Why trade internationally?
Introduction
Within this assignment, I will be discussing various aspects which explore the international context for
business operations and investigating the international economic environment in which business
operates. I will be assessing the impact of globalisation, analysis barriers of operating internationally,
trading blocs on international trade, the features of globalisation and the types of finance available for
international trade. By assessing two businesses, Nestle and GBS freight, with all of these aspects, I will
understand how and why they trade internationally.
Exporting businesses
Exporting businesses is when a business residing in a country trades with another country. Within the
process of trade, an export declaration, export licence, custom duties and taxes on the goods where they
are being sent to. However when exporting to unions such as the EU, exports for EU countries to other
EU countries can be freely moved with no customs checks. Exporting business usually occurs when a
good can be manufactured cheaper within an external country and then brought into another country.
Nestle operates within the EU and has major distribution centers within it. Nestle distributes all around the
world however, they manufacture their goods within counties with cheap labour and resources. When the
manufacturing is finished, the next step is to transport the products to the distribution centres. As they are
usually distributed out of Africa and South America, they are liable to pay custom duties/taxes and are
required to have an export license. This increases logistic costs and transport time as more checks are
required to export goods. As a result, a surge of factories built in the EU has been a result of the growing
EU market. Nestle now has 100 factories in the EU meaning they don’t need an export license or pay
custom duties to distribute goods throughout the union out of these factories.
https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/about_us/nestle-in-
europe.pdf
Gbs freight operates out of the UK and is a logistics company for the clients. They distribute around the
world and transport consumers freight from AtoB. As they send and distribute to places outside of the EU,
they will need to have an export licence and have additional charges (custom duties). These additional
charges will be placed on the client however, export declarations can hold up packages being sent.
Therefore, GBS freight must ensure all the items sent are legal and have the correct paperwork. As GBS
freight is a logistics company, they distribute to every continent in the world. Therefore, they must
understand every country's policies on trade.
https://www.gbsfreight.co.uk
Importing businesses
When a business imports goods from an external country this usually is because a business can source
cheaper goods with better quality as external countries have lower labour and material cost. As a result,
most businesses import from external countries to ensure they source the good which best suits the
business. Also, if a multinational enterprise requires raw materials, importing them into the country which
needs it may be required if local suppliers cannot provide the quality and price. Importing from the EU
however is when a business is not required to have a licence or to pay import duties but, VAT must be
paid and that a commodity code must be attached to the import to ensure the correct amount is paid.
Importing goods from outside of the EU will need an import declaration, import licence, VAT, commodity
codes and custom duties to be towards the HMRC. As a result, it is more expensive to move goods into
the EU rather than around it as businesses need to pay for an import licence, VAT and additional duties
payments.
,Nestle has factories within 86 countries meaning that the factories can provide goods to consumers within
the surrounding area which saves on logistics, import licences, VAT and additional duties. However for
the other 103 countries, they have to import from countries where the factories are placed. With the EU
being the 2nd biggest consumers with $19.6billion in sales behind the US with $34billion sales, Nestle
can save on import licences, VAT and additional duties within the EU. However, when importing goods
into the USA, all the cost of production increases as raw materials have to be imported.
https://www.nestle.com/investors/annual-report
https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/about_us/nestle-in-
europe.pdf
Multinational enterprises
These are when an organisation operates within more than one country and operates in different global
markets. A multinational enterprise is an international business which sources at least a quarter of sales
and revenue outside of its founding country. They have to be cautious to adjust to the new environments
as each country has different rules surrounding importation, tax and other additional duties. As a result
they need to adjust towards the laws and cultures which the country follows.
Nestle makes sales within 191 different countries including their own country, switzerland. Annually they
make $93.4 billion in revenue worldwide which mostly comes from external countries purchasing goods.
