Assignment Sample on MS60045E International Business
Introduction
The Covid-19 pandemic situation hampered the work life balance and work stress level of employees who work at UK based IT SMEs. Employees had to move to virtual work in this pandemic situation. The sudden transition to work from home of employees resulted in their social isolation, thereby causing high levels of stress and depression among them.
This report consists of all information on the impact of Covid-19 pandemic on work life balance and work stress level of employees in UK based IT SMEs. This report illustrates PESTEL analysis of the UK and Porter’s Five Force Model on describing impact of Covid-19 in the UK and work life of IT SMEs respectively. Cultural factors are going to be discussed in this report that impacts on employees of the UK. All trade barriers, tariffs and non-tariffs are going to be discussed in this report. Ethical and social issues that arise in this pandemic situation are described with authentic information. The methods of expansion are also illustrated in this report.
PESTLE Analysis
Political
There are many political factors that affect the UK. Among all the political factors that affect the working life of the UK some are discussed here. The main factor that affects UK work life is their stable government. There are many factors that determine the stability of government such as low or controlled corruption, rule of law and effectiveness of the policies of government. The UK has a stable government that performs all these factors successfully. The administrative system of the UK is very strong and traditional. The UK falls under the category of the most powerful countries of the world. The government system of this country consists of parliamentary democracy and constitutional monarchy (Hjálmsdóttir and Bjarnadóttir, 2021). The UK has a strong economy that comprises allies and associates. A permanent seat of the UK is provided by the UN as part of the UK’s strong economy. The UK has great influences on global issues like scientific, military, cultural, social, economic, and political. The impact of Brexit in recent years has created an atmosphere of uncertainty.
Economic
The economic factors that affect the UK are trends of the country’s GDP, diverse economy, direct investments of foreign, tax rate, inflation and unemployment. Economic position of the UK stands in the 6th position globally. The nominal GDP that the UK estimated in 2019 was 2.744 trillion dollars (Gigauri, 2020). Diversity is the main reason for the success of the economy of the UK. Markets of the UK are so diverse that it provides all businesses equal opportunities to flourish and grow. As long as the UK adds value to customers’ lives the demand of the market will increase. Direct investment of foreign helps the UK to grow by its diverse culture. The economy of the UK attracted the attention of many countries across the world. As a result, many companies and investors invested their capital and resources in various fields like sports, entertainment, grocery, clothing, food, technology, science, and real estate. The tax rate of companies in the UK is 19%. Economic conditions of UK SMEs become very much struggling due to this covid 19 pandemic situation. At times of this pandemic 52% of 653 SMEs survived in less than 12 months under trading conditions of time.
Social
Social factors of the UK lie in different factors like population, system of health care, education, and income level. The population of the UK according to the office of national statistics is estimated to reach 74 million people by the end of 2039. The current situation stands on birth rate exceeding the rate of mortality and its effects on the health care system and labor market. It also brings opportunities for industries to fulfil the needs of more people. The new normal situation of IT SMEs brings unexpected businesses, individuals and catastrophes (Irawanto et al. 2021). Consumers due to this pandemic situation become more adjusted with online shopping and online businesses. The UK SMEs that are offline businesses are facing troubles in this pandemic situation. They are trying to adopt new business strategies of selling goods online and transforming their office businesses into work from home. Some small enterprises had to stop their businesses as they are not getting enough employees or customers to run their business successfully. Social distancing has become one of the main factors that become harmful for these IT SMEs in the UK.
Technological
The UK has world’s leading developing institutes and research. This country always lays in a track of consistent effort of overcoming all possible barriers in almost every field. The economic structure of the UK provies all entrepreneurs with great opportunities to build innovative technologies on a daily basis. Technologically the UK stands in number one position in this world. Their development and inventions contribute to this country’s economy. In today’s world the UK is making themselves much more progressive in fields of technology. Technological industries of the UK are succeeding over American institutes, Korean, Japanese, and India. Development of IT would be beneficial for UK based IT SMEs. However, technologies for oline businesses that are developing in the UK will be very much useful for these IT SMEs. Development of IT would help in e-commerce activities.
