doing international business

8/14/2019 Doing International Business

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Doing International BusinessA case study of UK

Adil Awan Roll#30Muhammad Azeem Roll#04Hira Munir Sunbal Roll#13

Department of Commerce,

Bahauddin Zakariya University,

Multan


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International Business in UK Page 1


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The United Kingdom is renowned for its colorful history and strong sense of tradition that has

been shaped by a colonial empire, both civil and European war and a constitutional monarchy.

The fourth largest trading nation, the UK is fast becoming Europes leading business centre.

Supported by a long-established system of government and economic stability, the UK is an

attractive base for overseas business, offering skills in areas such as research, development and

technology. However, in order to operate successfully in the UK business environment, there are

a number of important issues to take into consideration both before and during your time there.


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UK

Official Name United Kingdom of Great Britain and Northern IrelandPopulation 60, 609, 153*Official Languages

English, Welsh (about 26% of the population of Wales), Scottish Gaelic(About 60,000 in Scotland)

Currency Pound sterlingCapital City London (Wales: Cardiff, Scotland: Edinburgh, Northern Ireland: Belfast)GDP Purchasing power parity $1.903 trillion*GDP Per Capita Purchasing power parity $31,400*Land Area 242,534 sq km

Population dens ity: 244 sq km

Life expectancy: Men 76 yrs

Women 81 yrs

Adult literacy: 99%

Average per household 2.4

Divorces per 1,000: 3

The EconomyGDP: $2,124bn

GDP per heads: $35,760

Employment(% of total): Agriculture 1%

Industry 24%

Services 75%

Unemployment: 5%

Main Exports

Type: Finished manufactured goods

Semi manufactured products

Food, beverages & tobacco

Fuels

Basic materials


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Destinations: (% total) United States 15%

Germany 12%

France 10%

Netherlands 6%

Ireland 7%

EU25 58%

Main Imports

Type: Finished manufactured goods

Semi manufactured goods Food,

Beverages & tobacco Fuels

Basic materials

Main countries of origin: Germany 14%

USA 9%

France 8%

Netherlands 7%

Belgium 6%

EU 55%

The British Government

Parliament decides the laws and make decisions on running the UK. (Some issues in

Scotland, Wales and Northern Ireland are now dealt with by their respective parliaments and

assemblies.) There has been a parliament at Westminster since the 13th Century.

The UK government is normally formed by the leader of the party that wins the most seats in

the general election. All actions by the government - and particularly its proposals to amend

or create laws - are scrutinized within parliament.

Overview of the UK Economy:

The UK is the sixth largest economy in the world, with a gross domestic product (GDP) of

US$2,646 billion (Source: World Bank, 2009).In summary, the UK:

a) Has a population of 61.4 million (Source: ONS, 2009),

b) Received the highest number of foreign direct investment (FDI) projects in Europe in 2008

(Source: Ernst & Young, 2009),
http://www.woodlands-junior.kent.sch.uk/CUSTOMS/questions/government/index.htmhttp://www.woodlands-junior.kent.sch.uk/CUSTOMS/questions/government/laws.htmhttp://www.woodlands-junior.kent.sch.uk/CUSTOMS/questions/government/laws.htmhttp://www.woodlands-junior.kent.sch.uk/CUSTOMS/questions/government/index.htm


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c) is a leading global trading nation, being the second largest exporter and third largest importer

of commercial services, and the tenth largest exporter and sixth largest importer of merchandise

(Source: World Trade Organization, 2009),

d) is a member of the European Union, the worlds largest trading entity, with nearly 500 million

consumers and a GDP of over US$18,000 billion (Source : IMF, 2009),

e) is one of the most competitive locations in Europe for business and personal taxation,

f) Has low unemployment (with an unemployment rate well below the European Union

average),

g) Has the best European city London in which to do business (Source: Healey & Baker,

European Cities Monitor; October, 2009).

Economic Growth

Economic growth in the UK was 0.6 per cent in 2008 (Source: HM Treasury, 2009). Over the

last ten years, GDP growth in the UK has regularly outpaced or matched growth in the European

Union (see Figure 1).

Exchange Rates

The UK Government has policies that encourage a stable and competitive pound; consistent

with the objective of price stability (for example, the Government is committed to holding a

referendum on the euro once it decides economic conditions are right for the UK to join).

