Nissans Trade and Investment between the Member States - Research Paper Example

?European Business Table of Contents Part Impact of Current Global Economic Situation on Nissan’s Trade and Investment between Member s 3 1Introduction 3 1.2 The Current Global Economic Situation 4 1.3 Impact on Nissan’s Business Operations In Terms Of Trade as well as Investment Connecting Member States 5 1.4 Conclusion 8 Part 2: Analysis of the Impact Created by the Enlargement of EU on UK Companies and an Explanation of the Strategies Adopted by the Companies to Assess Opportunities for Selling in Other EU States 9 2.1Introduction 9 2.2 Impact Created by the Enlargement of EU on UK Companies 10 2.3 Strategies Adopted by the UK Companies to Sell Their Products and Services to Other Member States of EU 13 2.4 Conclusion 14 References 15 Part 1: Impact of Current Global Economic Situation on Nissan’s Trade and Investment between Member States 1.1 Introduction The recent economic downturn instigated from a particular region but created a strong and long-lasting impact on the global economy comprising the developed as well as developing countries. As a result, various important countries were trapped in a deflationary ensnare. The impact was visible almost in every sector of the global economy. One of the major causes revealed by the evidences is the inefficiency of the financial markets in controlling the liquidity ratio with over liberalised monetary policies in most of the developed countries. Notably, the impact was strongest in terms of international trade and investment (UNCTAD, 2009). Considering the fact, this report will emphasise on the current global economic situation. The impact of the current trends will be further analysed with the example of a multinational company, Nissan in terms of international trade and investment. 1.2 The Current Global Economic Situation In the current scenario of the global economy, most of the developed countries, including the member states of European Union can be witnessed to struggle in their recovery stage. The growth prospects of the world economy has been quite evident but is remarked to be weak and uneven by various market analysts. The recovery of the major developed economies further seems to be fragile and anecdotal which are ineffective to secure economic stability in the near future (UNCTAD, 2010). The financial measures undertaken by the governments of developed countries have significantly contributed to the financial stability of the world economy. However, the structural limitations faced by these economies are likely to cause risks in relation to the debt, real estate and credit markets along with other factors which in turn can affect the overall economic stability. Lower GDP growth rate, widening fiscal deficit, political conflict, and other similar issues can be observed as the most effective trends in the current economic situation concerning the developed countries (UNCTAD, 2010). Surprisingly, the developing countries were recorded to be least effected by the recent economic downturn, gaining an extra advantage of sovereignty in the world economy. Comparatively well-structured fiscal policies and a strong growth of GDP have evidently signified the developing countries as the major drivers of economic upturn in the current scenario. Contradicting to the developed economies, the growth trends of the developing nations signify ample opportunities for international trade and investment. However, the economies can be witnessed to possess few limitations in terms of their dependency on the developed countries. Moreover, the developing economies are also recorded to face the challenges in terms of structural issues which depict a moderate growth prospect on the future context (Department for Business Innovation & Skills, 2011). These trends can also be witnessed in the context of EU economies. Notably, the member states of EU comprises of both developed as well as developing economies. This depicts that the European market is likely to face the risks of weak and moderate growth along with various challenges in terms of fiscal deficit and moderate GDP growth rate. The EU economies are also stated to face several risks which can hamper the growth of the member states. For instance, the declining of currency values, ineffective financial markets (i.e. debt, equity, and capital) and others are likely to negatively affect the trade as well as investment connecting the member states (Gardo & Martin, 2010). 1.3 Impact on Nissan’s Business Operations In Terms Of Trade as well as Investment Connecting Member States Nissan Motor Co., Ltd. was established in 1934, when its mother company, Jidosha-Seido Ltd. was taken-over by Nikon Sangyo Co. and was renamed. After its successful establishment in the major regions, such as Australia and the United States, the company preceded towards the installation of its operations in the member states of EU region. Since then the company had gained significant growth in the EU markets, signifying it as one of the major and most potential markets for the company (Nissan, 2011). Being a global company, it is quite apparent that the performances of Nissan will be strongly affected by the global economic downturn. Another fact contributing to the aspect relates with the organisational operations of the multinational company. For instance, Nissan’s operations in the EU markets are mostly based on the interstate trade as well as investment that are quite likely to be