Global Factors that Shape Business in the United Kingdom - Case Study Example

Global Factors that Shape Business in the United Kingdom Introduction The business environment in the United Kingdom (UK) is one that is influenced by numerous variables. Some of these variables emanate from the local market whereas others emanate from the global market. In the global market, issues such as supply and demand of products, national trade policies, exchange rates, tax systems and foreign investments made by companies among many other factors have a direct and indirect implications for businesses operating in the UK (Giudice , Kuenzel & Springbett 2012; Steers 2006). This research paper is an investigation into the major global factors that have influence on business in the UK. The research aims to divulge a number of possible global influences with direct and in-direct implications for businesses in the UK. Firstly, this paper will look at international trade and illustrate how it impacts on business in the UK. Secondly, it will discuss key global factors that influence UK business. Lastly, this paper will examine the European Union (EU) and depict its impact on business in the UK. International Trade The term international trade refers to “the exchange of capital goods and services across international borders or territories.” International trade has political economic and social implications for a country and as such it is interestingly a quiet important tool for diplomacy. International trade has the effect of transferring development from one nation to the other and therefore quite beneficial. Hence international trade can serve to improve people’s living standards all over the world (Love & Lattimore 2009). Political issues such as nature of government or change in governance to a great extent influence business operation across borders (Bartlett & Ghoshal 2002). These factors create uncertainty that in turn influence decisions of business owners on whether to take financial risks or otherwise given the prevailing political climate. Politics also shapes policies made by legislators which in turn have an impact on business. First, the forms of regulations put in place have had a great influence on the kind of business activities that take place in the UK. Such regulations, for instance the environmental regulation that took effect in 2011 was meant to offer direction on waste disposal. On one hand the legislation is aimed at environmental conservation which is a good cause while on the other hand it could attract hefty fines as an implication born by non-compliant businesses (4Imprint 2013). Trade laws also play a critical role in influencing UK’s business. For instance, liberalization of trade promises better trade benefits and advantages. This is more so in international trade where countries stand to benefit substantially from one another (Anderson 2011). According to Love &Lattimore (2009) liberalization of trade mainly involves the relaxation of laws that hinder trade. It serves to facilitate the growth of international trade. Liberalization according to Anderson (2011) has several advantages such as the flow of labour from one country to the other and increasing importation and exportation of products. This improves on productivity and ultimately on business development. Liberalization also comes with technological advantages where technology can be transferred from one country to another. Such technology leads to better communication and transport channels which impart on the overall development of the UK (Bartlett & Ghoshal 2002). It goes without saying that strict regulations prove counterproductive and would only serve to discourage international trade. The implication for UK business would be such that importations are made expensive while exports are derailed. As a result this increases the cost of international trade. Yet another economic factor influencing business activities in the UK is the cost of transportation as an element of influence over UK’s international trade. The formulation of legislation towards free flow of goods and services would be in futility if no proper mechanisms in terms of transportation are put in place to facilitate and ease the movement of goods and services. Transportation; whether in-land or at the port and other export/import termini, has infrastructural implications that have a direct influence on the facilitation of international trade as well as for businesses in the UK (Chappell & Nuttal 2003). The challenge of growing volumes of trade between the UK and other trade partners is yet another force to reckon with as it becomes quite cumbersome to manage the ever increasing number of businesses across international borders (Chappell & Nuttal 2003). Due to the insecurity risks that are associated with international borders, increased security protocols introduced by the UK government slow down international trade since it adds on to the cost of trading (Chappell & Nuttal 2003). Global Factors Global issues such as political uncertainty, introduction of strict policies and regulations, environmental regulation and terrorism also impede on business operations in the UK and the overall growth of the country’s economy. Political uncertainty is directly linked to economic uncertainty. Hence, uncertainty of the UK economy performance is one of the challenges facing UK international trade and businesses. A survey conducted by IPSOS in 2011 reveals that economic optimism is on the decline among British business leaders. The dwindling faith in the economic system is widely attributable to the recent Eurozone economic crisis (IPSOS 2011). 