Unit 5 - Assessment 1: External factors and cultural differences (DISTINCTION)
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Course
Unit 5 - International Business
Institution
PEARSON (PEARSON)
You have been asked to write the first part of an investigative journal
article. This will recommend one country that a business could target
for international trade.
Using your research, select an appropriate business, and two
countries that might be suitable for it to trade in.
Prepare the f...
and two countries that might be suitable for it to trade in
Written for
BTEC
PEARSON (PEARSON)
Business 2016 NQF
Unit 5 - International Business
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5.2: External Factors and Cultural Differences
Task 1: Recommending one country a selected business could target for international trade:
Company Research:
Adidas AG
Adidas AG, the company name for the popular sports brand, Adidas. The company is the largest
manufacturer in their sportswear in Europe. Second to only Nike worldwide. The company is
headquartered in Herzogenaurach, Germany.
Adidas was founded by Adolf Dassler and his brother Rudolf in 1924, Germany. In the 1940s, the
brothers split the business into Adidas and Puma.
Adidas has been a public company since 1995 and features on the DAX which is an index of the 3o
largest companies listed on the Frankfurt Stock Exchange.
The Adidas group is made up of Reebok, Taylormade, Runtastic, Timex and also owns a share of the
German football club Bayern Munich.
Adidas’s biggest competitors: Nike, Puma, Under Armour
Brand value of: $16.5 billion, employs: 62,000 people, net sales: €19.9 billion.
Adidas operate in 160 countries and their products likely reach many more through unofficial or
third-party imports. Their products come with a price tag that reflects the value of the brand.
Therefore, if there is an economic crisis somewhere in any of the countries that Adidas operate in,
their customers may purchase alternative, cheaper brands – affecting Adidas’s global revenue. This is
due to the relative purchasing power of the customers in these countries.
Adidas’s revenue also heavily relies on the cheap labor they employ to make their sportswear. The
manufacture their products in many different countries, but the majority is manufactured in China,
Vietnam, Cambodia and Indonesia. The reason they manufacture most of their products in these
countries is due to the low labor cost associated with these countries. Using cheap labor benefits
Adidas in terms of revenue but comes with drawbacks in terms of uncertainty of the future and
controversy related to bad workplace conditions in these countries. The reliance that Adidas place
on their low labor cost is a disadvantage to the brand as social and legal change may result in lower
revenue and higher costs to adidas due to development of the countries that adidas rely on. Another
issue that was previously mentioned with regards to using cheap labor is that the workplace
conditions and the pay that the factory workers receive is reported on as unfair and unethical.
Adidas have been called-out for using sweatshops which use forced-labor, unfair wages,
unreasonable hours, child labor and horrible working conditions. Labor MP, Richard Howwit
organized a hearing with an Indonesian non-governmental organization watchdog where the
working conditions were described as in breach of the company’s own code of conduct. These
hearing made the mainstream news in both the UK and the US. This resulted in backlash for the
company and many boycotted Adidas as a result, affecting both their net sales and their brand
image. The same hearing also outed the company for breaking the law, when they were seen to be
employing children, working 15 hour-days in their sweatshops. This controversy forced the
Indonesian government to launch an investigation into Adidas resulting in an undisclosed fine for the
company. This would have undoubtedly soured relations between the company and Indonesia as
well as contributing to the world-wide disliking for the company which would’ve resulted in mass-
boycotting and negative connotations related to the brand image of the company.
, 5.2: External Factors and Cultural Differences
Samsung
Samsung is a South Korean company which was originally a grocery trading company store founded
by Lee Byung-Chull in 1938. Lee Byung-Chull saw success with his original company direction and
then decided to expand into the electronics industry in 1969 with its first product being a black and
white television. The company soon became a major player in South Korean electronics
manufacturing and was exporting their products worldwide. By 1970, the company had acquired a
50 percent stake in Korea Semiconductor.
Samsung is now one of the major global manufacturers of electronic components. They supply large
companies such as Apple, Sony, Google, etc. with electronic components such as Batteries, Chips,
Flash memory and much more.
Samsung have also seen success in their mobile phone division, especially the Galaxy S series and the
Galaxy Tab series which directly competes with the iPhone.
