In Partnership with Naaya Aayam Multi-Disciplinary Institute

Assessment1 Title: A Management Report that Presents

Current Environmental Trends and Macro Environmental
Factors that Organization Need to be Aware of.

Module: Business Environment

Module code: BUS1001
Module Tutor: Meena Khanal
Student name: Binod Khatiwada
Email: binodkhatiwada1117@gmail.com
Word count: 2197 (Excluding references and executive summary)
Executive Summary

This is the management report of the consultant manager of Goldstar company to make
an export business in a new host country, i.e. South Korea. Here, there is an
explanation of the macro-environment and their factors. The macro-environment known
as the external environment affects every business with the change in its surroundings.
Here, Goldstar manager can find the explanation of macro-environmental factors and
their effect on business, if they are ignored. This mainly focuses on improving the
exporting aspect of the business, like how it can be improved or what the company
needs to be aware of while trading its goods in South Korea. Consultant managers have
analyzed the external factors affecting business, and have to make
suggestions/recommendations to an organization to carry out export. So, external
factors must be aligned with export while doing trade.
Contents
Introduction..............................................................................................................................................4
Macro Environment................................................................................................................................4
Macro Environment Factors and Trends......................................................................................4
PESTLE Analysis............................................................................................................................4
SWOT Analysis................................................................................................................................6
CAGE Analysis................................................................................................................................6
Effect of Macro Environment in Selected Company..................................................................7
Recommendations/Suggestions for Improving Export of Goldstar Company........................9
Conclusion.............................................................................................................................................10
References:............................................................................................................................................11
Introduction
In an organization, there are various factors bringing positive or negative changes.
Running an organization consistently in all forms is not easy for an organization as it is
affected by various internal and external factors. Internal factor that affects an
organization is microenvironment whereas external factor that affects an organization is
the macro environment.

But in this report, it’s about the macro environment which affects the organization in
exporting its goods and services. If the macro-environment factors and trends are not
analyzed, then the respective business will not be successful in the future. So, it must
be analyzed to reduce the negative factors in the business (Frue, 2017).

Gray (2017) states the analysis of the macro-environment helps the company to know
what environment surrounds the business which protects an organization from harmful
issues as well as helps to take benefit of the situation. This report analyzes the macro-
environmental factors to make a company aware of ongoing trends which helps
selected company, i.e. Goldstar to take a step forward in exporting goods in South
Korea where it has never exported its footwear before. But Goldstar has been exporting
its footwear in Countries like India, Australia, etc.

Macro Environment
The macro-environment is all the external factors that not only affects an organization
but also the whole population which does not depend on the business activity but
external activities (Gray, 2017).

Macro Environment Factors and Trends

For improving the export, Goldstar has to make a clear understanding of external
factors and their effect. So, the external factors that may affect business are explained
below:

PESTLE Analysis
PESTLE analysis is the macro-environment that is highly useful for recognizing external
trends that bring change in specific geographic regions within the possibility of their
political, economic, social, technological, legal, and environmental dimensions (West et
al., 2015).

Political factors which may bring change in business policies are: policy change in
government and its stability, tax and tariff policy, trade restrictions, intellectual property
law, etc. (Jurevicius, 2013). South Korea was a colonial country of Japan from 1910 to
1945 (Blakemore, 2018). But it is now a democratic country whereas Nepal has never
been colonized by any country. Due to stable government in both the countries in recent
time, trading will be easier for them.

According to macro trends (n.d.), the inflation rate of Nepal was 5.57% in 2019 which
was 1.51% higher than the previous year. Also, the inflation rate of South Korea was
0.38% in South Korea which was 1.09% less than the previous year (Macro trends,
n.d.). Won So (2020) analyzes that the unemployment rate of South Korea in 2020 is
4.1%. But the unemployment rate of Nepal in 2019 was just 1.41% (Macro trends, n.d.).
The GDP of Nepal and South Korea in 2020 is 97.37 billion international dollars and
2.30 trillion international dollars respectively (Plecher, 2020).

In socio-cultural factors, most of the people of Nepal follow Hinduism whereas People of
South Korea mostly follow Christianity and Buddhism. In Nepal, people speak Nepali
language and have various languages of different ethnic groups, whereas in South
Korea, people speak their native language i.e. Korean. English is the common language
of both countries.

