International business enviroment

Executive Summary

The chief slogan of this survey to supply information about Pakistan dress sector is analyzed and operated to happen out the recommendation for determination about operating concern with the Pakistani maker by Marks and Spencers

By and large the criterion of quality garments and update of scheme are basic demand of dress sector of Pakistan taxtile.More over the demand to follow child labour issue, minimal pay act, equal chance to all the occupants, issue of pollution and required to see the affair about client satisfaction, which can be increased their international repute.

While Pakistan have cheap labor and strong fabric sector which provide ample chance to make concern As consequence of these factors Marks and Spencer may acquire net incomes which can back up the concern with the Pakistan dress industry

Introduction

Fabrics is critical or we can state anchor of Pakistan economic system. Pakistan Textiles consist assorted sections like production of narration to fabric to knitting/weaving to dress fabrication. Marks and Spencer does non hold any fabrication unit, so they outsource their production chiefly form India and China. Now there is a chance to fabricate Mark and Spancers garments. The study consist fact and figures of Pakistan fabric and garment sectors, national concern system, import and export barriers, investing chance.

Section One

Analysis OF THE NATIONAL BUSINESS SYSTEM AND THE CULTURAL CONDITIONS IN PAKISTAN WITH THE ASSESSMENT OF HOW THIS WILL Affect MARKS AND SPENCER IN UNITED KINGDOM

Fabric industry plays an of import function in beef uping the Pakistani economic system. Textiles provide about 60 % of the entire Pakistani exports which accounts for $ 5.2 billion. This sector contributes to about 46 % to the entire end product produced by the state. However these figures might worsen in the close hereafter because of the ruin and jobs faced by the fabric industry. Pakistan is the 8th largest Asiatic state which produces quality merchandises related to textile industry. The fabric industry constitutes of 8.5 % of the entire GDP of Pakistan

By existent or Nominal GDP the economic system of UK ranked 5th in the universe through buying power para ( PPP ) .It was expected to be US $ 2.279 trillion.United Kingdom is besides a 2nd largest economic system of Europe.The economic system of Europe is increased by 1.1 % in the twelvemonth 2008, with that it stand 187 in the universe GDP growing rate conference in comparing with overall universe GDP of 3.8 % and EU growing rate of 1.5 % .UK service sector contributed 76.2 % of entire GDP where as UK Industry & A ; Manufacturing – 22.8 per centum and agribusiness contributed merely 0.9 % to the entire GDP.

1. Political Systems:

As such Pakistan is a democracy and democratic state but it is ever dominated by absolutism. Politically Pakistan is unstable. Pakistan has two chief national parties Pakistan People Party and Pakistan Muslim League People have economic freedom but there is no political freedom. Economic status is rather stable but any change political factor for illustration democracy to absolutism may lift revenue enhancements, regulations, import and export responsibilities etc. So from a political position, to make concern with Pakistan is rather hazardous

Whereas United Kingdom is a democratic state, where people have their freedom to make what of all time they wish, politically stable.

2. Legal Systems:

Major limitation for the investing in Pakistan because of deficiency of protection on the Intellectual Property Rights ( IRP ) . They have been placed under a “ Particular 301 ” Watch List since 1989, which indicates the degree of buccaneering and copyrighted stuffs in that state. Apparel and Media are of the bulk of those goods, which lack in IRP.

Child labour and minimal rewards are besides a major issue. Many kids are forced to make work, although child labour is a legal offense in Pakistan but if Mark and Spancers want to make concern with them, they have to do certain all the labours are legal and permitted to work by authorities of Pakistan so there will be no issue They besides make certain all workers are acquiring at least minimal rewards, and there will be no difference between work forces and adult females pay.

On the other manus UK has a good structured IPR System. And at that place 100 % jurisprudence against child labour, they have equal wage act, UK have minimum pay act in UK minimal hourly pay is & A ; lb ; 5.8.

3. Education System:

Pakistan has a low literacy rate Total Adult Literacy Rate: 54 % ( Male 66.25 % , Female 41.75 % ) – ( Pakistan ‘s Ministry Of Education. ) So Mark and Spancers could take advantage from this fact and since Pakistan has a inexpensive labour, so to make concern from the educational position could be good. Whereas, the literacy rate of UK in male 98 % and female is 99 % .United Kingdom authorities provide free instruction to kids.

4. Technology System:

Pakistan is a large market for textile machine fabrication states. Pakistan exports assorted and high measure of fabric goods, so China and Switzerland took the chance of that and has been providing them with progress fabric machines. So as per engineering Pakistan is non a pioneer but they have good quality fabric machines to bring forth the garments, which may assist Mark and Spencers to bring forth complex designs and manner.

