Mode of Entry
The choice of an entry mode is most crucial to the consideration that concerns entry to the Scottish whisky industry – and this involves some critical trade-offs. An already established market presence, several well-known brands, and a strong customer base come with acquiring an existing distillery. Nippa et al. (2019) evaluated that more than one hundred and thirty-five active distillers in Scotland are known for their history and unique customer loyalty. Although rapid market penetration will be achieved at minimal costs, there is a need to consider cultural integration and invest heavily in this route (Nippa et al., 2019). However, despite offering more control on brand building and higher levels of flexibility from the start, such investments take a longer time frame and significant costs before becoming profitable. One of the alternatives for this solution is joint ventures or partnerships. They allow the sharing of risks with the third party, bringing knowledge of the region. On the contrary, these arrangements make management and distribution of profits challenging. Therefore, the judgment is based on weighing short-term market entry against brand management and longer-term investments.
Output and Supply Constraints
Output and supply bottlenecks constitute serious problems for the Scottish whisky producers. According to Watson et al. (2021), the Scotch Whisky Regulations 2009 have had stringent regulatory regimes concerning production procedures, maturation period, and labelling requirements. The regulations provide quality, but there needs to be more scope for production flexibility and speed to market. For example, the compulsory oak cask ageing for at least three years (Watson et al., 2021) automatically restricts growth and flexibility. Another vital part of it involves the supply chain management due to particular types of ingredients such as the “Shetland Barley” and the “Fine Oak”. It was estimated that more than 90 per cent of the barley produced in Scotland was utilized by the industry, thus creating a high-competition market for essential inputs (Angleitner et al., 2021). The situation requires a strong supply chain policy to ensure constant quality and flow amidst uncertainties such as inconsistent raw materials.
Economic Climate and Strategic Implications
Mathieu (2020) commented that the ongoing Brexit and current global trade tensions are influencing the contemporary economic scene in the UK. These factors have a major impact on the strategic decision-making process in the Scotch whisky industry. Uncertainty surrounds post-Brexit trade, particularly regarding tariffs and border controls. One example is the imposition of a 25% tariff on Scotch single malts by the US, forming one of the trade conflicts (Mathieu, 2020). Moreover, Brexit-related issues may alter the flow in the supply chain concerning the supply of raw materials and the exportation of the final goods. Brexit has increased trade barriers and costs, affecting industries heavily reliant on exports, like Scotch whisky. The uncertainty surrounding future trade agreements, especially with crucial markets like the EU and the US, necessitates a flexible approach to market targeting and supply chain management (Ichijo, 2019). Finally, currency fluctuation caused by post-Brexit also contributes financial risk to pricing strategy while operating internationally. Therefore, this requires a good understanding of the economic factors for their effective incorporation into an enduring strategic market entry and operations plan that withstands external pressure. The Effect of economic climate, organizational structure and decision making in the United Kingdom.
A report by Liadze et al. (2023) indicated that by the end of 2023, the UK market will face several important issues that will impact managerial decisions. In addition, continued high inflationary pressures due to external factors and supply chain challenges have made businesses pay more (Liadze et al., 2023). Therefore, such a situation compels companies to reassess their expenses and pricing policies. Cost control measures are likely to involve cutting down workforces and delaying investments to increase future profits for a company. Besides, consumer spending is expected to become more conservative with increased prices and thus may affect discretionary businesses (Hooper et al., 2020). As a result, organizations have to change their offer in terms of products and services to adapt to changing customer preferences oriented towards values and affordability.
Businesses involved in trading with different parts have a hard time dealing with complications of the trade agreement and the chances of divergence between the UK and the EU. However, organizations must understand that they must manoeuvre through those intricacies. For example, it may imply changing their supply chain system from an across-border arrangement or even orienting to local markets. The transition period might add operational costs to their business and have them go through another strategic realignment, emphasizing agility and flexibility in their response to trading changes.
