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BTEC International Business Unit 5
Assignment 1
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Why Trade Internationally?
Introduction
In my essay I will be presenting the reasons why two businesses (BMW and River Island) operate
in contrasting international markets. Using the information from this research I will equally
proceed in explaining the types of finance available for international business and the main
features of globalization that affect BMW and River Island. In addition to this I will explore the
role of trading blocs on international trade, as well as analyzing the support that is available to
the businesses and the barriers of operating internationally.
BMW
BMW (standing for Bayerische Motoren Werke GmbH, which means Bavarian Engine works) is a
German multinational company founded on the 7th March 1916 in Munich, Germany, by Karl
Rapp, Camilo Castiglioni, Gustav Otto and Franz Josef Popp. They are now a world leading, big
manufacturer of luxury automobiles and motorcycles, as well as one of Germany’s big three
producers, with a global presence and a well-known household name. (During WW1, BMW
developed engines for planes). BMW is also a subsidiary to; Rolls-Royce motor cars, Drive now,
BMW Bank, John Cooper works and many more. This company is incorporated and owned by
shareholders, who are: “Stefan Quandt, Susanne Klatten , the Quandt family, and Public
investors. BMW’s headquarters is based In Germany.
River Island
River Island is a London Headquartered fashion brand company, founded in 1948 in East End of
London, by Bernard Lewis and brothers. Owned by the Lewis Family. With over 60 years of
fashion retailing experience, River Island is one of the most well-known and loved brands on the
High Street.1 This company is owned by shareholders, who are: Bernard Lewis, Leo Lewis (senior
executive and son of Bernard Lewis), Clive Lewis (Chief executive) and Ben Lewis (Bernards
nephew), this is a family incorporated business.
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P1: Explain why two businesses operate in contrasting international market
BMW
BMW (Bavarian Engine works) is a multinational company and turned into a public limited
company (PLC) in 1918, as such it is publicly traded on the Frankfurt Stock Exchange. They are
involved in the Automobile industry, producing luxury cars and motorbikes. As BMW is a PLC
they are owned by shareholders, who are; Stefan Quandt (a German industrialist and engineer)
who owns 29%, Susanne Klatten (a successful investor and sister to Stefan Quandt) who owns
21%, the Quandt family (a long-time shareholder of BMW AG, and between a brother and sister,
they own half of the company) and public investors own the other 50%”2 Given that it’s a PLC
company shareholder have limited liability. PLC company has its advantages and disadvantages.
Advantages:
• Personal assets of shareholders are protected, and they would only lose money that
they have invested, should the business fail.
• Better access to capital as well as the opportunity to raise funds by selling shares. This
could help to grow and expand their business; however, the public can take control of
the company.
• Liquidity, which allows shareholders to be able to buy and sell their shares
• Tax efficient income where Directors and the owners can pay themselves a dividend.
Disadvantages:
• Lots of legal requirements, such as delivering a corporation tax return to HMRC
• The company must (by law) disclose information and their main accounts out publicly
which means BMW can be inspected by the public and competitors can take advantage
of the situation so that it could benefit them.
• Given that anyone can buy their shares; an interested party can take over the company
• Setting up costs are expensive
They can export, with the help of government aid, because the government assists corporations
that invest in the community and stimulate the economy. 70% of its production is exported.
BMW uses direct exporting because it helps develop the company’s international marketing
strategies, they have greater control over marketing function, and they could earn more profits.
In addition, BMW uses a direct exporting by distributaries, such as BMW distributor in UAE is
ABMC. The United States has been manufacturing BMW since 1994 and have exported over 1
million units.