Technological aspects bring change in the cost and quality of the production, also
determine the efficiency of minimum production level. (YEP Nepal, 2020). In South
Korea, company does research and development activities whereas, in Nepal,
companies are not aware of the importance of R and D activities.

In ecological factor, both South Korea and Nepal have subtropical type of climate, but
due to growing global warming both the countries are being affected. The electricity
energy produced by South Korea in 2014 was 526 billion kwh whereas Nepal produced
only 4.24 billion kwh (World data, n.d.).
SWOT Analysis
SWOT Analysis is used by an organization to identify and analyze strengths,
weaknesses, opportunities and threats which may affect business operation (Fleisher
and Bensoussan, 2015).

In recent times, for employment, many Nepalese are flying abroad to South Korea, who
can encourage Korean to use our product and can create huge opportunity for Goldstar
to export its footwear. Also, due to fall down in economic condition, cheaper and
qualitative footwear like Goldstar will have opportunity to export its goods in South
Korea. The threat for Goldstar can be the competition from international footwear
brands like Adidas and Nike.

CAGE Analysis
From CAGE, except geography, cultural, administration, and economic factors are
explained in PESTLE Analysis. In geography, location and distance of the countries are
analyzed. Both Nepal and South Korea are Asian countries, as Nepal is in the southern
part and South Korea is in the eastern part. The distance between South Korea and
Nepal is 4,165 kilometers, it takes 4.62 hours using airlines to reach South Korea from
Nepal (Distance from to, n.d.).

Current Macro Environmental Trends

Ojha et al. (2018) state in Nepal, due to rapid change in the new structure of the federal
government, a devolution of authority, and greater inclusivity, it brings more peace and
stability, but also a few problems. But in South Korea, due to a mature and stable
democratic system, it has solid foundations, particularly the rule of law, regulatory
quality, and government efficiency are strong (Molen, 2015).

Kafle (2017) states in political factor, the rate of Nepal Foreign trade is increasing at a
rapid pace but the rate of import is increasing than export, which is regarded as the
trade deficit in Nepal’s Foreign Trade. Currently, there is an imbalance in the trade as
the import is higher than export because mostly agricultural, handicrafts, and raw
materials are exported which are of low commercial value and helps to bring only little
bit of foreign currency (Llanes, 2018).
Tax separated for exporting business in Nepal is 20% whereas in South Korea,
according to Privacy Shield Framework (n.d.), tax is 10% for all imported goods, it can
be 10-20% for luxury items and durable consumer goods.

Nepal has approved an agreement for SAFTA with SAARC, also it is a member of
BIMSTEC since 2004, and WTO since 2004 but has not been able to fulfill the
obligations of WTO due to political instability (Select USA, 2019). SAFTA, BIMSTEC
and WTO helps its member countries in removing tariffs and making free trade area.
South Korea is also a member of the WTO (International Trade Center, n.d.).

Today, everyone around the globe is facing a pandemic named COVID-19 which also
appears to be the biggest challenge of all the businesses all around the world. This
sudden change in the environment was obviously unexpected to all the companies and
the pandemic has affected them very badly due to the stoppage in international trade.
The same applies to Nepal as well as South Korea, but the product can be exported
after the end of the pandemic.

In today’s context, due to modernization and western influence, people these days
seem to be demanding branded and fashionable footwear in the market. Many are even
unwilling to buy footwears of older fashion. In this way, the lifestyle as well as mindset of
people has drastically changed regarding fashion.

Effect of Macro Environment in Selected Company

In the current situation, globalization is the main threat for every top business all around
the world due to widespread transmission of Covid-19 pandemic. No company is being
effective in the production process due to lack of supply of raw materials. Also, in every
footwear company of Nepal, especially Goldstar, they depend on India for the supply of
raw materials which is about 70-75 percent (Prasain, 2018). So, there has not been an
expected amount of production and distribution of footwear from Goldstar company.

