1

Qualification: Pearson BTEC Level 5 HND Diploma in Business

(RQF)
Unit Code
Unit Code: R/508/0603- Level 5
Unit Number and Title
UNIT 43: Tapping into New and International Markets
Submitted to:

Submitted by:

DATE:
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Contents
Introduction:....................................................................................................................................3
LO1 Analyzing opportunities and threats for firms:........................................................................3
P1 Explaining global business environment for SME firms:.......................................................3
P2 Analyzing threats and opportunities for SMEs in global business environment:...................4
LO2 Illustrating advantages of trading blocks for SME firms:.....................................................11
P3 Determining and analyzing the advantages of international trading blocks and agreements:
....................................................................................................................................................11
Trade bloc and agreements:....................................................................................................14
P4 Tariff and non-tariff barriers for international trading environment:...................................15
Tariff barriers:........................................................................................................................16
Non-tariff barriers:.................................................................................................................16
LO3 Determining exporting and importing processes:.................................................................19
P5 Evaluating advantages and disadvantages of exporting and importing for a secure deal
among firms:..............................................................................................................................19
Advantages and disadvantages of import:..............................................................................20
Advantages and disadvantages of export:..............................................................................21
P6 Explaining the difference between merchandise and service export and import:................22
PDF brochure (LO3):.................................................................................................................23
LO4 Evaluating ways how SMEs can enter into the international market:...................................25
P7 Demonstrating different ways of entering international market for SMEs:.........................25
P8 Comparing various methods for SMEs to enter into the new international market with pros
and cons of each methods:.........................................................................................................26
PDF brochure (LO4):.................................................................................................................28
Conclusion:....................................................................................................................................30
References:....................................................................................................................................30
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Introduction:
21st century is the age of globalization. This globalization has already emerged in the market
with many opportunities for companies. Globalization also affected business expansion and
international business in a great extent. Because of market expansion, companies need to
analyze the market to enter and gain sustainable business environment with local business
competition. In this report, we will evaluate and critically analyze opportunities and threats for
SME (Small Medium Enterprise) firms to sustain in the global competition. We will also
demonstrate international trade block and its advantages with importing and exporting
procedures for SME firms in the international market. We will conduct a secondary data
analysis from various sources.

LO1 Analyzing opportunities and threats for firms:

P1 Explaining global business environment for SME firms:
Companies are now a days expanding their business operation in many countries. Global
business environment influenced by various internal and external factors which may affect the
performance of international companies to create a market competition [ CITATION Tay01 \l 1033
]. Due to globalization and digitalization, SME firms have some opportunities for expanding
their business internationally. SME are non-subsidiary and independent firms with a few
number of employees [CITATION Jou10 \l 1033 ] . According to the European nation, an SME firm
should not have more than 250 employees for their business operation. Entrepreneurs and CEO
of SME firms are providing the mostly new jobs in recent years. Around 60%-70% jobs have
been created by SME firms in UK [ CITATION Ric09 \l 1033 ] . Government’s regulations and
conditions sometimes influence on the local and global business environment for SME firms.
Small and Medium Enterprises have no big investment and thus market expansion with
sustainable business growth in global market for them is difficult. But with the digital
technology and global business environment, 99.3% business in UK now a days accumulated
with SME firms [ CITATION SME19 \l 1033 ]. As a global business environment, SME firms in
European nations have a significance numbers of share value to gain the market value and
market share.
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Figure: Share of SMEs in business firms

Source: Joint OECD/Eurostat Database on SME Statistics

For analyzing the global business environment, 5.9% share of enterprises by size class in
European Union. According to the statement of European Union, SME are found in OECD
countries with many business portfolio and opportunities. Small and Medium Enterprises
effectively sustain by entering global markets [ CITATION Rho14 \l 1033 ] . Global business
environment needs effective marketing strategy with global market research for SMEs to
maintain business activities in less pressure (Internal and external).

