Business Environment

HNC/HND Unit 1 2011-12European Union policies &

global financial stability

Importance of International Trade◦ What is it?

Importance for Nations

Importance for organisations

Recap from last week

You are required to produce a presentation which addresses the following:

• Discuss the significance of international trade to UK organisations.

• Analyse the impact on organisations operating in the UK of the growing economic, social and political influence of the BRIC countries as well as other global factors such as global warming, third world poverty and global financial stability.

• Evaluate the impact to UK based organisations of two policies of the European Union one of which must be the existence of the Eurozone.

Be able to assess the significance of the global factors that shape national business activities:

What is globalisation ?

Globalization "is the closer integration of the countries and peoples of the world ...brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders." (Stiglitz, J. 2002, Globalization and its Discontents, New York and London: Norton)

Worldwide movement toward economic, financial, trade, and communications integration. (Business Dictionary.com)

Globalisation

Financial implications◦ Access to global finance markets to raise capital◦ Global stock market variations can affect company value◦ More opportunities for FDI (Foreign Direct Investment)

Access to the global “free-market”◦ Reduction in trade barriers between countries◦ More markets for their products◦ Opportunities for outsourcing globally

Instant communication

Economic implications◦ The main argument is that globalisation leads to economic growth◦ Is this true for all nations?

So what does Globalisation mean for business?

The 1929 crash. ◦ What was the economic situation at the time?◦ What caused the crash?◦ How did the crash happen?◦ What were the consequences?

The 1987 crash. Read the BBC article on GOAL.◦ What happened? And why?

The 2007 crash (The love of money)◦ Key Questions

How is the crisis described? What was the real threat to the economy? What happened to stock markets worldwide when Lehman Brothers

collapsed? Why were people confused with the US bailout policy? What were the consequences of the lending freeze?

◦ To find out more watch all 3 episodes of the BBC “Love of Money” series

Global Finance: Stock market crashes

The European Union EU was created in 1951 Treaty of Rome signed in 1957 to establish

the EEC:◦ Belgium, France, Germany, Italy, Luxembourg,

Netherlands◦ 1973: Denmark, Ireland and the UK◦ 1981: Greece◦ 1986: Portugal and Spain◦ 1995: Austria, Finland and Sweden

In 2004 ten countries joined:◦ Cyprus, Czech Republic, Estonia, Hungary. Latvia, Lithuania,

Malta, Poland, Sloval Republic, Slovenia

In 2007◦ Bulgaria, Romania

On 1st July 2013 Croatia set to join

Macedonia, Montenegro, Serbia: now official candidates

Iceland and Turkey and Croatia have also applied for membership

The European Union

Growth of the European Union

“Copenhagen Criteria” for EU membership:

◦ A stable democracy, respecting human rights, the rule of law, protection of minorities

◦ A functioning market economy

◦ Adopt the common rules, standards and policies that make up the body of EU law

The European Union

On 1 January 1999 eleven EU countries started the Eurozone◦ Exchange rates were fixed and Euro introduced

Greece joined in January 2002

UK, Sweden, Denmark did not join the Euro

Greece Financial Crisis

Eurozone

Price stability◦ Inflation must be no more than 1.5% higher than best 3

performing states during the previous year Government finances

◦ Annual deficit to be no more than 3% of previous year’s GDP

Exchange rates◦ Two years participation in EU exchange-rate mechanism◦ Country must not have devalued its currency during that

period Long term interest rates

◦ No more than 2% higher that of the three countries in EU with best inflation records

Eurozone convergence criteria

Eurozone

Check out these links:◦ http://www.bbc.co.uk/news/special_reports/global_

economy/

◦ http://freevideo.rt.com/search?q=eurozone

◦ Immediate risk is of a Greek exit and the knock-on effects for Spain, Italy, Portugal and Ireland

◦ Greek exit will trigger exit of capital and savings from banks of those nations at risk

Eurozone Crisis

The regulation on the Free Movement of Workers within the European Community was completed in 1968 and states:

◦ Any citizen of a member state is entitled to take up work in the territory of another member state without restriction

◦ Those migrant workers must be treated the same as any of that country’s national workers

◦ Such workers have the same rights to training, social benefits, trade union rights and tax benefits as national workers

Free movement of labour

Key rules adopted within the Schengen framework include:◦ removal of checks on persons at the internal borders;◦ a common set of rules applying to people crossing the

external borders of the EU Member States;◦ harmonisation of the conditions of entry and of the rules

on visas for short stays;◦ enhanced police cooperation (including rights of cross-

border surveillance and hot pursuit);◦ stronger judicial cooperation through a faster extradition

system and transfer of enforcement of criminal judgments;◦ establishment and development of the Schengen

Information System (SIS).

Schengen Agreement 1985

Source: http://europa.eu/legislation_summaries/justice_freedom_security/fre

e_movement_of_persons_asylum_immigration/l33020_en.htm

Common Agricultural Policy

Environmental Policy

Transport Policy

Food Law programme

Trading standards

Other policy areas

Check GOAL for further information on:◦ Policy of European Monetary Union◦ Free Movement of Labour within the EC

Watch videos on Eurozone crisis and conduct further research

Preparation for your presentation

You are required to produce a presentation which addresses the following:

• Discuss the significance of international trade to UK organisations.

• Analyse the impact on organisations operating in the UK of the growing economic, social and political influence of the BRIC countries as well as other global factors such as global warming, third world poverty and global financial stability.

• Evaluate the impact to UK based organisations of two policies of the European Union one of which must be the existence of the Eurozone.

Be able to assess the significance of the global factors that shape national business activities: