Assignment Sample on BMG705 Business Expansion

Introduction

The macro-environment includes the economic, technological, ecological, political, demographic, legal, and social forces that influence a firm’s strategic business decisions and significantly impact its performance (Sammut‐Bonnici, 2015, pp.1-1). To understand these factors and their impact on a business decision, the present report focuses on a SME named Birley Manufacturing Ltd. which was established in the United Kingdom around 40 years back. The company provides an overall solution for manufacturing, designing, delivering, and installing furniture in various office, retail settings, and commercial places like offices, hotels, and fitness centers. The company also provides products as vanity units and bicycle racks for the rail industry. The cited companies manufacturing unit and head office are located in Sheffield, United Kingdom. Birley Manufacturing limited has generated $10.94 million in sales and has around 92 employees at the manufacturing unit. There are 2 companies in this corporate family (Birley Joinery Limited, 2021).

The cited company still lacks any international exposure and now want to expand their business internationally. The potential countries where they can expand their business are European countries, China, Russia, India, and Indonesia, where the market has immense potential to grow. With international expansion company’s brand image will be increased, which leads to more profit and increases its financial assets.

Birley Manufacturing Ltd. Aims to expand its business in Switzerland by September 2022 because of the high potential market of the country. The government of Switzerland provides subsidiary and required support to the business that is highly innovative and increases the GDP growth of the country. The customers of the Swiss market have the potential to buy the high-ended products manufactured by Birley Manufacturing Ltd. (Hoffman et. al. 2016, pp.180-195). Hence, the present report concentrates on the four major factors of the macro business environment for the company’s successful expansion. It will also focus on the entry methods and available market opportunities for establishment in Switzerland.

Reason for expansion

To understand the reason for expansion and the stage where the company is in the internationalization process, relevant theories and models are required. Uppsala’s internationalization model can be used for the same. According to the model, there are few stages in internationalization in early development (Forsgren, 2015, pp.88-110). These are:

  • Indirect export
  • Non-regular exporting
  • Establishment of Subsidiary
  • Manufacturing unit

Birley Manufacturing Ltd. wants to establish a manufacturing subsidiary unit in Switzerland to attain its goal. According to the model, establishing a subsidiary in Switzerland will get the required information and get the location advantage (Nguyen et. al. 2015, pp.207-227). Reasons for expansion in the context of the cited company can be defined as follows:

Increasing Revenue potential: The Swiss market is fully developed, and expansion in such a market avails an immense opportunity to increase the company’s revenue.

Entry to a new market: International expansion provides an opportunity for the companies to enter a new market and gain millions of new customers, but companies need to research the market thoroughly.

New customer Base: Expansion not only gives Birley manufacturing Ltd. an opportunity to sell their existing products to new customers (Storey, 2016). It also provides you a platform to introduce new products, gain profit, and generate more business.

Gain a competitive advantage: The cited company also wants to gain a competitive advantage by expanding in a developed market like Swiss (Eniola and Entebang, 2015, pp.334-342). Their existing competitors are still not that much active in that market to gain a competitive advantage from this expansion.

Cost-effective: By expanding in a new country, the operational cost of Birley Manufacturing Ltd. will also get low as the Swiss government provides ample opportunities and subsidiaries for the newly established business to grow (Brouthers et. al. 2015, pp.1161-1187). It will also help them acquire new talents from a highly innovative market, which increases their business more rapidly and helps in further company growth.

Increases the reputation: Expansion enables the cited company to establish a brand image of the company among customers. It also attracts new customers, and it is very helpful in retaining the existing customers. It also enables the company to get higher credibility in the market.

Factors for expansion

One of the significant actions and decisions that a business enterprise undergoes is its expansion strategy. Expanding a business in another country is a critical task for the organization. The company needs to focus on several host nations’ factors, such as political influences, technological advancement, GDP or economy rate, and many more. Thereby, in order to expand the business on global platforms, an organization first needs to draw out an efficient strategy.

Thus, it is worthy to note that Birley Manufacturing Limited aims to expand its business in Switzerland, which requires them to focus mainly upon the primary four factors while undertaking the decision of internationalisation. These factors are duly highlighted below:

Factor A: Positive Inclination and spending upon Technological and IT development 

Due to the high range of new and innovative technologies in the business market, Switzerland is considered the most advanced nation on a global platform. Switzerland highly focuses and invests huge per capita spending over the new and innovative technologies (Rice et. al. 2018, pp.1-18). It pays a huge focus upon the IT sector and its significant development to support the growth of the economy under the said country. Thus, following the same, there has been wide development in the fields of medicine, robotics, artificial intelligence, textiles, and many more.

