European Business

Debra Johnson, Colin Turner

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781134622047
• Edition: 3
• Topic: Business
• Subtopic: Business General
• Index: Business

The third edition of European Business is published at a time of turbulence in Europe. This uncertainty puts Europe's unique business environment at risk.

Key features of the new edition include:

• assessments of how individual member states affect the integration process and bring diversity to European business;
• new material on the links between Europe and the World's other main regions, including emerging economies;
• new case studies on topics such as the rise of the BRICs, the energy crisis, enlargement and the Euro.

The book retains popular pedagogical features to help students make sense of a confusing and complex environment.

A unique and accessible text, the book is ideal reading for students of European and International Business and important additional reading for those interested in European politics and economics.

Part I
A portrait of Europe

Squaring the circle of continuing diversity and greater integration?

Why European business? What is different about European business or business in Europe from American business or Asian business or business in any other part of the world? Clearly, businesses have much in common whatever their origin. They are all trying to find the best way to compete in a world which is becoming increasingly open and competitive. However, although their overall objective may be similar, business strategies are shaped and influenced by the culture, traditions, economies, political and institutional frameworks and general context of their home base. These contexts vary tremendously from country to country and from region to region. European business is no different and the first part of this volume establishes the context in which European business operates and which provides it with the platform from which it engages with the rest of the world. Part I also provides a context for the more detailed chapters that follow in Parts II to IV.

Chapter 1 opens with a broad-brush portrait of Europe which sketches the scope and main characteristics of the European economy and markets. In the process, some of the main similarities and differences among European countries are highlighted, particularly, but not only, in terms of the major social and economic models that co-exist in Europe. The chapter then discusses the nature of competitiveness in general and what measures various authors claim are necessary for nations to be competitive. The chapter concludes by discussing the European Union’s latest long-term initiative, Europe 2020, to boost Europe’s competitiveness and to enhance its place in the world economy.

Chapter 2’s focus is on European business in general terms, providing a profile of its structure, composition and measures of its competitiveness and the ease of doing business on its territory. What really makes European business unique, however, is the depth, level and ambition of the regional integration which shapes its operating environment. Indeed, in international business literature, regional integration is an important factor in business location: the example and experiences (both good and bad) of European integration can help other regions that are not so far down the integration road or even individual countries that are struggling to overcome market fragmentation. Chapters 3 and 4 outline how Europe has reached its current stage of integration. Chapter 3 discusses the theoretical and historical background to European integration while Chapter 4 sets out the institutional and decision-making process in which European integration takes place. Although it is not essential for those studying European business to know the ins-and-outs of the history of the EU and its decision-making process, it is extremely useful to have an overarching knowledge of these matters to help them understand the context in which European integration is taking place and to understand where and how the important decisions that affect European business are taken.

Chapter 1
A portrait of Europe

I think he bought his doublet in Italy, his round hose in France, his bonnet in Germany, and his behaviour everywhere.

William Shakespeare, Merchant of Venice,
(Act 1, Scene 2, line 78)

This chapter will help you to understand:

• key features of modern Europe;
• different European social models;
• conditions that can foster competitiveness;
• Europe’s priorities going forward.

Much of the focus of regional interest in the field of international business is on the rapidly growing emerging economies, particularly of India and China. For business practitioners, academics and students, these markets have attracted considerable attention, primarily because of their tremendous trade and investment potential; because they encompass two-fifths of humanity and because they are behind the shifting power within the global economy. Thus, the emergence of these states and the intensified economic rivalry this has provoked represent a serious strategic challenge for the 28 relatively small states of the European Union (EU) which occupy a comparatively small area of land at the far end of the Eurasian plate.

A cursory examination of the business press highlights the essence of the challenges facing Europe. It is not uncommon for Europe to be portrayed as the ‘old continent’, refusing to face up to the reality of relative decline, bereft of ideas and unwilling to make the necessary reforms to enable it to compete. Whatever the truth in these allegations, Europe remains a pivotal player in the global economic system as a market, a producer, an exporter and an investor – and is likely to remain so.

