Market Entry Report

write a recommendation or conclusion stating we recommend entering the UK market based on some points from the report

Market Entry Report – United Kingdom

MES-Sim Corp – The M-Box

Table of Contents

Executive Summary 3

Market Intelligence Repot 4

The Economy 4

Consumer Demographics 5

Government 6

Technology 7

Government Investment into Technology 8

Business Environment Analysis Report 10

UK Demographics 10

GDP & GNP 10

Major Industry Sectors 10

Currency 11

Labour Force 11

International Trade Partners 12

Implications of Brexit 12

Political & Regulatory Stability 13

Religion 13

The UK Culture 14

Business Customs and Practice 15

A Legal Synopsis: The UK 18

Pertinent Laws and Regulations 18

Report on Opportunity for Market Entry 20

United Kingdom Demographics 20

Labour 21

Report for Market Entry: Legal Barriers 21

Report for Market Entry: Tax Relief 22

Market Entry Strategy 23

Transportation and Communication Infrastructure 25

Transportation within the UK 26

Methods of Distribution 27

Telecommunication Infrastructure: Next Gen Gaming 27

Transportation Infrastructure 28

SWOT Analysis 29

Conclusion 31

Appendix A

Executive Summary

Market Intelligence Report

MES-Sim Corp has developed a new video game system called the M-Box. The country the company would like market is to the United Kingdom. It is our task to complete an analysis and recommend if the M-Box should be marketed to the United Kingdom. Through research into the country’s economy, demographics, government regulations and technology status, will provide MES-Sim Corp with an initial overview of England to assist in the decision making process.

The Economy

The United Kingdom’s (UK) economic freedom score is 78.9. This makes the UK the seventh freest economy in 2019 (GOV.UK, 2019). This score has increased in the past year, a total 0.9 with a large jump in fiscal health. The UK is ranked the 3rd among all the 44 countries in the European regions (GOV.UK, 2019). The U.K. has one of the world’s most effective business and venture situations.

Consistent development has made Britain’s economy, which has flourished as far back as the previous Prime Minister, Margaret Thatcher’s market changes during the 1980s, the world’s fifth biggest (Rogers, S. 2009, March). In 2016, the U.K. casted a ballot in a prominent submission to leave the European Union. Administrations, especially banking, protection, and business administrations, are key drivers of GDP development (Trading Economics, 2019). Huge oil and flammable gas holds are declining (Trading Economics, 2019).

Wage growth in UK has reached an 11 year high this year and employment rate has been at its highest since 1971, to 3.9% (BBC. 2019, Aug). An overall record high of 32.81 million people are employed as per the Office of National Statistics; this is 425,000 more than in 2018 (BBC. 2019, Aug).

The GDP per capita PPP is approximately $39,720 with purchasing power increasing 0.7% between 2017 and 2018 (Santantrade. 2019, Nov)

The combined value of exports and imports is equivalent to 62.5 percent of GDP (Trading Economics, 2019). The normal applied duty rate is 2.0 percent (Trading Economics, 2019). Some EU-coordinated nontariff exchange hindrances including specialized and item explicit guidelines, sponsorships, and standards might be balanced or expelled after Brexit (BBC.co.uk. 2019, Aug). A well-created monetary area keeps on supplementing one of the world’s most proficient speculation conditions.

Consumer Demographics

At over 66 million people, the population of the United Kingdom is the third largest in Europe as of 2018 (Jaaskelainen, L., n.d.). London is the largest city in England with 8.6 million people (Jaaskelainen, L., n.d.). The ethnic origins of the demographics is divided by European (87%), African (3%), Indian (3%), Pakistani (2%), and mix (3%) (Office of National Statistics). The UK has an aging population with the median age of 40.5. People under 24 represent almost 30% of the population, and people over 55 represent 30% of the total (Santantrade. 2019, Nov).

There are 99 men for every 100 women. On average there are 2.3 people per household with 31% of households living alone, 36% are couples with or without children, and 11% are other (example roommates). 83.4% live in the urban areas, one of the main cities being London (Santantrade. 2019, Nov). The level of education in the UK is high with 81% of adults aged between 25 – 64 years of age having a secondary education, and 43% are in University.

In terms of consumer behavior in the UK, there is a mass consumer society. The main factor influencing purchases are price, quality, design, brand or environmental benefits (corporate social responsibility and the triple bottom line are important aspects). The British consumer is increasingly buying online with Amazon being the number one online company five years in a row (Santantrade. 2019, Nov). Internet penetration is currently at 95%, and the UK is one of the most socially connected markets in the world. After-sales service should be considered as claims are common from this consumer base (Wright, J., 2019, Mar).

