Management: European Union
The European Business Environment The Single European Market and related EU Policies
The Single European Market (SEM)
Single or Common or Internal Market: A market where there is full freedom in the flow of Goods, Services and factors of production (Labour, Capital)
Completing the internal market = abolishing the barriers
Physical barriers: customs and frontier controls involving excessive paperwork, estimated costs for EU industry at 12bn per year
SEM moved border procedures (e.g. taxes) and controls (e.g. health) inland
Technical barriers: different national product regulations and industry standards hindered market growth
SEM institutionalised European standardisation (e.g. www.etsi.org), set up mutual recognition, information-notification procedures, down to industry level
SEM liberalised public procurement : public sector contracts open to competitive bidding, current and future contracts published through Official Journals
Fiscal barriers: uneven excise duties and indirect taxes distorted market operation
SEM set minimum excise duties, set a standard rate VAT band of 11% to 25%
The Impact of the Single Market
The Economic Impact
The Impact on Market Structures
The Impact on Corporations
The Impact of the SEM
3a. Impact on Corporations
Benefits:
Unified larger market (barrier removal) & Incentives for expansionary pan-European strategy via standardisation-economies of scale, collaborative corporate arrangements across countries (networking)
Rationalisation of production and operations (Free movement, recognition of common European standars)
Reduced transaction costs (no cross-border paperwork)
Ability to relocate production (lower transaction costs, free mobility)
Incentives for new technology and innovation (EU policy incentives)
Reduction in input costs (competition, access to more sources)
Reduced financial costs, especially after the Euro
The Impact of the SEM
3b. Impact on Corporations
Threats/Risks
Increased competition from other EU firms
Squeezed profit margins from more competitive market
Least efficient firms and sectors faced problems
No adherence to EU directives by some members states. Examples: competition law, public procurement, state aid leading to unfair competition and risks for market entry
Small companies might become targets for take-over through cross border M&A or other national companies trying to gain market share.
The 7 clusters:
1. The Balkans & South Italy
2. Spain, Portugal, South France
3. The UK
4. Scandinavia
5.Central Eastern Europe
6. CN-France, Netherlands, Belgium, W.Germany
7. N.Italy, Austria, SE Germany
Euro-clusters
CEE included
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Second level
Third level
Fourth level
Fifth level
The Acquis: Economic Capacity for Economic Unification
The Acquis Communautaire (32 chapters)
The Internal Market (single market)
Trade Liberalisation
Goods & Services (ch1, ch2)
Labour Mobility (ch3)
Financial Liberalisation
Free movement of capital (ch4)
Price Liberalisation & Competitive markets
Competition Law (ch6)
Single Pan-European laws/regulations across countries regarding cross-border trade & commerce and mobility of labour & capital. They are above national law & constitution
The Acquis: Business Environment at industry and corporate levels
Company Laws & Industry Regulation (ch 5)
Industry regulation
Business Dispute Resolution
Trade marks & Property rights
Bankruptcy & Liquidation
Commercial legislation
Taxation (ch10)
Market oriented incentives (Industrial policy, Small-Medium Enterprises, investment incentives)
Single Pan-European laws/regulations across industries and corporate conduct rules throughout the EU
Chapters of Acquis Communautaire: The Institutional Framework of the European Union
Internal Market
Competition
Regional/Cohesion
RTD (research and technological development policy)
Employment and Social Protection
Enterprise
Industry
Environment
Transport
Energy
External Trade
Consumer Protection
EU policies that are important to business
All governed by European Law: The Acquis Communautaire
The Institutional Framework of the European Union: EU Policies
Competition Policy/Law: preserve the free market principles for doing fair business, allow aid to areas without distorting the market mechanism
In defence of competitive free market: prevents corporate and national practices that undermine the SEM (price fixation, cartels, monopolisation)
Prevents the abuse of market dominance, e.g. monopolistic or discriminatory pricing
Controls firm size through examination of mergers and acquisitions vis-à-vis their impact in sectors and markets (anti-trust regulations)
Restricts state aid to indigenous firms: no “passive” shield to competitive pressures
The rules on state aid: state aid is only allowable under the following cases:
natural disaster
recovery from excessive shock to the local or regional economy
development of economic activities in a manner not adverse to Community trade
promotion of culture, heritage and European interests
Competition policy: flexible to allow for the growth of firms fit for global competition, yet in a manner that does not undermine competition and further market growth
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The Institutional Framework of the European Union: EU Policies
Regional or Cohesion Policy
Fears that peripheral regions losing out after 1992, absorption of socio-economic potential from the periphery to core areas: human resources and capital flight
“Objective 1” : regions with below 75% of EU average GDP
“Objective 2” : areas under industrial decline (unsuccessful or no restructuring)
“Objective 3”: areas facing youth unemployment & facing long-term unemployment
Cohesion Structural Fund & Community Support Frameworks (INTERREG, URBAN, LEADER, EQUAL representing large development plans for the periphery
Main impacts:
Enhanced subnational and regional governance
Promoted convergence in economic growth between the core and the periphery across Europe(lesser focus on social development)
Issues for social development and competitiveness: reliance on cohesion funding, growth of the state at regional level, insufficient promotion of regional networking, often at strain with competition policy (neutral policies versus industrial targeting policy)
The Institutional Framework of the European Union: EU Policies
Social, Industrial and Enterprise Policies
The Social Charter included in the Maastricht Treaty: guarantee of minimum working rights to employees
Industrial policy aims at industrial restructuring, strong intervention to promote targeted sectors/industries of the economy (out of fashion)
Enterprise policy composed of a mix of non-interventionist and strategic interventionist measures (in fashion) that look to:
encourage open and competitive industrial and business sectors
assist with restructuring (large firms) and internationalisation (SMEs) challenges
promote networking among SMEs and between SMEs and larger firms
encourage access to and the exploitation of innovation through R&D, best practice dissemination, promote entrepreneurship
create linkages (through forums and working groups) between public administration and business sectors towards effective policy-making
General trend: Shift away from traditional industrialisation policies (import substitution, sectoral focus) and towards neutral free market policies and flexible labour markets