In historical terms, one cannot overstate the significance of the ‘old continent’. For centuries, Europe has been the source of ideas that have shaped the world and its business practices. The spread of Europeans throughout the globe has been pivotal in shaping the contemporary environment to which Europe must now respond. The challenge for Europe is that it must be and remain a good place to do business. To this end, Europe has to undergo a process of adjustment. This means a transformation of how it creates and sustains employment; the types of jobs it creates; how it innovates; how it enables its businesses to expand and develop and how it engages with the rest of the world.

Within the context of the rest of this text, this chapter addresses a number of objectives. The first is to offer a portrait of contemporary Europe and to examine its economic structures. The second is to elaborate upon the various European social models – models which are both controversial and important in terms of setting the context within which businesses operate. The chapter then examines the core competitive challenges for Europe before moving on to outline how the EU seeks to address these challenges through its Europe 2020 strategy.

Contemporary Europe

The bulk of contemporary Europe’s business environment is organised within the framework of European integration in the form of the EU, an arrangement which is the main focus of this text. In 2015, in Western Europe, only Switzerland and Norway plus a few smaller independent nations such as Andorra and Liechtenstein stand outside this framework. The 2004 EU enlargement absorbed eight Central and Eastern countries plus the two island states of Cyprus and Malta and two more – Bulgaria and Romania in 2007, followed by Croatia in 2013. The situation is more complex in South-east Europe where several Balkan states are at varying stages of applying and negotiating to join the EU (see Chapter 16). Further eastwards, Turkey has been in accession negotiations with the EU for a number of years.

The EU in 2015 is composed of 28 nation states with a combined population of over 500 million people (see Table 1.1). Europe’s main traditional economic rivals – the United States and Japan – have populations of 316 million and 127 million respectively whereas the two largest emerging economies – China and India – have populations of 1.4 and 1.3 billion respectively and great potential as markets and labour forces.

A major thrust of Europe’s integration process has been to create a Single European Market (SEM) (see Chapters 3 and 5) within which European businesses can compete with each other on equal terms and which creates a strong domestic market for European business to use as a platform from which they can compete with businesses in the rest of the world.

Figures 1.1 and 1.2 go some way to explain why a key thrust of European integration is to end the fragmentation of the European market place. Europe’s economies range widely in terms of their size. The big four are Germany, France, the UK and Italy. Their economic dominance helps explain their centrality in many EU policy debates: Germany’s GDP, for example, is bigger than the combined GDP of the 21 smallest EU economies. This dominance by a few states also explains why smaller states are so anxious for their concerns to be heard. However, in an international context, the US economy is over 4.5 times bigger than that of Europe’s biggest economy – Germany. It is, therefore, only through acting as an integrated unit that

Table 1.1 Portrait of the EU, 2013 (unless stated otherwise)

Figure 1.1 GDP of EU economies, 2013

Source: Eurostat.

Figure 1.2 Relative size of EU GDP compared to other major economies, 2013

Source: Eurostat.

Europe begins to match the US (see Figure 1.2) in terms of market size, influence, potential for economies of scale and the other benefits claimed for a unified single market.

In order to understand European business and its environment, it is important to acknowledge the different units which make up this trading bloc – the individual nation states – which, although having much in common, also exhibit factors which give Europe significant diversity in terms of culture, organisation, tradition, history, economic structures and interests, etc. These can lead to major differences at EU level in relation to the determination of policy and the future direction of Europe. Moreover, diversity within Europe also continues to exercise an influence over the business environment. Thus an abiding theme in the creation of modern Europe is the constant tension between convergence and divergence among EU member states.

In terms of convergence, Europe shares much in terms of a broad common history and intellectual traditions going back several centuries. More recently, there has been a convergence of political and economic ideology and of commercial structures. After the Second World War, economic policy in Western Europe was based on Keynesian economics in which there was a clear role for the state in managing economic demand. The dominance of Keynesianism started to diminish in the 1970s when the simultaneous existence of high levels of inflation and unemployment began to undermine its key assumptions. Neo-liberalism – that is, an economic ideology that limits the role of the state to more or less creating an environment in which market forces determine resource allocation – began to replace the demand management approach, albeit with more enthusiasm in some member states than others, and provided the underpinning economic philosophy of the SEM.

