Paper Example on Rahat Continental Limited E-commerce Business Venture

Introduction

The company's willingness to venture into an e-commerce business into children apparel is an unrelated diversification from the primary activity. For that reason, there are different target segments of the operations in providing air service and the new business of children apparel. In other words, it means different risks of exposure and other new risks as they try to go international with an unrelated expansion (Luthans and Doh, 2018, n.p). The report on the market research uses PESTEL analysis to analyze the risk of the business in the United Kingdom. Also, the report outlines the barriers that may hinder the growth or success of the e-commerce business in the UK. From the analysis and identification of the barriers, the paper recommends on what Rahat Continental Limited need to adapt to compete and succeed.

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Market Research

Statistics show that as from 2014, children's clothing market has expanded. In the global market and in particular the clothing industry, children's clothing market is the fastest growing. The statistics from 2009 to 2014 has shown that a growth rate of 15 % was witnessed (Cooper, 2017, p.1). Additionally, the G8 countries, UK among them, predict a 2% yearly growth in the children apparel industry. On that note, it is an indicator that an expansion into such line of business is expected to meet the demand and promise of the future market and revenue expansion after the venture into the business. Also, in EU, they spend almost 11% on children clothing industry which shows that there is a rapid growth in the sector. The extension is mainly attributed to increase in birth rates and more spending in a single child. For instance, children between 0-24 months of age have fast biological growth rates, and thereby they outgrow the clothes fast. Therefore, parents regularly buy new clothes, thereby increasing the demand. Narrowing down to the United Kingdom, conducting of international business with the aim to use the country's benefits to acquire the target market will depend on analysis of political, social, economic, technological, environmental as well as legal factors (Rachet, 2014, P.6).

Political Factors

Despite the country being ranked among the country expecting a continuous growth in the children's clothing sector, some political decisions affect on the market or the revenue (Grunig and Kuhn, 2015, p.89). In the United Kingdom, the dominant political factors that may affect Rahat Continental Company include the post-Brexit uncertain outcomes. The government cuts on public expenditures as a way to reduce the deficit, and Scotland claims to be independent. The mentioned political factors may affect the business venture internationally as the policies of the country may result in uncertain outcomes. In case the UK leaves the EU, it means that the country is going to lose part of its market, thereby exerting the pressure of local competition that may lead to price decrease (Dhingra, Ottaviano, Sampson, and Van Reenen, 2016, p.24). Rahat Continental Company and its ability to offer the children apparels at a competitive price will not be able to make the significant margin of profits or may have higher prices compared by the local companies.

On the other hand, the cut of public spending by the government directly affects the consumers' confidence and may cut on their daily consumption. Hence, Rahat Continental Company has the likelihood of growth regarding market and revenue may be affected by the future result of political moves of UK. There is lot of uncertainty if Scotland becomes independent from UK or incase UK leaves the European Union (Eid, Hakvoort and de Jong, 2017, p. 33).

Economic

The significant economic factors that may be faced in this case include exposure of exchange rate risk, inflation, and the economic state. Any company operating beyond its borders is exposed to the movement of exchange rate movements that may cause a reduction in profits when changing from one currency to another (Rachet, 2014, p.7). Rahat plans to sell through e-commerce where the prices will be quoted in the UK currency, but later they will need to convert it back to the Indian money for records. The firm may either gain or lose the value during the conversion depending on the exchange rate at different times of the year. According to the United Kingdom exchange rate system, it is a floating system where the market demand and supply determines the rate of exchange. In such case, the exchange fluctuation will automatically affect the value of the local currency in which the final records will be translated into financial currency.

In November 2017, UK recorded the highest inflation since 2012 which was 3.1%. But the country has been able to control the inflation movements thereby it is an indicator that there is a stable economic environment for Rahat Continental Company. For instance, if foreign inflation rose above the home inflation, it would make the production cost expensive which would in return result to increase in the prices, but for the company, it will remain constant due to the low rate on inflation in their home country. On the other side, in case the foreign interest rate is lower than in the home country, it would mean that the production cost of their primary supplier will be high, thereby increasing the prices of the children clothes. As a result, the prices may be higher compared to the local competitors, and they may end up losing customers at such times.

