UNIT 5 International Business P1, 2, 3, 4, M1, 3, 2, D1 PDF

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Tykuan Jones

Unit 5: International Business

196385

Unit 5 Assignment 1: Why trade internationally? Learning Aim, A: Explore the international context for business operations My two contrasting businesses will be Apple and louis Vuitton

P1 Apple inc., is a multinational company well-known hardware and software firm best known for its line of personal computers, the iPhone, and its cutting-edge product marketing methods, tracing their origin from Cupertino, California, United States. Apple is the dominant force in the tech industry, ranking not just as the world's largest tech business, but also as the world's eighth largest company on “Forbes' Global 2000 list”. In 2018 apple announced their highest annual revenue of 265.6 billion U.S. dollars and as of last year 2020 they announced their revenue of 91.8 billion U.S. dollars.

Louis Vuitton (LVMH) is a multinational company. Louis Vuitton was a French entrepreneur and fashion designer who founded the eponymous fashion house. The company, which is now one of the world's major international fashion brands, has more than 460 outlets in 50 countries. Their headquarters being in its country of origin (Franch, Paris). LV is one of the biggest designer brand names in the world and as of 2021 it is in the top 15, being number 5 on the list of luxury brands. As of 2019 LVMH has had a 16% increase in revenues. LVMH Moët Hennessy Louis Vuitton's total revenue fell by 17% in 2020, the world's largest luxury goods company nevertheless managed to produce revenues of 44.7 billion euros ($54.5 billion U.S. dollars) and of 2020 they have accumulated over 5003 stores worldwide.

P2 Because Apple and Louis Vuitton are international companies, they must devise new ways to finance their operations in order to keep their organisations afloat. International enterprises can fund their operations in one of four ways, depending on their circumstances. They may determine that one option is preferable to the others for a variety of reasons. Prepayment by an importer This strategy requires them to pay up ahead, or they may refuse to deal with you by not giving you merchandise. Because there is minimal confidence between the importer and their enterprises, they need payment up front. Therefore, payment is required to obtain the product required by your organisation. This can happen if your company is new, your suppliers are unfamiliar with your business model, and you lack a stable and recognised organisation. It could also be that there is a great demand for the goods or services you desire, in which case buying in advance allows you to lock in a price so you know precisely how much you must spend.

Tykuan Jones

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Unit 5: International Business

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ADVANTAGE: The exporter can avoid non-payment because part of the payment is collected during the transfer of the items. If you pre-pay for goods and services, there may be a fixed price, which means there will be fewer problems with cash flow forecasting. DISADVANTAGE: This approach can cause a buyer's cash flow problems. Buyers may also be afraid that their items will not be dispatched after payment is made, which means that sellers who use this method to export goods may lose out to competitors.

Letter of credit It is given by a bank to another bank (especially one in a different country) to serve as a guarantee for payments made to a specified condition. When there is an importer and an exporter and there needs to be confirmation for this to be shared, a letter of credit is required. It is a bank instrument that guarantees a buyer payment to the supplier if the buyer cannot pay due to the agreed contract through letter of credit, the bank will cover the remainder of the price. 

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ADVANTAGE: Using this method has the advantage of ensuring that buyers receive the goods they have paid for, as it would be a breach of contract for the seller to fail to do so, which could result in legal action. Another benefit is that sellers are protected against buyer non-payment because if the buyer does not follow the contract and the bank does not cover the payments, this can be considered a breach of contract. DISADVANTAGE: It is based on documentation rather than physical inspection of goods for the buyer, which means that the contract explains what you must receive but you do not see the goods in person. The cost of negotiating and other letter of credit procedures is high for the exporter.

Bank loan Long term source of finance. It is a fixed amount given to a business by the bank. Bank loans are determined by your contract with a bank, and the types of loans available are determined by the size of the loan required by your company, the country from which you are importing, and the bank's understanding of the type of market your company operates in. 

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ADVANTAGE: If the business is suitable, the money is guaranteed for a set length of time. Interest is paid on the loan, so there is no need to give the bank a percentage of your profits. Interest may be fixed for the term or low, depending on the amount borrowed and the payback term. DISADVANTAGE: The bank has security over your business asset only in case you fail to make the complete repayments, which implies that there may be legal action taken against your firm which might lead to bankruptcy.

Tykuan Jones

Unit 5: International Business

196385

Export credit They are government financial support, direct financing, guarantees, insurance or interest rate support from national exporters. When an organisation sells you, goods offer you export credit, you agree to buy the goods and pay for them later, after a set length of time. This strategy allows businesses to save money by allowing the consumer to pay for the things they have purchased over a period. 

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ADVANTAGE: Allows your business to confidently grow into new markets, knowing that you will be paid if the goods or services you requested fail to arrive. Export credit can help you decrease your risk management burden as an exporter, allowing you to save time and focus on what matters most. DISADVANTAGE: Some categories of goods may be excluded from coverage by insurers; therefore, the policy may not cover the entire cargo. They might not be able to supply certain goods to specific countries that your company imports from.