Cultural Conditionss:

Harmonizing to the Hofstede ‘s Model in Figure 1, both states have different cultural conditions. Pakistan has a Power Distance ( PDI ) of 55 points, which shows that Pakistani people expect and accept that they are non treated decently and every bit, where as UK holding 35 points indicates that they are being treated on the mean side.

Pakistan has a low mark of 14 on Individualism ( IDV ) , which indicates that they are more of a Bolshevism state, where they consider everyone in their surrounding in exchange of trueness Contrary Germany has a mark of 83, which points out that they are more of an Individualism state, where they merely look after themselves and their direct household members.

Pakistan has scored exact 50 in Masculinity ( MAS ) , bespeaking that they are on the mean side sing non merely Masculinity but besides Femininity. The importance is equal on self-asserting and competitory pole every bit good as the lovingness and modest pole. Whereas UK hiting 61 demonstrates that they are little more into Masculinity in which the dominant values of society are success and money.

In Uncertainty Avoidance Index ( UAI ) , Pakistan attained 70 indicating that it does n’t digest uncertainness and their society is based on the regulations and ordinance. UK has a lesser mark of 40, which besides different state of affairs as comparison to Pakistan.

The last theoretical account is the Long-run Orientation ( LTO ) , where Pakistan has no mark, which signifies that they are wholly based on a Short Term Orientation ( STO ) with regard for its tradition and carry throughing societal duties On the other manus UK marking 20 besides represents STO but at a lower degree than Pakistan.

* Description for each of Hofstede

Section Two

AN ASSESMENT OF THE PATTERN AND TREND OF TRADE BETWEEN UNITED KINGDOM AND PAKISTAN IN TEXTILE – APPAREL SECTOR AND THE CONSIDERTATION OF THE TYPE AND LEVEL OF PROTECTION MEASURES AGAINST IMPORTS AND FOREIGN INVESTMENT IN PAKISTAN

Garments exported during the decennary. It has shown a uninterrupted growing over the 10 period-time and in the twelvemonth 2007 and 2008 garment export has reduced in 2008 but over4 all exports has been increasing. Whereas, in another tabular array indicates that UK is the 3rd biggest purchaser of Garments from Pakistan. A 10.4 % % an negative alteration from 2006-07 to 2007-08.

Imports Barriers

Although for the twelvemonth 2007-08, mean applied duty in Pakistan was 14.5 per centum, with 14 different ad valorem responsibilities runing from 0 per centum to 90 per centum, and specific rates of responsibility on 44 merchandises, in its 2008-09

Budget, the authorities increased responsibilities on 300 non-essential and luxury points from the 15

Percentage to 25 per centum scope to between 30 per centum and 35 percent. , . The custom responsibilities on autos with 1800cc engine capacity and larger have been raised from 90 per centum to 100 per centum. A 5 per centum responsibility has been imposed on imported vehicles with engines smaller than 850cc engine capacity. A $ 3.70 responsibility is being assessed on imported cell phone French telephones. Pakistan ‘s simple mean applied duty was 13.1 per centum in FY 2008

An understanding was signed with the WTO Balance of Payments Committee to govern out any quantitative limitations of the fabric imports in November 2000, which led to removal of all the fabric merchandises from “ the negative list ” , including woven cotton cloths, woven man-made cloths, certain knitted cloths and dress points, collapsible shelters etc. Therefore there are no limitations now on any of the fabric merchandises to import in Pakistan

Investing Barriers

There is no barrier to put in Pakistan and set up their ain endeavor except in five restrictive Fieldss ‘ weaponries and weaponries, high explosives, currency/mint operations radioactive substances, and new non-industrial intoxicant workss. Minimum foreign investing $ 150,000 is required for non fiscal services ( except, Information Technology services ) Minimum investing of $ 300,000 is necessary for agribusiness, substructure undertakings, and societal services. ( for illustration Health and Education )

All the imported machinery and equipment has zero responsibilities and they besides benefit from higher inducements holding a first twelvemonth reduced payments of 50 % on all fixed assets

The undermentioned paperss are required for imports.

