BS7312C International Business Environment and Trade Assignment Sample

Module Code And Title : BS7312C International Business Environment and Trade Assignment Sample

Introduction

International expansions often become a reliable strategy to expand business for various organisations which ultimately proves beneficial in achieving organisational goals and objectives. In this report, a detailed discussion will be done on the various aspects of international business and the problems associated with them in order to further develop knowledge and understanding on it. The report will also use various theories and models including Porter’s diamond model and John Dunning’s Eclectic Paradigm to explain in detail the justification of Foreign Direct Investments (FDI) made by Pfizer and BioNTech in forming collaboration with Brazil’s Eurofarma in order to manufacture Covid-19 vaccines.

Research the background for the deal

Problem of Company

The company has faced several issues during the expansion phase which includes problems relating to clear and effective communication along with issues in the management of the employees. On the other hand, paying attention towards research and development always proves effective in avoiding unwanted circumstances along with utilising the available opportunities in the most appropriate way (Klimczaket al., 2017).

Apart from this, lack of mutual trust and collaboration has also proved to be a serious problem for the company in expanding its business. In addition to this, absence of proper guidance under an able leader has also been a major issue faced by the company.

Moreover, differences in mentality and psychology of the employees and staff have also impacted the productivity of the company to a considerable extent. It may be implied that having a clear vision about organisational roles and responsibilities eventually assists in gaining organisational sustainability and reduces the possibilities of confronting various threats (Lozano et al., 2021).

All these problems have been faced by the company while expanding its business in Brazil for manufacturing Covid-19 vaccines for Latin America. It may be opined that differences in mindset of the employees have created these problems which need to be avoided through strategic approaches.

The different style of management in the different companies creates a threat for the company to manage the whole work process in the initial stage of the collaboration of the companies. The partnership process in the business is a complex procedure and the agreement of the companies obstructing the path of work process creates obstruction to manufacture the vaccines regarding Covid-19. The companies face problems in leadership as the different companies follow different leadership styles and it effectively affects the management process of employees and it creates conflict among management.

The investment capital creates an initial cause of conflict as the companies may not have a proper planning for investments in manufacturing the vaccines for Latin America. In case of collaborations there are some disadvantages such as more potential companies showing more power to other companies and data management becomes hard for the companies regarding the employees (Dichevska, 2018). Frameworks such as international business environment analysis, Porter’s Diamond model and other frameworks may provide guidance for a company to shape effective planning regarding collaboration.

International Business Analysis

The micro environment analysis is immensely helpful in understanding the importance of the international business environment and the factors such as political, economical, social, technological, legal, environmental. Political environment of the countries is important to collaborate in business and Brazil maintains a cordial relationship with the USA as mutual commitment of both the countries are based on economic growth and prosperity, international security, and peace.

Another important factor is the economical business environment which effectively supports the collaboration process of the companies such as Eurofarma, Pfizer, BioNTech as good economic conditions boosts the business. The low inflation rate of Brazil provides the opportunity for high purchase capability of the consumer in the market of Brazil and boosts the alliance properly (Data.worldbank.org. 2022).

Figure 1: The Graph of Inflation (Source: Data.worldbank.org. 2022)

In contrast to that, the Gross Domestic Product (GDP) is comparatively low such as in 2019, the GDP rate is 1.878 Billion comparatively high from 1.445 Billion GDP in 2020) due to the Covid-19 pandemic situation and it may create trouble in the collaboration for the companies (Refer to Appendix 1). The growing population of the country effectively helps the business to collaborate among three companies such as Eurofarma, Pfizer, BioNTech as the companies find consumers for manufacturing the product.

The dense population of the country also provides opportunity for collaborative business as the companies hire desirable employees to achieve the desired productivity and maintain the growth in the international market. Additionally, the company selects the social factors which refer to social, demographic and cultural factors and it should be chosen according to the needs of the company (Phan, 2021). Brazil is a technological advanced country and it provides immense opportunity in collaboration with the companies such as BioNTech, Pfozer, Eurofarma in the operation of the business.

