Introduction
This report explores Universal Solutions Ltd’s (USL) external and internal environment and offers a recommendation concerning an entry strategy that best suits USL and the social media and soft technology sector. The report is split into several parts that examines the UK external environment concerning the social media and soft technology business and the USL’s internal environment using tools.
Analysis of the UK external environment
PESTLE Analysis
Perera (2017) explains that a PESTLE analysis is among the most utilised tools in the assessment of the external environment. According to Perera (2017), these factors entail social, economic, environmental, legal, political, and technological influences. This tool can be used in several distinctive scenarios and can direct firm managers in strategic decision-making. Besides, as Perera (2017) highlights, a PESTLE Analysis can be utilized to realize how future problems could affect a firm and presents information that could assist in identifying considerable drivers of change that could be utilized in creating scenarios of choices.
Application of PESTLE Analysis to USL
Political factors
According to Odey (2021), the impact of Brexit on human resources is a key political factor in the UK that might impact the social media and soft technology business. The UK has been affected by skill shortages in particular services for years (Odey, 2021). Many sectors, including the social media and soft technology business, have been reported to have the highest shortages of skilled manpower, a situation that has been exasperated by Brexit.
Economic factors
Corporate tax and unemployment rate are key economic factors in the UK that could affect the social media and soft technology business. As of 2023, the corporate tax was 25%, an increase from 19% in 2022 (BBC.com news, 2023). Such an increase in corporate discourages investors from investing in the UK, threatening the social media and soft technology business. on the other hand, the unemployment rate (4.3%), affects customer spending on social media services (Statista, 2023).
Social factors
A growing population is a key social factor that influences the UK. Currently, the UK population is 67,852,315 individuals, an increase from 67,736,802 individuals in 2023 (Worldometer, 2024). Such an increase represents a growing consumer market for social media and soft technology businesses.
Technological factors
Technological advancements and tech investment are major technological factors influencing the UK. Research institutes and private businesses work on the expansion of technology to earn a competitive advantage in the UK market (Odey, 2021). The government has also invested a lot in the tech industry as it contributes a lot of income to the UK’s GDP, presenting an opportunity to USL.
Legal and environmental factors
The UK holds several regulations and laws for firms operating in the nation. Such laws include the Employment Act of 1996 which protects workers and the Equality Act of 2010 which protects individuals against discrimination (Odey, 2021). Thus, the social media and soft technology business must comply with these regulations while operating in the UK. Additionally, the UK has taken several steps to lower environmental pollution by educating people about environmental issues and to act responsibly. Thus, the social media and soft technology business will be required to act responsibly while operating in the UK market.
Entry strategies
The opportunities and limitations for USL to choose various entry modes and a recommendation regarding an approach that best suits USL and the social media and soft technology sector.
Joint venture
According to Almenar-Llongo et al. (2021), a joint venture is a normal way of merging the expertise and resources of two otherwise unrelated firms. It encompasses contractual conformity between two or more corporations stating that each party will collaborate for a precise amount of time with the same goal (Almenar-Llongo et al., 2021). In other words, two or more companies agree to function together with mutual ownership for shared benefits. firms utilize this entry strategy due to the low risk associated with it. Thus, a major opportunity for the USL to select this entry mode is access to new markets and greater resources, such as finance and technology (Almenar-Llongo et al., 2021). Another opportunity for USL to select this entry strategy is reduced political and economic risks in a host country since both partners share costs and risks. USL could also access new expertise and knowledge, including skilled personnel. However, a key limitation of a joint venture is the existence of a risk that USL could give up its authority and its goal could not match its partner’s goal since the partners could anticipate different things from the joint venture, as Muñoz de Prat et al. (2020) explain.
Foreign Direct Investment (FDI)
According to Ercilasun et al. (2020), FDI denotes an internationalization approach where the organization creates a physical presence overseas via a direct possession of productive assets like plant and equipment, buildings, labour, technology, and capital. Therefore, a key opportunity for USL to select FDI is that by investing directly in another nation, USL could bypass the tariffs and other trade barriers between its home nation and the target market (Ercilasun et al., 2020). Another opportunity for USL is the creation of a competitive market. According to Ercilasun et al. (2020), FDI enables the entry of overseas firms into the local market. This move assists in developing and maintaining a strong competitive atmosphere which further assists in breaking down the local monopolies. Nevertheless, a key limitation for the USL in selecting FDI is that the FDI could generate social tensions, especially when the USL’s objectives differ among local communities. Another limitation is that USL will not reinvest its profits back into the host nation, leading to huge capital outflows from a host nation, as Ercilasun et al. (2020) note.
Merger & Acquisition
According to Reddy (2014), a merger is when two firms agree to join together to attain one’s objectives at the expense of the other’s resources in addition to the expense of the predecessor’s resources. Acquisition is when an acquiring company retains a considerable possession interest in the target company by purchasing the target’s equity or assets. Thus, a key opportunity for USL to select this entry strategy is the low risk compared to a new investment as the acquisition results might be more precisely and easily projected (Reddy, 2014). Another opportunity is improved distribution capacities. A merger or acquisition could expand USL’s geographically, increasing its capability to deliver services on a broader scale. Nevertheless, USL could encounter increased legal costs since unifying two firms is a legal business that often needs the engagement of numerous key professionals (Reddy, 2014). Merging USL with another firm could also be difficult due to different organizational cultures, management systems, and relationships.
