BMG705 Global Business in Context Assignment Sample 2024
Introduction
Ovation Systems Ltd is a company that is specialised in developing and designing rugged and high-performance videos surveillance used by police, the military, and many other governments law agencies (Ang et. al. 2018). That company has been working and also have gained a reputation for over 20 years. The company has also gained many awards regarding the same in the year 2009 and that award was the queen’s award for international trade.
Moreover, the global business is a very different aspect of the company as their only customers are the government and the military. On the other, the products that are being developed by the company are small and rugged audio and video recorders for highly covert and body-worn deployment.
Moreover, the other products that are being sold by the company include picture-in-picture modules that help in showing several video channels on one screen. Nevertheless, there are many countries in which the company is working but there are very countries in which the company has not been developed like Poland. For the report, the country in which the company is not developed Poland has been taken into consideration (Dumitrescuet. al. 2019).
Due to many challenges that are present in the country, this has been difficult for the company to develop their business there. The present report highlights the reasons for the expansion of the company that defines the stages and the reasons that the company should take into consideration for their expansion in Poland. Lastly, the report also provides recommendations to the company for how they can develop their business.
Reasons for Expansion
Because of expansion, the company should expand their business in Poland as the country is a vastly different and new market that is very beneficial for the company. In the view of the government and military of Poland, it will also be very beneficial for them as this will help them in developing new and better techniques for their process (Goryniaet. al. 2021). This expansion will help both the government and the company they will gain benefit in their ways.
On the other hand, there are few stages in the process of internationalisation which include Licensing, Exporting, Local warehousing and selling, local assembly and packaging, Joint ventures, and direct foreign investments. Nevertheless, the stages of internationalisation that affect the process of expansion of the company in Poland are licensing.
As the company Ovation Systems Ltd deals in the products like small and rugged audio and video recorders for highly covert and body-worn deployment and more. It would be difficult for them to have a license for working in the country, exporting this will also be very difficult for the company as the products that they are providing are very delicate and sensitive so they might get damaged in the process.
Lastly, local warehousing and selling this may create a problem only in situations if the government of Poland does not agree with the expansion of the company in their country.
Factor 1: Infrastructure
Infrastructure is concerned with the basic system and services required for an organisation to operate successfully without any difficulty. Infrastructure involves buildings, transport, communication and information technology, and electricity and power supplies. Factors of infrastructure are very important for an organisation to operate and manufacture goods and services. This is why it becomes very important to determine that country in which Ovation Systems Ltd is expanding has a well-developed infrastructure.
Undeveloped or underdeveloped infrastructure can be the reasons for organisation inefficiencies in producing quality output and for operational inefficiencies (Harrison, 2013). A country with well-developed infrastructure indicates that country is economically developed because it is an important factor in the health and wealth of the country.
Infrastructure is divided into two types and one of them is economic infrastructure and the second is social infrastructure. Transportation, communication networks are examples of economic infrastructure and the education system is an example of social infrastructure.
Economic infrastructure is directly linked with the ability of the firm to produce goods and services efficiently. Social infrastructure is also very important as a sound education system will make students skilled who will be able to become competent employees for businesses. The infrastructure of the country is undoubtedly one of the most important factors to be considered before infrastructure.
Ovation Systems Ltd is a manufacturing firm and as it expands to manufacture infrastructure is a very important requirement in Poland. Poland has a well-developed infrastructure, and the country is continuously working towards improving roads and rail networks in the country.
Along with this, airport infrastructure in the country is also in very good condition in which nearly 50 million passengers travelled through Polish airports in 2019 (Infrastructure & Intelligent Transportation Systems. 2021).
Strong road, rail, and airport infrastructure along with well-developed seaports suggest that Poland has well-developed transport infrastructure. In terms of electricity and power supplies, Poland generates electricity through different methods and is capable of meeting demand. In relation to telecommunication rapid development and modernisation have taken place in Poland.
Development and modernization of telecommunication services suggest that Poland also has developed telecommunication services.
