International Management
ASSESSMENT
Executive summary
Farmfoods had a substantial amount of resources, such as human resources, capital resources and more and that had helped the company to work on its international venture in France with significant effectiveness. However, there were certain factors, such as the economic condition of France after Covid-19 that proved to be a challenge for the company to enter the French market. The external environmental influences of France has been helped in managing the country with better policies and management and even help the country to understand the business ventures which helps several companies such as Farmfoods to expand the business in the country.
Introduction
The internationalisation of a company depends upon the way the company is able to help in the increase in the revenue of the company and also in the involvement of the enterprises in the international market situation in a much better way. The company has to make sure that the company is able to demarcate the policies and framework as used by the company in need and even help in flourishing the company in the global arena. In this report, the Farmfoods Company of the United Kingdom (UK) is to be stated to understand the way the company is able to flourish in the new market of France by understanding the overall situation of the country in a better manner.
Analysis of the external environment of France
Political
The government of France keeps tight surveillance upon the administrative matters of the country as the ministers of the country are not much favourable with various kinds of rights and privileges as enjoyed by the citizens of the country. The political condition of France helps in maintaining the political stability of the country although at a certain time the effect of several protests impacts the business environment of the country even though the country is quite favourable for the expansion of new business enterprises. Although, the country shares extremely good diplomatic relations with other European nations which have helped the country to share good bonds and even better understanding with other countries in such a well-built manner. The Farmfoods Company of the UK is a frozen food company that is made for the benefit of the families of the UK by delivering the products in good quality by maintaining waste management of the company in an eco-friendly manner (Farmfoods.co.uk. 2022).
Economic
The economic condition of France is quite good which may help the company Farmfoods to flourish in the country without any kind of hindrances and may be able to gain a huge number of profits from the new markets. The Gross Domestic Product (GDP) of France is 7% in France in 2021 which is quite higher than most countries because of the Covid-19 pandemic situation all over the world and the GDP per capita of the country was 2.63 trillion United States Dollars (Refer to appendix 1). The country has made several collaborations with various organisations which may help the country to flourish well which may help the company to progress well and even the higher taxation within the country may help the company may affect the tax rates of the company.
Social
The population growth rate of France is quite steady who has helped the country to progress in the global market in a sustainable manner and which also has affected the working of the business within the country in a better way. The social factors of a country with the help of values, demographics and level of education and social groups may help the country to make innovation and management in a better way (Saltamarski, 2021).
The population of the country is 67.41 million and the language French is considered to be the second official language of the world after English and the standard of the lifestyle of the people of the country is quite high (Refer to appendix 2). This kind of attitude and even the gender equality in the country is better and even working in a company such as the Farmfoods may be quite good for the company to grow well.
Technological
The technological innovation in France is quite well-known as the country has developed nanotechnology, Information Technology (IT) and several other research and development in collaboration with other countries such as Russia. The government is more inclined towards development in the health sectors and as the country has a good economic condition it helps in launching several kinds of innovative technology. The poor infrastructural development and inadequate skills of the employees and even lack of legitimacy of the employees may affect the working of a company within a new market (Nandonde, 2019). Therefore, the country has made advancements in internet services which may help the country to progress well and also it might help the company to help in making fast delivery and better transport facilities for the goods and other services which may help the company to maintain the services and manage the costs.
Legal
The legal framework of France is quite good which helps the employees of the company to take both paternity and maternity leave and even provides incentives for providing provisions to the employees. The development and the cooperation and collaboration helps in the educational purposes for the benefit of the business development of the company which helps in understanding and developing various factors (Ricci et al., 2021). The government of France with the help of the Action Plan for Business Growth and Transformation (PACTE) helps the foreign companies in the country to create business and helps in making legal obligations by making the companies innovation which may help the Farmfoods to flourish in the country in a much better way (Gouvernement.fr. 2022).
Environmental
The advanced development of the industries has led to a major problem for the growth and progress of the country and the increase in the level of carbon dioxide has led the country to face major challenges due to pollution management. The country is managing climate change by providing a cyclable country by 2026 and also by reducing carbon emissions for a sustainable environment and even by encouraging the use of the electric bike for social benefits which may help various kinds of businesses to grow well (World Economic Forum. 2022).
