Unit 5 international business, Why Trade Internationally
By Rahul Nagar
Section 1
Introduction about Adidas and Coca Cola.
Adidas
Adidas is a clothing and footwear business, which sells sport, items for example, trainers,
football kits, clothing and hoodies. Adolf Dasseler founded Adidas in 1924. Adidas has
become a very popular business due to football sponsorship and Adidas selling high quality
products. Adidas main competitors are Nike. Nike, has the most percentage of market
shares in the sport clothing market. Adidas has many stores in the world and they operate in
over 160 countries meaning they are an international business. Adidas also sell their clothes
online and at different retail shops such as, JD sport and sport direct. The challenges Adidas
face operating internationally is when finding which customers to attract as in different
countries different individuals have different taste of fashion and another challenge must
have been that different countries have different currency meaning for Adidas having an
increase in revenue. Adidas total revenue in 2019 was £22 billion, which led for a profit of
£12 billion. Adidas is valued around 7 to 8 billion pounds, however their competitors who
are valued and worth more, which is, Nike. Adidas will be in the primary sector because
Adidas manufacture their clothes meaning they make their own clothes. In addition, Adidas
is a public limited company meaning Adidas has limited liability and investors or individuals
can purchase stock or shares in the stock market. However, Adidas market share is low
compared to Nike meaning more customers prefer Nike. Adidas market share is 4.7% in the
USA, but Nike is 21.1% in the USA, this is a big difference and this shows us Nike is doing
better than Adidas.
Coca Cola
Coca Cola is a business, which sells fizzy drinks. John Pemberton founded Coca Cola in 1886.
It’s a fizzy drink made of kola nut and coca leaf and with lots of sugar. This leads for millions
of people to enjoy drinking Coca Cola. Every Christmas Coca Cola has the same advert about
Santa Claus as for some individuals Coca Cola reminds them of Christmas by the red colour.
Coca Cola now owns many other famous drinks for example Fanta. Coca Cola is an
international business as they operate within some many countries (more than 200
countries). A challenge for coca cola is that Coca Cola has cause a lot of health problem due
to the amount of sugar meaning demand of healthier product has increase and how Coca
Cola solved this issue was by bringing Coke zero and Diet Coke with no sugar meaning a
healthier product. This has lead for more people drinking Coke zero or diet Coke. Coca Cola
total revenue in 2019 was $37 billion and Coca Cola revenue and profit increase every year.
The Coca-Cola Company has interests in the manufacturing, retailing, and marketing of non-
alcoholic beverage concentrates and syrups. Coca Cola is a business, which is known as
selling fizzy drinks. The business is the owner of more than 550 different brands meaning
they operate internationally and Coca Cola has many ways to gain revenue, leading for Coca
Cola being very successful businesses Coca Cola operate in over 200 countries meaning they
are a popular and well know business. Coca Cola is worth £55 billion, which is a lot of
money. Coca Cola operates in the secondary sector because Coca Cola sells and producers
,their own drinks. In addition, Coca Cola is a public limited business meaning they have
limited liability meaning the business is responsible for the business debts.
Adidas and coca cola both trade internationally as they are both well-known and famous
businesses. Adidas and Coca Cola are both oligopolists meaning it is where the business has
the most sales in an industry. For example, Coca Cola market share is about 50%, which is
the most in their market.
However, we cannot compare Coca Cola and Adidas, as both businesses are different as
Adidas is a sport and clothing business, Coca Cola is a beverage, and drink business, meaning
both businesses sells different goods. In addition, both businesses operate internationally as
more profit can be made. Coca cola and Adidas have 100 or more factories around the
world meaning it will be easier to sell and buy goods to other businesses. Most of Adidas
factories are in Asia as Asia is the continent with the most population and coca cola main
factories are in the USA as USA is where Coca Cola sell their most goods. The scoop and
scale of Adidas and Coca Cola is huge as both businesses operate internationally, leading for
both businesses to have more work and activities to do for example, negotiating with
worldwide businesses, advertisement their product internationally,. The size of Coca cola
and Adidas can be measured by their market share, which will show us Coca cola is a big and
massive business due to their market share and their competitors.
The reason why Coca Cola and Adidas trades internationally is because of fiscal benefits,
access to new market, brand exploitation, market leadership, additional revenue streams,
diversification increasing market share, preferential tax rate, growth, economies of scale,
comparative advantage and technological dominance.
Fiscal benefits and Preferential tax rate
One reason why Adidas and Coca Cola operate international is because of fiscal benefits and
preferential tax rate. Fiscal benefit is a government incentive, meaning the government will
offer incentives to businesses to operate in their economy. For example, the government
will offer an incentive to businesses to come to their countries, to offer new jobs, which will
lead to an increase in revenue and it helps to have a better economy. This means the
business cycle will build, which will lead to an increase in revenue. This means if Adidas’s or
Coca Cola, was choosing to export outside the UK, the business may be given support by the
UK government to do so. This is because it will have a positive impact on the U.K. economy.
One way this could potentially be done is by having preferential tax rate on profits and this
will lead businesses to pay lower chargers and taxes in different countries.
For example, Adidas have started to use robots to bring shoe production back to Germany
and this lead for cheaper labour cost, as fewer employees will be needed, leading for the
Adidas being able to save money on labouring. This will save time as the robot production
line takes about five hours to create each pair of sneakers from scratch. By comparison, it
apparently takes "several weeks" to do the same job in an Asian factory with human
workers. This will potentially lead to efficiency and cost savings. In addition, Adidas will be
able to potentially cut cost by manufacturing when a shoe is in high demand leading for
unwanted stock being sold off on the cheap at the end of the season, reducing waste and
boosting profits.
