Business Environment Analysis Report. Business & Marketing Essay

Business Environment Analysis Report
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Executive Summary
This report proposes a move into the UK by Incitec Pivot, an Australian-based multinational firm dealing with the manufacturing and supply of industrial explosives, chemicals, and fertiliser products. The UK has an attractive business environment and the company has a limited presence in Europe. The approximately 65 million people in the UK who primarily speak English will provide market for the company’s products. Other key factors that favour the move include low corporate tax, economic freedom, large economy, and technological readiness. Brexit negotiations, which are still ongoing, offer the biggest challenge for the company’s move to the country. Infrastructure is also a key concern. This report recommends that the company enters the country through foreign direct investment (FDI). This report also recommends that the move into the country should take place after the conclusions of Brexit negations in 2019.
Introduction
Incitec Pivot is an Australian-based multinational firm that manufactures and supplies industrial explosives, chemicals, and fertiliser products (Incitec Pivot, 2018). Its core nitrogen capability is instrumental to its performance both domestically and in the international market. The company supplies industrial supplies as well as blasting services to construction, mining, seismic, and quarrying industries. It is Australia’s largest supplier of fertilisers used in farming industries such as dairy, sugar, pasture, cotton, horticulture, and grain. Incitec Pivot currently owns and operates 20 plants located in Australia, the US, Mexico, Turkey, Indonesia, and Canada in addition to joint ventures in China, Malaysia, South Africa and Australia (Incitec Pivot, 2018). The target country, the UK, is located in Europe and is one of the major economies of the world. This report proposes that Incitec Pivot begins operations in the country. The report begins by explaining the rationale for the selection of the UK as a target country and goes on to analyse the key variables in its business environment. The report also offers an assessment of UK’s attractiveness to Incitec Pivot and provides recommendations for doing business in the country.
Rationale for selection of the UK
There are a number of reasons for selecting the UK as a possible business destination for Incitec Pivot. First, Incitec Pivot has limited operations in Europe with Turkey being the only country in which it operates in. By doing business in the UK, Incitec Pivot will have an easy access to other European countries like Germany, France, Netherlands, Belgium, Russia, and Italy. The company has already cemented its presence in North and South America and Asia and now it is time it focuses on Europe.
Second, the UK was ranked first by Forbes as the best country for business in 2018 (Badenhausen, 2017). Key factors considered in the rankings include taxes, property rights, freedom, corruption, and investor protection. Despite its citizens voting to leave the EU and the subsequent prediction of an economic collapse, the country is still the best for business. Other companies such as Apple and Wells Fargo have made big moves into the country and this signifies a belief in the economy. Therefore, the company being ranked first by Forbes, one of the world’s renowned magazines, clearly shows there is potential in the economy. This is thus another reason for selecting the UK as the company’s possible destination.
Analysis of the business environment
Social and cultural environment
The UK has a population of approximately 65 million which is expected to grow to above 70 million by 2030 (Office for National Statistics, 2017). It is evident that the country’s population is growing. The country’s life expectancy is also rising. This population will not only offer a market for the products of the company, but it will also provide the necessary human resources to advance its strategies. The main language is English and Christianity is the main religion. Given that the primary language in Australia is English, it is deducible that the move to the UK will not be affected significantly by language barrier. However, as informed by Grotts (2014), there are many British accents in the UK which indicate education, class, origin. This is one of the cultural factors that Incitec Pivot has to consider when beginning operations in the country. Other key cultural factors that are worth consideration by the company include communication styles and timekeeping.
In regards to communication styles, the Brits are polite and formal (Grotts, 2014). In addition, maintaining a good posture and communicating using facts are necessary. According to TMF Group, (n.d.), the Brits come across as distant and reserved at first and it can take a considerable amount of time to get to the key elements of meetings. While the Brits consider time as an important factor, decision-making can take a long time since there many people and bureaucracy involved (TMF Group, n.d.). It is evident that there exist cultural barriers that the company will experience in its move into the country. Understanding them prior to the move is thus critical for a successful entry.
Political and legal environment
The political and legal environment perhaps presents the biggest challenge for Incitec Pivot’s move into the UK. The country has a stable political environment that will be key to the company’s move. While the Conservative Party lost its majority in parliament in 2017, it still remained in power as Democratic Unionist Party from Northern Ireland supported it (Heritage, 2018). The country is characterised by an accountable democracy where there is a high security of contracts and property rights. There is thus an opportunity for Incitec Pivot to acquire and own property in the country easily given there is a high protection by the law. According to Heritage (2018), there is also an effective protection of intellectual property. The judiciary in the country is independent, efficient, and impartial. Such factors reduce the challenges the company may have to face when it starts operations in the country.
A major political factor that will influence Incitec Pivot’s move into the UK is Brexit. Given that the country voted to leave the EU in 2016, companies already in the country, as well as those planning to enter must monitor the regulatory and legal challenges that accompany the move. At the moment, the negotiations of leaving the EU are still ongoing. Leaving the EU has significant implications for UK’s business environment. The country may have to renegotiate investment and trade deals with third parties including Australia since leaving the EU could mean expiry of treaties for the UK. However, UK leaving the EU should not be a big concern for the company since it could also access to newer opportunities. While the country is leaving the UK, it is negotiating deals with other potential partners. In addition, the country will still find a way of trading with other countries including EU member states. Therefore, irrespective of the outcome of the Brexit negotiations, Incitec Pivot would still have access to the European market. However, according to TMF Group (n.d.), if the trading relationships with EU in the future are characterised by barriers, the country’s economy could struggle keeping up with the growth trends in the region.
Another impact of Brexit for a company planning to enter the UK is potential tax-related aspects. According to KPMG (2017), some of the tax benefits applicable to EU countries may not be available anymore for firms in the UK. With different tax regulations in the UK and EU, there could be a rise in administrative costs.
Despite Brexit, the UK still scores highly in economic freedom. The country is ranked fourth in Europe with a score of 78 ahead of Estonia, Ireland, and Switzerland (Heritage, 2018). Generally, foreign investment in the country is not significantly affected by the policies of the government. In fact, under the law, domestic and foreign investors receive equal treatment. Therefore, it is evident that the company is still attractive to foreign investors.
Economic environment
The UK economy is one of the biggest in the world. It is the sixth largest globally and in 2017, it grew by 1.7% (E...