effected by the global economic situation (Nissan, 2011). It is due to the fact that a strong effect of the recent economic turmoil is created upon the trade as well as investment decisions taken by the market players in the international platform (Gardo & Martin, 2010). Subsequently, this forced the managerial decisions regarding the trade and investment operations of the company to be re-evaluated and reframed. The Japanese automaker in the pre-recessionary period was chiefly focussed on its investment to trade new products almost every month of a fiscal year to attract and retain customers, especially in the EU markets. But, considering the impacts of the current global economic situation, the company has decided to abandon this strategy. In turn the company will provide greater emphasis on developing its previous models in terms of engine quality and efficiency (Nissan, 2010). Another major strategy adopted by the company is its shift of focus from the mature markets to the customers in the emerging markets. The strategies further depict to provide considerable emphasis on the development of its brand awareness as well as brand recognition. This implies that the company is acting on a retrenchment of its investment which in turn has a significant effect on the trade affairs executed by the company in the developed regions (Nissan, 2010). 1.4 Conclusion With reference to the above discussion it is quite apparent that Nissan’s strategies in the developed regions, including the EU member states, are focussing on the retrenchment of investments in large volumes and thus affect its trade between the member states. The strategic alliances undertaken after the recent economic downturn can also be observed as a risk averting process. It is worth mentioning that these strategies are likely to have a negative impact on the trade and investment sectors of the industry. The situation is likely to be again effected by the shift of focus to the emerging countries. However, with the development of the brand and a more effective customer oriented approach, the company can be observed to be set on the objective to grasp the available opportunities present in the EU markets. Therefore, it can be stated that the current global economic situation has a considerable impact on the organisational operations related to trade as well as investments. Part 2: Analysis of the Impact Created by the Enlargement of EU on UK Companies and an Explanation of the Strategies Adopted by the Companies to Assess Opportunities for Selling in Other EU States 2.1 Introduction The enlargement of EU possesses a historical impact on the economic development processes of the European countries. The first initiative to create the union can be witnessed in the 1950s with the establishment of European Coal and Steel Community which was further accompanied by European Economic Community and European Atomic Energy Community till the end of 1957. In the year 1967, these three communities accumulatively formed the European Community which came to be known as European Union by the year 1993 (Archick & Kim, 2008). Since its introduction to the world economy, EU has continued to enlarge. Presently, the union comprises of 27 member countries of the continent and is looking forward to further enlargement (European Parliament, 2010). Undoubtedly, the enlargement had a major impact on the economic development of the member states facilitating labour and financial resources. Thus, the enlargement of EU also had a considerable affect on the companies based in the member states. This report, thereby, will be focussed on the assessment of the affect that EU enlargement had on the UK companies. It will further intend to explain the strategies adopted by the companies in order to gain the opportunities rendered by the enlargement. 2.2 Impact Created by the Enlargement of EU on UK Companies The substantial impact created by the EU enlargement includes the rise in migration rates which in turn have significantly increased the population in the member states. Due to the fact, employment opportunities have also been recorded to increase in the region with facilitated distribution of resources between the member countries. However, the GDP rate has been recorded and forecasted to be growing unevenly causing challenges for the companies (Barrell & Et. Al., 2007). The opportunities gained by the UK companies as an effect of EU enlargement is often attributed as the availability of low cost labour force. It is due to the fact that EU enlargement has significantly facilitated the collaboration between the developed European countries and the developing economies. Where the developing economies serve with skilled and low cost labours, developed economies provide considerable employment opportunities. Thus, EU enlargement has rewarded the UK companies with efficient and low cost labours from other member states (BBC News, 2006). Along with the availability of low cost and skilled labours, EU enlargement has also encouraged the trade between the member states. It is due to the fact that collaborative approaches between the member states proved beneficial in facilitating an efficient distribution of resources. Moreover, the enlargement also increased the growth prospects of the UK companies by influencing the market demand (Barysch, 2003). The expansion of EU has besides raised few limitations or challenges to be faced by the UK companies. For instance, the UK government had been witnessed to impose