Similarly in the 1970s, the twin systems of political dictatorship and economic isolationism in Greece, Spain and Portugal gave way to convergence with Western European norms and, indeed, EU membership in the 1980s for all three countries. By 1989–90, it had become clear that the era of Soviet domination, both economically and politically, over Central and Eastern Europe was rapidly drawing to a close. The former Soviet satellites, without exception, chose the model of democracy and market economics to guide their social, economic and political transformation. Moreover, the goal of EU accession required them to adopt the institutions of a market economy and all existing EU rules and regulations (the acquis communautaire) which essentially gave them a detailed roadmap to help them achieve their transition goals. In short, by the turn of the century, after over 50 years of division, Europe’s nations had converged on a broad common economic and political framework. However, many differences remained among Europe’s nations in relation to the details of this framework.

All European states are currently examples of mixed economies. Most have privatised some of their state-owned enterprises (SOE), although many still retain full or partial control of some SOEs, especially in the utility and transport sectors (see Chapter 2).

The size and role of the welfare state also varies considerably within Europe (see Table 1.1 and the section below on European economic and social models). This reflects differences not only in the a...

Table of contents

• Cover Page
• Half-Title Page
• Title Page
• Copyright Page
• Table of Contents
• List of illustrations
• List of contributors
• Abbreviations
• Preface
• Part I A PORTRAIT OF EUROPE: SQUARING THE CIRCLE OF CONTINUING DIVERSITY AND GREATER INTEGRATION?
• 1 A PORTRAIT OF EUROPE
• 2 EUROPEAN BUSINESS: STRUCTURE AND PERFORMANCE
• 3 THE EVOLUTION OF EUROPEAN INTEGRATION
• 4 EUROPE‧S INSTITUTIONAL FRAMEWORK
• Part II THE BUSINESS ENVIRONMENT AND MARKET INTEGRATION
• 5 THE SINGLE EUROPEAN MARKET: TOWARDS A NEW PHASE OF MARKET INTEGRATION
• 6 EUROPEAN COMPETITION POLICY: THE GUARDIAN OF INTEGRATED MARKETS
• 7 PROMOTING STRUCTURAL CHANGE: EU INDUSTRIAL AND ENTERPRISE POLICY
• 8 ECONOMIC AND MONETARY UNION: A STEP TOO FAR FOR EUROPEAN INTEGRATION?
• 9 THE EUROPEAN CITIZEN AND CONSUMER
• PART III INPUTS AND FACTORS OF PRODUCTION
• 10 TRANSPORT: TOWARDS EFFICIENT AND EFFECTIVE MOBILITY
• 11 ENERGY POLICY: THE QUEST FOR COMPETITIVE, CLEAN AND SECURE ENERGY SUPPLIES
• 12 EU ENVIRONMENT POLICY: A GREEN LIGHT FOR COMPETITIVENESS?
• 13 A DIGITAL AGENDA FOR EUROPE: CREATING THE INCLUSIVE INFORMATION ECONOMY
• 14 EUROPEAN LABOUR MARKETS AND THE SEARCH FOR FLEXIBILITY
• PART IV EUROPE AND THE REST OF THE WORLD
• 15 EUROPE IN A GLOBAL CONTEXT
• 16 ENGAGING WITH THE EUROPEAN SPACE: ENLARGEMENT AND NEIGHBOURHOOD POLICY
• 17 EUROPEAN BUSINESS IN A GLOBAL CONTEXT: THE DEVELOPED WORLD
• 18 EUROPE AND THE BRICS: OPPORTUNITY OR THREAT?
• 19 EUROPE AND THE LEAST DEVELOPED COUNTRIES: TRADE, AID AND THE ACP STATES
• Index