BTEC Business Level 3 - Unit 5 - Task 3 - International Business
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Course
Unit 5 - International Business
Institution
PEARSON (PEARSON)
Btec business level 3 national diploma - unit 5, task 3 - International Business... this is from a distinction* distinction* student in 2023
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Examine the Strategic and Operational Approaches to Developing
International Business
In this piece, I will identify different strategies and operational approaches to formulating and
developing a business internationally. Deciding this will require hard decisions to be made and these
should suit the needs and wants of the company. Additional adaptions will be made to ensure local
demands are met and necessary costs are put in place to support the business to operate in this way.
Explain How Products and Processes have to be Adapted for International
Markets by a Selected Business
There are eight main ways that businesses use
to ensure success when operating
internationally. As shown in the photo to the
right but also listed below:
- Subsidiary Business
- Joint Ventures
- Partnerships
- Licensing to Business
- Franchising
- Subcontracting
- Outsourcing
Subsidiary Business
A subsidiary is a business that is part of
another business, also known as the parent
company or holding company. Having or
owning more than half of the subsidiary
company's stock, the parent has a controlling
interest in it. A subsidiary is referred to as a totally owned subsidiary when another company owns
it entirely. As a result, the subsidiary must follow the laws of the country in which they are based
and also pay the relevant taxes and business expenses.
To setups a subsidiary business, a new business can be formed, or an existing one can be taken
over. The subsidiary business formed operates in its own rights and therefore has its own legal
liabilities.
Subsidiary businesses are one form of developing internationally that I believe would suit Aldi as a
company, this is because they will be able to limit risk and function their store separately from the
other, this ensures that the main company and brand name are not as tarnished if anything where
to occur. Also, if they decide to purchase another company and take over then they will be able to
utilize the information that they have collected previously saving them serious amounts of time,
which they can spend on developing their introduction into the market, additionally, they will
potentially have some tax advantages through becoming a new entrant in this fashion. However,
Aldi will have to do more work to set up the company this includes producing more complex
financial statements, the company is also seen to be liable for its own debts and this means the
correct management shod be put in place to ensure that there are no issues that arise.
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, This shouldn’t be an issue because Aldi already has the financial means to ensure the functioning
and operational sectors of the business will be set up rapidly and succinctly removing the chance
for issues to emerge.
Pros:
- Limits risk.
- Good controls in place to expand internationally.
- Through taking over existing subsidiary via investment, the business will be able to take
over all existing knowledge of country in which they decide to operate within.
- Supply chain relationships and supplier networks are purchased as they are being taken
over.
- Tax advantages
Cons:
- More legal and accounting work
- Complex financial statements
- Liable for subsidiary’s actions/debts
- Local knowledge may not satisfy the needs for parent company.
- Subsidiary company may be hostile to take over.
Joint Ventures
A joint venture is when two or more businesses come together by contractual arrangements to focus
on a particular business transaction or deal. This joint venture reduces risk and increases levels of
expertise. However, the business that they go into a joint venture with should be one that they can
trust and complement one another, otherwise the process might become dissatisfactory. Another
example of a joint venture would be between a producer and a supplier of goods.
A joint venture might be ideal for Aldi when looking to develop abroad. Borrowing money wouldn’t
be difficult for Aldi from a third party as they are already quite large and well-trusted through their
well-established reputation. The shared risk means that f the area in which they decide to adventure
into is slightly more volatile than others, it could mean that there is more of an incentive to expand.
Additionally, the shared entrance into the market would mean here is double the resources to
achieve jobs and this could vary from technology to information and general knowledge about the
environment of which they are entering.
A negative to this would be that communication issues may occur and if they do not see eye to eye
this can cause problems in getting jobs done. This is bad for a company as big as Aldi as every step
they make ill be essential in making their dominant entrance into the market. If issues where to
occur they may not meet the timeframes that are set to reach deadline for achieving their goals. Aldi
as a company has never changed the way they operated and have continued o function the same
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