European Business Enviroment

European Business Enviroment

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European Business Environment

International trade can describe as the exchange of goods and services between two or more countries. International trade brings much advantage such as low production cost, like when a country is buying goods at a cheaper rate from another country. It will reduce their production cost because they will stop or reduce the production of those particular goods

International trade serve some country as a major source of income like china that depends on trading with most countries for their major source of revenue

Comparative advantage

Comparative advantage exist when a country has lower opportunity cost over another country in production of goods for example china can say to have comparative advantage over Vietnam because its produce more finish goods at a cheaper cost than Vietnam. Comparative advantage is good to all countries involved.

A country can gain comparative advantage by specializing in a particular product which they are good at like Britain specializing in financial services thereby gaining comparative advantage of France that specialize in champagne

The principle of comparative advantage (David Ricardo, 1817) states that it is not necessary to have absolute advantage, only a comparative advantage, he further explains that one need to make something at a lower cost in terms of other goods sacrificed to gain comparative advantage

A country can have absolute advantage over another country if the country can produce goods using smaller resources than another country like if a unit of labour to produce 90 units of wool in china and 30 units of wine while in France 1 unit of labour produce 20 units of wool and 70 units of wine then china has an absolute advantage in wool while France has absolute advantage in wine

China can benefit in trading wool to France’s wine

Advantage of international trade

The biggest advantage of international trade is that countries trading with each other are less likely to go to war with each other

International trade can help a country to establish and specialize on particular goods

International trade improves consumer welfare by increasing choices and quality which leads to lower prices

Disadvantage of international trade

The biggest disadvantage of international trade is the destructions of local industry and labour, when a country so much on imports from abroad like UK once a leading car production country over dependence on car importation destroy it once local thriving car company like range rover etc making them

When a country depends so much on trading with a particular country, it makes them vulnerable, the dependent country can be easily influence in the policies by the country they are depending on

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Limiting trade

A country can limit its trade with another country if the country is a threat to the country or if there is any trade sanction or embargo like united nation imposing trade sanction or on Iraq during the tyrannical regimes of sad dam Hussein forcing every one of its member to comply and another example where a country can place embargo on another country because it perceive the country as a threat to them is the USA imposition of trade embargo on Cuba in the 60s because of Fidel Castro’s support of communism Russia in the cold war

DISCUSS RECENT TRENDS AND REASONS FOR GROWING ECONOMIC INTEGRATION

Growing trends and reason in economic integration is the maximisation of labour worldwide due to globalisation taking UK as a case at hand. Labour is very expensive and the cost of living is high, most of the company in UK utilize the recent trends of globalization where they outsource some of their departmental to another company where labour is cheap like 3g network, a phone service provider outsourcing their call centre and customer care department to India to save cost

Another economic integration is the forming of EU which integrated its member states economy into each other because of this integration the EU is one of the biggest and the most trading bloc in the world

ILLUSTRATE UK POSITION IN THE GLOBAL ECONOMY

UK is a more prosperous country than it was a decade ago. UK has a leading and influential position in the global economy because of its high GDP which is among the best in the world and the overall stability of UK economy, this makes UK more powerfully in the global economy to influence the policies of the developing economies and the third world and London the capital of UK is perceive as the financial capital of the world making most of the world capital and money to pass through London making most of the country to invest in London because of its perceive stability thereby giving UK the economic edge and leverage of most country globally

SECTION 2

ANALYSIS OF TWO POLICIES OF THE EUROPEAN UNION ON UK BUSINESS ORGANISATION

The European Union started in 1951 through the treaty of Paris which founded the coal and steel community. It was set up with the aim of ending the frequent wars between neighbours in Europe, the ECS community helps in limiting European countries economically and politically for lasting peace. Six of the pioneer members are France, Germany, Italy, Luxembourg, Netherlands and Belgium. And in February 7, 1992 maastricht treaty was signed by member countries and entered into force in 1993 which led to the creation of European Union (europa.eu/history accessed on 19/05/08)

EU immigration policy which makes any citizen of any member state of the EU to reside and work anywhere within the EU freely without any legal permit impacted positively on the UK farming and plumber industries before the advent of EU and this immigration policy the plumbing industry and farming industry in UK is on steady decline because of UK shift from an industrial economy to service based economy, labour shifted to the service sector so is very difficult to get plumbers and farmers which is affecting the industries but the policies brings lots of immigrants workers to work as plumber and in the farm thereby revitalising this declining businesses

2- EU single currency (euro) the EU monetary policy impacted on UK business for example some of the UK business that has branches across Europe and some of UK business that does business with some EU countries has to convert their money from pounds to Euro thereby creating barriers for them which restrict the easy and free flow of goods and services and creating trade obstacles for them .

SECTION 3

EXPLAIN THE ECONOMIC IMPLICATION FOR UK ENTRY INTO EMU

I think UK joining the EU they will lose more than they could gain, it will impact negatively on their powers worldwide and also on their economy starting from the pounds which is seen worldwide as a stable currency, it might make UK to devalue the pounds because the pounds is basically stronger to euro on the global market.

London normally seen as the investment and financial hub in the world because of its strategic position and UK stable economy will lose its attractiveness to the investors.

The London perceive by some many investors as the financial capital of the world will lose that powers to Frankfurt the seat of the central bank of Europe while UK will lose the Queen on its money which is a tradition in UK , having their monarch on their money

It might disintegrate the UK because Scotland might see it as an opportunity to join separately thereby opting out of the United Kingdom while UK by joining the might lose control of its immigration which will create chaos on their already overburden housing and hospital amenities and it will increase crime rate in London and UK in particular because most of the criminals from the less developing EU countries will find London attractive to indulge on the criminal activities
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