TARIFF BARRIERS FOR ASOS.COM IN THE INTERNATIONAL EXPANSION OF BUSINESS
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RunningHead:TARIFFBARRIERSFORASOS.com(AUKCOMPANY)IN INTERNATIONAL EXPANSION OF BUSINESS Tariff barriers for ASOS.com (A UK Company) in the international expansion of business [Name] [Institution’s Affiliation] [Date]
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TARIFF BARRIERS FOR ASOS.COM1 Table of Contents Executive Summary...........................................................................................2 Introduction.....................................................................................................3 Outline of Issues...............................................................................................4 Response........................................................................................................6 Impact...........................................................................................................9 Conclusion and Recommendations......................................................................11 References....................................................................................................14
TARIFF BARRIERS FOR ASOS.COM2 Executive Summary The change in the economic conditions across the world have increased the range of trade tariff towards its products, the considered case of ASOS.com determines that the firm following an e-commerce model to increase its sales and profits in the markets they are working towards balancing their business. The company is working in the USA, UK, and Europe, however, after the implementation of trade tariff by USA’s Trump Administration, the global economy is on the verge of global war, thus it requires the firm to plan its strategies following the trade tariffs in the international market as it will help the organization to expand its business successfully and accomplish its targets successfully.
TARIFF BARRIERS FOR ASOS.COM3 Introduction International trade is carried out in collaboration with businesses and government by putting aside the trade barriers because these barriers create obstacles to sell their products and services in a foreign market. The key challenges for companies include natural barriers, tariff barriers, and non-tariff barriers. Natural barriers are physical or cultural for the firm, for example, marketing lingerie brand in public advertisement medium in UAE or Saudi Arabia (Ding, Huo, & Campos, 2017). This might create issues for the company ona national level. It is important for organisations to work to develop an understanding of the market approach in forming perspective. Language is considered another barrier which is required to be taken into consideration while planning strategic management(Keck, Hancock, & Nee, 2018). Tariff Barrier is another element which is imposed by the government of nation on imported goods; they are charged per unit, which makes the goods more costly for a firm.For many companies, tariff barriers is a key reason that refrains their management from international business expansion(Xue, Li, & Pei, 2016). Non-Tariff barriers include government using other tactics to restrict trade between the two countries. For example, the government is keen to set quotas for import in a specific amount of any product. Other barriers include embargoes, buy-national regulations, and exchange control. However, it is important to discuss different types of tariffs in relation to the business expansion of ASOS.com in the international market(Zhang, Xia, & Shu, 2016). ASOS.com is a UK based online fashion and cosmetic retailer founded in 2000 in London, targeting young adults (ASOS, n.d.). The company is associated with more than 850 brands; it also has a range of clothing and accessories which is offered to customers across 200 countries using its e-commerce business model from its fulfilment centres in the UK, USA, and Europe(Ogbor & Eromafuru, 2018).It has been working in the industry since the last two decades, and it has managed to build a strong brand position among its rivals. The key operations of the firm are managed by Brain McBride, Nick Beighton, and Anders Holch Povlsen (which hold 27% stakes of the firm)(Ruiz, 2018). Currently, the revenue of ASOS.com is £2.4 billion as calculated in 2018, 4386 employees are working with the company to manage its operations. The work domain of the company iswww.asos.comandwww.asosplc.com. Since 2013, the company is working towards expanding its business in Russia and China. In 2014, ASOS.com sponsored McLaren Formula One team as a marketing tactic. In 2015, the company was declared as the largest