P2 Analyzing threats and opportunities for SMEs in global business environment:

Global business environment is competitive and complex for SMEs. Small and Medium
Enterprises are effectively overcoming this pressure now a days by implementing strategic and
tactical plans. There are three major challenges can be found for SME owners and
entrepreneurs to sustain in global business environment. They are distance, context and
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resources. Distance means the distance between customers and the SME Company because of
lack of infrastructure to cope with the operations and business activities. Context means if any
SME company wants to operate their business globally, the company may face some
government’s rules, regulations and legislative polices. Resources is the big challenge for SMEs.
Small and Medium Enterprises can’t afford to expand their market globally because of global
marketing and global market research as these all are expensive and costly [ CITATION Red11 \l
1033 ]. Because of the extreme competition and lacking of SMEs, there have been some
opportunities and threats for SMEs business operations. Threats and opportunities are external
analysis for organizations. Opportunities for SMEs in global business environment is given
below-

External opportunities Factors

Technological advancement 1. Availability of new technology
2. Affordability and effectiveness of new
technology
Customer’s perception and expectation 1. Customer preference and expectation
for price
2. Customer preference and expectation
for quality
3. Diversified products and services
Supplier’s perspective Major shift in suppliers and third party
vendor for operation activities in global
market
Other opportunities 1. Enhancing domestic competitiveness
with local firms
2. Global market share with
international trade technology for
operational activities
3. Increased sales and profit for firms in
local business area (Geographic
profit)
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Threats for SMEs on global business environment is given below-

External threats Factors

Changes in regulations 1. NAFTA (North American Free
Trade Agreement)
2. Fluctuations of exchange rate
3. Government’s regulations and
changes
Extreme competition 1. Market competition with local
competitors
2. Competition in export market
3. Global competition
Other threats 1. Timing issue
2. Language barriers
3. Local politics and inefficient
distribution channel

Some global competencies are needed for SME owners and CEOs. Small and Medium firms
should follow some strategic and tactical plans for integrating all functional units like research
and development (R & D), marketing and sales, large portfolio of business etc. Strong and
effective alliance like joint-venture, acquisition and merger will increase the opportunities for
SMEs in global business environment. Apart from this, strong and efficient distribution channel
with supply chain will increase the value for SMEs in international markets. To be a
multinational company, SME companies should focus on the internet security and strong
organizational policies to achieve organizational objectives in global market. These factors will
reduce the global business risk and threats for SMEs in very strategic way. To be global, SMEs
should more focus on the e-commerce as a business tool. According to the research, 30%-60%
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small and medium firms are innovative in European Union and also effective for re-engineer
and re-design the product and service in a very unique way.
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LO2 Illustrating advantages of trading blocks for SME firms:

P3 Determining and analyzing the advantages of international trading blocks and
agreements:
International trade means the exchange of goods and services across the international borders
or a specific geographic area. International trade creates global business opportunities
[ CITATION Het09 \l 1033 ] . International trade also expand the consumer’s perceive choice about
various products and services of other countries. There are several international trade theories
are found. For SME and big companies, it is very much important to analyze the market before
international market expansion. Country similarity, product life-cycle, global strategic rivalry
and Porter’s national competitive advantage. Country similarity means when a country’s
products and services are similar like other. Similar qualities with products and services can be
traded with each other [ CITATION Ste13 \l 1033 ] . Before country similarity theory, intra industry
should be analyzed effectively for the firms to accumulate with international trade. PLC or
Product Life-Cycle has four major stages for international trade. They are introduction, growth,
maturity and decline stage.

Figure: Product Life-Cycle for international trade

Source: Atomic Dog Publishing, 2002

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Multinational companies those who are effectively doing international business in many
countries, can develop and design products with customer’s preference and then export.
According to the PLC theory, SME and some other multinational companies can move their
production in developing countries. In the late maturity stage, developing countries have more
competitors and multinational companies need to improve their product’s quality and service
structure for importing. In decline stage, home country market will be diminishing. Global
strategic rivalry will enable the competitive advantage for sustaining in the foreign market. In
this theory, firms and companies will try to sustain in the global competition of business and
thus they need to create a competitive advantage by research and development. All the
functional unit of a firm can be integrated with one another to sustain in the long-run global
business environment. Global strategic theory has-

1. Intellectual property rights for SME and multinational companies.

2. Investment in R & D (Research and development).
3. Economies of scale in production in global business environment.

Figure: Global strategic rivalry in digital sectors for UK firms

Source: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/image_data/file/61518/Chart_3-2.png

According to this graph, UK firms are becoming more globally strategic in their digital sectors.
From this graph, it is clear that UK’s business strategy has grown effectively in recent years with
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extreme globalization comparing with digital sectors. Digital sectors grew as global competition,
globalization and sustainable business opportunities among multinational companies.
According to Michel Porter, he suggested about the Economies prosperity for international and
multinational companies [ CITATION Mic90 \l 1033 ]. Porter briefly discussed about the
competitiveness for companies based on natural resources, investment and production
capability of goods and services for global business opportunity.

