CRITICALLY EVALUATE WHAT PARTICULAR ASPECTS OF THE BUSINESS ENVIRONMENT IT MUST TAKE INTO ACCOUNT WHEN ASSESSING THE DECISION TO INTERNATIONALISE OR NOT?

Introduction

Innovation in business relies on extrinsic variables, including the political legislative, cultural, socioeconomic and ecological variables. A suitable market climate also has beneficial impacts on the activities and performance of the company. The business analysis, therefore, optimises extrinsic variables for the evaluation of the effects of the extrinsic business climate on business operations. In turn, the consideration of extrinsic variables also facilitates the method of decision-making for fundamental business operations.

In order to determine extrinsic requirements for the execution of other business strategies, business operations such as expanding strategy are needed. The United Kingdom is one of the well-known SME production centres that serve several sectors such as the automotive sector, the technology sector, the aerospace sector and the retail sector. The main worldwide corporate climate and its effect on the development of SMEs such as Ovation Systems Ltd in other regions will be presented in the following. This report will concentrate on the dynamic shifts in extrinsic variables that may have an effect on the SME production decision-making mechanism.

Company outline

Ovation Systems Ltd. is actively engaged in designing, producing and marketing high-performance housing video surveillance mechanisms (S-ge.com, 2020). This organization also manufactures and offers security services to others for industrial, domestic and legislative requirements. In turn, the firm establishes its monitoring structure, which also comprises combinations of mechanical circuits. It also creates automatic video recordings that can be viewed remotely via smartphones. The business has used fragmented innovations to provide consumers with protective strategies (Ovation.co.uk, 2020). Although, by optimising daily tasks, the organisation strives to enhance the standard of daily existence. In addition, the organization exports its services to various nations and has outlets in the UK and has several manufacturing facilities with R&D areas. Practical manufacturing and innovative product development provide reliable goods for the absolute protection of consumers (Ovation.co.uk, 2020).

At the same moment, the organisation also focuses on a progressive business strategy in which ecologically conscious products and tool production meet the optimal practice legislations. (Ovation.co.uk, 2020). The organization is immersed in research initiatives that encourage the creation of tools for sustainable resource technologies such as solar resources and has been awarded the Queen’s Award.

The business currently has a division in the UK and plans to offer military protective services to other nations (Ovation.co.uk, 2020). Germany, as a prosperous and multicultural European nation, will be competitive in the prospective success and business transformation of Ovation System Ltd. Germany has the strongest sustainable protection objectives and is a committed participant of the European Union (Herr and Nettekoven, 2018). The nation, for example, has its tasks to establish renewable resources and commodity efficiency. In addition, the policies of the Federal Government of Germany promote the development of small and medium-sized enterprises in the nation as well as their consumers (Ovation.co.uk, 2020). The advancement of enterprise in Germany would nevertheless be successful in providing consumers with sustainable alternatives.

The organisation has lately presented National Healthcare procedures with optimization of healthcare management systems. The business has addressed the massive development of surveillance technologies in the automation industry. The organization has now implemented Artificial intelligence into its safety and automation tools (Ovation.co.uk, 2020).

Technological advancement in Germany has highlighted where the nation’s initiatives for sustainable business strategies can provide business organisations with opportunities, according to Prasanna et al. (2019). At the same moment, the assimilation of healthcare surveillance mechanisms with AI and automation innovation is prevalent in German technological frameworks (Freund et al. 2020). (Freund et al. 2020). (Freund et al. 2020). This involves the automation and growth of innovative regions of technology, such as healthcare. Therefore in contexts of novel business opportunities, selecting the German market might be an imperative next step. High-economic stability in the German markets has better prospects for providing high-end technical interventions, according to Matinaro et al. (2019). The significant impact of foreign customers could decrease the burden caused by the mediator in the corporation which means decreasing the sales operational expenses in Germany (Herr and Nettekoven, 2018) (Herr and Nettekoven, 2018).

Comparison of countries’ global business environment

Areas of Global Business

Figure 1: SMEs growth in the UK

(Source: Statista.com, 2020)

Cultural factors:

According to Hofstede’s theory of the cultural dimensions, Germany’s low power distance index showed a promising potential for growing market opportunities in the area (Röhl and Engels, 2020). In addition, Germany has outlined its primary goals for the preservation of plurality in the country. This also means that Germany has its priorities and attempts to retain the diverse cultural climate that will enable the company of Ovation System Ltd to thrive. The corporation’s AI technology and ICT, for example, will help Germany’s growth objectives in the very same region (Freund et al. 2020). Furthermore, this may help the ambition of the German Federal Government’s ICT strategy. As studies show, masculinity in German society indicates a significant challenging and goal-oriented market climate for the advancement of SME companies.

