The current business scenario is one of the most challenging environments for the contemporary business organizations. This is due to the reason that, the current business state of affairs is having huge number of competitors in the market, which lead to the reduction of the profitability. Thus, it is important for the business organizations to identify various effective strategies in order to identify more market opportunities and enhancement of the profitability (Grant 2016). One of the key strategies being initiated by the contemporary business organizations is globalization. With the initiation of the globalization, business organizations can enter in foreign markets in order to increase their market share and presence.
Coles is one of the leading retail organizations in Australia operating in the sector of fast moving consumer goods category. They are having good number of branches in and around Australia and offers huge diversity of product portfolio. However, in the Australian market they are facing the competition from the emergence of the competitors such as Woolworths (Keith 2012). Moreover, the retail market of Australia is become saturated and thus, it is of urgent need for Coles to opt for international business in other market.
This report will discuss about the opportunities and challenges to be faced by Coles in their international business. China and United Kingdom are being shortlisted as the potential host countries. Both these countries are having huge market and business opportunities and one of the attractive destinations for foreign investments. This report will consider various aspects to compare between the two countries in order to select the ideal host country for Coles to enter.
United Kingdom is one of the most developed and advanced countries in the world. They are one of the forerunners among the countries in the European Union in terms of economy and other domestic infrastructure (Baum, Poplawski and Weber 2012). Moreover, with the migration of people from different parts of around the world, United Kingdom is having diverse population. However, it is important for Coles to determine the environmental factors to be faced by them in operating in the United Kingdom.
United Kingdom is one of the oldest and strongest democracies in the world. Various countries around the world have inspired from the political system of United Kingdom. Moreover, United Kingdom is having clean political background without having any instances of any political issues (Culpepper and Reinke 2014). Thus, business organizations entering will have favorable political environment. In addition, according to the report of Transparency international, United Kingdom is having the ranking of 10 in the global corruption index. Thus, the rate and impact of corruption is also low in United Kingdom.
Figure: 1
Corruption index of United Kingdom
Source: (e.V. 2017)
However, apart from the favorable political environment in United Kingdom, there are various challenges also being identified. According to the reports of global competitiveness index, tax regulations are the most problematic factor for the business organizations operating in the United Kingdom. Companies will face the issue of stringent taxation system in the United Kingdom (Sandford 2015). Another issue being identified is the bureaucracy in the government system, which hinders the effectiveness of the system. Thus, these will be challenges being faced by Coles in entering and operating in the United Kingdom.
Figure: 2
Issues in doing business in United Kingdom
Source: (Global Competitiveness Report 2014-2015, 2017)
According to the reports of global competitiveness index, United Kingdom is the top ranked country in the world in terms of inflation. Thus, the business organizations operating in the United Kingdom will have favorable rate of inflation. In the case of Coles, they will have more favorable impact due to the positive inflation scenario. It is also been reported that, United Kingdom is having the ranking of 13 in terms of credit rating. Thus, it will be safe for the business organizations to invest in the United Kingdom.
Figure: 3
Macro environment in United Kingdom
Source: (Global Competitiveness Report 2014-2015, 2017)
It is also being reported that, United Kingdom is having the ranking of 18 in terms of procedures to start a new business. Thus, Coles will have positive and favorable impact in initiating their business there. However, on the other hand, the intensity of local competition is more in the United Kingdom. This is due to the reason that, they are having the ranking of 15 in term of intensity of local competition. Thus, Coles will face huge competition even in the market of United Kingdom.
Figure: 4
Market efficiency in United Kingdom
Source: (Global Competitiveness Report 2014-2015, 2017)
It is also being reported that, United Kingdom is having ranking of 37 in terms of the easy access to the loans and other financial services. Thus, it will be favorable for Coles to have their business there due to easy access to the loans. Moreover, according to global competitiveness index, United Kingdom is having favorable ranking in availability of the financial services, which will help Coles to have the source of funding for their investment (Gibson and Thirlwall 2016).
Figure: 5
Financial market in United Kingdom
Source: (Global Competitiveness Report 2014-2015, 2017)
As discussed earlier, United Kingdom is having diverse population due to having various ethnic groups and migrants from different countries. Moreover, according to the reports, United Kingdom is having the ranking of 9 in terms of domestic market index. Thus, it can be concluded that, the market opportunity is huge in the United Kingdom for Coles. Moreover, the GDP of United Kingdom is ranked at 9 in the world. Thus, the per capita income along with the purchasing power of the customers will be high in the market of United Kingdom.
