The report is a discussion on the international and global economics of an Australian company. The company chosen for this report is Woolworths Supermarket. Woolworths Supermarket represents the largest supermarket chain of Australia (Woolworths.com.au 2017). The company operates around 995 stores across Australia and has 115,000 in storemembers, support offices and distribution centre that help in providing the customers with superior value, range, convenience and service. The company has been working closely with the Australian farmers and growers for ensuring that customers receive the best quality products. The company sources around 96% vegetables, fresh fruit, and 100% fresh meat from the Australian growers and farmers. This, make Woolworth the fresh food people of Australia. Woolworth is Australia’s innovative retailer, as they understand that customers look for new and simpler ways of shopping. This is why the company has launched Woolworths Supermarket App that allows consumers to shop at their own convenience and get the groceries delivered straight to their kitchen bench (McCormick 2013). The report also helps in identifying two countries based on Europe and Asia that Woolworths plans to make an entry. There is also discussion on the current macro environmental and geopolitical factors of each of the countries along with an identification of the business and trade policy of each country. The report also put forward an analysis of the potential dangers, opportunities and risk in the current or short-term policies of each country. The report also puts forward recommendations on the most suitable country for market entry along with necessary reasons and justifications.
European Country
The European country selected for market entry of Woolworths is United Kingdom
One Asian Country
The Asian country selected for market entry of Woolworths is China
PESTEL analysis determines the macro-environmental forces of United Kingdom. This implies political, economic, social, technological, environmental and legal factors affecting external business environment of United Kingdom:
Political
The United Kingdom (UK) has a constitutional monarchy influenced and governed by parliamentary system (Nugent 2017). This is a country where opportunities exist for foreign and internal entities. In UK, the public has huge influence on internal working of the country and has proactive role towards the country’s betterment. The country has a political stability although the administration split into local and national level.
Economic
The economy of UK is stronger compared to other countries. In recent years, the country faced high foreign direct investment (FDI) and lower gross domestic product (GDP) growth(Mathias2013). Moreover, UK has a large population that makes the smaller markets profitable. UK is however a liberalized economy with large private and public sectors.
Social
The social class of UK highly influences its social structure. High society remains an aspiration behind general population and in recent times UK have become a multicultural place that encourages the proliferation of different race of people(England2017). The country has a densepopulation of about 64.1 million inhabitants but is open to migration of as it ensures easily available and cheaper workforce. The standard of people is also quite high in the country.
Technological
The country has access to updated innovations and technology that contributes to the development of the country. The country has improved and updated information technology and science and ensures effective implementation of intellectual property rights(Bateman et al. 2013). The country put forward a plethora of internal growth that stimulates growth.
Environmental
The government of United Kingdom plays vital role in the implementation of environmental standards in all its policymaking(McCormick2013). The initiatives for the promotion of sustainable development help in setting up a target that focuses at the economic, social and economic development of European Union. The foundation of sustainable development includes natural resources like waste, biodiversity, health and quality of life.
Legal
The government of UK implements strong policies whose laws are applicable throughout United Kingdom(Walkerand Jones2012). The legal changes responsible for influencing business tied to the political ones so that they must prepare and anticipate futuristic changes.
The Brexitapproach had a significant impact on the international standing of the country. Brexit refers to the hypothetical or potential departure of United Kingdom from European Union. UK acted as a primary entrance for the European markets so a change its status would potentially influence the country(Taylor2016). Brexit led to the decline of Great Britain in the affairs of the world affairs since the loss of the position of the country with the distant allies. Thus, the geopolitical destiny of UK tied to the rest of the Europe due to its closer proximity. However, the Brexit approach will never serve the interest of British people and UK considers it an obligation morally in not abandoning Europe and its allies and friends.
However, the Brexitacts as a challenge for the future of United Kingdom since ensure removal of the European Law that helped them to bind together(Whitman2016). The futuristic impact of Brexit in the United Kingdom is unpredictable and profound. There are also certain fundamental challenges faced by the United Kingdom because of Brexit.
The political, economic, social, technological, environmental and legal (PESTEL) factors affecting the external business environment of China are as follows:
Political
The political factoraffecting China includes government regulations that are both informal and formal rules that the firms follows affects the country hugely(Laruelleand Peyrouse2012). China has a huge unsettled political force.
Economic
The economy of China over the past five years have experienced rise in GDP growth. If this continues then the country will have a GDP that is higher than that of United States(Kang and Jiang2012). The country has availability of skilled and abundant labor and supports exports business. This leads to the potential urban growth of the company. This increased growth rate can lead to higher inflation rate and prices of property.
Social
The age distribution and population growth fluctuates in China that can also influence cultural values and social trends(Laruelleand Peyrouse2012). The social factor that has an impact on the external business environment of China includes education, religion, emigration and consumer lifestyles. The accounts for a literacy rate of 90 percent.
Technological
The major technological hinge faced by China includes its inefficiency in making a stable and safe online payment system(Chong, Chan and Ooi2012). Since the Chinese buyers focuses highly on the avoidance of uncertainty and long-term orientation so the problem strengthens.
Environmental
The rapid industrial development in China is leading to the creation of negative impacts on the environment through increase in pollution and decrease in the natural resources. China is the highest emitter of carbon dioxide along with other gases compared to rest of the world.
Legal
China also has certain legal issues based on its e-commerce framework. The country possesses little experience inintellectual property right tax and protection. The country also does not have any kind of regulations supporting the recognition and privacy of digital structures, validation of electronic contracts and consumer rights.
