Introduction

According to Hebron and Stack (2013), globalization is "the further development of the process

initiated over many centuries, reflected in the expansion of trade, exploration, conquest,

migration, colonization, technological advancement, and other events that have occurred

throughout the history of the world." The international trading market known as "global

business" has several risks and opportunities for risk management and market value capture

(Buganová, Šimíčková & Brutovský, 2021). Only in an environment that is supportive of the

company's success can business operations occur. This can happen if a company has extensive

knowledge and is skilled at interpreting both the macro and microenvironments to ensure its

financial success (Eruemegbe, 2015).

The term "internationalization" refers to the practice of creating products that may be easily

adjusted or that are designed to fulfill the needs of consumers worldwide (Hayes, 2021). The

process through which businesses expand their global operations has been the focus of the

development of the internationalization theory. The goal of internationalization is to understand,

clarify, and show how internationalization is implemented by businesses (Welch & Welch, 2000

cited in UKEssays, 2018).

Foreign Direct Investment is defined as "cross-border investment made in a business in another

economy by a resident of one economy with the goal of developing an enduring stake in the

investee economy" (Sudha, 2013). Such investments may be made for a variety of reasons, such

as to benefit from lower salaries or exclusive investment advantages (such as tax exemptions)

provided by the nation (Sudha, 2013).

This report focuses on the foreign direct investment concerns that must be kept in mind when

entering a new market. In this report, a UK-based SME Haywood & Padgett bakery is

considered. Established in 1987, the family-run Haywood & Padgett bakery has more than 30

years of experience making high-quality scones and other bakery items. With over 150 workers

and a production capacity of over 60,000 scones per hour, they are quickly becoming the largest

scone producer in the UK. Haywood & Padgett bakery current net worth is £23 million with a

total asset value of £13 million, total current liabilities of £3 million and £6 million as cash at

hand (Company Check Ltd., 2022).

Haywood & Padgett Key Financials (Company Check Ltd, 2022)

Foreign Direct Investment Issues Influencing Global Business Expansion

The business world is evolving, and businesses are expanding into new markets to broaden their

clientele and drive their businesses to success and growth. When a business is focused on

becoming global, market research is crucial. The Haywood & Padgett bakery is extending its

operations to the French market in order to improve its financial situation. Their reason for

choosing the French market is as a result of the global ranking of France as the fourth highest

importer of bakery products and services with about $2.66 billion imports of bakery products and

services annually (Wunsch, 2022). Market research is crucial because when an organization

enters a new market, it may experience both good and negative effects (Ayuba & Aina, 2015).

Before entering the French market, Haywood & Padgett bakery must make sure that there are

plenty of prospects for the market to boost sales and the firm's profitability. Different macro

business environment-related elements should be considered. Recently, the pandemic's negative

effects are still being recovered from over the world. As a result, it's critical that the company

concentrate on assessing all the variables involved in its entry into France. The company should

expand operations to France if the elements considered support the company objectives.

However, Danilova and Kuznetsova (2020) asserts that for businesses like Haywood & Padgett

bakery a thorough market research and attempt to build the strategies that will support their entry

into the French market and allow them to conduct legitimate business must be done. Thus, the

following FDI issues were considered in this report.

Political Issues

Several factors such as, customer base, profitability, and others, will be in their favor when

Haywood & Padgett bakery expands their operation to France. The raw materials or products
will be subject to various laws, regulations, and taxes which will have an impact on the business

obligations of Haywood & Padgett bakery. For instance, the corporate tax in UK is 19% (HM

Revenue and Customs, 2022) while the corporate tax in France is 26.5% (Trading Economics,

2022). This difference in tax rate will have an impact on Haywood & Padgett bakery. However,

comparable legislative bodies will result in no change to the firm's current worth, but

investments in trade and transportation will be made. The Haywood & Padgett bakery will need

to develop a presence in France and purchase assets in order to produce tangible evidence.

More so, the company employs about 150 people, but as it expands and its activities must

comply with government rules in the investing countries, a better workforce will be needed. Due

to the nature of their commercial operations, the government will also impose a number of

guidelines on the environmental factors that must be adhered to. The regulators will impose a

number of environmental standards on waste disposal to guarantee that the business does not

contaminate the environment. The business will need to make sure that transportation taxes are

correctly operating in line with the political considerations that exist in the market in order to be

able to run effectively and financially.

Economic Issues

According to Simionescu (2019), a nation’s economic situation has a significant impact on the

sales of the businesses that operate in such country. For every business operating in a particular

country, economic factors are crucial. While entering new markets, businesses must concentrate

on the numerous economic factors. Haywood & Padgett Bakery is concentrating on expanding

into France, a country with a stable economy that is addressing a number of economic difficulties

including high unemployment, a high poverty rate, slow growth, and weak competitiveness.

France is among the strongest economy in the world and its economy is ranked seventh globally
(Caleb, 2022). This indicates that there is a tremendous possibility for Haywood & Padgett

Bakery business to grow in France and make more money. From this, it can be concluded that

France will provide the Haywood & Padgett Bakery with a better customer base and significant

financial support as they expand their product line into France's new market. Additionally, the

French confectionery industry is expanding more favorably. This is another significant indicator

that the company has excellent growth potential in they expand into the France market.

Additionally, France's GDP is rising (from $2.63 trillion in 2020 to $2.94 trillion in 2021) and it

represents 2.2% of the world’s economy (Trading Economics, 2022). The impact of the

pandemic on country was experienced less. Despite this, this pandemic impact on the French

economy is being properly addressed, and the economy is expected to recover fully by the end of

2022. Based on these, Haywood & Padgett Bakery should concentrate on better utilizing the

excellent economic condition of France in their business expansion into the country.
 Figure 3: France FDI Net Inflow (% of GDP) (World Bank Data, 2021)

The French government changed the labor laws to emphasize development and ethics, ensuring

that all businesses entering the French marketplace will grow more successfully (Prosser, 2018).

