Unit 5 Assignment 1 Exemplar - P1,P2,M1,D1 - International Trade - BTEC Business Studies Level 3 Diploma - 25 Pages, 10861 Words
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Unit 1, Unit 5, Unit 21, Unit 4 (720GLH)
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BTEC Level 3 National Business Student Book 2
Unit 5 Assignment 1 Exemplar - P1,P2,M1,D1 - International Trade - BTEC Business Studies Level 3 Diploma - 25 Pages, 10861 Words
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Unit 1, Unit 5, Unit 21, Unit 4 (720GLH)
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Why trade internationally?
I am currently on work experience in Portishead at the Chamber of Commerce and I
have been asked to write a report on how businesses trade internationally. I have
decided to look at two businesses, which trade in different ways, compare, and
contrast them. To decide which businesses I was going to look at I researched many
businesses that trade in contrasting international markets to help me decide which
businesses would be best. I know someone who works at Axa Insurance so this seemed
like it could be a good business to choose as a large number of exports from the UK
are in the financial services sector. Although I knew someone who worked for Axa,
their knowledge was limited on the international trade because they worked in IT
and were unable to get me in touch with a person who worked specifically in the
international part of the business. The website was limited for information about
their international trade so I decided not to pursue and look at different
businesses instead. Another business I looked at was McDonalds because they trade
internationally however their business image might not be reflective of the
industries our clients are in. I also looked at Cath Kidston but after reading a
Telegraph article with an interview from their chief executive, Kenny Wilson, it
seemed they only operated with franchises abroad and this again wouldn�t appeal to
the audience. http://www.telegraph.co.uk/connect/small-business/cath-kidston-chief-
on-how-to-grow-business-internationally/
I looked at Unilever because I believed they were a business, that operate in a lot
of different countries as they have so many products to offer. They are a very open
business and provide a lot of information that I can use online. Unilever were a
particular interesting company as they recently had a failed takeover by Kraft
Heinz. I have a contact at White Stuff, which can provide me with information about
their business, and about the countries, they trade in internationally. They are
new to the international market so they contrast well with Unilever as they have
been trading internationally for a long time. I feel like I can explain the
differences in these companies with their being some similarities as well.
Unilever structure, activities and chosen market
Unilever have two companies, which were set up, one being Unilever PLC and the
other was Unilever N.V., they operate together as one company and share the same
business values. However, the two companies of the business have separate legal
entities. They have one board of directors for the two companies but it is unclear
as to why they are still trading as two companies but it is likely to be something
to do with tax. There are NV shareholders and PLC shareholders. Unilever have split
their company into four categories, which are home care, foods, refreshments and
personal care, and then their company is split into two regions, which are North
America and Europe. They have a chairman and 11 non-executive directors and then
they have their chief financial officer and their chief executive officer. The
company have different
functions in their organisational structure, which are chief marketing and
communication officer, chief research and development officer, chief supply chain
officer, chief legal officer, chief HR officer and a Group secretary. Unilever
trade with each of their four categories internationally depending on their
customers� needs and wants and the demand for types of products in specific
countries and markets. They sell products in every continent but they just tailor
the products, for example in Tanzania they don�t have a big selection of brands
that are available because there is a narrower market for products than in the UK
where they have a big selection that are available to people.
This is a screenshot of the brands that are available in Tanzania, there isn�t very
many of them and they don�t have any under the refreshment sector. However, in the
UK there are 46 brands, which cover all four of the categories because there is
more of a demand for these products than in a country like Tanzania.
,Unilever operate in developing, emerging and developed countries. They operate in
more than 190 countries and 2 billion people use their products globally every day.
They operate in Kenya, which is a developing country, and they don�t offer as many
brands as they do in developed countries such as the UK where they have a lot more
products available to their customers. People who live in developed countries have
more demand for a wider range of products because the per capita income in
developed countries is a lot higher than it is in developing countries so they
might be buying more than people in developed countries. Unilever�s brands cover
some essentials as well as more luxury brands so they choose which ones will be
most appropriate in the different countries and which ones their customers are more
likely to buy. In the developing countries they are more likely to just be buying
the essential brands they need rather than buying items that have luxury prices as
they won�t be able to afford these a lot of the time so
Unilever won�t be making profits from having these products in shops in developing
countries. Between developing and developed countries there is the emerging markets
and Unilever have their brands available in countries such as Egypt and Thailand
which are both in these markets.
The next section of the report goes on to explain why Unilever trade
internationally.
Access to new markets
International trading gave Unilever a chance to expand their sales from similar
markets in different countries. For example, the developed countries have similar
markets and the customers expect the same things, so Unilever have expanded into
the international countries and this allows access for people to buy their products
globally and means they are opening themselves up to gaining more profit and
becoming more successful. Also they are giving a chance to 57% of the business that
is in emerging markets to buy their products because they are mainly selling
essential products that everyone needs to buy.