In Poland, 90 percent of households have access to the internet but the internet in Poland is highly expensive (Share of households with internet access in Poland from 2009 to 2020, 2021). Concerning the internet, Poland ranked 45th in the world for mobile speeds and 27th in broadband speed during August 2021 (Poland’s Mobile and Fixed Broadband Internet Speeds, 2021).
The ranks are not very impressive but are not bad either and suggest that Poland stands at a good position in internet services. Infrastructure in Poland including transport, communication, and the internet is in good condition suggesting that the overall country infrastructure is of good quality. Here, it can be said that when Ovation Systems Ltd considers different factors for expansion in Poland, infrastructure is in good condition. Good infrastructure will ensure that firm can manufacture and build goods efficiently in less time and cost.
Factor 2: Investment Feasibility
Expansion of a firm in another country comprises investment in other countries. Ovation Systems Ltd is looking for expansion of their business in Poland and expansion will be in form of the manufacturing facility. Establishing a manufacturing facility involves significant investment in Poland and this requires that country is investment friendly and barriers of investment are low.
Investment barriers are in form of technical regulations, unnecessary expenses for foreign firms, and discrimination with foreign firms. For foreign direct investment barriers are a lack of clear and transparent sectoral policies, restricted FDI regime, and lack of liberalization. It is very important that while investing such barriers do not exist or their existence remains insignificant.
Poland is considered as one of the best places to invest and in the 2019 Global Best to Invest ranking, Poland is at 5th place followed by China, Germany, the UK, and India (Czarzasty, 2021). This is a very important achievement by the country which suggests that for investing Poland is a very appropriate selection by the company.
Further, Poland is the third best place in Europe for foreign investment and the Polish government is inviting foreign investors to invest in Poland. The reasons for Poland being one of the best locations for foreign investment are low barriers and high feasibility to investment. Covid-19 has made an impact on foreign direct investment and investment in 2020 collapsed because the world economy was in a strong crisis.
Poland is a start-up leader and is working on the development of e-mobility in Poland along with this, Poland is also the leading exporter of video games in Europe (Cavusgil, et.al. 2014). Poland is working towards developing its leadership in technology and technological advancements and this is why it is appropriate for investment by Ovation Systems Ltd.
The company specialises in the design and manufacturing of rugged and high-performance surveillance products and production is driven by technology. Poland is continuously working on development on the technological front and also has well established infrastructure.
Both these factors make it worth investment, and investment feasibility in the country is also high which has been confirmed by multiple rankings for the company. Investment feasibility in Poland is high, but it does not make it completely free of regulations. The Polish government places limitations on foreign ownership for some sectors.
According to Polish law, non-EU citizens cannot have more than 49% ownership in air transport, television, and radio broadcasting, and airport and seaport operations sectors (Deresky and Christopher, 2015). Ovation Systems Ltd is a UK based firm and because of Brexit it is a non-EU company hence becomes subject to limitations.
However, the sector in which the company is likely to invest is different, and this is why it is not covered in sectors that limit foreign ownership. In Poland, foreign direct investment is regulated by the Act on the Control of Certain Investments. Ovation Systems Ltd will require ensuring adherence to the act for investing in Poland.
Factor 3: Impact of EU and Brexit
European Union (EU) is a political and economic union of 27 member countries that are mainly located in Europe. EU has a very strong impact on its member countries regarding their economic policies and political policies of the country. EU membership enables countries to come into a contract where trade barriers of the country with other EU member countries are very limited. Poland is an EU member country since 2004, and earlier UK was also a member of the EU.
However, after Brexit UK is no more a member of the EU, hence it does not have access to free trade benefits with EU member countries (Pierscieniak and Grzebyk, 2020). Impact of EU and Brexit is a very important consideration for Ovation Systems Ltd because it is based in the UK and planning to expand and invest in EU member countries.
Brexit is one of the very big and important events that have taken place in the history of the EU, and Poland has also been affected by Brexit. The impact is due to the UK not being a member of the EU and Poland being a member of the EU. The relationship between UK and Poland will be affected.