Figure: 6
Market size of United Kingdom
Source: (Global Competitiveness Report 2014-2015, 2017)
Figure: 7
Labor market of United Kingdom
Source: (Global Competitiveness Report 2014-2015, 2017)
It is also being reported that, United Kingdom is having favorable ranking in terms of labor employer relations and flexibility of the wage. Thus, Coles will have favorable management environment along with maintaining the proper wage and human resource management. Availability of the skilled employees will be easy for Coles in the market of United Kingdom due to the reason that, it is being reported that, United Kingdom is having the ranking of 27 in terms of staff training. Thus, the training infrastructure in United Kingdom is favorable (Katz 2012).
Figure: 8
Training scenario of United Kingdom
Source: (Global Competitiveness Report 2014-2015, 2017)
Coles is catering to the fast moving consumer goods category and it one of those categories, which are witnessing rapid growth in the field of technology. Thus, it is important to Coles to have the favorable environment of technologies in United Kingdom. According to the reports, United Kingdom is having high ranking in terms of availability of latest technologies. Moreover, it is also being reported that, they are having higher ranking in firm level technology absorption. Thus, Coles will have favorable environment in terms of technology in the market of United Kingdom.
Figure: 9
Technological scenario of United Kingdom
Source: (Global Competitiveness Report 2014-2015, 2017)
China is one of the leading developing countries in the world with having the largest population in the world (Banerjee, Duflo and Qian 2012). Thus, having the largest population will help the business organizations to have more marketing opportunities. Moreover, in the recent times, the policies and regulations being initiated by the government of China have helped to attract huge foreign investment in the country (Zhang, Wang and Wang 2012). Similar to the United Kingdom, China is also having various environmental factors that are important to determine for the business organizations.
The political environment of China is quite different than that of other countries. This is due to the reason that, China is having autocratic communist government compared to the democratic government in other major countries. Thus, the political system is different than the United Kingdom. However, the risk of frequent change in the political system will be less in the case of China (Lawrence and Martin 2012). This is due to the reason that, China is having autocratic type of government and thus, there is no occasion of election. It will be a favorable impact on the business organizations such as Coles. They will not have to face the issue or risk of frequent change in the political systems (Geng et al. 2012). However, in terms of the corruption, China is having score of 40 in 2016, which denotes that, corruption is an important and influencing factor. This will be a negative point for the business organization.
Figure: 10
Corruption index of China
Source: (e.V. 2017)
Moreover, it is also been reported that, taxation system in the country is one of the key problematic areas in investing in China. Thus, business organizations investing in China will have to face the issue of stringent tax regulations. In addition, another problematic area identified is the instability to implement policy. This denotes that, government in China is having the difficulty to implement the regulations effectively.
Figure: 11
Problematic areas of China
Source: (Global Competitiveness Report 2014-2015, 2017)
China is having the ranking of 1 in terms of inflation similar to the United Kingdom. Thus, business organizations in China will have similar impact on their operation like in the United Kingdom. However, on the other hand, China is having the ranking of 26 in terms of credit rating. Though, the ranking is favorable, but still it is behind United Kingdom. Thus, business organizations will have more risk in investing in China than in United Kingdom.
Figure: 12
Microenvironment of China
Source: (Global Competitiveness Report 2014-2015, 2017)
In terms of intensity of the local competition, China is standing at 33, which denotes that, they are also having good amount of competition in the domestic market; however, the intensity is less than that of the United Kingdom. Thus, Coles will face less competition in China compared to United Kingdom. Moreover, China is having the ranking of 104 in terms of the number of procedures to start a business. This will be a huge negative impact on the operation of Coles due to the reason that, ranking of 104 denotes that, China is having huge complexities in providing permissions to the business entity.
Figure: 13
Market environment of China
Source: (Global Competitiveness Report 2014-2015, 2017)
China is having the ranking of 54 in terms of availability of the financial service and thus, they are behind the United Kingdom. Coles will face more difficulties in availing the financial services in China than in United Kingdom. Moreover, it is being reported that, China is having the ranking of 37 in terms of access to the loans. Thus, there is not much difference in terms of access to the loans between the two countries.
