Business and Organization - Essay Example

Business and Organization Lecturer: Significance of international trade to UK business organizations UK being an open economy means that businesses and households in the economy are capable of engaging in trade with other nations. International trade being the exchange of capital, products and services to other nations has various advantages for UK like greater utilization of resources, importation of products that are not produced locally as well as increasing the variety of choices for consumers to choose from. Nevertheless, international trade poses disadvantages associated with it to the UK economy together with the loss of jobs and increased the level of dependency to foreign markets (Dudovskiy, 2013). International trade in UK is essential for country’s economy because it is vital for the country to sustain its economic strength as well as progress in the increasingly competitive environment. UK economy relies on foreign trade with the government supporting unrestricted trade and championing for international trade organizations. Among the nation’s top 500 companies, 60 of them are American; however, the country, main trading partner is the UE member states (Encyclopedia of Nations, 2014). International trade is not only essential for UK’s economic growth but also there are various benefits for global organizations and the general economy of the world. Without international trade it would not have been possible for the country to attain its prevailing success level it finds itself in now. International trade remains the main source of the nation’s revenue; moreover, the nation’s GDP relies on it since the country has been participating in the international trade for decades, which makes the country an essential player in international trade. International trade accounts for almost half of the nation’s GDP and contributes to various benefits to the UK economy like enhancing domestic competitiveness, increasing sales and profits, decreasing the dependence on the existing markets as well as increasing the potential of business expansion. However, considering domestic UK organizations that focus on the domestic markets to gain steady profits, international trade increases competition and limits the possibility of the organization growing. However, international UK organizations trading in other countries are capable of earning high profits and increasing its customer base. Moreover, through international trade, it is possible for an organization to decrease the production costs because when UK companies build production plants in host nations where the cost of production is low compared to the cost of production in UK then the organization is capable of increasing its profits. The decrease in production costs associated with international trade also decreases the consumer price. Because of the presence of international markets, UK organizations are capable of attaining high earnings since margins in some markets are beyond those in the domestic market; moreover, international trade allows UK organizations the ability to spread risks because sales within the home market may decline while sales overseas are booming. As well, international trade offer UK organizations the opportunity to develop a competitive edge because of the exposure to intense competition, fresh products and efficient technologies as well as enhanced working practices. International trade provides UK organizations the opportunity of increased growth that results in benefits associated with economies of scale (The Times 100, n.d). Impact of global factors on UK business organizations Global factors that influence UK businesses include the increased scale of international trade, increased level of multiculturalism within UK organizations as well as the increased level of interdependence on national economies. Effective analysis of global forces on UK organizations can be efficiently analysed through PEST analysis tool in relation to businesses in the country. Political, economic, societal and technological factors are global factors that sway UK businesses. International political environment results from interactions between domestic and foreign political environment with the international political environment constantly changing that in return affect the domestic political environment. For instance, the attack on WTC and the changing WTO policies influence domestic environments in various nations among them the UK; therefore, for UK multinationals operation in several nations have to study the environment in the various nations (Jain, Trehan & Trehan, n.d). Economic environment is the most significant component within the international environment in trade and is usually dynamic and keeps on changing in accordance with government policies in the various nations (Jain, Trehan & Trehan, n.d). Economic conditions of the economy influence UK businesses because f the income level, purchasing power of the public and the current price level of the economy; hence, economic conditions affect demand and the nature of manufactured goods. Economic policies developed by the government affect policies of business organizations because managers have to develop business policies in accordance with the prevailing economic policies. Business environment is made up of factors that influence business operations and the factors can be classified in two broad categories that include external and internal factors in the business environment (Jain, Trehan & Trehan, n.d). In international trade, the external factors are factors that cannot be controlled at any cost leaving only UK business to adopt to these factors that include