Praisain (2018) states, in changing generation, the lifestyle of people has also changed
which have affected the mindset of people, so the current generation prefers more
international footwears than our local product. This changing lifestyle of youths have
affected the local footwear produced in our country because of the preference of
international brand. Youths demand for more fashionable and stylish brand rather than
cheaper footwear like Goldstar. Also, South Korea is a modern country, people there
expect more fashionable and stylish footwears. So, they would import more attractive
shoes rather than cheap and less attractive goods.

Aljazeera (2020) states due to the outbreak of the virus, shipments of South Korea have
fallen to 10.2%, which shows the significant fall of the economy of the country. In this
situation, the Nepalese brand Goldstar has no chance of exporting its footwear in South
Korea. Also, in this situation, the company has not been able to produce the expected
quantity of goods which lower down the generation of income but the tax on exporting
any goods is 20% which is pretty high in this situation. Also, the importing goods of
South Korea is 10-20% which is pretty high compare to the present situation. So,
neither the country can trade with each other but they can build a good relation in trade
in the coming time after the pandemic is over.

While exporting its footwear to South Korea, Nike and Adidas are its toughest
competitors as Goldstar is far way back from them (Basnyat, 2005). In local markets as
well people prefer Nike and Adidas rather than Goldstar as Goldstar is less fashionable
and less attractive than international brands, also Shikhar, Black Horse, and Royal
shoes are Nepalese brand competitors (Bhattarai, n.d.). So, not only in the international
market, but also in the local market Goldstar is having the toughest competition and has
the toughest work to export its goods to South Korea.
Recommendations/Suggestions for Improving Export
of Goldstar Company
Above every aspect, globalization is affecting the exports of every business in the
present context of the world. As in the current scenario, due to the outbreak of Covid-
19, no business worldwide is in their best but they have the best opportunity to find the
gap in the market which helps them in thinking differently from other companies for
innovation of new products. Due to no airline services, no companies can import raw
materials for quality production. Lack of raw materials affect the company on its
production, which will decrease its distribution pattern. So, the company must make
proper plans and focus on innovations rather than wasting their time by focusing on the
same goods which applies to Goldstar as well.

Goldstar is one of the top footwear brands of the country, which has been exporting its
goods to various countries especially India. Therefore, the company highly needs to
improve in its production quality and marketing strategy for exporting its goods to South
Korea. Since, South Korea is a developed country that focuses on trade with the USA
and European nations, there is high chance that they may not show interest in Nepalese
production. So, Goldstar must work in a way that South Korean companies get attracted
towards importing Goldstar products to their country from Nepal.

However, before focusing on international trade, Goldstar must give more importance to
domestic trade and improvement in the quality of product. Company managers have to
think about being the number one shoe supplier in their own country rather than jumping
directly into the international market. To improve the quality of footwear, the company
must focus on high-quality raw materials. The company must try to make its footwear
more attractive and fashionable like that of Europe and the US. If the company
succeeds in becoming the number one footwear supplier of country and worldwide
supplier of footwear, South Korea will also focus on our product rather than focusing
only on European brands.
In the domestic scenario, Goldstar can focus on Blue Ocean Strategy rather than red
ocean strategy. Like other Nepali shoes brand, Goldstar is also using red ocean
strategy which increases competition and does not help in earning high profits. To
improvise on Blue Ocean Strategy, like Nike and Adidas, Goldstar also must focus on
manufacturing various products rather than producing only footwear. Goldstar can
produce various types of apparel, sports kits, and can provide sponsorship in producing
international kits for the various clubs all around the world which will also help them in
international trade. If Goldstar succeeds in improvising Blue Ocean Strategy, South
Korea will also get to know about the brand which will encourage them to import goods
produce by Goldstar.

Conclusion
Every entrepreneur all over the world needs to analyze the macro environment before
starting the business as external factors will have a huge impact on the business in the
future. Goldstar is a Nepalese footwear brand that is trying to initiate trade with South
Korea. Before trading with South Korea, Goldstar must analyze the macro-
environmental factor of both the countries which is mentioned in the above report.
Exporting its goods in a developed country like South Korea is pretty difficult. However,
the company has already exported its footwears to various developed countries which
can be taken as a motivating factor. So, Goldstar must work on improving its brand
quality and start working on R and D activities.

The report is all about Goldstar company which is trying to export its goods in South
Korea, the problem they have been facing and also how they can be solved or made
easy.
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