The Integration of European Union - Essay Example

Introduction The integration of European Union is one of the most important events in the history of Europe as it has brought about a change that has resulted into many benefits not only for businesses but for the Region as a whole encompassing important aspects such as socio-political. The question of whether the integration and standardization of EU will bring in some benefits for the businesses in 21st century is important questions as it outlines the various changes that may take place to complete revamp the way business was done in the region. This integration has resulted into free flow of goods, services as well as labor across the EU thus strengthening the very base for the economic development. Also the abolishment of conflicting laws and uniform rules and regulations will assist businesses to streamline and adapt uniform policies across the EU. This paper will discuss some of the benefits that businesses of 21st century may acquire due to integration of EU and will further discuss as to what are such benefits, how they may be of any help for the businesses. The focus of this paper will therefore be largely on examining the advantages and challenges of EU integration for businesses. European Union European Union comprises of 27 member States and is serving as a Political as well as Economic Union of European Countries. The basic philosophy behind the integration of Europe is to allow the regional integration by creating a single market for the whole of Europe. The basic theme of EU is despite having differences in the values and cultural aspects of the individual member countries; however such differences shall not be the basis of competition between member States. Thus despite creation of single currency and market, EU member States have retained their individual characteristics thus creating a fine amalgamation of integration which is advocating the formation of collective identify for EU while at the same time allowing individual member States to keep their own individual characteristics intact. Established in 1993 as a result of Maastricht Treaty, EU is now a region comprising of 500 million people contributing almost 30% of the share in the World Gross Domestic Product. At the global level, EU is therefore operating as a system of supernationalism as well as inter-governmentalism allowing member States to dominate the world scene in the disguise of an integrated Regional Community. One of the most important aspects of this integration is the fact that establishment of EU has resulted into the creation of a single market which not only allowed the free movement of people but also goods and services thus creating an strong window of opportunity for businesses working within the Region to flourish and prosper at least at the Regional Level. Further, the integration has resulted into the enactment of laws which have virtually abolished all the conflicting regulatory structures within the Region thus allowing businesses to follow one set of rules across the Region. Such facilitation therefore creates strong advantages as well as challenges for the businesses too. Creation of Single Market EU as a single market means businesses of 21st Century will not only find it easier to sell their goods and services across the market in most competitive manner. The removal of the trade barriers, free flow of goods and services as well as movement of labor is something which will greatly allow the modern businesses to improve their competitiveness not only at the regional level but also at the international level by leveraging the different competitive advantages held by each of the Member State. Further, the creation of a single EU market also means that the businesses will have a large pool of customers i.e. approx 500 million to serve. Such a large pool of readily available customers therefore will allow large businesses to achieve their economies of scale more quickly besides allowing small and medium enterprises to get an access to potentially larger markets outsides their own home countries. Further, as the businesses grow and achieve their economies of scale early, they will becoming more competitive thus further improving their chances to dominate the world market with the help of their improved cost structures and newly acquired efficiencies. What is also significant to note that the integration of EU will also attract new immigrants from outside the Region to make EU as their second home thus the overall pool of the customers will further broaden for businesses already working in the Region. What is however, significant to note that the international firms may not find it easier to enter into EU because EU is a regional alliance with a clear mandate of creating a single market for European firms therefore the opportunities and challenges that will be arising out of this integration will be more specific to the regional businesses. What is also however, important to understand that the global businesses have already started to set up EU specific businesses in order to take advantage of this integration. Large corporations are founding firms which are completely based in EU and focus on EU as the single market to serve. Viewed in this perspective, international businesses therefore may also be take advantage of the perceived benefits provided by the integration of EU as a single market. Besides offering advantages, the creation of single market also poses significant challenges to the businesses too. The increase in the market space will allow everyone to compete against everyone thus to remain sustainable in such environment will be a significant challenge for smaller businesses specially. The