In this assignment I will be concentrating on International Business and the European Union and how it has an effect on businesses in the U.K. The aim of the assignment to use a U.K based organisation as a scenario. I will be writing the assignment based on a report for the Board of Directors from my chosen company. The company I have chosen is a vehicle manufacturer called Octopus Vehicle’s. They currently have been given the opportunity to supply EU sourced cars and export them to many countries around the world. They have been offered offices based in Spain and Holland and currently have one in the U.K.
International Trade, Economics, and Global Markets
In this chapter I will be discussing the effect that international trade and globalisation have on U.K business and in particular how it affects Octopus Vehicle Imports. I will also discuss the challenges and opportunities that Octopus Vehicle’s face if they decide to trade internationally.
Trade Blocs are nations that have a mutual trade pact. They agree to give each other reduced tariffs and other accommodations. Trade blocs will impose trade barriers and restrictions on non-member countries. Today the world is increasingly divided in trade blocs, they play a central role in international trade negotiations. Some examples of trade blocs are: NAFTA – The U.S has linked with Canada and Mexico to form a free trade zone, the North American Free Trade Agreement. It covers environmental and labour issues as well as trade and investment. APEC – It has 21 members which account for 45% of world trade. Some of the members include Australia, Canada, Chile, China, Singapore, New Zealand and the U.S. E.U – It has 27 members and has become the most powerful trading bloc in the world with GDP nearly as large as the U.S.
One of the main challenges for Octopus Vehicles will be the threats imposed by foreign firms. U.K exporting firms are finding it harder to win overseas contracts due to international competition on price and non-price factors increasing. One thing that has triggered this competition is companies using low wage economies in the far east to manufacture. China is certainly one of the countries that has had it’s economy boosted through firms manufacturing goods and paying low wages. In five years between 1999 and 2004 China’s economy grew by 66%. China’s foreign trade has grown faster than it’s GDP for the past 25 years. It’s economy expanded 10.3 percent in 2010 the fastest in three years. That is compared with growth of 9.2 percent in 2009. Trade is increasingly global in scope today, there are several reasons for this but a significant reason is because of technology. Our transport and communication opportunities today are more practical.
The U.K had a contraction of 0.5% in the last three months of 2010. The U.K is currently the sixth largest national economy in the world measured by GDP and the third largest in Europe after Germany and France, it’s purchasing power however is second after Germany.
Consumers and businesses now have access to the very best products from many different countries. Increasingly rapid technology also has increased the competition among countries as to who can produce the newest technology. In the last several decades countries have taken increasing steps to promote global trade through agreements such as the General Treaty on Trade and Tariffs, the World Trade Organisaton (WTO), and of course the E.U. This has caused specialisation of countries, for example the U.K specialise in services such as finance, legal services and more recently airlines such as EasyJet and Ryanair, China specialise in manufacturing goods and the U.S in software. A result of globalisation is the homogenisation of goods, it is important that Octopus Vehicles keep their cars unique to keep a competitive advantage.
Globalisation is important because it spreads best practice and new...