As a result, they are multinational with millions of sales and more than a quarter of revenue is made
outside of switzerland. Also, Nestle has 447 permanent factories in 86 countries worldwide which cut
costs down as the products are made within these countries and accommodate the target audience
without paying importation and additional duties. In addition, transport of goods are cut down as long
distance logistics are reduced as they can accommodate the domestic demand.
https://www.nestle.com/investors/annual-report
GSB freight operates out of the UK though their London and felixstowe branches. They do not have any
external hq’s however, they operate within the international market. As they are a logistics business, they
get clients from different markets quireing for their service. They operate within all continents respective
markets and import and export goods in and out of the UK. GBS freight provides services towards 56
different counties meaning they have a market share within all of them. Although they are a small
business compared to DHL, they still have a market share in these 56 countries as they make sales. In
addition, as they provide services to 56 countries, their revenue from surrounding countries would be their
main source of revenue.
https://www.gbsfreight.co.uk/regions
https://www.gbsfreight.co.uk/contact
Associated businesses
In some occurrences, businesses may offer support to other corporations regarding service or resources
or even working as a partnership. Businesses which work closely with each other may offer specialist
services relating to logistics or marketing to make international trade easier and cheaper for both
organisations as less resources will be consumed as they are shared.
Nestle are in an association with Kuehne + Nagel who are their main logistics firm who handle
warehousing, transportation and deliveries. Nestle Netherlands uses Kuehne + Nagel’s distribution centre
to distribute their goods. Using Kuehne + Nagel gives nestle access to simple trade and allows for smooth
, trade between countries. As a result, Nestle receives storage, distribution and transport of their goods by
being and associated with kuehne + nagel.
https://newsroom.kuehne-nagel.com/nestle-chooses-kuehne--nagel-netherlands-as-its-logistics-partner/
https://supplychainanalysis.igd.com/news/news-article/t/nestlé-enters-5-year-logistics-partnership-with-kuehne--
nagel/i/17266
GBS freight is an international transport company which transport goods worldwide. As international
businesses need to distribute their goods, they may become freight partners with GBS freight. As a result,
they will become an associated business as the organisation is using GBS freights resources in order to
sell goods. As they are essential to the distribution of goods they work closely with GBS freight to allocate
the resources effectively and efficiently. With a business working alongside GBS freight, this makes
international trade easier and more effective as GBS already has the infrastructure in place.
Sole trader
A sole trader is an individual who is self employed and owns/operates their own business. They are solely
responsible for the actions the business takes and the overall success of it. As they are a single owner, a
sole trader has the right to change any aspect of the business as they are the boss. As a result, decision
making is much easier as there is no conflict of interest and is a benefit for the business and the sole
trader.
Partnership
This is a form of business operation which is binded by a contract in which two or more individuals share
responsibility and profits. A partnership gives a business more resources, experience and management
capabilities which enable it to grow and expand. By having more partners in a business, the more likely a
conflict of interest will occur. As a result, when decision making, it is much harder to come to an overall
agreement which suits all partners. There are three main partnerships which are, general, limited and joint
ventures which are all commonly used within the business community.
limited company
A limited company is a business structure where the business has a separate legal identity from the
owners and shareholders. As a result, the owners are responsible for the company's debts however, only
to the extent of the total capital they invested. Only business assets and capital can be taken to pay off
debts which protects personal assets. As they cannot source capital through shares, they may take a loan
to raise capital for business ventures.
GBS freight is a limited company meaning that the owners are not liable to pay off outstanding debts
through personal assets but only through business capital and assets. This protects shareholders and
owners from losing more than their investment. As they are funded internally rather externally through
shares, they are privately funded meaning they have the capital to operate. However, as they are not a
PLC and rather a LC they may take out business loans to fund ventures which have more risk than
sourcing capital through shares.
Public limited company
A public limited company, (PLC), is a company offering shares towards traders for the opportunity to raise
capital quickly for investment into projects in order for expansion and growth. Shares are traded on the
stock exchange and can be bought and sold at any time in the working week. If they are prepared to trade
on the stock exchange, a company must be willing to publish their complete and true financial position to
investors to determine if they should sell or buy. A PLC abides by the same rules of a limited company
with only business assets that can be seized to pay off debts which protects owners and shareholders
from furter personal losses.
