Global business assignment

Student ID: 991480411, 991546414

Peter Cowan

Table of Contents

Executive Summary 2 Introduction 2 PEST Analysis 2 Germany 3 Political Factors 3 Economical Factors 4 Social Factors 5 Technological Environment 5 Environmental Factors 6 Legal Environment 6 Mexico 6 Political Factors 6 Economic Factors 7 Social Factors 7 Technological Factors 8 Environmental Factors 8 Legal Factors 8 Decision Matrix 9 Recommendation 10 Bibliography 11

Global expansion refers to taking the operations of a business to overseas markets. The markets must be lucrative to generate attractive returns. Global expansion is one of the strategies to attain growth by establishing a presence in other countries. Before choosing the next destination, a company must do enough research about the country of interest before making any tangible decisions. This is important to avoid blind decisions that will harm the financial health of the company. Investing in market research is not a waste of time. Instead, it is an opportunity to understand more about several markets that can be tapped and leveraged to the advantage of the company (Simoes, 2020). One of the ways of researching the potential market is using the PESTLE model. This model involves the analysis of a country's political, economic, social, technological, legal, and environmental factors that may influence the success of the business. This document is a comparison of Mexico and Germany as the two potential markets for the expansion of Loops Insight. The assessment of these factors will lead to a conclusion and recommendation of the best destination that will be discussed and justified at the end of the paper. After a careful assessment, Mexico is considered better than German after the assessment of the PESTLE factors.

The company Loop Insights, based out of Vancouver is looking for new markets to enter and expand their business. The company is focused on helping other businesses calibrate their models to satisfy customer needs. They are seeking to enter countries that can be compatible with their technology, help them easily integrate their services and make businesses more efficient in the respected countries. Germany and Mexico are potential candidates for the company to expand their business into. A PEST analysis is going to be used to compare which one of these countries would be the best choice for Loop Insights.

A PEST analysis helps find out what type of stance a country takes politically, where they stand economically, social issues currently going on in the country, and what kind of technology is available. It also helps in assessing future complications that could arise and how they would impact the company. It is a key part of finding out and planning which country will be the best fit for the company.

Germany is a powerful country in Europe with the 4th largest economy in the entire world. They are the world's second largest exporters and third largest importers. The country excels in technology and takes a lot of pride in their scientists and inventors. These are just some facts about Germany, below is the PEST analysis that makes the case for expansion to the country.

The politics in Germany are very stable, the company scores 6th out of 128 countries for overall score in the World Justice Project (World Justice Project, 2020). Although, there has been recent news of corruption allegations against a senior German politician (Sugue, 2021). The politician under fire allegedly took a commission of a little over half million euros and avoided paying tax on it. Other than that the German government does not contain much corruption according to WJP where they have a score of 0.82, which is 11th out of the 128 countries. They did have less corruption from 2017-18 where their score was 0.83, but the changes are not drastic and should not be harmful to new business coming into the country. According to the World Justice Project, Germany has a ranking of 0.93 in order and security, which is 3rd out of 128 countries (World Justice Project, 2020). This means they keep persons and properties in their countries secure, crime is controlled, and civil conflicts are not an issue. Loop Insights should not have much trouble adjusting to laws and policies in Germany, or about facing any trouble from government officials. Germany values customer service from their businesses greatly, Loop Insights would have to hire experienced customer reps to integrate their business model and keep the reputation at a consistently good level.

Germany is considered a world leader because of their inventions and having a sustainable economy, which is ranked the 4th largest across the globe. It is the largest one in the European Union, with the service sector of the country contributing 70% of the GDP, industry contribution of 29.1% and agriculture at 0.9% according to Britannica (Britannica, 2021). The Focus economy in 2019 that recorded a nominal GDP of $ 4.2 trillion. Recently, there have been concerns in the manufacturing and production sectors. Germany has a healthy job market and records a 3.2% unemployment rate which is one of the lowest rates in the world (Stolper, 2017). In Germany, employees have a good working environment, enjoy the longest holidays and attractive salaries. The government deducts 15 % corporate tax, and businesses incur a 5.5 % solidarity surcharge of their corporate tax and 14 to 17 % local tax. In total, they pay about 30-33%. Loop Insights will be paying significantly less in tax conducting their business in Germany compared to what they pay in Canada. With Germany’s economy on a good path Loop Insights could thrive working there with other businesses.

In terms of health, wealth, education, and quality of life, Germany is one of the most beautiful countries. It is the second-most populous country with a life expectancy of 78 years for men and 83 years for women. It registers one of the lowest birth rates globally (Simon et al., 2018). As a cosmopolitan country, it is characterized by the pluralism of lifestyles. Christianity and Islam are the main religions in the country. Most people enjoy a high standard of living with the freedom to shape their lives. Currently, the country faces several social challenges: low birth rates, an aging population, low purchasing power, expensive lifestyles, and falling wages. The most important social factors are privacy, structure, punctuality, diligence, hard work, and perfectionism.

