Factors Affecting Global Economy and Growth of International Trade: A Case Study of Tesco plc

This essay examines the forces shaping the international business environment, identifying factors affecting the global economy and their influence on the growth of international trade with specific examples. The case study of Tesco plc, a British multinational organisation, is used to justify the facts of the essay.

International Business
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Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Factor affecting global economy and its influence on growth of international trade.............1
CONCLUSION................................................................................................................................5
References:.......................................................................................................................................6
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INTRODUCTION
International business is a global practice of trading of goods and services across the national
borders. Basically, the international trading is transaction of monetary value, goods and services
between two or more countries (Milner, 2021). The international business helps the countries to
raise their economy and GDP. For conducting international business the organisations needs
skills, resources and a stable business that has potential of growing in another market. In order to
pursue international business a person must conduct appropriate R&D as this will help the
business stakeholders to forecast the scope of success company holds in new market.
International business in today's era is also referred as the globalisation. This practice is
important in order to facilitate the connection of different economies, culture, traditions and most
importantly labour. The organisations that are involved into the international trading or business
are commonly termed as the multinational organisation. Technological and economic
developments are reason for the reduction of the barriers to the international trade and they are
cultivating new opportunities for the global businesses. The present essay on international trade
will examine the forces that are shaping international business environment. In the essay there is
identification of the factors that affect global economy and their influence in growth of
international trade with specific examples. For this Tesco plc a global organisation is chosen as
an example to justify the facts of essay. Tesco plc is the British multinational organisation and
third largest retailer. The company is headquartered at Welwyn Garden city, England, UK.
MAIN BODY
Factor affecting global economy and its influence on growth of international trade
It is essential for every business to analyse the factors for their international growth. It is also
essential for companies to focus on trade barriers and restrictions for their international
expansion (Meng and et. al., 2018). Most of the countries are having very strict rules and
regulations for their international trade that even they did not allow the company's of other nation
to expand their business in the country. External business environment such as Political factor is
one of the most essential factors which can impact a company's growth at international trade.
Government restrictions, trading regulations, interest rate and many others are the examples of
political factors. The countries having more stable political factor will have more opportunities
for in growth. In context of UK, Brexit impacts their international trade because when EU
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separated from UK then various kinds of new trading policies were made by UK government.
Tax policy is also one of the most important political factors which attract more companies to
invest their business within new country. For example, a country having lower interest rate on
loans will be attractive factors for those companies which are using banking finance for their
business operations. On the other hand, trade restrictions are also one of the most important
factors for a country for their international growth. Like UK, which is having low restrictions on
import and exports for those companies which is based in UK. Hence, due to this reason most of
the foreign companies likes to invest in UK and this will further help to develop international
trading activities.
Economic environment is another factor which can impact the growth of international business
(Verdier, 2021). Cost of raw material, inflation rate, fiscal policy, employment rate and many
others are the examples of economical factors which can impact the growth of international
business. Tesco is earning their most of the part of revenue from UK due to their economical
factor. Company's sale get affected due to any change in economical factor. Due to high inflation
rate, the price of raw material get increased which directly impacts upon finished goods and
hence, the prices of finished goods get increased which further impact upon purchasing power of
customers. Hence, it is essential that Tesco must minimize the prices of their products even
during inflation so that more customers will get attracted toward their brand and help the
company to develop their sales. Cost of raw material is also important for international trade
growth. The countries having low cost of raw material attract more companies for their business
investment in other nation (Avdjiev and et. al., 2019). Low cost of raw material will help the
companies to manufacture their products at lower cost which further help companies to offer
their finished goods at lower prices to their targeted customers and gain more customer loyalty
and satisfaction. On the other hand, value of a currency will also impacts international trade.
Countries mainly avoid trading their products in those countries which are having low value of
currency because low values of currency will impacts upon their earnings ratio.
Technological factors also help to grow international business and international trade. Using
quality tools and equipments for production process will help the companies to develop the
quality of their products. This will further help the companies to generate high level of demand
in international market because nowadays most of the customers are preferred to use quality
products. On the other hand, online payment options for companies will help the customers to
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pay the bills in easy way. Due to technological factor only a company is able to analyse their
product's demand at international level and try to invest their business in that country which are
having more demand of their products. Global Positioning system (GPS) which is used to track
the location of products and further used to analyse the route for travel. This will help the
companies to analyse the location of their vehicle which carry the bulk of their products from
one country to another by road transport (Popp, 2020). On the other hand, social media platforms
are also used by various companies to promote their products and generate international demand.
For example, Tesco which is using Instagram, Facebook and many other social media platforms
to generate more demand because a company have global level followers on their social media
platforms.
Competition is also one of the most essential factors for business growth at international level.
