International trade is one of the important aspects contributing towards exchange of capital, goods and services across the international borders. Mainly, this type of trade leads to rise in the economy of a nation through cost or demand and supply directly affected by the global events. This tends to directly impact upon the performance of a company which operates its business in another country. Along with this, it includes the process of buying and selling of products and services in different countries so as to facilitate easier flow of goods and capital from one place to another and foster the growth of world economies (International Trade,2017). In simple words, this can be referred to as importing and exporting. It also accounts for a significant part of GDP of a nation. GDP refers to the sum total of market value of the products and services manufactured within a specific time frame, which is usually ascertained to be annual. With the assistance of this, an organisation can easily conduct their activities as well as operations within foreign market. This helps the firm to easily gain competitive advantage in global trade.
Over a period of last few years, international trade has seen a rapid growth. There are various factors which are believed by authors and academicians to significantly contribute towards it. These comprise of adoption of latest tools and technologies and globalisation of markets in order to fulfil needs and demands of consumers and to make sure that multinational corporation are able to carry out business growth and expansion. Further, the emergence of global organisations like GATT, WTO, World Bank and other such institutions ensure the facilitation of free trade among the countries and assist in faster growth of international trade. These entities are responsible for liberalising the trade barriers and protection barriers which hinder the inter-country trade.
Present report is based on Marks and Spencer which is a famous British multinational retail company specialising in selling of clothing, home products and luxury food products to customers. Marks and Spencer is planning to expand their business in Japan with the purpose of targeting new market. Being a developed and market oriented economy, company has selected Japan as the target market. This has been done to easily increase their market share and also attain success in near future. This report includes background of company and the economy where they intend to expand their business. Along with this, analysis of key trade issues is mentioned in project which would be faced by the company in the specific country.
Background Information Of Company And Economy
Background to Marks and Spencer
Marks and Spencer is a multinational retailer company situated within London which specialises in segments such as clothing, luxury food products and home products. This company was found by Michael Marks and Thomas Spencer in 1884 in Leeds. This enterprise has around 979 stores in UK inclusive of 615 which only sell food items to customers. The main focus of this organisation is to expand their business and increase its share in marketplace with the target of attaining success by providing best quality products and services. In context of Marks and Spencer, the company intends to expand their business in Japan with the aim of establishing their competitive brand image and position in the minds of customers prevailing within this nation.
Marks and Spencer has a vast variety of goods within every outlet that assists the customers in choosing the best products as per their needs, demands and accords. For instance: In vegetable category, M&S initiated selling of fruits and vegetables around 40 years back. The belief of company had always been to maintain healthy relationships with farmers in order to procure fresh products from them. At present, Marks & Spencer has contacts with over 1200 suppliers to provide 400 different varieties of goods as well as 500 types of vegetables and fruits.
Background to Japan
Japan is a highly developed economy which is largely market-oriented and supports the growth of businesses which are operating and functioning as an important part of this nation. The main reason behind selection of this country for expanding the operations of Marks & Spencer is that its GDP and political factors are effective which may and facilitate the provision of efficient support to business organisations to formulate expansion of their business activities.
Business environment refers to the combination of internal and external factors which directly impact upon the overall performance of a company. In this regard, business environment consists of political, economical and social factors which together have an immense influence upon the operations as well as functioning of business. In this regard, Japan is the fourth largest nation by purchasing the power parity. This is the main reason behind Marks and Spencer selecting this nation to expand their existing business in order to increase their current global market share (Dai, Maksimov, Gilbert and Fernhaber, 2014).
Japan is a constitutional monarchy which has limited political affairs. Also, this country is in close relationship with US. Along with this, Japan also put a lots of efforts with the purpose of building as well as maintaining better relationship with other countries such as UK, France, Australia (Enloe, 2014). As the political restrictions within this nation is low, Marks and Spencer can easily accomplishing their positive brand image. Besides this, Japanese economy is immensely strong which has a positive impact upon the companies that expand their business in this country. Japan is the third largest economy in the world with a total in terms of GDP of approx $4.9 trillion. It has mixed economic system which provide lucrative opportunities for the company to improve their market image. In this regard, Marks and Spencer can easily expand their business in Japan to enhance their market share by fulfilling the needs and demands of consumers. Furthermore, the current Japan corporate tax rate is approx 30.86% but recently government has approved a plan for reducing the tax rate to 20% for companies. This tends to provide opportunity to Marks and Spencer to establish their image at this marketplace.
