Assignment 1 International Business
Why Trade Internationally?
In this assignment I have been asked to prepare a report entitled ‘why trade
internationally?’ to do this I will need to gather comprehensive research evidence into two
businesses that trades internationally. This research will include two contrasting businesses,
one that is located in one country but trade in another, as well as a business that has many
trading locations around the globe.
SECTION ONE:
P1 - Example 1 – NI/GB/IR business that trades internationally – Tesco
The business that I have chosen those trades internationally within the local area is Tesco
PLC. Tesco’s was made in September 1932 by Jack Cohen in Middlesex. Tesco is a huge
grocer within the UK that trades internationally to many countries such as Ireland,
Czechia, China, Republic of Ireland, South Korea and Turkey as well as many other
countries. Tesco has over 330,000 employees that help to manage and operate the
company on a day-to-day basis, and these employees help to manage over 600 stores in
the world owned by Tesco. Tesco’s business structure is a hierarchal structure, which
means that there are many leaders and layers of management to help manage the chain
of command. Tesco’s business activities are in the area of retailing, and retail banking as
well as insurance services. These activities have enabled Tesco to become the biggest
retailer in the UK which have earned them a total revenue of £41 Billion. Tesco’s purpose
and business values are to ‘Serving our customers, communities and planet a little better
every day.’ As well as to ‘Treat people how you want to be treated’ and their famous tag
line ‘Every little help’s’. The chosen market that Tesco have chosen to operate in is cost
conscious individuals who are interested in cheap bargains and sales.
P1 - Example 2 – Global business IKEA
The Business that I have chosen those trades globally is IKEA. IKEA is a manufacturing
retail company that began in a small Swedish town in 1943 created by Ingvar Kamprad at
the age of only 17. He began by selling pens and wallets until he began selling furniture,
which is the IKEA we all know today. IKEA is the 3rd biggest furniture retail company in the
world and is renowned for their easy to build furnishings and décor. IKEA is a massive
company and has 473 stores and operates in 63 countries some of these countries are
Germany, Japan, Sweden it’s home country, Australia, Ireland and many more. IKEA has
over 219,000 employees that help to operate the many stores within the world. IKEA’s
business structure is a hierarchal structure, which means that there are many leaders and
layers of management to help manage the chain of command. IKEA’s key business
activities are the designing, manufacturing and sale of furniture. These activities have
helped IKEA to become the 3rd biggest furniture retail company in the world which has
earned them a total revenue of £47.6 billion in 2023. IKEA’s purpose and business values
are “to offer a wide range of well-designed, functional home furnishing products at prices
so low that as many people as possible will be able to afford them.” And their vison
statement is “to create a better everyday life for many people.” IKEA’s target market is
1|Page
,“young, urban professionals aged between 20 and 34”. As well as families who are looking
for new stylish furniture, that’s affordable.
P1 - What are the reasons each conducts its business internationally.
There are a range of opportunities to be gained by conducting business internationally.
These are explained below.
Growth
Opening stores in other countries outside of the UK allows for growth and development
that may not be viable from working in only the UK. Which in the long-term will allow for
an increase in profits and reputation, as highly sold items and services that were popular
in the UK will increase your sales if they’re sold in another country. Which is why both
Tesco and Ikea have chosen to develop their companies in the international market.
Additional revenue streams
Another benefit of conducting business internationally that both Tesco and Ikeas have
capitalised on is you acquire additional revenue streams as you will be offering your highly
demanded products to another market that’s lacking them. Which helps both Tesco and
IKEA to function if one of their revenue streams aren't working from other countries.
Brand exploitation
Tesco have used brand exploitation throughout their years of business by manufacturing
many products from other countries such as Poland and Germany and selling them
throughout UK stores to gain a profit. As well as IKEA have also used brand exploitation
throughout their years of business by manufacturing goods other countries such as China,
Poland and Italy and selling them in Sweden.