In Poland, UK firms may experience restrictions placed by the EU for the UK after Brexit. The restrictions of the EU for the UK are likely to limit freedom of business for Ovation Systems Ltd in Poland. Brexit is can also affect the relationship between Poland and the UK, earlier over 1 million Polish people are working in the UK. In case they are forced to leave the country in such a situation, Poland is likely to face major economic challenges like high employment (Onyszkiewicz, 2017).
Forcing Polish workers can also create challenges for the UK as the economy of the country considerably depends on Polish workers for keeping several economic sectors working effectively. Additionally, Brexit will also affect the political relations of Poland and the UK. Hence, it is highly important to consider the impact of the EU and Brexit before the expansion of Ovation Systems Ltd in Poland.
Brexit can also affect bilateral trading relations of UK-Poland because Poland is the second biggest trade partner of the UK. Indirectly, when the Polish economy gets negatively affected, this is also not favourable for UK businesses operating in Poland. The favourable and strong economic condition of Poland is important for all businesses in the country whether they are domestic or international (Simionescu et.al. 2017).
It means that the impact of the EU and Brexit put relations of the UK and EU in a very uncertain position. The company is planning to expand in 2022, and after the completion of the transition period in 2021 UK is no longer subject to EU regulations. Possible changes in the economic policies of the UK create strong uncertainty about the impact of the UK and Poland’s economic and political relations.
Before deciding on the expansion of Ovation Systems Ltd in Poland, the factor and its possible impact should be considered by the company. Brexit will also bring changes in the functioning of foreign investment by the UK in Poland, making it another important reason to consider whether to internationalise in Poland or not.
Factor 4: Resource availability
Resources of the business enable them to operate without any difficulty, and this is why the availability of resources is a crucial factor of the macroeconomic environment. Resources are factors of production required for producing goods and services for the company. Land, labour, and capital are resources that a company requires for producing goods and services along with entrepreneurship. Land, labour, and capital are resources that are a factor of the macro business environment.
Land needed for establishing business is a big consideration before planning to expand. Labour is another essential factor because the availability of labour required for the company is a crucial element contributing to the success of the business (Juraszet.al. 2021).
Ovation Systems Ltd requires a technologically competent workforce for carrying out its operations that is determined by the availability of labour. Employment and unemployment have a strong impact on the availability of labour in the country. Employment and unemployment rate determines competition in the labour market and the accessibility of a competent workforce for a company to hire. Unemployment in Poland was higher in 2014 but conditions of the labour market are improving with the availability of labour.
The UK employs around 1 million Polish people, and they are essential for the economic well-being of a country. This number indicates that Poland has a positive employee or labour availability because of which country have labour or human resource.
Capital is another essential resource that a company requires for carrying out its operations. Capital is concerned with financial investments in a company for different types of fixed assets and other requirements for production. Capital availability gets affected by economic output and financial policies like interest rates also affect capital availability. Capital requirement is a very important element that affects the decision of a company to internationalise.
Capital requirement for expansion, more than a company can invest might lead the company to change their decision to expand. In Poland, the capital requirement is not very high for a business operating in the UK, and this is why it becomes a favourable factor (Czainska et. al. 2021).
A favourable economic environment is a very important reason that Poland is one of the best countries to start a business or invest in. Land, labour, and capital resources are in favourable condition in Poland. Poland is also right for expansion for manufacturing because in the best locations for manufacturing in the world Poland is among the top 10 countries. Based on the total EU value of industrial production sold Poland comes at number 5 after Germany, Italy, France, and Spain.
The position of Poland indicates the potential and capacity of Poland in production and manufacturing which is possible by the availability of resources. Resources are very important and this is why this factor of macro business environment is very important to consider before deciding on expansion of business.
Factor 5: Labour laws
Labour laws also affect the decision of expansion of a company in another company. Businesses are looking for expansion in countries where labour laws are simpler (Nkwabi and Mboya, 2019) (Lobo et. al. 2020). Labour is one of the means or factors of production, and labour laws control how organisations can use labour resources available to them.
Labour laws in Poland are based on employment agreements and civil law agreements. Labour laws in Poland are not something very difficult. This is why labour laws is a favourable or indifferent element for the expansion of Ovation Systems Ltd in Poland.
