European Business Context Revision Lecture PDF

European Business Context Revision Lecture Des Cooney PhD Revision Lecture Overview of the module Revision tips Examination tips Exam held during week beginning 13 January 2025 Overview of the module Week 1: Globalization and the EU Drivers of Globalization; Complexities of manag...

European Business Context Revision Lecture Des Cooney PhD Revision Lecture Overview of the module Revision tips Examination tips Exam held during week beginning 13 January 2025 Overview of the module Week 1: Globalization and the EU Drivers of Globalization; Complexities of managing globally; Globalization and the EU Week 2: A Portrait of Europe and its Institutions Broad European characteristics; EU challenges of today; European social models; European institutions Week 3: European Business Environment EU competitiveness; SOEs, SMEs and European MNCs Week 4: Regional Economic Integration Levels of economic integration; Benefits and risks of regional economic integration; history of the EU Overview of the module Week 5: Economic and Monetary Union Primary characteristics; EMU benefits and challenges; EU EMU; Euro-crisis Week 6: Managing Business in the EU Intercultural management in Europe; EU culture; Hofstede’s cultural dimensions Week 7: Marketing in the EU Pan-European marketing strategies; standardization vs localization; marketing research for foreign companies entering the EU Overview of the module Week 9: EU and the BRIC economies Opportunities and threats; FDI; FTA’s; political and legal challenges Week 10: Brexit and the EU How did we get to here? What will the future look like? Week 11: Enlargement and neighbourhood policy Enlargement and the process of acceding to the EU; Copenhagen criteria; interaction with the states on the EU’s borders; interdependence; impact of the Arab Spring; Turkey and EU accession. How to revise Have a revision plan. Study the lecture notes. Read the core text. Work with a friend, discuss and help each other. Time management Exam: Week beginning 13th January 2025 The exam is in-person It is scheduled for the week starting 13th of January 2025. It will be a closed-book 2-hour exam Answer 2 out of 3 questions (Cross out any answers that you do not wish to be marked). Revise any and all materials from the module Lecture notes and videos Textbook chapters Seminar cases In the news Exam tips Don’t rush to write answers. Spend first 5-10 minutes to read questions. Read through the paper, read carefully. Choose the two questions. Understand the question - what is being asked? Exam tips /2 Identify the major issues and minor points - focus. Write down key points for each question while you still remember them. Define key concepts and terms clearly. Develop your argument - logical and balanced. Refer to relevant concepts/theory/models. Try to be analytical and critical rather than descriptive. Exam tips /3 Use examples. It is important to answer the question: to define the concept and discuss the issue, not just to give examples. Use bullet points wisely, list 3-5 points but need to elaborate on 1-2 important ones. Don’t forget conclusion Exam tips /4 Plan your time Mind your handwriting. It must be legible. How to cite reference: “Johnson says…”, no need to give details. How many pages … Class 80% - 100% 70%-80% 65% -69% 60% - 55%-59% 50%- 45-49% 40% -44% Fail Mark 64% 54% Content Complete Complete and Complete Complete Correct Mainly Some Mainly Widespread and type and correct correct and correct and correct answers descriptive accurate descriptive inaccuracies in of answers answers with answers answers with some text. Some points, but text. Missing the answers or answer with strong strong with good with evidence of evidence mainly points in the very partial evidence of evidence of evidence of reasonable analytical of descriptive answers or no answers. No analytical analytical and analytical evidence of and critical analytical text. Missing missing evidence of and critical critical and critical analytical thinking. thinking. points in the points but sufficient thinking. thinking and thinking and critical Use of Occasional answers or inaccuracies knowledge of Pertinent pertinent use and thinking. examples evidence inaccuracies in the the topic or use of of examples. pertinent Pertinent and of critical in the answers and evidence that examples Appropriate use of use of reference to thinking. answers and insufficient concepts have Marking and reference to examples. examples case Missing insufficient evidence of a been appropriate case studies. Appropriate and studies. points in evidence of a clear misunderstood. reference to Strong reference to appropriate the clear understanding case studies. evidence of case reference to However, answers understanding of the topic. Strong independent studies. case some with of the topic. Wrong or no evidence of thinking. Good studies. missing reasonable Superficial or use of independent evidence of points in the but no use of examples and thinking and Elaboration independent Evidence of answers or superficial examples and wrong original of original thinking, independent occasional use of superficial reference to elaboration ideas. including thinking. inaccuracies examples reference to case studies. of ideas and creative but and case studies. alternative Shows synthesis of reasonable reference views or understanding module use of to case frameworks. of nuances materials. examples studies and and correct complexities. reference to case studies. Europe’s growth problem Europe faces a competitiveness Three decades of low growth problem Why is that? The Euro? State infrastructure? Productivity rates of Member States? Innovation-driven? Two-tier Europe re competitive performance?  