In regards to product origin, 6 out of 10 have said that origin of a product is as important as price (Santantrade. 2019, Nov). Brand loyalty depends on price. Social networks are also important during the decision making process with Facebook being one of the main networks with 50% rate of penetration (Santantrade. 2019, Nov). This consumer base are becoming increasingly aware and valuing businesses that have ethical and environmental business practices. Half the consumers are willing to buy more expensive products if the brand supports important causes. (Santantrade. 2019, Nov).

Newzoo has published its annual Global Games Market Report for 2019, in which it projects the state of the industry for the year, as well as issuing predictions for the industry three years down the road in 2022 and it shows in Figure 1 and 2 in Appendix A, that the gaming console is the second largest market (31%) where smart phone are the largest (41%). The UK is the 6th largest video game market in 2018 in terms of consumer revenues, after China, USA, Japan and Germany. Approximately 37.3m people in the UK play games (Ukie.org.uk).

Government

Current Conservative Party pioneer and Prime Minister Theresa May has been arranging the particulars of the March 2019 Brexit. The Tories, who expelled the Labor Party in 2010, lost their parliamentary majority in 2017 however held power with the help of Northern Ireland’s Democratic Unionist Party. A progression of prominent, Brexit-related renunciations in 2018 further debilitated the May government.

Video games in general across the world are so easily accessible to any age group who wishes to consume the game. More often than not, games which attract the greatest number of users are the violent ones. For example, Fortnite became such a hit in the industry that there were tournaments going around the world with large prizes handed out to the winners. The game basically is you team up with your friends, and try to be the last one standing, all by killing others. The game is easily accessible to all console users as it is free. Children can have access just by downloading it and witness all this violence created on this game. In the United States, the regulations are not as strict as they should be as there are so many violent incidents happening in the nation, which can potentially stem from the violence created on these video games.

The UK video games are completely against any violent and sexual games in which has their own classification as the British Board of Film Classification (BBFC). They act upon and label games which age limit, which, if incorrectly labeled, can come with a nasty fine and time in prison. Up to £5000 or up to six months in prison as a punishment. However, it is not as followed as people would like as 90% of these games are exempt from the classification.

Technology

Being a developed nation England has access to all of the latest technologies such as smart T.V.’s, monitors, videogame systems, phones & tablets, as well as artificial intelligence. International development companies like Microsoft, Activision Blizzard, Sony Interactive Entertainment, Konami and Take-Two, have offices in the U.K., and companies like Warner Bros, EA, and Ubisoft have invested in development studios and publishing networks in the U.K. this shows that the U.K. and specifically England is an internationally renowned market for video games and videogame related technologies. According to a study by TIGA, the U.K. video game sector is the largest in all of Europe, it has contributed more than $1.96 billion towards British GDP in 2017 (TIGA, 2019).

Government Investment into Technology

In 2018 the number of video game development and sales related jobs rose from 24,274 – 26,241 in the previous year (TIGA, 2019). Due to the significant influence that this industry is having on England the government is keen to increase imports and exports so that England can continue to build a thriving video game market. The British Video Games Tax Relief (VGTR) is a government scheme that allows UK game developers to apply for tax relief funding, although currently this tax relief program is targeted at domestic based companies the country is looking at expanding this tax relief to some foreign companies since a majority of the companies operating in the UK are foreign (Myriad Associates, 2019).

Technological Development

The U.K. video game development sector is constantly staying ahead of the rest, on average it spends 20% of turnover revenue on R&D.  Government-supported R&D projects include an innovation for Games and Media Enterprise (InGAME) R&D center in Dundee (Innovation For games, 2019).

Conclusion

There is a large population to market to in England with high purchasing power. The economy is strong, however consumer confidence is waning due to the Brexit and the uncertainty. The country is also technologically advanced and would be able to receive the M-Box and with gaming on the rise in the UK, there is a healthy market to target with long term opportunity and growth. There is a great potential with this market for the M-Box product to succeed.

Business Environment Analysis Report

United Kingdom Demographics

The UK is made of up four countries: England, Northern Ireland, Scotland and Wales. As of August 2019, the population in the UK has reached 66.4 million people with migration being the main driver to the population growth (GOV.UK. 2019, August). The population is ageing with the mean age of 39. The UK has 49.4% males and 50.6% females (GOV.UK. 2019, August). The population of UK is the third largest in Europe as of 2018 (Jaaskelainen, L. n.d.).

