External business environment - EU

Question 1

Single market - advantages

Answer 1

• reduced production costs because of free movement of goods and common standards
• efficient companies producing for larger market can benefit from economies of scale
• consumers can benefit from increased choice and cheaper products
• innovation in the creation of new products improve as businesses compete for customers
• innovation in processes and procedures improves as businesses strive to cut costs whilst maintaining quality
• labour moved freely reduces chances of labour shortages as foreign labour can be used

Question 2

Social chapter - positive impacts on businesses

Answer 2

• workers become more motivated as working conditions are improved (annual leave)
• as a consequence productivity usually increases
• better industrial relations and worker participation due to improved consultation
• worker participation brings good ideas to managers

Question 3

Social chapter - negative impacts on businesses

Answer 3

• raises labour costs to business (eg minimum wage)
• more difficult to compete on price basis with non EU firms e.g. China and India
• increased regulations make labour market less flexible

Question 4

Single market - disadvantages

Answer 4

• migrant labour drive down local wages
• non-efficient businesses struggle
• members become inwardly focussed and don’t respond to global economic changes

Question 5

Social chapter - description

Answer 5

1997, included directives which gave the workers rights to
- join a trade union
- take industrial action
- have access to vocational training
- parental leave
- four week annual leave
- participate in decision making

Question 6

EU enlargement - impact

Answer 6

• more export opportunities as new members join
• EU grants available to expand into new member countries, encouraging UK firms to set up facilities
• open up sources of recruitment which eliminates shortages

Question 7

Five institutions

Answer 7

• the European Council
• the council of the European Union
• the European commission
• the European parliament
• the court of justice

Question 8

The European council

Answer 8

• meets at least twice a year to resolve major policy issues and set policy directions
• heads of state and president of commission

Question 9

The council of the European Union

Answer 9

• agrees or adopts legislation based on omission’s proposals
• each member state acts as president for six months

Question 10

The European commission

Answer 10

• proposing EU legislation, implementing it, and monitoring compliance
• one member for each member state

Question 11

The European Parliament

Answer 11

• 751 MEPs directly elected by population of member states
• consultative rather than legislative, debates legislation proposed by European commission, proposing amendments

Question 12

The Court of Justice

Answer 12

• one representative per country
• deals with disputes between member states and ensuring established laws are observed

Question 13

Effects of joining EMU

Answer 13

• no transaction costs
• price transparency

Question 14

No transaction costs

Answer 14

• no transaction costs to exchange sterling for euros
• as credit deals priced in Euros, no longer conversation of unfavourable exchange rates

Question 15

Price transparency

Answer 15

• UK firms can compare the prices of suppliers in UK and others in Eurozone countries and choose the cheapest
• might lose customers who can now compare prices across the Eurozone