from different region and also focuses on retaining the right people who will help in the growth of SMEs.
• Technology – also has a most significant role in influencing the development of SMEs in the global market as technology refers to the transformation of the business. This factor empowers leaders to plan on making better and cleverer business decisions and focus on fast changing needs and demands of the customer, business performance, and most importantly managing risk. Technology has a profound impact on SMEs as it provides various opportunities and challenges.
• Finance – every business whether a large business or an SME requires funds to grow and manage business operations. Finance influences the growth strategy of SMEs (Bouazza al. 2015)

The rationale for SMEs to expand their businesses internationally

Once the company has done all due diligence around all the potential restrictions which is successfully worked out the potential market, it is time for expansion of the basic steps involved in the expansion of SMEs in the global market is as follows:

• Research financial choices - Exporting goods or services overseas is expected to be very costly. If the company is not able to cover projected costs there are various options for funding to be considered like government grants, debt-based finance, and investors from overseas (Dominguez and Mayrhofer, 2017).

• Conduct systematic market research - Conduct market research proceeding to expanding and enter in a new market. Using secondary research is also a great option to understand if the company is dealing in a same kind of product or service in the chosen target market.

• Developing an international business plan - The key to success depends on planning strategies for expansion. The plan needs to contain various elements which are part of the standard business plan and also needs to focus on the target market in which SMEs want to expand. The plan must involve goals and objectives, operational information, and financial information.

• Understand the local culture - If the company is looking out for expanding into a market that is knowingly different from the current market in which the company deals, is very important to researchthe local culture thoroughly (Adebayoet. al. 2019). The company's research may include social norms, behavior, culture, etc.

Opportunities andchallenges SMEs face whenentering the competitive global environment

Challenges faced by SMEs

• Informational Barriers: The Company faces big problems in selecting, identifying, andcommunicatingin international markets because of information inadequacies. The major challenges in gathering information are :
  • Limited information to analyze the market
  • Untrustworthy data (Rahman al. 2017)
  • Identifying global market opportunities
  • Difficulty in contacting overseas customers
• Human Resource Barriers: Disorganizations of human resource management about the market situation of global environmental issues. The important points to be considered are as follows:
  • Less managerial time is devoted to analyzing global issues regarding human resources.
  • People parts of the global team are untrained and there is an insufficient quantity of work.
  • HR faces difficulties in managing overseas employees (Rizos al. 2016)
• Financial Barriers: The Insufficiency of finance regarding the global market operations is known as financial barrier.The important factors are as follows:
  • fewer funds to finance the working capital of overseas branches
  • shortage of funds to finance investments
  • No insurance for the global operations of the company

figure 1 graph above shows the challenges for SMEs in international market.

Opportunities

Many SMEs entrepreneurs understand the opportunities presented in the global market, and gaining contacts in international markets is turn out to be a strategic tool for increased competitiveness in the market. Entering the international marketfor small businesses is a very big step as it offersvarious business opportunities, like

• entry new niches and larger markets,
• achieving technological advantages,
• promotion of technological capability (Chandra al. 2015)
• spreading risks,
• lowering and sharing costs,
• R&D costs
• Managing to improve access to finance.

Gaining entry to international markets helps to realize the company’s potential for high growth in the market, and it is often an important strategy to move forward with investing a large amount in intellectual property.

The advantages of trading blocs for firms

Alternative strategies that SMEs could employ

International strategy and global expansion are very important for SMEs. There are various opportunities in new international markets and varieties of affordable talent to access, and less manufacturing expense also helps in the growth of SMEs (Loboet. al. 2020). Various large enterpriseshave special benefits from global markets which are quickly becoming superficial for SMEs. The thing is, taking the step into the global market is a very big decision for every small business so the company should consider the following points:

• Incremental agile approach – There are many SMEs who are looking forward to entering the global market and focusing on considering the lean approach. The company needs to test the market from point of view of sales and operation to see if the market is beneficial for investment or not.
• Light infrastructure step – SMEs will find more success if they consider holding on to infrastructure investment or hard costs in the global market till their company's operation gets matured(Ahi al. 2017).
• Utilizing technology and a service-oriented approach – The company should adopt technologies like project management tools and sharing economy helps in making the work accountable.

The major international trading blocs and agreements, including the various tariff and non-tariff barriers

The major international trading blocs

• Intellectual and collectivebarrier: The intellectual barriers are the cultural barrier and collective barriers are comes under the societal barrier. Every country has its own cultural and social restrictions made by the people for safeguarding the business environment. The Intellectual barrier mostly comprise of necessary things of human life like food and shelter which are connecting family, religion and customs of the nations. The business involves sales and purchase of things which are necessary from one nation to another and sometimes due to cultural and societal differences it becomes difficult for SME to sell the products.
• Political barriers: The political environment of a nationhas most important part in internationaltrading. Political factors might change the attitudein the direction of foreign firms at any time. And that collision can create an adverseimpression for intercontinental business.
• Restrictions upon tariffs and nontariff trade

Tariff Obstacles

These barriers are designed to keep domestic businesses' prices stable. It is enforced in one, all, or a combination of the following three ways:

• Ad Valorem obligations: Customs duties or taxes are calculated as a proportion of the value of the products or services intended for import and/or export.
• Direct obligations: It is a flat rate customs duty that is calculated as a net amount of tax regardless of the value of the goods.
• Compound obligations:It combines direct obligations and ad-valorem obligations.

Non-Tariff Barriers or Trade Barriers

These are several indirect barriers that interested nations are continuing to develop in order to establish obstacles that will slow, halt, or restrict imports. These obstacles are commonly described as quota systems or quantitative limits.

• Financial Obstacles: There are three such obstacles to take into account:
• Discretionary Export Limitations (VER): Under this arrangement, the exporting nation voluntarily restricts the export of certain products to certain markets. These limitations are placed on nations that rely largely on exports.
• Blocked money
• changing exchange rate
• Obtaining government authorization to secure foreign currency

The benefits of specific trading agreements for SMEs in the UK

UK-Australia free trade deal

In June, the UK and Australia reached a free trade agreement that is expected to promote the 3.5 million UK workers employed in definite industries. With the elimination of tariffs on £4.3 billion value of exports, the agreement will effect in tariff-free commerce for all British goods, building it more reasonable to sell household names like automobiles, Scotch whiskey, and ceramics. The agreement is also usual to open up chances for the UK's digital and tech industry, position the country to take the lead in fields like artificial intelligence, low-emission technology, and space exploration. The agreement will also result in less red tape and bureaucracy for 13,000 small firms (SMEs) in the UK, which will increase the efficiency of exporting to the market.

SMEs can overcome barriers and take advantage of international opportunities

There are various barriers that SMEs face in the international market. However, the companies need to work on barriers and convert them into opportunities some of them are as follows.

• Researching and narrowing down all the opportunities for the entry into the global market. Determining the target market and target customer helps the company to decide which market is more viable for what the company offers (Toulova al. 2015).
• Being culturally sensitive is also important for SMEs to enter in global market, as there are so many countries in the market and each country has its own culture. The company must understand how to engage with the target customer.
• To speed up the learning it is very important to hire a local workforce for understanding the needs and requirements of customers in a particular region.

Conclusion

The report concludes with facts about SMEs and their expansion in the global business market. The understanding is developed upon this report that SMEs need to focus on challenges and opportunities to be part of the global business market. There are various barriers that every small enterprise faces while entering the international market, companies need to focus on overcoming barriers and taking full advantage of opportunities that the international market provides. The report also recommends some major points that an SME should consider before entering into the international market.

Reference

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