Unit 5 International business
Assignment 1
Why trade internationally?
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, Content
Introduction …………………………………………….………………………………………………….…………………….……….…..3
Methods used to finance international trade………...………………………………………….….………………………..4
• Prepayment by the importer • Letters of credit • Export credits • Bank loans
• UK Export Finance • Department for International • Trade Chambers of Commerce
Globalization……………………………………..………..……………………………………………………….…………….…….……..7
Trading blocs……………………………..……………………………………………………………………………………..……………..9
• World Trade Organisation
• Customs unions and common markets - European Union • Mercosur • NAFTA • APEC
assessment, health and safety
Protectionalism……………………………………………………………………………………………………………………………….12
• Tariffs Customs • Duties • Currency restrictions • Quotas Subsidies • Legal restrictions
Barriers to trade……………………….……………………………………………………………………………………………………..14
• Trade restrictions • Exchange rate volatility • Legal and regulatory systems • Financial
requirements • Operating risks • Economic sanctions
Effects of Globalization on Vodafone ……………………..……………………………………………………………………….17
Conclusion……….……………………….……………………………………………………………………………………………………..18
Referances……………………………….……………………………………………………………………………………………………..19
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,Task 1 - P1, P2, M1
Introduction
This report will carry out independent research on two contrasting international businesses -
Vodafone Group Plc and Innocent Drinks. Using the information from this research to explain in
detail how and why the two business operate in the international market. Then it will proceed with
explaining and analysing the types of finance made available for international businesses, applying
this information to both Vodafone Group Plc and Innocent Drinks.
P1: Explain why two businesses operate in contrasting international markets.
Vodafone Group Plc currently is world leading international telecommunications services provider,
which has major presence in the Middle East, Asia, Europe and the United States. The company
launched in 1985 in the UK as the first national network. In 1993 Vodafone Group International was
found to supervise overseas interests and acquire licences. Since then the company have grown
tremendously, now Vodafone is operation across 5 continents including 27 different countries.
“Vodafone’s ambition is to contribute to sustainable living by delivering connectivity and innovative
services to our customers, while maintaining the trust of our stakeholders by behaving ethically and
responsibly wherever we operate.” (Vodafone Vision and Approach, n.d.) Exanimating Vodafone’s
vision statement, for the full version of which refer to the bibliography, we can safely conclude that
the number one reason for the company to become international was to grow by increasing its
market share and introducing the company services to new geographical regions. We can see that
Vodafone have reached not only this goal but they have become the global market leadership.
Another reason to go international was gain competitive advantage over their competitors. Because
the company is international it is able to provide no roaming fees in 48 countries, meaning that
people can travel freely around those countries without worrying about high roam fees. It also
provides the some of the lowest international call’s fees, which is really attractive to people who
have friends and family abroad.
To reach the aims described above Vodafone decided to focus on the emerging markets, like the
fast-growing Indian mobile market. What influenced them to choose this market is the fact that
there is less competition and more business opportunities due to the huge potential size of the
market. Using this strategy, the company have rapidly grown eventually becoming the global market
leader.
Innocent Drinks is international company which was found by Richard Reed, Jonathan Wright and
Adam Balon in 1998. The company has great ethical rating of 12.3/20, which is due to the fact that
all of their drinks are produced with fresh fruits and that the company donates at least 10% of their
profits to charities. The great philosophy behind this company is the reason why lot of people want
to buy into it, as well as the amazing taste. The company went international when Coca Cola took
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, ever by buying more than 90% of the company. In the
first year Coca Cola focused on introducing the
company into the Europe market and by the end of
the financial year the company had tremendous 97%
increase of profit. Now this UK company exports
smoothies all around the world and has become the
number one European smoothie brand. There were a
few reasons why Coca Cola wanted to take Innocent
Drinks to the international market place. The first and
most important reason was that the growth of the
https://www.maritimefirstnewspaper.co
company started to fall flat – Innocent hit the glass
m/2017/09/08/drinks-market-share-is-
ceiling in the UK. The company saw potential for growth internationally, after some research they
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found that in Europe there wasn’t any well-known smoothie brand, which will give them the first-
move advantage. The company saw a gap in the market abroad and decided to introduce their
products. That way Innocent got all of the benefits of being first, there are no competitors and the
consumers get to know their brand very well as it is the only option on the market. The company
was in need of new customers and they found them internationally. That’s one of the reason why
Innocent become a globally trusted brand – becoming international increased the business prestige,
customers assume that international brands can be trusted.
P2: Explain the types of finance available for international business.
Methods used to finance international trade
• Prepayment by the importer – the importer pays in advance, before the due date of the
payment. This payment can include the complete amount of the debt or pre-agreed fraction
of it. The borrower/importer is obligated by contract to pay the due amount. Some
examples of repayment are loan repayments and rent
• Letters of credit– a letter of credit, issued by a bank, which gives guarantee that the buyer
will pay the seller, the due amount, within the arranged time period.
• Export credits – is financial support by the government, which can be in the form of
guarantees, direct financing, interest rate support or insurance. This financial support is only
available to foreign buyers in order to help them finance their purchases of from national
sellers.
Innocent drinks used export credit in form of direct financing, which was obtained from UK
Export Finance, to help the company establish itself around Europe. At the time the
company wasn’t well known in this part of the world, which meant that companies didn’t
want to take the risk of buying Innocent’s drinks. The UK government offered export credit
in the form of insurance to some of the major European food retailers, thereby ensuring
those companies that they won’t make a loss. Once Innocent drinks were introduced to the
European market they prove to sell very well, which resulted in a lot of new contracts.
• Bank loans – those are also available to international businesses. The terms of this loans can
very on variety of factors like the size of the loan, market size, to what country the products
are delivered to, and many other factors.
When Vodafone Group Plc was just starting to go international, the company had to use
finance in the form of bank loan in order to improve its cash flow. It helped Vodafone to
fund their international trade transactions by providing the funds needed to start trading
overseas. This finance helped the company to fill in the gap between spending funds on
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