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Unit 5 international business.
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Unit 5 Navneet KaurP1 Explain why two businesses operate in contrasting international markets:
Businesses are involved in one or more different activities when they operate
internationally. This can mean that they need offices in different locations, or they will
subcontractors (a person or business that carries out the work on behalf of another
business or the person) to carry out the work.
The first business that I will be looking at is Tesco's. Tesco's is a MNC and a
supermarket business that is an importing business, where they get their stock from
outside the business from different organisations. Tesco gets most of their products
from Europe, for example Unilever, south America and Asia, where their source their
foods and vegetables from. Tesco has diversified and also has a Tesco Bank, Tesco
Mobile, One stop convenience stores, food and drink wholesaler booker, and data-
science business dunnhumby, household products. With Tesco's they’re meeting
customers’ needs, they do food deliveries, and investing to make the quality of
products better and still save. There are 6 different types of stores Tesco’s have
one-stop, metro, Extra, superstar, and express. The scope for Teso is that it is a
British MNC and is It is an international supermarket located in the UK, with over 3
thousand stores. Tesco's primarily operates in the UK and Ireland and
internationally. In the UK, there’s over 2k stores and over 4 thousand worldwide. This
gives Tesco a competitive edge over Asda, Lidl, and Aldi. As it gives them more
brand awareness and profit. There are many reasons as to why businesses would
want to conduct business internationally, to make a profit, get more customers and
become bigger. Tesco’s headquarter is in the UK and is a multinational retailer of
general merchandise. It has over 4500 stores across five markets: the UK, Ireland,
Czech Republic, Slovakia, and Hungary through online and in person stores.
Tesco added 79 stores in FY2022 and 60 stores in Fy2021 due to the continued
growth in its operations. In FY2020 the company sold its businesses in Asia bringing
down its reported segment store from 2380 from 4613 in FY2019. In 2022 the store
count declined to a total of 4613 compared to 6993 stores in 2019 due to the sale of
its businesses in Thailand and Malaysia at the end of 2020.
In the UK, sales grew by 0.4% including the growth of 1.2& in the first half and the
decline of 0.5% in the second half. This was the result of evaluated demand during
the 2nd and 3rd lockdown in the prior years. Comparatively to previous year, when
shop traffic was lower and customers prioritised buying food during the first national
lockdown, the first half rise was driven by non-food and higher levels of discretionary
expenditure. Food sales decreased in the second half as customers began to eat out
more frequently than at home once again. Sales fell 2.9% last year in Ireland as a
result of the COVID-19 effect. Since the limitations on hospitality were in force for a
longer length of time in Ireland than in the UK, the impact there was particularly
significant. With Best Food Logistics, whose customers are mostly fast-service
restaurants, Booker, its food and drink distributor, saw double-digit growth of 15% as
a result of a dramatic recovery in catering sales when hospitality outlets reopened.
There are loads of benefits of being an international business If for example: sales in
one country decline and the store doesn’t make as much they can focus on the ones
,Unit 5 Navneet Kaur
that are growing. There's always disadvantages to business trying to do anything
new, going internationally could have a negative effect on the company, the business
could have concerns about products exporting into the country as every country has
its own rules about what can be exported and imported. They have a lot to think
about, the region they want, the country, etc., making sure the new workers have the
right pay and that the customers' needs are met.
One key benefit of being a global organisation is that Tesco has built a range of
revenue income streams throughout each franchise around the world. Therefore,
having a multinational firm may be a disadvantage as it will need to conform to the
laws, conventions, and cultural norms associated with importing and exporting. All of
these concerns need to be methodically organised and thoroughly researched.
Language barriers are another downside because some customers can be fearful of
being judged if they don't understand something. However, this can be avoided by
using translators or automated checkouts that handle multiple languages.
A disadvantage to international trade is political risk. This is a possibility that a
business could suffer because of instability or political changes in a country. Like
changes in the international policy or business law. So, businesses like Tesco may
face some problems when operating internationally, however, because they have so
many branches open in so many countries if one doesn’t work, they could always go
for another one. Credit risk is any type of risk to do with money. That could be things
to do with money coming in and out. For example, getting paid back loans, or not
meeting debt deadlines. Things to do with money put businesses into difficult
situations.