Edo (2019) commented that a tight labour market in the UK results in some skill gaps in various industries. The situation is further complicated by Brexit policy changes affecting access to skilled labour supply coming out of the EU. Therefore, organizations will face increased recruitment difficulties, and staff development initiatives will become more critical as they adopt a staff retention-oriented approach (Edo, 2019), including investment into training and development, workplace flexibility, and competitive compensation packages. The recent developments in the UK economy are pushing up interest rates to combat rising inflation levels that affect firms and consumers alike. Organizational plans for investments and corporate expansions are affected by higher borrowing costs. When borrowing costs increase, companies could be more cautious about adopting additional debts that lead to a halt in growth initiatives or capital investments. Such a careful stance may be especially critical for SMEs heavily dependent on external financing. Higher interest rates may reduce disposable income for individual consumers, thereby curtailing consumer spending. Hence, such businesses relying on consumer demand are also affected indirectly. Such a situation demands a change of strategy by most organizations, which should turn all their attention to improving their cash flow position and debt payment capacity.
Exporting Scottish Whisky to Sweden Macroeconomic Considerations
To successfully export products to Sweden, it is essential to have a good knowledge of the country’s stable macro environment, including forward-looking policy instruments and a high prosperity level. The latter contributes to strong economic growth and keeps inflation low, leading to a high business level and general consumer confidence in Sweden. Due to the financial stability, a bigger consumer purchasing power is mostly felt by product categories targeting mid to high-market segments (Angleitner et al., 2021). Besides, companies should consider that many people live in Sweden, and thus, they are aware of everything, including the costly standard of living. The latter also makes the Swedes more demanding when making purchases, making them price-sensitive. Success in the Swedish market requires an emphasis on a product’s high quality and good value proposition (Sachdev et al., 2023). Download Businesses seeking to venture into Sweden’s export must comprehend these economic factors as they determine the mode of entrance, product pricing, and marketing approaches.
An important issue for successful export activity is the exchange rate between the Swedish krona (SEK) and the British pound. It might help to lower the cost of imports, which may increase the consumption of foreign products. Such a scenario benefits exporters, leading to increased sales volumes, which may eventually translate into better or improved profit margins. However, a depreciation of SEK could lead to relatively high prices of foreign goods for Swedish consumers and thereby reduce consumption levels. Hence, firms interested in exporting to Sweden should be watchful of foreign exchange rate movements. There needs to be a high degree of vigilance as this will facilitate the adoption of appropriate pricing strategies responsive to these transformations and remain profitable. It is important to adapt prices to adjustments in foreign exchange rates and thus make products attractive both for customers and the company.
Sweden’s trade positions stemming from her membership with the euro are greatly responsible for the flow of exports into the country. Internationally, trade within the EU imposes relatively fewer restrictions due to low tariff rates, creating an enabling atmosphere for imports. The competitive structure or environment in this respect will make it easier for exporters to enter the market, making Sweden a competitive location for international trade. Nonetheless, companies must appreciate that the EU has strict rules, guidelines, and standards and ensure their compliance (Jelliffe et al., 2022). They are usually concerned with consumer safety, environmental protection, data privacy, etc. Businesses must ensure that their products and business processes conform to these regulations because they may face legal and operational issues if the rules are not followed. Failure to follow through attracts big fines, tarnishes reputation, or even bans selling products.
References
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Angleitner, B., Kluge, J., Lappöhn, S., Plank, K., Mateeva, L., & Schnabl, A. (2021). The economic and ecological footprint of the spirits sector in the EU, the UK, Norway and Switzerland. https://irihs.ihs.ac.at/id/eprint/5957/
Angleitner, B., Kluge, J., Lappöhn, S., Plank, K., Mateeva, L., & Schnabl, A. (2021). The economic and ecological footprint of the spirits sector in the EU, the UK, Norway and Switzerland. https://irihs.ihs.ac.at/id/eprint/5957/
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