The science and technology of Brazil is well-developed and most of the people are mobile phone and internet users in the country and the population supports the business as the tech-savvy population helps in the process of business. Legal factors are another important part of international business environment analysis and the international laws are important to enhance the scope of collaboration within the countries such as Germany, USA, and Brazil. Additionally, Free Trade Agreements boost the inter country trade relationship as the US utilises the agreements to keep favourable treatment with other countries (Trade.gov. 2022).

Brazil is also engaged with the USA through the Agreement on Trade and Economic Cooperation and it boosts the export import relationship among two countries as Brazil is USA’s 17th largest supplies of goods and 9th largest exporter country that boost the collaboration process. Climate change is a noticeable issue and the companies take several initiatives such as meeting the sustainable development goals, net zero emissions of carbon, smart waste management to combat the climate issues and the collaboration process effectively helps to meet the initiatives in a more innovative way.

The overall international analysis of the business environment helps the companies to achieve prosperity as the factors such as economical, legal and political individually provide opportunities to boost the partnerships.

Action of Company in terms of relevant theory

Porter’s Diamond Model

Porter’s Diamond model is a popular model which helps to analyse the national advantages which helps to create advantages on an international level and the factors are factor conditions, relating and supporting industries, demand conditions and strategy, structure, rivalry. The factors condition refers to the production factors such as the labour costs, commitment qualifications to enhance the process of collaboration of Pfizer, Europharma and BioNTech. Natural resources in terms of factors also provide competitive advantage to the country and the liquidity of stock markets of the countries provides immense opportunity to make the collaboration successful.

The interaction among the economies of scale, the size of national market and transportation market enhance the collaboration process of the companies of Brazil, USA and Germany. The investor shows interest as the national economic condition of USA and Germany is good which helps the companies to service the market from a single location.

The success of the collaborative venture depends on the presence of suppliers and related industries within a country and competitive suppliers provide immense support to implement creativity or innovation as well as internationalisation. Along with that, cost, quality and type of infrastructure influences competitiveness and cultural institutions, communication and mail systems impact quality of life or in a project (Deng et al., 2018).

Strategy, structure and rivalry is another factor through which Pfizer and BioNTech are managed and the corporate objectives to maintain the work culture in a successful manner. Domestic rivalry is also an important factor of Porter’s Diamond model as the competition within one’s own country provides advantage to the companies to compete internationally. Government plays an effective role in the business and it provides immense support in terms of political and economical infrastructure to expand a business locally as well as globally.

Along with that, the government policies such as tax policies, development and research tax incentives in promoting industries Government plays an important role according to Porter’s Diamond Model (Wonglimpiyarat, 2018). Moreover, chance events refers to the innovation of the company that helps the companies such as Pfizer to collaborate with BioNTech and Europhrama to produce vaccines as a new venture globally.

Figure 2: Porter’s Diamond Model (Source: Wonglimpiyarat, 2018)

Regional economic Integration

Regional economic integration refers to agreement among nations to eliminate or reduce trade barriers, more specifically, through collaboration of BioNTech and Pfizer with Euro pharma, two different geographic regions reduce trade barriers. The free trade agreement among Brazil and USA, Brazil and Germany indicate the level of regional economic integration is low and it directly opines that the complexity is also low. Free trade agreements provide the opportunity for Brazil, USA and Germany to resolve disputes and overcome the challenges regarding the business disputes or any problem in collaboration.

The general aim of the trade agreements is to promote economic efficiencies, develop the economy and take competitive advantages. Brazil has been a member of the World Trade Organisation (WTO) since 1955 and tariffs among the member countries are modified to provide financial advantage and help to grow the economy. In contrast to that, Brazil’s deep moral, social, economic and political crisis has declined after participating in the European Union (EU) agreements and undermines its potential as a country (Gratius, 2018).