Legal
All companies of IT SMEs in the UK, who are planning to build their industries in the UK and are trying to operate their business in the UK have to follow the Employment Act of 1996. In terms of paternity or maternity leave, holiday pay, minimum wage, or sick pay, this particular Employment Act of 1996 protects their rights. The Equality Act of 2010 on the other hand is also mandatory for all start up businesses to follow in the UK. This Equality Act of 2010 protects all citizens of the UK from being discriminated against colour, gender, race or any other difference. In this pandemic situation the Employment Act of 1996 will give support to those employes who lost their jobs in IT SMEs. This Act will also help those start up companies to get compensation from the government in this pandemic situation to build up their businesses with new strategies like the new normal.
Environmental
All industrialists have to face serious issues for environments as an economy cannot move itself towards success without industrialisation. In this environmental situation of Covid-19 pandemic all industries of the UK gets hampered. However, the government of the UK, charity organisations and private corporations are taking major steps to help these IT SMEs in this situation to rebuild their industries in the UK. Maintaining social distances and proper vaccination IT SMEs in the UK could start up their offices with 50% of employees.
Porter’s Five Forces Model
The advent of Covid 19 has seriously impacted the working pattern of the employees, associated with the UK based IT SMEs. In terms of analysing the UK market, Porter’s Five Forces framework is adopted here.
The threat of the new entrants (High)
Rivalry is considered to be the common phenomenon of every industry and the IT industry of UK is no exception. Bruijl, (2018) mentioned that the rivalry of the firms is dependent upon the market structure. In the IT market of UK, there are numerous firms operating and competing with each other. It can be surmised that UK IT market is characterized by perfect competition and it is one of the most growing sectors (PROSPECTS, 2021). In such a domain, the threats of the new entrants would be exceedingly high. Therefore, the SMEs of the IT market would have to strive hard to withstand the market competition and continual fluctuation of demand and supply. It can also be stated that due to the preponderance of the global players, the workers of IT SMEs in UK would have less scope for work-life balance, especially in the Covid scenario.
Consumer bargaining power (High)
The bargaining power of the consumers is found to be conducive to drive the prices down. Varelas and Georgopoulos, (2017) stated that the resilient bargaining power of the consumers stems from the number of firms operating in the marketplace. Being a global industry, the numbers of dominant players are relatively high in UK IT industry. Consumers have numerous options to switch to buy the products at affordable prices. Therefore, the bargaining power of the consumers is quite high in UK IT markets.
Supplier bargaining power (Low)
The suppliers can exert more influence on both the firms and the consumers if their number remains low in the industry. The data has revealed that in UK market, there is an abundance of suppliers, who are both locally and globally catering to the requirements of the consumers (GREAT GOV, 2021). Thus, the IT SMEs of UK can manipulate and negotiate with the suppliers to increase profitability and to obtain better deals.
Internal competition (High)
Competition is quite intense in UK market as there are a huge number of players in the marketplace, attempting to override each other with various product offerings. The emerging technologies and the wide product portfolio are intensifying the competition day by day in UK IT industry (TECHNATION, 2020). On the other hand, the usage of IoT and cloud computing are contributing to the market expansion.
Threats of substitution (Low)
The IT market of UK is operating under the regulations of EU. As per data, EU’s “single market law” is applicable for all industries and monitors the business activities of the firms (TECHNATION, 2020). Besides, the patent and copyright laws are also highly stringent in UK territory to protect the substitution of intellectual property. Due to the presence of such stringent regulations, the threat of replication of the product offerings and business strategies are quite low.
Management of the UK has ensured that no employees can be terminated from any companies as well as IT SMEs during this pandemic situation. All IT professionals would have to be compensated with a full amount of salaries. Employees tend to get facilities so that they can work from home. All employees are bound to be provided with online systems like laptops and desktops if they could not afford them on their own (Uddin, 2021). The new normal trend is not normal for all employees, mainly those who are aged and are used to working manually in office premises. Managers and directors are responsible for their employees to make them understand the ways of techniques to how they will work at home like in the office.