There is a slowdown in the population growth rates. There are 12.8 million married couples, 3.4 million cohabitating couple families, 2.9 million lone parent families and there is an increase in the number of people living alone (GOV.UK. 2019, August). 13.4% of the people in England and Wales (7.5 million) were born outside of the UK. 80.5% of people in England and Wales said they were White British and 19.5% were ethnic minorities (GOV.UK. 2019, July 11).

GDP & GNP

Gross National Product in the United Kingdom increased to 544804 GBP Million in the second quarter of 2019 from 544473 GBP Million in the first quarter of 2019. Gross National Product in the United Kingdom averaged 175881.16 GBP Million from 1955 until 2019 (Trading Economics. n.d.). The GDP per capita as of December 2018 was $42 986 USD and GDP per capita PPP $40, 158 USD (Trading Economics. n.d.). Public consumption as a percentage of GDP has increased and is at 19.2% (Trading Economics. n.d.).

Major Sectors

The UK has a market-oriented and highly developed economy. The country also has the largest GDP based on PPP in the world (Sawe, B. E. 2019, July 8). The country’s economy accounts for 3.5% of the world GDP and is ranked as the 22nd with the highest GDP per capita (Sawe, B. E. 2019, July 8). The Capital city of London which is among the world’s largest financial hubs.

The major industries in the UK consist of the agricultural sector, manufacturing, construction, forestry and tourism (Sawe, B. E. 2019, July 8). Agriculture occupies about 25% of the country’s total land area and accounts for 1.5% of the country’s labour force. The UK famers are highly skilled using high sophisticated technology (Sawe, B. E. 2019, July 8). It accounts for $3003.00 GBP million of the GDP (trading economics). The UK is a leading manufacturer of engines and it accounts for $45925.99 GBP million of the GDP (Trading Economics. n.d.). The UK ranks the world’s sixth largest tourist destination and in 2018 received more than 40 million visitors (Sawe, B. E. 2019, July 8).

Currency

The British Pound (GBP) is the currency in the UK (Trading Economics. n.d.). The Bank Rate is 0.75% during October policy meeting (Trading Economics. n.d.). The Bank lowered the GDP forecast by the end of 2019, 1.6% by end of 2020, 1.8% by end of 2021 and 2.1% by end of 2022. The target inflation rate is 2% (Trading Economics. n.d.). The UK interest rate average is 7.45%. Inflationary pressures are projected to lessen. CPI inflation remained at 1.7% September 2019 and is expected to decline to around 1.25% by spring 2020 (Trading Economics. n.d.).

Labour Force

As of April 2019, the UK had an employment rate estimated at 76.1%, an unemployment rate estimated at 3.8% and an earnings growth increasing by 1.25 (GOV.UK. 2019, June). United Kingdom’s Labour Force Participation Rate increased to 63.9 % in Sep 2019, compared with 63.8 % in the previous month (ceicdata.com. 2019, Sept). Overall in 2016, the UK games industry provided 47,620 FTE jobs and contributed £2.87bn in GVA to the UK economy (Ukie.org.uk. 2019).

There is a large labour force and skilled labour for the gaming industry which is an additional advantage for the MES-Sim Corp.

International Trade Partners

The UK has five major trading partners. The US is the number one export destination receiving 13.39% of the UK exports with a total value of $59.18 billion (Fleming, S. n.d). Germany is the second largest trading partner with 10.56% of its total exports valued at $46.69 billion (Fleming, S. n.d). The third largest trading partner is France with 6.88% of UK exports totaling $30.4 billion dollars (Fleming, S. n.d). Netherland is the fourth largest trading partner with 6.24% valued at $27.57 billion. Ireland is the fifth largest trading partner with 5.68% totaling $25.1 billion (Fleming, S. n.d).

Implications of Brexit

The effects of Brexit on the UK economy is showing to have a negative effect on the economy due to instilling insecurity in the market. June 23, 2016 referendum held where UK voted to leave the EU. As of now, the EU granted an extension to the UK government request to delay Brexit until January 31st, 2020. If a deal is not reached by then, the UK would no longer be an EU member and it would have no trade agreements therefore eliminating Britain’s tariff free trade status with the EU members. This could be an issue for future expansion into other neighbouring markets for the M-Box. This would raise the cost of exports, tariffs would also raise the prices of imports. Other effects include: inflation rising, restricted labour movement, wide spread real estate depression and the UK would have to pay a 51 billion Euro for its divorce to the EU.