Figure: 14
Financial environment of China
Source: (Global Competitiveness Report 2014-2015, 2017)
China is having the ranking of 1 in terms of domestic market and GDP due to being the largest country in the world in terms of population. Thus, the market opportunity will be more for Coles in China than in United Kingdom. Moreover, China is having the ranking of 50 in terms of labor employer relationship and ranking of 89 in terms of wage flexibility. Thus, Coles will face more challenges in China than in United Kingdom.
Figure: 15
Labor market of China
Source: (Global Competitiveness Report 2014-2015, 2017)
Figure: 16
Market of China
Source: (Global Competitiveness Report 2014-2015, 2017)
Chins is standing at 81 in terms of availability of latest technologies. Thus, in this aspect also, United Kingdom is ahead of China. Coles will have more access to the latest technologies in United Kingdom than in China.
Figure: 17
Technological environment of China
UK is having more positive geopolitical environment due to their political system in the country. UK is having democratic and capitalist government, which is more popular in the global scenario. While, on the other hand, China is having communist government, which lead to the conflict with the major economies in the world. Moreover, the geographic location of UK is more strategic compared to China. This is due to the reason that, UK is located in the developed region and China is located among the underdeveloped and developing countries.
From the above discussion, United Kingdom is being chosen as the ideal host country. This is due to the reason that, United Kingdom is having more favorable political scenario than China due to the political system. Moreover, the domestic infrastructure is more improved in United Kingdom than in China. Only advantage of China is the market size, which is the largest in the world. However, the intensity of the domestic competition is also more. In terms of access to the financial service also, United Kingdom is ahead of China. Thus, United Kingdom will be the ideal host country for Coles (Fifka and Drabble 2012).
Conclusion
This report concludes that, China and United Kingdom is having different political and other environment. Two countries are being compared in terms of different aspects and scenarios. It is being seen that, United Kingdom is having more business opportunity compared to China except the market size. Having discussed all the required aspects, it is concluded that, United Kingdom will be the ideal host country for Coles.
References
Banerjee, A., Duflo, E. and Qian, N., 2012. On the road: Access to transportation infrastructure and economic growth in China (No. w17897). National Bureau of Economic Research.
Baum, M.A., Poplawski-Ribeiro, M.M. and Weber, A., 2012. Fiscal Multipliers and the State of the Economy (No. 12-286). International Monetary Fund.
Culpepper, P.D. and Reinke, R., 2014. Structural power and bank bailouts in the United Kingdom and the United States. Politics & Society, 42(4), pp.427-454.
e.V., T. (2017). Corruption Perceptions Index 2016. [online] www.transparency.org. Available at: https://www.transparency.org/news/feature/corruption_perceptions_index_2016 [Accessed 11 Dec. 2017].
Fifka, M.S. and Drabble, M., 2012. Focus and standardization of sustainability reporting–a comparative study of the United Kingdom and Finland. Business Strategy and the Environment, 21(7), pp.455-474.
Geng, Y., Fu, J., Sarkis, J. and Xue, B., 2012. Towards a national circular economy indicator system in China: an evaluation and critical analysis. Journal of Cleaner Production, 23(1), pp.216-224.
Gibson, H.D. and Thirlwall, A.P., 2016. Balance-of-payments theory and the United Kingdom experience. Springer.
Global Competitiveness Report 2014-2015. (2017). Economies. [online] Available at: https://reports.weforum.org/global-competitiveness-report-2014-2015/economies/#indexId=GCI&economy=IND [Accessed 11 Dec. 2017].
Grant, R.M., 2016. Contemporary Strategy Analysis Text Only. John Wiley & Sons.
Katz, R., 2012. The impact of broadband on the economy: Research to date and policy issues. Broadband Series.
Keith, S., 2012. Coles, Woolworths and the local. Locale: The Australasian-Pacific Journal of Regional Food Studies, 2, pp.47-81.
Lawrence, S. and Martin, M.F., 2012. Understanding China’s political system.
Sandford, C.T., 2015. Economics of public finance: an economic analysis of government expenditure and revenue in the United Kingdom. Elsevier.
Zhang, J., Wang, L. and Wang, S., 2012. Financial development and economic growth: Recent evidence from China. Journal of Comparative Economics, 40(3), pp.393-412.
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