All businesses operating in France are subject to explicit rules and regulations from the

government. Additionally, the government had established the same regulations for domestic and

foreign businesses operating in France. As a result, Haywood & Padgett Bakery would have few

difficulties running its operations in France. Additionally, the organization is more likely to find

highly qualified and trained employees. This gives Haywood & Padgett Bakery another

advantage as it enters the French market. The company would have an excellent potential to

develop and conduct profitable operations in France.

Finally, the Company should concentrate on creating plans that will enable them to survive in the

market. Haywood & Padgett Bakery should understand that they are entering into a highly

developed and competitive nation as such effective strategies are required to stay in business as

there are other competitors in the market. Furthermore, the organization will have a variety of

difficulties and problems in the new market. Therefore, choosing a successful entry strategy for

the new market becomes critical to the company's success. In addition, it is necessary to develop

an effective marketing plan and other strategies in a way that will correctly position the company

in a new market (Varadarajan, 2010).

Covid-19

The impact of the 2019 pandemic on global business was huge as the world economy entered

into recession. This impact was felt in every sector of the economy including the FDI inflow and

outflow globally (Moosa & Merza, 2022). This was as a result of business closures from the
public due to lockdown rules. This affected the global economy thus reducing inflow of FDIs

globally. Figure 2 shows the number of inbound FDI projects between UK and France during the

covid-19 pandemic period.

Figure 2: Number of Inbound FDI projects between UK and France (GlobalData, 2020)

Porter’s Five Forces of Competitive Advantage

Porter’s Forces Haywood & Padgett Bakery

Bargaining power of Suppliers This factor is not considered high as there is

no monopoly of supply in bakery products in

France. Haywood & Padgett Bakery

expansion is not really threatened by this

factor.

The bargaining power of buyers This factor is considered high as buyers have
 several factors influencing their choices on

what products to go for. Haywood & Padgett

Bakery can take advantage of this factor by

offering more for less to gain the needed

market share to enter this market.

Threats of new entrants This is considered low as the market is almost

saturated and the competition is high which

tends to deter new entrants to the market.

Haywood & Padgett Bakery is not threatened

by this factor as their unique value

proposition will make them stand out.

Threats of Substitutes This factor is considered high as there are

several businesses that offer the same services

to the same market. Haywood & Padgett

Bakery should make their product different

and unique from the ones already in the

market which will make their product to be

difficult to be substituted.

Competitive rivalry This factor is considered high as the market is

highly saturated with similar businesses.

Building strategic partnerships will similar

local businesses will give Haywood &

Padgett Bakery the competitive advantage

 they need to enter this market.

Mode of Entry

Using the best entry strategy when entering a new market is crucial for businesses throughout

market expansion. The basic market entry strategy identified by Jeannet and Hennessey (1992)

are split into three broad groups: exporting, joint venture, and direct investment or strategic

partnership. Selling a product abroad without committing to local manufacturing is what is

known as exporting (Burnett, 1993). Haywood & Padgett Bakery can use a variety of entry

strategy but the most effective entry strategy for them would be the strategic partnership entry

strategy.

With an estimated $18.26 billion in yearly revenue (Statista, 2022), the French confectionery

sector is extremely competitive, making entry difficult. As a result, Haywood & Padgett Bakery

should concentrate on developing strategic partnerships with the local French bakery service

providers. This will reduce problems caused by regulations and laws. However, because of the

laws and regulations that the French government has put in place to facilitate the international

expansion of businesses into their nation, Haywood & Padgett Bakery will not face many legal

hurdles or trade regulations. Additionally, Haywood & Padgett Bakery will gain more from their

strategic partnership and both companies will share in the risks and rewards. This would assist

the business in lowering concerns about financial risk and other dangers (Blackburne and

Buckley, 2019). Additionally, Haywood & Padgett Bakery's strategic partnerships with local

bakers will make it easier and more productive for them to enter the market over time.
The Haywood & Padgett Bakery's sales and profitability are greatly impacted by its pricing

strategy. The pricing strategy is significantly influenced by a number of market variables. When

a company decides how much to charge for a product in a certain market, economic factors have

a significant effect. The French economy is now performing well, and the majority of French

people (91.99%) earn an income (O’Niel, 2022). As such, Haywood & Padgett Bakery should

maintain its average pricing so that consumers may easily afford it. In addition, upon entry,

Haywood & Padgett Bakery would benefit from a value-based pricing approach, a cost plus

pricing strategy, and a competitive pricing strategy.

Recommendations

Figure 3: Projected Revenue change in France Confectionery Industry (Statista, 2022)

Based on the identified issues and selected market entry, the following recommendations have

been made for Haywood & Padgett Bakery:

  The business should pay attention to the identified issues in this report for the effective

internationalization of their business.

 The mentioned mode of entry should also be designed into Haywood & Padgett Bakery

marketing strategy as the enter into the French business environment.

Conclusion

For Haywood & Padgett Bakery to have a successful business entry into France the business

must understand the global market dynamics that governs the French market so as to allow them

to position and take advantage of the business opportunities inherent in this market. More so, the

identified FDI issues mentioned in this report must also be addressed in line with Haywood &

Padgett Bakery global business objectives and their business strategies must be designed to

reflect the current realities in the French global market environment. Apart from the identified

FDI issues, the market entry suitable for Haywood & Padgett Bakery has also been discussed.

Hence, Haywood & Padgett Bakery should pay attention to these issues for them to have a

successful internationalization of their business in France.

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