Introduction
Globalisation has been on the increase in the last couple of decades, as the world’s economy continues to grow. This has led to increased international trade. Most organisations are seeking to expand their customer base in the international market. International trade refers to the type of trade that occurs among nations. In other words, it can be defined as the exchange of goods and services among different countries or organisations from different countries (Dlabay & Scott 2010).
Multinational organisations have increased with the development of globalisation. There are a number of reasons why most organisations and countries prefer international trade. However, it should be noted that international trade also poses a threat to the organisations and nations participating in the trade (Brown, Gutterman & Curry 2011). This article will discuss the international business opportunities and risks faced by the pharmaceutical industry in the UK.
International business opportunities
The pharmaceutical industry in the UK is a significant sector in the country, as it contributes to a significant amount of the country’s GDP and it provides employment to the citizens. The country is home to some of the largest pharmaceutical companies in the world. It also hosts significant foreign pharmaceutical companies (Grossman, Lindgren & Dor 2010). Therefore, the industry has a good presence in the international market. There are a number of opportunities that the industry realises in the international market, which would probably not be available in the domestic market. Some of the major benefits are discussed below.
The international market provides an extensive market to the UK pharmaceutical industry. The companies in the country are able to reach more customers for their products, which is important because it increases the chances of success for the companies (Aswathappa 2010). It should be noted that business organisations are formed with the aim of maximising profits, and the best way to guarantee profits is to capture as many customers as possible.
The international market presents the UK pharmaceutical industry with a wide pool of customers for the companies to sell their products. This is a great opportunity that is essential to the future, as well as current growth and development of the industry. The fact that an international pharmaceutical firm can access many customers means that it is highly likely to increase its profitability and growth.
The UK pharmaceutical industry is able to come across a wide range of similar products that are of varying quality, distinct designs, as well as different product development strategies by participating in the international market (Whewell 2010). This acts as a learning opportunity for the industry, as the industry is able to understand the products better. This facilitates quality improvement. An international organisation in the pharmaceutical industry is better positioned to produce better quality through learning from the international market. This improves its competitive advantage, as it increases customer satisfaction.
The industry also gets a chance to spread its portfolio. The industry becomes secure from probable events that may take place in the UK, which are likely to have a negative effect on the industry or the economy at large (Pugatch & Perez 2004). In addition, the companies in the industry find markets for some of the products that may not be selling well in the domestic market. Any international firm in the UK pharmaceutical industry can, therefore, be better positioned to spread its production portfolio because it can produce a wide range of products.
The pharmaceutical industry in the UK will face reduced competition in the international market. The UK has a competitive pharmaceutical industry, given that it is home to some of the largest pharmaceutical companies. Companies are likely to reduce the level of competition that they would face domestically by expanding into the international market.
International business risks
One of the major risks that firms from the UK pharmaceutical industry would face is the failure to understand the local legal framework of the countries in which they expand to, as different nations have different legal frameworks. It is important for the companies to understand these requirements to successfully trade in the country of expansion with less or no sanctions (Tihanyi, Devinney & Pedersen 2011). This is a risk that the pharmaceutical industry faces, as it is not easy to understand the legal framework of each nation.
The lack of effective communication with the international business partners is a common risk to most industries (Rugman, 2009). This is caused by the language barriers between nations. Failure in communication may present a great risk to the industry, given that communication is one of the major factors that lead to success in business. Distance may also be a barrier to communication. The UK pharmaceutical companies may have to spend a lot in travels, thereby increasing expenses and reducing profitability.
An unstable profitability is another risk that the pharmaceutical industry in the UK faces by participating in the international market. It is hard to have a stable profitability due to the fluctuations in the foreign exchange rates. It is not easy to predict the exchange rates, thus the pharmaceutical companies may not be able to predict their expected expenditure and revenue with precision (Paul 2009). The profits are also unstable, making it difficult to plan for the future.
Conclusion
International business is important to many industries and organisations as it helps in expanding the market and reaching new opportunities that may not be available domestically. However, companies also face challenges that may threaten their success in the international markets. It is, therefore, important for the firms in the UK pharmaceutical industry to understand all the relevant factors in the international market and make the right decisions when approaching the international market.
Reference List
Aswathappa, K 2010, International business, Tata McGraw Hill Education, New Delhi.
Brown, R, Gutterman, AS & Curry, JE 2011, A short course in international business plans: Charting a strategy for success in global commerce, World Trade Press, Petaluma, CA.
Dlabay, LR & Scott, JC 2010, International business, South-Western, Mason, OH.
Grossman, M, Lindgren, B & Dor, A 2010, Pharmaceutical markets and insurance worldwide, Emerald, Bingley.
Paul, J 2009, International business, PHI Learning Private Ltd, New Delhi.
Pugatch, M & Perez, M 2004, The international political economy of intellectual property rights, Edward Elgar Publishers, Cheltenham.
Rugman, AM 2009, The Oxford handbook of international business, Oxford University Press, Oxford.
Tihanyi, L, Devinney, TM & Pedersen, T 2012, Institutional theory in international business and management, Emerald, Bingley, UK.
Whewell, R 2010, Supply chain in the pharmaceutical industry: Strategic influences and supply chain responses, Gower Publishing Ltd., Farnham.