Global Business and Investments
Table of Contents
In this study, effective expansion of the businesses to an international market will be evaluated in the context of a new biotechnological medical products organization that has unique products. Germany has been recently identified as a biotechnological hub for the organizations so the business will be extended to Germany which is in Europe and has constantly rapidly increased the market of biotechnological products. The growth and overview of the German market will be discussed in this study as well as a pestle analysis will be presented to identify the political-economic social technology, environmental and legal elements of the German market to identify the effectiveness of business expansion there. Also, the most commonly used appropriate alternative approaches for entering the market will be discussed and their strategic alliance in partnership would be considered the most appropriate and best method for the biotechnological medical products company to enter the German market.
In the European Union, the biotechnological industry has been rapidly increasing in the past few decades. Europe has been playing an important role in the continuous growth and development of the biotechnological industry as several European companies are effectively playing an important and strong role to offer better growth and dynamics to the industry(Dubrall, et al, 2018). When it comes to identifying the growth of biotech companies in Europe, it has been identified that around 988 companies are currently operating in these areas and the following graph will be helpful to identify the breakdown of these biotech companies in different areas of Europe.
Source: McKinsey, (2022)
When it comes to expanding the business to the international market, it is very important to understand which countries are having a higher demand for biotechnological products and services.In recent years Germany has quickly become quite popular among the leading countries of Europe which has a focus on the biotechnological industry. It has been identified that Germany has different organizations and research institutions which are based on biotechnology to effectively offer better biotechnological solutions to the customers. Currently, in Germany, there are 202 research facilities for biotechnological practices (McKinsey, 2022). The biotechnological industry of Germany has been booming as currently, more than 50000 employees are working in more than 660 highly dedicated biotech companies in 2019. The following graph will be helpful to identify the development in the revenues earned by the biotech industry in Germany from the year 1999 to 2020.
Development of revenues in the biotech industry in Germany from 1999 to 2020(in million euros)
The graph indicates that the revenue has been increasing and the past years and currently there is about £6486 million in revenue generated in the year 2020 from the biotechnological industry. Also, the biotechnological industry has increased its turnover by 14% in the previous year as these companies are playing an important role in fighting the symptoms of covid-19. However the biotechnological industry of the United States of America and China are far more advanced but Germany is also considered one of the leading medical biotech nations around the world (statista, 2020).
After the evaluating the growth of the biotechnological industry and revenue generated in the past few years, it becomes easier to understand that for establishing a new unique biotechnology-based medical product company in the international market, Germany would be considered one of the most appropriate choices especially during the post Brexit era because it has lesser effects of Brexit and also the country quickly recover from these challenges (Kamusheva, et al, 2018).
When it comes to expanding the business or launching the business in a new country, it is much more important for the organization to effectively use different frameworks as they can help to evaluate the new country on various parameters. For evaluating Germany as a better expanding location for the new biotechnological medical organization, following PESTEL analysis frameworks is an effective framework.
For evaluating the external business environment of any country, it is helpful to identify the current status of some of the external elements which offer a better understanding of the market. This analysis will include the effective evaluation of the political, social, environmental, economic, technological, and legal aspects that helps to identify the external business environment for the new organization which expanding its businesses in Germany.
Political – When it comes to the German political environment, it has been identified that it is a democratic republic where the president is the head of the state and the prime minister does not have an identical role like other democracies. The nearby countries include Sweden Denmark Netherlands Austria Poland and the Czech Republic. It has been identified that the German government has been considered liberal in terms of import exports and FDI. The government is highly appreciating the foreign brands which want to bring business into Germany as it can bring better than effective economic conditions to the country (Paster, 2018). The government has been offering various types of attraction factors and facilities to foreign companies.
Economic – Germany is the fourth-largest economy in the world and despite different types of manufacturing and industrial production-related issues, the country has been maintaining its effective economic growth. In the years 20-21, the gross domestic product GDP is estimated at £3570.62 billion. The country has been known for its focused exports competitiveness, global networking as well as innovativeness which have been playing an important role in increasing the GDP and economic growth of the country over the years. Germany has a very good health ratio however its unemployment rate is very low because the workforce costs are higher. The corporate tax rate is approximately 15% and subs also had to pay a search or 5.5% with a trade rate of 14 to 17%. The employees of different organizations have been receiving different benefits and higher salaries along with different facilities. Due to that, it is easier to find a skilled and trained workforce there.
Social – in the context of the social life in Germany it has been identified that it is considered one of the best countries to live in the aspect of education, quality of life, health, wealth, employment opportunities, and others. In 20-21, the population was more than 84 million and the life expectancy rate for women is 83 years and for men, it is 78 years. Germany also has the lowest birth rates and an increasing number of retired people are also a concern. The main sociological factors of German society include privacy, hard-working attitude, perfectionism, punctuality, and diligence. It helps to understand that the German people are openly welcoming and easy to adapt so it would be easier to expand the business there (Gabrieland Bitsch, 2018).
Technological – Germany is the fifth-best technologically highly advanced country in the world and the country has a higher investment in innovations, technology, and creativity. Currently, research and innovation have been practiced in different markets such as military technology medicine biotechnology. More than 1 million people are doing their job in technology sectors and the global market share of technological industries, Germany holds around 14% global share. The German government has invested around 3 billion euros for 2025 to be spent on research and development programs on artificial intelligence technology. It is indicating that not only the German government but also the population has strong knowledge and interest in technology products/ services so it would be easier for the organization to expand the business in Germany.