Figure: National competitive advantage

Source: http://cdn.Economiessdiscussion.net/wp-content/uploads/2015/01/clip_image00286.jpg

According to Porter, competitive advantages for firm depend on factors of production to

import, demand situations in the country, supporting industry condition and strategic structure
of firms. Labor infrastructure, situation of the home market, national supplier industry to
sustainable growth, implementation of the strategies to organizations are the main factors
according to Porter to gain national competitive advantage for global business expansion.
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Trade bloc and agreements:

International trade agreements, regional trade barriers etc. are some policies determined by
government to reduce trade threats. Regional trade blocs depend on regions and specific
geographic area. To accumulating with the uncertainty of business, trade blocs and trade
agreements are effective. There are some regional trade blocs are found for international
business and international trade agreements for both SME’s and multinational companies. They
are-

1. European Union (EU)

2. African Union (AU)
3. European Free Trade Association (EFTA)
4. Arab League (AL)

Apart from this, doing international business also affected by some other regional trade blocs
by Central American Integration System (CAIS), CARICOM etc. There are a lot of advantages of
international blocs are found for global business environment. They are given below-

Free trade Free trade will explore both the local and
global market for the firms.
Economies of scale Cost advantage strategy for firms which may
enable the sustainable growth in
international market.
Jobs More jobs opportunity will be created for
global business expansion as firms will focus
on market growth to achieve competitive
advantage.
Foreign direct investment (FDI) Foreign direct investment will expand the
business portfolios and reduce the risk which
will be effective for international market.
Rapid expansion of technology Entering into the international market will be
effective for firms to implement technology
like ERP (Enterprise Resource Planning),
business database etc.
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P4 Tariff and non-tariff barriers for international trading environment:

Tariff is basically to be paid on specific imports and exports. Tariff on SME and multinational
companies is regulated by the government and trade unions for reducing the risk of global
business competition [ CITATION Nei15 \l 1033 ] . To forecast and analyze the SME’s business
expansion in international market, tariff and trade agreements will ensure a sustainable
business practice. Non-tariff barriers are a trade barrier to restrict imports and exports of
goods. This restriction will have both positive negative impact on the economy.

Figure: Exports of goods to UK with tariff and non-tariff benefits

Source: European Union

According to the graph, UK’s most exported country is Belgium. The growth by GDP for Belgium
is almost 8% for UK’s economy. To trade, UK has some non-tariff benefits for some countries.
Trade barriers basically using for protecting the local and domestic market. SME and other local
firms will be directly affected because of extreme exported goods. So, trade barriers on tariff
can increase the trade, decrease sanction and embargos.
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Tariff barriers:
To protect local market, tariff is essential for any country. Tariff can protect domestic market
with local employment. In a closed economy, tariff can also protect the consumer and their
perceive choice. With the extreme globalization, sometimes government’s regulatory
commission faces challenges to cope up business competition with international and
multinational companies. By imposing tariff, certain industry and national security
measurement will be accomplished. Types of tariffs are-

1. Specific tariff: Tariff imposed on specific goods for both exporting and importing.
2. License: Licensing from the government and regulatory board to do business in
international market.
3. Import quotas: Quotas on various products and services depending on the volume.

Non-tariff barriers:
Non-tariff trade barriers are another way for a country to control the trade and exports from
other countries. To control Economies of scale, production and gross domestic product non-
tariff barriers are essential for both local and global business companies. Non-tariff barriers
include-

Import policy and its barriers A policy in which government impose

restraint on flow of international goods and
services. Tax on imported products is a
common import policy.
Anti-dumping Anti-dumping is a protectionists
measurements imposed by government on
foreign goods. Companies including SME and
large can export products at a lower price
from international market than home
market.
Adequate protection of intellectual Intellectual property rights of multinational

property rights and local firms will ensure a good business

practice. Intellectual property are like
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copyright, trademark, logo of a company and

government needs to evaluate adequate
protection for intellectual property rights.
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LO3 Determining exporting and importing processes:

P5 Evaluating advantages and disadvantages of exporting and importing for a
secure deal among firms:
Import and export are very common business term for any companies. For both local and
international companies, analyzing new market with potential export and import demand of
customers are essential. Bring goods and service from another country for sale is the basic idea
of import. When a country can’t efficiently produce specific goods by maintaining a good
Economies scale and an effective production that country needs to import that goods from
another country. Countries also import various raw materials cheaply in order to maintain an
efficient production. Imported products are sometime high in price which may increase the
consumer’s standard of living and lifestyle. For SME and other multinational companies,
importing will be good with an analysis of foreign market. On the other hand, send products,
goods and services to another country is known as export. For any country, exporting will
increase the GDP with Economies scale of production.

