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Unit 5 assignment 2: International business:
Management Accounting: Costing (North Warwickshire & South Leicestershire College)

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Unit 5 Assignment 2: External factors and cultural differences:
The business I have chosen to use in this report is Morrisons, my reasons for doing so is
because they are one of the largest supermarkets within the UK and operate very successfully
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P5:Explain the external factors that influence a selected business considering
trading internationally:
P- Two political reasons that Morrisons would have to consider include, trade
tariffs and tax policies
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Especially
because Morrisons tries to offer the best, lowest price to its customers
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This is the same for tax policies, this can
either benefit the business as it will make it prosper and lead to increased amount
of trading in various other countries; or it will set Morrison’s back, especially its
employees, as it could cause them to deflate workers wages in order to redeem a
higher profit return for their items
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It also means
that if a country has a weak exchange rate that their exports are higher, however
it makes imports of goods very expensive
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Floating exchange rates can also act as a protection
from external shocks, for example, the price of oils, therefore this should help
reduce the negative impact on external products
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However, when
the interest rates are increased, it means that borrowing money comes at a higher
price of return
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Unit 5 Assignment 2: External factors and cultural differences:
S- If Morrison’s starting selling products internationally a big influence they would
have to consider is culture, this could be both a positive and negative to the
business because on one hand it could open up many different paths for
Morrisons allowing them to sell more cultured products that are specific to the
country
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An opportunity for Morrisons is seasonal buying,
as certain crops can only be grown at certain times of the year, Morrisons could
find suppliers and offer products that aren't available in certain countries due to
the season and buy them
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This is a good thing for a business as it reduces costs significantly in the
long run as next to no staff are needed, and productivity is also improved as more
stock can be turned over and sold to customers internationally
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Secondly, Morrison’s could
easily use the impact of new media to set up an international business as social
media has allowed people to gain 24 hour access to items online
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On the other
hand, as social media is so easily accessible, if anything were to hiccup during
Morrison’s international plans for trade people could start having a negative
opinion on Morrisons
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L- legal reasons that would need to be taken into account before Morrisons
considered going international are all the different labour laws and trade barriers
for certain countries as not everywhere has the same rules and legislations as the
UK
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Morrisons would also have to look into
all the various labour laws before they decided to branch out internationally as
certain countries will have completely different laws to us in the UK
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Whereas, the downside of labour laws is that the
business will still have to pay employees even if they aren't working, for instance if
someone took maternity leave, as well as having a temporary replacement, which
will be expensive for the business
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The downside of this is that the cost of produce could be quite costly for
Morrisons to then package and sell on to its customers compared to the UK
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Three factors that can have an influence on the business would include
online shopping, this could help reduce overhead costs if Morrisons wished to just
launch an online service instead of having physical stores internationally
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Lastly, promotional marketing for Morrisons would be less costly for the business
but also more widely viewed by customers as they could promote themselves on
social media platforms such as instagram and facebook
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For example, the three main ones include; cash in advance,
international credit card and international bank transfer
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This
enables businesses to trade internationally as it means no money will be
outstanding for products that consumers have purchased, also means that the
business doesn’t have to chase the money that hasn’t been paid, as this can be
very time consuming
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Finally, international bank transfer allows you to
freely move money into someone else's account via a banking app or online, this
is usually free of charge, this can be done easily and at any given time
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M3: Carry out a situational analysis on two countries that Morrisons may
consider to trade within:
If Morrisons was to trade within two different countries, I would choose
Switzerland and the Netherlands to begin with
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Secondly they are both within Europe, which is close to the UK
so this could be a good way of opening trading links
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The Netherlands also has
outstanding trade hubs, this would be a significant benefit for Morrison’s to trade
within as their products could be delivered efficiently through the country’s
amazing transport links
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This
could be an issue as there will not be a lot of local resources, therefore if
Morrison’s wished to open up stores they might have to import a lot of their stock
if they cant produce it locally in the Netherlands
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Secondly, as the capital is Amsterdam, the Netherlands has a huge tourist
