BTEC Business Studies

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Unit 5 Task 1

International Business

Adidas
Apple

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Research

Apple Inc Apple is an American multinational technology that designs and sells
electronics and software. Products include Iphone, Ipad, Imac, Ipods,
Iwatches and other electrical goods. Their software includes the macOS
and iOS. The media players they supply are iTunes and Safari, the web
browser. Apple located in Cupertino, California operates all across the
world and has 478 retail stores in seven countries and online stores
available in 39 countries. Apple's main challenges that they face is
competition, Apple have to worry about the rise of other technology
businesses such as Samsung and Microsoft. These businesses are a threat
to Apple as Microsoft are the main computer software supplies therefore
Apple need to make sure they when they update or bring out new software
that it is the favoured software over microsoft. Samsung is also a threat to
Apple as they are one of the best phone retailers in the world. Another
challenge that Apple faces is their security issues, Apple is facing
problems with security as many people have been hacked and had their
accounts breached.

Adidas Adidas is a German multinational business that designs and manufactures

sporting goods such as clothing and shoes. The business is headquartered
in ​Herzogenaurach, Germany. Adidas is the world's largest sport
manufacturer in the whole of Europe and is second in the world. Adidas
operates all over the world in over 60 countries such as the U.S, Brazil,
Canada, Mexico, China, Japan, U.K, Germany, Italy and many more.
The first Adidas apparel was the Franz Beckenbauer tracksuit in 1967.
Adidas now sells a range of clothing varying from jackets, tracksuits,
leggings and T-shirts. Adidas have many collaborations with famous
people for them to design their own products and an example of this
would be Kanye West or Pharrell Williams, by doing this Adidas gain a
bigger following as fans of these famous people gain interest in the brand.
Adidas main challenges that they face is against other sportswear brands
such as Nike, Adidas rivalry with Nike is a big thing as each year they try
to be the leading sportswear brand. The challenges they face all over the
world is that they are trying to be the best sports brand but Nike is beating
them towards endorsements and brand deals that promote their brand
better. Another challenge they face is trying to juggle their brand as well
as Reebok, In 2004 Adidas bought Reebok for 3.8 billion dollars.

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Coca-Cola Coca-Cola is an American carbonated soft drinks company, headquartered

in Atlanta, Georgia, United States. Coca-Cola more commonly known as
Coke sells a variety of flavours of Coke for example they have Diet,
Caffeine free, Life, Cherry, vanilla and lemon and lime. The business
itself also sells other types of soft drinks like Fanta and Sprite. Coca-Cola
is the world's largest beverage company, they operate over 200 countries
and 94% of the world recognizes their famous red and white logo. Some
examples in which they operate are the United States, U.K, Canada, Italy,
Spain and many more worldwide countries. Challenges that Coca- Cola
face is competition against Pepsi and other soft drink companies. Another
challenge Coca-Cola faces is the amount of sugar in their products, this
affects the company as people drink their products and end up with health
issues such as diabetes or obesity.

Nike Nike inc is an american sports brand that designs, manufactures and
develops sporting goods. Nike sells sporting goods such as footwear,
apparel and equipment. The company headquartered in Beaverton,
Oregon US. It is the world's largest sports supplier of shoes and apparel.
Nike has loads of collaborations with other brands that make it successful
an example of this would be Jordan Air or Nike golf. Nike owns other
apparel companies such as Converse and Hurley. Nike is known for their
slogan ‘Just do it’ and also known for Nike swoosh logo. The countries
that Nike operates in are in over 120 countries such as the U.S, U.K,
France, China, India, Spain and many more. Nike’s challenges are their
labour laws in factories and the conditions of the factories. Nike has been
accused of sweat factories in the past which is a big problem for the
company's reputation.