Accessing new markets
Tesco and IKEA trade internationally which helps to access new markets that don't offer
the same product as them so that they have a prominent USP. Which allows for many
new opportunities within these new markets, as the new products that they are offering
have not likely been seen before.
Diversification
Both IKEA and Tesco have used diversification in their lifetime by offering new products to
a new market that they have entered so that they reduce risks, so that they are not
relying on any single product.
Increasing market share and market leadership
IKEA and Tesco both seek to operate in many big markets around the globe so that they
can increase their market share as much as possible, because having a higher market
share means to have more sales and higher capital. And by gaining a higher market share
Tesco and IKEA then became a leader of their markets as they have a higher control over
the market compared to other companies. Which allows for IKEA and Tesco to make sure
that they're the first to come up with unique products or services.
Technological dominance
By having franchises internationally throughout many big countries allows Tesco and IKEA
to become an even powerful business and increase their capital. As they became a market
leader in their sectors which means that they would also have a technological dominance
2|Page
, over competitors. Which means that Tesco and IKEA would be able to manufacture and
buy many high-quality equipment, so that they can increase their efficiency and attract a
higher amount of customers, for a higher profit and market share.
Comparative advantage
Because IKEA and Tesco have many stores and manufacturers internationally, they can
use other manufacturers and stores in other countries to cut down on costs because they
can use brand exploitation by selling their products made in one country to another.
Economies of scale
As Tesco and IKEA have become massive companies internationally, they are now able to
buy in bulk with a higher quantity which will overall cut down on their costs so that they
can then have a higher net profit.
Fiscal benefits and Preferential tax rates
Tesco and IKEA are able to get fiscal benefits from their trading activities because when
they enter a market in a new country then they probably be offered fiscal benefits,
because they are creating many jobs for the country and improves the economy. As well
as both these businesses are likely to receive preferential tax rates because the country’s
government is likely to reduce their profits that have been made in their country as they
are improving the economy and providing jobs.
P2 - What types of finance are available to international business?
3|Page
Why Trade Internationally?
In this assignment I have been asked to prepare a report entitled ‘why trade
internationally?’ to do this I will need to gather comprehensive research evidence into two
businesses that trades internationally. This research will include two contrasting businesses,
one that is located in one country but trade in another, as well as a business that has many
trading locations around the globe.
SECTION ONE:
P1 - Example 1 – NI/GB/IR business that trades internationally – Tesco
The business that I have chosen those trades internationally within the local area is Tesco
PLC. Tesco’s was made in September 1932 by Jack Cohen in Middlesex. Tesco is a huge
grocer within the UK that trades internationally to many countries such as Ireland,
Czechia, China, Republic of Ireland, South Korea and Turkey as well as many other
countries. Tesco has over 330,000 employees that help to manage and operate the
company on a day-to-day basis, and these employees help to manage over 600 stores in
the world owned by Tesco. Tesco’s business structure is a hierarchal structure, which
means that there are many leaders and layers of management to help manage the chain
of command. Tesco’s business activities are in the area of retailing, and retail banking as
well as insurance services. These activities have enabled Tesco to become the biggest
retailer in the UK which have earned them a total revenue of £41 Billion. Tesco’s purpose
and business values are to ‘Serving our customers, communities and planet a little better
every day.’ As well as to ‘Treat people how you want to be treated’ and their famous tag
line ‘Every little help’s’. The chosen market that Tesco have chosen to operate in is cost
conscious individuals who are interested in cheap bargains and sales.