P3 The entire globe has devolved into a massive marketplace. It is now much easier to contact customers and conduct business with companies in different nations. This means that different countries are now intertwined, and whatever happens in one will almost certainly happen in the other. Traveling between countries becomes easier in this instance because moving throughout the world is both rapid and easy. Because of the introduction of mobile phones, communication is now faster than it has ever been. People can communicate with one another anywhere in the world. Because of the ease with which these commodities can be carried around the global market, globalisation has made it easier for different enterprises to trade across borders. Foreign countries export and import items from one another, and individuals can now use the internet to shop in different countries. Not only has globalisation made all these things easier, but it has also made migration between countries easier. As a result, many individual countries, such as the United Kingdom, now have a much more diverse local culture than they did previously, influencing demand for various goods and services. Not only that, but various businesses have expanded their accomplishments to different borders, implying that businesses now conduct their activities in different countries in order to meet the needs and provide services to a variety of people around the world, as well as to help their business become known by a variety of people, thereby increasing profit and revenue.

Tykuan Jones

Unit 5: International Business

196385

Globalisation has different features such as Trading blocs: are groups of countries that work together to remove trade obstacles and make it easier to transport products and services between them. These countries oversee managing and promoting trade. 

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EU: European Union: They facilitate unrestricted commerce between EU countries, and it has been discovered that trade obstacles in the EU are becoming increasingly invisible. Between 1999 and 2003, there were 166 manufacturing industries in 11 member states. The EU currently has 28 member countries, including Austria, Belgium, Bulgaria, and the United Kingdom. These countries have the right to free commerce, which means that governments cannot impose import/export limits or restrict trade in any other manner across the EU's borders. As a result, once a product enters the EU, it can be freely transferred throughout the EU. EFTA: European Free Trade Area: they abide by EU regulations, and the agreement allows EU nations and three non-EU member states, Iceland, Liechtenstein, Switzerland, and Norway, to freely trade within the EU. The four EFTA countries are competitive in a variety of sectors and are significant to the global economy, with competitiveness, wealth generation per capita, life expectancy, and quality of life among the highest in the world. These four countries, however, are not members of the European Union. NAFTA (North American Free Trade Agreement): allows countries like Canada, the United States, and Mexico to trade freely since their economies are growing and prospering. This union was established in 1994, and it has demonstrated how free trade increases wealth and competitiveness, providing real benefits to families, farmers, workers, manufacturers, and a variety of organisations that ensure that the agreement is interpreted correctly and that consumers are protected. It.

International labour and capital mobility: 

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More people working for different organisations in different nations throughout the world. For example, EU citizens can migrate and work wherever they want within the EU. Money can also be moved more easily from one country to another. John is a citizen of Germany. He does not require any documents in order to work in the United Kingdom because Germany is a member of the European Union, which permits him to freely move and dwell in any EU country. Callum is a native of Canada. He does not require a visa to work in the Schengen area for 90 days; but, if he stays longer than 90 days, he must leave the area before 90 days unless he is detained or penalised for each additional day he stayed. To restart the 90day clock, Canadians cannot leave the territory for a day or two and then return. Each day counts toward a total of 90 days in a six-month period.

Tykuan Jones

Unit 5: International Business

196385

International currencies There are around 150+ currencies in use throughout the world today; businesses must be aware of the various ways to trade globally, as well as the common currencies that can be employed. Brazilian real, Australian real, British pound, Canadian dollar, Czech koruna, Danish krone, euro, Hong Kong Dollar, Hungarian forint, Indian rupee, Indonesian rupiah, Japanese new shekel, Japanese yen, Korean won, Malaysian ringgit, Mexican peso, Norwegian krone, Pakistan rupee, Philippine peso, Polish zloty, Singapore and Nigerian naira. Multinational corporation: This is a company that trades all over the world. Because of the size of their organisation, some firms have annual turnovers that exceed the wealth of various countries throughout the world. In most cases, a corporation's headquarters are in one country, and it runs wholly or partially owned branches in other countries. The corporation's divisions report to the corporate headquarters. The following are examples of several types of communication systems  

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Telephone: a system for transferring voices over a long distance via wire or radio, allowing people to converse all over the world. Websites: are a collection of related web pages under one domain name. Users can produce and share content on these websites and applications, as well as participate in social networking. Facebook, Snapchat, Instagram, WhatsApp, email apps, and Twitter are all examples of this. FaceTime is defined as time spent in direct contact with another person.

Advantages 

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It is easier to communicate with people all over the world because you get a faster response, calls can be made 24 hours a day, seven days a week, and you may leave a voice message if the individual is not available to take calls. Text, photos, colour, icons, design colours, audios, and videos can all be used to connect with the organisation. It provides organisations with large audiences and allows them to reach out to their target audiences; it is free to create, encourages sharing, increases brand awareness and loyalty, and allows customers to communicate with providers for any inquiries; it is free to create, encourages sharing, increases brand awareness and loyalty; and it allows customers to communicate with providers for any inquiries. It works great over 3G and automatically populates with your Apple contacts.

