BTEC Level 3 Business Extended Diploma Unit 5 International Business Learning Aim C&D
External Factors and Cultural differences
Introduction
For this assignment, I have chosen Hotel Chocolat as my case study. Hotel Chocolat is a British
chocolatier and cocoa grower who operate in over ten countries and plans to expand into more. Hotel
Chocolat is the only company in the United Kingdom to grow cocoa on its own plantation. In my
assignment I am going use a PESTLE analysis to outline the key relevant factors that Hotel Chocolat will
need to consider when deciding to expand internationally. Then I will carry out a situational analysis on
two countries Hotel Chocolat could consider trading in. I will also explore, analyse and evaluate the
affect and impact of cultural differences on international business. I will also explain how business
support systems enable Hotel Chocolat to trade internationally. I will summarise my findings and then
recommend one country I believe Hotel Chocolat should consider expanding into for international
trade.
Proposal: Comparison of South Korea and Spain as potential new countries for Hotel Chocolat to
expand into using PESTLE analysis.
Political
Trade tariffs are taxes charged on the import of goods from foreign countries.
Spain is part of the harmonised trade system of the EU. This means importing and exporting are
covered by the EU Taxation and Customs Union. According to export.gov Spain’s trading tariff tax is
21% for all exporting and importing. South Korea trade tariffs according to trade.gov is 10% on all
imports and domestically manufactured goods and these taxes must be paid in the Korean currency
which is the Korean Won within 15 days of the goods being cleared by customs.
Trade tariffs impact Hotel Chocolat positively and negatively, an example of this is it impacts Hotel
Chocolat’s revenue streams. If a country has high tariffs, then this means Hotel Chocolat will have to pay
more taxes to the government of that country which has a negative impact on Hotel Chocolat as it
means they will produce less revenue compared to a country that has lower trade tariffs. Lower trade
tariffs have a positive impact on Hotel Chocolat as it means Hotel Chocolat has to pay less taxes to the
government of that country, which increases their revenue. As Hotel Chocolat is already an
international business, they have had to deal with trade tariffs before. Looking at the trade tariffs of
countries that Hotel Chocolat currently operate in, these being America and Japan, the trade tariffs are
more similar to South Korea than Spain. America's trade tariff tax is 5% and Japan’s trade tariff tax is
10.1% which is the highest trade tariff tax country Hotel Chocolat currently operate in.
In conclusion looking at the trade tariffs of both countries, it would best suit Hotel Chocolat to operate
in South Korea. Because Hotel Chocolat already operates in countries with a 10% trade tariff tax which
means it is feasible for Hotel Chocolat to do so again. Also, 10.1% percent is the highest trade tariff tax
Hotel Chocolat pays to operate in a country. A trade tariff tax like Spain which is 21% may not be
feasible for Hotel Chocolat to operate in and may cost them too money if they did so.
,BTEC Level 3 Business Extended Diploma Unit 5 International Business Learning Aim C&D
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor
and influence a nation's economy.
According to https://fiscalpolicy.org/ Spain fiscal spending averaged 42.37 percent from 1995 until
2020, reaching an all-time high of 52.30 percent in 2020 and South Korea fiscal spending is to
increase by 2.1% year for next 10 years and will 54.7% in 2021.
Fiscal policy impact Hotel Chocolat positively and negatively, an example of this is its impact on Hotel
Chocolat’s revenue streams. If a country has a higher fiscal policy, it means it spends more money on its
economy. This will allow it to invest and grow which has a positive impact on Hotel Chocolat as it leads
to increase consumer confidence and spending which benefits the sales of Hotel Chocolat. Sustained
economic growth in a country will likely increase confidence and encourage Hotel Chocolat to take risks
and innovate which also increases Hotel Chocolat growth. If a country has a low fiscal policy this would
have a negative impact on Hotel Chocolat as it will do the opposite to the positives shown above, which
is slower growth in the economy, resulting in it being harder for Hotel Chocolat to grow in that country.
As Hotel Chocolat is already an international business, they have dealt with different countries fiscal
policies. Looking at the fiscal policy of countries that Hotel Chocolat already operate in, these being
America and Japan, America's fiscal policy is 50% and Japan’s fiscal policy is 56%. The fiscal policy of
Spain and South Korea are similar to America and Japan as they are both over 50%.
