with the introduction of open international trade

8/6/2019 With the Introduction of Open International Trade

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With the introduction of open international trade, businesses now have more

opportunities to offer their products and services to foreign markets.In order to do this,

companies typically answer the questions as to which foreign market will they be

entering, how will they enter it and when will be the best time to enter it. Once the

company has identified it market prospect, it is then important that the company analyze

and understand its selected market segments.

This paper primarily provides the PEST Analysis of ABC Clothing Company in

line with the planned expansion in international business operations. This provides

insightful details regarding different factors of in the external environment that an

organization must monitor. After which, this paper will attempt to select one of the most

essential factors that must be given emphasis by the company in order to sustain their

competitive advantage among their competitors for the foreseeable future. Further, this

report will also outline the role of marketing research to support the company's decision

making process.

International expansion is one of the main representations of business success

as it suggests the companys ability to meet foreign market demands and supply

resources needed for foreign operations. Financially, operating abroad can be

demanding; in addition, the company would need to adjust a number of its standard

operation in order to adjust to foreign business practices. In other words, there are

many risks involved in global trade. As this business activity requires significant

resource allocation, the companies must then ensure that they are capable of

overcoming possible risks and will be able to achieve success.


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One way of doing this is by analyzing the environment that the companies wish

to invest on. It is important that business entrepreneurs are aware of the distinct

features of each foreign setting; in this way, the investors will know how to address the

risks in the most effective way. If for example the food company is from the West,

establishing a branch in the Eastern section will naturally make western and eastern

differences apparent. In ABC Clothing Companys case, the company has been

operating successfully based on Western standards; as it aims to expand into newer

international markets such as Asia, this concept applies very well to the company.

Foreign origins have distinct differences on various aspects like politics,

philosophy, society and history. Hence, it is imperative that entrepreneurs understand

their market prospects well. From this aspect, learning and adaptation are perhaps the

two most important factors that should be present.

The Marketing EnvironmentTodays market is characterized by highly competitive organizations which are all

vying for consumers loyalty. Firms are faced with the challenge to maintain their own

competitive edge to be able to survive and be successful. Strategies are carefully

planned and executed to gain the ultimate goal of all: company growth. However,

external factors are not the only elements which influence growth. There are also

internal factors, components working within the organization which shape the direction

of the company.

The companys marketing environment influences the business organization

directly. This includes the suppliers that deal directly or indirectly to the people within


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the business organization, the consumers and customers who demand for the products

or services offered by the company, and other local stakeholders who influence the

decision-making process or affected by the business decisions made by the business

firm. As such, the marketing environment of a particular company describes the

relationship between firms and the driving forces that control this relationship who are

members of a specific industry wherein the relationship is local and the firm may

exercise a degree of influence.

PEST Analysis OverviewThe environment we live in can be very volatile. All organization has its

considered internal weaknesses and strengths, but the outside world will also have a

major impact on the organizations future. PEST Analysis is a popular marketing

management tool and method of examining the many different external factors affecting

an organization. The acronym PEST stands for the following: Political, this is the current

and potential influences from political pressures; Economic, the local, national and world

economy impact; Sociological, the ways in which changes in society affect the

organization; and Technological, the effect of new and emerging technology.

Since the company is offering clothing designs for all ages which depend on the

needs and demands of their customers, there are some external factors that the

company must consider in order to stay in the competitive world of business. The

following are some of the factors within the external environment that the management

of the company must consider.

Political (Legal) Aspects


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A company will not be able to gain success, good reputation and trust if it will not

consider legal and political sector as part of their strategy. Political and legal sectors

include the needs of the company to follow the given policies and regulations of the

government in order to be considered as legal and authorized business company. In

this manner, ABC Clothing Company should be able to consider political and legal

aspects so as to show that they value the policies and regulations of the government in

any of the business operations.

- tax policy- employment laws- political stability- environmental regulations- trade and tariff restrictions

Economic AspectsIt is important that a certain company must also give enough attention to its

economic stability. The economic goal of a certain industry is like an axis in which other

objectives or goals are revolving. The economic factor involves the context in which an

industry belongs, i.e. the configuration of the competition in which a company operates

the active demand of the products, general economic condition of the nation or region,

conditions in relation with other industries, and the situation of the resource markets.

- economic stability

- economic growth- interest rates


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- inflation rates- exchange rates

Socio-cultural SectorSociety and culture is an important factor that must be given emphasis by any

business, specifically those who are operating in the global arena. It is important that

the company must operate in compliance with the social systems in order to gain good

reputation and effective public image. On the other hand, cultural aspects is equally

essential, in order to understand the various needs of different individuals that belongs

to different cultures.

- population growth rate- age distribution- career attitudes- consumer behavior-

religion and culture itself

Technological Aspects

The complexities of achieving business success through increased efficiency,

effectiveness and competitiveness, combined with innovative applications of modern

technology, has heightened the awareness of both technology and business managers

towards more strategically oriented approaches for planning and management of any

industry. Hence, it is important that a company must be able to give consideration to the

technological aspects.