It can also be claimed that the underpinnings of large corporations would not impact the functioning of comparatively tiny and medium-scale businesses in the industry. In turn, fair opportunities have been given priority in the core demographic and the nation has established autonomous workplace culture. Staff members are involved in the judgement calls and other meetings for the organisation, as per Adeleke et al. (2019), and contact in Germany is straightforward and participatory. On the other hand, in Germany, corporate performance is represented by a multi-lingual, deeply qualified workforce. As a result, Ovation Systems Ltd. and its operations in the German market will profit from a professional workforce and a productive institutional climate for development and entrepreneurial activity.

The social diversity of the United Kingdom, moreover, portrays a comparable environment where power disparities are minimal and individuals often accept equal treatment and affirmative action are distributed. From now on, Ovation Systems Ltd. will profit from operating in a similar social setting. The United Kingdom and individualism in culture rated closer to Germany, as per the views of Stachová et al. (2019). This provided the company with a probable atmosphere. The room for imagination would also be close to the cultural climate of the UK. In addition, technology has affected British communication, where emailing and other technological advances have become the way of communication. Although in the case of the German small and medium-sized enterprise market, business communication follows a similar communication approach where face-to-face communication is relevant.

Economic factors:

As a nation of elevated ambiguity prevention, analysis has shown that Germany has minor priorities for the avoidance of high uncertainty. Therefore the growth of small and medium-sized enterprises and related important parameters, such as the growth of Schumpeterian SMEs, are indispensable assets to the nation’s advancing economy. In comparison, Germany’s previous impact, such as that of its non-profitable savings banks, has greatly helped the growth of SMEs. In the last five years, for example, 58.5 per cent of opportunities have been generated by the SME industry, which accounts for 35.3 per cent of total revenues and includes 54.9 per cent of the country’s GDP added profit (Röhl and Engels, 2020). Germany has a GDP growth rate of 8.50 per cent over the past year as reported by Röhl and Engels (2020), which implies a good corporate advancement climate. This has shown a positive climate for SME projects. By comparison, due to economic development in the area, transaction errors in business have been minimized in the past couple of years. Contrary to this the nation’s economic development has been affected by post-Brexit and changes in business setup standards and strategies have been witnessed in the united kingdom. As reported by Fontrier et al. (2019), owing to ability levels and incentive-related motives, a low financial outlook has contributed to poor profitability in SMEs. Although to improve efficiency, vigorous expenditure in the manufacturing sector has been witnessed, involving policies such as investment incentives and goal expenditure.

In the United Kingdom, 74.69 million firms account for 99.9 per cent of the private market industry and have GBP1, 000 turnovers annually (Oecd-ilibrary.org, 2020). As per the survey, a large percentage of small and medium-sized enterprises (SMEs) cover different industries, particularly manufacturing, and support the UK economy with assistance. In turn, the study reported a 51 per cent turnover rate of the UK SME sector produced by private companies in the UK (Oecd-ilibrary.org, 2020). Given Germany’s economic background, the strong buying power is shown to target customers, and the top rate of SME operation will be useful for B2B corporate communications. However, owing to worldwide financial conditions, economic development has fallen significantly in 2019. This implies that the role of SMEs in reconstructing the nation’s economy and 99.9% of business operations in Germany are embodied by small and medium-sized enterprises (Röhl and Engels, 2020). The price inflation in the German economy has diminished in the post-pandemic circumstance which highlighted that household consumption has been rising from (1.5%) in 2019 (S-ge.com, 2020).

Political Factors:

A grand alliance in the political climate has also reinforced the economic circumstance, according to the theories of Alpsahin Cullen and Archer-Brown (2020). German politicians have demonstrated their top priority in terms of spending on science and technology, which is the strongest in relation to other EU countries. Thus, with respect to its advancement and technological growth in the German markets, Ovation system Ltd. will deem this successful (Freund et al. 2020). Furthermore, the corporation would discover new buyers and a secure political climate would be efficient and profitable for its eventual growth in Germany, being driven by the strong involvement of foreign companies in the German industries.

