Significance Of International Trade To UK Business Organizations

Comparative Advantage and International Trade

1. Discuss the significance of international trade to UK business organisations.
2.Analyse the impact of the global factors on UK business organisations with particular reference to the following:
a) Emerging markets
b) Climate change
3. Evaluate the impact of 2 policies of the European Union on UK business organisations.

1. International trade can be defined as the exchange of the capital goods and also the services within and across the borders. The benefits in regards to the international trade involve the higher use of the resources, importing merchandise that cannot be manufactured locally and elevating the variety of preference to the clients. However, the global business might be associated with few disadvantages as well including a higher rate of dependency on the international markets and loss of the local employment (Feenstra 2015). 

According to Kell (2013), the significance of the global trade to the business organizations in UK can be discussed in regards to the notion of “comparative advantage.” In accordance with the concept the business between two nations can be developed in a mutually favorable manner, only if both the country has “comparative advantage” to produce products to be traded. For example, England has relative advantage in manufacturing clothes since fewer labor hours are consumed in this work. Regarding Northern Ireland, the growth of the economy over the few decades has been affected by many factors. One of such success has been achieved in the “high technology manufacturing sectors (Alon et al. 2013).” 

Effect of the international business to the UK trade can be illustrated by various studies. In one of the studies, the fact reveled is related to the UK based producer and distributor of high-technology equipment used in the field of agriculture, construction industries and environmental field that generates considerable fractions of its revenue from the aspect of international sales that exports its products to higher than twenty countries globally. The international trade is a vital characteristic of the UK economy. It is also important for the UK in order to sustain the economic strengths and development in an elevating competitive international economic status (Kell 2013).

On reviewing the historical statistics, it has been observed that throughout the post war period and the colonial period the global trade has been significant for the dev elopement of the UK economy. As discussed Alon et al. (2013), the UK economy is vulnerable to the effects that are evidently beyond its sphere of influence. There are several factors that are significant about worldwide trade, economic amalgamation, and international markets. Without an international deal, businesses wouldn’t be as gainful and financial system would suffer. The reasons for the significance of the international business to the business organizations of UK are as follows:

Impact of Global Factors on UK Organizations

Wider horizons and markets – For example, if a corporation located in the UK want to sell simply and do business with their goods domestically, by no means marketing or approaching their good to clients in other nations, the country would totally limit its possibilities. They may forever gain a stable trade from UK clients, but they wouldn’t be capable of developing as a great deal if the company operates in eight other nations. This is why global trade is so vital for companies and the financial system which it elevates traffic, client statistics and sales (Dunning 2014).

Production Costs – By doing business in other nations, the company also unlocks itself up to minor production expenses. On considering an example, a television manufacturer in New Zealand might discover that its goods could be shaped for considerably small in a factory in Germany. Such an issue only saves the organizations money, but it aids the client as the television can be sold for a smaller amount. Moreover, Germany’s economy has helped the television company in disbursing the factory to develop its own product (Lang and Heasman 2015).

Materials – If the trade was not with other countries’, then it wound not be possible to get a number of the materials that is required to make goods used every day. For example,  in terms of the food industry it can be said that colder nations, such as the UK, depends on hotter nations for fruits such as mangoes and bananas, and these hotter countries depend on locations such as the UK for food items like the potato. Without a global trade or economic assimilation of food trade, all nations would possess a sparse choice (Dunning 2014).

2. The global forces that affect the UK trade system involve elevation in the scale of the global trade, increasing rate of multiculturalism in the organizations in UK, elevation of the inter-dependency levels of national financial levels and others. The factors that are involved in the affects are the political, social, economical, legal, technological and ecological factors (Gray 2015). (a)Emerging market –

The significance of the international market and to uphold is very important to UK since, over decades, UK has done business with USA, Netherlands, Germany, the Republic of Ireland and France. As stated by Baylis et al. (2013), transversely almost all the sectors analyzed, the eleven key markets justified as a minimum of a third of whole UK exports. Within these associations of sectors and markets, amid “2002 and 2007,” the UK had expanded its sell abroad from its traditionally more important trading partners as like the USA, Japan, and Germany in the direction of the eight promising markets (Levin et al. 2012).