More competition for a company will help them to generate the aim of international growth and
gain competitive advantage. Most of the company’s main aim is to gain more customers and
compete with their competitors by offering quality products in lower prices than their
competitors. Hence, this will also help to grow international trading activities. Companies who
aim to gain competitive advantage are supposed to import raw material from those countries
where they will found quality raw material in lower cost and export their finished products in
those countries where they predicted that the sales of their product will increase (Urbanek,
Rymowicz and Mirończuk, 2018). A company like Tesco which has gained good amount of
customers in their home country will aim to expand their business in other country with the main
target of gaining competitive advantage in that country also. Therefore, competitive environment
will also help a company to expand their business internationally and promote international
trade.
Social environment such as customers demand, their perception and many others also impacts a
company for their international growth. High demand of customers regarding a product will also
help a country to develop their international trading activities. High demand of customers will
influence government of the country to remove restrictions on their trading activities to import
high quality of products for their citizens. On the other hand, high income of customers will
generate high purchasing power for customers in that country. It is essential for a company to
focus on social factors such as language, legal restrictions for promotional activities and many
others. Social factors of a country can also become a barrier for a company to expand their
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business into other countries (Bożyk, 2019). For example in context of China and France, door
to door selling is prohibited due to their legal restrictions. Hence, companies are required to
avoid door-to-door selling in these regions.
Environmental factors also impacted upon growth of international trade for an international
business. The companies will try to expand their business in those countries where they will
found more natural resources. Companies are also required to focus on sustainable use of
resources which they use from particular nation. In case companies will conduct unethical ways
of producing goods and products and pollute their natural environment, then these types of
companies are not allowed to expand their business in most of the nations. Hence, companies are
required to focus on their production process and make sure that they will use sustainable
activities to expand their business. Therefore international trading activities will get impacted by
environmental factor (Dalevska and et. al., 2019).
Relationship between two or more nations with each other is also essential to develop
international trade for a business. Two countries having effective relationship with each other
will easily agree to share their goods and services with each other. On the other hand, countries
North Korea and South Korea, India and Pakistan and many others which are having bad
relationship with each other will restrict to trade their products with each other. They also did not
allow their investment of enemy country. Hence, it is essential for the countries to maintain good
relationship with each other to promote their international trade.
Globalisation is also one of the most important factors for developing international trade.
Globalisation is the process where countries are becoming interconnected with each other to
exchange their import and exports with each other (Akerman, 2018). Due to globalisation most
of the countries are able to establish their new business in other country and conduct their
business activities appropriately. Here, countries remove restrictions for the international
companies to invest their business in specific region. Due to globalisation, trading activities of a
country get increased and even they build good relationship with each other due to globalisation.
Globalisation will not only allow transfer of goods and services from one country to another but
it also allow movement of human resource from one nation to another for a particular purpose.
Therefore, due to globalisation a company can hire skilled employees from other nation and with
the help of international employee they can expand their business well by their performance.
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CONCLUSION
From the above information it is concluded that there are various kinds of factors which can help
in growth of international trade. These factors are political factors, technological factors,
environmental factors, social factors, economical factors and many others. In case two or more
nations have good relationship with others than they can easily trade their products and services
with each other which further help to develop international trading activities for a company. On
the other hand, globalisation factor also plays an important role in developing international trade
for global companies. The nations which are having more natural resources and low cost of raw
material is one of the most attractive factors for companies to expand their business in that
particular nation.
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References:
Books and Journals
Milner, H.V., 2021. Resisting protectionism: Global industries and the politics of international
trade. Princeton University Press.
Meng, J. and et. al., 2018. The rise of South–South trade and its effect on global CO 2
emissions. Nature communications, 9(1), pp.1-7.
Verdier, D., 2021. Democracy and international trade: Britain, France, and the United States,
1860-1990. Princeton University Press.
Avdjiev, S. and et. al., 2019. The dollar exchange rate as a global risk factor: evidence from
investment. IMF Economic Review, 67(1), pp.151-173.
Popp, D., 2020. International technology transfer, climate change, and the clean development
mechanism. Review of Environmental Economics and Policy.
Urbanek, A.K., Rymowicz, W. and Mirończuk, A.M., 2018. Degradation of plastics and plastic-
degrading bacteria in cold marine habitats. Applied microbiology and
biotechnology, 102(18), pp.7669-7678.
Bożyk, P., 2019. Globalization and the transformation of foreign economic policy. Routledge.
Dalevska, N. and et. al., 2019. A model for estimating social and economic indicators of
sustainable development. Entrepreneurship and Sustainability Issues, 6(4), p.1839.
Akerman, A., 2018. A theory on the role of wholesalers in international trade based on
economies of scope. Canadian Journal of Economics/Revue canadienne
d'économique, 51(1), pp.156-185.
Hu, H. and et. al., 2018. The role of renewable energy consumption and commercial services
trade in carbon dioxide reduction: Evidence from 25 developing countries. Applied
energy, 211, pp.1229-1244.
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