Discussion about Farmfoods UK’s resources
All the organizations are a collection of all the resources that the company has, which mainly may be separated into four categories, such as capital, labour or human resources, land as well as knowledge. All these resources are the aspects that provide an organization significant competitive advantage and these are also quite a relevant factor when it comes to the aspect of internationalization as well. It needs to be mentioned that attaining affirmative economic as well as production results within the business is not a product regarding the efforts put forth by an organic people’s circle, however, it is the result of the members of the complete enterprise (Petrova et al., 2020).
Capital resource of Farmfoods UK- The concept of capital resources fundamentally refers to the concepts, such as office infrastructure, facilities of manufacturing and more in general. It needs to be mentioned that in order to enter a new international market, it is imperative that a firm has all the similar tools and resources in abundance as without it the business practices may not generate any fruitful result in the end. In the context of Farmfoods, it is a family business that has been operating within the UK market for over 60 years and from being a butcher shop, the company now has 300 stores all over the country indicating that it has a substantial amount of capital to attain success in an international venture (Farmfoods.co.uk. 2022).
Human resources- The aspect of human resources or labour indicate the number of employees or the magnitude of a workforce a company has, since more employees implies that an organization has a significant amount of manpower to get various jobs done. Farmfoods UK also has a substantial amount of manpower and to be precise almost 4000 people work in that company, which will be beneficial for the enterprise to acquire productive results while entering the market of France (Refer to Appendix 3). The concept of human resources within an organization is known to play an extremely critical role to facilitate as well as enable a company attain success from the initial stages to the end (Rubel, 2019).
Land resources- Land resources refers to the idea of having a substantial amount of land to open a business or build an infrastructure for a business, since without having proper land a business is unable to open several businesses. It needs to be mentioned that Farmfoods UK has also a substantial amount of land in the UK which has allowed the company to open so many stores all over the country and that has further made the organization quite successful in the business. Therefore, it may be presumed that if the company decides to open a wholly owned subsidiary in France, Farmfoods UK will be able to acquire land there with its financial capability.
Knowledge resources- Knowledge based resources imply the fact that an organization has cordial relations with its suppliers, all the stakeholders, be it external or internal and along with that it has significant knowledge and expertise regarding technology as well. By creating cordial relationships with all these people, Farmfoods UK has been able to operate the business for over 60 years and the company puts extreme emphasis on serving its customers right, who may be known as external stakeholders and build a good relation with the individuals. Henceforth, Farmfoods has not kept any policy concerning customer service that is too complicated in order to ensure that consumers are always satisfied while doing business with Farmfoods (Refer to Appendix 4). It has come to light that the internationalization of firms that are led by families are different from the internationalization of the ones that are non-family firms and in that context the knowledge based resources help to moderate the association (Fang et al., 2018).
Critically analysing the different entry modes
In order to venture into any international market, first it is required that an organization selects the most appropriate entry mode that will bring the maximum amount of benefits to the business of the firm. It is required that for entering the French market, Farmfoods UK follows the Uppsala model of internationalization, which is one of the most effective and relevant frameworks that elaborates the different stages that companies go through while internationalizing. The Uppsala model states that companies often have a lack of knowledge regarding the foreign market it wants to enter and thus, it is imperative to establish a firm knowledge about the same at first. In this scenario Farmfoods UK first needs to have proper knowledge about the French market before entering and based on that select the most fruitful entry mode that will be able to extract a significant amount of financial benefit to the enterprise. The Uppsala model that is perceived as a framework for the process of internationalization or explains the sequence of internationalization has catered as a theoretical approach in the field of international business for a long time (Hult et al., 2020).
Wholly owned subsidiary
After looking at the resources that Farmfoods has, it may be presumed that the company will be able to establish its wholly owned subsidiary in France and gain significant revenue from that business venture. A wholly owned subsidiary is an organization that is owned by a different organization which will be known as its parent company and in this case, Farmfoods will be the parent company given that it wants to open a new subsidiary in France. The wholly owned subsidiaries offer various advantages to a firm as companies that are dependent upon different suppliers may take control of the complete supply chain network with the help of wholly owned subsidiaries.
This is a common example of vertical integration in which companies within a supply chain belong to a common owner and that way Farmfoods will have the complete control over the stock of its wholly owned subsidiary in France and will be extremely beneficial for significant revenue earning as well. However, the consolidated amount of net income for the parent company increases as the earnings are transferred from the not wholly owned subsidiaries to the holding companies as the parent company enjoys the complete earning and does not share it with any investors (Luo et al., 2021).