Based on the evaluation of several entry modes, the recommended approach that best fits USL and the social media and soft technology sector in the UK is a joint venture. This is because according to Almenar-Llongo et al. (2021), this entry strategy will permit USL to access resources, and skills and understand the UK culture.
Systems including health and well-being, materials and energy, cities, and food and agriculture. They represent over 60% of the actual economy and are vital in distributing the Universal Goals. Furthermore, the report approximates the establishment of about 380 million new jobs connected to these four sectors over the coming 10-15 years due to the association of business plans to the SDGs. Thus, to fully seize such opportunities, USL must pursue environmental and social sustainability as passionately as it pursues shareholder value and market share (Business & Sustainable Development Commission, 2017). Additionally, financiers are becoming more anxious about businesses’ sustainability risk profiles and comprehending sustainability-associated business opportunities. Besides, they have indicated a concern about the SDGs and firms proactively encouraging the attainment of the SDGs (Business & Sustainable Development Commission, 2017).
When operating in the UK, USL needs to consider the triple bottom line requirements or three P’s”: people, planet, and prosperity theory. According to Correia (2019), the triple bottom line requirements guarantee that the company focuses its consideration outward. This implies considering the sustainability of supply chains and the effect of the firm’s operations on the communities that it works in and enhancing them to guarantee prosperous results for all involved. Additionally, USL could have a higher positive influence on the planet when operating in the UK (Correia, 2019). Rather than concentrating on paper profit, the company could quantifiably establish how its operations will favourably change the planet and the people it will engage with. This, in turn, will inspire worker retention and lower attrition, as Correia (2019) highlights. Employees could be more likely to trust an organization if its environmental effects are communicated. Moreover, favourable working situations comprising days off to volunteer, training, and competitive salaries could keep workers around, lowering the costs of recruitment.
Conclusion
The report has explored Universal Solutions Ltd’s (USL) external using a PESTLE Analysis and internal environment using SWOT and VRIO tools and offered a recommendation concerning an entry strategy that best suits USL and the social media and soft technology sector. From the PESTLE analysis, key factors influencing the UK include Brexit effects, unemployment rate, population growth, technological improvements, and employment laws. Based on the internal analysis, intense competition from sector leaders like Twitter threatens USL’s market development. Nonetheless, the company has a strong financial performance that could enable it to successfully expand into the UK market. Thus, a recommended entry strategy is a joint venture since it will enable USL to access resources, expertise, and markets.
References
Almenar-Llongo, V., de Prat, J. M., & Orero-Blat, M. (2021). Qualitative analysis for joint ventures as an entry mode in foreign direct investment. Journal of Business Research, 123, 324-332. https://doi.org/10.1016/j.jbusres.2020.09.062
BBC.com news. (2023, March 15). What is Corporation tax and who pays it? BBC Breaking News, World News, U.S. News, Sports, Business, Innovation, Climate, Culture, Travel, Video & Audio. https://www.bbc.com/news/business-63255747
Business & Sustainable Development Commission. (2017, January 4). BETTER BUSINESS BETTER WORLD. The report of the Business & Sustainable Development Commission. https://d306pr3pise04h.cloudfront.net/docs/news_events%2F9.3%2Fbetter-business-better-world.pdf
Correia, M. S. (2019). Sustainability: An overview of the triple bottom line and sustainability implementation. International Journal of Strategic Engineering (IJoSE), 2(1), 29-38. DOI:10.4018/IJoSE.2019010103
Ercilasun, M., Akyüz, A., & Döner, A. S. (2020). Foreign Direct Investment Strategy in International Marketing: The Case of Turkey. https://www.avekon.org/papers/1255.pdf
Muñoz de Prat, J., Escriva-Beltran, M., & Gómez-Calvet, R. (2020). Joint ventures and sustainable development. A bibliometric analysis. Sustainability, 12(23), 10176. https://doi.org/10.3390/su122310176
Odey, L. (2021). An Evaluation of Challenges Affecting New Technology Startups in the United Kingdom Today: A Pest Analysis. Bournemouth University. DOI:10.13140/RG.2.2.24136.24329
Perera, R. (2017). The PESTLE analysis. Nerdynaut. Available at:
Reddy, K. S. (2014). Extant reviews on entry-mode/internationalization, mergers & acquisitions, and diversification: Understanding theories and establishing interdisciplinary research. Pacific Science Review, 16(4), 250-274. https://doi.org/10.1016/j.pscr.2015.04.003
Statista. (2023, November 14). UK unemployment rate 2023. https://www.statista.com/statistics/279898/unemployment-rate-in-the-united-kingdom-uk/
Worldometer. (2024). UK population (LIVE). https://www.worldometers.info/world-population/uk-population/#:~:text=the%20United%20Kingdom%202023%20population,(and%20dependencies)%20by%20population.
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