Interest Rates

The official Bank Rate in the UK, set independently by the Bank of England, is 0.5% as of

December 2009 (although the rate is subject to review on a monthly basis.) F igure 2.

Inflation

The Bank of England has full operational independence in setting interest rates to meet the

Governments inflation target of 2 per cent for the annual increase in the Consumer Price Index

(CPI). The CPI is based on the internationally comparable Harmonized Index of Consumer

Prices. In October 2009, the CPI stood at 1.5 per cent.

Foreign Direct Investment

The UK has a very strong track record in attracting foreign investment. In 2008, the

cumulative stock of foreign investment in the UK was more than US$983 billion, the third

highest level of FDI stock globally (Source: UNCTAD, 2009).


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Similarly in 2008, the UK attracted the fourth highest amount of foreign investment globally,

receiving US$97 billion of FDI inflows, representing 19 per cent of all FDI inflows into the

European Union (Source: UNCTAD, 2009).

The UK attracted a record number of foreign direct investment projects in 2008/09, with

1,744 investments being made by international companies, up by 11 per cent on the previous

year (Source: UK Trade & Investment, 2009).

In addition, the UK is the second largest single destination globally for US investment and in

2008 accounted for 26 per cent of all US investment stock in the European Union. Indeed, the

UK has attracted more US FDI than the combined totals of Germany, France, Spain and Ireland

(Source: US Department of Commerce, 2009).

Trade

The UK is one of the leading trading nations in the world. It is the second largest exporter

and third largest importer of commercial services, and the tenth largest exporter and sixth largest

importer of merchandise (Source: World Trade Organization, 2009).

Leading destinations for UK products and services include the US (17 per cent of all

exports), Germany (9.4 per cent) and France (6.6 per cent). Exports of goods and services to the

European Union as a whole accounted for 49.7 per cent o f all UK exports (Source : ONS, The

Pink Book, 2009).

Taxation

The UK has a relatively lightly taxed economy, with the overall tax burden well below the

average for the European Union and, in particular, countries such as Germany, France, Spain, the

Netherlands, Belgium, Sweden, Denmark and Italy (Source: Eurostat, 2009).

The main corporation tax rate in the UK, at 28 per cent, is lower than in other major

European economies. The UK also has one of the lowest standard rates of VAT in the European

Union (at 17.5 per cent from January 2010) and, unlike many other European countries, does not

impose VAT on a wide range of essential goods, including food and childrens clothing.

Major UK-owned Companies

A substantial proportion of the worlds leading companies are UK-owned. The Financial

Times Global 500 survey (www.ft.com /ft500), which identifies the largest 500 global

companies by market value, calculates that UK companies comprise the third highest number of

the worlds largest companies, behind only the US and Japan. Major UK companies in the list


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include BP, Vodafone, GlaxoSmithKline, HSBC, the Royal Bank of Scotland, Barclays,

Standard Chartered, AstraZeneca, Tesco and Diageo. The major UK companies account for the

third highest market capitalization in the world, only bettered by the US and China.

Labor EnvironmentThe UK has a highly skilled, flexible and dynamic labor market, with less labor regulation

than most other European countries. Skills are particularly strong in the UK, with many world-

class universities and centers of research and development located across the country. London is

consistently ranked as the leading European location for the availability of qualified staff

(Source: Healey & Baker, European Cities Monitor, 2009).

Employment is currently at high levels with 28.92 million people in work, comprising 21.26

million in full-time work and 7.66 million in part-time work (Source: ONS, 2009). Theemployment level (the proportion of working age people in work) is also high in the UK at 72.5

per cent, compared with the European Union average of 64.8 per cent (Source: ONS, 2009).

The UKs unemployment rate (using the internationally comparable standardized rate) of

7.8 per cent is significantly lower than the European Union average of 9.3 per cent (Source:

ONS, 2009).

The annual rate of growth of average earnings across the UK economy stood at 1.2 per cent

in September 2009 (Source: ONS, November 2009).

