Unit 4: Business Environment Organization Purposes
Q 4.2 Analyse the impact of global factors on UK business organisations.
Globalization: It can be defined as a process through which entire world is increasingly getting interconnected due to massive increase in trade and cultural exchange. Globalization has resulted into increased production of goods and services. Today biggest company in a nation has changed into multinationals, with their subsidiaries in several countries (Hopkins, 2011).
Two driver of globalisation are :
- Low transportation cost: Cost of shipping has come down significantly due to various advancement in logistics. Due this overall cost of the product is reduced, hence companies importing the product can import at relatively lower cost.
- Digital communication: Internet has dramatically reduced cost of transmitting and information communication. Digital products has stimulated the global trade in knowledge products and services creating an entirely new sector of services.
Two global factors which effect UK businesses are:
Competitive Drivers: Due to globalisation new companies are entering UK market. For example setup of low cost carriers (LCC) in UK’s aviation sector has resulted into stiff competition. Due to which customer is getting benefited as competition has resulted in drop of airfare and increase in quality of services.
Government Drivers: UK’s government has been promoting liberalization of UK’s market since many years. Because of which every sector such as retail, insurance, automobile and aviation etc. has witnessed entry of new players. This has proved boon for customers, but companies having operation only in UK are facing the heat as they are not able to adapt themselves in such competitive structure. In such situation many local business might extinct over a period of time if government does not protects them from the international competition.
Q 4.3 For an organisation or organisations of your choice, evaluate at least two European Union policies and explain the impact of these polices on your chosen organisation(s).
Organisation selected for this task is Admiral Group.
The main purpose of European Union can be defined as to promote social and economic progress among its member countries. It also focuses on the area of freedom, security and justice which is maintained and built on the law established under European Union (Jura, 2012).
Two European Union Policies are:
- EU has a common external trade policy. Which means that trade policy has been declared as an exclusive competence of European Union and no member state can initiate and negotiate its own international trade agreement with a different country.
- Free trade and open border policy of EU allows transportation of goods and services within Europe quickly without any restrictions from the member states.
These policies have significant impact on Admiral Group’s business. For example because of Free trade and open border policy Admiral group was able to expand its business significantly in other part of EU such as Spain where it launched car insurance comparison website. That is why Admiral group after establishing itself within UK first, is now aggressively expanding among other member states of EU. Since there is no restriction and free trade policy is applicable for EU members, Admiral Group does not have to go through any legalities to establish its business in any other part of EU.
However external trade policy has resulted into the fact, that Admiral Group cannot form a joint venture or partnership with an entity out of EU member states. Thus if it had to form an alliance with a non- EU member entity then the process is very complex and resource consuming. This has resulted into loss of opportunity in growth economies of many Asian countries. With no alliance Admiral Group has to establish its own operation in non-European countries which results into huge operational cost.
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