This concern with Brexit is a consideration that needs to be taken into account as it could cause limitations to growth or at the very least, cost the company more money to expand into neighbouring markets. In the long term, UK businesses may struggle to attract certain-skilled creative/technical individuals, leading to a general drain on talent within the UK gaming industry. This could potentially put the UK at a disadvantage on a global scale and require UK businesses to work even harder to continue to produce/develop high quality games in the UK. Also losing access to a cheap labour market in the EU could also lead to increased labour costs for UK businesses in the gaming sector.

Political and Regulatory Stability

The English government is very open and welcoming to businesses overseas. “This government organization offer free advice and assistance to overseas businesses. They have a well knowledgeable and global network of business facilitators and staff in embassies.” (Foreign Investment, 2019) The government encourages corporations to grow within their country that will benefit their economy. By welcoming new businesses, there are job opportunities that are created which will help with the unemployment rate. Foreign investors may see England as a great way to grow their fortune as there are so many opportunities for growth and so much help from the country in order to be successful.

Religion

Religions and opinions on video games tend to differ in the UK, there are religions that use games to teach and to convert people or certain trends, while other games are banned in some cultures. Overall as the world is evolving, it is generating upstanding amounts of people who enjoy playing video games. The gaming industry within the UK no longer has the stereotype of the boys in their mother’s basement. The gaming industry has allowed people or all sorts to just kick back after a long day, whether it’s at school or work, and just sit down and play the games they enjoy for hours on end. It truly is a beautiful thing; it’s a place where people can play with people all around the world. “And today, the British online games industry is a giant of the global market. It’s widely predicted that by 2020, the sector will be worth some $113 billion to our economy.”(Gavin)

The UK Culture

When looking at the culture of the UK, it is important to be aware of the clearly distinct nations which form the UK. The United Kingdom of Great Britain and Northern Ireland consists of England, Scotland, Wales and Northern Ireland. The citizens of any of these countries may be referred to as “British”. This term is also the safest to use when not certain of a person’s heritage. When certain of heritage, you are free to call the different residents as follows: English, Scot, Welsh or Irish. While the four countries share many customs, each has its own set of traditions and history (Expatica.com. 2018, June). The British have long-standing traditions, and their customs have had an impact on more than just their patch of land in Europe. British culture includes different races and ethnicities, though the predominant race is white, or Anglo-Saxon (Expatica.com. 2018, June). A Brit may seem reserved and cold at first but that is just an impression, they are very friendly and helpful to foreigners.

The most culturally recognized aspect of British tradition is their monarchy. Royalty is a significant part of British culture, and the many ceremonies surrounding royalty have been a celebrated custom for over 1,000 years. The monarchy exists today mostly as a tradition (Besart. 2019, May).

English is the official language and the main language spoken in the UK, roughly 98% of them speak English as their first language. Art is an important part of the British history and culture. Many British artists created irreplaceable artwork whose appealing influenced many artists from all around the globe (Besart. 2019, May).

The core concepts of the British culture are privacy, humour, common sense, honesty, consideration, fair play, informality and diligence (Besart. 2019, May). Keeping these core concepts in mind when developing the marketing strategy and when interacting with the British will be invaluable to successful market entry.

Business Customs and Practice

England faces distinct business customs and practices regarding issues like ethics, corruption, and respect of the law play. Business ethics in England is an interesting mix. Businesses may allow wearing unofficial clothes, although conservative people prefer official clothes. Other than professional titles like professor or doctor, it is considered polite to refer to a man as ‘Mr.’ while women as ‘Mrs.’ or ‘Miss’ when unmarried. It is actually recommended to use formal titles for businesses (Zibarras & Coan, 2015). It is also customary to be given a business card at the end of a meeting or for one to write on your business card. Furthermore, the meeting has clearly defined goals, with an agenda, and those attending are always expected to be a bit early or on time. During the meeting, facts are expected to be backed with facts and figures rather than emotions. It is also considered ethical to maintain eye contact without staring.

Ethics is clearly noted from the communication styles used in England. For example, when communicating with people who are equals or are of the same class or rank, the communication language used is direct but modest, while communication with known people may take an informal model (Zibarras & Coan, 2015). Written communication strictly follows rules of protocol and is addressed using the person’s title and surname, unless the person is known very well. Even when using emails, communication is mainly formal compared to other countries. Communication avoids slang and abbreviations. Major business decisions are usually made from the top management and passed down the chain with any confrontation ill-advised (Zibarras & Coan, 2015). The current management style is open and progressive compared to the previous approach that was conservative. It is also common for employees to be consulted on matters that might affect them in England, be treated with respect, and their time used efficiently.

