Unit 4 Business Environment Assignment Armani
4.1 Discuss the importance of international trade, and globalization to Tesco or other organisations. Use the varieties of examples to support your answer.
International trade occurs when there is exchange of goods and services across national boundary. It allows flows of economic resources – capital, labour, technology, and production to countries, as well as sharing knowledge and cultural values for the benefits of mankind and national and international marketing development. Tesco PLC is the UK’s largest retailer and has its presence in 12 countries all around the world. If the revenue and market share of Tesco is considered, it is the 3rd largest retailer in the world. In UK, Tesco has captured around 29% retail market and now it is expanding to overseas countries to exploit the benefits of the international trade.
- Importance of international trade and globalisation:As new markets are opened, resources are deployed though investments. Companies can take advantage of relocating its operations or selling and distribution of its products and services thus creating revenue potential and profit for companies taken advantage of these opportunities. Tesco has its different operations in India, China, Japan, Malaysia and many other Asian countries and the company is getting benefitted a lot by its facilities in India and China because in these countries, there is no big brand in the retail market and Tesco has easily acquired lots of market share in the retail industry in India and China (Oestreich, 2004). These new international markets have helped Tesco to maintain a sustainable growth even if it is facing tough competition in its home market UK.
- It creates organisations competitions:International trade creates intense competition among companies. For example, when Tesco started its operations in India, some other organisations in India has started to invest in the retail grocery market and a new competition has been started in this industry which is helping the customers in getting the quality products on the cheaper price.
- It makes it easier for the movements cheap financial capital those really need its:Movements of financial capital make it easier for firms to access funds at cheaper cost of capital for investment. And companies’ reaches saturation or decline market, they can look for investment to emerging markets because there are cheaper sources of across the globe which can be accessed. The easy transfers of profits or dividends also make it for company willingness to relocate its overseas operations where cheap capital can be found.
- Easier movement of skilled labour to where the demand is low:Easier movements of skilled labour where their needed. Workers feel free to move to a country where their skilled are needed as a result there is no shortage in the market and labour cost is cheaper forms thus achieve labour cost competitiveness among firms. It is a well known fact that India, China and many other Asian countries have huge man power which comes on a far too less pay as compared to the UK labour. This is the reason; Tesco is now planning to open its full fledged production facilities in India and China.
- International trade improve standard of living among international trading partners:The international trade has also affected the life of the people and now because of the globalisation, the people of the developing countries are also able to get the quality products from the multinational organisations. The UK organisations like Tesco are now expanding in the developing countries and making the lives of the people easier and comfortable.
4.2 Analyse in what ways the role of WTO, emerging markets (BRIC) and protectionist tendencies of national government may impact the UK organisations in the coming 10 years.
The World Trade Organisation (WTO) is global international organization dealing with the rules of trade between nations. The goal is to help producers of goods and services, exporters, and importers conduct their business. WTO ensures that there are fair trading practices among partner countries across the globe and its work can be summarized as: ‘To stimulate economic growth and employment, cut the cost of doing business, internationally encourage good governance help countries develop, give the weak a stronger voice and support the environment and health’
Its functions are for example to:
- Administering WTO trade agreements
- Forum for trade negotiations
- Handling trade disputes
- Monitoring national trade policies
- Technical assistance and training for developing countries
- Cooperation with other international organizations
As mentioned in the previous section, the emerging markets like India and China are now become the focus on Tesco and company is concentrated a lot in these markets because these markets have huge potential for growth. Although there are some protectionist policies of the overseas countries which tries to make sure that their local organisations also stay in the competition and no organisation from other country like Tesco dominate the home market. That is why there are FDI (Foreign Direct Investment) policies are being developed by the government of these countries which make sure that Tesco do not have the controlling share in a local organisation especially in the public sector.
The barriers to international trade through protectionism is being dismantle giving way to global trade, which benefits companies leading to world economic growth, better standard of living among nations. The international competitiveness among nations and multi-national companies in particular has created market opportunities, movements in technology and technical skills across national boundaries (Dolia, 2012). The Common Agriculture Policy (CAP) is the policy initiated by European Union to implements agricultural subsidies to farmers and landowners of the member countries. This policy impacted on UK agriculture and of recent this policy is criticized for preventing fair trading and competition among some member countries.
The EU policies which are related to the fair competition in the market have been incorporated by the UK government and the EU commission is making sure that the free market economy could be established 100%. The EU Competition policy has given the opportunity to the new small organisations to grow and find new methods in the business processes for the increased efficiency (Lee, 2006). Because of this, the innovation has become one tool which is now setting up the stage of exponential growth of the UK market and in the coming 10 years, the UK market would set an example for the rest of the world. Tesco is aware of this trend and that is why Tesco has already started its online e-commerce stores in many countries where people could order from the e-commerce websites and mobile application and receive the delivery of the products at their door step.
4.3 Evaluate the impact of policies of the European Union on UK business organisations by using Armani or other organisations.
European Union competition policy regulation of competitiveness want to ensure that organisations do not create trade barriers through cartels and monopolies that would damage the economic interests of society (Moreno-Dodson, 2013).
Through the following activities, for example:
- Mergers, control of proposed mergers, acquisitions and joint ventures involving companies that have a certain, defined amount of turnover in the EU, according to the Merger Regulation
- Cartels, or control of collusion and other anti-competitive practices, under article 101 of the Treaty on the Functioning of the European Union (TFEU).
- Market Dominance, or preventing the abuse of firms’ dominant market positions under article 102 TFEU.
Some other policies of EU which have great impacts on the Tesco are:
- EUETS:The EUETS policy of the EU is mainly concerned with the emission of carbon by the production facilities of the organisations in the EU countries and EU has implemented this policy very strictly to make sure that the environment in the EU countries remains healthy for the people. EU is very strict about the emission of carbon and other harmful chemicals from the Tesco Production facilities and asked the company to use the proper hardware and processes to make sure that the waste from the production facilities does not pollute the environment.
- Free Movement of Labour: This is one policy which has given relief of many UK organisations when it comes to get the cheap and skilled labour in the local area. Most of the production facilities face issues of non availability of the cheap labour in the nearby locations and now EU has made it free for the employees to cross the borders of the EU countries so that they could migrate to the area where work is available (Morrison and Wilhelm, 2007). This has resolved the issues of unemployment and scarcity of the human resources.
Tesco has established its facilities in the EU countries where the cost of land and taxes are less and now company is exporting the labour from the other countries where labour is cheaper. The free movement of labour across the EU countries has made it easy for Tesco to reduce the production cost and improve the revenue and Customs Taxation of the organisation. It is also benefitting Tesco in providing the cheaper products with good quality to the people. France, Hungry and Poland are some examples where Tesco started its operations only because of the liberated EU policies and now company is making lots of profit from these markets.
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