According to Ratti, (2018, pp. 197-220), the development of the technological sector in any country highly assists the business organization in formulating its expansion strategy as technological development reduces labour intensive burdens and time consumption within an organisation. These factors could be highly beneficial for the manufacturing entities in order to save time and labour costs. Thus, technology development is a key asset while any country focuses upon its internationalization strategy as advanced technological advancement is the most preferred criterion for expansion. In simpler words, it can be stated that Positive Inclination and spending upon Technological and IT development is a key factor for targeted expansion by a country.

It is noteworthy that the host nation in the present report highly supports the manufacturing and technical industry. The said nation is a global research hub in the sector of innovation and technological development (Beck et. al. 2020). In order to enhance the same many research centers and universities are developed by the nation. Thereby, Birley Manufacturing Limited can increase its production by use of advanced technology and machinery available in Switzerland. By using advanced technology, the cited company can efficiently reduce human resources and help save the time of production.

Thereby, the company can efficiently manufacture and design the rail products interiors like stacks of luggage or racks to hold the items, holding panels, toilet and its related items, sleeper berths, electrical equipment, pull up chains, technical instruments, and many more by the use of advanced technology. This would reduce the cost and effort of labour and would even save more time. There is only one requirement that the cited company needs to ensure in regard to the use of advanced technology, which is the training and appointment of skilled people to handle the technology.  

Factor B: Well established legal framework and business-friendly legislation

Before expanding its business in a country, internalization is duly considered as it reviews the concept of legislative regulations that a country follows.  It immensely focuses upon the country’s actions and performance on global platforms by the ways of signatory covenants and treaties. The trade restrictions, trade barriers, and the trading norms followed by the country influence the exports and imports of the country.

Investing, expansion, and work environment are favourable factors under the Swiss market. Moreover, there are no legislative trade barriers for entering the market of Switzerland, which makes it the most preferred market for expansion worldwide. Even the Swiss government has undertaken a non-obstructive and independent market environment for foreign investments. Föllmi et. al. (2018, pp.1-21) states that such conditions create a favourable environment for foreign investors and several business organizations to expand their market.

Moreover, Switzerland is a highly stable and low corruption country. The factor of a business-friendly environment, flexible laws, and the non-existence of corruption is the greatest strength of the country’s market. However, every organization needs to follow the set legislative frameworks of their host nation while conducting their business in the relevant sector of the market (Meier-Schatz and Larsen, 2020, p.7). Thereby, Birley Manufacturing Limited has to ascertain Switzerland’s set rules and legislations to expand and carry out its business. The cited company should focus upon all laws and regulations while formulating its expansion strategies. The company needs to draw out its framework considering gender equality in the working environment and pay scale as the law of Switzerland highly promotes non-discriminatory work practices equal pay for equal work norms.

The Employment Law of Switzerland supports the protection of all rights of the employers and the employees (Taylor and Emir, 2015). This is quite evident because the salaries offered to the workers of Switzerland are quite high compared to other nations around the globe. This is because of the strong legislation providing numerous competitive benefits packages to the employees such as insurance schemes, flexible work environment, pension, paid leaves, and many more. Though the country does not have a National Minimum Wage Act, it persists in protecting the rights and benefits of the employees through legislative frameworks such as Cantonal regulations, collective bargaining agreements, and Standard Employment Agreements (Villanueva, 2015). Also, Swiss law creates no scope for discrimination on any grounds for the employees. It even ensures the workplace safety of all its employees, which is a highly beneficial factor for any business while expanding. Also, the law provides special provisions for working pregnant women and other exceptional categories. Thereby, the employer-employee relationship is governed efficiently under the country by means of a set contract.

Thereby, when a country provides performance enhancement, huge growth opportunities, recognised positioning, easy expansion, and goodwill to a business enterprise, it is considered the most suitable country for expansion.  Also, the rights and obligations set under the legislative framework support the company, its employees, employers, stakeholders, board of directors, and other related persons. Thus, the cited organization has vast opportunities to expand its business in Switzerland, consisting of business-friendly and effective rules and legislation.

Factor C: Developed economy and favourable exchange rates supporting the business organizations of the UK

With time, there have been many changes that have taken place with respect to the living style of the people of Switzerland. Further, it has been observed that Switzerland falls under the wealthiest countries. According to Markard et. al. (2016, pp.215-237), there are many factors that fall under Switzerland’s economy; it includes professional workforce, GDP, Swiss banking, import, and export. In the year 2019, GDP recorded for Switzerland was $7003.8 million and is considered one of the largest economies (Giugni and Grasso, 2016, pp.447-472). This way, it can be stated that expansion of business by Birley Manufacturing Limited will be favourable as they will be able to ensure profit volume. Overall the host market can be termed to be highly developed infrastructure, strong purchase power, low tax rates, stable microenvironment, and favourable exchange rates.

