Jake Watkins
Unit 5 Assignment 1
Mr Atkins
Why Trade Internationally?
Learning aim A (P1, P2, M1): Explore the international context for business operations
P1: Explain why two businesses operate in contrasting international markets
The two businesses I am using to discuss why they operate in contrasting international markets is
McArthur Glen and Unilever.
Unilever is a British multinational consumer goods manufacturing company that specialises in selling
food, condiments, ice cream, minerals, and supplements and many more. These are all goods that
can be bought at supermarkets. They own a variety of different brands, some of the most well-
known ones they own is Bovril and Ben and Jerry’s. Because Unilever are such a large business, they
are an exporting business, this is for many reasons. It allows Unilever to invest more so productive
capacity increases which allows for greater sales of a product which results in increased revenue for
the enterprise. Real GDP of other countries increase as well which results in increased demand for
Unilevers products, so more income is generated.
McArthur Glen are a shopping centre complex that hold numerous stores that contain outlet items
such as clothing. They currently have 26 designer outlets in 10 countries ranging from Canada and
France to the UK and Greece, they are dedicated to enhancing the performance of the brands in
each of their centres as they are currently Europe’s leading designer outlet group. McArthur Glen is
argued to be an import business as they depend on stocks from foreign businesses, they import for a
variety of reasons, one of them being that raw materials bought from abroad are usually cheaper, so
costs are reduced for them. Meaning that McArthur Glen can remain cost effective and spend a
larger proportion of their money elsewhere in the business as well such as marketing and HR. The
range of goods sold overseas is much broader as well so businesses can supply more if demand
allows.
Furthermore, there are key differences between Unilever and McArthur Glen to why they operate in
different places/markets. For instance, McArthur Glen aim at markets in developed countries such as
places in the UK because they sell high quality, reasonably expensive clothing/outlet items. Although
they sell them for cheaper, they are still reasonably expensive. They appeal to developed markets
because these countries have the most developed economy so people can afford premium priced
items such as outlet clothing that McArthur Glen sell, individuals simply have the purchasing power
to buy high quality products. Although there is already established competition in developed
countries, if McArthur Glen operated in less developed countries (LDC’s) for instance, the citizens of
those countries do not have the purchasing power and disposable income to pay for premium
products that McArthur Glen sell so they would not generate the revenue that they generate from
developed countries such as the UK.
However, when it comes to Unilever who operate in over 100 countries, they are obviously going to
operate in all types of countries ranging from LDC’s to developed countries. According to
Euromonitor, in 2015 40% of their sales were from developed markets but their sales increasingly
stem from emerging markets in developing countries with Brazil, Indonesia and India accounting for
most of that. Emerging markets have characteristics of a developed market but do not meet the
standards of a developed market. This is different to McArthur Glen as they predominantly operate
in developed countries however Unilever do not sell mostly premium priced items so it would not be
1
, Jake Watkins
Unit 5 Assignment 1
Mr Atkins
suitable to purely operate in these types of markets, some of the items they sell such as food is
reasonably cheap which is why operating in emerging markets and some LDC’s as well is effective
because they can afford the items. LDC’s have less purchasing power so there will be a greater
demand for some of Unilevers lower priced items which is another reason why they do target the
odd few countries that are less developed as well. Overall, McArthur Glen operate differently to
Unilever in terms of the markets they target although they do share their similarities as well
discussed.
Unilever and McArthur Glen compete in the international market mainly for gaining access to
customers. By operating in more than one country it allows them to increase their exposure and
different types of customers being interested in their products such as food and clothing. Increased
exposure leads to greater brand awareness and recognition so more customers will be purchasing
their goods and services, resulting in increased sales revenue generated and higher profit margins
being met. Meaning that profit can be reinvested for expansion or to aid them in meeting their aims
and objectives. For example, in McArthur Glens environmental report in 2018 they stated they
wanted to reach their objective of zero landfill by reusing and recycling more. With the increased
profit and revenue generated this is easier to achieve as they can resort to recycling more despite
the cost of it. A business that does not operate internationally would not resort to this straight away
as they would not have the profits to do so.
Another reason to why these two enterprises compete in the international market is so that they
can increase their market share. Unilever for example is more of an established brand overseas as
they operate in over 190 countries compared to McArthur Glen who operate in only 10 countries so
they have the opportunity to gain more market share as they have a greater influence in taking
customers away from foreign competition using their established brand, meaning that due to the
multiple streams of revenue from multiple countries overseas they can increase their market share
more easier, contributing to them potentially becoming market leader someday.
P2: Explain the types of finance available for international business
There are numerous types of finance businesses use when trading internationally, one of them being
prepayment by the importer who is normally used by manufacturing businesses such as Unilever.
This is when the buyer of the products sends their payment to the exporter before it is delivered,
this allows for definite payment to occur towards the exporter so that the products are fully paid for.
Exporters use this method so that there are no worries about credit control and that they have
better liquidity, exporters will have greater liquidity due to cash flows flowing into the business
before the product has actually been sold.
Letters of credit is another form of finance available for sellers of products and is normally used by
multinational businesses as they trade internationally. It provides security for both parties involved
because the seller of the product is guaranteed an agreed payment from the buyer. Fortunately for
the seller there is reduced risk as the risk is transferred to the bank instead. For example, if someone
is using letters of credit from HSBC the seller can ask HSBC to add confirmation to their document if
the risk is removed of non-payment by the buyer’s bank and associated country risks. HSBC also
allows the seller to have full control over the payment process.
Furthermore, export credits are where foreign businesses is given financial support to help buy
goods and services from exporters in the UK, typically used by general companies. This type of
finance is normally provided by financial institutions, export credit agencies or even the exporter
2
Unit 5 Assignment 1
Mr Atkins
Why Trade Internationally?
