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2021 btec business level 3 unit 1 exploring business distinction assignment 2
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PEARSON (PEARSON)
Business 2016 NQF
Unit 1 - Exploring Business
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2021 BTEC Business Level 3:
Unit 1 - Exploring Business
(DISTINCTION*) Assignment
2
C1 Nike External Environment
The government of any country must enforce economic policies that
will benefit the growth of industries and businesses in that particular
country. The US policies have enabled Nike to grow and market its
products. The support accorded to Nike by the US government,
particularly in the general macroeconomic stability, low-interest rates,
stable currency conditions and the international competitiveness of the
tax system, form the foundation critical to Nike’s growth. Nike’s main
production facilities lie in the Asian countries where political unrest
prevails. The rise and fall of governments’ results in change in policies
relating to tariffs on import and export, foreign direct investment, etc.
This political unrest in the production countries may affect Nike. There
is also the case of employing under aged workforce in the factories
located in the Asian countries.1
One political factor affecting Nike is Tax policy. Tax policy is the choice
by a government as to what taxes to levy, in what amounts, and on
whom is to be paid. The stability of a political system can affect the
appeal of a particular local market. Nike pay corporation tax to the
government in order to run the business. Due to this Nike have been
able to manufacture and sell their goods. The £3.35 billion company
Nike would owe on its £9.96 billion in offshore profits translates to a
U.S. tax rate of 33.6% meaning it has only paid foreign taxes on these
profits at a rate of 1.4%2. Nike benefits with tax policy as paying tax
would allow them to expand free trade policies and also receive
1 https://www.ukessays.com/essays/marketing/analysing-the-market-environment-for-Nike-marketing-essay.php
2 https://itep.org/fact-sheet-Nike-and-tax-avoidance/
, government support leading the business to reach all over the globe
and to be well-known, creating more awareness which would benefit
Nike business as this would make them receive more customers. As
Nike has to pay less tax this will lead to less outflows and more money
maintained within the business. Therefore, Nike will have more money
to finance their business and improve the clothing, shoes, and
equipment quality which would satisfy customer’s needs.
One positive impact of this is it creates a good brand image because
it’s not just people who have to pay personal tax, even companies
have to pay tax to run their business. Paying tax would be seen as
good ethics as the money paid would be used by the government to
invest in good projects which would help the society, leading the
society to being happy and supporting the business therefore would
increase the business’ publicity and ethical values. This would benefit
the Nike business as they would receive more publicity and more
purchases would be made which would result in the business’ revenue.
Receiving more revenue would benefit the business as they would be
able to invest in new products such as shoes, clothing and equipment
which would satisfy customer’s needs. In the future, Nike should
continue paying business corporation tax to keep the good brand
image and to run the business well. Having a good brand image would
benefit Nike as customers would see Nike’s good ethics values. This
would make them happy and interest them into purchasing Nike
products such as shoes, clothes and equipment. This would also allow
Nike’s revenue to increase due to the high sales volume. However, one
negative impact of paying tax is, this would result in loss of money and
decrease in profit therefore this may not allow Nike to invest in new
ideas which may negatively affect the business as customers would be
disappointed and would not purchase goods from Nike leading to
decrease in sales which may result the business to slow down and
experience loss in sales and revenue. Furthermore, if Nike has to pay a
huge amount of tax then Nike will increase their premium price. This
can also affect the business negatively as increasing the price could
decrease Nike’s sales and revenue due to customers not being able to
afford their goods and Nike may not be able to pay their total cost
which may put the business in debt. Also, if Nike is not able to pay tax
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