U5A1 Why trade internationally PDF

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P1 In this assignment I will be gathering research on two contrasting international businesses and why they trade internationally. International business refers to the trade of goods, services, technology, capital and/or knowledge across national borders and at a global or transnational scale. The two businesses I've chosen are Tesco and EasyJet. Easy Jet is a British low-cost airline company with its headquarters at London Luton Airport. Its affiliate airlines EasyJet UK, EasyJet Switzerland, and EasyJet Europe conduct domestic and international scheduled services on over 1,000 routes in over 30 countries such as France,Italy and Spain. Tesco plc, headquartered in Welwyn Garden City, England, is a British multinational grocery and general products store. It is the world's third-largest retailer in terms of gross revenues and the ninth-largest in terms of revenues.Tesco has expanded into departments such as book, clothing, electronics, furniture, toys, petrol, software, financial services, telecoms, and internet services since the 1960s.Tesco has 1,600 product lines in its Tesco Value and Tesco Finest divisions. Around 40,000 product lines are available in a typical Tesco Superstore, with 25,000 of them being food and beverages. Tesco also provides a mobile network ,Tesco Mobile which is highly recommended by customers. Tesco operates in the UK and 11 other countries; China, Czech Republic, Hungary, Japan, Malaysia, Poland,Republic of Ireland, Slovakia , South Korea,Thailand and Turkey. Exporting is selling goods to another country.When a business wishes to export, it has the option of doing so both within and outside of the European Union. As a result of operating within the EU, goods entering Europe are not subject to customs checks and can be moved freely. This kind of export is referred to as dispatches. Other constraints exist when a corporation decides to export beyond the EU while still operating within the EU, and the countries to which goods are transported are referred to as "third countries." Exporting to these nations may need an export declaration, an export licence, paying customs fees, and paying applicable taxes in the destination country. For the past decade , Tesco's international export business has exported the Tesco own brand products to 20 partners in countries such as Australia, Saudi Arabia and in Europe. However Tesco has revealed plans to axe its international wholesale business. Importing is bringing goods into the county.When a firm imports products from an EU country into the UK, it normally does not need a licence or pay import duties, but it must pay value added tax (VAT) and have a commodity code connected to the import so that the correct VAT level may be paid. Importing goods from outside the EU requires: an import declaration, an import license, commodity codes to be allocated to goods, VAT to be paid. Tescos imports its products from all over the world such as salt from Wales, Wine from France and Italy , and Olive Oil from Barcelona. Tesco has 2,500 suppliers in the UK and 100 are strategic partners, all operating on the Tesco brand. Tescos suppliers include Booker, Premier Foods, Kerry Foods, Muller Milk & Ingredients, Yeo Valley Farms, Cargill Meats Europe / Avara Foods, and Allied Bakeries.Tesco has saved £104 million in logistics and distribution expenses as part of its ambition to save £1.5 billion in operational costs by 2019-20.

Tesco is the market leader in the UK , to occupy a strong position and competitiveness they also trade in global markets. This allows the company to expand their sales from similar targets in different countries. The advantages to being a global brand is that it enables consistency of advertising. A multinational business is one that operates in more than one country and in many large global markets. Coca-Cola, Cadbury, Schweppes, and McDonalds are examples of a multinational business. Easy jet is the second largest budget airline in Europe. Easyjet offers the service of taking customers country to country via plane for a lovely holiday or a work trip etc. As well as this , Easyjet partners with key suppliers/businesses and uses their services to import and export products of partnership businesses. Reasons for trading internationally Tesco trades internationally to grow the business and gain brand exposure. Tesco already has international operations in 13 international markets on 3 different continents. Operating in international markets gives access to new markets. This then allows them to expand their sales and access additional revenue streams in similar target markets such as their mobile service Tesco mobile. International revenues increased by 13.8 percent in 2010/11, more than three times the rate of Tesco's 4.3 percent growth in the UK. Tesco is expected to open more stores outside the UK than within the UK by the end of the 2011 financial year, owing to a quicker rate of store openings. Tesco already has nearly two-thirds of its space outside of the UK. In overseas markets, Tesco's main competitors include Penny Market, CBA, Carrefour, Walmart, SPAR, Aldi, and Lidl. Similarly, Easyjet trades internationally to grow and gain brand exposure. Growth - Offering goods and services in locations other than the United Kingdom allows businesses to expand, and increasing sales should lead to increased profitability in the long run. Generally businesses exist to create profit, so taking something that is selling well in one place and offering it in another should result in more sales and, eventually, more profits if the firm is run well.From outside the country . businesses operating outside the UK can offer new goods and services. This can offer growth in markets. Additional revenue streams- Companies who choose to sell goods or services in other countries have greater revenue potential. Methods for generating new revenue are known as new revenue streams. The more income-generating options an organisation has, the more stable the company will be. If one revenue stream isn't performing well, there are other options for generating revenue. Brand Exploitation- Exploiting brands involves maximising the brand's name throughout multiple countries. This means that a brand name could be used for sponsorship in many countries. Access to new markets- Businesses that trade internationally have the opportunity to grow their sales and offer items and services that are common in one country but not in another.