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TARIFF BARRIERS FOR ASOS.COM4 independent online and fashion beauty retailer(Yang & Shen, 2015). Recently, the company isupgradeditsreturnpolicieswithaneasyreturnprocess.Currently,ASOS.comis encouraging social media and digital marketing tactics to promote their products and services meeting the demands of the company’s stock. In 2018, the management of the Company declared 58% of its sales happened using mobile delivered(Ogbor & Eromafuru, 2018). The reportaimstodiscussthetariffbarrierstowardsthebusinessofASOS.cominthe international business market. It aims to discuss the trade tariffs in detail to highlight the issue in detail with an appropriate response to identifying the impact of tariffs towards the business of the undertaken company. Outline of Issues Tariff barriers are a tax imposed by the government of a nation over imported goods; they are charged per unit or commodity, which increases the value of good over a certain percentage. Hence, it is sold in the market at high prices; it is the reason that imported products are considered expansion in comparison to local products(Parboteeah & Cullen, 2017).It is another reason which makes local products more appealing for local customers in compare to imported products. Furthermore, protective tariffs make imported products less attractive to buyers in comparison to domestic product(Yousefi, 2015). For example, in the USA,the protective tariff is imposed on poultry, textiles, sugar, and other imported products. In Trump Administration, the tariff was imposed on steel and aluminium from other countries (Keck, Hancock, & Nee, 2018).However, a number of criticism has been given by political parties such as Congress since 1789, the key arguments include, -The tariff protect infant industry, it is because it gives the new struggle for the domestic industry to become global competitors -Tariffs protect the USA jobs, with the union and other tariffs to keep foreign labour from the region. -The tariffs aim in military preparedness and protect the industries and technology in peacetime important for militants in war event(Yang & Shen, 2015). However, the issues unfavourable for ASOS.com in trade barriers include, -It discourages free trade leading towards less competitive advantage to design their work more efficiently.
TARIFF BARRIERS FOR ASOS.COM5 -Tariff prices increase the prices of good, which male them less favourable among the customers. For example, in 2017, the government of the USA imposed a tariff of approximately 63.86% to 190.71% on Chinese Steel products. The idea behind the tariffwastoofferafairsharetotheUSAsteelmanufacturerstoconclude antidumping and ant subsidy probes(Colpan & Cuervo-Cazurra, 2018;). -In return, the Chinese companies are more likely to impose tariffs on USA products and services to build negotiation on intellectual property rights and piracy to bog down(Ding, Huo, & Campos, 2017). Besides, non-tariff include governments of different companies to use other tools other than imposing tariffs to restrict their trade (Pedersen & Stucchi, 2014). One such barrier is import quota which limits the control of imports; this has been done to protect the domestic market of the region, for example, the USA government has protected its textile industry using import quotas. In the case of ASOS.com, it is found that the company is working in the USA, UK, and Europe market to export its products using the e-commerce model(Yang & Shen, 2015).In Europe, the business of ASOS.com has an open platform to offer their products and services. However, when it comes to the USA market, it is important for the company to consider trade barriers under import quotas and tariffs imposed on its products and services. Working in the European market seems a good option for ASOS.com because it supports free trade across the members of the European Union(Zhang, Xia, & Shu, 2016).In regards to the UK, it is found that ASOS.com will also find issues to plan the distribution of its products and services from the UK to Europe(Colpan & Cuervo-Cazurra, 2018;). After the regulations and legislation with the EU has been finalised between the UK and EU, the situation will be cleared for ASOS.com, as it will help the organisation to plan its supply chain successfully (Zhang, Zuo & Zheng, 2016). Besides, the competition for ASOS.com in its target market will be high; it is because the government regulations give domestic manufactures special privilege under the buy-national regulations(Keck, Hancock, & Nee, 2018).It has been discussed above that the government in the USA has imposed ban over foreign steel to support its domestic market. It is the reason that ASOS.com has both its own product line and a support product portfolio of famous clothing retailers around the world to support its sales and profits successfully(Yousefi, 2015).Recently, ASOS.com has increased 35% of its sales with approximately £1.9billion and the profits are expected to grow up to 24% in the USA and Europe. The figures have played an important role in