Corruption in England is never treated lightly. Corruption cases are very minimal, as reported by the Transparency International (Lord, 2016), either because the corruption might occur to marginalized groups or because the corruption might occur in intangible ways such that the victims are not immediately clear. Business culture in England treats corruption as unethical, and Transparency International has established general and specialist training courses and advisory services to help people when faced with corruption issues (Lord, 2016). The Transparency International conducts “health checks” intended to regularly check the levels of corruption and identify appropriate responses to the growing threat. This is common in sectors where the response to corruption risks is uncoordinated and incoherent.

The respect of law play in England places everyone to be equal before the law. This is known as ‘equality before the law.’ Businesses and other public authorities are expected to act within the law assigned to them in England. Actually, for businesses to operate smoothly, they are expected to respect and obey the law, respect the rights of others and their opinions, treat others fairly, and look after the area the business is located and its environment (Kaplan, 2017). This guarantees the business freedom from unfair discrimination, the right to a fair trial, among other freedoms. The rule of law may be invoked when considering controversial government powers seeming to stray from precedent actions or breaking legislative ground.

Environmental concerns are a common phenomenon in England due to the high population causing increasing human activities, and therefore levels of pollution and contamination. England practices regeneration of the cities to deal with environmental concerns (Harper, Harper, & Snowden, 2017). The UK has enacted various policies to deal with environmental concerns like conserving water sources and lowering carbon emissions. For example, all companies listed in England are expected to submit their reports showing carbon emissions so that consumers can see the carbon footprints of the businesses and make their decisions. Environmental offenders are also facing higher penalties to prevent them from committing environmental offenses. For example, fines have increased from tens of thousands to hundreds of thousands. The government in England is also offering incentives to support the use of green technologies in providing electricity, heating, and transportation.

On the other hand, human rights issues are also addressed with the utmost care. Since England does not have a codified constitution, England uses its political system to protect fundamental human rights. This is done through the use of the Human Rights Act and other legislation, the courts, and the Parliament. The Human Rights Act, the common law, and other forms of statutes that may be formed by the Parliament are used to protect human rights (Symonides, 2017). There exists a strong institutional framework in England that guides and helps address human rights issues in England. A good example is the Joint Committee on Human Rights in Parliament, the Equalities and Human Rights Commission, and further backed by strong political support helps address human rights issues in England.

A Legal Synopsis: The UK

The UK is a constitutional monarchy, England and Wales operate a common law system which combines the passing of legislation but also the creation of precedents through case law. The laws are established by the passing of legislation in Parliament which consists of the Monarch, the House of Commons, and the House of Lords. The House of Commons is elected by the people and the Prime Minister is a member of this House ( Bodleian Libraries, 2019). Very similar to Canada, the legal system is transparent and fair, although differences do exist in Northern Ireland and Scotland for the most part import, property rights, copyright, and trademark laws are interchangeable throughout the UK.

Pertinent Laws and Regulations

The UK is a major hub for Foreign Direct Investment (FDI), despite the UK’s exit from the EU; the UK has seen a rise in total projects with FDI projects up by 6%, digital FDI projects increased by 33% which is more than three times the rate of overall market growth, a large number of these projects included computer services and sales as well as digital entertainment (Bletso, et al., 2018). The UK is a ripe market for FDI as there exists no domestic legislation that governs FDI this is because there is no policy distinction between foreign or domestic investment. In the UK the owner of a patent has the right to exclude others from doing certain acts in relation to the invention claimed in the patent, this includes importing products which use or are made in accordance with the invention patent, as such it is important to investigate any conflict patents with the gaming system which may be currently held in the UK (Bletso, et al., 2018). Imports to the UK from outside the EU are subject to a value added tax (VAT) and the importer must pay the VAT on import at the same rate as if the goods were supplied within the UK, customs duty and excise duty may also be payable on imports but will differentiate according to the type of good.

Conclusion

The UK is a culturally diverse nation with great potential to enter the gaming market. There is disposable income for the target market to make purchases within the gaming industry and statistics show (as mentioned in this report) that the gaming industry is successful and growing.

Report on Opportunities for Market Entry

United Kingdom Demographics

In regards to the gaming demographics, there are 23.1m people aged between 6 and 64 playing games in the UK, or 49% of the population in that age group (2018 Q1). On average, 11 to 64 year-olds in the UK spend 10.3 hours per week playing games (2018 Q1), refer to Figure 3 in Appendix A. For game consoles, 29% (13.9m) play on consoles, 28% (13.5m) on computers, 25% (12.1m) on smartphones, 19% (9.1m) on tablets and 11% on handhelds (5.2m) (2018 Q1). (ukie.org.uk. 2019)

This information shows that there is a large market to reach in the UK with consoles still being the second largest form of gaming device. This translates to a wide target market with great potential for success.

