BSNS7360 International Business

(I) Economic Environment

• Trends in economic development, including GDP/capita, and GDP growth rate.

In 2016, the real Gross Domestic Product (GDP) of UK was estimated at 2.619 trillion USD with a per capita GDP of 42514.49 USD making the country one of the countries with the highest Per Capita GDP in the world. The purchasing power parity (PPP) calculated using the per capita GDP was estimated at USD 42,100. The UK has a population of 65,637,239 people. Daigneault, Greenhalgh, & Samarasinghe, 2018).

• Income level and distribution,

Britain has one of the highest distribution inequalities in the world with a few very rich people and large middle class and a sizeable number earning minimum wage. Pay is at the highest point obviously, however different things matter as well: openings for work, capacity to acquire efficiently, the estimation of our benefits including our homes and the sentiment of a need to spare. For whatever length of time that the activity advertises up, and there are no crash in-house costs, individuals will continue spending (Daigneault, Greenhalgh, & Samarasinghe, 2018).  

• Major sectors of the economy

The service sectors is one of the most important sectors of the UK economy constituting about 80% of the GDP. The country exports a variety of manufactured goods and import a number of capital goods and horticultural products (Rashbrooke, 2015).

• Inflation and currency exchange rates, ease of doing business, other relevant economic characteristics

The export to the international market from the UK includes manufactured products, bank services and capital good. The imports include horticultural products, manufactured products and dairy products (Skallerud & Olsen, 2011). The main trading export partners are the EU countries, the USA and China (Dinica, 2017).

• Inflation and currency exchange rates, ease of doing business, other relevant economic characteristics

The inflation in the UK is high, but the monetary and fiscal policies are keeping it in check. Furthermore, the UK has a flexible rate of exchange (Callander, & Barber, 2016). Even after Bexit, the British economy has shown its resilience by bouncing back and recording some gains (Peake, Green Alliance, & Circular Economy Task Force., 2017). Extra spending does not undermine monetary maintainability, with government obligation as yet declining as an offer of GDP. These loan fee increments are relied upon to balance out expansion near the 2% midpoint of the Reserve Bank's objective range (Organisation for Economic Co-operation and Development (2017).  

Rising import costs have driven expansion to its largest amount for a long time. However, the Bank of England predicts that the yearly rate will have crested in October 2017. Expansion has now fallen as the impact of the drop in the pounds goes out of the figures, yet the national bank expects that a tight work market may before long prompt residential inflationary weight (Berden et al., 2009)

The UK is one of the easiest places to set up a business as the registration processes have been streamlined. The extensive use of information technology in most of the processes of acquiring the necessary business permissions and even paying for the same has reduced the red tape hastening the business processes (Wadsworth, 2015). In the UK, a person can apply or access government services and business tools through the government website making it easier to register and update business information (Giudice, Kuenzel, & Springbett, 2012).  Also, the government policies are for liberalisation with the deregulation allowing for fair competition between businesses. Furthermore, online business services ensure the integrity of the information and cut down on bureaucracy which might make a traditional offline system a den of corruption and inefficiencies (Yazdifar, & Askarany, 2012).

Much vulnerability stays with the official exit from the EU booked for March 2019. Some U.K. organizations are holding off on speculations to perceive how Brexit impacts exchange relations, and development is estimated to moderate in 2018. However, Britain's business atmosphere stays alluring. The U.K. positions first without precedent for Forbes' twelfth yearly overview of the Best Countries for Business. None the less, the U.K. is positioned among the best 25 nations (out of 153 estimated) in every one of the 15 measurements followed, outside of political hazard where it positioned twenty-eighth. In other words, Britain is still a favourite for many businesses as the best and easiest place to do business (Sampson, 2016).   

(II) Cultural Environment

• predominant religion(s), language(s)

English is the official language of communication in Britain as most people within the bounds of the Greater UK are native English speakers. Britain is made up of many religions but the main religions are Christianity and Islam followed by Jainism and Buddhism. In the Christian religion, Anglican dominates (McGuigan, 2010). The country is sometimes described as a multicultural country and some people refer to is as a secular country.

• social class structure

Britain is a structured society with different social economic classes. The gap between the poor and the rich is expansive but cannot compare to the gap between the rich and the poor in the developing countries. The social structure is not a caste system and people move between the classes depending on their economic resources.  

• values and attitudes,

Britons value hard work and winning and such people work hard to secure a future in a competitive environment. Britons are individualistic and do not care a lot about people outside their close relatives. The Britons are work hard to maintain political stability in the knowledge that it is the environment that supports economic development.  

o Other relevant cultural characteristics (Using Greet Hofstede cultural dimensions).  (Hofstede, 2001)

• Power Distance

Power distance dimension in Hofstede’s cultural analysis deals with the issue of inequality in the society. It is axiomatic that even in the most egalitarian societies there are differences between the members of the societies, albeit minor differences. However, in most societies, the inequalities are so pronounced that the oppressed come to accept the inequalities as a normal part of life. Power distance measures how ready the people of a certain nationality are likely to consider power inequalities as an acceptable part of life. The UK scores very low (35) on the Power Distance aspect as most Britons recognize the differences in power distribution but do not believe they are cast in stone. At the workplace, the juniors have a voice, and the seniors allow and even encourage them to give suggestions on various matters The Managers even go as far as accepting criticisms on decisions that they make.  In the UK, the communication between managers and employees tend to be informal, and the employees expect to be consulted before decisions are made.        