TARIFF BARRIERS FOR ASOS.COM6 diverting the attention of ASOS.com towards the international market(Colpan & Cuervo- Cazurra, 2018;). In July 2018, ASOS.com booked about 38% and 41% increase in its sales in Europe and the USA respectively; it might be because of the week position of pounds in the internationalmarket.Theinternationalsalesofthecompanyareexpectedtoseea predominant growth in the international market because of its stronghold of management. Thecompanyisconsidering2018asayearofinvestmenttoexpanditsbusiness internationally with the end goal to improve its market position and achieve its targets successfully(RAVENDER SEMBHY, 2017).There have been speculations over the policies required to be taken into consideration by the government on following fixed business rates and corporation tax, and it is a threat to the stable business of ASOS.com especially associated with its digital sales tax. Approximately, 56% of the company’s business is conducted via an online platform. The company understand their responsibility to pay the taxes under the jurisdiction of government set under the UK legislation(Ogbor & Eromafuru, 2018). However, at this point, the company is required to adjust its business rates to take their business practices under the corporate structure so that they canmake recognisable profits in the international market which are not subjected to taxes in the region(Sarah Butler, 2018). The firm is working towards an effective global delivery system aligned with e- commerce localisation to compete in international e-commerce. However, other common issues for the management of ASOS.com is required to be planned with complete information about the market standards because lack of adequate information to lead towards the violation of laws, regulations, processes, and methods important for the foreign market(Parboteeah & Cullen,2017).ThecustomrelatedbarriersforASOS.comarecomplicated,overly burdensome, and involved with other issues such as corruption, and others. Therefore, it is important for the company to consider these issues while looking forward to planning its resources following the understanding of trade tariffs for the firm. An adequate response has been highlighted for the firm in the next section to formulate perspective(Ruiz, 2018). Response A considerable lot of the hindrances avoiding the acknowledgement of the Internet as a driver of worldwide exchange can be tended to utilising fittingly structured universal exchange standards and standards. As the review in the past section illustrates, exchange law and arrangement alone cannot deliver every one of the blocks to understanding the maximum
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TARIFF BARRIERS FOR ASOS.COM7 capacityoftheInternettodriveglobalexchange(Keck,Hancock,&Nee,2018). Accordingly, participation is required between the global exchange network and those workingadvancement—wherehelptoframeworkadvancementcanimproveexchange coordination’s and U.N. endeavours to advance vitality access for poor people(Parboteeah & Cullen,2017).ForASOS.com,exchangestrategyandlawcanmakeasignificant commitment by decreasing the expense of Internet get to, changing the development of merchandise and enterprises, improving traditions procedures and access to expedited service administrations, lessening dangers from various ways to deal with buyer insurance and protection, and access to debate settlement. The World Trade Organization is the key multilateral foundation administering universal exchange for the considered company(Ruiz, 2018). Its guidelines are key to supporting a wide range of universal exchange, including on the web exchange. There have been late advancement at the WTO on growing new guidelines to additionally advance Internet-empowered worldwide exchange. In particular, in December 2013, WTO individuals consented to another exchange assistance result that will streamline traditions techniques, increment straightforwardness, and lessen costs, all of which will profit online exchange products(Xue, Li, & Pei, 2016). Nevertheless, the rest of the WTO rules have not been refreshed since the foundation of the association in 1995. Theydo not consider the fast progressions on the Internet and the expansion of new Internet administrations, for example, distributed computing. In this way, these improvements have made existing WTO runs in extraordinary need of business process upgrades(Sarah Butler, 2018). At the WTO ecclesiastical gathering in Bali a year ago, a work program on web-based business was settled upon, and it educates the WTO to keep taking a shot at this issue. This incorporates analysing the connection between web-based business and advancement(Colpan & Cuervo-Cazurra, 2018;). While concession to the requirement for further work on this issue in the WTO featuresthesignificanceofgrowingnewstandardsforInternet-empowereduniversal exchange, arranging new multilateral exchange rules remains a prisoner to the moderate moving WTO Doha Round of exchange dealings(Yang & Shen, 2015). In parallel, new standards for Internet-empowered exchange are additionally being created in respective and provincial Foreign Trade Agreements. Either these are the U.S. base or EUare gathering to incorporate online business chapters. Current FTA in Trade in Services Agreement (TISA),