Red Bull Red Bull is an Austrian energy drinks company headquartered in Fuschl
am See, Austria. Red Bull is one of the best energy drinks companies with
5.3 billion cans sold in 2013. Red Bull’s famous slogan ‘Red Bull gives
you wings’ makes them stand out from the other energy companies as
their products are advertised frequently on T.V. The product also markets
through other advertising, Red Bull are proud sponsors of many sporting
events and teams. Red Bull sponsors T.V events like the Red Bull
soapbox racing and Red Bull cliff diving. Red Bull are also sponsors of
the racing team that compete in Formula One. Red Bull operates in over
165 countries some of these include Spain, Italy, France, United
Kingdom, U.S and China. The Global challenges that Red Bull face are
health issues, drinking too much can lead to ​cardiac and psychiatric
conditions. The other challenge that Red Bull faces is competition against
other energy drink companies such as Monster energy owned by the
Coca-Cola company.

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Why Trade Internationally?

Trading internationally will benefit the company/brand's client base, Trading internationally
will increase the amount of clients the business will receive as you will be able to reach out to
other countries selling your product/service abroad. An increase in gross profit to the business
is another benefit to trading internationally. Less competition is a benefit to trading
internationally as in your country there might be a lot of competition whereas in other
countries your business product/service could be very unique and be a success overseas, This
will result in an increase to your profits as others countries will be willing to buy your
services/products.
In this assignment I will investigate two different businesses that trade internationally. These
businesses are Adidas and Apple. I will be investigating why they trade internationally and
the impacts of globalisation and the challenges they face.
The two businesses that I have chosen are Apple inc and Adidas. Apple inc is a American
technology company that designs and manufactures software and electronics. Adidas is
German sportswear brand that designs and manufactures sporting goods and apparel. Both
businesses are tertiary sector businesses that trade in different markets. Apple is Ltd this
means they are a limited company and Adidas are a Plc this means they are a public limited
company therefore anyone can invest and buy stocks.

The international market that Apple operates in is the electronic and software markets. Apple
is a technology brand therefore they operate in the technology market selling their products.
Adidas operates in the sporting market selling their apparel and their sporting equipment. In
recent years Adidas has started to operate in the clothing and fashion markets as the brand is
becoming more popular and are keeping up with the trends. The technology market that
Apple trade is very popular and they face a lot of competition with other technology
businesses. The sporting market where Adidas trade is also very popular but there is far less
competition.

The two businesses operate in contrasting markets as Apple operates in the electronic goods
and software market and Adidas operates in the sporting market selling sporting goods and
sporting apparel. Apple sells electronic goods such as Ipads and Iphones as well as
developing software. Adidas sell sporting goods such as trainers and sporting clothes as well
sponsorship to sporting teams. The organisation structure of both businesses are
geographically, this means they open stores anywhere in the world and sell their products.
Both businesses trade internationally as there is more resources and more money when
trading internationally. When trading internationally the business can improve the living
difficulties in less developed countries as they can offer new jobs.  

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The scope and scale of international business

The scope of international business is the range of products or services that the business
produces. An example of this for Adidas is Adidas selling a range of products like sport
clothing and sport shoes as well as equipment. Adidas also provide their service as they do
training sessions and sponsorship deals with professional teams. Apple also has a wide range
of products and services that they provide for example they manufacture Ipads, phones,
laptops and other electronic goods as well as their software for example safari, Itunes and the
app store.

The scale of international business is how much a business produces and sells. Adidas net
sales within 9 months in 2016 was £14,604 million in the U.K. Apple’s net sales over the
whole year worldwide was $215,639 million. Both of these figures showed how much money
they made from their sales therefore they must have to produce a lot of products in order to
get this net profit.

An export is when goods or services are sent to another country for sale. An example of this
is when you sell a product such as a car to another country.
An import is when goods or services are received from other countries. An example of an
import is when you car dealers buy cars from other countries.
The U.K’s main exports are machinery, metals, electronic equipment, medical equipment,
plastics and organic chemicals.The U.K main imports are machinery, vehicles, oil, clothing,
plastics, medical equipment and suppliers and metals/gems.
The local economy is the economy within your local county.
International business helps shape the local economy because it provides more jobs available
for the local people. Local businesses will also be able to sell worldwide not just locally.
International business helps local economies as they are able to source lower cost materials
for their businesses. International business also provides local opportunities in less developed
countries such as certain African countries.

