Summary
Summary Unit 5 Business
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International Business
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A.P1: Explain why two businesses operate in contrasting marketsExportP1
Amazon is an exporting business where it’s a website where many sellers that can either be an
individual or a company that will sell their products and Amazon will earn retail sales from it, other
methods of earning money are selling ads, subscriptions where consumers will have a special
privilege of having a free tomorrow delivery regardless of the amount they have spent in their order.
They are also a multinational enterprise due to having numerous headquarters across the globe,
delivering goods and services.
Whereas Volkswagen is also an exporting business as they have many cares exported all across the
globe because for the business to generate a lot of sales to continue manufacturing the cars
Volkswagen makes, they must be able to have enough money to source raw materials. Therefore,
they would sell cars globally which countries like China would account for 50% of Volkswagen’s
global sales as of 2021.
Import
Amazon does not import goods and services as more than half of the products that they sell are all
done by third party (e.g., individual and manufacturers) meaning that Amazon does not have to go
out of their way to source goods and services as it will increase the expenditure of the business. It is
statically proven that 78% of Amazon sellers work with suppliers in China because of having cheaper
raw materials and lower cost of production and its labour from China. As a result, it is very profitable
to import goods from China that has low cost of production and low GDP which developed countries
can take advantage of, as they will have a higher GDP than China that can allow them to source even
more goods (e.g., 10 dollars is equivalent 71 Chinese yuan).
On the other hand, Volkswagen is an importing business as they will primarily look for countries that
they can operate in that will not have much impact to their finances such as operating in China
where the costs of production is low as they produce a large volume of units that will lead the cost
of per unit priced low, cheaper labour as there is still a significant number of people in poverty and
raw materials will be low because of market dominance in raw materials responsible for half of
global supply of raw materials.
Multinational enterprise
Amazon is multinational enterprise because to become more successful as a business they will need
to broaden their brand so that they will be able export more goods and services by being able to
have multiple headquarters operating at once around the world. Therefore, this will allow Amazon
to have a further increase in sales revenue which they can then use to expand their business by
investing heavily on technology so that users will be able to easily access their website and
comfortably use to shop for basket of goods regardless of how experienced you are with technology.
Whereas Volkswagen is a multinational enterprise because to become a successful vehicle
manufacturing business they will have to branch out their brand to create enough sales revenue to
remain operational and as well as having enough inflow to create new vehicles according to the
latest trends of cars to meet consumer demands. Therefore, they would require having many
production plants as the time needed to create a vehicle takes a lot of time but highly profitable if it
gets sold. Hence, the reason why they would need many plants so that they will be able to generate
a lot of more vehicles in different variety of models (golf, polo, Passat, etc) that would then be sent
off to be sold.
Page 2 of 35
, Associated business
Since Amazon is an international e-commerce company, they are most likely going to have many
partnerships as they are the sole reason why they remain operational and as well as having the
sufficient amount of funds to develop. The partners that Amazon have mainly comes from third
parties that use Amazon’s services to sell their goods and services which is called Amazon Web
Services (AWS) which is also primarily Amazon’s main source of income from product sales.
For example, their market share in Japan contributes to 22.9% which is 2 nd leading e commerce
business operating in the country. Therefore, the motivation that encourages Amazon to operate in
in international markets is to maximise profits because by entering new markets it will create
multiple sources of income that Amazon can rely on and as well as having a competitive advantage
over its direct competitors such as Alibaba, Ebay, Taobao, etc.
On the contrary, Volkswagen have recently been associated business with BP which is an oil industry
company announced in 15th March 2021. They have decided to partner which they aim to boost the
adoption of electric vehicles with both Volkswagen and BP shifting towards using renewable energy
rather than using petrol/oil as they contribute to CO2 emission that can cause an increase in global
warming leading to a gradual global temperature to change due to greenhouse gas emission blanket
of Earth called the greenhouse effect that traps the sun’s heat. Consequently, will cause a climate
change such as Antarctica’s iceberg melting that will eventually cause droughts for other countries
that can destroy food production and damages the ecosystem. In summary, the partnership is a
strategic attempt to become more environmentally friendly to help reduce CO2, reduce demand for
barrels of oil in the future and to save money. The opportunity in doing this is they will become more
reputable as a business due to making a contribution in helping the environment which will lead to a
higher likelihood of customers to choose VW over its direct rivals as they will be seen as more
worthy when making a purchase for a vehicle especially for those that value the environment a lot.
The challenges however in partnership is it can cause conflicts from disagreements meaning both
businesses is prone to have negative working relationship that can lead to a fallout.
What market Amazon is in
The market Amazon is in an emerging market as they operate in countries that are emerging such as
China and India. There are countries that are growing significantly over the years but have yet been
fully developed as there still poverty within their countries. Figure 2 is a graph one of the fastest
growing countries in the World which is China caused by industrialisation and manufacturing
exports.
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