TARIFF BARRIERS FOR ASOS.COM8 Trans-Pacific Partnership (TPP) and US-EU Transatlantic Trade and Investment Partnership (TTIP) exchanges(Yousefi, 2015). Research shows that after the USA has placed 200% trade tariffs on Chinese goods and steel, and it's trading partners around the world, EU, Canada, China, and Mexico has implemented retaliatory tariffs of American products(Craik, 2015). These are focused on agriculture and good products whichthe USA do not export. In case of the European Union, 25% tariff of approximately $3.4 billion on American Goods include Harley Davidson Motorcycles. As a response, the company decided to move its manufacturing products to European Union countries outside the USA to control the damage towards its resources (Dunford, Dunford, Barbu, & Liu, 2016). EU hastarget other products such as denim, orange juice, tobacco, whiskey, and peanut butter. However, the response is yet to be determined. In other words, the EU has imposed a tariff on most products which are not purchased online from the US retailers and suppliers. Therefore, it is more likely to have a small impact on US e-commerce(DALY & HASNI, 2017).In case of Asos.com, it is important for the firm to have a defined policy over trade tariffs, it is an online company, the tariff imposed by the USA and EU government are more likely to impact the firm’s business directly(Aziz, Salloum, & Alexandre-Leclair, 2019). Hence,itisimportantforthefirmtoplanitstradingpoliciesfollowingthe government structure around the world to control the damage towards its business. The tariffs to date increment the expense of crude materials and now and again disturb the production network. China is the main wellspring of certain merchandise. A deficiency of crude materials will probably result in the United States(Giuffrida, Mangiaracina, Perego, & Tumino, 2016). Increments in costs will be passed on to purchasers. In the U.S., this impliesa cost-focused approach on local traders because of tariffs on B2B crude materials and segments, just as tariffs on completed purchaser products. In China, Mexico, Canada and others from the EU, the product cost nourishment and drink will increment(Brennan, 2018). Most American vendors that sell solid products (not for prompt utilisation) will be unaffected except if they are purchasing and selling merchandise made with crude materials and parts, for example, steel, that has been slapped with tariffs. Online traders who sell merchandise made with steel or aluminium should raise their costs or endure marked down benefit in the event that they keep up current evaluating(Guedes & Buest, 2018).
TARIFF BARRIERS FOR ASOS.COM9 The trade strategies and policies of Trump are more likely to harm the US economy and undermine the world's trade framework. This will support a trade war between the two superpowers of the east and the west part of the world and will increase the tension between region and companies, for example, ASOS.com will face issues in expanding its supply chain management in China after the international expansion(Choi & Choi, 2018).IMF expects the trading contest to have minor monetary results - abating GDP by a small amount of a rating point. The circumstance is basic and progressively hard to factor in right now as it will affect the local financial circumstance(DALY & HASNI, 2017).IMF has likewise taken steps to pull back from the North American Free Trade Agreement (NAFTA), was reacting to rising worries about the symptoms of organised commerce. These measures, however, are probably going to move the globe further far from an open, reasonable, and rules-based trade framework, with unfriendly impacts for both the US economy and for exchanging accomplices(Deschamps, Carnie, & Mao, 2017). Following this whole situation, it is important for ASOS.com to assess the situation while trading in the USA or China, there seem to be profitable markets after Europe. Therefore, it should penetrate the market dynamics more in order to seek benefits. In another scenario with America, it is important for the management of ASOS.com to calculate its assets following its export to seek benefits from its resources(RAVENDER SEMBHY, 2017). Impact ThequantityofHarmonisedTariffStandards(HTS)thatarecurrentlyunder investigation keeps on ascending, as there are presently extra 284 