Although only 30 per cent of small and medium-sized enterprises are eligible for foreign business transactions, while one-third of small and medium-sized enterprises are willing to participate in global firms. This showed that constitutional change has created trust among UK companies and raised long-term currency exchange agreements in 2017 by 40 per cent (S-ge.com, 2020). On the other hand, in response to fluctuations in standards and strategies since Brexit, a large proportion of SMEs have shown no business development in the economy. In 2017, global commerce in all global firms was limited (Baraya et al. 2020). Although the analysis points out that small and medium-sized enterprises (SMEs) performed a crucial role in the international market in small businesses, which improved total production in terms of overall trade values.

E-governance promotes presumed utility (PU) for SMEs in compliance with the Technology Adoption Paradigm and decreases concerns of openness in the industry (Alpsahin Cullen and Archer-Brown, 2020). E-Governance, on the other hand, has supported organizational functions in the efforts of small and medium-sized enterprises in the German market, and it has enabled businesses to start new businesses by strengthening their financial affairs and promoting access to markets. The State Secretariat for Economic Affairs (SECO) has a significant position to play in supporting initiatives for small and medium-sized enterprises and makes it possible to work closely with the other stakeholders, such as the Centre of Excellence for Enterprise Internationalization (Oecd-ilibrary.org, 2020).

Legal Aspects:

The Federal Government has established programs to protect the activity of small and medium-sized enterprises and to try to secure financial assistance through the provision of loan guarantees to enterprises and to expand SMEs’ access to banking services. In addition, the German federal government has improved SMEs’ access to markets. In particular, the Federal Government has clear SME development incentives that promote an advanced market and build a competitive economy for enterprises. UK trade laws, on the other hand, are a little more complicated than Germany’s (Freund et al. 2020). Common organizational conflicts constitute 13.2 per cent, as per the suggestions of Press et al. (2020), and workplace contract-related disagreements constitute 12.5 per cent of SME organizational problems. Legal problems are also related to consumer lawsuits, legal disputes that have led to a loss of GBP113.bn for SMEs in the UK (Prasanna et al. 2019). In turn, legal frameworks and regulations for resolving regulatory concerns in SME enterprises have been established.

The study claimed, moreover, that the contractual requirements for organizational sustainability in small and medium-sized businesses cover the minimum workers’ wages in the UK and the gender wage disparity. Legal enforcement for staff compensation was mandated by the legal framework. According to the report, workers have been inspired by the national pay rise in the United Kingdom and legal concerns surrounding the worker pay rates and compensation have been decreased.

Complex changes occurring within the global economy and its impacts upon the SME

Regarding uncertain economic markets, the global financial system has experienced difficulties. In contrast to other EU countries, outsourcing problems are therefore poor. Embedded supply chain networks in Germany and social capital in the German small and medium-sized enterprises (SME) sector have enabled stable access to broad social institutions. Therefore, it could be successful for the organization to grow and expand its operations together with other investors.

Significant impacts have been identified by a study on the post-pandemic circumstance and its connection to the economy (Stachová et al. 2019). Government initiatives have therefore endorsed lending penalties in Germany for the preservation of high efficiency and for operational activities in the German economy. Ovation Systems Ltd. will also obtain positive funding from the government for its responsible commodity manufacturing strategy. Open markets and exposure to other European nations, on the other side, may also boost business development and commercialization. In turn, proactive government funding would be successful in supporting the core activities of SMEs for professional reasons. In order to identify commercial, private, and retail consumers, the organization would be able to advertise its quality packaging. However, analysts have documented improvements in customer practices with respect to the use of sustainable goods.

Impacts of external factors differences in the decision-making process

The effectiveness and coordination of the institution’s decision-making mechanism are significantly influenced by cultural influences. SMEs functioning in newer markets can profit from, for example, a corporate strategy to ensure an inclusive environment and anti-discrimination legislation. Furthermore, culturally diverse locations will enhance SME efficiency and minimize organizational tensions, and promoting the company’s performance objectives. In Germany, the company credit market works well and has access to high finance (Stachová et al. 2019). Therefore, it can be mentioned that it may be advantageous to collaborate with yet another German firm to complete the high level of financing for business operations.

Depending on the legal system will assist the business raise government funding, and this will help to set up new manufacturing facilities in the German market. The extra assistance includes highly trained German workers with high-quality training who can endorse the corporation’s brand differentiation strategy in Germany. The effect of the financing of the Federal Government for loan facilities will support the establishment of manufacturing facilities and provide the enterprise with high trust.