political forces, legal practices, advances in technology and cultural influences. Internal factors that influence UK businesses in the international trade involve factors that can be controlled by the management of the organization and the factors include land, labour, business location and capital among others. Social factors that influence UK organizations in international trade include insights into behaviour, tastes and lifestyle of the various populations in the international market. Purchasing behaviour in consumers is heavily influenced by structural changes in population and consumer lifestyles; therefore, in the global environment UK businesses have to consider the social and cultural differences in the various countries the organizations engage with. Legal factors that influence businesses in international trade are associated with changes in regulations; hence, UK organizations in international trade have to consider the legal issues in various situations. Laws change with time and organizations have to be aware of the changes like in the area of consumer protection, environmental legislation and health and safety laws among others. Technological factors influence strategies in business because they influence opportunities for businesses to adopt fresh innovations that help businesses decrease costs and create new products. In the global trade, technological advances help businesses gain competitive advantage because technology is major global aspect in globalization. Through technology, businesses are capable of communicating with customers across the globe; hence, technological factors have a great impetus within the international business environment. Impact of policies of the European Union on UK business organisations Membership to EU affects the UK economy in several ways; however, the main effects to UK businesses arise from the single market, a programme for economic integration that guarantees EU’s four freedoms. Moreover, other economic of EU is felt in various aspects of the policy like the EU’s exclusive competence to negotiate agreements with nations that are not members of the union. Hence, this membership to the EU profoundly influences UK’s trade relations with nations that are not members of the union. For instance, EU policies do not allow member states to activate autonomous trade policies like pursuing joint trade accords that involve EU non-member states. Hence, the EU affects businesses by setting policies that any country outside the EU that wants to do business with any members of EU has to comply with. Policies that allow trade between EU member states offer a large market because EU is a huge economic zone that offers UK businesses a relatively level playing ground in carrying out their business. The UK, which traditionally was considered to be an open trade economy benefits from the fact EU negotiates on behalf of the largest single market because it gives the country a greater clout than it would on its own. The single market enable UK organizations to establish new branches across the union while complying with EU competition law. The EU’s policy on competition proves essential in opening up areas that were closed to fresh entrants, which enable UK business organizations to expand across the continent. The key benefits for businesses is that the single market offers one set of rules instead of 27 different regulations regarding exportation or even operating in more than one EU member states. Even though the policy of the single market has caused some difficulties in some areas, the overall benefit to UK businesses has been considerable. Being a member of the EU ensures that British business organizations and British citizens are free to carry out their activities without any extra charge, because of the single market policy (Euromove, 2011). UK’s membership to the EU has had very positive impact on the country’s business organizations since it eased the organizations’ access to the EU which is one of the largest markets in the world. UK organizations also benefit from the EU policy that allows movement of individuals across the member states since the organizations are capable of recruiting staff from across the EU. Moreover, being a member of EU has been beneficial to UK organizations in terms of the capability to purchase and sell products both within and beyond the EU markets because there are no prohibitive tariffs (Thompson, 2013). Hence, EU policies seem to promote the interests of the UK business firms mostly through the various policies that address employment, consumer and tax regulation. References Dudovskiy, J. (2013). Significance of International Trade to UK Business Organisations. research-methodology. Available at: http://research-methodology.net/significance-of-international-trade-to-uk-business-organisations/ Encyclopedia of Nations (2014). United Kingdom – International Trade. Available at http://www.nationsencyclopedia.com/economies/Europe/United-Kingdom-INTERNATIONAL-TRADE.html Euromove (2011).The Economic Benefits to the UK of EU Membership. Available at http://www.euromove.org.uk/index.php?id=15296 Jain TR, Trehan M. & Trehan. (n.d). Business Environment (for BBA -1). FK Publications. The Times 100. (n.d). Supporting international trade: A British Trade International case study available at http://businesscasestudies.co.uk/british-trade-international/supporting-international-trade/why-do-uk-companies-export.html#axzz2tCWtVjgD Thompson, G. (2013). The Economic Impact of EU Membership on the UK. parliament.uk. Available at http://www.parliament.uk/business/publications/research/briefing-papers/SN06730/the-economic-impact-of-eu-membership-on-the-uk Read More