Maritime Business in UK: External Environment
Table of Contents
External Environment Analysis. 4
The Political and Legal Environment 4
Maritime Business in UK: External Environment
The UK has been rated by the World Bank as the fourth country where doing business is easy and convenient. With globalization and worldwide business liberalization, many economies have introduced various trade restrictions which make it extremely challenging to either invest, or expand an existing entity. Cattedown Wahrf, Plymouth, which has been in the business of fuel importation, and currently wants to build a terminal which will enhance its maritime business, has a lot of factors to consider including the external and internal environments. These are factors that significantly affect the operations of a business, and must be effectively managed in order to achieve a firm’s objectives. The external environment represents those factors that attack the business from outside, and over which it has limited control (Carter, 2006). Basically, they include political, ethical, social, technological, economic, and legal factors, commonly abbreviated as PESTEL. This paper proceeds to present a comprehensive analysis of the external business environment that would significantly influence the operations of Cattedown Wahrf as it seeks to gain entry into a new business location.
Vital information regarding external environmental factors affecting maritime business in the United Kingdom was gotten from a range of sources through diverse means. Primarily, internet search was done on the UK government official websites such as Gov.UK, as well as extensive research from scholarly, peer-reviewed articles talking about doing business in the UK, potential risks, barriers, and opportunities. More importantly, research was focused on the maritime business and all its affiliates such as the port and overall energy and transportation sectors.
Additionally, face-to-face interviews were conducted targeting the government authorities concerned with maritime business such as Maritime UK. Important information was gotten from these sources, including the most current government incentives, offers, and bans. Moreover, plans for the future and future industrial projections were also sought from these sources, and notes taken for further analysis. The information received was organized and analysed for consistency and conformity to literary facts. A total of twenty people participated in the interview, which was open and did not involve the use of structured questions. The results obtained were filtered and presented as here below.
Results and Discussion
External Environment Analysis
The Political and Legal Environment
As earlier stated, UK has been ranked as one of the most strategic places for doing business in terms of ease of market entry and procedural issues (Aldrick, 2013). For Cattedown Wahrf, the political factors that would be very crucial for business include political pressures that affect market regulations, various political institutions in the area, political structures and processes that have to be followed while starting or doing business, various lobbying practices, and regulatory procedures that govern business operations (Banham, 2010; Cullinane, 2010). Aldrick (2013) asserts that one of the major attractants to investors to the UK maritime business is the flexibility of its judicial and political system. The UK is also presented as one of the countries with the most affordable tax systems.
In the maritime industry, the government offers a wide range of tax credits including up to 130% tax deductions for large companies such as Cattedown Wahrf. The company would be required to adhere to a standard corporation tax rate of 23%, but is projected to reduce by 2014 to 21% (Maritime UK, 2013). To the investors who shall be leaving in the UK, say the shipping companies that Cattedown Wahrf would attract, would be required to pay an income tax of not more than 45%, which is also documented as exceedingly affordable. The UK government had recently launched a program dabbed “Open for Maritime Business” which has introduced a favourable climate for maritime investors such as shippers (Maritime UK, 2013; Hobson, 2013). This shows that the government through its legal body “Maritime UK”, has adequate involvement in the industry, therefore Cattedown Wahrf must expect political interferences from time to time. Other incentives such as tonnage tax are yet to be introduced, and these might provide opportunities for the business. According to a recent study, the UK’s legal environment is also one of the most supportive for businesses. Actually, the registration process for a new business could take as little as 24 hours (Hobson, 2013). This would be a strong point of attraction for external businesses such as feeder vessels into the Cattedown Wahrf location.
It would be important for Cattedown Wahrf to have a clear understanding of the economic factors and situation in UK, even as it seeks to launch a new line of business. Elements such as economic growth, exchange rates, interest rates, and inflation rates are all important considerations that would affect the maritime business in a significant way. Bhattacharjee, Higson, Holly, and Kattuman (2009), report that UK is the sixth largest economy in the world, with a GDP of $2,174 billion. Based on this fact Ernst & Young European has ranked the UK as the most attractive destination for FDIs (UK, 2013). Moreover, the exchange rates are usually very stable, approximately going at 1.6122 pounds to dollars (UK, 2013). On the same note, the interest rates as reported by the Bank of England has always stabilized at 8.12, but extreme situations have seen the rates go as low as 0.5% and as low as 17.0% (Bhattacharjee, Higson, Holly, & Kattuman, 2009; Spence, Jeurissen, & Rutherfoord, 2000).
As outlined by (Maritime UK, 2013), although UK is a multi-cultural state, it has been recognized as a business destination that is attributed by business etiquette, business communication, high cost of living, social media guide, business meeting etiquette, and student placement and internships. The country has two official languages which are English and Welsh. As it stands, the UK is the leading country with the highest English speakers, as well as considerable portion of Christians. In fact, about 59% of the total population are Christians, but the society is multi-faith (Banham, 2010). For a business such as Cattedown Wahrf, it would be important to consider some of these variables, as they would significantly affect the nature of business operations, such as the image of the business as perceived by the public.