Accessing new markets opens up fresh possibilities because individuals in those nations may not have before encountered such things. Diversification- Diversification refers to the introduction of a new product or service into a different market. Diversification can help a company decrease risk by allowing them to provide a variety of products or services rather than relying on just one or two, but it can also increase risk if a product or service fails to catch on in a specific nation. Increasing market share - international businesses frequently operate across multiple countries and even regions. Having a larger market share indicates that they have more sales in that market and are more dominant than the other firms that operate in that market. Comparative advantage- The ability to create goods or services in more than one country and then sell them in another lowers a company's costs and increases the possibility of larger profits. Technological dominance-When a company is large enough to trade across borders, it might invest in technology to make procedures go more smoothly. As sales rise and costs fall, this frequently leads to larger profits. Businesses that operate globally can establish technological superiority by sourcing materials or conducting research in one country and then selling goods or services in another. Economies of scale- Economies of scale refer to the fact that the more of a product or service you sell, the lower the per-unit cost of production. This is because your overheads will remain the same whether you produce one product or 1000. The economies of developed countries are more sophisticated, their infrastructure is more developed, their capital markets are more mature, and their living standards are greater. These are the most developed countries in terms of economic development, with well-established capital markets, regulatory organisations, and high family incomes. North America, Western Europe, and the United Kingdom have the most developed marketplaces. Tesco operates in many developed economies, such as the UK and Japan. Easyjet is a European airline and the majority of Europe is developed. It is important for businesses to operate in developed economies as there are advantages such as, already established and support available from agencies to help trade here, higher employment rates and established trading rules. On the other hand, emerging countries are undergoing rapid expansion and growth, but they have lower household incomes and less developed capital markets than developed countries. Tesco operates in China therefore also operates in emerging economies, this could increase sales as china has a high population. Less-developed countries are countries that are underdeveloped and have considerable structural barriers to long-term development. Less developed countries are more sensitive to economic and environmental shocks and have less human assets than developed countries. Both Tesco and Easyjet do not operate in less developed countries. As of 2017 Easy jet introduced a global connections service that will enable passengers to book connecting tickets from Europe to and from worldwide destinations. This means that Easyjet will offer flights to America and other countries such as Singapore. This will benefit Easyjet as they will be operating in new markets.

Tesco, on the other hand, does not operate in the United States because it was unable to adapt to the lifestyle differences between the United Kingdom and the United States. It is important for a business to operate in the right market to ensure maximum sales. Factors to consider when choosing market is : Type of product- Some products may not be right for certain markets or may work better in particular ones. Tescos products may be too expensive for less developed countries however perfect for a developed market/ emerging markets as products can be sold at a higher price but still affordable for the market. This is similar to Easyjet as it operates in a developed market where airplane travel is more popular but also able to be an affordable airline. Cost- The market may be expensive to trade products The size of the market- Businesses must consider the population of the market to determine how many customers they will have there. Despite being an emerging country , Tesco operates in China and makes a lot of sales due to China's high population. Whereas Easyjet only operates in Europe on a developed continent as its a airline service it's not important to consider a highly populated less developed market. P2 Methods used to finance international trade Prepayment by employer- if a business wants to import goods into the UK to sell you pay in advance, however trust is needed between the two trading organisations. Letters of credit- The bank of the importer guarantees to pay the supplier as soon as the order is completed and the letter of credit terms and conditions are met under an import letter of credit. The bank assisting the importer will ensure that the importer gets paid. The bank keeps track of the agreement between the two companies and acts as a go-between to make things easier for both. Export Credit- When a company arranges with a supplier to offer or give credit for a specified period of time and according to predetermined terms and conditions, it is known as an export credit. When a UK company enables a foreign company to have the goods up front and pay for them after a certain amount of time, export credits may be granted. Bank loans- Another way to fund international expansion is to take out a bank loan. The quantity of the loan required, the sort of products or services on offer, understanding of the market/country to which the items are being shipped, and the experience and track record of the business dealing internationally all influence the type of loan and terms granted. P3 The main features of globalisation World trade and partnerships are growing easier as a result of improved communication, funding, and links between countries, this is called globalisation. Trading with firms in other nations is considerably easier now, due to the advanced technology.

