IntroductionThere are a number of countries that many organizations have been opting to do business in. The reasons are mainly based on the ease at which countries are willing to reduce their barriers as a way to invite and attract new international investors. A company in the United States is more willing to trade in China, the United Kingdom and Australia. China is currently the cheapest nation to produce in. The government in recent years has been devaluing their currency as a mode to invite more production in their nation. Currently United Kingdom is the center of financial institutions which is important for an organization like our case study. Expanding in Australia requires more capital, however they are more suitable to expand in.
Trade barriers are government imposed barriers that are aimed at restricting the inflow of international organizations. The basic idea is to protect local companies from competition from giant organizations. Tariffs are the most common form of barriers where by the government increases tax on imports and creates specified trade barriers for an organization that wants to venture in the country.
In countries like the United Kingdom, the government offers subsidies to local companies. This makes it cheaper for them to produce and hence have a bigger trade and profit margin. With such lower domestic prices, entry in the country may be troublesome because the company cannot compete with the local companies in terms of pricing.
All barriers work on the same principle where there is an imposition of a given cost on trade. These costs raise the prices of products. While economists argue that the trade barriers reduce economic efficiency, they can be justified on the need to protect the local business. In theory, United States and the United Kingdom have a free trade area under a number of trade agreements. (Author, 2016)..,
Impact of trade barriers
Trade barriers have more effect on developing nations. Rich nations normally set the rules, they are able to make the policies. however, this fact does not apply in our case. The United Kingdom would be the best place for the company to invest in. The bilateral trade agreements currently in place are the determining factors. For the bigger part, they have reduced the trade barriers that exist between the two countries. They have the ability to make entry in to the country easier and cheaper.
Setting up a business in the county will be like expanding to a different state. Major supporting factors include the vast number of skilled labor, lower minimum wages and the existing political environment. For a company like XYZ there are challenges that are going to be faced starting with the fact that London is one of the most expensive places in the world. The property prices, transport cost and other factors of production are very costly. Furthermore, local suppliers and developing nations create a strong competition. On the brighter side, such markets have the potential to offer higher prices for customized products and thus having a larger profit margin.
Factors of manufacturing
The United Kingdom has a devolved administration which creates different policies than those in United States. England, Scotland and Wales all have differentiated policies that will impact the way business will be conducted. The ability of the regions to have fiscal autonomy however can be an advantage in entry (Gibson & Thirlwall, 2016).
There have been major cuts in government spending which means that subsidies for manufacturing have gone down and XYZ can comfortably compete with local companies. Unlike China where we can manufacture but have to incur transport cost to the market, United Kingdom is a perfect market in which both production agents and markets are readily available.
There is low consumer confidence in the country especially with the uncertainty of the impact of Brexit. The government commitment to the reduction of the budget deficit is driving the market away from equilibrium. Producing in the country will offer the market new products that are cheaper, differentiated and more likely to do well than in any other part of the world. Coupled with the help of United States Commercial Services Department of Commerce, we are in a position to cheaply produce and sell in more them two hundred nations across the globe (Sampson, 2017).
The best move is to demonstrate a clearly defined value position on the manufactured goods. These aspects create a competitive advantage that the UK market has been missing in recent times. By paying attention to what is a subtle cultural difference, research shows that there is a need to adjust the current marketing strategy that is used in United States. After meeting production, the most important aspect is, choosing an established local distributor who is flexible enough and understands the market.
Prospective partners will be identified as a way to solidify presence and create loyalty to consumers that are attracted to locally produced products. United Kingdom like the European Union has non-tariff trades that cover production in agricultural products, foods, animals, plants, chemicals, firearms and medicine. It means that clothes are not covered and thus we must embrace the impact of certain tariffs. Further, Europe is the center of fashion in the world today. The clothing industry has been doing particularly well which means that license requirements will be easier to get. Though the quota system for the European Union does not exist, the opportunity will allow the company to expand further to the rest of Europe.
Market entry will also be done through purchase of existing companies. At this point, no single entry strategy is the best for the organization. The plan has been set for two years in which it will be adjusted according to the plans and environmental changes. A feasibility test will be conducted before mass production to determine the necessary adjustments. Further, XYZ has been exporting to European markets for years and thus the products are already known and demand is going up. Partnership however, as mentioned above is necessary for the first entry. The first partnership strategy will be based on marketing where the company will focus on a co-marketing strategy with local partners that have been marketing the products exported in the past.
Australian markets and china are good for business. The cost of production is relatively lower in china while the fashion industry and the diversity of the markets can allow for expansion. The United Kingdom however presents a strategic position because the organization has already been exporting to the market. Sales reports indicate a growing demand of the products, and thus production of clothes in the country not only reduces the hustle of starting fresh but also provides a ready market.
Gibson, H. D., & Thirlwall, A. P. (2016). Balance-of-payments theory and the United Kingdom experience. Springer.
Sampson, T. (2017). Brexit: The economics of international disintegration. Journal of Economic Perspectives, 31(4), 163-84.
Autor, D. H., Dorn, D., & Hanson, G. H. (2016). The china shock: Learning from labor-market adjustment to large changes in trade. Annual Review of Economics, 8, 205-240.