Germany is ranked the fifth country in terms of technological advancement. It is known for its huge investments in research and development. The ITC sector employs more than a million people. The country has a global market share of 14% (Yu & Schweisfurth, 2020). Reportedly, the German government sets aside funds for research and development in a bid to develop artificial intelligence. This is aimed at reducing the gap between Germany and other nations in software development innovation. Germany’s advancements in technology is what gives great potential for Loop Insights to move there.

Germany has beautiful tourist destinations, making tourism a major industry that contributes 4.5% of the country’s GDP. It is a unique country in terms of culture, history, sceneries, small villages, grand palaces, and cathedrals. Like other parts of the world, German faces the consequences of global warming. It experiences water pollution, acid rain, air pollution, and emissions from industries and coal-burning utilities (Zito et al., 2019). However, the government reported that it had appointed the panel for addressing these challenges.

When establishing companies, foreigners are subject to the same legal environment as Germans when it comes to making investments. The government promotes all businesses and is less concerned about whether the businesses involve nationals or foreigners. In this country, $ 9.19 per hour is the minimum wage, and Employees enjoy 25-30 days of holiday per year (Akcouglu et al., 2017). Employers are also expected to offer equal opportunities for employment regardless of their race, religion, gender, ethnicity, sex, culture, and other factors. Legal actions are taken against employers who defy the contract or subject employees to harsh conditions.

Mexico is a presidential democratic country headed by the president. Through NAFTA, Mexico has a positive business relationship with the US and Canada. It is significantly present in the globe and strong regional power. It has a significant diplomatic relationship with several nations across the globe and an active member of the UN. Historically, Mexico has a neutral position in international conflicts. Therefore, it is less affected by such wars. However, the country is reported to register very high levels of bribery and corruption in governmental and non-governmental institutions (Gerrido & Freidenberg, 2020). This challenge poses a great risk for local and global businesses.

Mexico is ranked position 15 in terms of its economy, with a GDP growth rate of 4.25 % annually. The company exports to the USA, Japan, Germany, Canada, and China. It also imports from the USA, China, Japan, Germany, and South Korea. It is a member of the MINT group, which is predicted to be the next giant. The country is open to foreign direct investments with a high growth rate of foreign investments. Currently, the corporate tax in the country is 30%, and the individual tax ranges from 1.92 % to 35%. All the retail sales incur a value-added tax which is 16% in most parts of the countries, except the borders whose rate is 11%.

The total population of Mexico was 125.3 million, according to 2018 census reports. The country is known for its natural beauty, affluence, high ad levels of poverty. For men, the life expectancy is 75, while for women, it is 80 years. The major language and religions are Spanish and Christianity, respectively. Mexico is considered to be one of the most affordable countries in Latin America. There is a very wide gap between the rich and the poor, and economic affluence remains to be a dream (Hauer et al., 2018). The Mexican society fancies family as the most important element in society. Despite these challenges, some of Mexico’s socio-cultural aspects have global attention, including the family facet and its football fun that has fans all over the world.

Technological Factors Over time, Mexico has been a significant target for some of the largest tech firms across the globe, including Uber, Google, Amazon, Facebook, and others. By 2022, the IT and communication sectors are projected to represent approximately 10.7% of the country's total GDP (Herrera et al., 2018). Reports show that the country is willing to use technology to revolutionize its economy. The country has made Guadalajara which is the second biggest city global center that deals with research, design, and programming.

Mexico is a very beautiful country, with beautiful landscapes, beaches, desserts, historical marks, and favorable weather. These features attract millions of tourists who contribute greatly to the country's economy. However, there are several environmental challenges, among them air pollution that has reached a level that threatens human health (Robina Galatas, 2018). In 2019, BBC reported that the government had urged citizens to stay indoors to prevent the health risks associated with air pollution. Other environmental challenges include water pollution, loss of water resources, and toxic wastes have been a threat to the country.

The Mexican judiciary is an independent and free arm of the government. However, the high rates of corruption in the countries raise questions about the credibility of the judiciary. Companies operating in Mexico must provide legal contracts and sign them with employees. The written contracts are meant to seal the relationship between employers and employees and create a healthy environment for both parties. There are strict laws on how employers treat employees, especially laws related to compensation and benefits and workplace discrimination. Workers are also entitled to maternity leave and annual holidays. The law prohibits sexual preferences.

The preferable country, in this case, is Mexico because of its relatively favorable conditions based on the PESTLE analysis. The analysis reveals that Mexico is more attractive politically, economically, socially, technologically, and legally. The two countries experience the same environmental challenges as mentioned in the analysis. Therefore, it is recommended that Loops Inc. considers Mexico as the next destination for global expansion, the company could excel further in Mexico’s business environment. The factors discussed in this paper present great opportunities that can be exploited by such a company to enhance its global presence.

Investopedia. (2020, 11, 14). PEST analysis. Retrieved from Investopedia: