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In time, Paula and Thomas intend to expand the business into the EU market - Leaving Cert Business - Question B - 2006
Question B
In time, Paula and Thomas intend to expand the business into the EU market. (i) Describe the implications for the business of expansion. (ii) Explain two methods of... show full transcript
Worked Solution & Example Answer:In time, Paula and Thomas intend to expand the business into the EU market - Leaving Cert Business - Question B - 2006
Step 1
Describe the implications for the business of expansion.
Answer
Expanding into the EU market carries several implications for Paula and Thomas's business:
Short-term Implications
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Organisational Structure: The business may need to adjust its organisational structure to accommodate new markets, potentially adding more layers of management or opening new departments.
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Capital: Initial investments will be required for market research, setting up operations, and marketing efforts in the EU.
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Cash Flow: There may be impacts on cash flow, particularly if the expansion takes time to generate revenue. Adequate financing will be necessary to cover costs without straining existing operations.
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Resources (Human and Other): Hiring additional staff with knowledge of the EU market and regulations may be essential, along with securing resources such as suppliers and logistics providers.
Long-term Implications
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Future Marketing: The business will need to develop marketing strategies tailored to the EU market, understanding local consumer preferences and regulatory requirements.
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Research and Development: Ongoing R&D may be necessary to adapt products or services to meet the expectations of the EU customer base.
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Production Facilities: Depending on the expansion strategy, new production facilities might be needed, which incurs further investment and operational management.
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Strategic Planning: A robust strategic plan will be crucial for navigating the complexities of international business and market entry.
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Profits: The expansion could eventually lead to increased profits, but initial stages may involve higher costs and lower margins.
Step 2
Explain two methods of expansion you would advise them to consider.
Answer
There are several methods Paula and Thomas might consider for expanding into the EU market:
1. Merger/Takeover
Entering into a merger or acquisition with an existing company in the EU can provide instant access to established operations, customer bases, and local knowledge. This strategy can lead to economies of scale and enhanced market presence quickly, although it requires substantial capital and careful due diligence to ensure a favorable outcome.
2. Strategic Alliance and Joint Venture
Forming strategic alliances or joint ventures with local companies can allow Paula and Thomas to share resources, risks, and expertise. This method enables them to enter the market with lower financial risk while leveraging the partner's local market knowledge, distribution channels, and established networks. It can also foster innovation and adaptability to local consumer needs.