The UK is the sixth largest video game market worldwide since 2016 (Fuller, S. n.d.). It has a market value of 5.7 bn GBP in the UK. Consoles sales grew a solid +6.5% to 702m GBP, despite no new consoles being released. 88% of UK households have access to the internet, an increase of 2% on 2016. There are 25.3 million fixed broadband connections, 10.8 million (44%) of which can be classified as super-fast (more than 30Mbps).

In 2017, 32.4 million people play games in the UK which is approximately half the population (Ukie.org. n.d.). 32% of UK players play mobile, console or PC games (Ukie.org. n.d.). 23.1 million people aged between 6 and 64 play games in the UK, or 49% of the population in that age group. On average, 11 to 64 years old spend 10.3 hours per week playing games.

54% of the players in the UK are male and 46% are female. The largest single age/gender demographic is 15 – 24 year old males, making up 14% of all players, whereas 15 – 24 year old females make up 11% of all players (Ukie.org. n.d.).

Labour

UK higher education is a strong supporter of the games industry. Sixty universities/colleges provide 215 undergraduate and 40 master video game courses throughout the UK in 2014, 23% of the courses are in London, 18% in the West Midlands and 16% in Yorkshire and the Humber: these 3 regions cover 57% of all courses provided. The top 3 universities in number of courses provided are: Staffordshire University (29 courses), University of East London (17 courses) and Sheffield Hallam University (16 courses). The computer games workforce is highly qualified, with 63% having a degree compared to 57% of the wider Creative Media workforce and 37% of the wider UK economy in 2011(ons.gov.uk. 2019, June).

There is a new group called the Game Workers Unite U.K. (GWA), that is a young, dynamic and global organization whose number one goal is bui8lding the foundations for mass game industry unionization (gwu-uk.org.). They have aligned with the Independent Workers Union of Great Britain – well known for their landmark lawsuit against Uber. Unionization of this labour force could raise employment costs, affect the businesses selling the gaming system, as well as taking into account manufacturing issues. It is known as “crunch” where the gaming labour force works long hours of unpaid overtime to reach goals for anticipated releases (gwu-uk.org.). The GWA wants to ensure fair pay, fair employment classification, and working hours. This would affect manufacturing in the UK (gwu-uk.org).

Report for Market Entry: Legal Barriers

Using findings from the Business Environmental Analysis Report (BEAR), the market analysis has found that within the UK there exists significant opportunities for market entry. From a legal prospective the M-Box by MES-Sim Corporation is not infringing on any existing patents in the UK which allow its full import and sale without any domestic parties being able to preclude its import and sale due to patent law. Import laws & taxes on video games and gaming systems are straightforward and easy to navigate, video games and systems like the M-Box are duty free but subject to a Value Added Tax (VAT) the VAT for a video game system is 20% as it is classified as a retail item (GOV.UK, 2019).

Report for Market Entry: Tax Relief

Video Games Tax Relief(VGTR) has been available for qualifying games companies to claim since April 2014 (ukie.org.uk, 2019). To be eligible for Video Games Tax Relief, your company must be responsible for the majority of the planning, designing, developing, testing and producing of a game. This company will be called the Video Games Development Company (VGDC).  At least 25% of your eligible costs must be incurred in the European Economic Area (ukie.org.uk, 2019). Video console games are eligible. This is important to further investigate for any financial assistance when entering the market.

The UK has a Video Games Tax Relief (VGTR) which allows game publishers to claim up to 20 percent of certain production costs. Each claim can amount up to $500,000, and companies have so far claimed $20 million (Sega), $30 million (Sony), and $60 million (Warner) in tax breaks (Oliver, Keza, & Keith, 2019). Although the tax break is earmarked for British companies foreign companies are able to claim the tax benefit by setting up operations within the UK and continue to claim the benefit due to their stimulus into the economy, therefore based on the size of the tax relief a domestic operation should be considered by MES-Sim Corporation if European investment is expanded open.

Market Entry Strategy

Determining a market strategy for the M-BOX and MES-Sim requires setting specific goals for the achievement of objectives in the new market, such as determining the level of sales attainable. Further, it is essential to focus on the goals to make the strategy a success and monitor the products and opportunities as well as business goals developed (Love, Roper, & Zhou, 2016). The M-BOX requires creating goals that will enhance the establishment of the business in the new market. The various goals and objectives will guide the business in attaining its full potential and counter competition for other established businesses.