British Business Structures

Although traditionally hierarchical in structure, many British firms have moved towards a

flatter, less bureaucratic approach. This has also resulted in a certain lack of shape, with

boundaries and responsibilities being blurred. It can be difficult to get a clear picture of the

structure of a British company, with even employees being unclear as to the exact remit of their

jobs. As a result, job descriptions tend to be somewhat vague and imprecise with little clear

guidance on specific tasks to be undertaken.

British Management StyleBritish managers tend more towards generalization than specialization. The proposition thatthe manager needs to be the most technically competent person would receive little support in

the UK. Therefore, pure academic education is afforded much less respect than in other countries

(notably Germany and France) and the emphasis is on relevant experience and a 'hands-on',


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pragmatic approach. Titles such as doctor or professor are rarely used outside academic circles

and can even be seen a sign of affectation. The British find it difficult to be direct and British

managers often give instructions to subordinates in a very indirect way, preferring to request

assistance than to be explicit. This use of language can be very confusing for the non-British.

Family

English families are small (one or two children are the norm) and often tightly knit. Fewer

people are getting married and those who do are marrying later. Women are having fewer

children and are waiting longer to have them. In the past three decades, a substantial number of

women have begun working outside the home. In recent years, the divorce rate has risen, as has

the number of single-parent families.

Education

Education is an important part of British life. There are hundreds of schools, colleges and

universities, including some of the most famous in the world. Education is free and compulsory

for all children between the ages of 5 - 16. Some children are educated at home rather than in

school.

Status of Women

Women make up a large percentage of the workforce - almost 50% - but are often found in

low paid and part-time jobs. More female managers will be found in service and hi-tech

industries than in the more traditional engineering sectors - this is largely due to the small

number of women in the UK who graduate with technical degrees.

1-It is ok for women to eat alone in a restaurant.

2-It is ok for women to wander around on their own.

3-It is ok for women to drink beer.

Costumes

Some people think men in England wear suits and bowler hats, but it is very unusual these days

to see anyone wearing a bowler hat. Business attire is conservative.1-Men should wear a dark colored, conservative business suit.

2-Women should wear either a business suit or a conservative dress

Climate

England has a temperate maritime climate meaning that it is mild with temperatures not much

lower than 0 C (32 F) in winter and not much higher than 32 C (90 F) in summer.
http://en.wikipedia.org/wiki/Temperate_climatehttp://en.wikipedia.org/wiki/Maritime_climatehttp://en.wikipedia.org/wiki/Maritime_climatehttp://en.wikipedia.org/wiki/Temperate_climate


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Culture of the UK

The British are rather formal. Many from the older generation still prefer to work with people

and companies they know or who are known to their associates. Younger businesspeople do not

need long-standing personal relationships before they do business with people and do not require

an intermediary to make business introductions. Nonetheless, networking and relationship

building are often keys to long-term business success. Rank is respected and businesspeople

prefer to deal with people at their level. If at all possible, include an elder statesman on your

team as he/she will present the aura of authority that is necessary to good business relationships

in many companies.

Indirectness The British, in particular the English, are renowned for their politeness and

courtesy. This is a key element of British culture and is a fundamental aspect of British

communication style. When doing business in the UK you generally find that direct questions

often receive evasive responses and conversations may be ambiguous and full of subtleties.

Consequently, it is important to pay attention to tone of voice and facial expression, as this may

be an indication of what is really meant.

Stiff upper lip This is a term often used to describe the traditionally British portrayal of

reserve and restraint when faced with difficult situations. In British culture, open displays of

emotion, positive or negative are rare and should be avoided. During meetings, this means your

British colleagues will approach business with an air of formality and detachment.Humor A vital element in all aspects of British life and culture is the renowned British

sense of humor. The importance of humor in all situations, including business contexts, cannot

be overestimated. Humor is frequently used as a defense mechanism, often in the form of self-

depreciation or irony. It can be highly implicit and in this sense is related to the British indirect

communication style.

British communication styles

The British have an interesting mix of communication styles encompassing both

understatement and direct communication. Many older businesspeople or those from the 'upper

class' rely heavily upon formal use of established protocol. Most British are masters of

understatement and do not use effusive language. If anything, they have a marked tendency to

qualify their statements with such as 'perhaps' or 'it could be'. When communicating with people

they see as equal to themselves in rank or class, the British are direct, but modest. If


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communicating with someone they know well, their style may be more informal, although they

will still be reserved.

