BTEC Level 3 Business Extended Diploma Unit 5 International Business Learning Aim A&B
Why Trade Internationally?
The following report will analyse two contrasting businesses that trade internationally but are based
in the UK. I have chosen to investigate Associated British Food and JD and why the two companies
trade overseas. The effects of globalisation and the challenges they face because of undertaking
international trade.
The first business that I have chosen to research is Associated British Food. Associated British Food is
a UK based company which sell its products all over the world. Associated British Food has a large
share of the food market and they operate in over 60 countries. As of 2021, Associated British Food
is the 15th most valuable food producer in the world. Associated British Food is worth a staggering
£13,000,000,000 (thirteen billion pounds) and making an average net income of £455 million a year.
Associated British Food is in the secondary sector, as the company produces their products
themselves. Associated British foods operates in over 53 different countries including the US,
England, China, Spain, France and Canada.
JD is the second business which I have chosen to research. JD is a sports clothing, footwear and
accessory brand that was created by David Makin in 1981. The company designs their own products
and collaborate with music artists and athletes to create personalised products such as Anthony
Joshua, Rita Ora and Bugsy Malone.
JD is currently valued at £6,000,000,000 (6 billion pounds) in 2021,
around £25bn below their biggest rival Nike. JD is in the primary sector because they have
independent partners who manufacture the products that the company designs. JD has a limited
liability and shares of the company can be purchased on the stock market. JD operates in over 20
countries including England, US and Australia
JD and Associated British Food both trade globally in an imperfect market structure. This means that
both companies produce differentiated products compared to their competitors and they can
arrange their own prices for what they sell. More specifically, they are both oligopolists, meaning
that they are in an imperfect market but the two companies still have a majority share over other
companies. JD has the largest worldwide market share (10%) of the world sports fashion market.
Associated British Food both only has (1%) of the food producer market share.
Although both companies are in the same type of market structure, they are in opposite industries
and produce completely different products. The JD Group is in the sports apparel, footwear and
clothing (footwear being their main focus). Two examples of JDs footwear and clothing are shown by
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,BTEC Level 3 Business Extended Diploma Unit 5 International Business Learning Aim A&B
the pictures below. The footwear are Jordan’s air aura to juniors, which is a shoe designed for
basketball and the clothing is a black puffer jacket, both products you can find in JD stores.
JD and Associated
British Food both rely heavily on international trade. Associated British Food gets supply’s all over
the world from places such as Africa, South America, North America and Asia. JD works with over
500 independent factories that manufacture their products, most of which are located in Asia,
overseas from their main headquarters. Two examples of ABF product are shown in the pictures
below which is their sugar and their cookies they sell.
Scope and Scale
The scope of an international business means the activities that the company undertakes such as
sales or services, product development, marketing/advertising, negotiating contracts, etc. The more
brands that a company owns and the larger the scale, the wider the scope of activities. Looking at
both of their business scope, both JD and ABF have large business scopes. ABF has a larger business
scope compared JD as they own 14 other business brands. JD does have a large business owning
nine other business brands. When comparing the two ABF is bigger since it owns 14 other business
brands compared to JD who owns 9 other business brands 5 less then ABF.
The scale of a business is simply the size of the business. This can be determined by market share,
value, global operations, etc. Companies can increase their size by partnering with other firms in
order to multiply and expand their business operations around the world. By closing out favourable
deals with suppliers and partners, companies can achieve more net profit, allowing them to scale up.
Looking at the scale of both businesses JD and ABF both dominant businesses in their markets. JD is
in the sportswear market with the market valued at £353 billion, JDs owns 10% of the market share
meaning they market share value is worth £35,3 billion. Compared to ABF who owns 0.2% of the
food producer market which is worth £11.7 trillion, meaning that market share is worth £110 billion.
when comparing the size of the market shares between JD and ABF market share is worth a total of
75 billion £700 million more than JDs market share.
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, BTEC Level 3 Business Extended Diploma Unit 5 International Business Learning Aim A&B
Imports and Exports An import is the purchasing of goods from overseas to bring into another
country. The UK’s main imports are machinery and computers. An export is the sale of goods to send
to other countries. UK’s main exports are manufactured goods, fuels, chemicals, gas turbines, food,
beverages and tobacco. The UK mostly exports natural resources and materials which they have in
abundance, while importing mostly technological goods. International business has helped shape the
local, national and international economy through a number of different ways. Both JD and ABF
import and export products as they are above international businesses and need to transport their
products from one country to another. JD import their products this being sports wear clothing from
China to England to their main warehouse which then they then export the products to the different
countries which they operate in. ABF imports their products from South America and Asia to their
main three warehouse England which it gets manufactured and produced ready to be exported to
countries they operate in. Both companies have a similar approach as they import their products to
their main warehouse in England where they then export their products two different locations, they
operate in.
The factor that affects businesses of all scales the most is raw material sourcing. By being able to
source their materials at a cheap price, businesses can widen their profit margin.
Reasons for why JD and Associate British Food trade internationally.
Growth
Growth is a main factor why both JD and Associate British Food went international, due to the
importance of growth to a business. Growth is an important to the long-term survival of both
business as it acquires new assets, opportunities and new customers, furthering more success for
both companies. An example of growth internationally for JD is in the last four months JD has
opened a further thirty-six stores in the US. The reasons for this according to Peter Cowgill,
executive chairman of JD Sports, said: “Overall, we remain encouraged about the progress that we
are making internationally and are excited by the opportunity ahead of us in the United States. An
example of growth internationally for Associate British Food is two years ago when Associate British
food expanded into the Belgium market. The reason for this is due to success in France Associated
British Food had and as France and Belgium are next to each to each other Associate British believed
they would have similar success and opportunities in Belgium like they did in France.
These two examples for both companies links to why JD and Associated British Food trade
internationally as it offers more growth and opportunities for their business.
Additional revenue streams
Conducting business internationally can offer companies additional revenues. Additional revenues
are non-operating revenues which are proceeds gained from side activities unrelated to its core
business. Both JD and Associate British Food have international additional revenue streams.
An example of JD international additional revenue is they own another company called Rikers gyms
which is a gym chain nothing to do with JDs operating revenues which is the fashion industry. These
gyms can be found in different countries such as America and England.
An example of Associated British Food additional revenue is they own Primark a well-known clothing
company nothing to do with Associated British Food operating revenue. Primark has over 380 stores
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