Figure: UK’s top 10 trading partners (Import and export)

Source: https://ichef.bbci.co.uk/news/624/cpsprodpb/B063/production/_98055154_eu_export_chart_640_v1-nc.png

From the above graph, we are seeing that in 2015, import partner of UK was Germany as UK
imports a bigger portion of their economy. Apart from this, USA is the big partner of UK in
terms of exporting goods and service in 2015. Germany is the second and France is the third.
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This graph demonstrate that UK and its partner countries have some advantages for importing
and exporting. Mutual collaboration in business expansion will strengthen because of effective
import and export policy among the countries.

Advantages and disadvantages of import:

Advantages of import Disadvantages of import
Extending profit margin with sales and Importing will affect negatively in domestic
revenue, import is essential. market.
Ensuring better quality of products rather If import is higher than the export, economy
that domestic and local market. will be in deficit stage.
For importing, government give various trade Excess importing will create a conflict in
policies and regulations which are beneficial domestic market value among consumers.
for firms and companies.
Import will enable the technological Due to an unstable domestic market because
advancement and digitalization. of import, unemployment rate will go high.
Low priced resourcing of products through Economy will lose foreign currency due to
global procurement of goods and services extreme import.
can be possible by importing.
Effective and efficient importing of goods and Import will discourage local manufacturing
services will give competitive advantages and companies and inflation in the economy will
secure a standard of living. increase.

Advantages and disadvantages of export:

Advantages of export Disadvantages of export
Production will be maximized. Natural resources can be depleted because
of extreme exporting for manufacturing
firms.
Significantly expanding markets with market Exporting bad quality products will decrease
share and market growth. the reputation of the firm as well as the
country.
Global market can be easily analyzed and Exporting low value products will decrease
foreign exchange can be easily earned. the foreign exchange for a country.
Exporting goods will create employment Transportation cost maximized with
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opportunity for local people. exporting for firms.

GDP and market sustainability can be Exporting lead to different tariff and non-
developed. tariff barriers which will be difficult for firms
to gain competitive advantages.
Cost for foreign market entry can be Companies and firms may be dependent on
minimized with effective production. foreign third party for exported product
distribution which increases cost and time.

For securing business deal by importing and exporting, firms should follow some strategies.
They are given below-

1. Companies should identify their own strengths depending on the market value.
2. Before negotiating for export and import, clear contract should be developed between
both the parties about payment and product distribution in foreign market.
3. Using international commercial terms to reduce business risk.
4. Good relationship with suppliers and manufacturers for effective international trade.

P6 Explaining the difference between merchandise and service export and import:
For selling goods and products in foreign markets, merchandising is a good concept.
Merchandising is a process of selling and buying goods in retail locations [ CITATION Pen14 \l
1033 ]. SME and multinational companies effectively and efficiently doing merchandising in

various retail outlet which increase sales and productivity of goods. Merchandisers can give a
sample of a product and based on that firms can create those products according to the local
demand. Merchandising with proactive business strategy will expand product category for a
firm in a specific market to ensure the targeted needs of consumers. Marketing division of a
company should integrate all the functional department effectively for merchandising campaign
in exporting and importing. Tangible goods are exported through merchandisers. Export
merchandising is basically a process for offering retail goods and products in consumer market.
Large companies including SMEs maintain an integrated functional support to find a way for
doing better in retail market through export merchandising. Export merchandising is effective
and efficient for operating business in home country. Merchandisers and all marketing
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expertise of a company should accumulate with the change of global business practices and
propose an export which can find a niche market. Apart from this, implementing retail outlets
for firms in foreign countries will be costly and merchandising is expensive in a sense. For SME
and other small companies, internet will help to provide better information about export
merchandising. Retail website, retail social sites will help a lot for companies in export
merchandising. This strategy will reduce the cost of shipping and supply infrastructure for
companies to enter into the new market through export merchandising.

PDF brochure (LO3):

24
 25

LO4 Evaluating ways how SMEs can enter into the international
market:
P7 Demonstrating different ways of entering international market for SMEs:
There are a lot of business expansion strategy for SME to tap into the international market. For
effectiveness of the entry strategy, it depends on several factors. International market is
diversified competitive. To reduce the risk and competition, the factors are discussed below-

1. Assessing market:

Market research with effective expansion strategy can accumulate with business risk for SMEs.
For entering into the new market in abroad, SMEs should do several market research. The
research will include market share, potential growth rate, market demand, market competition,
trade barriers, political risk, climate, geographical location and the situation of potential
 26

suppliers. Though market research (Qualitative) is expensive, it is better to explore the

opportunities and threats before entering into the foreign market for Small Medium
Enterprises.