4imprint (2013) reports that uncertainty about the economy, policies, environmental concerns, terrorism and so on serve to shape investors’ viewpoints of international trade. This in turn predisposes UK international trade stakeholders to set up a contingency mechanism to oversee unprecedented occurrences through appropriate planning both in the short term and long term (4imprint 2013). Strict policies and regulation especially those relating to environmental conservation is also another global factor that has significant impact on UK businesses.The hyped debate on climate change specifically on carbon emissions has notable implications on tariffs levied on imported/exported carbon goods pausing a great threat to international trade between the UK and other countries in the international arena (Chappell & Nuttal 2003). European Union The role of conglomerates in influencing businesses is substantially crucial for the success of a country in international trade; such is the European Union. The BIEU (2013) describes the EU as an economic and political partnership between 27 European countries located centrally in Europe. Some of the member states of the European Union include; Austria, Belgium, Denmark, Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Spain, Sweden, and the UK. The aim of the union stems beyond just economic and political unity to becoming an instrument of stability, corporation, development and sustainability of member states. Such conglomerates as the EU are the basis on which social aspects of international trade are grounded (Love & Lattimore 2009). The EU is said to be the world’s biggest trader accounting for a whopping 20% of the world’s total international trade (EU 2013). It is committed to free trade among its member states and it advocates for the liberalisation of trade worldwide. The implication for UK’s international trade therefore is such that it stands to enjoy the benefits that its membership to the EU presents. Such benefits include standard tariffs for member states during international trade. Nonetheless, UK’s international trade can also be limited by policies prescribed by the EU as it is a member state and hence bound by its legislations. Such limitations may encompass the use of shared natural resources (Chappell & Nuttal 2003). International agreements made between the UK and other trade partners such as European Union member states also influence UK’s international trade. The individual or personal interests of say EU member states in implementing a given legislation unanimously agreed upon visa-vis common interests of the union is at times conflicting in nature and this ultimately influences international trade (Chappell & Nuttal 2003). For instance, policy regarding “Origin Marking” – a piece of legislation that seeks to ensure that products imported into the UK are to be branded with labels stating their country of origin would translate to increased tariffs levied on goods coming from the regions other than the EU member states with direct implications on UK trade (Chappell & Nuttal 2003). Similarly, another benefit of EU membership according to the UK government OGC (2008) is eminent in the purpose of the EU’s procurement directives. The laws are such that they are tailored to secure the free flow of supplies, services and labour among member states. In this way, procurement laws in the UK advocate for competitiveness in international trade with direct implications for UK as a member state. This would translate to better earnings for UK businesses through the liberal manner in which business is conducted in the EU. Nonetheless, agencies tasked with the implementation of regulations also have a task to live up to especially in their role as coordinators. This is because lack of coordination leads to delays at border points that are followed by cost implications. This in turn impacts negatively on businesses in the UK (Chappell & Nuttal 2003). Conclusion Basically, this paper has discussed the major global factors that have influence on business in the UK. It has looked into international trade and illustrated how it impacts on business in the UK. Moreover, it has discussed key global factors that influence UK business and examined the EU and how it impacts on business in the UK. The findings of this paper show that, Political issues, trade laws, cost of transportation and strict to a great extent influence business operation across borders. These factors create uncertainty that in turn influence decisions of business owners on whether to take financial risks. It also influences the cost of trade thus affecting business operations. Moreover, global issues such as political uncertainty, introduction of strict policies and regulations, environmental regulation and terrorism also impede on business operations in the UK and the overall growth of the country’s economy. International agreements made between the UK and other trade partners such as EU member states also impacts on business in the UK. Some of the benefits associated with the EU include; standard tariffs and free flow of supplies, services and labour. References Anderson J E. 2011, International Trade Theory. Investment Analytical Papers. London. Bartlett, C.A & Ghoshal, S 2002, Managing across borders: The transnational solution, Harvard Business Press, MA. Chappell, M. & Nuttal, C 2003, Business and the European Union, Nelson Thornes, London. European Union (EU) 2013, How the EU works, viewed 23 August 2013 Giudice G, Kuenzel R & Springbett T 2012, UK Economy: The crisis in perspective, Routledge, London. 4Imprint 2013, Tackling the Top 10 Issues Facing Businesses Today, viewed 23 August 2013 IPSOS 2011, Economic Challenges Facing UK Business, viewed 23 August 2013 Office of Government Commerce (OGC) 2008, EU procurement guidance: Introduction to the EU procurement rules, viewed 23 August 2013 Steers, R 2006 Managing in the global economy, M.E Sharper, New York. Love, P & Lattimore, R.2009, International Trade: Free, Fair and Open? OECD Publishing, Paris. Read More