Entry Mode Analysis- Mode of Expansion

The company provides consumer services, security agencies, and develops robotic remedies for consumers in compliance with the existing provisions of the organization. The commercial and defence industries are two major partnership sectors for the organization, according to the study. These aim at the automation of the healthcare industry and, therefore, operational automation. The business has a model of collaboration for joining the automation technology market. As reported by Nkwabi and Mboya (2019), under legal guidelines, partnerships and strategic partnerships have enabled legal partners to be established in other countries. A foreign business relationship, therefore, provides a better chance of resolving challenges by offering required assistance, such as contractual terms with other companies. In addition, the policies of the German government to promote the creation of small and medium-sized enterprises (SMEs) and strengthen the terms of funding will help the company’s partnership objectives in Germany.

In Germany, the company credit market works well and has exposure to high funding (Stachová et al (2019). The assurances of government loans and negative interest rates would have a beneficial effect on collaboration strategies. In turn, growth initiatives have promoted productivity development, and this will also have a positive effect on the level of profitability of the organization.

In the German market, non-bank financing, trade credits, factoring, lending, overdrafts and micro-finance include projects and alliances that can foster growth in start-ups (Röhl and Engels, 2020). The services of Ovation Systems Ltd. will be a bonus for this and the collaboration would be able to provide its clients with its robot goods. In turn, the relationship of the organization can be benefited by high GDP growth and high pay potential of customers. In terms of price and importance, collaborating for product creation and marketing would support customers. Consequently, as mentioned above, governmental actions are also supportive. Collaborating with residents first has many benefits, as per Matinaro et al. (2019), such as recognizing local culture, resolving cultural obstacles, and can be linked to customer feelings. In addition, Ovation Systems Ltd. has a streamlined program for automation collaborations and can profit from the Automation Alliance Program’s quality and development. The business already has 7,000 consumers across countries and will endorse the agreement with other Eu members by setting up new manufacturing facilities in Germany. Alpsahin Cullen and Archer-Brown (2020) have pointed out the Federal Government’s policy on environmentally sustainable growth, including international relations, has a strong attachment to the nation achieving sustainable development. From now on, international policy, including economic and international partnership policies, could profit Ovation Systems Ltd. The relationship priorities of the two firms would benefit from this. Strategic alliances and strategic partnerships have become common, as reported by Alpsahin Cullen and Archer-Brown (2020), which can be correlated with public assistance. This would provide the firm with a competitive edge. In addition, the market encourages risk-sharing, including problems with workforce diversity and work control. This will overcome successful projects and strategic partnerships.

Recommendations

Recommendation 1:

In the German industry, the organization should therefore participate in a cooperative partnership and collaboration or joint project management. In addition, the company’s objectives for qualified workers for the sustainable transformation system should prioritise the highly skilled and trained existing community.

Recommendation 2:

With regard to political variables in the German corporate climate, the political environment has shown that the nation is committed to promoting the functionality of its SMEs and is also concerned about sustainable enterprise applications. From now on, regulations for corporate collaborations and the setting up of development must encourage productivity and workforce development.

Recommendation 3:

The organisation must provide its workers with higher salaries to encourage high efficiency and a sustainable approach to manufacturing operations. Joint product innovation may be successful in improving innovation, as per Alpsahin Cullen and Archer-Brown (2020), and collaborations for collaborative project management must conform with the German administration’s standards and laws.

Recommendation 4:

According to Fontrier et al. (2019), the partnership must be supported with motivations such as technology sharing and risk and reward sharing. Political connections and distribution channels must ensure a knowledge-sharing process for delivering major benefits in the skill development process.

Recommendation 5:

The regional collaboration may be useful for raising Ovation Systems Ltd.’s market share, and this could be used to increase market share and reduce the expense of marketing and delivery of the goods of the organization.

Recommendation 6:

The organization must apply the guidelines of the ILO and encourage its operations in the EU markets. The advancement of main activities will henceforth be assisted by the ILO in its collaboration operations. Recruiting local staff and alliance companies would help this business prevent problems with hiring requirements.

Conclusions

It can be concluded according to the above discourse that the social component is the centre of the global corporate environment and that it defines how the company can function in a new or established country. In particular, the developments in the social context reflect dramatic changes in methods to handle and inspire workers. Both the UK and Germany have complex cultural backgrounds where the power gap is relatively minimal and this helps to promote employee roles without drastic policy adjustments. From now on, Germany will profit from a responsible solution to product growth, and government funding will provide constructive support for partnership objectives. In addition, Germany’s automation technologies and the recruitment of qualified workers could be useful for joint ventures, and could also approach local markets and EU markets. Political variables in the German national sector have supported SMEs operations and the company can utilise this for producing automated robots. Hence, political, cultural and legal factors are required to be assessed before the decision to internationalise businesses.