2. Financial support and investment:

SMEs need financial investment for tapping into the new foreign market. For a sustainable
growth and competitive advantage, SME needs to act proactively with product and service
quality in the foreign market. Some financial factors for SMEs are government intervention for
taking loans, business support, funding etc.

3. Effective distribution channel:

SMEs should focus more on the retail distribution channel. For this, exploring effective and
efficient distribution channel needs market analysis. SME should analysis the foreign market,
assess all potential dealer and distributor efficiently to make a strong channel power in foreign
country.

Apart from this, SMEs should-

1. Licensing
2. Franchising
3. Joint-venture

Licensing and franchising for SMEs are effective. Franchising and licensing means someone to
operate business activities with brand logo and intellectual property rights. Overall business
activities and operating support will be same. Joint-venture is a strategic alliances. Joint-venture
is made with two or more parties where both parties are agreed to do business to share
market, intellectual property rights etc. SMEs can adopt any strategic decision for entering into
an international market.
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P8 Comparing various methods for SMEs to enter into the new international
market with pros and cons of each methods:
SMEs are very much proactive now a days for sustaining in the competitive market in UK. SMEs
can enter into market with licensing, franchising, joint-venture, merger and acquisition. Each
form has both pros and cons. According to SMEs, pros and cons of various methods for tapping
in international market are given below-

Factors Pros Cons

Licensing and Better talent with market Controlling over managers

franchising agreements potential will be accessed. and employees is tough as

Capital can be easily franchising and licensing is an
expanded because franchisee independent business.
will pay for supply chain of Because of the different
each outlets. For this, growth goals, it will create conflict.
risk in foreign market will be Apart from this, community
minimized. will be weaker for business.
So, innovation challenges will
increase.
Joint-venture Companies will be notified Joint-venture is a timely
for new business expansion. strategic business alliances. It
To retain the market, is also expensive. To create a
assessing new geographic sustainable joint-venture,
location with technological SMEs need a brand value in
knowledge can be a bigger the foreign market which is
opportunities for SME firms. difficult. Apart from this, in a
Joint-venture is flexible and joint-venture business
risk can shared. So, it will objectives are not clear thus
minimize the business risk. partners do not allow for
business support and legal
advice.
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PDF brochure (LO4):

29
 30

Conclusion:
SMEs can enter into the international market with potential trade agreements with effective
market analysis. SMEs are facing unique challenges in local business environment. For global
business expansion, SMEs should be more proactive and need to evaluate the global business
environment. By successfully adopting technological advancement, customer’s preference,
SMEs can gain competitive advantage for sustainable business practices in intentional markets.

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Hudson.

Michel Porter. (1990). Comparison Between Interntaional Trade and Agreements among
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Neil & Jackson. (2015). International Business and Reserach. Comparative Analysis of
Development of SMEs, 5(12), 103-104. Retrieved April 12, 2019, from
https://www.researchgate.net/publication/266594413_Comparative_analysis_of_devel
opment_of_SMEs_in_developed_and_developing_countries

Peng. M. (2014). Global Business Strategy and Market Expansion (15 ed., Vol. 5). Wales:
Prientice and Hill.

Redmond & Richardson. (2011). Global Business Environment (12 ed., Vol. 5). Wales: Hudson.

Rhodes, J.K. (2014). Principles of Management (15 ed., Vol. 5). Boston: Pearson.

Richards. (2009). Journal of Management and International Business. Small Medium Enterprise:
A New Source for Job Creation in UK, 12-14. Retrieved April 8, 2019, from
https://www.oecd.org/cfe/smes/2090740.pdf

Shelly & Broklyn. (2010). Journal of Policy Brief. Small Medium Sized Enterprises: Local Strength,
Global Reach, 2-3. Retrieved April 8, 2019, from
http://www.oecd.org/cfe/leed/1918307.pdf
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SME Business Numbers in UK. (2019, April 8). Retrieved from Cloud Account:
https://www.cloudaccountant.co.uk/blog/2017/12/sme-business-numbers-skyrocket

Steffan Linder. (2013). International Trade Agreements (12 ed., Vol. 5). Boston: Pearson.

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