Introduction
Within this assignment, I will be discussing various aspects which explore the international context for
business operations and investigating the international economic environment in which business
operates. I will be assessing the impact of globalisation, analysis barriers of operating internationally,
trading blocs on international trade, the features of globalisation and the types of finance available for
international trade. By assessing two businesses, Nestle and GBS freight, with all of these aspects, I will
understand how and why they trade internationally.
Exporting businesses
Exporting businesses is when a business residing in a country trades with another country. Within the
process of trade, an export declaration, export licence, custom duties and taxes on the goods where they
are being sent to. However when exporting to unions such as the EU, exports for EU countries to other
EU countries can be freely moved with no customs checks. Exporting business usually occurs when a
good can be manufactured cheaper within an external country and then brought into another country.
Nestle operates within the EU and has major distribution centers within it. Nestle distributes all around the
world however, they manufacture their goods within counties with cheap labour and resources. When the
manufacturing is finished, the next step is to transport the products to the distribution centres. As they are
usually distributed out of Africa and South America, they are liable to pay custom duties/taxes and are
required to have an export license. This increases logistic costs and transport time as more checks are
required to export goods. As a result, a surge of factories built in the EU has been a result of the growing
EU market. Nestle now has 100 factories in the EU meaning they don’t need an export license or pay
custom duties to distribute goods throughout the union out of these factories.
https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/about_us/nestle-in-
europe.pdf
Gbs freight operates out of the UK and is a logistics company for the clients. They distribute around the
world and transport consumers freight from AtoB. As they send and distribute to places outside of the EU,
they will need to have an export licence and have additional charges (custom duties). These additional
charges will be placed on the client however, export declarations can hold up packages being sent.
Therefore, GBS freight must ensure all the items sent are legal and have the correct paperwork. As GBS
freight is a logistics company, they distribute to every continent in the world. Therefore, they must
understand every country's policies on trade.
https://www.gbsfreight.co.uk
Importing businesses
When a business imports goods from an external country this usually is because a business can source
cheaper goods with better quality as external countries have lower labour and material cost. As a result,
most businesses import from external countries to ensure they source the good which best suits the
business. Also, if a multinational enterprise requires raw materials, importing them into the country which
needs it may be required if local suppliers cannot provide the quality and price. Importing from the EU
however is when a business is not required to have a licence or to pay import duties but, VAT must be
paid and that a commodity code must be attached to the import to ensure the correct amount is paid.
Importing goods from outside of the EU will need an import declaration, import licence, VAT, commodity
codes and custom duties to be towards the HMRC. As a result, it is more expensive to move goods into
the EU rather than around it as businesses need to pay for an import licence, VAT and additional duties
payments.
,Nestle has factories within 86 countries meaning that the factories can provide goods to consumers within
the surrounding area which saves on logistics, import licences, VAT and additional duties. However for
the other 103 countries, they have to import from countries where the factories are placed. With the EU
being the 2nd biggest consumers with $19.6billion in sales behind the US with $34billion sales, Nestle
can save on import licences, VAT and additional duties within the EU. However, when importing goods
into the USA, all the cost of production increases as raw materials have to be imported.
https://www.nestle.com/investors/annual-report
https://www.nestle.com/sites/default/files/asset-library/documents/library/documents/about_us/nestle-in-
europe.pdf
Multinational enterprises
These are when an organisation operates within more than one country and operates in different global
markets. A multinational enterprise is an international business which sources at least a quarter of sales
and revenue outside of its founding country. They have to be cautious to adjust to the new environments
as each country has different rules surrounding importation, tax and other additional duties. As a result
they need to adjust towards the laws and cultures which the country follows.
Nestle makes sales within 191 different countries including their own country, switzerland. Annually they
make $93.4 billion in revenue worldwide which mostly comes from external countries purchasing goods.
