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Essay Unit 18 - International business
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Example for BTEC Business Level 3 - Unit 5 Assignment 2 and 3 with all the criteria up till distinction level
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Assignment 2Unit 5 – International Business
External Factors and Cultural Differences
BP, British Petroleum
1
,Introduction:
The purpose of this report is to have a look at the external factors that influence a business
when trading internationally. I will also discuss the different cultures and what are the
impacts on international business. The business I have chosen for this report is BP (British
Petroleum) and the countries are Germany and Saudi Arabia. BP British petroleum is a
British multinational oil and gas company with their headquarters based in London, England.
BP is one of the largest companies measured by profits and revenue. The founders of the
company are William Knox D’Arcy and Charles greenway, and they serve their products
worldwide. https://en.wikipedia.org/wiki/BP
P5 – Explain the external factors that influence a selected business considering
trading internationally
PESTLE:
POLITICAL:
This factor refers to the government policies and the government as they have a huge
influence on the business operating. As BP is a UK company, they have a huge advantage as
they can easily trade and transport their goods with other EU countries. They comply with
the EU laws and regulations that provide everyone with equal rights and opportunities.
Germany is a democratic and federal parliamentary republic which has been dominated by
the Christian democratic union (CDU) and social democratic party (SPD). Whereas in Saudi
Arabia the government is dominated by the royal family. BP operating in the EU have to
adapt different laws that are created by the European union.
Saudi Arabia's primary business and source of wealth is the production of oil and gas. It
makes up 80% of the nation's overall GDP. The demand for oil and gas unexpectedly
decreased as a result of the global lockdown and business closures. Additionally, the retail
price fell dramatically, which resulted in a -6.8% annual GDP decline. Import tariffs are
probably the most common way in which governments intervene in international trade. An
import tariff is a very specific tax that is placed on certain imported goods, thus causing
these imported goods to cost more and disrupting the balance of international trade.
Increased tax rates can affect BP as they will impact their profits so meaning that this lower
it. Additionally political decisions like workforce education, health and economy
infrastructure influences business operations.
https://en.wikipedia.org/wiki/Politics_of_Germany#:~:text=The%20federal%20system
%20has%2C%20since,of%20the%20legislature%20as%20well.
https://realbusiness.co.uk/governments-intervene-international-trade#:~:text=Import
%20tariffs%20are%20probably%20the,the%20balance%20of%20international%20trade.
https://www.trade.gov/country-commercial-guides/saudi-arabia-trade-barriers
ECONOMIC:
2
, Economic factors are very significant, and they have a long-term effect on the business. this
is associated with the GDP. According to sources bp supported an estimated £9.7 billion
gross value-added contribution to the UK's gross domestic product (GDP) and 90,100 UK
jobs in 2019. Other economic factors that affect a business include the interest, wages and
the inflation rate. In case of low interest and the demand for the business is increasing the
business will expand and take risk. This means that the costs of loans and mortgages will
increase as the higher the interest rate the higher the prices will go and affect the spending
power. Germany is the 4th largest nominal GDP in the world of 3.747 trillion with a growth of
1.8% whereas The GDP of Saudi Arabia was $842.6 billion in 2021. Saudi Arabia had
population of 35.459 million in the year 2021 and expected to reach 39.932 million by 2027,
growing at a CAGR of 1.99%. Saudi Arabia ranked 35th out of 136 nations in the GCRI Q4
2021. The production of oil and gas is the main industry and source of income of Saudi
Arabia. It contributes 80% to the country’s total GDP.
One good example is the oil spill at Gulf of Mexico has made BP a huge quantity of financial
loss. The increase in the crude oil price affected all the chain such as power charge, oil-
based raw material, plastic. Media reports state that BP is of such a size and significance in
that country, that “one pound in every seven” of investment and pension fund income in
the UK is derived from BP. Local media offered views on what this might mean for citizens.
As BP was reported to be “offloading billions of dollars in assets” in preparation, some
estimates suggested the total legal responsibility could amount to as much as US $100
billion (UK £67.5 bn) by the conclusion of the tragedy.
https://www.bp.com/content/dam/bp/country-sites/en_gb/united-kingdom/home/pdf/bp-
impact-on-the-economy-2019.pdf
https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-releases-
report-on-causes-of-gulf-of-mexico-tragedy.html
https://www.navadhi.com/publications/saudi-arabia-snapshot-pestle-swot-risk-and-
macroeconomic-trends-analysis
SOCIAL:
Social factors involve the elements of people’s life such as their lifestyle habits, religion or
beliefs, their ability to afford an item and level of education. Shared beliefs and attitudes of
the population play a great role in how marketers at Bp Plc will understand the customers of
a given market and how they design the marketing message for Oil & Gas industry
consumers. On the other hand, bp needs to understand the cultural aspects of the country
they are trading with such as trading with Saudi. Saudi Arabia follows sharia law which
means they will have to work according to it, and they will be doing business with mostly
men. They also need to monitor so they can match the customers wants and requirements
better. Saudi Arabia is being a part of many different projects which contains ‘the line’
meaning more people would like to do business with them and travel to that country which
will have a positive impact on the businesses as they can attract more customers.
3
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