Japan is 10th ranked populated country in the world (Haggard and Kaufman, 2018). Along with this, number of people in Japan prefer Japanese company. It negatively impacts on foreign companies because it make training process more difficult. This is the main reason that many foreign companies have failed in establishing their business in Japan (Trevino and Nelson, 2016). Thus, it is important for Marks and Spencer to carry out a detailed environmental scanning before establishing their business in Japan. Middle class segment within Japan is stable in nature which is beneficial for the business organisation that wants to operate its business in this country.
Japan has one of the most advanced telecommunication systems across the globe. Mainly, it uses modern technologies in every field. Thus, it is important for Marks and Spencer to make use of advanced technologies within their activities so as to ensure smoother working in this country (Rodan, 2016). For example, automation is a technique which is highly used by business organisations within Japan. It provides great opportunities for companies like Marks and Spencer to tap advantage of this technique and bring innovative products in Japan to gain a competitive advantage over rivals.
Japan is a clean and environmentally responsible country, however, it faces issues related to environment like waste management. Along with this, it is also get affected by natural disasters such as earthquakes, floods, cyclones and many more which negatively impacts upon those companies that want to expand their business in Japan. All the above mentioned elements play an important role in analysing the business environment within Japan. By taking these into consideration, Marks and Spencer can easily expand their operations in Japan with the aim of attaining competitive advantage.
In every respect, Japan is the most advanced country that provide opportunities to companies to enhance their market share. Furthermore, it is a high-tech country which specialises in production process as it is heavily dependent on exports. Marks and Spencer is operating their business within retail industry which is a highly developing and growing sector which demonstrates that there is a vast scope for company to facilitate international trade by carrying out expansion within Japan.
Analysis of Key Trade Issues
International trade refers to exchange of services, products and capital across the international borders. Trade is relative cost of import in context of export and it is explained as cost of export ratio. Under this, trade issues are dominating and also continuing international theme. For instance: Child labour, sanctions, global market etc. There are wide range of strategies for entering in Japanese market. When one company is developing its business in another country for the purpose of business expansion, it faces many issues. It is necessary that firm should be aware about the policies and strategies of new country (Deardorff, 2014). Regulatory, culture and some of the other non-tariff issues to entry in market as well as sustainability exist. In addition to this, Marks & Spencer is establishing its business in Japan to enhance its market share.
Japan does not have non- tariff barriers that can affect on commercial activity through delaying or impending import of foreign goods. Japan is one of the leading centre of innovation and business. In Japan, starting business is not complex but expensive. There is critical analysis of key international and business trade issues that impact on the decision making of Marks & Spencer while entering Japan. The key trade issues that are highlighted in context of M&S while entering Japan are import licensing, innovation, culture, standards etc. These are elaborated below:-
Import Licensing- Under this, many products do not need any import license and they can easily be imported to Japan. In context to this, import licenses are needed for some goods, For instance: plants, perishable products, materials etc. License is also needed for goods which are related to import quotas consisting of categories such as fish products. As Marks & Spencer deals in retail sector so for importing, it is necessary to have license to facilitate easier international trade (Saslavsky and Shepherd, 2014). Import is found to be a significant part of international trade and facilitate movement of goods and services outside national boundaries. It is ascertained that if M&S fails to obtain licenses for getting imports, this may lead them to harm as per the regulations of Japan.
Innovation- In recent years, Japan has taken initiatives related to innovation in order to ensure development of economy. The businesses within Japan are willing to undertake innovation and want to incorporate unique and new specifications in existing products. In this context, Marks & Spencer should conduct an investigation before establishing its business in Japan to gain knowledge about demands and preferences of consumers. Innovation is the key to economic success and if not adopted by the firm can lead to downfall of M&S within new country. In order to effectively trade within Japan and ensure the sustainability of company, it is essential for Marks & Spencer to indulge in innovative practices and procedures at regular intervals as this is a key component of corporate culture of Japan.
