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BTEC Business Level 3 - Unit 5 Assignment 1
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Assignment 1Unit 5 International Business
Why do businesses trade internationally?
Introduction:
In this assignment I'll be discussing the two companies and how they run in various global
markets. I will also discuss the various financial options and aspects of globalisation that
affect the businesses. BMW and River Island are the companies I've chosen. The report will
also analyse the support and barriers that are there for companies that conduct
international business, as well as the impact of trading blocs on global trade as well as the
impact globalisation have on businesses. BMW and River Island are the businesses I've
chosen for this report; both of them conduct business abroad.
BMW:
Karl Rapp, Camilo Castiglioni, Gustav Otto, and Franz Josef Popp created the international
corporation BMW PLC (Bayerische Motoren Werken) on March 7, 1916, in Munich,
Germany. The company has offices across the world, including in South Africa, the
Netherlands, Brazil, Germany, China, India, Mexico, the United Kingdom, and the United
States. As the industry leader in the production of automobiles and motorcycles and one of
the top three German producers, they have a well-known brand recognition. During World
War 1, BMW also created aircraft engines. The business is a subsidiary of various companies,
including Drive more, BMW bank, and Rolls Royce. Susanne Klatten is one of the company's
shareholders, along with the Quandt family, who own the long-term shares and the
remaining investors. https://en.wikipedia.org/wiki/BMW.
River Island:
Bernard Lewis started the international fashion brand firm River Island in 1948, and it is
headquartered in London. It is a private limited corporation that the Lewis family owns
outright. Although the firm is most recognised for its womenswear, they also provide
collections for men, children, and pets. With 250 locations nationwide, including in London,
Liverpool, Manchester, and Birmingham, the company has a positive impact on high streets.
https://en.wikipedia.org/wiki/River_Island
P1: Explain why two businesses operate in contrasting international market:
International business is the trading of goods and services in different countries which
involves importing and exporting between the countries. Now a days so many companies
are trading internationally which contain BMW and River Island. The reason they trade
internationally is so they can increase their revenue by targeting more customers as they
engage in international commerce in order to enhance income by focusing on a larger
,market, which helps the company build a sizable consumer base. When a company enters a
new company, they get access to the customers which makes the client base high.
Multinational corporations have an advantage over other businesses confined to regional
offices and establishments in that they boost their possibilities of connecting with clients on
a worldwide scale by creating locations or offices in several nations. They have more options
to develop and tailor their goods and services to meet the demands of potential clients
since they have access to more customers.
BMW is an international company since it has operated in several nations. BMW is a fairly
well-known brand with operations in 31 manufacturing and facility locations throughout 15
countries. BMW employs more than 134,000 workers at its corporate headquarters in
Germany. With a market share of 6.5% in the UK, the firm has a global sales network in
more than 140 countries. Through a number of different branches and subsidiaries, they
carry out business in the present country. BMW has the benefit of a huge market that
enables them to simply reach closer to their clients and raise brand awareness by
conducting business in established nations like the UK and the USA. Being close to the
consumer will enable them to avoid import taxes, which might cut the company's overall
costs, and having more customers will also result in having a greater profit margin. As a
result of underdeveloped markets and low demand, operating in emerging countries like
India and China will have lower levels of competition, making it simpler to build a brand.
River Island delivers its goods abroad and operates stores all over the world in order to
boost income and brand recognition, which will encourage more people to make purchases
from them and put them ahead of the competition. Due to increased customer demand,
they will provide cutting-edge goods that will draw clients and keep them coming back.
Customers may now purchase from them instead of visiting the store thanks to their
website, which makes it easier for them to do so from anywhere in the world. Their business
will grow, and they will make more money if they switch companies. As a retail company,
they may locate better suppliers from another nation when researching the market, and
depending on the nation, they have to pay fewer prices, saving them money that they can
put to use elsewhere in the company. A larger market allows the business to operate closer
to its clientele. River Island will be able to hire additional professionals with the necessary
skills to advance the organisation and provide innovative ideas that will propel the firm
forward of competitors like ASOS and New Look.
River Island uses export activities since it offers worldwide shipping. All products are sent
from the UK, and any applicable taxes and import duties must be paid by the customer at
the time of placing a shipping order. The UK and Ireland serve as the company's main
operating bases, and it has activities in over 100 countries overall. However, they also have
locations throughout South America, the Middle East, Asia, and Europe, and their website
offers six different currencies. They are less able to connect with customers since, unlike
BMW, they don't have any agents maintaining their brand across numerous countries. In
contrast, BMW's sales representatives aim to increase brand familiarity and accessibility of
the company's products to consumers.
P2: Explain the types of finance available for international business:
, Prepayment, bank loans, letters of credit, and export credits are the four main types of
finance available to an international business.
Bank loans:
The amount borrowed from the bank during the specified timeframe is referred to as a bank
loan. The amount that must be repaid will vary depending on the loan's term and interest
rates. Utilizing bank loans is advantageous because they have lower interest rates than
other high interest loans like venture capital. You don't have to give up any equity to obtain
a loan since you have the freedom to spend the money wherever you want because you are
in complete control. However, in order to qualify for a loan, you must be financially
successful or have a solid credit score as an individual. You will have to accept the bank
forms because that is a sort of protection, they use in the event that the payments cannot
be completed. It takes time and is not as simple to obtain.
https://www.nerdwallet.com/uk/loans/how-do-bank-loans-work/
Prepayment:
This phrase refers to paying off a loan or obligation before it is due, like paying off a
mortgage loan early. Any operating expense, as well as non-operating expenses that must
be paid before the item's expiration date, may be included. Essentially, this is the sum that
the company has paid in advance for the goods they will later get. Prepayments have the
advantage of allowing you to establish a fixed amount for a specific period of time. They are
set with an emergency credit amount of £5, which can come in handy if you run out of
credit and there are no blocked funds, and they can assist a business pay off debts. The
disadvantage of this approach is that you must keep your metre current and make sure you
have enough credit if you are on vacation because there is no option to self-disconnect
using this method without credit, and the tariff cost is high because of company expenses.
This can be a problem since if you lose or break the key, you could be charged for not having
methods like pay point outlets. https://www.investopedia.com/terms/p/prepayment.asp
Export Credit:
When conducting commerce with developing and emerging markets, this is applied. Credit
is a loan that an importer opens with a bank in an exporter's nation to pay for export
operations. This strategy protects against consumer non-payment and gives access to
current data, including payment patterns across diverse industries, which guarantees cash
flow. Additionally, this helps the business grow into new markets and increase sales to its
current clientele. The cost will also be high if any account does not fall under this method's
exclusion of high credit risk accounts. This does not cover instances of non-payment, and
the limitations change. https://stats.oecd.org/glossary/detail.asp?ID=909
Letter of Credit:
A letter from a bank ensures that the buyer will pay the seller on time and in full. If, for
whatever reason, the buyer is unable to complete the payment within the allotted time, the
bank is then obligated to pay the full or remaining balance of the purchase. This form of
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