The purchasing power of customers is high, so Birley Manufacturing Limited will benefit as Switzerland uses railways for intermodal trade. So the need for such services is high. The success of a business depends upon the sale they made or the purchases done by customers (Ingold et. al. 2017, pp.442-463). This enables to raise the profitability of the organization, and the findings show that the people of Switzerland are wealthy. So they will be able to make high purchases of the products and services. However, there are some economic aspects that can affect the business; it includes wage rates, inflation rate, and interest rate (Sciarini et. al. 2015). Further, the exchange rates in Switzerland are favourable enough for the business when compared with UK currency. Thus it creates opportunities for the business for expansion.

In accordance with the above examinations, it can be stated that the economy’s present condition and growth rate are favourable. This will be highly effective for Birley Manufacturing Limited in the long run and in attaining the set goals. Further, the score of economic freedom in the year 2021 is 81.9%, and it falls under the top 5 freest economies (Ravasi et. al. 2015, pp.1335-1359). This shows that Birley Manufacturing Limited can ensure long-term stability in the market. Moreover, it is has been identified that the unemployment rate of Switzerland is 3.211%. Low employment rate and developed service industry and determined as the most effective features for a company to make their business expansion.

Considering all the above-mentioned factors, it can be stated that it is favourable for Birley Manufacturing Limited to expand their business in Switzerland. In other words, the host company will be able to attain its set goals and objectives in an effective manner.

Factor D: Political stability and supportive Macroeconomic environment as compared to other European countries

As per Giugni and Grasso (2016, pp.447-472), analysis needs to be done for macroeconomic factors and political stability. This is essential for entering into a new market. When talking about Switzerland has a developed and stable economy, which is effective enough for any company to make its business expand. It consists of factors like interest rate, economic growth, unemployment, and inflation. All these factors are quite stable in the Swiss market when compared with other countries of Europe. Apart from this, Switzerland has about 26 Federal States and is known to be a federal republic (Church, 2016). The cited country has a direct democracy in which people have their own opinion. This way, it can be stated that the firm needs to consider the factors that fall under the macroeconomic environment so that they may not have an inverse impact on the functions of the business.

 In order to expand the business in Switzerland, laws, and regulations that support the administration must be examined. Consideration of law can help in identifying the restrictions or operations that are permitted (Sciarini et. al. 2015). In this context, Switzerland is determined to be the safest for the business to operate, and it is due to its stability in the macroeconomic environment. Apart from this, cited country is a member of the World Bank and International Monetary Fund; this proves that the market is highly stable.

Many tools and agencies are helpful enough to provide assistance on a regulated basis for the companies that are willing to expand their business. According to Cronin (2017, p.4), a consensus and transparent political environment enable the business to run efficiently. From the above aspect, it can be stated that Birley Manufacturing Limited will be able to expand as the factors are favourable enough to undertake the business operations.

Recommended Mode of Entry

Switzerland’s market is a market with huge opportunities for growth and expansion. It also supports highly skilled labours and supports their productivity. Moreover, the Swiss market highly considers manufacturing as a potential sector and supports expansion under it. This enables the formulation of new business opportunities in the Swiss market and is considered a huge opportunity for the companies to enter into the said market (Michalski, 2015). It is quite evident that it stands as a major opportunity for our cited company, Birley Manufacturing Limited, as it is a manufacturing SME that aims to establish itself in a new market to increase its production and business opportunities.

Furthermore, it is noteworthy that Switzerland’s market always has a high demand for good quality and long-lasting usage products. The social factor of the country always inclines towards products with good quality and usage of services that provide maximum benefit and ensures hygiene and safety even at high-paying cost limits. Thereby, this is a positive factor for the cited organization as they keenly focus upon product quality, hygiene maintenance, and safety measures. Also, it is highly to be noted that railways are an interconnectivity mode used across the whole European nation, increasing the demand for good products and services provided by the cited organization.

The mode of entry that the company can adopt is a partnership, as it is the most adopted market entry method to facilitate the presence of the organization in the targeted market (Ahi et. al. 2017, pp.1-21). The partnership will be the efficient market entry strategy for Birley Manufacturing Limited as it will attain support for certain factors such as technology, resources, and market cover. Moreover, through the partnership, the cost of production can also be curtailed and will help the company to establish itself in the competitive market effectively. Furthermore, the company needs to focus upon the law and regulations of Switzerland in regard to the partnership.

Conclusion and Recommendations

Thereby, it can be articulated that macro environment analysis plays a vital role for any organization that aims to expand its business on international platforms. The present report needs to focus on the four primary factors essential to draw out its expansion strategy in the present report. Thus, the company needs to focus upon the factors like well-established laws, per capita spending over technological and IT development, Stable macroeconomic environment, and exchange rates. Also, opting out of an efficient market entry strategy is a necessary decision that a company takes in regard to its expansion in the host nation.