P1 - Example 2 – Global business IKEA
The Business that I have chosen those trades globally is IKEA. IKEA is a manufacturing
retail company that began in a small Swedish town in 1943 created by Ingvar Kamprad at
the age of only 17. He began by selling pens and wallets until he began selling furniture,
which is the IKEA we all know today. IKEA is the 3rd biggest furniture retail company in the
world and is renowned for their easy to build furnishings and décor. IKEA is a massive
company and has 473 stores and operates in 63 countries some of these countries are
Germany, Japan, Sweden it’s home country, Australia, Ireland and many more. IKEA has
over 219,000 employees that help to operate the many stores within the world. IKEA’s
business structure is a hierarchal structure, which means that there are many leaders and
layers of management to help manage the chain of command. IKEA’s key business
activities are the designing, manufacturing and sale of furniture. These activities have
helped IKEA to become the 3rd biggest furniture retail company in the world which has
earned them a total revenue of £47.6 billion in 2023. IKEA’s purpose and business values
are “to offer a wide range of well-designed, functional home furnishing products at prices
so low that as many people as possible will be able to afford them.” And their vison
statement is “to create a better everyday life for many people.” IKEA’s target market is
1|Page
,“young, urban professionals aged between 20 and 34”. As well as families who are looking
for new stylish furniture, that’s affordable.
P1 - What are the reasons each conducts its business internationally.
There are a range of opportunities to be gained by conducting business internationally.
These are explained below.
Growth
Opening stores in other countries outside of the UK allows for growth and development
that may not be viable from working in only the UK. Which in the long-term will allow for
an increase in profits and reputation, as highly sold items and services that were popular
in the UK will increase your sales if they’re sold in another country. Which is why both
Tesco and Ikea have chosen to develop their companies in the international market.
Additional revenue streams
Another benefit of conducting business internationally that both Tesco and Ikeas have
capitalised on is you acquire additional revenue streams as you will be offering your highly
demanded products to another market that’s lacking them. Which helps both Tesco and
IKEA to function if one of their revenue streams aren't working from other countries.
Brand exploitation
Tesco have used brand exploitation throughout their years of business by manufacturing
many products from other countries such as Poland and Germany and selling them
throughout UK stores to gain a profit. As well as IKEA have also used brand exploitation
throughout their years of business by manufacturing goods other countries such as China,
Poland and Italy and selling them in Sweden.
Accessing new markets
Tesco and IKEA trade internationally which helps to access new markets that don't offer
the same product as them so that they have a prominent USP. Which allows for many
new opportunities within these new markets, as the new products that they are offering
have not likely been seen before.
Diversification
Both IKEA and Tesco have used diversification in their lifetime by offering new products to
a new market that they have entered so that they reduce risks, so that they are not
relying on any single product.
Increasing market share and market leadership
IKEA and Tesco both seek to operate in many big markets around the globe so that they
can increase their market share as much as possible, because having a higher market
share means to have more sales and higher capital. And by gaining a higher market share
Tesco and IKEA then became a leader of their markets as they have a higher control over
the market compared to other companies. Which allows for IKEA and Tesco to make sure
that they're the first to come up with unique products or services.
Technological dominance
By having franchises internationally throughout many big countries allows Tesco and IKEA
to become an even powerful business and increase their capital. As they became a market
leader in their sectors which means that they would also have a technological dominance
2|Page
, over competitors. Which means that Tesco and IKEA would be able to manufacture and
buy many high-quality equipment, so that they can increase their efficiency and attract a
higher amount of customers, for a higher profit and market share.
Comparative advantage
Because IKEA and Tesco have many stores and manufacturers internationally, they can
use other manufacturers and stores in other countries to cut down on costs because they
can use brand exploitation by selling their products made in one country to another.
Economies of scale
As Tesco and IKEA have become massive companies internationally, they are now able to
buy in bulk with a higher quantity which will overall cut down on their costs so that they
can then have a higher net profit.
Fiscal benefits and Preferential tax rates
Tesco and IKEA are able to get fiscal benefits from their trading activities because when
they enter a market in a new country then they probably be offered fiscal benefits,
because they are creating many jobs for the country and improves the economy. As well
as both these businesses are likely to receive preferential tax rates because the country’s
government is likely to reduce their profits that have been made in their country as they
are improving the economy and providing jobs.
P2 - What types of finance are available to international business?
3|Page
