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Business Environment
HNC/HND Unit 1 2011-12European Union policies &
global financial stability
Importance of International Trade◦ What is it?
Importance for Nations
Importance for organisations
Recap from last week
You are required to produce a presentation which addresses the following:
• Discuss the significance of international trade to UK organisations.
• Analyse the impact on organisations operating in the UK of the growing economic, social and political influence of the BRIC countries as well as other global factors such as global warming, third world poverty and global financial stability.
• Evaluate the impact to UK based organisations of two policies of the European Union one of which must be the existence of the Eurozone.
Be able to assess the significance of the global factors that shape national business activities:
What is globalisation ?
Globalization "is the closer integration of the countries and peoples of the world ...brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and people across borders." (Stiglitz, J. 2002, Globalization and its Discontents, New York and London: Norton)
Worldwide movement toward economic, financial, trade, and communications integration. (Business Dictionary.com)
Globalisation
Financial implications◦ Access to global finance markets to raise capital◦ Global stock market variations can affect company value◦ More opportunities for FDI (Foreign Direct Investment)
Access to the global “free-market”◦ Reduction in trade barriers between countries◦ More markets for their products◦ Opportunities for outsourcing globally
Instant communication
Economic implications◦ The main argument is that globalisation leads to economic growth◦ Is this true for all nations?
So what does Globalisation mean for business?
The 1929 crash. ◦ What was the economic situation at the time?◦ What caused the crash?◦ How did the crash happen?◦ What were the consequences?
The 1987 crash. Read the BBC article on GOAL.◦ What happened? And why?
The 2007 crash (The love of money)◦ Key Questions
How is the crisis described? What was the real threat to the economy? What happened to stock markets worldwide when Lehman Brothers
collapsed? Why were people confused with the US bailout policy? What were the consequences of the lending freeze?
◦ To find out more watch all 3 episodes of the BBC “Love of Money” series
Global Finance: Stock market crashes
The European Union EU was created in 1951 Treaty of Rome signed in 1957 to establish
the EEC:◦ Belgium, France, Germany, Italy, Luxembourg,
Netherlands◦ 1973: Denmark, Ireland and the UK◦ 1981: Greece◦ 1986: Portugal and Spain◦ 1995: Austria, Finland and Sweden
In 2004 ten countries joined:◦ Cyprus, Czech Republic, Estonia, Hungary. Latvia, Lithuania,
Malta, Poland, Sloval Republic, Slovenia
In 2007◦ Bulgaria, Romania
On 1st July 2013 Croatia set to join
Macedonia, Montenegro, Serbia: now official candidates
Iceland and Turkey and Croatia have also applied for membership
The European Union
Growth of the European Union
“Copenhagen Criteria” for EU membership:
◦ A stable democracy, respecting human rights, the rule of law, protection of minorities
◦ A functioning market economy
◦ Adopt the common rules, standards and policies that make up the body of EU law
The European Union
On 1 January 1999 eleven EU countries started the Eurozone◦ Exchange rates were fixed and Euro introduced
Greece joined in January 2002
UK, Sweden, Denmark did not join the Euro
Greece Financial Crisis
Eurozone
Price stability◦ Inflation must be no more than 1.5% higher than best 3
performing states during the previous year Government finances
◦ Annual deficit to be no more than 3% of previous year’s GDP
Exchange rates◦ Two years participation in EU exchange-rate mechanism◦ Country must not have devalued its currency during that
period Long term interest rates
◦ No more than 2% higher that of the three countries in EU with best inflation records
Eurozone convergence criteria
Eurozone
Check out these links:◦ http://www.bbc.co.uk/news/special_reports/global_
economy/
◦ http://freevideo.rt.com/search?q=eurozone
◦ Immediate risk is of a Greek exit and the knock-on effects for Spain, Italy, Portugal and Ireland
◦ Greek exit will trigger exit of capital and savings from banks of those nations at risk
Eurozone Crisis
The regulation on the Free Movement of Workers within the European Community was completed in 1968 and states:
◦ Any citizen of a member state is entitled to take up work in the territory of another member state without restriction
◦ Those migrant workers must be treated the same as any of that country’s national workers
◦ Such workers have the same rights to training, social benefits, trade union rights and tax benefits as national workers
Free movement of labour
Key rules adopted within the Schengen framework include:◦ removal of checks on persons at the internal borders;◦ a common set of rules applying to people crossing the
external borders of the EU Member States;◦ harmonisation of the conditions of entry and of the rules
on visas for short stays;◦ enhanced police cooperation (including rights of cross-
border surveillance and hot pursuit);◦ stronger judicial cooperation through a faster extradition
system and transfer of enforcement of criminal judgments;◦ establishment and development of the Schengen
Information System (SIS).
Schengen Agreement 1985
Source: http://europa.eu/legislation_summaries/justice_freedom_security/fre
e_movement_of_persons_asylum_immigration/l33020_en.htm
Common Agricultural Policy
Environmental Policy
Transport Policy
Food Law programme
Trading standards
Other policy areas
Check GOAL for further information on:◦ Policy of European Monetary Union◦ Free Movement of Labour within the EC
Watch videos on Eurozone crisis and conduct further research
Preparation for your presentation
You are required to produce a presentation which addresses the following:
• Discuss the significance of international trade to UK organisations.
• Analyse the impact on organisations operating in the UK of the growing economic, social and political influence of the BRIC countries as well as other global factors such as global warming, third world poverty and global financial stability.
• Evaluate the impact to UK based organisations of two policies of the European Union one of which must be the existence of the Eurozone.
Be able to assess the significance of the global factors that shape national business activities: