WHY TRADE
INTERNATIONALLY?
PEARSON BTEC LEVEL 3 NATIONAL EXTENDED DIPLOMA IN BUSINESS
UNIT 5 - INTERNATIONAL BUSINESS
CHLOE ROBERTS
,CONTENTS 01.
Introduction
02.
What is international business?
05.
About Dior & Starbucks
07.
The types of finance available
08.
The types of support available
10.
The main features of globalisation
11.
The role of trading blocs
14.
Analysis on barriers to international business
15.
Evaluation on impact of globalisation
,INTRODUCTION "International business encompasses all
commercial activities that take place to
promote the transfer of goods, services,
resources, people, ideas, and technologies
across national boundaries."
-InternationalRelationsEDU
Throughout this report I will unveil the reasons as to why two
businesses operate in contrasting international markets and I
will also explain the types of finance, which is available to each
of them.
Using this research, I will then go on to explain the main
features of globalisation that affect my chosen businesses and
in addition to this I will explore the role of trading blocs on
international trade.
Furthermore, I will analyse the support that is available to each
of my chosen businesses and the barriers that they face when
operating internationally. Finally, I will evaluate the impact of
globalisation on one of my chosen businesses.
I have chosen to base this report on well known luxury brand
Dior and the world's largest coffeehouse chain - Starbucks.
Both of these businesses stood out to me because their name
attracts attention globally for plenty of reasons and I believe
that this assignment would be a great opportunity to extend
my knowledge about them. Most importantly, why they
decided to start trading internationally and what benefits they
gained from this.
After reading this introduction, you're probably wondering:
What is international business?
What is international trading?
Why do businesses take part in international trading?
And what are the methods of entering international markets?
Fortunately, the next section of this report will explain that all
for you.
01
,WHAT IS INTERNATIONAL BUSINESS?
International business "involves cross-border transactions of goods and services between two
or more countries. Transactions of economic resources include capital, skills, and people for
the purpose of international production of physical goods and services such as finance,
banking, insurance and construction."
Businesses tend to start trading internationally for numerous reasons, some of them include:
Fiscal Benefits Access to New Markets
Diversification Growth
Market Leadership Brand Exploitation
Additional Revenue Streams Technological Dominance
Comparative Advantage Economies of Scale
Innovation Lower Costs
"Fiscal benefits and enhancements relate to the amount of spending and tax a government
of a country is seeking to make. If a business is choosing to export outside the UK, they may
be given the support by their government to do so, as this has a positive impact on the
performance of the UK as a whole. If an international business chooses to import to the
country and is a large employer, so will create a lot of jobs, the government may offer an
incentive for them to come. One of the ways in which this can be done is for them to have a
preferential tax rate on profits that they have made in the UK. The same is true for businesses
operating outside the UK that seek to pay lower charges and taxes overseas if they are able
to do so."
02
, "Trading on an international basis gives businesses the chance to expand their sales and offer
goods and services that may be common in one country and sell them in another. Accessing
new markets offers new opportunities, as people in those countries may not have come
across those products before."
"Diversification means taking a new product or service into a new market. Diversifying can
help a business to reduce risks as they will then offer different types of product or service so
they are not reliant on one or two, but it can also increase risks if that product or service does
not take off in a particular country."
Businesses have the potential to grow if they start offering goods and services in areas
outside of the UK, "and growing sales should lead, in the longer term, to growing profits.
Most businesses operate to make a profit, so taking something that is being sold successfully
in one country and offering it in another should lead to more sales and eventually more
profits, if the business operates carefully. Businesses operating outside the UK can also offer
new goods and services from outside of the country. This can offer growth in particular
markets for them as well as growth for the associated companies that are required to help
them, for example in distribution or marketing."
"Having a greater share of the market means that they have more sales in that particular
market and they are more dominant over the other businesses that are operating in that
market. By becoming the leader in a market, the business has the most control over a
particular market and can make sure that they are first to make changes to a particular
product or service."
"Exploiting brands means making the most of the name of the brand across different
countries. This means that a brand name may be used for sponsorship in different countries,
which is commonly used in sports, so different brands will sponsor different teams. Brands
may also be exploited by using a brand name that is associated with one country and then
having it licensed to be made or offered in another country by other companies on behalf of
the business."
Businesses may choose to sell their goods or services in other countries so that they have
more opportunities to generate revenue. "New revenue streams are methods to generate
new income" and the more revenue streams a business has, the more stable they are likely to
be. "If one revenue stream is not working well, then there are others that can be used to
generate income instead: for example, companies such as Virgin choose to offer different
products and services that complement one another, such as trains, flights, and gyms."
"To have the position of the market leader, means that you are the most powerful business in
a particular market sector. Having dominance may make it hard for other businesses to
come into the market in which you are operating and one of the other effects that often
follows is technological dominance. When a business trades across countries and becomes
large, it is able to invest in technology to make processes work more efficiently. This often
leads to higher profits as sales go up and costs go down. Technological dominance can also
be gained by businesses operating internationally as they source supplies or carry out
research in one country and then sell goods or services in another."
"Being able to produce goods or services across more than one country and then sell them in
another reduces costs for a business and supports the potential for higher profits to be
made. This is called comparative advantage."
"Economies of scale mean that the more of a product or service that you sell, the lower the
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