Tykuan Jones

Unit 5: International Business

196385

Disadvantages 

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If the person you're contacting is unavailable to speak, the line may be engaged; there may be voice interference; you won't be able to view a person's body language; and you may have to pay for the call if you don't have data. A website necessitates an excessive amount of content that must be clearly communicated, and it must be designed with the organization's target market in mind. As a result, a significant amount of money and effort must be invested in the creation of a website. It enables easy negative criticism from clients, as well as the risk of embarrassment, therefore suppliers must be extremely cautious about what they post on their website. It's no longer available, and it's solely for Apple products.

P4 A trade bloc is a sort of intergovernmental agreement, frequently part of a regional intergovernmental organisation, in which trade obstacles are decreased or abolished among the members. They can also have an impact on the economy, increased reliance on the economic success of other trading bloc countries. If the Eurozone enters recession, it will affect all the Eurozone's countries. Due to the intimate relationship between trade cycles in different countries, even if countries are not nominally in a trading block, this is almost unavoidable.

International labour and capital mobility: People can work for different organisations in different countries throughout the world because of globalisation. People can work in other nations around the world because of international labour mobility. Since the United Kingdom exited the European Union, it is still unclear what criteria will apply to working in both the EU and the UK. This could be a disadvantage for companies like LVMH and Apple because it will be more difficult to hire qualified employees from different nations until they have the proper documents, which will occupy time that could be spent on other things. Currencies used abroad: In the world today, there are 180 different currencies. Businesses can take advantage of globalisation by learning about diverse trading methods and currencies. LVMH and Apple will benefit from this because it will be easier for them to comprehend the many trading options and accessible currencies. Dollars, euro, and sterling are some of the most prevalent currencies used in trade (pound).

Corporations with a global reach:

Tykuan Jones

Unit 5: International Business

196385

Another element of globalisation is that firms often expand over the world, such as Apple, which has offices in the United States, the European Union, Asia, Australia, and Africa. Apple's annual revenue may be bigger than the riches of some countries on the planet. LVMH is an international company because it only has a Paris office that exports to countries all over the world, but Apple has several offices all over the world. Communication in the international business world: International firms connect daily via the internet, websites, social media, Skype, and other similar platforms. This has aided and altered worldwide trade because it is a far more costeffective and efficient method of working. Apple and LVMH would generally negotiate business deals with foreign countries using common languages such as English. System of international payment: Paying for items and having them transported to several countries used to be extremely difficult because you had to deal with many bank accounts and make arrangements for money exchange. Hoverer, as business and technology have progressed, it has become more easier to pay for things in other countries using only one bank or organisations such as PayPal. LVMH and Apple will have a lot of money that needs to be paid and spent. Using a secure organisation like PayPal, which can trade in 203 nations in 26 different currencies and runs 24 hours a day, every day, may help them. WTO (World Trade Organization): To begin with, the World Trade Organization (WTO) is an organisation that ensures that countries and their businesses, such as LVMH and Apple, can trade with other countries as smoothly, reliably, and freely as possible. This is advantageous for LVMH and Apple since they will already have an agreement with the country with whom they are trading, providing their firm with rights and protection and ensuring that the laws of many countries are recognised and respected. The WTO's principal goal is to assist people all over the world in trading efficiently with one another by keeping costs low and guaranteeing that all countries trade fairly. The World Trade Organization (WTO) comprises 160 member countries that account for around 95% of global trade. They will try to intervene and assist if there is a problem between two countries. This organisation benefits everyone since it promotes justice to trading, which is why more countries want to join because it makes it easier for businesses to trade while also protecting the health of their populations and the environment. In several parts of the world, such as Europe and South America, customs unions and common markets have been established. This facilitates free trade between the countries that have agreed to a common market/union.

Tykuan Jones

Unit 5: International Business

196385

The EU: Following World War II, the European Economic Community gave birth to the European Union. The EU is made up of 28 separate countries that allow commodities and services to flow freely between them. The UK and firms operating within it, such as LVMH, benefit from the EU since they can freely trade their products with these 28 countries, making doing business with them much easier and more successful. Mercosur: Mercosur, like the EU, makes it easier for countries to trade with one another. Argentina, Brazil, Paraguay, Uruguay, and Venezuela are the South American countries in question, as well as its partner countries Peru, Chile, and Columbia. Even though Mercosur's land area is far larger than the EU's, Mercosur has not made as much progress as the EU, but they share the same vision of allowing people to freely migrate between nations, supporting growth, and effectively trading. NAFTA (North American Free Trade Agreement): The North American Free Trade Agreement (NAFTA) is an agreement between the United States, Mexico, and Canada. This is to facilitate commerce and abolish tariff duties, particularly for Mexico, so that products can be traded easily between the two countries. They've also made sure ...