As a result, they are multinational with millions of sales and more than a quarter of revenue is made
outside of switzerland. Also, Nestle has 447 permanent factories in 86 countries worldwide which cut
costs down as the products are made within these countries and accommodate the target audience
without paying importation and additional duties. In addition, transport of goods are cut down as long
distance logistics are reduced as they can accommodate the domestic demand.
https://www.nestle.com/investors/annual-report
GSB freight operates out of the UK though their London and felixstowe branches. They do not have any
external hq’s however, they operate within the international market. As they are a logistics business, they
get clients from different markets quireing for their service. They operate within all continents respective
markets and import and export goods in and out of the UK. GBS freight provides services towards 56
different counties meaning they have a market share within all of them. Although they are a small
business compared to DHL, they still have a market share in these 56 countries as they make sales. In
addition, as they provide services to 56 countries, their revenue from surrounding countries would be their
main source of revenue.
https://www.gbsfreight.co.uk/regions
https://www.gbsfreight.co.uk/contact
Associated businesses
In some occurrences, businesses may offer support to other corporations regarding service or resources
or even working as a partnership. Businesses which work closely with each other may offer specialist
services relating to logistics or marketing to make international trade easier and cheaper for both
organisations as less resources will be consumed as they are shared.
Nestle are in an association with Kuehne + Nagel who are their main logistics firm who handle
warehousing, transportation and deliveries. Nestle Netherlands uses Kuehne + Nagel’s distribution centre
to distribute their goods. Using Kuehne + Nagel gives nestle access to simple trade and allows for smooth
, trade between countries. As a result, Nestle receives storage, distribution and transport of their goods by
being and associated with kuehne + nagel.
https://newsroom.kuehne-nagel.com/nestle-chooses-kuehne--nagel-netherlands-as-its-logistics-partner/
https://supplychainanalysis.igd.com/news/news-article/t/nestlé-enters-5-year-logistics-partnership-with-kuehne--
nagel/i/17266
GBS freight is an international transport company which transport goods worldwide. As international
businesses need to distribute their goods, they may become freight partners with GBS freight. As a result,
they will become an associated business as the organisation is using GBS freights resources in order to
sell goods. As they are essential to the distribution of goods they work closely with GBS freight to allocate
the resources effectively and efficiently. With a business working alongside GBS freight, this makes
international trade easier and more effective as GBS already has the infrastructure in place.
Sole trader
A sole trader is an individual who is self employed and owns/operates their own business. They are solely
responsible for the actions the business takes and the overall success of it. As they are a single owner, a
sole trader has the right to change any aspect of the business as they are the boss. As a result, decision
making is much easier as there is no conflict of interest and is a benefit for the business and the sole
trader.
Partnership
This is a form of business operation which is binded by a contract in which two or more individuals share
responsibility and profits. A partnership gives a business more resources, experience and management
capabilities which enable it to grow and expand. By having more partners in a business, the more likely a
conflict of interest will occur. As a result, when decision making, it is much harder to come to an overall
agreement which suits all partners. There are three main partnerships which are, general, limited and joint
ventures which are all commonly used within the business community.
limited company
A limited company is a business structure where the business has a separate legal identity from the
owners and shareholders. As a result, the owners are responsible for the company's debts however, only
to the extent of the total capital they invested. Only business assets and capital can be taken to pay off
debts which protects personal assets. As they cannot source capital through shares, they may take a loan
to raise capital for business ventures.
GBS freight is a limited company meaning that the owners are not liable to pay off outstanding debts
through personal assets but only through business capital and assets. This protects shareholders and
owners from losing more than their investment. As they are funded internally rather externally through
shares, they are privately funded meaning they have the capital to operate. However, as they are not a
PLC and rather a LC they may take out business loans to fund ventures which have more risk than
sourcing capital through shares.
Public limited company
A public limited company, (PLC), is a company offering shares towards traders for the opportunity to raise
capital quickly for investment into projects in order for expansion and growth. Shares are traded on the
stock exchange and can be bought and sold at any time in the working week. If they are prepared to trade
on the stock exchange, a company must be willing to publish their complete and true financial position to
investors to determine if they should sell or buy. A PLC abides by the same rules of a limited company
with only business assets that can be seized to pay off debts which protects owners and shareholders
from furter personal losses.