A management consultant of an organisation should have to be very much responsible in handling all employees with comfort. Working from home is much more difficult than working from office premises. All organisations should arrange counselling sessions and provide to all employees so that they get habituated with this new normal situation. Mental stability is very important for doing any kind of work whether from the office or home. At home there are many difficulties that employees have to face due to their family members. Employees are given proper facilities of guidance by team leaders or managers so that they could work smoothly at home with proper guidance.
The communication process must be very much effective at this time. Without proper communication people could not get proper instruction of works and as a result there will be a misunderstanding in doing works. Communication processes like mobile and internet connections should be provided to all employees to work from home and get information from senior management teams.
Tariffs
- Personal income tax
The UK based IT SMEs have to pay a traders tax in their country. Under tax law of the UK a sole trader has to pay personal income tax on their profits from business taxes. Each year it has been calculated by accountants that when a company has to fill and complete a self assessment tax return, details of a business’s sales revenue and tax allowances that are outgoing are taken into account. There is a standard personal allowance that is tax free from this year 2021 to 2022 is £12,570 (Nithya et al. 2021). This tax free allowance says that a company would not have to pay income tax until it earns more. If a sole trader makes an annual profit that is sales minus allowances and costs, combined with any other income that is taxable then the trader will receive a range between £12,687 and £50,561. The trader will have to pay an income tax rate of 20%. A 40% higher rate of income tax is applicable for profits and other income taxes that are above £50,561 but not exceeds £150,000. With a rate of 45% additional, payable income tax on profits above £150,000. Soles traders also have to pay “National Insurance Contributions” (NICs).
- NIC
If a sole trader of IT SME makes more than £6,475 in a year between 2020 and 2021, then it has to pay a flat rate of NICs that is £3.05 per week in 2020 to 2021. With this NIC an income tax would also have to be paid after completion of Self Assessment return of tax.
Non-Tariffs
- Import Duty
IT SMEs play an important role in UK bilateral trades of goods. The UK ranked in the fifth largest position in exporting goods in 2019. The UK served as a key entry point for SMEs of other countries like the US to the EU. Merchandise exports of the UK grew with an average of 15.9% that is compared to a decrease of 6.4% for other firms that are larger than SMEs during the same year. The current import duty amounts to 2.5%, which is a significant trade barrier.
- Embargoes
By 2020, on the other hand, SMEs that are identified as exporters to the UK increased by a 0.3% compared to 5% of larger business firms. SMEs in the UK exported $20.4 billion worth of goods in the UK by 2020 which later accounted for 38% of “known value” of other exports like the US to the UK (Majumder and Biswas, 2021). Sanctions Act, arms embargoes consist of prohibitions on export, supply or delivery, making available and transfer of military items and on the provision of technical assistance, financial services and funds, and brokering services related to military items.
In this pandemic situation there is an increasing pressure on all business organisations in the UK. Additionally, they had to run their operations more effectively, efficiently and most economically to increase their performances. Due to this Covid-19 pandemic and continuous changes in the competitive environment all businesses including SMEs must find new ways of meeting competitions in a more traditional way of offering better goods at lower prices. Modern SMEs in the UK employ people with diverse backgrounds in terms of socioeconomic status, education, age, religion, culture, and nationality. These people come into workplaces with different perceptions, goals and values (Pirzadeh and Lingard, 2021). This diversity among people creates ethical and social challenges for all managers as well as individuals.
In businesses ethical misconduct becomes more costly in societies and in organisations as a whole. Consequently “small and medium-sized enterprises” (SMEs) have become worstly affected due to this pandemic situation. As they lack strategic information, relevant alliances and funds to implement practices ethically. Despite their sizes these small and medium enterprises cannot afford to disregard the ethics of a business. It is noticeable that there are continuous business failures among these SMEs in this year 2020-2021 due to Covid-19 situation.