Three geopolitical imperatives of China are as follows:
Maintenance of Unity in China’s Han Core region is essential for maintenance of cohesion in China and the security of communist party(Basham2013). Han core is also increasingly diverse and complex geographically, economically and culturally. Thus, balancing the differences is becoming increasingly difficult with the current economic slowdown of China.
China ensured control over its buffer regions for securing Han Core. Therefore, the country fought with its neighbors, established a policy of middle kingdom, and kept the neighbors at bay through the nominal tributary system that required minimal military force that helped in gaining minimal control and true influence.
The country is self sufficient in natural resources(Mohan 2013). However, additional resources found along the routes of Silk Road located towards the west of the country that often suffered international raids and plagued by privacy so there was a need for protection of coast from all kinds of encroachment.
The United Kingdom focuses on the free trade policies for overcoming the trade barriers. The barriers of trade are resolved by having a direct conversation with the country that creates such barriers. (Haleyand Haley 2013). Thus, UK takes part in negotiating with the international trade agreements that also includes the Transatlantic Trade and the Investment Partnership that exist between the European Union and United States. There is also a free trade agreement signed between The United Kingdom and South Korea that helps British companies for easily doing business in the country. The United Kingdom also has centre for single market centre for dealing with frequent problems of the companies based in United Kingdom.
The government of United Kingdom ensures that the agreements about the international trade enable the countries that are still developing. However, the support fund for the trade and other trade related projects for development enable the developing countries to carry on business with other nations.
The short-term policy can pose challenging for the British companies in undertaking operations outside United Kingdom(Loader2013). This may be a result of the discrimination of the rules and practices that prevailed in some other countries or as a result of misinterpretation of the rules by the authorities of the administration. This might result when a different country imposes an unfair increment in the import or levies duty on business of United Kingdom. Trade barriers are either tariff or non-tariff barriers. Tariff barriers refers to the amount of charged import duty on goods whole the non tariff barriers refers to the measures intended for favoring the local industry.
China continued in reducing the administrative barriers of trade. China has ensured liberalizing the foreign trading system. This has allowed the country to amend the Foreign Trade Law that was effective from the July 2004. The law was applicable to all types of enterprises including private ones. The law also applies to the individual Chinese wants to conduct foreign trade.
The impacts of the Current policy of China include removal of quota and licensing requirements on the imports(Haleyand Haley2013). There was an adoption of quarantine inspection for ensuring the custom clearance of both the import as well as export goods. In addition, there was a compulsory product certification adopted by China that allowed the products sold, imported or used in the country.
Conclusion
The report ends with a discussion on the trade and business policy of United Kingdom and China. There is also discussion on the potential risk, danger and opportunities of the short-term policies of both the countries. The report also discusses about the geopolitical and macro environmental factors that influences each of the countries.
The ideal country for the market entry would be United Kingdom since it has free trade policy and has political stability. The population of UK is also large thereby making the market profitable. In the recent years, the country also has an increasing amount of foreign direct investment in the country. Compared to this, China will pose as a challenge as it will restrict the business from attaining the strategic objectives of cost reduction and a stage of local differentiation.
References:
Basham, V., 2013. War, identity and the liberal state: Everyday experiences of the geopolitical in the armed forces. Routledge.
Bateman, I.J., Harwood, A.R., Mace, G.M., Watson, R.T., Abson, D.J., Andrews, B., Binner, A., Crowe, A., Day, B.H., Dugdale, S. and Fezzi, C., 2013. Bringing ecosystem services into economic decision-making: land use in the United Kingdom. science, 341(6141), pp.45-50.
Chong, A.Y.L., Chan, F.T. and Ooi, K.B., 2012. Predicting consumer decisions to adopt mobile commerce: Cross country empirical examination between China and Malaysia. Decision Support Systems, 53(1), pp.34-43.
England, P., 2017. Households, employment, and gender: A social, economic, and demographic view. Routledge.
Haley, U.C. and Haley, G.T., 2013. Subsidies to Chinese industry: state capitalism, business strategy, and trade policy. Oxford University Press.
Kang, Y. and Jiang, F., 2012. FDI location choice of Chinese multinationals in East and Southeast Asia: Traditional economic factors and institutional perspective. Journal of World Business, 47(1), pp.45-53.
Laruelle, M. and Peyrouse, S., 2012. The Chinese question in Central Asia: Domestic order, social change, and the Chinese factor (Vol. 29). New York: Columbia University Press.
Laruelle, M. and Peyrouse, S., 2012. The Chinese question in Central Asia: Domestic order, social change, and the Chinese factor (Vol. 29). New York: Columbia University Press.
Loader, K., 2013. Is public procurement a successful small business support policy? A review of the evidence. Environment and Planning C: Government and Policy, 31(1), pp.39-55.
Mathias, P., 2013. The first industrial nation: The economic history of Britain 1700–1914. Routledge.
McCormick, J., 2013. British politics and the environment (Vol. 6). Routledge.
Mohan, C.R., 2013. Emerging geopolitical trends and security in the association of SoutheastAsian nations, the People’s Republic of China, and India (ACI) region.
Nugent, N., 2017. The government and politics of the European Union. Springer.
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Whitman, R.G., 2016. Brexit or Bremain: what future for the UK’s European diplomatic strategy?. International Affairs, 92(3), pp.509-529.
Woolworths.com.au. 2017. [online] Available at: https://www.woolworths.com.au/ [Accessed 28 Dec. 2017]
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