following section will discuss some of the challenges and opportunities that integration of EU may offer to the businesses in 21st century. Advantages and Challenges Abolishment of Conflicting Laws The business requirements of the 21st century would probably require a more seamless transition from one aspect of doing business to another. Over the period of time, businesses could not yield their full potential as they have to often face different sets of rules in each country they attempted to do business. The different accounting rules and regulations as well as incorporation laws made it literally difficult for large multi-national organizations to present their financial information into one uniform and standardized set of rules applicable to all countries where they work. (Harris & Moran, 2004). It is important to note that for facilitating a single market, it is important that all irrelevant and conflicting laws shall be abolished in order to create a regulatory environment which is not only same across the region but also assist businesses in achieving their objectives. Thus one of the most important advantages which businesses of 21st century may enjoy will be the creating of a uniform regulatory environment for them. This will not only allow the firms to have a uniform playing field to compete but will also provide similar advantage to all businesses as far as the regulatory support for the businesses is concerned. The removal of discriminatory laws will therefore further encourage the businesses across the region to easily incorporate into other member States and compete on fair terms with each other. Economic Stability Apart from the recent credit crunch, the overall GDP of EU increased after the creation of single market in EU. This also means that the overall productivity of the firms have greatly increased in recent past due to the integration process that took place across the EU. The introduction of Euro also served as a strong motivator for creating strong economic stability across the region as it allowed firms to insulate themselves against the foreign exchange risks as well as boosting the exports from the Region due to relative position of Euro against other major currencies of the world. (Madslien, 2007). Economic stability also resulted into the creation of an environment which was will be more conducive for the smaller businesses. Though the current financial meltdown may have resulted into the greater economic volatility however, as the EU progresses and the impact of recession started to lessen there will be lesser uncertainty and as such the smaller businesses specially will be more benefiting from the increased economic stability of the Region. Cheap Labor The integration of EU has also allowed the free movement of labor from one country to another. With less stringent immigration laws, the flow of cheap labor will increase and as such the modern businesses will be able to get access to skilled but cheap labor thus increasing their overall efficiency and ability to compete. Further, the demography of the Region indicate that there are certain countries such as Poland where the overall availability of cheap labor is large as compared to other member States therefore such opportunity will further provide leverage to the future businesses to either relocate to the places where labor is cheap or through favorable immigration laws, attract such labor to their home countries. In any way, the businesses of the 21st century will greatly benefit from availability of such cheap labor. (Ratten, 2007). Further, the reliance on countries such as India and China will decrease once the cheap labor from countries like Poland and Hungary will start to flow to the countries such as UK and Germany with strong manufacturing base. (Pizzati & Funck, 2002). Reseach studies also indicate that in order to allow full mobility of labor within the Region existing web of complex regulations further need to be revised to allow modern businesses to take full advantage of the cheap labor mobility across the region. (Floyd & McManus, 2009). Increased Competition as well as Demand As discussed above that the creation of single market will allow a level playing field of all to compete against each other. However, this increased competition will not only result into the increase of demand but it will also decrease the prices of inputs as well as finished goods. The increase in the competition however, may be tough for small businesses however, as far as large businesses are concerned, the overall benefits will be relatively more because of their economies of scale as well as other core competencies developed over the period of time. Cost Savings The removal of tariffs as well as other border controls will allow businesses to produce their goods at relatively lower costs. As discussed above that the future businesses will take benefit out of the increased demand and free mobility of workers as well as other inputs therefore this will definitely reduce the costs and further create room for improved competition. The following section will discuss some of the challenges that modern businesses will face due to this integration: Marketing Challenges One of the most important challenges that the businesses will face in the aftermath of this integration will be the marketing challenges. Integration of EU will create a single market with lot of diversity and the traditional implications for the marketers will readily change. (Paliwoda & Marinova, 2007). Due to increased competition, the overall marketing strategies will also change since the firms will have to compete on diversified basis. Managing Diversity The development of businesses in EU will largely depend