Factor 6: Inflation
Inflation is concerned with the increase in prices over a given period of time. Inflation in the UK has increased to a record high at a rate of 5.4% annual increase is expected. In Poland, the inflation rate is 3.27% in 2022 and is likely to decrease in the coming year (Lobo et. al. 2020). This is a favourable state for the expansion of Ovation Systems Ltd in Poland.
Factor 7: Taxation
Taxation is also an important consideration for companies when they expand in other countries. Taxation is concerned with the rate of tax that corporate need to pay on their taxable income, and this rate is equal in Poland and the UK. Hence, as the company expands in Ovation Systems Ltd in Poland, there will be no effect on the taxation of the company after expansion.
Factor 8: Covid impact
The covid impact is also a very important factor affecting the expansion of the business. Covid has affected the strategies and functioning of the business (Nkwabi and Mboya, 2019). Businesses are increasing reliance on technology and this is why the technological strength of the country affects expansion decisions. Furthermore, the impact of Covid on the financial position of Ovation Systems Ltd also affects their expansion considerations.
The expansion of business is part of its growth strategy, and growth is business as per Ansoff Matrix can be done in four ways.
From the above strategies, the market development strategy has been adopted by Ovation Systems Ltd. Market development is concerned with developing a market for an existing product of the business to attract more customers with the existing product value.
Recommended Mode of Entry
Various methods are involved in the process of entering a new market for a company. These modes include foreign direct investment, a wholly-owned subsidiary, joint venture, franchising, licensing, and many more.
The company has been recommended to use the method of licensing, franchising, and joint venture. These are the method that will help the company in the proper expansion in Poland. As seen, licensing is the process that will help the company in legally working in the country which will not only benefits them but also the government and their military at the same time.
Furthermore, the company can also use the method of franchising as in this they can give the franchise to any government agency as this will help them is proper working and getting every detailed information from the government of Poland (Kozioł-Nadolna, 2019). Licensing and franchising are two important and most common ways of expansion of business in the international market. This enables businesses to invest the least amount of money in expansion and it can earn a significant profit through fees and royalty of the business.
Nevertheless, the company also have the option of a joint venture. In a joint venture, the company can connect with any of the company in Poland that is working in the same or similar area of development. As a result, this will help them in expanding their business with many new and innovative modes.
The joint venture enables to work with a company that has a strong understanding of the target market, but it also requires significant capital investment for establishing a venture (Schellenberg et. al. 2018). Joint ventures are also difficult to operate because two firms work collectively and differences in the firms affect the functioning of the business.
Further on, the most relevant method that can be used by the company which they are planning to develop their business in Poland is licensing. This is one of the most important and safest modes of expansion of the business in the markets of Poland. This is the process that will directly connect the company to the government of the country.
There are many more benefits like dealing directly with the government and military, getting proper and fair feedback on the products, and many more. Nevertheless, the government and the military of Poland will also get many benefits from the products of the company. There will be more improved versions of recorders, cameras, and also picture modules than they have been using at the current stage.
Conclusion
Hence, the above report highlights the business environment which includes competitors, factors that affect the company both internally and externally. The market analysis that is done by the company affects the processing of the business. Ovation Systems Ltd is a company that currently works for helping the government and the military.
The company provides products that help in investigations like high covert and body-worn products. The report also showed the stages that are at the international process that can be used by the company in their expansion in Poland. The stages that are involved in the process of internationalisation include the domestic market stage, a pre-export stage, an experimental involvement stage, an active involvement stage, and a committed involvement stage. This means the company is properly processing Licensing, Local warehousing and selling, Local assembly and packaging, Joint ventures, Exporting, and Direct foreign investments.
The report also includes a few recommendations for the company that can be taken into consideration for the expansion of their business in Poland. The report also includes the methods that are believed to be helpful for the company in its expansion in Poland. Moreover, the factors that are affecting the company are also mentioned in the above report.
Every aspect of the report analysis shows that the company should advance in innovative and technological methods that will help them in developing many new products. Along with this, strategies that can be used by the government and the military and also will help them in developing their business in Poland at the same time.
References
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