The Regency Carpet Manufacturing Limited

Global Business in Context
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Global Business in Context
Small Medium Enterprises (SMEs) are small local businesses that usually have under 250 employees. In the UK, a growing number of small businesses have contributed to the country’s economic growth, and a good number of these businesses are intent on international expansion. Regency Carpet Manufacturing Limited is one such SME, a small manufacturing company in the United Kingdom that has enjoyed massive success locally and now seeks to expand its business to the international market. For this expansion to be achieved, there is no doubt that local SMEs need the necessary support from the government and some favorable Foreign Direct Investment (FDI) issues in other countries to propel the local industries to the global stage.
Company Overview
The Regency Carpet Manufacturing Limited is an SME located in the Bangor region in the UK. The company is a private business that was established in the year 1994, and it majorly deals with the manufacturing of carpets and rugs that are tufted or woven. Currently, the CEO of the company is Stephen Large, and the company’s mission is to meet the expectations of customers all over the world while focusing on developing and improving the quality of its products. The company has about 107 employees and generates approximately $57.66 million (Dun and Bradstreet, 2022). From this, it is clear that the company has enjoyed some success in the local market, and therefore, it would make sense for it to expand to the world stage. With this in mind, China would be the most appropriate country for Regency Carpet Manufacturing Ltd. to consider in its expansion. China has encouraged more FDI flows through its favorable laws, policies, and infrastructure, making it the best option for the Regency Carpet manufacturing company.
FDI Issues that Make the Decision to Expand
In the effort to expand to the international market, several Foreign Direct Investment (FDI) issues in China are the most appropriate country for an SME, such as Regency Carpet Manufacturing Limited, which is considering expanding internationally. One FDI issue in China that makes it a favorable option is the large market size that would offer an opportunity for expansion for the Regency Carpet manufacturing company. Accordingly, in their research, Faheem et al. (2011) noted that China has a large market that has been important in ensuring profitable investments for foreign businesses in the country. With the large market size, foreign investors are also provided with more significant investment opportunities, contributing to more profits. Profitable investments can enable small-medium enterprises to grow. Considering this, there is no doubt that the FDI issue of a readily available market and growth prospects for small foreign businesses will favor the manufacturing company’s decision to expand.
Another important FDI available in China is the relatively low-cost labor. Generally, low-cost labor in China is advantageous to a small manufacturing company such as Regency Carpet Manufacturing Limited since it would mean the business is spending less on paying its employees. Even though the cost of Chinese labor has notably increased over the recent years, the overall cost still remains relatively cheaper compared to other developed countries (Plekhanov, 2017). The availability of cheap labor will undoubtedly benefit a small company intending to expand internationally since, with reduced wages and benefits for the employees, the business will enjoy increased profits. This FDI issue of cheap labor implies that Regency Carpet Manufacturing Limited would have increased chances of success by expanding its operations to the global market in China, thereby justifying the country’s suitability for expansion.
The other FDI issue that supports the decision to expand SMEs in China is the availability of infrastructure in the country. As a country, China has invested heavily in its physical, financial, and technological infrastructure. Infrastructure is a crucial element necessary for the growth of any business. In essence, China has well-developed bridges, highways, and roads that make it possible for employees and goods to move from one region of the country to another (Bloomenthal, 2022). The availability of proper transportation means and technological advancements has given it a competitive advantage to China and made it more attractive to foreign investors. This is especially important since small foreign companies expanding in this country are assured of increased profits and earning heavy returns because of the developed infrastructure. Financially, the Chinese government also promotes small foreign businesses by providing grants and loans that help businesses succeed faster. Considering this, there is no doubt that Regency Carpet Manufacturing Limited in the UK would benefit since it would be easy for its products to reach its customers in all areas. This will, in turn, translate to increased sales and profits.
Apart from the mentioned, the other FDI issue that supports the decision to expand in China is that the country has invested majorly in advertising, which is a significant aspect when it comes to the growth of small and medium businesses. According to Thomala (2021), China has the second-largest advertising market in the world, just after the United States. In addition, various channels are used for advertisement, including broadcasting, traditional printing, Internet ads, and outdoor advertising. Ideally, government spending on advertising has increased recently, particularly because of the rapid advancements in technology and a population that highly uses mobile phones (Thomala, 2021). Considering this, it makes sense for a small manufacturing company such as Regency Carpet Manufacturing Ltd. to invest in China to enjoy the various advertising channels there. For example, online advertisements increase sales benefits since potential customers can be reached easily and be informed about the company’s services, brand, and products. Having an online presence in a foreign country would give Regency Carpet Manufacturing Limited a competitive advantage, thereby increasing sales and profits.
The low taxes in China also make the country a suitable choice for the Regency Carpet Manufacturing Limited. Accordingly, China has been known to offer reduced tax rates and notably reduced value-added tax (VAT) to foreign investors to encourage foreign investment ...