Managing and promoting trade operations are normally managed and promoted by trading blocs, which are usually groups of countries in certain regions.Tesco benefits in the UK being part of the EU trading union, as they are able to deal much more freely and cheaply with other EU countries. They can save money on importation and get their items from cheaper sources in other countries.The goals of these trading blocs are to lower trade barriers between countries in these areas, to improve relations, and to encourage free movement of labour, capital, and other resources. The formation of trade blocs may result in an increase in foreign direct investment. This can help the economy of participating countries by generating new or increased jobs. People can work in different nations around the world because of labour mobility. To work outside the EU, UK citizens may need a permit. EU citizens have the freedom to relocate and work wherever they want inside the EU. This will benefit multinational corporations and global corporations such as Tesco, as labour mobility will allow the company to hire the employees it requires for the job. The mobility of workers allows these businesses to hire people from all over the world who have acquired a variety of skills and experiences that can benefit the company. All countries have different currencies, for examples the pound is the currency in England and the US has the dollar. Businesses must be aware of the currency of the business they are trading with to ensure they are paying the right amount. International business communication has become considerably faster and more efficient as a result of increased globalisation and technological advancements. International business communication can be done swiftly using email, text messaging, and phone calls.Tesco is a multinational company with operations on several continents; therefore, international business communication will be quite beneficial. There are a number of international payment systems to choose from. Debit cards, credit cards, electronic payments transfers, direct debits, online banking, bank loans, letters of credit, export credit, and e-commerce payment systems like PayPal . Money can be transmitted overseas using these techniques.Tesco and Easyjet will benefit from these payment methods since they will allow customers to use common and easiest forms of payment all around the world. P4 The World Trade Organisation ensures that countries can trade with one another as smoothly, reliably, and openly as possible, allowing firms to sell their products globally.The World Trade Organization (WTO) aspires to assist people all over the world in effectively trading with each other by keeping costs low and ensuring that countries trade fairly .The purpose is to assist producers of goods and services, as well as exporters and importers, with their operations. The European Union is a trade and monetary union made up of 28 countries. The EU is significant because it established its own internal market, allowing goods and services to flow more freely between the 28 eu countries.Tesco operates in the EU trading bloc , which is beneficial as they are able to trade cheaper and more freely with other EU countries.

The Treaty of Asunción in 1991 created Mercosur, a South American trading bloc. Argentina, Brazil, Paraguay, and Uruguay are the four full members of the organisation. Mercosur, like the EU, is a group of countries who have come together to help each other trade. The Mercosur area makes it easier for countries to trade with one another, and, like the EU, Mercosur includes associate countries that work with the organisation to encourage trade. Moving products, services, and people in areas with little or no limitations can also be used to other free trade zones developed around the world. The North American Free Trade Agreement (NAFTA) zone and the Asia Pacific Economic Cooperation (APEC) zone are two examples. The North American Free Trade Agreement is a trilateral trade bloc in North America that was signed by Canada, Mexico, and the United States.The goal is to make trading easier and to eliminate tariffs, particularly those that apply to Mexico, so that goods can be traded more effectively between Mexico and the other two nations. NAFTA encourages people to move between the nations, but also requires citizens who want to work in the United States to have a three-year temporary work permit. The Asia-Pacific Economic Cooperation (APEC) is an intergovernmental group of 21 Pacific Rim economies that advocates free trade throughout the area. The goal of this regional economic conference is to bring greater wealth to the people of those countries by creating inclusive communities where everyone may be encouraged to live in better living conditions, reduce poverty, and improve health.The region's 21 countries work together to increase trade as much as possible, which benefits small and medium-sized businesses as it helps them to grow. This means that more people are employed in those countries and are able to contribute to the economy's wealth. M1 Uk export finance Uk export finance is the export credit agency of the United Kingdom. It supports the Uk by providing exporters with insurance and banks with guarantees to share the risks of providing export financing. It can also issue loans to forgein buyers of British goods and services. Services Uk export finance provide: -

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Protects UK exporters from non-payment by international purchasers By guaranteeing or underwriting bank loans to finance purchases of goods and services from UK exporters, it assists overseas buyers. Shares credit risks with banks, which aids exporters in raising tender and contract bonds, obtaining pre- and post-shipment working capital financing, and obtaining letter of credit confirmations. Protects UK investors in foreign markets from political dangers.

This is relevant to Tesco since they are a UK firm that exports. By using UK export finance, they benefit from loss protection as well as the ability to respond rapidly to changing demands, which improves Tesco's competitiveness.

Uk Trade and Investment A UK government department that works with UK-based businesses to help them succeed in worldwide markets, as well as assists foreign businesses in locating and expanding in the United Kingdom. The services are available in over 100 countries throughout the world.Tesco benefits from this as Tesco exports its food items to countries all throughout Asia because it provides them with the skills and development they need to export to different countries, as well as trade and investment support and assistance in discovering new markets. Easyjet operates in the United Kingdom, therefore use of UK trade and investment, provides them with more chances in the international market, allowing them to expand their international market share.

Chambers of commerce The British Chambers of Commerce assists businesses in international trade and partnership working between organisations from various countries. The assistance provided is intended to provide guidance on how to work in various marketplaces throughout the world. Tesco benefits from the British Chamber of Commerce as they are able to engage with businesses, which allows them to form new relationships and pursue new ideas. Easyjet also benefits as they were able to partner up with WestJet in order to have connecting flights to America.

Regional Advisory Organisations The goal of Regional Advisory Organizations is to involve more stakeholders in the fisheries industry in decision-making in this area.It participates in a few...