Consequently, research should be done using all techniques available to acquire all the relevant information available in the new market. The research could include interviews, business pilot study, online searches, competitor analysis, creating business contacts in the area and attending and participating in trade shows and exhibitions (Love, Roper, & Zhou, 2016). These will contribute significantly to having more knowledge of the M-BOX and MESI-Sim. Also, of importance is to learn on the political, cultural and social environment. The nature of politics in the UK is somehow volatile, which could hinder the M-BOX and the MES-Sim to limit their investment. As such, the UK has a favourable socio-cultural setting that will accommodate the businesses.

Further, competitor analysis is another essential aspect when determining the potential of a new market. Due to high competition in the UK, the M-BOX and the MES-Sim should carry out a thorough competitor analysis to determine the potential of available businesses in the market. The research will enable the business to make critical decisions for market establishment and expansion. For instance, checking what technology they use the level of expertise, modes of transport, among other factors (Love, Roper, & Zhou, 2016). The study will enable differentiating between the various competitors available in the market.

The choice of mode entry is also essential when entering a new market. The M-BOX and the MESI-Sim will utilize the services of an agent or distributor available in the UK. It could enquire from a franchise or collaborates with existing business ventures. The M-BOX and the MESi-Sim could also create a new brick-and-mortar facility. Most developing and markets in the UUK have partnered with existing distributors to save on cost.

Prior to entry into a new market, the M-BOX and the MES-Sim need to schedule their financial needs. It is essential to have support from various sources to counter the volatile business environment available in the UK. Further, the multiple challenges and contingencies that could arise should be considered, and an insurance cover purchased where required. The insurance cover should protect the business against losses such as when customers fail to pay.

However, the M-BOX and the MES-Sim should plan for the various challenges expected in the market especially in the transport and communication sector that most includes terrorism and cybercrime. The current developments in Brexit have exposed the UK to security threats (Kelly, Tyler, & Crawford-Brown, 2016). As such, England being the most developed of the other countries will experience disruptions with the growing disintegration. Terrorism has affected both the transport and telecommunication disrupting communication between and within the counties

Transportation and Communications Infrastructure 

The transport and communication network have a significant impact on determining market strategy. These elements are essential in creating a system for the transportation of good and services around the country. The development of transport and communication has created opportunities in the social and economic sector. The public has embraced the widening connection in determining critical decisions to meet economic ends (Kelly, Tyler, & Crawford-Brown, 2016). Further, the development of technology has significantly influenced the development of the telecommunication sector. The connection has attracted investors from various parts of the globe who have contributed to the economy. Globalization has exposed the UK to the international market in the export and import of products. The emergence of globalization has increased production as the county can acquire raw materials and expertise from various parts of the globe. According to Kelly, Tyler, & Crawford-Brown, (2016), the manufacturing industry is composed of 11% of the gross value added with exports making up to 44% employing more than 2.6 million people. The UK market is composed of 70% controlled by business and entrepreneurs. These aspects have increased the industrial and manufacturing sector by approximately 1.4% annually (Kelly, Tyler, & Crawford-Brown, 2016). Further, 13% of business investment increase has been achieved over the past 10 years. The Office for National Statistics (ONS) indicates that the development of transport and communication has contributed to a more skilled workforce, production of quality products, improved automation industry, integrated global economy, shift to high productivity and increased investment in research and development. 

However, various challenges have been experienced in both the transport and communication sector with most including terrorism and cybercrime. The current emergent of Brexit has significantly disrupted the economic development of the UK (Kelly, Tyler, & Crawford-Brown, 2016). That various changes have disintegrated the transport system, especially the railway line which connects all the countries of the UK. As such, England being the most developed of the other countries will experience disruptions with the growing disintegration.

. Also, the development of technology has contributed to cybercrimes and cyberbullying as most people use devices to connect to the internet (Kelly, Tyler, & Crawford-Brown, 2016). Technology has led to the emergence of hackers who propagate cyber-attacks. The entry into the UK market will require the company to developed advanced technology and security systems. 

To a great extent, the market is somehow stable despite the various challenges experienced. The country is making efforts in the development of various infrastructures in transport and communication to accommodate local and foreign investors. The developed systems in the road, railway and air transport have created an opportunity for investment. To adequately fit in the UK business environment, it is important to consider the business will be affected by the transport and communication networks. These actors have a considerable effect on business, numerous operations and coordination. As such, it is also important for the company to identify a communication network that is focused on customer service satisfaction. The numerous strategies applied have to synchronize with people for efficient and effective business operations.  