Entry Mode

In this case the entry mode is considered as the joint venture because it refers to the combination of two or more companies that wants to develop a single project to gain an overall profit and also share associated risks with the development of the project. Countries such as Australia, UK, Singapore and China are the top countries that consider the joint venture and it is based on the countries and policy maker’s decision (Chan et al., 2020).

Pfizer, BioNTech are collaborating with Brazilian company Eurofarma to manufacture Covid-19 vaccines and it is considered as a joint venture to achieve the overall profit. There are four types of joint ventures such as project, vertical, functional and horizontal joint venture and project joint venture is the most common form of joint venture. The companies such as Pfizer and BioNTech consider Eurofarma based on capacity, highly trained workforce, safety track records, project management, working relationship and commitment to accelerate the pace of the project.

The joint ventures help the companies to enhance the capability and sharing costs and risk is another advantage that helps the companies to overcome the challenges as well as obtain prosperity. In collaborative projects the companies also take competitive advantage as through this project the Brazilian company Eurofarma utilises several technological advantages of other two companies or vice versa. On the other hand, the family business and the joint ventures are usually not accepted because the emotional attachment reduces the strategic sensitivity whereas the governing ability of the families are comparatively higher (Debellis et al., 2021).

John Dunning’s Eclectic Paradigm

Ownership advantages

Ownership advantage refers to various intangible properties which a company owns which may include rights related to copyright, patent and trademark and due to this reason the company will certainly get benefits. Additionally, developing Covid-19 vaccines in a collaborative manner may also improve the brand image and reputation of Pfizer and BioNTech in the global context.

Location advantages

The location is of immense importance for the company as it has provided all the required facilities including the availability of raw materials and transportation of the essential raw materials. Furthermore, analysing the numerous dynamic factors associated with location and modes of production becomes extremely crucial in gaining competitive advantage (Sharmiladevi, 2017). The location of Brazil is quite appropriate as it provides all sort of modern facilities and technologies which may definitely help the company to achieve its organisational goals and objective successfully.

Figure 3: John Dunning’s Eclectic Paradigm (Source: Sharmiladevi, 2017)

Internalisation advantages

Internationalisation has been proven to be immensely beneficial for the company as it has saved financial resources of the company by forming collaborative bonds with Brazil’s Euro Pharma. It may be clearly opined that the Foreign Direct Investment (FDI) made by Pfizer and BioNTech may generate fruitful results in the long run.

Recommendations

The recommendations are as follows:-

The companies should implement stringent rules and regulations to avoid any kind of conflict within the initiatives such as manufacturing vaccines related to Covid-19 on Latin America
The companies should plan the required funds properly to avoid sudden description in the project and check the new company’s financial capability to avoid loss
The company should plan import tax from another source as foreign trade agreements reduce the scope of collecting tax
The company should implement rules regarding diversified work culture as the employees are from different countries

The companies such as Pfizer and BioNTech evaluate the opportunities and threats before collaborating with Brazilian company Eurofarma, however, there are some recommendations for the company. The company should implement stringent rules to avoid any kind of conflict as the conflicts pose immense threat to the collaboration process and growth of the business. The company should plan the whole financial investments in a constructive way to avoid any kind of disruption and check the potentiality of the new company as due to loss of the company the other companies may have huge losses.

The global companies have to adopt cross-cultural management to reduce the difference in decision, situation and opinion and it helps the company to manage the employees internationally (Thapliyal and Joshi, 2022). In addition to that, the import tax rate and rate of tariffs are reduced in the free trade agreement whereas the company should implement a plan to enhance import tax from other sources (Sinaga, 2018).

Conclusion

From the above discussion, it may be concluded that business expansion in global range plays a pivotal role to take competitive advantage as well as achieve the overall success in business operation. For this reason, Pfizer and BioNTech are collaborating with the Brazilian company Eurofarma to manufacture vaccines of Covid-19 for Latin America and face several issues such as communication gap among employees within the company.