The challenges that all SMEs have to go through are ethical challenges and dilemmas in developing their business. In the UK , SMEs have to overcome diversity among people, discrimination between male and female and racial distinctions. Economic developments are contributed by SMEs by the creation of employment in urban population and rural populations. In a developing country like the UK, economic growth plays a very important role and leads to reduction of poverty (Kossek and Lee, 2020). SMEs in the UK, have an employee of 70% labour force. These SMEs have 90% of establishments, 47% manufacturing contributes and establishment and 65% of employment.
In this 21st century the main power of developing an SME lies on stakeholders. Stakeholders have the full control over businesses and markets that affects performances of businesses, major factors of success and ethical practices. Such as, an owner of a business and its employees must have faith in each other in their business practices as both of them engage themselves in making continuous profits. Businesses which operate regardless of values ethically certainly face problems with customers, business partners, law and employees. Once a business loses trust of their customers due to unethical behaviours it faces difficulties in regaining trust and significance.
In the long run, social and ethical practices are responsible for getting benefits as entrepreneurs financially. This resembles that behaviours that are associated with integrity and maintaining honesty become trustworthy and this can be engaged in good commercial practices. For all SMEs it is important to take responsibilities and have to become accountable for others actions in long run strategies. Social and ethical behaviours in unpredictable fast changing environments help a business in gaining support from external groups of stakeholders. Ethical practices bring benefits and enable competitive advantages in businesses. Stakeholders on the other hand bring social protection from all unpredictability that a business may face.
Joint Venture
There are various reasons behind a business that the business looks into international expansions. These international expansions include lower costs, greater profits, acquisition of new and modern technologies and skills that diversified profit and cost bases among themselves. While starting a new business an entrepreneur should undertake some expansion strategies before undertaking a business decision. Joint venture helps in selecting the business market which is a first and important step for expansion strategy. It helps in gaining understanding of the readiness of a company to which way it is expanding is very much crucial. In order to launch products and services successfully overseas a joint venture is very much important. This strategy may seem very much common but many SMEs in the UK failed to do their conscientiousness regarding market entries.
In recent times, globalisation has become the most important and interesting in the business world. Most of the SMEs are trying to escape from their home markets and trying to get into international markets in order to expand their businesses (Mello and Tomei, 2021). As per driving force internationalization becomes common in all market strategies. More companies are starting and transferring their businesses into foreign entrants by the help of deregulation and liberalization of earlier trade laws. Joint ventures help external factors like technologies and logistics to improve a start up business. Expansion into markets internationally by an organisation is motivated by various factors. Among these factors one of the most important factors is increase and growth in profitability.
Many SMEs are there who are trying to enter in foreign trade markets in order to expand their influence, productivity and increase in revenues and sales. Internationalization for such developing companies is important for a wider base of customers, which will imply more revenues and sales of products. As more a company could expand itself into fore in trades the more it will gain profit and value. In international markets there is an increase in volume of products which leads to reduction in product’s unit prices. In addition to this, products that sell across various countries help an SME to diversify its risks by reducing exposure to economic and political instability in solo markets. The entry mode of foreign markets varies in particular markets internationally. These international markets are practical and safe for new start-up industries.
Thus, it is to conclude that the impact of covid-19 pandemic on work life balance and work stress level of employees working in UK based IT SMEs are not so comfortable but difficult. In this report various business drivers are used such as PESTLE analysis and Porter’s Five Force Model to evaluate the condition of the UK and the working employees of IT SMEs. Cultural factors that affect SMEs in this pandemic situation are described briefly with various examples. In trade barriers, tariffs and non-tariffs are used to discuss the UK’s taxation policy and its economical position. Among tariffs and non-tariffs four topics are being discussed in this report namely, personal income tax, NICs, import duty and embargoes. Methods of expansion are also illustrated briefly with discussion of joint ventures.
Reference List
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