The national economy is the country's economy e.g England. International business helps
national economy as their more jobs available for example an international business opening
in another country like Mcdonald's provides more jobs in that country and the business would
want to branch out further in that country. More recruitment from other countries helps the
national economy as people are willing to work abroad. Advancing technology and
production is also a benefit from businesses trading internationally.

The international economy is a worldwide economy.International business helps the national

economies as it opens up more opportunities to collaborate with other businesses. It also
gives a shared knowledge and expertise when trading internationally. International business
also helps source lower materials costs and labour costs.

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There are many forms of payment methods for international businesses. Credit
cards, paypal, bank transfers and union pay. Credit card payment method is
paying with a card that grants a line of credit each month. Paypal is another payment method
that is a payment option available online. Bank transfers are an electronic payment direct to
or from your bank account to the person you are dealing with. Union pay is another payment
method associated with bank cards.

There are many different forms of finance within a business internally and externally.
Internal finance are loans, crowdfunding, mortgages, venture capital and owner's capital.
Loans are payments taken from a bank which is paid back with interest, crowdfunding is
when people donate money to a starting up business the outcomes of crowdfunding is either
getting interest back from the business or having a stake within the business. Mortgages are a
legal agreement with a bank where you borrow money to buy properties or just expensive
equipment mortgages are usually paid back in small payments over 25 years. Owner’s
capital is money owned by the owner of the business who would invest it straight into the
business. These finances are associated with P.L.C’s public limited companies, this means
you sell your shares on the stock market for anyone to buy.

External finance are grants, hire purchase, debt factoring, trade credit and donations. Grants
are payments or gifts from governments or other organisations. Hire purchase is a system
when one person pays a regular instalment. Debt factoring is when a business sells their debt
to a money collecting company and they go and get the money. Donations are a sum of
money gifted to a business. These types of payments are associated with private limited
companies. The different sources of financing are retained profit which is all of the money
earnt by the business after all of their expenses. Net current access is another source of
financing; this is all of the money the business has to spend, usually invested into the
business. Sales assets are another source of finance where businesses rent out their stuff for
example a car company renting out their cars for money.

The support that Adidas and Apple receive are support from local areas as they let them open
stores within their area as they provide local jobs and increase the local economy. Adidas
receives support from the European Union as they allow the German brand to trade freely
within Europe. Adidas also receive support from international businesses due to their
collaborations and example of this would Adidas receiving support from Bape a Japanese
streetwear brand that they collaborated with. Another example would be Reebok is Adidas
and Reebok are all one big company.
Apple receives support from the government as they use the government for their privacy
features. Apple also receives support through the chamber of commerce as they try to keep
their brand environmentally friendly and try to improve the wildlife near their warehouses
and factories.
Both business are supported by the British chamber of commerce which is when they support
businesses that trade internationally and they also help promote partnerships between
organisations in other countries

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SECTION 2

The international economic environment in which business operates

The international economic environment is when a business must manage to deal with a large
variety of cultural and environmental differences.
Exchange rates are the price of countries' currency exchanged into another country's
currency, an example would be exchanging the British pound into Euros. The exchange rate
of the Pound to Euros is 1.18.
Inflation is the rate at which the general level of goods and services is rising. Inflation means
there is an increase in living costs. An example of inflation is the cost of products rising like
the prices of bread is now greater.
Unemployment rates is the measurement of unemployed people within a certain area or
country. A falling rate of unemployment means the economy is rising which therefore means
inflation.
Global trade is the imports and exports of goods and services across the international scale.
Goods and services that enter the country are called imports and goods and services that leave
are exports.
Labour costs are the sum of wages given to people who work for a business/company either
everyday, weekly, monthly or yearly. The costs of labour are broken into direct or indirect
costs.