Significance of Emerging Markets

Among the elevated enlarged markets, there are folks that are at a more complex stage in their growth, such as Korea, Turkey, Singapore and Taiwan and those that are rising faster from an inferior height of “GDP per capita,” like China, Vietnam, India and Indonesia. “Middle Eastern” superior developed markets by now have comparatively higher of “GDP per capita.” There exist many nations budding as a novel wave of elevated growth markets. For example, Bangladesh, Philippines, Egypt and Nigeria are predicted to record standard growth rates over seven percent per year between the present year and 2050, developing more enduring opportunities (Hirst et al. 2015).

The weather by now considerably affects economic ventures. If the climate unexpectedly changes, every field of UK trade would face with preparing for a variety of inborn threats and prospects. This section aims to discuss an impression of “climate change impacts” and adjustment for trade. According to Levin et al. (2012), the weather is obviously very changeable but, it is the climate that at present is also altering as consequences of “greenhouse gas emissions.” Although weather actions do not give evidence of climate change, investigating the trade consequences of severe weather events which involve snow events as well, that are probable to turn into less frequent, could help to construct an understanding of susceptibility to weather and climate. This is significant in aiding to inform hard work to settle in to prospect climate change (Baylis et al. 2013).

Progression, in the businesses operation in global markets and dependence on global supply collaboration, can be based on the various adaptations. Thus, the manner climate is anticipated to change the exterior of the UK would have amendments for trade based there since they develop strategies to adapt. “The Intergovernmental Panel on Climate Change 4th Assessment Report” involves certain international climate projections. With regards, in Asia, as well as elevating temperatures, presently expect rising precipitation transversely in the maximum continent, a rising strength of “tropical cyclones, “snow melt” causing floods and water scarcity in areas which already endure from water stress (Koellner et al. 2013).

The climate also impacts the general public. The workforce or the customers who want to purchase products and services; the climatic condition becomes an unacceptable threshold in terms of their working condition. Almost all the organizations have the transport facilities. But these facilities are vulnerable to the weather related issues such as flood, storms, etc. In terms of the international market, the business in UK might get hampered if there is huge climatic change. For example, in the case of the import and export business, the seasonal foods might get damaged during the transportation from another location (Levin et al. 2012).

3. As discussed by Annansingh (2013), there are financial systems with dissimilar ideologies. For example, socialism approves government possessed and regulated commerce. Capitalism endorses liberated market competition. The allotment of possessions in socialism is prepared by the government on the foundation of their judgment of the necessities. Since in a socialist financial system, simply the state owns some and all sectors and fabrication and there hardly exist private property. Therefore, the state may assign resources which suits best. According to Kern et al. (2014), capitalism, allocates resources on the foundation of the stipulations and supply goods in the market that have been created owing to dealings of market forces unobstructed by government control. In this regards government has incomplete or no control on the market and permits for private possessions and thus the allocation of capitals is a likely response or outcome of the market circumstances. The two policies of “The European Union” that have impacted on “UK business organizations” are as follows:

1. Employment Policy – The UK government plays a chief part in to enforce or stimulate service. For example, the current government is eager to support business competence so that the nation’s trade is competitive in global markets and thus create employments. In the case of those individuals who have trouble finding work, the government has developed what is coined as “The New Deal,” contributing to the community the opportunity of rising training and skill on “government funded and sponsored employment programmers (Useem 2014).”
2. Inflation Policy – The UK government request to make sure that there exist no unexpected broad elevation in prices. It is done through the “Monetary Policy Committee (MPC)” of the “Bank of England” that lay down interest tariffs. Interest rates are set up if there is a possibility of danger of individual scrounging and expenditure too much, in turn pushing cost up. “Raising interest rates” creates it more costly for trade to borrow currency. This also makes it extra expensive for clients to borrow cash. After that they have to expend less that aids to force down the values (Aldred and Jungnickel 2014).

Therefore the consequences of the international factors that shape UK business actions can be huge. These factors can also have their impact on “European Union” on the global market and how much significance it possesses in maintaining order in the midst of these nations. As a whole, these impacts have helped to understand the vital role of stakeholders. As stated by Howell, K.E., and Annansingh (2013), “The EU’s competition policy ensures that the market competition remains free and that companies work to provide the best products to customers at the best prices. This ensures that no company is able to create a market situation wherein it profits at the expense of other companies. Thus, the chances of surviving and doing well, particularly for small scale or emerging companies, is enhanced.”