Another economic factor that affects international business venture is the level of employment rate. Increase in level of employment is an indicator that people have disposable income thus they can increase their expenditures. Also, high levels of unemployment increases the dependency among people and reduces income that could be used to buy more goods and services. In the United Kingdom, labor statistics in the last two years show that both the level of employment and unemployment increased. This strongly indicates that the market will not lose its value when there is an increase in the employment rate.

London is the most expensive cities to conduct business in the European region. This is through consideration of transport, restaurants and property prices. Due to its reputation as the land that provides quality, reliability, and transparency, it would be a reason for the expensive services. On that note, it means that Rahat Company Limited will incur lot of costs for buying the properties in which they need to store the infant clothing. This may also lead the expensive transport fee when delivering an inline order to their clients.

Social Factors

Social factors include the take on online business, people customs and beliefs and purchase behaviors (Mizdrak, Waterlander, Rayner and Scarborough, 2017). In the recent times, people in the UK have adopted the online purchases where the current generation prefers to use their smartphones to shop online than physically presenting themselves in stores. This indicates the Rahat Company ability to maneuver and pursue and gain market share of young people in the job market. More so, the fact that people love shopping online means that they will get interested in adopting the online shopping for kids apparel where they can be delivered to their premises.

From the statistics provided in 2016 on consumer behavior, it shows that around 80% of consumers get products in the physical stores and goes ahead online to get the best offer prices of the same commodity. Therefore, it is a reliable indicator that Rahat Business venture may have a positive performance in case the prices are competitive. Additionally, more than 50% of people confessed that they do not mind shopping from foreign retailers as long as the prices are favorable. Additionally, 44.5% do not opt to buy goods from individual retailers. The conclusion of the consumers to avoid buying goods from certain retailers could be due to the first impression created by the retailers that scare them off. So, Rahat's first impression to the UK population is very crucial to ensure that their entry to the market does not face adverse reaction that can make them lose a segment of the market forever (Stokes, Clarence, Anderson, and Rinne, 2014, p.147).

Technological Factors

This involves technological advancement in production, marketing, and distribution of the infant clothing (Ab Talib, Hamid, Zulfakar, and Jeeva, 2014, p.119). Most of the clothing retailers in the UK have adopted technological advancement to market their products, improve the quality and to distribute to customers. In the recent past, high rate of consumers' adoption of smartphones has increased the search for products online. Alternatively, the retailers have gone ahead to open online stores to reach the digitized market. Also, it has been made easier for marketers to advertise their products online where they use social media networks to create awareness to customers on different products available in their stores. Through the use of social media, the different companies have reduced the costs of reaching out to the potential borrower. It has become more accessible to communicate directly with the customers who through their opinions or suggestion may highlight changes in designs, quality or cost.

Therefore, from the analysis, Rahat Company will face significant competition because of the latest retailer adoption to open online stores in the UK. Additionally, the clothing industry in this country is so competitive that has led to prices being held low. For that reason, Rahat may face the challenge of pricing their products in already a competitive industrial sector. It may be profitable for local clothing companies as much as the prices are held low because they may not incur extra costs like transport costs from one country to another as well as transactional costs that Rahat may face.

Environmental Factors

Different international businesses must observe environmental rules and regulations that are provided by different countries to operate in their land. It is to the advantage of Rahat firm since their venture is an e-commerce business that does not have any harm to the natural environment. There would be barriers to the implementation of the business if they were setting up a company in the UK to manufacture clothes by themselves. So, in this case, they avoid the barriers that are put by the government of UK to prevent excessive pollution. For that matter, most of the local manufacturers are obliged to strictly follow the environmental rules on pollution and disposal of waste materials, failure to which that may cause closure of the company.

Despite the fact that they are not limited by pollution laws, they may be affected by the weather conditions. Due to the recent adoption of e-commerce business by most of the retailers and clothing companies, many people will prefer to order goods and then wait for them to be transported to their premises. During the extreme cold weather that are at times characterized with flakes of snow, floods and storm affect the transport of the baby's clothing to customers' premises (Eid, Hakvoort, and de Jong, 2017, p.329). This may lead to dissatisfaction of some employees whose orders may be delivered late. So before the establishment of the business idea, the company should ensure that some strategies on how to deal with the lousy weather effects are outlined to maximize the satisfaction of employees.

Legal Factors

The legal observance is another significant driver that can help Rahat to expand in the United Kingdom successfully. This includes competition laws and regulations, protection of customer rights and legal regulations that need to be observed (Khan, 2017, p. 26)....