The detailed analysis of the international business environment guides the companies to successfully collaborate in order to manufacture the vaccines and there are several factors such as political, economical, legal, technological factors that influence the business process deeply. Along with that, Porter’s Diamond Model provides the way the companies utilise domestic advantages internationally to take competitive advantage as well as maintains market growth.

The companies implement joint ventures as mode of entry and it boosts the operation as the companies implement innovation in the ongoing manufacturing venture. Countries such as the USA, Brazil and Germany are following free trade agreements that provide immense opportunity to conduct business in a more flexible way.

In addition to that, due to the free trade agreement the regional economic integration as well as complexity is low and helps the companies to develop the business process. The joint ventures, mergers and acquisition provide high profit, operational control, reduction of tariffs and it effectively helps to take advantage in a highly competitive market (Tien and Ngoc, 2019).

References

Chan, A.P., Tetteh, M.O. and Nani, G., 2020. Drivers for international construction joint ventures adoption: a systematic literature review. International Journal of Construction Management, pp.1-13.

Data.worldbank.org. 2022. Inflation, consumer prices (annual %) – Brazil | Data. [online] Available at: <https://data.worldbank.org/indicator/FP.CPI.TOTL.ZG?locations=BR> [Accessed 7 April 2022].

Debellis, F., De Massis, A., Petruzzelli, A.M., Frattini, F. and Del Giudice, M., 2021. Strategic agility and international joint ventures: The willingness-ability paradox of family firms. Journal of International Management, 27(1), p.100739.

Deng, A., Yeo, A. and Du, L., 2018. A Study on Gwadar Port International Competitiveness using Porter’s Diamond Model. World Journal of Innovative Research, 4(1), pp.1-7.

Dichevska246, S., Karadjova247, V. and Jolevski248, L., 2018. Advantages and disadvantages of cooperation between banks and insurance companies

Gratius, S., 2018. Brazil and the European Union: from liberal inter-regionalism to realist bilateralism. Revista Brasileira de Política Internacional, 61.

Klimczak, K.M., Machowiak, W., Staniec, I. and Shachmurove, Y., 2017. Collaboration and collaboration risk in small and middle-size technological enterprises. LogForum, 13(2), pp.221-235.

Lozano, R., Barreiro‐Gen, M. and Zafar, A., 2021. Collaboration for organizational sustainability limits to growth: Developing a factors, benefits, and challenges framework. Sustainable Development, 29(4), pp.728-737.

Phan, S., 2021. The effect of pestle factors on development of e-commerce. International Journal of Data and Network Science, 5(1), pp.37-42.

Sharmiladevi, J.C., 2017. Understanding Dunning’s OLI paradigm.Indian Journal of Commerce and Management Studies, 8(3), pp.47-52.

Sinaga, M.S., 2018. Analysis of Influence of Tariff of Import Duty, Exchange Rate, Import Value And Import Volume on Income of Import Duty In Indonesia With Free Trade Agreement (FTA) As Moderating Variable. International Journal of Public Budgeting, Accounting and Finance, 1(2), pp.8-8.

Thapliyal, K. and Joshi, M., 2022. Cross-Cultural Management: Opportunities and Challenges. Integrating New Technologies In International Business: Opportunities and Challenges, pp.31-53.

Tien, N.H. and Ngoc, N.M., 2019. Comparative Analysis of Advantages and Disadvantages of the Modes of Entrying the International Market. International journal of advanced research in engineering and management, 5(7), pp.29-36.

Trade.gov. 2022. International Trade Administration | Brazil – Trade Agreements. [online] Available at: <https://www.trade.gov/country-commercial-guides/brazil-trade-agreements> [Accessed 7 April 2022].

Wonglimpiyarat, J., 2018. The role of government in Porter’s Diamond model: comparative cases of Singapore and Thailand. International Journal of Technology, Policy and Management, 18(1), pp.73-88.