Bill of ladling

Bills

Packing lists

Certificates of beginning

Transcripts of letters of recognition

Insurance certifications

COMPETITIVE Advantage

Competitive advantage will non be a job because every industry would love to work with Marks and Spencer in Pakistan working with Marks and Spencer non merely make their good will but besides increase their national and international concern. Marks and Spencer need to cite lesser monetary value to their nearest challengers like Tommy, Levis, Hillfigiger, Nike etc. Marks and Spancer can cite same monetary value like their rivals but they need to offer some excess which rivals are non supplying to maker and client. Must be flexible with on the cargo day of the months. Small rise and autumn on the measure of the merchandise, all these factors must be considered, if want to hold competitory advantage while making concern with Pakistani maker.

Section Three

AN ASSESMENT OF THE IMPLICATION OF THE INTERNATIONAL INSTITUTIONS: WORLD TRADE ORGANIZATION and EUROPEAN UNION ON TEXTILE BUSINESS WITH PAKISTAN

WTO encourage carnival patterns through dialogues, this impartial nature of the organisation helps in edifice solid trade understandings by cut downing the barrier between two States.

Multi Fibers understanding of 1974 – 1994 managed to enforce limitations on wool and adult male made fiber merchandise along with the cotton vesture and fabrics. This improvisation from the 1961 – 1973 cotton fibre understanding proved disparities among the trading state, that were responsible for textile trade in the planetary economic system.However GATT/WTO managed to present 10 old ages Quota system on a aid of understanding on fabric and vesture ( ATC ) , thereby all the companies indulging in trade pattern are restrained to export limited sum of fabrics.

European trade is chiefly controlled by WTO under the GATT and tried to get rid of Quotas bit by bit to convey balance of trade. Meanwhile during 1995 both United Kingdom became the member of WTO to accomplish pre-regime advantage.

In the twelvemonth 1995 day of the month 1st Jan, Pakistan and United Kingdom both joined WTO taking to derive from Pre-WTO government. The advantages and disadvantages of Pre and Post WTO Regime for the house like Mark and Spancers

PRE WTO REGIME ( 1995-2005 )

Advantages

· Quota makes Guaranteed Production

. Because there is quota, so maker know the bound of export and purchasers know the bound of import, due to this concern will stay same.

PREFERRED Customers

Each purchaser chose their maker that it was working with, because of this client purchase cost and opportunities of loss are really less.

Disadvantage

· Lack of Growth

Since there is quota of for imports so at that place growing is non so high for both maker and purchasers.Due Quota neither purchasers can import nor maker can bring forth.

· Low OPERATION IN INTERNATIONAL MARKETS

Operation are normally done in close market, so there are less makers by whom order can be placed, all this create little market to maker and purchasers.

· PROFITABILITY FOR MANUFACTURER

Monetary value was non a component. Manufacturers were acquiring higher net incomes by citing higher monetary values, which the purchasers had to hold on.

POST WTO REGIME ( 2005 – Present )

Advantage

· High Demand

Now there is no limitation, hence addition of concern for both purchasers and maker, addition in concern merely means rise in net income.

· High EXPOSURE TO THE RISING EXPORT MARKETS:

Now both industry and purchasers have a opportunity to come in in to new markets now they have a chance to research new markets which they have ne’er thinked.

· INCREASE FOREIGN INVESTMENT:

Because of good public presentation in term of volume and good

Macroeconomic policies of authorities, foreign investor are attracted for investing due this new provider and industry comes in the market which result healthy competition which creates good quality merchandises and high public presentation in another word this healthy competitions.

· MODERN TECHNOLOGY AND WORK PROCEDURES

Modern engineering reduces the cost of production and saves times which leads chance to maker advanced, Modern engineering cut down the unwanted fabrication procedure and high quality of merchandises it besides reduces wastage, all these things leads to a quality merchandises in less clip. All these things increase the productiveness of the maker.

Disadvantages

· HIGH COMPETITION

Cut pharynx competition in their markets forced many maker to go forth the market as they do non hold low economic systems of graduated table, because of this whole industry is suffered.

· Low Net income

Net income border has been reduced due cut pharynx competition, maker had to sell at low net income border because of this net income borders are reduced.

Because of remotion of quota system Pakistan manufacturerare non benefitted now Chinese makers are acquiring maximal garments orders. Now Pakistani maker are need to better quality to acquire success. On the other manus Marks and Spancer are benefited now they have pick through which they can bring forth their garments.

Section Four

ADVISING ON WHETHER MARKS AND SPENCER SHOULD EXPORT OR USE FOREIGN DIRECT INVESTMENT OR A COMBINATION OF THOSE MEANS TO DO EFFECTIVE BUSINESS IN PAKISTAN

Certain outstanding jobs like kid labor, lower limit rewards, equal chance employer, wellness and safety, pollution, terrorist act, unstable political status and protection in IPR may present serious job for Marks and Spencer in FDI, so it is advisable to trust upon exporting instead than direct investing. Some of the jobs associated with FDI and exporting are discussed below maintaining the the organisation in concern.