Transportations within the UK

Through roads, rail, air, and water, there are plenty of way to ensure our product can reach our customers in a timely manner. “The UK has well-developed sales and distribution channels, ranging from wholly-owned subsidiaries of foreign manufacturers to independent trading companies that buy and sell on their own account.  Between these two extremes are independent resellers, sales agents, and stocking distributors, who have contractual relationships with their suppliers. The selection of an appropriate marketing organization depends largely on the nature of the goods and services involved.  Also, increasing international e-commerce has contributed the growth of local fulfillment and delivery/return services.” (UK Government Exports). 

Methods of Distribution

Direct Retail Distribution- Merchandise will be sold and operated out of a retail spaces all around the United Kingdom.  

Direct by Means of the Internet – Using our own e-commerce site, we will create markets in all areas, proven to be a fantastic way of reaching our customers.  

Wholesale and Distributor – We will offer our promotional deals by selling product to companies that buy bulk quantities of our product and sell it in smaller amounts to other local retailers and resellers.  

Telecommunication Infrastructure: Next Gen Gaming

Throughout the UK there exists a robust telecommunications infrastructure with 4G, LTE, and a national fibre optic network. This ever-expanding framework of wireless and wired network infrastructure makes the UK an ideal point of expansion for MES-Sim, over 90% of households in the UK have access to internet service which can support the state of the art M-Box (Mauro, Barbara, & Novella, 2015). The telecommunications infrastructure in the UK is likely to continue to advance and as Internet Service Providers (ISP’s) improve upon existing broadband infrastructure and improve services for costumers. With this increase in service will come an increase in demand for products capable of utilizing faster internet, MES-Sim can be marketed as the next generation of gaming systems for the UK, one which is paired to utilize the future 5G network infrastructure.

Transportation Infrastructure

When it comes to physically getting the M-Box in to market the UK represents a unique challenge of being a nation surrounded by ocean, two obvious methods of import are going to be by air and by sea. Heathrow airport is the largest UK port by value and future expansion plans for the facility include becoming one of Europe’s busiest airports for cargo, the airport plans to move 3 million tonnes a year by 2040, which makes the airport a easy point of access for shipping the M-Box by air freight. (Heathrow, 2019). Being a group of islands, the UK houses some the busiest ports in the world, these port towns have robust economies and are keenly connected to major cities by way road infrastructure. Having an established port infrastructure allows MES-Sim to make larger shipments directly to a port where a warehouse that houses M-Box stock is located, using marine transportation allows for a greater volume in shipment for a lower cost than air freight (Barrios, 2019). Based on the demand and sales volume predicted by MES-Sim a combination of air and sea freight will allow for a steady supply line of product into the target market.

SWOT Analysis

Strengths

The UK is already a proven market with enormous volumes in video game sales yearly, one of the most important things for MES-Sim is the VGTR which can give a significant tax relief for the company with claims of up to $500,000 (Oliver, Keza, & Keith, 2019). Furthermore, the UK is a major port of entry for both air and sea freight, this means that large scale shipments of the M-Box into the UK are logistically not as complicated as some other markets.

Weaknesses

There is already a significant foothold established in the market by other video game media companies, displacing these giants and taking a market share will be a difficult feat as video gamers are extremely brand loyal consumers (Teoh, 2019). This will have to be offset by a significantly targeted marketing strategy in order to win over the diverse markets present within the UK.

Opportunities

With nearly $5.05 Billion in sales generated in 2018 from the video game market roughly 51% of the entertainment industry in the UK is generated through the sale of video games and their systems (Statista Research Department, 2019). With this sort of market share being held by the video game industry, using the right market entry strategy the MES-Sim can capitalize on the market while using the UK as a base of opportunities for expansion into Europe

Threats

The largest threat that currently exists to the MES-Sim’s launch of the M-Box in the UK is Brexit. Following Prime Minister Boris Johnson’s re-election Brexit is now a mandate from the public and is expected to happen in 2020, although it can be foreseen that Canada will maintain a good trading relationship with the UK and most likely establish some sort of FTA until the agreement has been codified there exists a reasonable threat to the stability of the trading relationship and MES-Sims ability to make an aggressive market entry during a time of uncertainty.

Conclusion

With the in depth research completed into the United Kingdom market it is a

Appendix A

Figure 1

Figure 2

Newzoo has published its annual Global Games Market Report for 2019, in which it projects the state of the industry for the year, as well as issuing predictions for the industry three years down the road in 2022. The report is based on consumer research surveys of 62,500 invite-only respondents across 30 countries. Those 30 countries in total represent 90% of all global game revenue (WriterTuesday, R. V. S., 2019)

Figure 3

https://ukie.org.uk/research#demographics

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