Environmental – The Government of Germany has become serious about the environmental aspects of the country. It has been identified that tourism is one of the major industries in the country and the first few years due to the poor tourism practices, different environmental challenges have been faced by Germany which include water air pollution, industrial waste damaging forests acid rain, and other automobile exhaustion. Because of these global warming and climate change issues the country has been facing different natural disasters such as floods in July 2021. The German government has been initiating a high number of rules and regulations which are very necessary to be followed by the businesses that are operating there to manage the environmental damages (Doluca, et al, 2018).
Legal – in the context of the legal landscape of Germany, it has been identified that German law is quite similar for the local and international companies doing business in the country. The German laws are promoting different types of businesses among locals /nationals and foreigners. It would be helpful for the businesses to follow all the regulations and laws of the government such as the minimum wage law. Overall the legal escape of Germany is easier to follow and support the business is expanding as well.
There are different types of methods that can be used for entering the international market. The organizations need to become aware of these entry modes for international expansion so that it would be easier for the organization to effectively select the most appropriate expansion method for the business. The following are the most commonly used and popular international extension entry modes.
Exporting – exporting is considered one of the easiest and most commonly used methods for entering an international market and most large-scale companies have started exporting the production services from their home country to the target country. It is fast and remote which has lower risk however it does not help to manage effectively with control and the transportation cost becomes increased. Also, the dependability of the supply chain system would increase (García-Canal, et al, 2018).
Licensing and franchising – franchising and licensing are considered an appropriate mode of entry especially for international brands because it is a very fast mode of entry. It has low risk and low cost of entering. However, in franchising licensing, the control would be lesser and the company has to face higher local competition. Also, the legal regulations are much stricter for franchises.
Strategic alliance and partnering – When it comes to entering into a new foreign market, developing a strategic alliance or partnership with the local domestic partner is considered one effective mode of entry. It includes a mutual contract or agreement which defines the common purpose, roles, and responsibilities along with duties. It reduces the cost as well as the risk because the local support has been received for the business expansion. However, it has a higher cost than exporting and franchising. Also, integration and conflict-related issues can be faced in the future.
Acquisition – To expand the business into the international market and acquire the local businesses in the same industry, there is also one effective mode of entry however it requires a lot of legal complications and financial requirements to follow this mode of entry. It offers established and noon operations in the local market and due to that it is considered a fast Andrew mode however it could include the integration-related issues between the two companies. When it comes to the large-scale organizations who want to expand their business into international land it could be considered one effective method for them as they do not have financial complications and an effective legal team would handle all the complications raised in the future.
Greenfield venture – The Greenfield venture is referred to as launching a completely new wholly-owned subsidiary business into the new country. It is potentially costly and complex but the company can own complete control over various activities and at the same time, higher revenue generation and returns can be expected with this entry mode. When it comes to establishing a new business in a new market the cost and risk are two factors that are always higher but it is important to have all the knowledge and experts of the existing market as well as the potential market growth to manage the competition and run the business effectively (Schwens, et al, 2018). It would be better for the organizations to hire a domestic local consultant to manage all the risks and costs associated with the Greenfield venture entry mode.
When it comes to the biotechnological medical products company entering into the German market, the following are the best methods for the organization to enter into a new country.
Strategic alliance and partnership – As the company has been operating on a small scale but the technology which the company is using to develop its medical products is very unique and advanced so it would be better for the organization to develop a strategic alliance and partnership with any of the domestic organizations which are also operating in the similar field. However, the organization needs to understand the importance of doing some effective R&D in the market. Developing strategic alliances and partnerships with the local domestic partners would be considered easier for the organization and the company can also have local support from the businesses as well as the cost rules and responsibilities can be divided which impacted positively on the business expansion. Also, the agreements and mutual contracts would make it easier for the organizations to effectively collaborate and coordinate to manage their functions. It has been identified that since the biotechnological medical organization has been operating on a small scale so for expanding into a new country the company requires a high amount of strategic direction planning and support from the locals not only to establish the company but also to run the operations in a much more effective manner (Liu, 2018). It is also considered a cost-effective method which is beneficial for the organization as they can divide the cost and efforts for running in establishing the business in Germany.
The biotechnological medical products industry of Germany has been evaluated in the context of expanding the business into Germany. It has been identified that despite Brexit the country has been identified as having higher growth in the biotechnological medical industry so it is considered one appropriate location internationally to expand the business. An effective biotechnological medical products industry has been evaluated which helps to identify that the growth of this industry has been rapidly increasing in past periods. Also, different frameworks such as pastel analysis have been used to identify the effectiveness of the German market in terms of extending the business there. The evaluation included effective elements of the external business environment such as political, economic, social technology, environmental and legal. Different alternative approaches to entering a new country have been discussed which include export licensing/ franchising, strategic alliance, acquisition, and Greenfield ventures. After evaluating all these modes of entry it has been identified thatalliance and partnership would be considered the most appropriate entry mode for the biotechnological company to explain their business in Germany.
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