The type of exporting they can utilize is Manufacture under licence, where Marks and Spencer gives a licence, together with proficient cognition, to the Pakistani Manufacturer, where they can be able to bring forth the garments in that state.

Reason

Advantage in Transportation – Extra net income earned by inexpensive labor and sensible natural stuffs, can be made usage in big investings to make inordinate trade name image to last in the competitory market, hence alternatively of reserving the grosss as net income they can be used for farther concern enlargement.

Location Specific Advantage: South Asiatic states are conspicuously known for their inexpensive labor production cost. So Pakistan being a state in the Asiatic continent is demographically defined as one of the state where the cost of production will be cheaper due to moo labour cost.

Risk Factor-Both FDI and export have their ain hazard factor if the company consider of direct investing, than the hazard factor associated with that have to realised such as linguistic communication, civilization, labor, faith and assorted national concern system.

Terrorism – Pakistan is enduring from terrorist act this is besides a large cause for non traveling with FDI in Pakistan everyday there is bomb blast which causes heavy loss to people in term of life and concern.

Politically Unstable- As such Pakisatan is good topographic point to put but now a yearss because of Unstable authorities there is a high hazard to put in Pakistan, authorities in today ‘s scenario is besides really weak.Politcal instability cause job to concern.

Buying Parity – Per Capita income of the people in Pakistan is really low, which automatically reduces their buying power.If the company thinks of puting in Pakistan than it can non anticipate a big market for it goods produced which return may do losingss for the company on a long tally, altering client demands may enforce disputing demand in the domestic market in the company. This is a ideal clip to bring forth it from Asia ( inexpensive labour ) and sell it to Europe ( High Purchase Power ) ensuing in more Net incomes.

Section Five

ADVISING ON THE PROBLEMS OF ESTABLISHING AND OPERATING A CORPORATE SOCIAL RESPONISIBILITY POLICY COVERING BUSINESS WITH PAKISTAN

Marks and Spancers need to bear societal duty while making concern Pakistan, non merely they have to see their maker, but besides production of their merchandise could non take pollution, wastage, smoke which affect wellness of the people. They besides make certain all

During concern at that place should non be any improper activities are being taken. They should follow all the statute law like kid labor, lower limit rewards, equal chance employer, wellness and safety steps etc.

Child labor and Minimum Wages

While covering with maker the biggest job is child labor, Generally in fabric industry maker ever want to cut down cost by improper ways specially engaging child labors because they are less paid employee, Marks and Spancer should maintain on oculus on the maker that they could non use kid labour by taking proper steps such as uninterrupted audit of the companies bespeaking the figure of employees working, variegation, working hours etc. So when maker is bring forthing for Marks and Spancer employee must be legal as per Government of Pakistan Guideline.

When maker is bring forthing for Marks and Spancer maker should follow lower limit pay act of Pakistan so Marks and Spancer ever make certain employee who bring forthing their merchandise at least acquire minimal rewards so they can acquire all the basic things and they can take their life merrily.

National Laws Refering to Child Labour and Minimum rewards which Marks and Spencer need to follow while working with Pakistani makers. The Fundamental law of Islamic Republic of Pakistan provinces: No kid below the age of 14, Children and adolescent worker should non be engaged in any mill excavation or any other sort of unsafe employment it besides prohibits forced labors and human trafficking prohibited and there are Numberss of jurisprudence which regulates the working status of the employees.

Minimum Wages Board has decided to increase the minimal rates of rewards by 30.43 % w.e.f.01st July 2008 of all classs of workers ( Skilled and semi skilled ) of 50 one different industries as specified in the Labour and Human Department Notification No:

6-29/01 dated 7th August 2007 published in the official Gazette dated 15-8-2007Government of Pakistan have made Child labour jurisprudence and minimal pay jurisprudence which Marks and Spancers need to follow at any cost.

Environment:

During fabricating procedure specially when garments is colored the waste H2O by and large assorted with the clean H2O which causes H2O pollution, and H2O pollution is a root cause of many diseases, the best option is this waste H2O dumped in some distant land so it could non do injury, they should utilize harbal colourss for dyeing, less chemical should be used, to avoid air pollution chimneys must hold good tallness, they besides reuse the cloth waste for illustration by doing socks, bags, hankies, by doing all the these things Marks and Spencer can acquire more gross, while taking all these steps cut down the pollution in Pakistan this is besides a manner to function for Pakistan.