Direct export
Along with establishing a wholly owned subsidiary the company may also enter the French market by directly exporting its products and goods. Direct exporting is an approach that is significantly free of any business risk as that way the company will directly export its products to France without the presence of a middleman which often creates confusion within business. Exporting is regarded as one of the most simple approaches for expanding a business internationally and an organization only produces products and transfers to international companies who will further carry out all the sale related practices in that market (Tien and Ngoc, 2019). By choosing direct exporting to France, Farmfoods will earn greater profits by discarding the middlemen, and will have more control over all the sales and transactions. Along with that the company will also get better protection regarding its trademarks, copyrights, patents and more which is quite helpful for removing a lot of business risks (Refer to Appendix 5). Therefore, the given discussion explicitly establishes that direct exporting will also be a viable option for Farmfoods UK to enter the market of France and acquire significant benefits from the market as well.
Challenges that Farmfoods may face while entering the international market
Along with acquiring several benefits by entering an international market, there are some challenges that companies also face within the initial stages and similarly Farmfoods may also presumably experience some challenges while entering the French market. One of the significant constraints that Farmfoods may face while entering France at this time is related to economy, since the outbreak of Covid-19 has led the French economy to drop significantly in many years. The unprecedented pandemic has led the economy of France to one of its worst recessions since the time of Second World War as the Gross Domestic Products (GDP) decreased by almost 8.3% in 2020 after the impositions of nation-wide lockdowns (GOV.UK. 2022). Therefore, investing in the French market may be a wrong approach as of now for Farmfoods, since the statistics implies that owing to France’s economic condition the business may face significant challenges to generate revenue.
In addition to that, after the UK’s exit from the European Union (EU) or simply known as Brexit, the relationship that the country shares with France has become quite uneasy as it is assumed that France may completely despair the British reliability, be it in multilateral or bilateral business association. It may be taken as an example that although Brexit may not weaken the relationship between the two countries regarding its security and defence association, the phenomenon is most likely to establish risks of both the nations drifting apart from one another (Ricketts, 2018). Therefore, it is a matter of concern whether or not the UK firm in this given context will be able to open a subsidiary or export to France without any challenges that may be disruptive to its business practices. The cultural differences is also another factor that may be a contributing aspect regarding the company facing challenges concerning opening new business in France as well.
There has been a long standing history of the two countries having rivalry with one another which has several times been a significant determinant regarding the lack of good relationship between the two countries (Refer to Appendix 6). Therefore, it may be assumed that Farmfoods may also face challenges owing to the rivalry and cultural differences that exist between the two countries and the products sold by the company may not be completely accepted by the French citizens as well. If the export taxes suddenly rise in France then it may also be a potential threat for the UK organization to enter the market as that would require strategic planning and more investment than previously determined. Countries that upgrade the products that are exported to different countries within the context regarding the openness of trade experience increased revenue on non-resource tax in the long as well as short term (Gnangnon and Brun, 2017). Opening a wholly owned subsidiary in France may also be quite challenging for Farmfoods as the licensing and other official rules and regulations established by the French government for a foreign business may take quite long to be completed.
Advice for Farmfoods UK about the internationalization
In order to effectively enter the international market and acquire significant success from doing business in France, Farmfoods will require gaining complete knowledge regarding the French market and the demands of consumers in the country. Along with that, it is also imperative to have profound knowledge regarding all the official rules and regulations that are prevalent in France for companies that belong to a different country. It is safe to say that without the knowledge of these two aspects the company will fall on its face while entering France and also will be unable to meet consumer’s demand which will further lead to significant loss in business. In addition to that, the management of Farmfoods will also require thorough and complete strategic planning and decide on all the pros and cons before taking the decision regarding the internationalization to the French market in order to make sure that the business does not run into any unprecedented risk suddenly. The management of the company will also need to focus on the timing of internationalization since it has already been established that the French economy is not quite stable now and thus, Farmfoods may take a step back and decide on a significant time for investing in the country. Research states that while internationalizing an organization may attain significant success or failures and this variation in the results is dependent upon the resources that a firm is able to draw within its ecosystem by the unpredictability of its environment (Santangelo and Meyer, 2017).
Conclusion
It may be concluded that in order to flourish and progress in the market situation of the company that it Farmfoods which may help in progressing in France and as France is a suitable country to flourish and even helps in the profit-making of the company. Thus, the company may face certain challenges in making the company internationalise although may be mitigated with the help of better management and techniques.
References
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