BTEC Business- International Business Assignment 2. Includes P5, P6, P7, M3, M4, D2 , D3 criteria's. This assignment investigates the differing factors such as political, cultural and other external influences which has an direct impact on multinational businesses operating in foreign countries. Th...
Assignment 2: Learning Aims C and D
Title: External Factors and Cultural Differences
Aim C- Investigate the external factors that influence international business.
Aim D- Investigate the cultural factors that influence international business.
Abstract
In this two-part newsletter, I plan to explore and investigate the external factors and
cultural differences affecting international businesses. This investigative newsletter will look
into the impact of these factors on a British based organisation that operates domestically
and has operations based in other countries. The business I have chosen to study for this
news report is Tesco Plc. Part One of this newsletter will explore the external factors
influencing the selected business whilst part two will look at the cultural differences
affecting international business.
Part One
The first part of the newsletter will investigate the external factors influencing the selected
business and will analyse two countries they could potentially trade and operate within; this
has been narrowed down from a prior search into various countries for potential expansion.
This section will include the following contents:
● An explanation of external factors influencing the chosen business
● The impact of international support systems enabling trade
● A situational analysis into countries for potential expansion
● A conclusion recommending one country for the business
Company Background
I have chosen to research Tesco Plc for this two-section newsletter. Tesco is a private retail
grocery company which was established in 1919 by Jack Cohen. Tesco first started as a
market stall in London’s East End after World War 1 with the name ‘Tesco’ created in 1924
after Cohen brought a shipment of tea from TE Stockwell; the initials of Thomas Edward
Stockwell and the first two letters of ‘Cohen’ were used to form the name Tesco. 5 years
later the first store of Tesco was opened in Burnt Oak, Edgware which was then followed by
an expansion after 1950 with 500 more stores opening.
, INTERNATIONAL BUSINESS
ASSIGNMENT 2
Later in the 1990’s Tesco established smaller stores in local
areas such as Tesco Metro, Express and Extra alongside the
introduction of the Clubcard and ‘Every Little Helps’ slogan. In
1995, Tesco started expanding internationally first starting
with Hungary and then moving to countries including Czech
Republic, Poland, Thailand and India within a decade. Tesco
now has 5,000 stores and 420,000 employees worldwide
across 13 countries including the UK.
External Factors Influencing the Selected Business
This section will look into the external factors that generally affect Tesco as an organisation.
This will be looked at by conducting a PESTLE analysis on Tesco’s external environment. A
PESTLE analysis is a study that investigates the external factors affecting an organisation.
Businesses tend to use a PESTLE analysis to help make key decisions as it provides a greater
understanding of the business environment, they are in.
PESTLE stands for the following:
Political
This is the first factor considered within a PESTLE Analysis, this includes looking at Taxation,
government support and changes affecting a business such as the National Minimum Wage.
Larger businesses are expected to pay higher tax rates and follow legislation. However,
SMES would receive grants and support in creating jobs to keep unemployment rates low.
Another political factor is corporation tax which Tesco would be required to pay since they
are an established business. This would mean they would have to follow all political laws set
such as wage requirements and working hours. Tesco already helps the government a lot as
they help create jobs and employment opportunities, in countries where stores are based.
2
, INTERNATIONAL BUSINESS
ASSIGNMENT 2
A current factor is Brexit which is a major political issue affecting all UK businesses as there
is a trade barrier between the European Union and the UK who does not enjoy the benefits
of being an EU member anymore. This has made trading within Europe difficult for Tesco as
they now have to pay expensive tariffs to import products from countries such as France,
Belgium, Spain and Switzerland which are all key for Tesco. These countries are key for
providing the UK with food products as the UK imports food produce including fish, fruit and
vegetables from the EU. The import of fruit and vegetables are more common in the winter
months as the weather is not good enough to grow them hence this is why food and
vegetables was the most imported product from the EU in 2020 according to Statista. For
example, the UK imports 85% tomatoes, 90% lettuce and 70% of fruits from the European
Union. Also, frozen potatoes come from Belgium and the Netherlands whilst the UK gets
more than £400 million worth of fresh tomatoes per year from the Netherlands.
Another current issue which is more recent is the outbreak of war between Russia and
Ukraine. The outbreak of war in Ukraine has meant that Tesco has followed other UK and
European businesses in removing Russian products from their stock. Tesco has removed
Russian products from its shelves in all their stores, this is not only in the UK but within all
outlets all over the world. Furthermore, Tesco has helped and supported the humanitarian
aid provided towards Ukraine by supporting multiple charities in donating to Ukrainian
citizens. Their first donations of food, clothing and hygiene products left the ports of
Hungary and Slovakia just 48 hours after the outbreak had started. The organisation has
donated around £1 million to the Red Cross which is a charity that has teams across Ukraine
who are providing warm shelter, warm clothes and supporting shelters in train stations.
Economic
One economic factor is corporation tax; Tesco must pay corporation taxes wherever they
operate, in the UK the tax businesses have to pay is 19%. The corporation tax rate in other
countries where Tesco operates are: 12.5% in Ireland, 21% in Slovakia, 19% in Czech
Republic and 19% in Poland. This factor will cost them lots and reduce the amount of return
which makes them reliant on the UK population as 30%
of the UK shop at Tesco. Another factor affecting Tesco
is changing interest rates, for example, the UK interest
rate has experienced a recent rise as it has gone from
0.5% to 0.75%. This means businesses may choose to go
for short-term loans as loans are more expensive, this is
risky for Tesco as they will find it tough to repay loans so
quickly. As a result, the higher interest rates would
make Tesco discouraged from borrowing from any bank
as interest payments are more costly.
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