codes, worth $16 billion, that the organisation is proposing to incorporate into the equivalent 25% tariff. Currently, of assembling, the vast majority of the products web-based business stores and retailers sell can be created much more adequately in different pieces of Asia like Vietnam, India, or the Philippines. In spite of the fact that the framework in China is exceptionally solid, in the event that you see work rates in a portion of these nations, work is increasingly moderate outside China these days(Ardley, 2018). Since finding out about the capability of these international tariffs a year ago, the company is required to understand the tariff existence following worldwide inventory network crosswise over India, Bangladesh, Vietnam, Thailand, Pakistan, Philippines, and Mexico. It is significant for ASOS.com to pursue the examination with the given queries to
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TARIFF BARRIERS FOR ASOS.COM10 plan viewpoint and diminish the harm towards its economy(Parboteeah & Cullen, 2017). These are, 1)Reviewing the rundown for HTS ASOS.com need to import, this will bolster the organisation to consider its very own rundown of HTS code to perceive how much volume is really brought into the US, and possibly spot different nations that send out similar merchandise(Yang & Shen, 2015). 2)It is essential to appraise the budgetary effect towards the matter of ASOS.com before working forward in the market. It is believed by many economies that the United States has abused World Trade Organization leads and lighted the biggest trade war in monetary history. Such tariffs are commonplace trade harassing, and this activity compromises worldwide supply chains and esteem chains, slows down the worldwide monetary recuperation, triggers worldwide market strife, and will sting progressively blameless global companies, endeavours and customary shoppers. It will hurt, not support American firms(Ruiz, 2018). Form a focused perspective, these tariffs sum the amount of $478.8 billion worth of merchandise and enterprises from China in 2017, so the tariff target is genuinely little in respect to the all-out trade among America and China. It is likewise completely small with respect to the extent of the general American economy, which is required to aggregate about $20 trillion out of 2018. Taken a gander at another way, there were $150 billion of tax breaks that Congress passed on tariffs in 2017. These new forced tariffs of $34 billion are little in examination(Yousefi, 2015). Therefore, the immediate effect on individual people can at present be huge on the off chance that you work in enterprises with new tariffs. For instance, burdening imported clothes washers is a major ordeal for the clothes washer industry and for individuals who happen to be in the market for a clothes washer. The Washington Post made a summary from Trump's trade plan and noticed that clothes washer costs have risen 16 per cent since March and that the burden of tariffs in January was trailed by two of "the biggest month to month cost increments since the Bureau of Labour Statistics started gathering such information in 1977(Knox, 2018).The cost of real apparatuses has been relentlessly succumbing to years, and these tariffs have driven them back up a smidgen. Clearly, a 16 per cent value climb is yet a major ordeal if an individual's clothes washer simply broke, and you have to purchase another one(Ruiz, 2018).Many people do not purchase clothes washers that as often as
TARIFF BARRIERS FOR ASOS.COM11 possible and the present costs are low by recorded benchmarks. The key effect on the dealer of ASOS.com will incorporate, 1)In the first place, the vendors of imported products dependably have motivating forces to ingest some portion of the tariffs to clutch their clients. It is never a benefit expanding technique for a vendor of imported merchandise to pass 100% of tariff increments to shoppers if customers are to some degree value flexible that determine that the customers purchasing power will reduce significantly(Xue, Li, & Pei, 2016). 2)Second, shoppers can generally substitute far from the imported products influenced by higher tariffs to buy less expensive choices if such options exist. They can likewise postpone buys. 3)Third, tariffs will invigorate residential import-contending businesses, and there will be some salary impact for specialists in those enterprises and past. "At the end of the day, if your salary is higher, cost increments don't feel so difficult(Aziz, Salloum, & Alexandre-Leclair, 2019). Conclusion and Recommendations To conclude, trade tariffs influence exporters and shippers in the apparel, footwear and design part in the grown-up and youngsters' business sectors. Guidelines, charges, or different limitations may apply to apparel, footwear, and style trades as they