Trading blocs is a regional trading group of countries within a geographical location or region
that protects themselves from imports from members that aren't in the group. Trading blocs
are a form of economic integration and are increasingly shaping the pattern of world trade.
An example of a trading bloc is the European Union (EU) or the North American free trade
agreement (NAFTA) these trading blocs allow free trade within the geographical location and
protect themselves from foreign traders. The main role of trading blocs is for members of a
certain block to trade their services and products freely.

The role of a trading bloc on international trade is free trade and to stop countries not in the
bloc from trading with them. Trading blocs affect international businesses and their trade
because trade blocs allow free trade within certain blocs. A company such as Apple benefits
from trade blocs as they are a part of the (NAFTA) as they are a American technology
company therefore they can trade with Canada and Mexico freely. Adidas benefits from trade
blocs as they are a German sportswear brand and Germany are members of (EU) as a result
of this they can trade freely with other members within the (EU). International trade can be
affected by trading blocs as they can prevent countries that are not a part of there bloc from
being able to trade with other countries. An example could be a U.K business unable to trade
with another European country as they aren't in the same trading bloc.

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There are many types of trading blocs that businesses trade within. Common market is one of
the many types of trading blocs, Common market is a trade bloc that requires each member
country to remove any trade barriers so that there is free movement of goods and services. An
example of a common market is the European Union. Another type of trade bloc is a free
trade area, this is a trade bloc where the member countries have signed a free trade agreement
which removes trade barriers. But each member country will have their own independent
trade policies from outside the bloc. An example of this is the (NAFTA). A custom union is
another trade bloc where two or more countries decide not to impose common external tariffs
on goods from countries outside their custom union. Preferential trade area is the final trade
bloc, this trading bloc that gives access to certain products from participating countries. This
is done by reducing tariffs but not abolishing them completely.

The benefits of trading blocs are free trade within the bloc, this means every member in the
trading bloc can trade freely and an example of this is the North American free trade
agreement where the U.S, Canada and Mexico can trade freely. Another benefit of trading
blocs is an increase in jobs as the economy opens up new jobs for people. Protection is
another benefit as firms inside the bloc are protected from cheaper imports from outside their
bloc. Market access is a benefit from trading blocs, this is easier access to other’s markets as
other countries are more willing to trade with other countries. An example of this would be
the U.S trading with the U.K they are in different bloc’s but still trade with each other. Trade
creation is when free trade enables high cost domestic producers to be replaced by lower
costs and more efficient imports. Economies of scale is the last benefit for trade blocs as
producers can benefit from applications of scale economies this therefore leads to lower costs
and lower prices.

A disadvantage of trading blocs is a loss of benefit, this is when countries in other bloc’s
trade are lost. An example of this would be a country such as the U.S that have lost their
benefits of trading with European countries such as the U.K therefore the bond would have
been broken and there are no benefits from them to trade with each other. Distortion of trade
is another disadvantage from trade blocs, distortion of trade is trading blocs are likely to
distort world trade and therefore it will reduce the beneficial effects of trade. Trade diversion
is a disadvantage from trade blocs, trade diversion is when trade is diverted away from
efficient producers who are based outside the trading area. The final disadvantage from trade
blocs is inefficiencies, inefficient producers within a block can be protected from more
efficient ones outside the bloc.

Globalisation is the process by which the international exchange of goods, service,

technology and capital becomes increasingly interconnected. Globalisation has increased the
production of goods and services. The biggest businesses are no longer firms, they are now
multinational corporations. Globalisation has resulted in increased international trade,
company's operation in other countries, greater dependence on the global economy and

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recognition of companies to LEDCs.