Learning aim A (P1, P2, M1): Explore the international context for business operations
P1: Explain why two businesses operate in contrasting international markets
The two businesses I am using to discuss why they operate in contrasting international markets is
McArthur Glen and Unilever.
Unilever is a British multinational consumer goods manufacturing company that specialises in selling
food, condiments, ice cream, minerals, and supplements and many more. These are all goods that
can be bought at supermarkets. They own a variety of different brands, some of the most well-
known ones they own is Bovril and Ben and Jerry’s. Because Unilever are such a large business, they
are an exporting business, this is for many reasons. It allows Unilever to invest more so productive
capacity increases which allows for greater sales of a product which results in increased revenue for
the enterprise. Real GDP of other countries increase as well which results in increased demand for
Unilevers products, so more income is generated.
McArthur Glen are a shopping centre complex that hold numerous stores that contain outlet items
such as clothing. They currently have 26 designer outlets in 10 countries ranging from Canada and
France to the UK and Greece, they are dedicated to enhancing the performance of the brands in
each of their centres as they are currently Europe’s leading designer outlet group. McArthur Glen is
argued to be an import business as they depend on stocks from foreign businesses, they import for a
variety of reasons, one of them being that raw materials bought from abroad are usually cheaper, so
costs are reduced for them. Meaning that McArthur Glen can remain cost effective and spend a
larger proportion of their money elsewhere in the business as well such as marketing and HR. The
range of goods sold overseas is much broader as well so businesses can supply more if demand
allows.
Furthermore, there are key differences between Unilever and McArthur Glen to why they operate in
different places/markets. For instance, McArthur Glen aim at markets in developed countries such as
places in the UK because they sell high quality, reasonably expensive clothing/outlet items. Although
they sell them for cheaper, they are still reasonably expensive. They appeal to developed markets
because these countries have the most developed economy so people can afford premium priced
items such as outlet clothing that McArthur Glen sell, individuals simply have the purchasing power
to buy high quality products. Although there is already established competition in developed
countries, if McArthur Glen operated in less developed countries (LDC’s) for instance, the citizens of
those countries do not have the purchasing power and disposable income to pay for premium
products that McArthur Glen sell so they would not generate the revenue that they generate from
developed countries such as the UK.
However, when it comes to Unilever who operate in over 100 countries, they are obviously going to
operate in all types of countries ranging from LDC’s to developed countries. According to
Euromonitor, in 2015 40% of their sales were from developed markets but their sales increasingly
stem from emerging markets in developing countries with Brazil, Indonesia and India accounting for
most of that. Emerging markets have characteristics of a developed market but do not meet the
standards of a developed market. This is different to McArthur Glen as they predominantly operate
in developed countries however Unilever do not sell mostly premium priced items so it would not be
1
, Jake Watkins
Unit 5 Assignment 1
Mr Atkins
suitable to purely operate in these types of markets, some of the items they sell such as food is
reasonably cheap which is why operating in emerging markets and some LDC’s as well is effective
because they can afford the items. LDC’s have less purchasing power so there will be a greater
demand for some of Unilevers lower priced items which is another reason why they do target the
odd few countries that are less developed as well. Overall, McArthur Glen operate differently to
Unilever in terms of the markets they target although they do share their similarities as well
discussed.
Unilever and McArthur Glen compete in the international market mainly for gaining access to
customers. By operating in more than one country it allows them to increase their exposure and
different types of customers being interested in their products such as food and clothing. Increased
exposure leads to greater brand awareness and recognition so more customers will be purchasing
their goods and services, resulting in increased sales revenue generated and higher profit margins
being met. Meaning that profit can be reinvested for expansion or to aid them in meeting their aims
and objectives. For example, in McArthur Glens environmental report in 2018 they stated they
wanted to reach their objective of zero landfill by reusing and recycling more. With the increased
profit and revenue generated this is easier to achieve as they can resort to recycling more despite
the cost of it. A business that does not operate internationally would not resort to this straight away
as they would not have the profits to do so.
Another reason to why these two enterprises compete in the international market is so that they
can increase their market share. Unilever for example is more of an established brand overseas as
they operate in over 190 countries compared to McArthur Glen who operate in only 10 countries so
they have the opportunity to gain more market share as they have a greater influence in taking
customers away from foreign competition using their established brand, meaning that due to the
multiple streams of revenue from multiple countries overseas they can increase their market share
more easier, contributing to them potentially becoming market leader someday.
P2: Explain the types of finance available for international business
There are numerous types of finance businesses use when trading internationally, one of them being
prepayment by the importer who is normally used by manufacturing businesses such as Unilever.
This is when the buyer of the products sends their payment to the exporter before it is delivered,
this allows for definite payment to occur towards the exporter so that the products are fully paid for.
Exporters use this method so that there are no worries about credit control and that they have
better liquidity, exporters will have greater liquidity due to cash flows flowing into the business
before the product has actually been sold.
Letters of credit is another form of finance available for sellers of products and is normally used by
multinational businesses as they trade internationally. It provides security for both parties involved
because the seller of the product is guaranteed an agreed payment from the buyer. Fortunately for
the seller there is reduced risk as the risk is transferred to the bank instead. For example, if someone
is using letters of credit from HSBC the seller can ask HSBC to add confirmation to their document if
the risk is removed of non-payment by the buyer’s bank and associated country risks. HSBC also
allows the seller to have full control over the payment process.
Furthermore, export credits are where foreign businesses is given financial support to help buy
goods and services from exporters in the UK, typically used by general companies. This type of
finance is normally provided by financial institutions, export credit agencies or even the exporter
2