leave the UK when they confer at their goal nation. It is significant that you look into the two sides of the exchange. American attire retail organisations and shoppers are planning to feel the torment of Trump's most recent round of tariffs. The most recent round of U.S. tariffs incorporates a 10% and destined to be 25% toll on things including silk, fleece, cotton, and different materials just as purses, gloves, caps, and some garments classifications, for example, calfskin or hide apparel. China's tariffs are corrective and will fall into a scope of 5-10% on $60 billion worth of merchandise. On the off chance that the tariffs proceed, extra clothing and materials will be set significantly more unequivocally in the focus. It could be a vital turning point for ASOS.com to remain above water in the midst of expanding rivalry from web-based apparel retailers and rebate dress stores. ASOS.com have communicated extraordinary worry over the way that tariffs will push up their expenses. These organisations are hoping to move supply chains from China to develop rundown of Trump's tariffs, yet this is a difficult task: recognising, checking, and contracting with another provider takes around two to five years. A few organisations are swinging to nations like
TARIFF BARRIERS FOR ASOS.COM12 Vietnam and Cambodia, which have far lower work costs than China and have not been getting up to speed in the trade war. Apparently, organisations like Steve Madden and Puma have been looking to move their activities out of China to stay away from the tariffs. In any case, patching up assembling activities and supply chains for American attire organisations delivering abroad would require a tremendous move, as over 40% of garments brings into the U.S. also, over 70% of footwear imports originate from China. There are numerous reasons that the organisations are creating in China in any case, instead of in the United States. China produces many design segments, for example, zippers and catches. The nation has an enormous, talented work power that is very much prepared in creating an amazingly wide scope of pieces of clothing. Its coordination's industry and foundation are all aroundcreated,whichimpliesthatmerchandisecanmovefromgenerationtodeals practically medium-term. China additionally has simple access to contributions from different nations. Moving to a nation that is reasonable (which means it has low wages) frequently implies building production lines without any preparation and endeavouring to manage average coordination's framework. The retail business is liable to low net revenues in any case. A few organisations that as of now have even lower overall revenues, like JCPenney, will battle to endure. A great deal of garments merchants has thought that it was hard to contend with retail rebate locations like TJ Maxx and Marshall's. Other physical stores have attempted to stay above water because of the overwhelming challenge from less cost-concentrated online retailers. The inquiry is whether retail locations will eat the additional expenses of the tariffs or pass them on to the purchaser and hazard losing business. In any case, clothing stores remain to lose. A few organisations might be compelled to shade disconnected areas to cut down expenses. Almost certainly, especially with the presumable inconvenience of further tariffs that influence a more prominent scope of clothing items, most American makers will be influenced. How gainful the organisation is in the pre-tariff stage and how it adjusts to the tariffs, just as how clients respond to the tariffs, will figure out which firms endure and which come up short. For such a long time, clothing producers had seen not being situated in China as a risk – presently, the majority of that has been turned around. There are not very many American organisations, similar to Michael Stars and American Apparel that source and produce attire completely in the USA. As the tariffs mount and trade exchanges remain slowed down,
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TARIFF BARRIERS FOR ASOS.COM13 buyers are going to turn out to be probably the greatest casualties of the trade war. Organisations will probably need to pass on the tariff costs, or possibly part of them since 25% of the imported esteem is a huge sum. Now, the U.S. has set imposes on about portion of everysingleChineseimport.WalmartandTargetbothhavecautionedtheTrump organisation that they will need to raise costs. In a letter to Donald Trump and the U.S. Trade Representative, Walmart's ranking executive for worldwide government undertakings Sarah Thorn communicated worry over tariffs on 6,000 items, including purses and travel sacks. Extra tariffs would be considerably additionally obliterating for clothing purchases and global makers.
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