upon how the businesses succeed in combining the culture with the business. It is argued that the success and failure of businesses in EU will largely depend upon how they firms manage the increasing diversity due to mobility of the workforce. (Harris P. R., 2004). Diversity will also important due to the fact that international businesses have entered into the region too and as such the overall demand for the skilled labor will increase to a extent where the presence of large and diversified workforce will be of enormous benefits for the firms. Thus diversity management will not only be a challenge to the regional businesses but also for the international businesses. (Simons, 2002) Public Relations Managing effective public relations is another significant challenge that businesses might face as a result of this integration. The transcendence of borders due to this integration will therefore also means greater expectations to be held by the customers therefore firms have to really manage their public relations in a manner that keep their survival intact besides allowing them to localize themselves into significantly diversified single market. (Thøgersen, 1998). With focus on serving the citizens of EU, the firms will therefore have to redesign their PR strategies in a manner that must allow them serve those customers who are increasingly getting aware of their rights and obligations. Corporate Governance The current failure of the financial institutions of the Region has put a lot of onus on the businesses to straighten up themselves and improve their internal control mechanisms besides improving the corporate governance system. It is largely anticipated that there will be large scale effort on the part of EU to further toughen the corporate governance rules and regulations thus increasing the overall challenges for the firms. Corporate governance is also significant due to the fact that EU is heading towards a uniform regulatory environment therefore it is anticipated that the new changes that will take place may be relatively more tough as the overall stakes and impact of the failure of businesses in regionally integrated environment may be high. Further, since the member States will keep intact their individual characteristics also therefore corporate governance requirements also need to take into consideration the cultural aspects also. (Braendle & Noll, 2006). Conclusion The integration of EU is one of the most significant moves towards regionalization of economies as well as political entities. The integration of EU has also resulted into the creation of a single market with uniform set of rules and regulations to follow. The implications of this integration for the businesses of 21st Century therefore can be entirely different given the fact that the basis of competition has relatively changes. It is important to note that though integration of EU is a regional phenomenon however, due to creation of a single market comprising of almost 500 million customers, international firms are also working hard to gain market space into such market. This alteration in the competitive landscape for the firms therefore has not resulted into the significant benefits but it will also create important challenges for the businesses in 21st Century. The creation of single market, the reduction in prices and increase in demand, improved competition as well as uniform set of rules and regulations are some of the advantages that businesses of 21st century will inherit as a result of this integration however, the new challenges will be much more challenging as compared to the earlier challenges. The current financial crisis have created an strong case for the corporate governance hence new businesses might face difficult situation in terms of meeting corporate governance requirements. Similarly, PR and other marketing challenges will be more significant for the firms because the overall strategic direction and priorities of the businesses will change in 21st century. The emergence of new trends such as strong nationalistic sentiments within the member States will also be a challenge which may hinder the progress of firms in 21s Century. Bibliography 1. Braendle, U. C., & Noll, J. (2006). Enlarged EU: enlarged corporate governance? Why directives might be more appropriate for transition economies. Corporate Governance , 6 (3), 296 - 304. 2. Floyd, D., & McManus, J. (2009). Europe: is it ready for free movement of its workforce? International Journal of Social Economics , 36 (11), 1082-1085. 3. Harris, P. R. (2004). Success in the European Union depends upon culture and business. European Business Review , 16 (6), 556 - 563. 4. Harris, P. R., & Moran, R. T. (2004). Managing cultural differences: global leadership strategies for the 21st century. New York: Butterworth-Heinemann. 5. Madslien, J. (2007). Is the EU good for economic health? . Retrieved November 08, 2009, from BBC: http://news.bbc.co.uk/2/hi/business/6470513.stm 6. Paliwoda, S., & Marinova, S. (2007). The marketing challenges within the enlarged Single European Market. European Journal of Marketing , 41 (3), 233 - 244. 7. Pizzati, L., & Funck, B. (2002). Labor, employment, and social policies in the EU enlargement process: changing perspectives and policy options. New York: World Bank. 8. Ratten, V. (2007). The Making of the European Union: Foundations, Institutions and Future Trends. Journal of Enterprising Communities: People and Places in the Global Economy , 1 (1), 103. 9. Simons, G. (2002). The future of 'diversity' in Europe. European Business Review , 12 (2), 45. 10. Thøgersen, N. J. (1998). Public relations challenges in Europe. Journal of Communication Management , 2 (4), 374-379. Read More