Good will

.It is ever easy to gain money but is besides difficult earn good will if Marks and Spancer manage their concern while following all the regulations and regulation their good will will increase in Pakistan every bit good as in whole universe.When they provide good rewards work as a equal chance employer they have easy enlisting and they can retain employees for a long clip all the employees will be extremely motivated which cause high productiveness and low operating cost.Once the client know the Marks and Spancer is eco friendly, they are besides utilizing natural colourss in their garments and they are obeying all the regulations of Government people will be given to purchase more. CSR non merely assist Marks and Spencers but besides maker when foreign purchaser come to cognize that Pakistani maker are fabricating with international criterions More foreign purchasers would desire to give them further orders which would take to gain for the maker. There is besides a opportunity of acquiring some award from the authorities for staying all the regulations and ordinance which is made by the authorities. If Marks and Spencer won any ward it will Kohinoor diamond in their good will.

Decision

While sing all the factors, it will a good determination to make concern with Pakistan in fabric sector as they have inexpensive labor, authorities is welcoming investors, fabric industry is turning and they have equal engineering for production Since Pakistan ‘s 3rd most top exporter is to United Kingdom in fabrics, so it shows a positive mark that other United Kingdom companies have trust in the Pakistani Manufacturer ‘s production

There are some drawbacks like via media with the quality as maker are non holding latest engineering, issue of child labor, lower limit rewards act, but Marks and Spancer could mange all these issues if supervising is done Pakistan can be a good market to outsource our production, even by this manner Marks and Spencer can gain good net income and increase market portion.

Mentions

1. Source Government of Pakistan Date accessed to URL 18 January 2010 URLhttp: //www.labourunity.org/wages.htm

2. Fiber to Fashion Source: Pakistan Textile Machinery Industry Date accessed to URL: 18h January 2010 Section: Import and Export Scenario URL: hypertext transfer protocol: //www.fibre2fashion.com/industry-article/market-research-industry- reports/pakistan-textile-machinery-industry/pakistan-textile-machinery-industry1.asp

3. Writer: Geert Hofstede Source: Geert Hofstede Cultural Dimensions Date accessed to URL: 19h January 2010 URL: hypertext transfer protocol: //www.geert-hofstede.com/hofstede_united_kingdom.shtml

4. Writer: Geert Hofstede Source: Geert Hofstede Cultural Dimensions Date accessed to URL: 19h January 2010 URL Dhttp: //www.geert-hofstede.com/hofstede_pakistan.shtml

5. Beginning: World Trade Organization Date accessed to URL: 19th January 2010 URL: hypertext transfer protocol: //www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm

6. Source Govt of Pakistan Date accessed to URL: 19th January 2010 URL: hypertext transfer protocol: //www.ustr.gov/sites/default/files/uploads/reports/2009/NTE/asset_upload_file 282_15496.pdf

7. Source Govt of Pakistan Date accessed to URL: 19th January 2010 URL: hypertext transfer protocol: //www.ustr.gov/about-us/press-office/reports-and- publications/2009/2009-national-trade-estimate-report-foreign-trad

8. Writer: Aneela Batool Source: Fabric industry – bright chances in front – Khaleej Times Date accessed to URL: 10 January2010 URL: hypertext transfer protocol: //www.khaleejtimes.com/pakistan/Textileindustry.asp

9. SourceAll Pakistan Textile Mills Association ( APTMA ) Date accessed to URL: 10 January2010 URL: hypertext transfer protocol: //www.aptma.org.pk

10. Source World Trade Organization ( WTO ) Date accessed to URL: 20 January2010 URL: hypertext transfer protocol: //www.wto.org/

11. Source State Bank Of Pakistan Date accessed to URL: 20 January2010 URL: hypertext transfer protocol: //www.sbp.org.pk/

12. Source European Commission- Clothing and Textile Date accessed to URL: 22 January2010 URL ; hypertext transfer protocol: //ec.europa.eu/enterprise/textile/index_en.htm

13. Albaum et Al ( 1994 ) ‘International Selling and Export Management ‘ , 2nd edition. England: Addison- Wesley

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16. Beginning Blurt It Date accessed to URL: 22 January2010 URL: hypertext transfer protocol: //www.blurtit.com/q790600.html

17. Source UK Economic Indicators Date accessed to URL: 22 January2010 URL: hypertext transfer protocol: //www.economywatch.com/world_economy/united-kingdom/uk- economic-indicators.html