European Competitiveness shows North– South split. Nordic states invest strongly in innovation & education These lie at heart of problems of Euro crisis European competiven This is supported by the World Bank ‘ease of doing business’ index – UK is 3rd in Europe, France ess is 17th, Italy is 25th Issue is lack of reform Emergence of Far East as low cost competitor to the EU in both manufacturing and services Divergence in economic performance Nordic Europe: Sweden, Finland and Denmark Western Europe (and Estonia): Netherlands, Austria, Germany, UK, Luxembourg, Belgium, France, Estonia, Ireland Southern and Eastern Europe: Slovenia, Portugal, Spain, Czech Republic, Cyprus, Malta, Lithuania, Latvia, Italy, Slovakia, Poland and Hungary South-east Europe: Greece, Romania and Bulgaria  Warehousing and retailing (11.5%) EU Real estate activities (10%) productivit Public administration (7.5%) Human health activities (7%) y Construction (6%) – sharp fall in productivity since 2008 (percentag Professional, scientific and technical services (5.5%) es of EU Education (5%) Financial and insurance services (5%) GDP) Information and communication (4.5%) Which of the above will excel in the current environment? EU productivity Unit labour cost = cost of labour per unit of output Surge in productivity in the EU information & communication sectors Financial crisis – sharp decline in labour productivity in manufacturing without a consequent fall in wages Rising wages in EU business services were not met by increased productivity – declining cost competitive position Source of EU growth and competitiveness lies in its human capital EU has an educated workforce; also Europe 2020 project Growth in high knowledge/high technology sector - pharmaceuticals  Finding economies of scale Reducing operating costs per unit and spreading fixed costs over larger volume due to ‘experience curve effects’ Pooling global purchasing gives the opportunity to concentrate purchasing power over suppliers Building of centers of excellence by using larger scale and focusing talent in one location. Example? 1-19  Monetary v Fiscal policy Monetary policy consists of the actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply: affects interest rates. Monetary policy is maintained through actions such as modifying the interest rate, buying or selling government bonds, and changing the amount of money banks are required to keep in the vault (bank reserves) Fiscal policy is how a government adjusts its spending levels and tax rates to monitor and influence a nation's economy.  Participation in the ERM required members to maintain Exchang their currency within specified fluctuations of +/- 2.25 per cent of ECU central rates The ECU or European currency unit was a basket of e Rate currencies participating in the ERM Mechanis Aim was to have gradual currency realignment Recession in Europe in 1990’s, unemployment and m (ERM) German reunification had an impact – ECU became too strong for some founded UK and Italy left the ERM in 1992 – their currencies devalued in 1979 Both UK and Denmark opted out of joining the single currency A Single Currency: Convergence is key Nominal convergence – in terms of macro-economic performance Budget deficits no more than 3% of GDP Government debt no more than 60% of GDP What is the UK current National debt? National deficit? Interest rates no more than 2% above average of three best performing states Inflation rates no more than 1.5% above average of three best performing states Currency within normal band of ERM for at least two years prior to entry Real convergence – levels of unemployment and industrial & economic development between states should broadly approximate Institutional convergence – uniformity in economic policy leading to low & stable inflation – need to guarantee the independence of the national central bank Costs and benefits of the Single Currency Benefits Costs elimination of intra-EU transaction costs lower short term deflation interest rates loss of the exchange rate as a tool of uniform interest rates national economic policy removal of exchange rate uncertainty in intra- loss of power to set interest rates and EMU trade control the supply of money removes the option of competitive devaluations between EU states potential problems related to a lack of financial integration ‘real’ convergence and potential policy economic cushioning from domestic political conflicts instability the inappropriateness of one monetary creates a new international currency to represent the EU’s combined economic weight policy for so many states  Failure to reform and inadequate convergence was core to crisis Deterioration of public and current The Euro account balances in Portugal, Greece, Ireland and Spain crisis Contagion in system as the banking (Summar crisis turned into a public debt crisis y) Austerity vs. growth EU growth fell, and unemployment rose sharply What makes International Business different? Boundaries Currencies International Business Cultures vs. Domestic Legal Systems Business Availability of Resources Skills & Knowledge Culture Culture is the collective programming of the mind which distinguishes the members of one human group from another. (Hofstede, 1980) It is the learned ways in which a society understands, decides and communicates. 