customer
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T- Although Brexit could benefit trading within the Netherlands, it could also have
a major threat as currently the Netherlands exports 10% of products to the UK,
therefore when Brexit occurs it could have effects on tax and export/import rates
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SWOT analysis on Switzerland:
S- A similar strength of Switzerland is its good distribution systems within the
country, which will ensure that Morrison’s deliveries throughout the country
would be successful and efficient
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W- Unfortunately, Switzerland is completely land-locked, therefore exporting and
importing goods may take longer to arrive, and as there is no access to sea it can
make distribution of items a lot more expensive
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If Morrisons researched and produced ways of providing that to consumers
at their low prices, they would be able to supply the demand and increase their
revenues abroad
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Unit 5 Assignment 2: External factors and cultural differences:
Porter's 5 forces on the Netherlands:
Threat of new entrants: This sits quite low as Netherlands mainly exports goods
rather than people setting up business up there, so Morrisons already being
established shouldn’t struggle if they wish to make moves to the Netherlands
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Therefore, there should be little to no risk of substitutes
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Bargaining power of suppliers: Is quite high as there are many different suppliers
to choose from within the Netherlands, but also the prices are always fluctuating
due to continuous competition, so suppliers are trying to provide the best price
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Porter’s five forces for Switzerland:
Threat of new entrants: The threat may be high as the cost of production for new
entrants is fairly high in Switzerland, so Morrison’s may struggle to get on their
feet unless they are producing large quantities, which would give them a price
advantage
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Bargaining power of suppliers: Bargaining the price of suppliers might be quite low
because Switzerland is land-locked, therefore because products take so long to
import and export, the price of goods might be a bit higher than other places
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Unit 5 Assignment 2: External factors and cultural differences:
Threat of substitutes: Is fairly high as supermarkets are in high demand but also
other stores such as Aldi and Lidl have been the biggest competition and
substitutes over the last few years because they have managed to provide the
lowest prices possible
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Currently, there are 6,500 spoken languages, this means that Morrison's need to
consider all the different languages and have people trained in different
departments of the business to speak the basic languages
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By taking this into
consideration it will help build international teams across different countries,
ensuring that little to no mistakes are made via the clear communication systems
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For instance,
if Morrisons started selling products internationally they would have to do
research about the country before selling products there to get an understanding
of what customers want to buy, as culture and religion will be the deciding factor
about which products sell well or not because certain products that are great
sellers within the United Kingdom may not be the best sellers within certain
countries such as China or Africa
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For instance, if
Morrisons were to set up in South-Asian places, they would have to take into
consideration that certain religions do not eat certain meat
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Unit 5 Assignment 2: External factors and cultural differences:
The social structure of a country is probably one of the most important factors as
you have to be producing and providing the correct products for the people that
are in that country
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So, vice versa, you have
to select the correct products and price them correctly according to the social
structure of the population you wish to sell in
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Education systems also play a large part of cultural differences as different
countries have varying education systems, for example children only start proper
school at the age of 7 in Switzerland; whereas in the UK we start school as young
as 5
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This can
cause problems as businesses may have to upskill their workers which consumes a
lot of time, but also a lot of money to ensure the sufficient training has been
given
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For instance, the equality
between men and women, some people believe that the man should go to work
and bring in the income; meanwhile the woman stays at home and provides for
the children
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M4: Analyse how cultural differences affect international businesses:
International business crosses lots of borders and countries, so it does come with
its challenges
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So, when conducting
international business in various different countries the first factor that needs to
be considered is communication
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By
doing this, operating communications from country to country should be a lot
simpler and time efficient
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Therefore, this may lead to slight
delays in responses when operating in countries that have large time differences
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As discussed previously, some religions
have certain beliefs meaning they will not purchase certain items, such as muslims
will not eat beef
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Otherwise, this will be a waste of money for the business because if certain
products do not get sold within a time frame, they will go straight to the bin;
causing not only loss of profits but also it can cause mass waste
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Otherwise, this can have a huge impact on the businesses brand