Tesco's operates mostly within developed economies because of their target
customers. The prices of products aren’t cheap as Asda and Lidl, however they’re
better quality. They want customers to come the ones that can afford the products,
because as soon as you come in, there might be only one thing you came for
however, considering the fact that most of the Tesco's markets are big and offer
different products and services, it makes the customer want to buy other thing,
making the price of the whole shopping trip higher. Investing and developing in the
more developed economy also means access to better skilled and qualified labour
and more educated workers. Also, better infrastructure which will reduce transport
costs.
A benefit for Tesco trading internationally is that when Tesco imports good from an
EU country it does not need a license or to pay import duties, but value added tax
must be paid. And the business needs to have a commodity code attached to the
import.
I'll also be looking at a contrasting business which is Nike, a manufacturer of sports
equipment and an exporter of sports goods. The largest sports manufacturer and
seller of athletic shoes in the world as well as a provider of sporting goods is Nike,
Inc., a global firm based in the United States. Adidas, Puma, and Nike are a few of
the other major companies in the sector. With its headquarters in the United States,
Nike, Inc. is the owner of a variety of brands, including Nike, Converse, and Jordan.
Nike generated around 46.71 billion US dollars in revenue worldwide in 2022, a rise
,Unit 5 Navneet Kaur
of more than two billion dollars from the prior fiscal year. Since its founding in 1964,
Nike has grown to become both a significant producer of sporting goods and the
world's top seller of athletic footwear and gear. The corporation has about 80,000
employees globally as of 2022.
Nike manufactures sports products in less developing countries and sells their
products at higher rates to different companies, like: JD, footlocker. Because they
want to be paying those workers less money as possible and sell products for a
much higher price so that more profit is coming into the company, they’re able to put
more money into buying stock to make the products and pay less to the worker.
The product in the advertisement is aimed at athletes however, different age groups
can wear and because Nike have various products of all ages.
Nike makes products and because it’s such an excellent quality and successful
business, other businesses and company's buy the products to sell and keep them
stocked up. Nike do have a whole website on just their products that you can get
products on.
The scale and scope for Nike is that it has just over 1k stores/factories. It is
sportswear that they operate. Nike conducts business as it is the world's no.1
sportswear company and because of the low cost of wages and the ability to
produce high quality products. Nike is known for getting products produced in low
developing countries because of access to raw materials, cheap labour and the low
cost to make things. There are workers working non-stop and being paid underrated
wages. Due to Nike’s competitors being a big business as well Nike wants global
growth to become better.
For many years, Nike, a US sportswear giant, has operated a sizable number of
plants in China. Despite having offices in 45 countries and over 700 contract
factories with approximately 1 million workers in 50 nations, the corporation has its
global headquarters in Oregon, USA. When Nike began to outsource production to
foreign facilities, they had already been operating in China for more than 30 years.
Currently, 189,000 people are employed by 146 factories in China. Nike produces a
wide range of goods at plants all around China. Although their broader effects might
occasionally both aid and hinder China's growth, these factories provide their
employees crucial jobs. Nike has a 35% digitalization rate and wants to get to 50%
by 2025. It has had tremendous growth and is anticipated to end 2022 with annual
revenue of over $50 billion. Nike also gives DTC (direct to customer) sales top
priority.
Unfortunately, the disadvantage of international business for Nike is that it is also
had negative publicity of trading with countries who use child labour in their factories.
where not just the children but all the workers work over hours and for less pay. It all
comes under worker exploitation, abuses, excessive overtime, inadequate wages,
lack of medical facilities in its factories and bad working conditions. Low-income
countries are e.g., Afghanistan, Bangladesh, and Ethiopia. It’s easy to access to raw
materials there. Nike will then send their products off to more developed countries
like the UK to sell its products.
, Unit 5 Navneet Kaur
When Nike decided to export, it can do this within the Europe union or the outside of
the EU. Operating within the EU means that there are no custom checks on the
goods that are moving to Europe and those goods can be freely moved. This is
called dispatches. If a business decides to export outside the EU different rules will
apply and the countries.
Both of these businesses are multinational enterprises. This is where Nike and
Tesco operate in more than one country, and they can often operate in other
different markets globally. Multinational enterprises have to careful to adapt the way
they trade to different countries where they are operating. Because each country has
its own rules for importation, tax and other duties that needs to be done or paid for.
They also have different custom laws, and cultures which will affect their operations.
Business objectives: for Tesco their core purpose is to serve their customers,
communities, and planet a little better every day. Their values are to understand
customers, be the first to meet their needs, and act responsibly for the communities.
Nike aim is to make a profit and to bring inspiration and innovation to every athlete in
the world.
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