The positives of globalisation is that it increases the amount of new jobs and skills for the
local people. Large businesses bring wealth and foreign currency to local economies when
they buy local resources or service. The sharing of ideas and lifestyles of people and cultures
is a positive from globalisation. Globalisation also helps people more aware of global issues
such as global warming and deforestation.
The negatives of globalisation is that big businesses only trade in the richest countries, there
is no guarantee that wealth from investors will benefit the local communities and
globalisation is viewed by many as a threat to the world's cultural diversity.

Globalisation affects Adidas because it allows them to open up stores in different countries
and allows them to expand their business by opening new factories and shops. By opening the
new stores and factories they provide jobs for the local people and increase the local
economy. Globalisation also affects Adidas as it allows them to advertise their brand in other
countries that aren't familiar with the brand.
Globalisation affects Apple as it also allows them to open up new stores and factories in other
countries. The positives of opening a new store in another country allows new jobs for the
local people and it also helps the national and local economies. The positives of opening up
new factories is that Apple can get cheaper labour within that country for example opening a
new factory in China allows them to pay less wages for them to manufacture their products.
The negative from this would be legal laws that Apple would face backlash from the public
from exploiting cheap labour. An implication that Apple and Adidas face is their products
being faked

International communication and technology is the features that a business has and what the
business has to improve. Adidas technology is constantly improving in their products and
example is their shoes where they have now added and improved their boost technology.
Apple technology is always improving as they are always improving their software and their
phones and ipads. The communications is how as business communicates with each other,
Apple communicates with others through business meetings, telephone meetings and emails.
Adidas communicate through the same forms of communication as Apple as well as
communicating through their online website where they post upcoming events.

There are many international currencies that businesses have and what they use. International
businesses such as Apple have stores in several countries therefore they accept different
international currencies. An example would be Apple accepting ​Renminbi the Chinese
currency as Apple has stores in China. Adidas also has to accept different international
currencies as they also have international stores across the world therefore they accept
currencies such the U.S dollar. Both businesses have priced their products differently in other
countries as the exchange rates are different in other countries. Apple would have to adjust
their prices in countries such as China due to exchange rates as the rates as their exchange

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rates to the British pound is 0.12 to 1 Yuan.

Trading blocs will have effects on international business such as Apple and Adidas as it
allows them to trade internationally with other businesses associated with the trade bloc. An
international business such as Apple which is an American business allows them to trade
freely with other countries in America’s trade bloc. America’s trade bloc is the (NAFTA)
therefore they can trade freely with Mexico and Canada. Adidas get affected by trade blocs as
they are a German sportswear business and therefore are a part of the (EU) this trading bloc
allows Adidas to trade freely with other countries that are members of the EU.

International mobility of labour is the ability to move labour and workers to other countries
where either the conditions are better or the wages are higher. As international trade creates
job growth there is more potential for labour mobility of the workers. This affects Apple and
Adidas as they are able to import labour when needed, By doing this they can have workers
come over and work for them in factories or stores if needed. The mobility of capital is the
ability of individual and business investors to invest their capital where the returns are at its
highest. If an investment opportunity is in great demand it will cost more to invest in. This
affects Apple and Adidas as if they are in need of an investment they would have an investor
invest the capital that they need.

There are many barriers that affect international operations and trade. Foreign governments
are an example of a barrier that affects international trade and operations as they can change
the way business works and influence the economy either by passing laws or changing its
own taxes. This affects Adidas and Apple as foreign governments can stop them from trading
in countries or make them pay more when trading internationally by adding more tax on their
trade. Governments can also add taxes such as VAT on products to make the mobility of
labour and capital more expensive. Tariff taxes affect international trade and operations
because in most countries imports need to be declared for example what it is and how much
is getting imported. Tariffs are used to restrict trade as they increase the price of imports of
goods and services and therefore making them more expensive for customers. This can affect
Apple and Adidas as they as Tariff taxes can make their trade harder to complete as they
would have to declare what is coming into the country and the quantity of the product getting
imported.
Legal barriers are sometimes put in place to stop international trade between countries
breaking the legislations of that particular country. Social and cultural issues can also affect
international operations as businesses need to adapt their products to that country's culture
and example of this would McDonalds making products in other countries to suit their culture
like an Indian burger in India. This affects Apple as they need to make their products suit
certain countries' culture . An example of how Apple can adapt and change their product to
suit a culture is in China they might make a different Iphone for that country by making the
screen smaller or making the phone bigger.