,In addition, Coca Cola operates in many different countries and this lead for more job
opportunities and a better economy, this leads for Coca Cola having a lot of support from
other countries and government, leading for Coca Cola, paying less money on taxes.
However, Coca Cola has provided more than £1 billion pound in grants to support
sustainable community initiatives. This has benefited Coca Cola as it has reached more than
655 million people worldwide over the last 30-plus years through its support of more than
2,400 organisations with a focus on protecting the environment, empowering women,
education, and enhancing communities.
Access to new market
Another reason why Adidas and Coca Cola operate internationally is because, trading
internationally has helped for both businesses to have access to new markets and offer
goods and services, which may be common in one country and sell them to another country.
This means Coca Cola and Adidas operating internationally will be able to access new
markets, leading for new opportunities. This is because people in some countries may not
have come across items similar to Adidas or Coca Cola; this will lead for an increase in profit,
as there will potentially will be an increase to sales.
As for example, Adidas operates in over 150 countries, and this helps Adidas positively as it
helps Adidas to grow and increase sales. This will leads for Adidas profits to increase as they
are selling in more and new markets or countries, leading for more opportunities as people
in certain countries may not has come across Adidas products. Leading more sales to be
made. For example, Adidas, in India has gained popularity as people living in India, did not
really have a sport(clothing) shop 20 years ago and a small percentage of the population in
India could afford Adidas clothing 10 to 20 years ago., and as Adidas has operated in India it
has managed to tripled sales over 3 year. This is because Adidas are offering new
opportunities in different countries, leading for an increase in sales.
Coca Cola operates in over 200 countries and this helps Coca Cola to offer new
opportunities in new and different markets or countries. This leads for growth and an
increase in sales, meaning more profit will be made. A big reason why Coca Cola is
successful internationally as they operate in many different countries and this allows Coca
Cola to access new market and offer new opportunities. As Coca Cola, aims to sell
consumers the experience and lifestyle associated with its brand. For
example, Coke recently unveiled a new packaging campaign where they individualised 2
million bottle designs. This means Coca Cola is different in different countries due to many
reasons for example; the Coca Cola in America is very sweet. This is because Coca Cola
accesses to different market and meet the needs of different countries, which has helped
Coca Cola grow and increase sales every year.
Brand exploitation
Another reason why Coca Cola and Adidas operate internationally is because both business
will be able to exploit their brand, leading for a better brand recognition. This means making
the brand names (Adidas or Coca Cola) being used as a sponsorship in different countries as
both businesses will be making the most of the name of their brand across different
countries or having their brand logo on their products. For example, different brands will
, sponsor different teams, for example, Adidas sponsors Arsenal football kits and the arsenal
football kit is made by Adidas. This helped to increase reputation and brand recognition, all
of this leads to an increase in growth and revenue.
For example, Adidas sponsors a lot of athletes and different sports team around the world,
from, India, England, America and many more countries. For example, Adidas sponsor
cricket teams and athletes, such as Chris Gayle. In addition, Adidas sponsors many football
teams and players such as Arsenal and Aubameyang. This lead for Adidas brand to be
recognised by more people as more people and customers will be able to see the brand logo
more, leading for it to increase sales and attract more customers. This is because if people
from all over the world see their favourite athletes or sport team is being sponsored by
Adidas. This will lead for the individual starting to wear and purchase Adidas product as they
are loyal to their team or the athlete and they want to wear the same clothes their favourite
team or athlete is wearing. Adidas sponsors a lot of teams and athlete, which helps to
increase brand recognition and for their brands to be exploited, leading it to attract for
customers.
Coca Cola is a well-recognised brand across the world as Coca Cola has exploited, sponsored
and advertised their brand effectively. This has led to attract many customers leading an
increase in sales. For example, Coca Cola and the premier league had a 3.5-year partnership
deal. This means football fans watching the premier league will be watching Coca Cola
adverts, and this could potentially attract customer and leading sales to increase. In
addition, Coca Cola was a sponsorship for the Olympic held in Brazil and this would have led
for millions of individual seeing the Coca Cola brand, leading the brand to be well
recognised. This shows us Coca Cola has exploited their brand very well and mainly in sport
events such as the Olympics or premier league. This is because Coca Cola knows millions of
individuals watch the Olympics and premier league, leading for their sponsorship to attract
many more customer, this would help sales to increase. This has led for Coca Cola brand
being well known and recognised around the well. This shows us Coca Cola has exploited
their brand well, effectively and positively and we know this by how well recognised the
brand is and every year the revenue increasing.
Additional revenue streams
Moreover, Adidas and Coca Cola operate internationally due to the wide range of revenue.
This means Adidas and Coca Cola has decided to operate internationally, as this allows them
to have more opportunities to generate revenue and sales. The more ways or countries that
a business has to generate income, the more revenue is made and the more stable the
business will be. For example, if one of Adidas and Coca Cola revenue stream was not
benefiting Adidas, it would not have a massive impact. This is because there are other ways
for Adidas or Coca Cola to generate their revenue.
Coca Cola has a wide range of additional revenue streams, which helps Coca Cola be a more
profitable business. For example, as Coca Cola operate in over 200 countries, Coca Cola has
over 200 countries where they will be generating revenue and this definitely lead to a high
amount of revenue and profit being made. Coca-Cola Company generates revenue by selling
concentrates and syrups to bottling facilities around the world, and by selling finished
products to retailers and other distributors. Moreover, Coca-Cola owns four more well