In conclusion looking at the statistics, I believe it would best suit Hotel Chocolat based on the two
countries fiscal policies to operate in South Korea. This because South Korea has a plan to be able to
achieve an increase spending of 2.1% on their fiscal policy for the next 10 years which will increase the
fiscal policy by 21%, which would be one of the highest fiscal policy for any country in the world. It
would also be feasible for Hotel Chocolat to operate Spain as their fiscal policy is in the same percentage
range of fiscal policies they currently operate in, but based on the fact that South Korea’s has an
ambitious plan of investment for the future, I believe South Korea has the better long-term prospects
which in turn will benefit Hotel Chocolat.
Economic
Inflation rates are rates at which the prices for goods and services increase, it is expressed as a
percentage increase or decrease in prices over time.
The average inflation rate in Spain is about 0.2%. The average inflation rate in South Korea increased to
0.54% according to https://www.statista.com/statistics/271077/
Inflation rates impact Hotel Chocolat positively and negatively, an example of this is how it impacts on
Hotel Chocolat’s profits. If a country has higher inflation rates this can have a negative impact on Hotel
Chocolat. For example, to compensate for a high inflation rate, Hotel Chocolat staff may ask for a pay
rise above the rate of inflation, this will lead to higher costs for and could result in prices increasing
further fuelling higher inflation. Lower inflation rate countries have a positive impact on Hotel Chocolat
as it is easy to predict future costs, prices and wages. The stability of low inflation encourages Hotel
Chocolat to take on riskier investments which can lead to faster growth in the medium and long term.
As Hotel Chocolat is already an international business, they have had to deal with inflation rates before.
Looking at the inflation rates of countries that Hotel Chocolat already operate in these being America
, BTEC Level 3 Business Extended Diploma Unit 5 International Business Learning Aim C&D
and Japan, both Spain and South Korea have similar inflation rates to both these countries. Because
Japan’s inflation rate is 0.14% and Americas inflation rate is 0.6%
In conclusion looking at the facts it would best suit Hotel Chocolat based on the two countries inflation
rates to operate in Spain, because Spain has the lowest average inflation rate each year and is predicted
to remain at these low levels. Compared to Spain, South Korea’s inflation rate is over double and is
predicted to increase 0.9% next year. Spain’s inflation rate would allow Hotel Chocolat to have
confidence that they would not need to increase staff wages and prices for their products and services.
South Korea would do the opposite of this making Hotel Chocolates outgoings more costly and
unpredictable.
Interest rates are a percentage charged on the total amount you borrow or save. If you are a borrower,
the interest rate is the amount you are charged for borrowing money, this being a percentage of the
total amount of the loan. Interest rates also determine how much money a bank pays you to keep your
funds in their accounts, for example a savers account where the bank pays you annually based on a
percentage of the total amount in the account.
Spain's National Bank interest recently increased to 0.37%. It was 0.31% last month and was 0.82% last
year. South Korea interest rate was lowered from 0.75% to 0.5% recently.
Interest rates impact Hotel Chocolat positively and negatively, an example of this is its impact on growth
and profits. If a country has low interest rates, it impacts Hotel Chocolat positively as they can expect
higher profitability. Because Hotel Chocolat will have more access to financing because loans are less
expensive. As a result, Hotel Chocolat will have access to better resources to fund new business
ventures, equipment or improvements. High interest rates may have a negative impact on Hotel
Chocolat, because customers with debt have less income to spend because they are paying more
interest to lenders. This could result in reductions in spending at Hotel Chocolat by its customers.
Hotel Chocolat is already an international business who have had to deal with interest rates before.
Looking at the interest rates of countries that Hotel Chocolat already operate in these being Belgium
and Canada, the interest rates are more similar to Spain then South Korea. Because Belgium’s interest
rate is 0.16% and Canada’s interest rate is 0.3%.
In conclusion, looking at interest rates it would benefit Hotel Chocolat more to operate in Spain. At the
moment Hotel Chocolat operate in countries with interest rates either 0.3% or below. It may be less
feasible for Hotel Chocolat to operate in a country with a higher interest rate than 0.3% and if they were
to do so, it could put impact on their profitability.
Social
Buying trends is the study of identifying upward customer trends, each generation of people have
different and unique buying trends.
An example of a Spanish buying trend is that 75% of Spaniards look for a bargain
before buying something, while 24% leave their regular retailer if they find lower prices elsewhere. An
example of a South Korean buying trend is their consumer's desire for quality and luxury goods. South
Korea is one of the largest luxury markets in the world and a highly lucrative target market for a high-
end business like Hotel Chocolat.