Culture- It means the norms, values, principles, beliefs etc. which need to be followed. The culture of every country is different from the each other. The relationship in the business in Japan country and it is necessary to show right respect level and also be polite at all the times. When handling any types of business relation, it is necessary that company have patience and observe the local etiquette to develop products accordingly. Thus, Marks & Spencer will gain knowledge about the culture of Japan and provide training to staff members.
Standards- Imported good have to undergo product testing and also firms can not sell in Japan without any certification. Without any kind of certification, Japan will not allow M&S to sell products. In addition to this, compliance with the standards as well as regulations is governed through effective certification system (Deresky and Christopher, 2015). Additionally, Marks & Spencer will use quality tools like Total quality management which helps in reducing the defects and eliminating the wastages.
These all are the main issues which Marks & Spencer will have to face while conducting business operations in Japan.
On the other hand there are some benefits which firm can get in establish business in Japan country. From these issues, firm face some risks along with capture the better opportunities in the international trade (Gilpin, 2016). There are some opportunities as well as risks from the discussed issues as mentioned below:-
- License is necessary to import and export of products from one country to the another. License provides by the government to legally conducting the transportation activities in a better manner. From this, there is an opportunity to Marks & Spencer to import its products by using the import license in business. It can be helpful in capture the large market share and also can establish its business sin the Japan without face any issues.
- Innovation is helpful for company to make some unique which are not exist before. With the help of innovation, firm can success at market place and also can compete with its strongest competitors in competitive market. If Marks & Spencer company will make some innovation in its products by knowing about needs of customers then it will be helpful in target the new market share and also gain the attention of consumers at market place. For facilitating innovation, firm can adopt new technology and through this it can make changes to attract customers (Gilpin, 2018).
- Culture impacts on the business a lot. It is necessary that company should be aware about the culture of Japan so that it can not face any complexities in establish or conducting business. Awareness about the culture of different country is necessary. For this, Marks & Spencer firm should provide the training to its staff members about the etiquettes, business culture etc. On the other hand, Marks & Spencer can make the better connection with the local people so that they can get knowledge about the all things (Winham, 2014). From this, company will get better opportunity to perform its business operations in Japan without any kind of interruption. It will be helpful in capture the new target market and enhancing its business growth. It will help in provide the benefit to an economy.
- Quality plays an important role in business. In this present time period, each person wants to better quality of products. In Japan, government set some quality standards that need to be pass by the firms. So, by using the Total Quality Management, Marks & Spencer business firm can improve its quality and also provide the better quality of products to people of Japan for enhancing its sales.
- Under the import license, if company will not have any license to import the goods in Japan then it can face many issues and also will not able to import products. It will be risk for firm because it can not import the products. In order to make the license, there should be permission of government and company need to be taken.
- Innovation makes the business more effective and but if the employees are not able to make innovation in its business then in this case firm can not be satisfy neds of consumers.
- Culture impacts on business and the culture of every country is varied from the each other. If firm will not be aware about the culture of Japan then it will not able to perform its business activities at market place of Japan (Deresky, 2017). It will develop a risk on business of Marks & Spencer company.
- Quality is a necessary component and for consumers it is more important. If firm will not focus on the quality improvement then customers will not be interested towards purchasing the products of Marks & Spencer. It will be develop the negative impact on international trade of business firm.
Trade creation is economic concept that is related to the international economic under which the flow is redirected because of development of free trade. It occurs because of joining customs unions in order to minimizing protectionist policies for an instance trade barriers, tariffs, reducing the low taxes that will help in minimizing cost of services as well as products. It consists wide range of taxes. Trade treaty that consists the investment guarantees. Related to the trade, there are some issues faced by the other country. In order to make the trade with Japan, United Kingdom should be agree with terms and conditions of that country. From this, consumers can not switch the product and manufacture high quality of products.
Opportunities and risks
For the different stakeholders, there are some opportunities. The main opportunity is related to minimum cost products.
