External Business Environment

Introduction

External business environment has several factors which affect the business operation of foreign businesses, such as political, economic, social, technological and environmental factors. This study has selected China as one of the developing markets, in which UCB International Consulting Ltd is going to extend its business operation. China has strong economic framework with excellent growth in GDP rate. Economists suggest, China’s GDP rate will grow with 7.3% in 2019 (daxueconsulting.com, 2019). From the recent economic database on China market, it is seen that China has current interest rate of 4.35%, which assist foreign companies to get high economic advantages in this market (chinamarketresearchreports.com, 2019). Economic development in China market leads to high rate of urbanisation and digitalisation. This study will represent the opportunities and challenges that UCB International Consulting Ltd will face in order to operate its business in China.

In order to expand business operation in China, UCB International Consulting Ltd needs to analyse the different microenvironment factors in China market. macro environmental factors such as political, economic, social and technological factors are potential aspects of market in the oversees countries which impacts on the overall business operation of foreign company. Through conducting this analysis, UCB International Consulting Ltd, would be able to understand the opportunities and challenges for operating its business into china market.

Political	Strong as well as stable political system in China Formal and informal rules of new congress party assist SMEs in this market to their businesses Government inspire and motivate foreign investors and SMEs to development of e-commerce Supportive policies by china government fir investors and SMEs in for investing the industrial sectors Regulation and legislation are set by the new political party in favour of Small- and large-scale companies Political regulation assists SMEs to move in right direction of success and growth
Economic	High inflation as well as high property prices Growth rate in industrial sector is impressive Cheaper labour cost due to development of different companies and strong economy Increasing of purchasing power of local people GDP rate add more value in Society Potential urbanisation that leads to high rate of economic growth in SMEs High opportunity for export business Large number of skilled workers It continues its pace in economic development China’s economy has achieved excellent growth rate in GDP
Social	Positive transition of social behaviour, lifestyles, education and preferences of community people People in China are now more concerned and knowledgeable about the brand, products and services Social perception changes from the traditional viewpoint towards the digitalisation of world People prefers online purchasing and digital marketing Literacy rates in China is now 90%
Technological	New products are developed in China New purchasing mechanism with e-commerce facility Digitalisation of the market Innovative digital production technology New methods of purchasing, manufacturing and selling that assist SMEs to make fast growth of their businesses New distribution process

Table: PEST analysis of China market

Based on the abovementioned analysis of China’s macro-environmental factors it can be stated that, UCB International Consulting Ltd has several opportunities in this market in order to expand its business operation. Out of these opportunities two major factors that provides high level of opportunities abs benefits to this SME are governmental support in China on business operation and growth of SMEs, and highly relevant as well as useful labour market.

China government supports and motivate the large- and small-scale foreign business to invest into this market in order to promote economic growth and development in overall China market. based on recent economic data base of China market, China is one of the most valued and vibrant countries based on its economic development across the world (studymoose.com, 2019). China GDP growth has been increased from 362 billion RMB to 30 trillion RMB in 30 years. As stated by Ansah and Sorooshian (2017), high GDP growth is one of the most important parameters of determining the economic growth of the country. This would assist the marketers of UCB International Consulting Ltd for attaining high quality resources and economic support from China government in order to extend and operate their business. China government boost proper financial support to the foreign SMEs, by negotiating the tax rates, business regulation and industrial riles and legislations. In addition to this, China government has established more financial channels, development in credit rating process and loan discretion to loan banks, in order to support and motivate marketers of foreign SMEs. Moreover, as China government encourage investment in SMEs, it will assist marketers of UCB International Consulting Ltd, to get proper financial support in China market in order to expand and operate its business.

China labour market is full of skilled and abundant labours, which will assist UCB International Consulting Ltd to get high skilled workers for operating the business in right direction to get proper success. As stated by Ifinedo et al. (2018), in order to operate business in new market, the first thing on which the foreign marketers generally focus is, availability of high skilled labours. In addition to that, in China the labour cost is cheaper as compared to Japan, Brazil and other developed and developing countries (chinamarketresearchreports.com, 2019). This provides high opportunities for UCB International Consulting Ltd in getting high skilled labour at low cost, which not only reduce the overall operation cost of this business but also assist the marketers to appoint large number of workers to operate the business in smooth way.

From the PEST analysis that is mentioned above, two potential challenges can be identified that will affect the overall business operation of UCB International Consulting Ltd in China market.

One of the challenges is transition of social perception and community preference. although the three are changing social perspectives of local people in China is important for brands to grow their business, it can pose severe challenge on marketing strategies and business tactics of UCB International Consulting Ltd. now majority of the people in China shift their preference from luxurious products and services towards to eco-friendly and renewable services, which will promote the environmental sustainability (chinamarketresearchreports.com, 2019). Moreover, China government also emphasize on formulating regulation that impose obligation of SMEs to use less energies and resources in order to save energy and social resources. China government also impose obligation on all foreign SMEs to operate their business in such a way that will contribute to waste management and protect renewable energies. Therefore, these regulating and changing social perspectives, will enhance the overall management and operation cost of UCB International Consulting Ltd.

On the other hand, other challenges that UCB International Consulting Ltd can face in China market is rising rivalry by potential marketers and SMEs. As China is one of the most profitable emerging market that provide high skilled labours at minimum resources, most of the SMEs have already been developed and well-established in this market (chinamarketresearchreports.com, 2019). These companies can pose strong competition to UCB International Consulting Ltd. Moreover, due to ever increasing number of developing SMEs in China, it is possible that the market will soon suffer from crisis of skilled labours and proper resources. Therefore, UCB International Consulting Ltd needs to make proper market strategies to combat the competition and deal; with the changes.

From the above-mentioned discussion, it can be concluded that, China is one of the emerging markets which is full of business opportunities to foreign SMEs. Marketers of UCB International Consulting Ltd can have opportunities in several aspect in China market such as availability of cheaper and high skilled labours and governmental support to China people. In addition to this, government support will also assist this company to extend its overall, business. On the other hand, this company can face some challenges such as increasing competition in China posed by potential Small- and large-scale companies in China and the changing social perspectives of local people in China. In order to deal with all these challenges this company needs to have proper strategies and market tactics.

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