- distribution and communication channels


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- technology incentives- automation- rate of technological change- environmental and ecological aspect- barriers to entry- production level- outsourcing decisions

Emphasis on EconomicsThe marketing concept has been defined as the key to achieving organizational

goals and the marketing concept rests on market focus, customer orientation,

coordinated marketing and profitability. In a profit making business the firm obviously

has to try and achieve this level of customer satisfaction as a way of staying ahead of

the competition and making a profit. Traditionally, marketing has been utilized by the

private sector in decisively increasing the capabilities of an organization. Marketing can

be considered as one of the most important element underpinning successful business

creation. The importance of marketing concept incorporates oft-repeated elements such

as: customer orientation; integrated marketing efforts; and resultant profitability.

In marketing operations, the marketing manager must have the ability to

strategically decide the most essential external environment factors to be monitored in

order to sustain the competitive advantage of the company in the future. In the case of

ABC Clothing Company, the marketing manager of the company should give focus on

the economic aspects. As mentioned, economic aspects includes the possible

conditions needed in order to gain competitive advantage within the marketplace.


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Economic sectors include all the possible factors that drive an industry to know where it

belongs such as the condition of its competitors, entire economic situation of the region

and nation in which the company is operating. In this particular case, ABC Clothing

Company is operating in different areas or regions of the world, including Asian market.

In this manner, the marketing manager, should be able to consider economic

sectors in its monitoring to ensure that ABC Clothing Company adheres to all elements

of economic factors of the external environment. Just like what big as well as small

multinational companies that are operating globally. Herein, the marketing manager

should be able to monitor the economic status of a certain country where the company

is currently operating or the economic status of a country in which the company would

plan to operate in the future. It is said that if a country with a good economic status or

which is economically stable, there is possibility to gain more customers which would

avail the quality products offered by the company.

Industry AnalysisCompanies in the industry sell to a few large customers/buyers. Likewise, the

industry also displays an apparent impracticality for customers/buyers to switch from

one source of supply to another. This is reflected by the cost of raw materials as well as

the costs of operations. Moreover, the products offered by companies in the industry are

essentially interchangeable and indistinguishable. The product could also be considered

as a commodity for the retail industry especially in the clothing business. Moreover, the

industry shows that the cost of the product and service represents a relatively large

percentage of the buyers and customers total cost. Nonetheless, the customers could


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if desired backward-integrate specifically by acquiring a company in the industry to

which is included. The following are micro-environmental aspects that are necessary to

consider.

Suppliers PowerMany suppliers provide raw materials to the industry. Moreover, companies in the

industry are not likely to backward-integrate. On the other hand, it could also be posited

that the companies in the industry are the primary source of revenues for the suppliers.

This makes the competition among suppliers more rigid. Likewise, if raw -material costs

get out of line, companies in the industry would be able to have a hard time using a

different type of raw material to produce the product. The industry is also characterized

with the quality and costs of raw materials having a significant impact on the quality and

price of the products and services produced by the industry.

Moreover, the raw materials provided by suppliers are essentially

interchangeable and indistinguishable. The raw materials are essentially commodities.

Likewise, in an industry where loyalty is also considered necessary, there is also the

possibility for the suppliers to forward-integrate.

Rivalry Among CompetitorsCompanies in the industry considered to be diverse in their history and culture

and in how they do business. Moreover, the product/service sold by the industry has low

storage costs or is not perishable. Nonetheless, the industry is experiencing fast market

growth.


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The products offered by companies in the industry are essentially

interchangeable and indistinguishable. It has also been established that the product

provided by the company is a commodity to a major part of its stakeholders. Moreover,

it also shows that there are considerable numbers of large competitors that dominate

the industry.

In the said industry, companies in the industry have high fixed costs and spend a

lot of money on plant and equipment. Likewise, production capacity, to be economically

feasible, must be done in large, expensive increments. Significant barriers as well

hinder companies that want to exit the industry. These include regulations, labor

agreements, costs of closing facilities, and the absence of secondary market for assets.

In addition, it could also be observed that staying in the industry is of great strategic

importance to companies in the industry, probably because they have nowhere else to

go.

Threats of New EntrantsThe economies of scale play a significant role in the cost of produce the product

and service. Companies in the industry have low fixed costs and spend relatively little

on plant and equipment. Moreover, competitors in the industry are not likely to cut their

price to defend their market position. In an industry experiencing fast market growth,

patents, proprietary knowledge, and brand reputation are also considered as barriers for

companies entering the industry.

Threat of Substitute Products


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The price of substitute products is more expensive. This provides the industry a

great following. Moreover, the quality, features and benefits of substitute products are

generally lower.

The Role of Marketing Research in Decision Making ProcessThe structured method of marketing research has enabled countless of

producers and consumers alike to better understand their relationship. Generally, the

role of marketing research in every business environment is to provide information that

are necessary in the decision making processes for the development and benefit of the

company.

There are numerous studies conducted to verify the potential effects of

information in business environment obtained through marketing research. The value of

information in decision making is proven especially in enhancing performance, reducing

uncertainty, and processing business plans. The information collected through

marketing research, may it be qualitative or quantitative in nature is essential in the

overall being of the company.

Furthermore, there are other several experimental studies that have proved that

marketing research is indeed an important element in companies' success formulae.

give evidence that the level of use of marketing research is positively related to

company effectiveness. Every effort exerted in the research process is justified when

the by-product is the optimal performance of the business. In the same way, that more

successful companies carry out marketing research, in sharp contrast t


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with the introduction of open international trade

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