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SECTION 3

Apple Inc
The impact of globalisation of Apple is massive as it allows the business to open stores and
factories worldwide and expand the brand. When expanding the businesses worldwide it
gives the business more recognition as more people take interest and learn about the business.
When opening new stores in foreign countries it allows the business to earn more profit and
open new factories with cheaper labour laws. An example of Apple doing this is in China
where most of their factories are and where they have cheaper labour laws. By doing this they
can mass produce their products cheaply and sell them for a large profit.
An impact that also affects Apple is competition. This is an important factor for Apple as
they have many competitors such as Samsung and Microsoft. These businesses affect Apple
as they have all sold in the same market. If Apple wants to be the leaders in this market they
must constantly keep releasing new products. Technology impacts globalisation for Apple as
in certain countries where Apple don't have stores there might be a Samsung store and
therefore that country isn't familiar with Apple and their products. In countries where there
are Apple's competitors stores such as Samsung they are leaders in that country, this impacts
Apple as they would have lost out on a lot of profit. The exchange of technology affects
Apple as they need to keep up with the latest technology and they also need to keep up with
its competitors technology. An example of how Apple needs to keep up with the latest
technology is in certain countries such as China, Apple needs to make sure their products
have the latest technology and software in that country as customers might not want to buy
the products if there is no improvement. The exchange of information can affect Apple’s
globalisation as they can bring expertise over to help with the business and help with
designing and developing their latest products. Globalisation has impacted Apple in the last
5-10 years because they had to change where they manufacture their products as in China
they were accused of using cheap labour in the factories. Another thing that has impacted
Apple’s globalisation in the last 5-10 years is competition, Apple now have more competition
than they ever had with businesses like Microsoft, Google, Samsung. Now Apple has
introduced new products like the Apple Watch that impacts their globalisation as they now
have to compete with other smart watches. Taxes from other countries when exporting their
goods is another impact of globalisation on Apple as they now have to pay taxes and VAT
when exporting their products to other countries.

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Conclusion
In conclusion this assignment has helped with a clear understanding of why to trade
international and the impacts and effects of trading internationally.
Trading internationally is a positive and a negative for business. The positives of trading
internationally is expanding the business worldwide and the increase in profits. Trading
internationally also has impacts on a business as there could be an increase in competition
which therefore can result in less profits and harder sales. Another negative impact of trading
internationally is the boundaries that the businesses face, for example dealing with the trade
blocs and foreign governments. In conclusion businesses should trade internationally because
of the increase in profits and increase in market share the business will have. By trading
internationally it allows the business to open stores and factories in countries that are
unfamiliar with the brand. Another reason why businesses should trade internationally is
because they are more places for the business to open up new stores and be successful and
expand their profits.
This assignment has shown that businesses trade internationally because it's better for the
businesses as they can expand worldwide in different countries. By expanding to other
countries allows people around the world to get to know and understand your business, it also
brings in more profits from trading internationally as you can sell your products/services for
more money as well as importing goods cheaply. Apple and Adidas trade internationally as it
is better for them as a business as they increase their profits. An example of Apple trading
internationally is Apple opening factories in other countries as it's cheaper to manufacture
their products in countries such as China because of labour laws. An example of Adidas
trading internationally is them opening new stores in other countries such as the U.S as there
is more money and profits in other countries.
In conclusion businesses should trade internationally as they bring more profits and money
when trading internationally and it can increase your brand awareness when trading
internationally. Businesses may find that when trading internationally there might be less
competition as some countries don't have a business that provides their products and services
already in that country.

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Appendix

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