The most important element of the aesthetic component of business in the UK is its international relations. The country is in good terms with the United States as well as being a member of the Commonwealth. Thus, it enjoys close business ties with the world economy, allowing for easy inter-trade deals (Banham, 2010). Of crucial importance would be the external image of the company that would be guided by its commitment to corporate social responsibilities, production of quality goods, and their continued economic growth. All these would be determined by the overall good image of the country, UK, and its ability to attract the feeder vessels to its business hub. Moreover, the maritime industry in the UK is also characterized with rigorous marketing and promotion which are all aimed at putting various businesses in the public limelight. The nature of competition has a huge role in this, and it implies that Cattedown Wahrf would have to spend quite some capital on meeting these standards.
Brinkman, (2010), pointed out the importance of analysing customer spending behaviour, ability, dislikes, and preferences. Researchers claim that have a good knowledge of the customer base is important in tailoring products to meet their standards. In the UK, the consumer base for fuel and related products such as engine oils and lubricants is very rich but exceedingly competitive. At the port, for instance, there are many cruiser ships, motor-boats, and small sailor boats that require fuels to move. As stated earlier, the UK ports offer a rich a base of various kinds of business, owing to their level of connectivity to other parts of the world. The consumers as well have a high spending behaviour, since the UK citizens are ranked among the top people with the highest amount of disposable income.
The UK maritime sector has been adversely mentioned in the previous sections of the report, presents an area with intense competition, governed by powerful cartels which have amalgamated to form strong oligopolies that make it hard to venture into the business (UK, 2013). While the small scale sector could be easy to enter, the big-time business that Cattedown Wahrf is seeking would be a real challenge due to the nature of obstacles put in place by these cartels. For instance, the company would need high initial capital in order to start off at a point that would be able to stand a chance to compete with the other firms in the industry. However, these cartels are not officially recognized by the government and that means that one is allowed to corporate with other sectors in order to create a sustainable business base. Potter’s five competitive forces are very well in action within this sector, and it would be necessary for Cattedown Wahrf to adequately study them and device strategies to address them so as to maintain a competitive advantage.
The UK social environment represents a health-conscious nation with a population growth rate of 0.8% annually. Currently, the population is estimated at 63.23 million with a life expectancy rate of over 80 years (UK, 2013). As these statistics show, UK is not among the countries that have the highest growth rate, but it still tops China which surprisingly is one of the world’s most vibrant economic hubs (Dahlan, Auzair, & Ibrahim, 2007; Dinwoodie, Tuck, Knowles, Benhin, & Sansom, 2012). However, the people like shipping and sea leisure, and it is estimated that a considerable amount of the businesses taking place in the country, especially in Plymouth are mostly based on water and maritime business (Jourdan, 2013). What emerges strongly, however, is the proportion of the aged against the young population. Due to its high life expectancy and low population growth rate, the labour in the UK market is demanding and expensive (Maritime UK poll: UK economy, 2013). The company would have to compromise other areas of the production process to meet the cost of labour.
In terms of technology, UK is identified as one of the leading economy in green technology, especially in using wind as the primary source of energy generation (Bhattacharjee, Higson, Holly, and Kattuman, 2009). This is disturbing news for Cattedown Wahrf, since if the economy would exhaustively adopt this trend in energy production, then the demand for fuels would significantly go down (Dinwoodie, Tuck, Knowles, Benhin, & Sansom, 2012).
For the company to be fully operational, it would need a load of heavy machinery and sophisticated technology to meet the current standards of technological advancement in the UK economy. Such technologies would include plant robotics, heavy loading and off-loading machines, fuel refinery plant, tankers, and many other state-of-the-art innovations that would make its operations near completely automated so as to minimize the cost of production such as labour and the natural cause of human error. The minimum technological requirements for the company to start its operations such as the R&D activity and automation would determine the ease of access and entry of Cattedown Wahrf into the market, since they affect the initial capital required, the rate of innovation, and quality of products offered.
Lastly, according to Maritime UK (2013), it emerged that the UK government has put in stringent measures to guard against environmental degradation and pollution. Basically, the safety of the environment, including the flora and the fauna are among the top considerations that businesses are required to make while venturing into any type of business in the UK (Guy, 2009). As such, companies are required to conduct an environmental risk assessment and present the report together with their application for registration (Mason, 2008; Schaefer, 2009). For instance, the government had instituted an ambitious projects dabbed the Red Tape Challenge and the Habitat Directive, which specifically target the ports and maritime businesses. The PRISM project (Port Performance Indicators: Selection and Measurement) was instituted to gauge the performance of ports and maritime businesses based on their commercial health, waste generation, water usage, and carbon footprint (Maritime UK, 2013).
The results presented within this report reveal that there a lot of considerations that Cattedown Wahrf has to make before venturing into its large-scale business. The external business environment contains very crucial factors that affect businesses, which, unfortunately, they are not in control of (Strategy analysis, 2010). As identified in the results and discussions, they include legal and political factors, economic, social, technological, and environmental factors. Apart from these, internal business environment, which is not analyzed within this report, are also very important to evaluate (Halík, 2012). Basically, Cattedown Wahrf would need a huge sum of initial capital given the level of technological requirements as well as the competition that is currently in the market. Thus, inasmuch as the UK emerges as a lucrative and desirable investment destination, the fluctuating exchange and interest rates would be fluid aspects of the venture that would have to be given a close look; in order to adequately attract feeder container vessels at the brown filed side of Plymouth.
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Number of Words: 2,188.
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