References:

Adeleke, A.Q., Bahaudin, A.Y., Kamaruddeen, A.M., Bamgbade, J.A. and Ali, M.W., (2019). An empirical analysis of organizational external factors on construction risk management. Int J Suppl Chain Manag, 8(1), p.932.

Alpsahin Cullen, U. and Archer-Brown, C., (2020). Country-Specific Sociocultural Institutional Factors as Determinants of Female Entrepreneurs’ Successful Sustainable Business Strategies within the Context of Turkey and the UK.

Baraya, A.R., McKenzie, R. and Lopez, T.B., (2020), August. Global Partnership And International Education With Latin America: A Case Of Study. In Conference Proceedings Clute International Academic Virtual Conferences Summer 2020 August 3-4, 2020.

Fontrier, A.M., Gill, J. and Kanavos, P., (2019). International impact of external reference pricing: should national policy-makers care?. The European Journal of Health Economics, 20(8), pp.1147-1164.

Freund, D., Lee, R., Tüselmann, H. and Cao, Q., (2020). International high-tech SMEs innovative foreign knowledge inflows: effects of host country weak network ties and absorptive capacity. Multinational Business Review.

Herr, H. and Nettekoven, Z.M., (2018). The role of small and medium-sized enterprises in development: What can be learned from the German experience? (No. 53). Global Labour University Working Paper.

Kolk, A., (2016). The social responsibility of international business: From ethics and the environment to CSR and sustainable development. Journal of World Business, 51(1), pp.23-34.

Matinaro, V., Liu, Y. and Poesche, J., (2019). Extracting key factors for sustainable development of enterprises: Case study of SMEs in Taiwan. Journal of Cleaner Production, 209, pp.1152-1169.

Nkwabi, J. and Mboya, L., (2019). A Review of Factors Affecting the Growth of Small and Medium Enterprises (SMEs) in Tanzania. European Journal Of Business And Management, 33(1), pp.1-8.

Nosratabadi, S., Pinter, G., Mosavi, A. and Semperger, S., 2020. Sustainable banking; Evaluation of the European business models. Sustainability, 12(6), p.2314.

Oecd-ilibrary.org, (2020) Key facts on SME financing Available at:https://www.oecd-ilibrary.org/sites/7f826e1b-en/index.html?itemId=/content/component/7f826e1b-en [Accessed on: 15.12.2020]

Ovation.co.uk, (2020) About the organization Available at:https://www.ovation.co.uk/about-us/police [Accessed on: 15.12.2020]

Prasanna, R.P.I.R., Jayasundara, J.M.S.B., Naradda Gamage, S.K., Ekanayake, E.M.S., Rajapakshe, P.S.K. and Abeyrathne, G.A.K.N.J., (2019). Sustainability of SMEs in the Competition: A Systemic Review on Technological Challenges and SME Performance. Journal of Open Innovation: Technology, Market, and Complexity, 5(4), p.100.

Press, M., Robert, I. and Maillefert, M., (2020). The role of linked legitimacy in sustainable business model development. Industrial Marketing Management, 89, pp.566-577.

Röhl, K.H. and Engels, B., (2020). Cooperation of start-ups and SMEs in Germany: Chances, challenges and recommendations (No. 19/2020). IW-Policy Paper.

Rudenko, L.G., Zaitseva, N.A., Mekush, G.E., Dmitrieva, N.V. and Vasilieva, L.S., 2016. Improving private sector and government partnership system to support small businesses in the service sector. International Electronic Journal of Mathematics Education, 11(5), pp.1261-1270.

Stachová, K., Papula, J., Stacho, Z. and Kohnová, L., (2019). External partnerships in employee education and development as the key to facing industry 4.0 challenges. Sustainability, 11(2), p.345.

Statista.com, (2020) Percentage of small and medium enterprises (SME) in the wholesale and retail sector with growth plans for the next 12 months in the United Kingdom (UK) from 4th quarter 2011 to 2nd quarter 2019* Available at:https://www.statista.com/statistics/291548/uk-wholesale-retail-sme-small-and-medium-enterprises-with-growth-plans/[Accesed on: 15.12.2020]