The company employs over 287,000 people in 74 countries. They have market share of 21% in the
global smartphone industry and in 2020 they sold more than 267 million smartphones. Samsung’s
competitors include companies such as Apple, Huawei and Xiaomi. Samsung is also the world’s
largest television producer and is also the world’s largest semiconductor vendor worldwide.
Although Samsung employ people in 74 countries world-wide, their products make their way into
almost every country due to their hugely successful electronics manufacturing division. As they
operate in so many countries, they are subject to the changes in political stability that these
countries face. Samsung are a South-Korean company and house most of their operations in said
country. The past decade has seen tensions within the Korean peninsula rise. There have been
discussions on possible war with North-Korea which would heavily affect Samsung. Political
instability has also affected Samsung in Latin America and in Africa due to conflict and import/export
sanctions. Samsung have also seen legal challenges due to copyright issues related similarities to
Apple’s iPhone and iPad. Apple took Samsung to court and won, forcing Samsung to pay an
undisclosed amount to Apple. This affected Samsung in terms of revenue and also affected them in
terms the features that they are able to put on their devices, forcing design changes that may have
cost them market share. The company has also been fined for ‘purposely’ slowing down their devises
through software updates, accelerating the substitution of their devices. Like Adidas, Samsung also
employ cheap labor in countries such as China and Vietnam, this has raised ethical issues relating to
the production of their products due to reported poor working conditions.
Coca-Cola
Coca-Cola are an American beverage retailer and manufacturer that produce and sell over 500
brands in more than 200 countries, serving more than 1.6 billion drinks a day. The company are best
known for their Coca-Cola drink. The company is headquartered in Atlanta, Georgia.
The company was started as a medicine producer and retailer in 1887 and started to see rapid
growth by 1891.
Revenue: £31,944 million, Number of employees: 92,800, Market share: 51% of global market
(largest beverage company in the world)
As Coca-Cola create beverages, they must meet the regulations of the FDA. Coca-Cola is known for
its high sugar content and unhealthy products. If there is a change in social and legal attitudes
towards high sugar content in soft drinks, Coca-Cola may be forced to change their distinctive recipe,
, 5.2: External Factors and Cultural Differences
likely losing the company market share and revenue in the process. Coca-Cola is an multinational
company that sells its products in many different markets, each with their own taste. TO combat the
issue with different tastes in different countries, they often release geo-locked products. For
example, the brand came up with 30 alternative flavors in Japan alone to appeal to their Japanese
consumers. This can be costly and high risk for Coca Cola but can also result in higher, otherwise un-
realized profits for the company. Coca-Cola’s prices and overall revenue is affected by the price and
the availability of the ingredients that go into their products. One of the main ingredients of Coca-
Cola’s beverages is water. If the accessibility of water is lower in a certain part of the world, they
company may be forced to produce and import form a different part of the world, straining their
supply train and raising costs and therefore revenue.
Country Research
Germany
Germany is a North Western European nation that achieved national unity far later than its counter-
parts. After their defeat in the two world wars, the counter was split into their eastern and western
quarters. Following the cold war, the divide was broken and the country soon caught up
economically and militarily. Germany has now become Europe’s economic giant and is a key player is
the European Union. They are currently led by their chancellor, Olaf Scholz.
The country has a population of 82 million.
Life expectancy of 78 years for men and 83 years for women.
Currency is the Euro.
In 2019, Germany was the number 4 economy in terms of GDP, the number 3 in total exports, the
number 3 in total imports. Germany’s top exports are refined petroleum - $13.9 billion, Iron
Fasteners – $6.85 billion, Other iron products - $8.85 billion, Aluminum plating - $5.81 billion and
Petroleum Gas - $5.66 billion.
Germany is currently facing an aging society along with low debt levels meaning that the country
must soon make the decision whether to increase public spending and add to the economy or to
save for state pensions to cater for their aging population.
China
China is the most populated country in the world and houses ancient culture dating back to nearly
4,000 years. China, as we know today, is known as the People’s Republic of China and was founded
in 1949. China was subjected to a stagnant economy under a rigid socialist regime until Mao Zedong
reformed the economy along with capitalist ideologies, creating one of the fastest growing
economies in the world.
China is now a major player when it comes to foreign investment.
Population of 1.4 billion people.
Life expectancy is 75 years for men and 78 years for women.
Currency is the Yuan.
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