Recommendations

  • To draw out an effective expansion strategy by focusing upon the primary factors of macro environment analysis.
  • To draw out strategies that can help an organization to curb the barriers and challenges faced during expansion.
  • To produce eco-friendly products, as Switzerland is a country that highly focuses upon the protection of the environment and reduction of environmental pollution. Thus, setting up a manufacturing unit requires the consideration to adopt eco-friendly ways of production.
  • To ascertain delivery of good quality products that is hygienic, long-lasting, and ensures safety.
  • To ensure that all laws and legislative frameworks are duly followed and taken into account by the cited organization.

References

Ahi, A., Baronchelli, G., Kuivalainen, O. and Piantoni, M., (2017). International market entry: how do small and medium-sized enterprises make decisions?. Journal of International Marketing25(1), pp.1-21

Beck, M., Hulfeld, F., Spescha, A. and Wörter, M., (2020). Analysis of knowledge and technology transfer in Switzerland: The perspective of the enterprises (No. 160). KOF Studien

Birley Joinery Limited, (2021). [Online]. Access through:< https://birleyjoinery.co.uk/>

Brouthers, K.D., Nakos, G. and Dimitratos, P., (2015). SME entrepreneurial orientation, international performance, and the moderating role of strategic alliances. Entrepreneurship theory and practice39(5), pp.1161-1187.

Church, C., (2016). Political Change in Switzerland: From Stability to Uncertainty. Routledge.

Cronin, K., (2017). Book Review: Clive Church, Political Change in Switzerland: From Stability to Uncertainty. Swiss American Historical Society Review53(3), p.4.

Eniola, A.A. and Entebang, H., (2015). SME firm performance-financial innovation and challenges. Procedia-Social and Behavioral Sciences195, pp.334-342.

Föllmi, R., Fuest, A., an de Meulen, P., Micheli, M., Schmidt, T. and Zwick, L., (2018). Openness and productivity of the Swiss economy. Swiss journal of economics and statistics154(1), pp.1-21.

Forsgren, M., (2015). The concept of learning in the Uppsala internationalization process model: a critical review. Knowledge, Networks and Power, pp.88-110.

Giugni, M. and Grasso, M.T., (2016). How civil society actors responded to the economic crisis: The interaction of material deprivation and perceptions of political opportunity structures. Politics & policy44(3), pp.447-472.

Hoffman, R.C., Watson, S. and Preble, J.F., (2016). International expansion of United States franchisors: A status report and propositions for future research. Journal of Marketing Channels, 23(4), pp.180-195.

Ingold, K., Fischer, M. and Cairney, P., (2017). Drivers for policy agreement in nascent subsystems: an application of the advocacy coalition framework to fracking policy in Switzerland and the UK. Policy studies journal45(3), pp.442-463.

Markard, J., Suter, M. and Ingold, K., (2016). Socio-technical transitions and policy change–Advocacy coalitions in Swiss energy policy. Environmental Innovation and Societal Transitions18, pp.215-237.

Meier-Schatz, C.J. and Larsen, K.D., (2020). Swiss Securities Regulation and Capital Market Law: A Comprehensive Overview. Denver Journal of International Law & Policy18(3), p.7.

Michalski, E., (2015). Foreign market entry strategy. Acta Scientiarum Polonorum. Oeconomia14(2)

Nguyen, T.H., Newby, M., and Macaulay, M.J., (2015). Information technology adoption in small business: Confirmation of a proposed framework. Journal of Small Business Management, 53(1), pp.207-227.

Ratti, R., (2018). Development theory, technological change, and Europe’s frontier regions. In High Technology Industry and Innovative Environments (pp. 197-220). Routledge.

Ravasi, C., Salamin, X. and Davoine, E., (2015). Cross-cultural adjustment of skilled migrants in a multicultural and multilingual environment: an explorative study of foreign employees and their spouses in the Swiss context. The International Journal of Human Resource Management26(10), pp.1335-1359.

Rice, T., Quentin, W., Anell, A., Barnes, A.J., Rosenau, P., Unruh, L.Y. and Van Ginneken, E., (2018). Revisiting out-of-pocket requirements: trends in spending, financial access barriers, and policy in ten high-income countries. BMC health services research18(1), pp.1-18.

Sammut‐Bonnici, T., (2015). Macroenvironment. Wiley Encyclopedia of Management, pp.1-1.

Sciarini, P., Fischer, M. and Traber, D., (2015). Political decision-making in Switzerland: The consensus model under pressure. Springer.

Storey, D.J., (2016). Understanding the small business sector. Routledge.

Taylor, S. and Emir, A., (2015). Employment law: an introduction. Oxford University Press, USA.

Villanueva, E., (2015). Employment and wage effects of extending collective bargaining agreements. IZA World of Labor

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