7-26  Characteristics of culture Culture is learned – acquired over time Culture is interrelated – connected via religion, business, marriage & social status Culture is shared – passed on by family, parents, schools & friends 7-27  A marketer’s sociocultural understanding is crucial for marketing across borders. We need to be aware of different cultures & adapt to them different ways of thinking and behaving – Socio- business meetings cultural different tastes and preferences (aesthetics, religions, personal choices) conditio different life-styles (brand images, signs and ns values, family,) different priorities (individualist versus collectivist, dedication to work, family, leisure, attitude to change) Layers of culture National culture Business/industry culture Company culture Individual behaviour/ decision maker 7-29  Cultural analysis of 100,000 workers employed by US company IBM in 50 different countries Power distance (PDI) – power distributed Hofstede unequally (France, Poland) Uncertainty avoidance (UAI): extent people ’s feel threatened by uncertainty Individualism–collectivism (IDV) – some cultural cultures have a common goal Masculinity (MAS) – dominant values in dimensio masculine cultures are achievement & success ns – in feminine: care for others & quality of life Time orientation (LTO)  Cultural diversity is considered a value of the EU  Examples of Hofstede’s Cultural Dimensions 80 70 60 50 Netherlands 40 Sweden Germany Poland 30 Power distance (PDI) 20 Uncertainty avoidance (UAI) Individualism (IDV) 10 Masculinity (MAS) Time orientation (LTO) 0 PDI IDV MAS UAI LTO Changing Global Economy Collapse of communism/changes in political systems worldwide has created a host of export and investment opportunities Economic development in China has created huge opportunities despite Communist control Free market reforms and democracy in Latin America have created opportunities for new markets and new sources of materials and production Complexities of Managing Globally? Global coordination Global Market integration responsiveness 1-35  Further globalisation is inevitable Looking to the future International business will grow primarily along regional rather than global lines Globalisation and Europe Europe prominent player in the Global economy Europe’s response is both: -proactive (seek new markets, etc) -reactive (face increase competition)  Trade EU is a pivotal global trading entity With just 6,9% of the world’s population, the EU's trade with the rest of the world accounts for around 20% of global exports and imports. Over 62% of EU countries’ total trade is done with other EU countries. The EU is one of the three largest global players for international trade (next to the USA and China) Source: Europa.eu Europe 2020 – Long-term Growth Strategy Make Europe the most competitive economy Smart growth: based on knowledge and innovation – improved quality education Sustainable growth: more resource efficient; innovation in greener technologies – Germany Inclusive growth: high employment levels, investment in skills – benefits of economic growth reaches all parts of EU  1. Employment: 75% of 20 – 64 year Europe 2. olds employed R&D: 3% of GDP to be invested in 2020 – 3. R&D Climate change and energy Long- sustainability – greenhouse gas emissions: 20% below 1990 levels term 20% of energy from renewables 20% increase in energy Growth 4. efficiency Education – early school leavers rate Strategy 5. below 10% Fighting poverty & social exclusion – 20 Targets million fewer people in or at risk of poverty & social exclusion Pan- Advantages from wider business volume on an incremental basis Europea Expansion of life-cycles when domestic market has reached a certain level of maturity n Achievement of economies of scale (fixed costs) High sales figures obtain high additional value marketi First-mover advantages or advantages in following competitors, or following clients ng Defence or anticipation of potentially growing European and international competition strategi towards the local, regional or European market Streamlining of marketing services in terms of return on investment, risk diversification, es accountability for efficiency, speed and quality in creativity 41 The marketing mix in Europe – 1. Standard marketing strategy depends on with a standardized marketing number of mix applied to all groups segments the 2. Concentrated market dividing company targets a marketing mix to reach a single segment of the global market 3. Differentiated global marketing with different marketing mixes for each targeted group Which is the least attractive/most expensive for a company? 