restrictions on the employment of unskilled labours from Bulgaria and Romania which raised multiple questions on the sustainability of the economy which in turn also affected the sustainable growth of the UK companies (BBC News, 2006). Another major challenge raised by the continuous enlargement of EU is the escalating competition between the organisations of the member states. As stated by the experts, most of the European economies are tending to follow the rules and policies of the developed economies, such as the UK, developing a standardised and highly competitive market. From the short-term perspective, the competition is likely to occur in terms of wage rates and migration rate of skilled labours. Therefore, the UK companies will require adopting aggressive competitive strategies for survival in the European market (Barysch, 2003). 2.3 Strategies Adopted by the UK Companies to Sell Their Products and Services to Other Member States of EU The products and services produced in the UK market are mostly exported to the member states of EU. It is in this context that the UK companies enjoy a significant opportunity to market their products as well as services to other European economies with almost no regulatory barriers and lower cost of distribution. Due to this reason most of the companies tend to focus on the member states for exporting their products as well as services. According to the updated report, 51% of the total products and services produced in the UK are marketed in various economies that are also recognised as the member states of EU (House of Lords, 2011). With the given consequences of the recent economic downturn the UK companies in general is adopting strategies to attract potential customers from the foreign markets, i.e. the European markets. In other words, the strategies adopted by the UK companies are observed to be more customer-oriented than it was in the pre-recessionary period. The further strategies adopted by the UK companies also relate to the cost or pricing of the products as well as services rendered in the other European markets (House of Lords, 2011). Branding strategies have also emerged to be one of the most significant strategies to attract and retain customers in the European market. For example, companies, such as Nissan has been recorded to focus on the customer buying behaviour and its branding strategies to market its product in the European countries. It also signifies the pricing strategies with due consideration in this regard (Nissan, 2010). 2.4 Conclusion Changes in the macro-economic environment always have a considerable impact on the micro-economic environment of a region. The fact can be well-observed in the case of the UK companies. Due to the continuous expansion of EU, the UK based companies have gained various opportunities that in turn facilitated the overall growth of the companies. For instance, cross-border trade with larger profit margins, greater demand and low cost were few of the noteworthy benefits gained by the UK companies due to EU enlargement. On the contrary, the expansion has also raised few limitations in terms of competition and sustainability issues. The challenges were again boosted by the consequences of the recent economic downturn which indicated the necessity to re-structure trade and investment strategies adopted by the UK companies. Subsequently, the strategies adopted by the companies are witnessed to be more customer-oriented and focussed on the pricing and branding aspects with the intention of gaining competitive advantage in the EU market. References Archick, K. & Kim, J., 2008. European Union Enlargement. Congressional Research Service. Barrell, R. & Et. Al., 2007. EU Enlargement and Migration: Assessing the Macroeconomic Impacts. NIESR Discussion Paper No. 292. Barysch, K., 2003. Does Enlargement Matter for the EU Economy? Centre for European Reform. BBC News, 2006. EU Expansion 'Boosts UK Economy'. Politics. [Online] Available at: http://news.bbc.co.uk/2/hi/uk_news/politics/6173804.stm [Accessed May 24, 2011]. Department for Business Innovation & Skills, 2011. Global Context - How Has World Trade And Investment Developed, What's Next? Trade and Investment Analytical Papers. Vol: 1. European Parliament, 2010. The EU Family Of 27 Countries - But How Many More Will Join? Article. [Online] Available at: http://www.europarl.europa.eu/en/headlines/content/20101112STO94320/html/The-EU-family-of-27-countries-but-how-many-more-will-join [Accessed May 24, 2011]. Gardo, S. & Martin, R., 2010. The Impact of the Global Economic and Financial Crisis on Central, Eastern and South-Eastern Europe. Occasional Paper Series, Vol: 114. House of Lords, 2011. The EU Single Market. The Select Committee on the European Union. [Online] Available at: http://ramanujam1.parliament.uk/documents/lords-committees/eu-sub-com-b/singlemarketinquiry/cEUB240111ev6.pdf [Accessed May 24, 2011]. Nissan, 2010. Strategies after the Financial Crisis. Annual Report 2010. [Online] Available at: http://www.nissan-global.com/EN/DOCUMENT/PDF/AR/2010/AR2010_E_All.pdf [Accessed May 24, 2011]. Nissan, 2011. History. Corporate. [Online] Available at: http://www.nissan.co.uk/GB/en/inside-nissan/corporate/history.html [Accessed May 24, 2011]. UNCTAD, 2009. The Global Economic Crisis: Systemic Failures and Multilateral Remedies. UNCTAD Secretariat Task Force on Systemic Issues and Economic Cooperation. UNCTAD, 2010. World Economic Situation and Prospects 2011. Pre-Release. Read More