British business etiquette (Do's and Don'ts)

DO respect personal space. The British value their space and keeping an acceptable

distance is advised.

DO remember to shake hands on first meetings. It is considered polite to do so.

DO make direct eye-contact with your British counterpart, however remember to keep it

to a minimum or it could be considered impolite or rude.

DONT ask personal questions regarding your British counterparts background,

occupation or income.DONT underestimate the importance ofhumor in all aspect of business in the UK.

DONT forget that instructions are often disguised as polite requests.

Business meetings

Punctuality is a very British trait. It is especially important in business situations. In most

cases, the people you are meeting will be on time. Always call if you will be even 5 minutes later

than agreed. If you are kept waiting a few minutes, do not make an issue of it.

Summary of UK culture

The concept ofselfis high in UK. The Queue is highly adopted.


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Prefer direct communication. More punctual

Power distance is low Courage to face and ability to solve the problem

UK Trade

Consists of the movement of goods and services within the European Union (EU), of which itis a member, and to non-EU countries. International trade in the UK is assisted by UK Trade &

Investment (UKTI). This government organization focuses on enhancing the competitiveness of

UK companies through overseas trade and investments. It also aims at continuing to attract high-

quality foreign direct investment (FDI).

Trade Facilitation

The harmonization, simplification and automation of procedures for importers, exporters and

Customs through the systematic rationalization of controls and documentation for internationaltraders and administrative agencies in order to facilitate the international trade transaction

process or more simply reducing the procedural barriers that get in the way of trading across

borders


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Trade barriers & Policy

It is extremely difficult to estimate the actual size of the barriers that a trade facilitation

agreement is designed to reduce. Estimates of the global average costs of compliance with

present procedures range from 2% to 15% of the overall value of international trade, one widely

quoted UNCTAD study estimates that all trade transactions costs amount to 7-10% of the total

value of trade. Individual studies strongly suggest that the costs are higher for trade involving

developing countries than for those involving just developed countries, and for SMEs compared

to TNCs.

These costs can be seen as equivalent to tariffs. Unlike tariffs, they cannot be eliminated

completely. But the evidence suggests a considerable difference between the most and least

costly systems, implying the potential for considerable cost savings in some areas. It is certainly

possible to argue that a trade facilitation agreement could deliver global benefits at least

equivalent to those for the tariff negotiations.

Many of the worlds poorest countries are landlocked. As with tariffs therefore, the benefits

should be proportionally greater for developing countries as barriers come down.

There are also benefits from trade facilitation over and above those from an equivalent tariff

reduction. inefficient border procedures can also raise the cost of a countrys exports. Border

delays make FDI (particularly in just-in-time processing) less attractive. The government

revenue loss for developing countries is less than for tariff reductions (and indeed increased

imports from trade facilitation may well raise customs revenues).

Major issue of politics

The recovery and the election-The politicians prepare to fight over the economy

Iraq war issue-Investigation from the Tony Blaire & Cabinet


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UK is the fastest growing economy of the world. It is becoming the centre of international

trade. The UK was the first country in the world to industrialize in the 18th and 19th centuries,

and for much of the 19th century possessed a predominant role in the global economy. However,

by the late 19th century, the Second Industrial Revolution in the United States and the German

Empire meant the they had begun to challenge Britain's role as the leader of the global economy.

The extensive war efforts of both World Wars in the 20th century and the dismantlement of the

British Empire also weakened the UK economy in global terms, and by that time Britain had

been superseded by the United States as the chief player in the global economy.

The UK economy now need the products in service sector, because of being the capital

intensive and expensive labor the economy is unable to make offerings in service sector. So by

choosing the Imports/Exports as a mode of the International business a firm can capture a greater

market share for its services in UK, as china did.
http://en.wikipedia.org/wiki/Industrialisationhttp://en.wikipedia.org/wiki/Second_Industrial_Revolutionhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/German_Empirehttp://en.wikipedia.org/wiki/German_Empirehttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/British_Empirehttp://en.wikipedia.org/wiki/German_Empirehttp://en.wikipedia.org/wiki/German_Empirehttp://en.wikipedia.org/wiki/German_Empirehttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Second_Industrial_Revolutionhttp://en.wikipedia.org/wiki/Industrialisation

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