The Importance of International Trade to Two UK Business Organisations - Essay Example

? Business Environment Business Environment a) Discuss the importance of International trade to two or more UK business organisations. Trading internationally has significance importance for all the companies that indulge themselves in international trading. International trading usually result in expansion and increased market share, increased access to foreign markets, increased recognition and increased profitability for the company. On the other hand international trading is beneficial to the economy of the country which affects the balance of payment. (HOLDEN, MATTHEWS & THOMPSON. 1995) In UK there are many businesses which export and import product internationally. There are big names in UK like Unilever, Barclays, HSBC, Tesco, Marks and Spencer etc who are involved in trading internationally. To emphasize on Marks and Spencer it is been one of the oldest British retailer selling clothes and luxury food products. It operates in 40 countries of the world and is a well known brand world wide. Due to its vast operations world wide M&S is a global competitor for many international clothing brands. This global coverage through international trade has led to expansion in manufacturing activities of M&S worldwide which have made it profitable by outsourcing its manufacturing activities easily in cheaper countries which have made it possible for the company to compete in international market on low cost and maintain its margins. Due to its international trade, M&S has also altered their products in accordance with the demand of international market which have make the company deal with many types of commodities serving many markets worldwide. (COADE. 1997; BRUCE, MOORE & BIRTWISTLE. 2004) On the other hand Tesco is one of the largest retail chains in Britain which has grown steadily over time and has internationalized its operations throughout the world. The international trade pursued by Tesco has also benefited it in the similar ways; Tesco being a very strong player in the local market is able to use its brand successfully around the world and has gained next level recognition throughout the world. Due to internationalization its operations has expanded in many countries of the world like Malaysia, Czech Republic, Poland, USA etc. where it has achieved economies of scales resulting in lower operating costs and a better ability to compete internationally with lower prices. On the other hand international trading is extremely beneficial to Tesco’s financials that has become very significant in the group results of Tesco. Overseas trading accounts for 60% of Tesco’s total results and its makes up 20% of current trading profits, while most of the operations worldwide are either profitable or on breakeven and in many countries it is a market leader. Another advantage the international retailing of Tesco is that due to its operations in many markets, it overcomes or reduces its risks of failure. For e.g. Tesco has recently started operating in US and its still a loss making region. However this loss is compensated by the profits generated by the others regions which make Tesco a profitable group. International trade not only can result in cost saving but it also leads to international recognition, higher revenues and profits, dispersed risk which are all beneficial for the business as well as the UK economy. (FERNIE. 2005; SETH, & RANDALL. 2000) b) Analyse the impact of two global factors on two or more UK business organisations. Organisation operating worldwide and trading internationally faces much more difficulties as locally operated businesses. Due to the globalization Barclays faces different environmental conditions in geographic regions. Banking sector works closely with the laws and regulations. Like political factors legal factors mostly depend on local legislation and regulation. Risk management policies of Barclays will be in accordance to legislation. Legislative compliance should be incorporated in the over all strategy, these laws include health and safety, employment etc prevailing in the operating country. Technological advancement has changed the way things operate in every industry including the banking. Drastic changes were seen with the introduction of e-banking when everything manual was changed into electronic. In this dynamic world technological changes and advancements will continue to occur and it is extremely important for Barclays to keep pace with the change by introducing products incorporating technology for higher customer satisfaction in order to lead the banking industry. Socio-cultural factors of a particular region affect the organizations fit in its environment too. These factors greatly influence the success of particular products in a region for e.g. people tend to save more in the countries where population is low; similarly credit cards consumption is higher in countries where it is signified as a status symbol. Many such social and cultural factors can affect the demand of particular product that Barclay’s offer. (JOHNSON, SCHOLES & WHITTINGTON. 