External Environment - UK trading

Question 1

Effects of the EU single market on the UK and UK organisations

Answer 1

• Objective = lower the cost of doing business within the EU
• Simplified tax regimes
• Harmonised product standards
• Free movements of goods/services across borders. No barriers to trade, as well as people and capital
• Tariff free trading within the EU
• There is fair competition between organisations and their member states

Question 2

The continuing impact of the EU social chapter on UK organisations (employees/workers)

Answer 2

• Workers become more motivated as working conditions are improved
• As a consequence productivity usually increases
• Better industrial relations and worker participation due to improved consultation
• Raises labour costs to business (e.g. minimum wage)
• More difficult to compete on price basis with non EU firms e.g. China & India
• Increased regulations make labour market less flexible

Question 3

What is the EU social chapter ?

Answer 3

• The Maastricht Treaty of 1992 sought to bring members of the EU closer together by creating the social chapter
• Its aim was to create a “level playing field” for all EU members as regards conditions at work
• Many of the initiatives contained within the Social chapter had already been taken up by many of the member countries

Question 4

The Impact of the Social chapter on UK organisations (policies, etc)

Answer 4

• Changing policies and procedures to meet with changing requirements - costs time and money
• Greater employment rights for part-time workers has increased the cost of employing them e.g. paid holidays
• Consultation with employees may lengthen the decision making process
• Increase in wage costs as temporary workers must be found to cover maternity/paternity leave

Question 5

costs and benefits to the UK and UK
organisations of trading with ASEAN/China (Benefits)

Answer 5

• Cheaper materials- raw materials from ASEAN/China may be cheaper due to lower wage rates/lower production costs in these countries. China does not have a national minimum wage, but sets a minimum per region. The average minimum wage across China is £0.79,compared to £6.50 in the UK
• Large market- China has a population of 1.4 billion people, with ASEAN adding another 380million, meaning UK businesses have a larger market in which to export their luxury goods
• Newer technologies- owing to its vast size, population and GDP per capita, ASEAN/China have access to newer technologies, allowing for better quality products to be manufactured and used in UK production processes. This allows them to be at the cutting edge of product innovation

Question 6

costs and benefits to the UK and UK
organisations of trading with ASEAN/China (Costs)

Answer 6

• Price wars- as previously discussed, the wage and manufacturing costs of products coming out of Asia are much below that of the UK. As a result, UK businesses may have to lower their prices to compete with Chinese/ASEAN businesses
• Buying power- the buying power of Chinese businesses may leave UK businesses vulnerable to a takeover. A Chinese firm bought out pizza Express in July 2014 and there have been rumours that Tate and Lyle may be vulnerable
• Corporate culture- cultural differences could make trading with China/ASEAN nations problematic as UK businesses may be unfamiliar with local customs and cultures. The Chinese are very respectful people, and do not appreciate tardy appearances or time keeping. Language and currency differences may also reduce the success of international trade