BTEC Level 3 National Extended Diploma In Business
International business
Essay
External factors and cultural differences
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Course
International business
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PEARSON (PEARSON)
This document has an in depth analysis of the Body Shop and what problems to communication, cultural differences and external factors they face when operating on an international level.
BTEC level 3 National extended diploma in business
International business
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External factors and cultural differences
The Body Shop was established in 1976. A British company that was founded by Anita Roddick.
It started out as a business just for Anita to make a living. The Body Shop is an international limited
British cosmetic, skin care and perfume company. The company stands out amongst others as they
are very CSR friendly and follow many strong rules from day one of operation.
The company originally started trading in Brighton and is now based in London and Littlehampton in
West Sussex. The company was owned by L’Oréal from 2006 until 2017. In 2017 L’Oréal was sold to
Natura for £880 million. The company sells thousands of products in over 3,000 stores in more than
65 countries and is now owned by a Brazilian cosmetic company called Natura.
The company specialises in ethically sourced, cruelty-free, and natural ingredients. None of the
products are tested on animals and ingredients were sourced directly from suppliers.
The shop started selling with 25 products. The products started out as a refillable bottle policy as she
didn’t have enough money to afford many different bottles to fill up with her products. All labels
were had written and relied on local press for advertisement.
The business started to expand through franchising and by 1984 the business had 128 stores
internationally. By 1994 89% of the business locations were franchises.
The business went public in 1984 and was floated on the London
stock exchange with shares starting at 95p. Roddick kept 27.6%
of the shares in the business. Share prices then increased
dramatically with prices of shares rising 10944% in the first 8
years.
The UK began trading with the United States in 1988 with all
new stores being company owned until 1990.
Throughout the 80s and 90s the company joined in in several campaigns relating to CSR and
environmental issues. They included ‘Trade Not Aid’ campaigns in 1987. The company also made
alliances with Greenpeace and Amnesty International, (human rights for prisoners of conscience).
The Body Shops community trade programme launched in 1987 to give them a fair price for natural
ingredients. These ingredients include Brazil nut oil, sesame seed oil, honey, and shea butter. The
company now works with 31 suppliers in over 23 different countries helping 25,000 people a year.
The Body Shop interestingly does not export its products to China because of their cosmetic animal
testing regulation. However, The Body Shop has always sourced many baskets and other products
needed (not cosmetic) products from China.
Task 1 (P5, P6, M3, D2)
P5: Explain the external factors that influence a selected business considering trading
internationally.
There are many factors that will affect a business when wanting to trade internationally. I will list
and explain these below in a PESTLE analysis. Pestle analysis is an external analysis of the external
environment for a business. This is good for a business to analyse risk or reward of an idea and all
things they should look out for and be aware of.
, External factors and cultural differences
Many companies operate internationally and operate their goods and services across boarders for
many different reasons and should carry out internal and external analysis of the risks they may face.
Internal factors can usually be controlled by the certain business.
How it affects countries internationally.
Pestle stands for:
Political
Economic
Social
Technological
Legal
Environmental
Political factors affecting a business that wants to go international
There are many political factors that will affect a business when wanting to go international. For
example, changes in tax rates, new rules, and regulations (especially in uncertain covid times),
political stability of a country, trade regulations such as tariffs, quotas ext.
A political drawback for a business when wanting to trade internationally could be trade restrictions.
This means a business may not be able to expand in that country as it is unwanted from the
government and not encouraged.
Economic factors
Businesses must look at how economic factors relate to the economics of a country and how things
like inflation, Interest rates, income rates and employment levels will directly impact a business.
Social factors
Social factors will include, education, trends, society, consumer behaviour, demand for certain
goods/services, culture, and lifestyles.
Technological factors
Technology can have both positive and negative impacts on businesses. Due to the change in
technology, a lot of new things have been made possible such as communication internationally is
faster, and more efficient. Technology can greatly impact efficiency within a business. Technology
can also be seen as a disadvantage due to high demand of different products and services and may
not even be allowed in certain countries such as China.
Legal factors
A business must be aware of the legal environment and what they are getting themselves into.
Different laws apply in different counties these laws must be abided even if not the same as the
origin country the business started in. These laws relate to age, disability, wage rates, employment,
and many other laws such as bans on certain products or services in that country.
Environmental factors
The effects of an environment on businesses can affect the way in which it operates. For example,
weather, climate change and temperature will have an impact on a business. If the climate in which
a business operates in is warm and sunny, products and services will have to support this otherwise
, External factors and cultural differences
no profit would be made. There is no point operating a hat, scarf, and glove company in a hot
environment. It simply wouldn’t work, and a business would be making a huge loss leading to failure.
A company must also move forwards with being more CSR friendly and support global matters and
help move forwards with change rather than adding to the problem.
Current environmental problems include:
Global warming
Climate change
Food waste
Biodiversity Loss
Plastic Pollution
Deforestation
Air Pollution
Fossil fuels
Melting ice caps and rising sea levels
Farming and agriculture
These are just a few general problems; however, I will go into further detail within the assignment
relating these problems to 2 specific countries. Australia and China, two contrasting countries that
appeal to two contrasting markets.
P6: Explain how business support systems enable a selected business to trade internationally.
Business support systems can help ease communications and help businesses to trade
internationally. Over the internet, using technology and international payment method are ways in
which businesses can be supported with trade all around the globe. The use of the internet and
innovative products has enabled businesses to successfully trade all over the world by speeding up
processes and communication being much easier.
There are many different aspects a business may do such as prepayment of the importer, letters of
credit, export credits, bitcoin, Apple pay, international credit card and the internet in general.
Prepayment of the importer
Prepayment of the importer is when a company or business owner is being paid in advance for their
goods and services. It’s when an importer is paying for goods in advance. This requires a lot of trust
especially if this is happening over the globe within countries that are hundreds and thousands of
miles apart. This is also where the use of technology has been helpful as it allows for updates and
better communication. This could be a good way at gaining a business’s trust especially when carried
out overseas so that the receiver of the products will have faith in the company that they are
importing and exporting with. This may also help resolve cash flow problems within a business
however if the products do not arrive there will be major production problems.
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