2008; BARCLAYS PLC. 2010) Taking Marks & Spencer as an example, the retail industry is affected by many global factors which affect the strategies of the company. Operating internationally, the factor that can affect most is the international economy which includes the international demand of products. This will usually depend upon the economic conditions prevailing in the country. On the other hand, other economic factors that could affect the business are the interest rates, exchange rates, inflation rate, GDPs, level of income, etc in a particular country. Social factors can be extremely important for M&S prevailing in a particular country. These factors and people’s preferences will determine the strategy to compete for e.g. what designs would be in fashion etc. The other social factor that affects the business these days are the increasing awareness of the environmental and social concerns these days. For e.g. M&S had been accused to use child labour in there manufacturing process in Indonesia in 1999, such instances could affect the companies’ reputation and business all around the world. Technological advancements can also affect business in many ways. Like the increased access to internet has made M&S to sell its products online, further technological advancements is also incorporated into manufacturing processes which results in cost saving and product differentiation all beneficial for the business. c) Evaluate the impact of at least two European Union policies on two or more UK business organizations: Countries that form a part of the cluster of European Union are bound to comply with the EU laws, policies and regulations, being a member of EU, UK businesses and companies have to comply with all theses rules. These rules cover many aspects of businesses like consumer protection, health and safety, equal opportunities, environmental laws etc. There are many laws of EU that have to be complied with for e.g. This law affects the UK businesses in many aspects and its trading activities. CSR has also been an issue recently highlighted by EU policies which states Corporate Social Responsibility (CSR) is a necessary and natural counterpart to the drive for a more competitive Europe. Responsible business behaviour is crucial for establising trust towards the market and economy, trade openness and globalisation. These policies have included in UK law for e.g. includes working time regulations- which sets specific working hours for the businesses and it becomes compulsory for the companies operating under EU cluster to comply with such law, annual leave directives- which allows all workers to the leaves of four weeks. (BROWNE. 2001; EU ENTERPRISE AND INUSTRY.2012) EU Policies have mostly focused on the integration of the economies of all the member countries of EU which results in the promotion of trade between these counties. Some policies to integrate include making the region as a single market for goods and removing the remaining obstacles for free circulation of products, providing a major boost for trade in goods among the EU Member States for which steps have been taken where trading in one single currency all over EU countries, making custom unions which made policies making inwards and outwards trade easier between the countries, establishment of free trade areas where trade takes place on a tariff and quota free trade basis and establishment of economic monetary union (EMU) which maintains harmony economically, creates unification and puts limits to independent actions of states. (JOHNSON & TURNER. 1999; EU ENTERPRISE AND INUSTRY.2012) The impact of EU laws on UK companies can be determined by the example of Unilever, wherein the company won a two year battle to supply its products to EU countries. On one occasion the giant such as Unilever mentioned that EU standing committee had voted in their favour as the company uses authorized products whose key ingredients meet the standards. This shows that even giants like Unilever in order to operate in EU countries have to comply with European Union laws. (BROWNE. 2001) Bibliography HOLDEN, K., MATTHEWS, K., & THOMPSON, J. L. (1995). The UK economy today. Manchester, Manchester University Press. SETH, A., & RANDALL, G. (2000). The grocers the rise and rise of the supermarket chains. London, Kogan Page. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=61220. FERNIE, J. (2005). International retailing. Bradford, England, Emerald Group Pub. http://site.ebrary.com/id/10085625. BRUCE, M., MOORE, C., & BIRTWISTLE, G. (2004). International retail marketing: a case study approach. Oxford, Elsevier Butterworth-Heinemann. BROWNE, D. J. (2001). Heinemann business studies for AS level. Oxford, Heinemann. COADE, N. (1997). Managing international business. London, International Thomson Business Press. JOHNSON, G., SCHOLES, K., & WHITTINGTON, R. (2008). Exploring corporate strategy: text & cases. India, Pearson Education Limited. BARCLAYS PLC. (2010). Barclays PLC Annual Report 2010. Available at: http://www.barclays.com/annualreport2010 [Accessed: 16 June 2012] JOHNSON, D., & TURNER, C. (1999). European business: policy challenges for the new commercial environment. London [u.a.], Routledge. EU ENTERPRISE AND INUSTRY. (2012). Policy highlights overview. Available at: http://ec.europa.eu/enterprise/policies/index_en.htm [Accessed: 25 June 2012] Read More