Diversification increasing market share and market leadership
Unilever have diversified their products into new markets. They have over 400
brands but don�t offer these in every market and specifically choose the products
they are going to offer in specific markets depending on what the customers want in
those markets. They have some international brands so these are only available in
specific countries, for example, Bru coffee is an Indian coffee so they only sell
it in India because this is where the demand will be for the product because people
in India like it. People in other countries wouldn�t necessarily have a want or
desire for the products. This means it wouldn�t be beneficial for Unilever to offer
these products in other countries except the country where it has originated from.
They have diversified their products so they now have brands in the four different
categories which gives them more of a range to offer to their customers.
Growth
Unilever expanded their business internationally and they have products all over
the world. They have moved some of their manufacturing to Africa as this is easier
for them and the growth will cut out their import costs, as they normally have to
import them to Africa. Having it local for them helps, Unilever be more competitive
in most of the African markets. By offering products that are suited to the
specific countries they are offering them in means Unilever have made profits and
this has helped with their success. By being successful in more than one country,
Unilever have growing sales with 2 billion people buying and using their products
every day.
Brand exploitation
Unilever have made the most of their brands between the different countries, for
example deodorant brand which is known as Sure in the UK, Rexona, operate in other
countries as well under a different name. It was founded in Australia and it is
manufactured by Unilever. It is sold under the name of Rexena in Japan, Sure in the
UK and Ireland, Degree in the US and Canada and Shield in South Africa. This means
that people recognise their brand in the different countries when it is introduced.
Rexona is the global leader for deodorant so when they are launching a new product
, they launch it under the name of Rexona. They also sponsored the world cup and they
could only do this with Rexona and not Sure because Rexona is a global brand.
Preferential tax rates and fiscal benefits
Unilever have their two headquarters, one, which is in the UK, and one in the
Netherlands. They pay their tax rates split across Africa/Asia, Europe and America.
They pay 50% of their corporation tax in Asia/Africa and then the other 50% is
split so 29% is paid in America and 21% in Europe. However, from the KPMG website I
have found the corporate tax percentages and this shows the average tax in Asia and
Africa is 24.69%, the tax rate in Europe is 20.48% and the Americas is 27.86%. This
shows that Unilever aren�t focused on the tax they are paying because they are
paying over �2,000m a year and they haven�t reconstructed their business so they
are paying their tax in the country with the lowest rates. If Unilever were
concerned about the amount of tax they were paying then they could reconstruct
their business so they are paying for tax in the country with the lowest rate which
would be saving them money and they would be paying for their tax in Europe.
Economies of scale
Unilever have more than 261 manufacturing sites around the world and this allows
them to achieve an economy of scale because the more they are producing the lower
the costs are going to be for them and the higher profit they will make on their
products. Unilever will produce high volumes of products at each of their
manufacturing sites and then these will be exported to their retailers for them to
be sold. They are able to reduce their costs by producing products in big
quantities which is ensuring they are making a higher profit.
Comparative advantage
Unilever produce their products worldwide and they have to export some of their
products to other countries. For example, Unilever Philippines exports deodorant to
the US. Producing products in another country and then exporting them to another to
sell reduces costs for the business and means that they are able to make a higher
profit because their costs aren�t as high.
Additional revenue streams
Unilever have generated higher revenue by choosing to operate in more than on
country. International sales has allowed Unilever to create new revenue streams and
this means new income because they are open to a lot more people who can buy their
products. This has created stability for Unilever because their revenue streams are
successful and led to a �52.7 billion turnover in 2016. They have their 4 different
categories and as personal care is the largest this might be the one that they
choose to expand and improve because they know the market is there for their
products.
Technological dominance
Unilever are aiming to improve their technology to make it easier and more cost
effective for them as a business. They have a scheme to �design once, deploy
everywhere� worldwide so it will be saving them money and won�t reduce their
profits. Their new technologies will be cost effective for the business and they
are going to try deploying technology in some of their factories and then releasing
it globally. They have been able to invest in technology to make their work ethic
more efficient, which will lead to higher profits because the sales of their
products will increase.
White Stuff
White stuff started in the mid-eighties. Two men founded the business, George
Trevas and Sean Thomas, when they started selling t-shirts and hats which funded
them being able to ski as this was something they were both interested in. The
first White Stuff shop opened in Battersea, South London 6 years after they had
started selling t-shirts and hats. White Stuff is a fashion and lifestyle brand and
they sell men and women�s clothing, accessories and gifts. They now have over shops
in the UK, Germany, Denmark, Italy and Belgium. They also have concessions in the
UK and Denmark.
The first international white stuff shop opened in Copenhagen in 2012 after they
had previously had a mobile shop in France and then they opened another shop 3
years later which was there second international shop in Germany. It was opened in
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