42 The marketing mix in Europe – depends on number of The marketing solution for a specific target consumer must segments the be developed through: company targets A product or service that is well designed & adapted Its placement - Explain? A well-defined price Sold with the right choice for its promotion & communication (live streaming in fashion shops) 43 Marketin g Marketers need to be sure of the targeting process. – 3 main strategies strategie 1. Pull strategy – demand created s via promotional/advertising efforts – pulled through distribution channels – lead customer to products 2. Push strategy – pushes the product through the distribution channel into the retailer. Example? 3. Contact strategy – establishes direct contact with the consumer through canvassing and follow-up (Explain?) 44 The Pricing decisions have crucial marketing impact on RoI, revenues and mix in profits Shape perception & willingness of Europe people to engage/repeat purchase Price difference in Europe are relatively small. Exceptions: Goods or services taxed by governments – petrol Brands such as cars are more recognised and therefore expensive in certain countries Telephone services in a more deregulated market (Orange v SFR) 45 Product and promotion Which strategy is most suitable strategies for a depends on the product or service single but and its target market diversified European market Same product and the same means of promotion: has the least costs & permits economies of scale and scope The adapted product and the same means of promotion The same product and different means of promotion The adapted product and different means of promotion: has the highest costs and limits economies of scale and scope 46 The future of Europe 47 What are the Moving from closed to open BRICs? economy Perhaps from state to market economy Developing key market economy institutions Undergoing economic reform Rapid economic growth BRICs – challenges Intensification of competition in both & domestic & foreign markets as a result of lower cost & opportuniti increasingly sophisticated output of countries es Opportunities from the opening of these large and growing markets to incoming trade and investment European business can sell to increasingly well-off populations Use the lower cost centres as export platforms to serve rest of world Need to develop a formal framework of international commercial relationships to gain access for European business BRICs BRICs are not the only emerging or transition economies Also Latin America, Middle east & Africa Large populations of BRICs are attractive Natural resources of Brazil & Russia BRIC countries – 41% of world population - 21% of world economy China’s average annual GDP growth (10.6%) since 2000 has been 10 times that of EU (1.1%)......UK (1.5%)......US (1.7%)  To become a member of EU: have to conform to Copenhagen Criteria Becomin Six enlargements since 1973 to the present ga Croatia was the last accession member of the EU Since 2004 EU expanded eastwards towards Russia – former Soviet satellite States of Central & Eastern Europe......which ones?  The following 4 conditions have to be satisfied: The Stable institutions which guarantee democracy, the rule of law, human rights and respect for, and protection of, minorities Copenha A functioning market economy gen The capacity to cope with competitive pressure and criteria market forces within the Union The ability to take on the obligations of membership including political, economic and monetary union Impact of 1. Economic impact Seen to be of benefit to states via trade and investment enlargem Allowed Member States to counteract economic crisis since 2008 Aim was to address skill bottlenecks / gaps in the labour ent market?? 2. Political impact Embed political stability and democracy Geopolitical impact Lurch to the right by some political parties due to migration issues Role of Provide support to create deep democracy – offers financial European aid Neighbour Support inclusive development hood Policy Strengthen the two regional dimensions of ENP (the (ENP) Eastern and Southern Mediterranean Partnerships) to conclude sector specific programmes EU sets out values & standards that the neighbours should adopt  Act as framework for bilateral relations between the Role of partners ENP To develop mechanisms to fit these objectives Action Plans that are bespoke to the needs of each partner Plans reflect EU self-interest: aligned to security & defence in Eastern Europe  Mixed: offered trade links & benefits Record of Not support Eastern states from Russia – stand- offish regarding Ukraine ENP Russia will not allow States to move from its sphere of influence to that of the EU – Georgia EU neighbourhood has been volatile Arab Spring affected the process of reform - backlash  Some N. African States have authoritarian regimes – don’t share EU values & norms – not willing to accept them – futile? Record of Are incentives great enough to make it work? ENP Need more liberalised trade / competition – encourage move away from State controlled industries Positive conditionality – EU should offer aid to the best performing partners as opposed to punishing States when values & norms are not adhered to. BUS244 European Business Context Good luck with the exam!