image, as if someone takes something offensively, people will share it immediately
on social media causing it to spread like a wildfire
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Next, the products and services that a business provides will depend on the social
structure of a country
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Therefore this
allows Morrisons to set up in either LICs or HICs
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This can be a drawback
for businesses setting up in certain countries as people may not have received
good quality education, therefore they aren’t as experienced
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This can make it
harder for businesses to recruit people for more skilled jobs, as some people have
not been as fortunate to receive a good education
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Also, making
sure that the business is conducting the correct procedures to provide gender
equality to staff; in this instance, Morrisons are focusing on offering more female
roles within the business, offering the same rate of pay
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D3: Evaluate the impact of cultural differences on international business:
The overall impact on international business regarding cultural differences do tend
to have a negative impact or they need to be processed and thought about with
caution
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This has recently happened to one of Morrisons
competitors, Sainsbury’s supermarket, which is a traditionally british supermarket
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This has had a huge impact on Sainsbury’s and angered lots of
people, causing them to boycott Sainsbury’s, losing a fair amount of customers
and also causing a shade upon their business
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By extending the business further to different countries the main barriers are the
different languages but also time differences
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However, there are things that can be put in place to help reduce the difficulty of

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Unit 5 Assignment 2: External factors and cultural differences:
communications such as Morrisons offering language training to employees, by
using visuals, this can make a huge difference when trying to explain how a job
should be carried out
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Next, time differences varying in certain
countries can essentially slow down the process of messages and orders being
received, which isn’t ideal when trying to have operations all running the same
across the board
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But also due to technology, it allows video meetings and
messages to be sent at any time of day, to then be received and acknowledged at
any available time
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If Morrisons started operating internationally,
they would research that country and identify what the consumers will want to
buy in the shops, and then they can source and sell the products that people
want
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The reason for doing this is to help satisfy customers in particular
countries by providing their traditional specialties, it also helps open up more
options for innovation on products as Morrisons can be different to other
supermarkets by providing different but affordable food
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The reason for this is because it needs to
be targeting the correct people, therefore with Morrisons mission statement
being to provide affordable food for everyone, they would be able to open up in
lower income countries and be successful as customers have enough money to
afford it
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Ultimately, international business can be quite challenging to conduct due to all
the reasons that have been discussed, as any bad moves that are made by a

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Unit 5 Assignment 2: External factors and cultural differences:
business can either offend people or it can be something they have zero interest
in
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D2:Recommend one country a selected business could target for international
trade, justifying your decision:
After researching and considering both Switzerland and the Netherlands, I have
come to the conclusion that the best country that Morrisons could target for
international trade would be the Netherlands
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They also
ranked 6th for the best technological infrastructure across the world
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Meanwhile, another big factor that contributed to my final decision is the fact that
the Netherlands has amazing sea-borne trade as they are not land-locked, unlike
Switzerland
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Especially because they pride themselves on providing
fresh, quality, cheap food for everyone to enjoy
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This would be an advantage as it helps reduce transportation
costs but also allow larger amounts of goods to be shipped and sold in different
countries
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This opens up opportunities for Morrisons as it is a
recognisable supermarket store within the UK, therefore British tourists would be
more inclined to shop with Morrisons opposed to shopping at other stores,
especially if they do not offer the same affordable pricing that Morrisons will offer
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This will help increase Morrisons profit margins
by opening up more opportunity for sales to be made in a different country
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This will make communications between British stores
and stores in the Netherlands more efficient and little to no mistakes being made
due to miscommunications
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Also, as Morrisons is already an
established business, that has an excellent brand image; people will be inclined to
shop and experience what Morrisons may be like compared to other supermarket
stores within the Netherlands
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Especially as they supply all their own raw
materials, such as crops from their own farms which they then turn into products
to sell
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Therefore, this
provides Morrisons with a great opportunity to gain new profits and customers
into the business

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