• Individualism

In some societies, people identify themselves as “we” while in other countries the individual is the centre of relations. Individualism dimension measures the extent to which members of a nation believe they should help as many members of the society as humanly possible. In Britain, members of the society are quite individualistic and believe in supporting only the closest members of the family. The country scored high on individualism (89), the implication at the workplace is that the employees are expected to be independent and people with initiative.      

• Masculinity

The masculinity dimension speaks to the value system in a nation. Traits like competitiveness and winner-takes-all attitude characterize masculinity. The opposite of this trait is feminism, characterized by cooperation. Nations which score high in masculinity such as the UK (66) are characterised by the desire to stand out and be a winner, and not necessarily liking what one does.  

• Uncertainty Avoidance

The future is uncertain, and their people have various levels of anxiety depending on whether they feel they are in control and can predict the future or they believe it will overwhelm them. The uncertainty avoidance measure for the UK is 35 meaning that Britons are happy to live one day at a time.  

• Long-term orientation

Some nations have respect for traditions, and they believe it helps them face the future, while others are more interested in engaging in activities that help them the future with confidence such as education and saving for the future.  The UK is a balanced society with a low score of 51 on long-term orientation. Therefore, Britons are a people who have strong attachments and respect to their traditions but are also alive to the fact that the future awaits and they need to prepare for it.

• Indulgence

The cultural dimension refers to the values that children learn through the socialization process and which they carry with them throughout life. Parents are either strict with or permissive with their children developing in them the tendency to be focused on gratifying their immediate needs or being patient for a better thing tomorrow. Cultures with high scores in indulgence like Britain (69) are characterized with people who live and enjoy their present to the maximum and hope tomorrow will take care of itself. On the other hand, culture exhibiting low scores on indulgence dimension have people with the tendency to save and invest for the future with little enjoyment in the present.

(III) Britain’s Resources and Comparative advantage

According to Heckscher-Ohlin trade theory, skilled labour will be cheap in countries that have an abundance of such skills and conversely will be expensive in countries where such skilled labour is in low supply. At the same time, the theory proposes that movement to freer trade will negatively affect skilled labour in countries where with abundant low-skilled labour and favour high skilled labour in countries with an abundance of high skills labour. In other words, all other factors remaining equal, free trade will encourage countries that have a competitive advantage in skilled labour to produce more goods that need these skills to produce. At the same time, countries with low skilled labour will produce more products that require low skills.

The net effect is that more skilled labour will be required in skilled labour abundant countries, while less skilled labour will be required in countries that have an abundance of low-skilled labour. The competition for high-skilled labour prices in high-skilled labor abundant countries will shoot up while the reduced demand for skilled labour in low-skilled labour abundant countries will push down skilled labour prices.  The net effect is that people with high skills in high-skilled labour countries will be more welcoming of freer trade (globalization) compared to people with high skills in low-skilled labour counties. New Zealand has a competitive advantage of highly-skilled labour in the manufacturing and service sectors and abundant low-skilled labour in the agricultural sector (O'Rourke & Trinity College (Dublin, Ireland), 2003).       

Strong Economic Fundamentals

Economic and political stability are the engines that drive the economy, and Britain has the two. The economy of the country has shown a tremendous resilience that even after the world economic meltdown in 2008 it rose again from the ashes to produce impressive economic growth figures (Minford, 2015). Also, the government policies are conducive to business including the free-market economic practices and the Comprehensive trade agreements with partner countries. All these factors provide a conducive environment for business growth.

Infrastructure for Business

The UK has laid a very firm business foundation through the building of roads, railway, and air transport, which support the movement of goods and service, without which business would grind to a halt. At the same time, the country has established highly advanced and reliable internet service ensuring that one can easily apply for business and update business information easily.

Energy Supply

The UK is energy sufficient meaning that business is ensured enough electricity for its production services. Energy cost in the country is also low relative to other developed countries in the world ensuring that the cost of production of goods and services is low thus enhancing their competitiveness in the market (Scheve & Matthew, 2001).

Research and Development (R&D)

The British government supports the government/private partnerships especially through the public universities which help the universities to research and come up with innovative products which are consumed locally and internationally (Bloom et al., 2014).  

(B). V Drink New Zealand Export to the UK

V drink is an energy drink made and distributed by Frucor which is a New Zealand beverage company. The energy drink has been in the market from 1997 when the first product hit the market and has grown exponentially to its current dominant market share in New Zealand and Australia with 60% and 40% respectively.

I chose the product because of its current status in the market in the neighbouring countries, and there is every possibility that the drink will perform well in the international market. The large market informed the choice for exporting V energy drink to the UK, and the chances of performing well in the market are high (Méjean & Schwellnus, 2009).

The British economy is service oriented with the sector constituting a huge chunk of the country’s GDP. The Central Bank plays an important role in the maintenance of the price stability supported by the reserve back which controls the monetary policy. These institutions and their activities help to maintain a low-inflation environment (House of Commons, 2013). The UK economy applies free market principles with little regulation, making it easier for the business people to establish their enterprises in the country. Also, there are few regulations including fewer regulations on bringing money into the country as well as repatriation of funds. Furthermore, the UK has a flexible rate of exchange (Callander, & Barber, 2016).

Moreover, the UK has been performing fairly well for the past two decades by was hit by the 2008/2009 world recession. However, the economy is resilient and was able to immediately rebound to record impressive growth rates in the FY 2010. In FY 2017, the economy recorded an improved growth rate of 1.7% courtesy of tourism, construction and favourable terms of trade. The slow-down in the export sector of the economy due to reduced demand for products is affecting the growth rate, but the UK economy is expected to show a slowdown in economic growth to 1.5 in 2018 (Yazdifar, & Askarany, 2012).

1. C) Compute the Market Potential

References

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