- Customers of Japan can get the products on the low cost. Minimum price is helpful in enhancing buying power of consumers as well as make improvement in affordability.
- There has an opportunity for United Kingdom that it can expand its products as well as services in the market of Japan. It can not face any issue related to protectionist and tariff measures for an instance quotas.
- In the trade deals, if Japan country will agree to deal with the other country then it will be helpful in enhance and economy as well as market share of home country.
Risk related to trade creation as well as custom union is that government of Japan would minimize tax revenue from the import tariffs. It develops the main risk for the local producers to out from the business.
Impact on managers
Management of Marks & Spencer company face many challenges at the time of operating business in environment of Japan. Business expansion is helpful for firm to enhance sales, gain high profit, create trade business opportunities and many others. In addition to this, manager of Marks & Spencer should set the effective and beneficial distribution along with marketing related strategies that will helpful in generate more revenue and gain the market share.
Comparative advantage and Heckscher-Ohlin model
Heckscher-Ohlin model is related with the arguments towards the laws of comparative advantage. Thus, it is important for country to ficus on the overall production and export of the services. This type of theory can help county to attain comparative advantage.
Opportunities and risks
It is opportunities for the Japan as the Marks and Spencer can easily operate their production activities. This will help in creating number of employment opportunities for the local people an workers as well. Mainly, it create the win-win situation in which workers can easily enhance their skills and knowledge which directly contribute in enhancing the chances of attaining success at Japan market. In addition of this Marks and Spencer needs to keep their product price low in Japan market so that they can easily increase their market share.
Impact on manager
It is important for manager to effectively handle the risk factor that may help in improving the overall performance of the company at Japan market. In this they use quality control procedures to eliminate the wastage of the products that negatively impact on the quality of the products. Along with this, the also ensure about the workers needs at workplace. For attaining positive outcomes, company needs to provide better training and development programs to their workers so that they can easily perform their best and also meet customers needs and wants.
It is an economic policy that restricting the imports from the other countries by different methods like import quotas, imported products and different regulations of government. This kind of issue develops the short term impact on an economy of Japan. The main aim of develop this policy is to protect industries at domestic market place which can not be compete with international rivals. In context to this tariff is one of the protectionist measure that helps in act as import duty and its result in enhance in cost of goods and services.
Opportunities and risks
If the tariffs are need to be introduced on the Japanese products the it would introduce its tariffs and also provide an effective opportunity for government of China to earn the revenue of tax. On the other hand, through using this policy, Japan country can enhance wages of the domestic wages. Protectionism is helpful in develop the jobs to workers and it permits the home country to hire the employees.
The risk related to Protectionist policies is that it will loose international competitiveness as tariff results. Through this, products of Marks & Spencer will be expensive. The other risk from the Protectionsm is that there will be limited choice to consumers regarding the services and products. On the other hand consumers will pay more to products.
Impact on manager
In this manager of Marks and Spencer needs to evaluate all the situation related with the protectionist policies. In this management of the company influence the terms of speaking towards the policy maker which contribute in shaping the future opportunities in Japan market.
From the above mentioned report, it has been concluded that international trade is the way of exchanging goods and services in across the borders. Mainly, this process used by those companies who wants to operate their business in another countries with the aim of attaining success. As Marks ad Spencer wants to expand their business in Japan because it is developed country which provide various opportunities to the company to increase their market share. In addition of this, company needs to evaluate all the issues that can be occur at the time operating their business in another country. This will help them in establishing positive brand image at market place.
In addition of this, for enhancing the market share and growth it has been recommended that Marks and Spencer needs to effectively evaluate the external business environment of Japan before expanding their activities. This may support them in capturing future opportunities in market. Along with this, company required to evaluate the Japanese customers behaviour so that they can easily provide the quality services accordingly. Effective trade deal is also required for the Marks and Spencer in which they needs to analyse the trends of market and norms because it is not necessary that every products of Marks and Spencer is sell in Japan. With the assistance of this, company can analyse the whole market for implementing their activities in Japan market in most effective manner and also increase the chances of establishing their competitive image.
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