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EU BUSINESS CONTEXT Prof. Leo Sleuwaegen
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True or false? There are more than 10 official languages in the EU English is the most widely spoken mother tongue in the EU There are more than 100 nationalities present in the EU
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Languages in the European Union 24 official languages, 3 alphabets, representing 27 states More than 60 minority and regional languages in EU German is the most widely spoken mother tongue in the EU English spoken by 38% of EU citizens as first foreign language. At least 175 nationalities present within EU borders In the EU about 50% of all children in primary education learn a foreign languages
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True or false? The EU economy is larger than the US economy There are more people living in the US than in the EU
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EU Economy With about 314 million people, the U.S. economy is the largest national economy in the world, with an estimated 2012 gross domestic product (GDP) of US $16.24 trillion (23% of nominal global GDP). With about 505 million citizens, the EU combined generated a GDP of US$ 16.72 trillion in 2012
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Economic Growth in Selected Regions and Countries Source: International Monetary Fund, April 2013
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| 16-11-2010 |Sample S7 |
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The crisis has seriously affected the European economy GDP growth: -0.6% in 2012, 0% in 2013, 1.2 % in 2014 (US average of 2.3% over the same period) Industrial production: -20% with the crisis Unemployment levels: o 10.8% in 2013 (7.4 % in the US) o Youth unemployment over 20% Source: Presentation of Mr. Barroso to the Informal European Council
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Ageing is accelerating: EU working age population will be reduced by about 2 million by 2020, and the number of 60+ is increasing twice as fast as before 2007 Productivity levels are lagging behind: two-thirds of EU income gap with the US is due to lower productivity Structural Challenges Source: Presentation of Mr. Barroso to the Informal European Council
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Factors explaining the US lead Better/larger science base Better in linking science & industry on a global scale Entrepreneurship Venture Capital Flexible labour markets Better incentives But the main problem is - lagging productivity in services-
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Changing structure of EU economy
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Strong variation of income across member states
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Each country has some distinguished sectors in which it excels: Bulgaria: light industrial products, foods and wines France: machinery and transportation equipment, aircraft, plastics, chemicals, pharmaceutical products, iron and steel, beverages Greece: food and beverages, manufactured goods, petroleum products, chemicals, textiles Italy: engineering products, textiles and clothing, production machinery, motor vehicles, transport equipment, chemicals; food, beverages and tobacco; minerals, and nonferrous metals Sweden machinery,motor vehicles, paper products, pulp and wood, iron and steel products, chemicals
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EUROPE 2020 A new growth strategy for the EU
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Europe 2020 Source: Presentation of Mr. Barroso to the Informal European Council Growth based on knowledge and innovation Innovation Education Digital Society An inclusive high-employment society Employment Skills Fighting poverty Green growth: a competitive and sustainable economy Combating climate change Clean and efficient energy Competitiveness
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Growth based on knowledge and innovation Source: Presentation of Mr. Barroso to the Informal European Council
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An inclusive high-employment society Source: Presentation of Mr. Barroso to the Informal European Council
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Green growth: a sustainable and competitive economy Source: Presentation of Mr. Barroso to the Informal European Council
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| 16-11-2010 |Sample presentation21 |
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The performance of European industry is strongly influenced by the business environment, which is in turn created by the regulatory framework both at national and European level. Important EU policies o the creation of a single market o competition policy o industrial policy
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EUROPEAN SINGLE MARKET EUROPEAN SINGLE MARKET How do EU firms react ?
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Regional expansion and value creation (1) Firms can : expand the market for their domestic product offerings by selling those products in other EU countries realise location economies by dispersing individual value creation activities to locations where they can be performed most efficiently and effectively
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Regional expansion and value creation (2) Source: Presentation of Mr. Barroso to the Informal European Council realise greater cost economies from scale/experience effects by serving an expanded market earn a greater return by developing and leveraging valuable skills across countries
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Market integration effects Market integration costs scope and scale effects X-inefficiency competitive pressures restructuring technical progress & innovation prices volume - + + + + - + + + - - -
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To realise these benefits firms will adopt regional strategies characterised by: major market participation product standardisation activity concentration uniform marketing integrated competitive moves
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Process of European Restructuring Open boundaries and harmonisation Global markets Strong competition Need for specialisation and market expansion World-wide economic restructuring Acceleration of investment cycles Need for trans-national process organisation
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Need for trans-national process organsation
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Old versus new Euro-organisation : National market versus Euro- networks versus : Location firm activities (production, sales, R&D, …) Source: based on Vandermerwe (2003)
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Wider Impact on Value Chain
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Unilever Toilet Soap Manufacturing Locations in Europe 1973 (#13)2000- (#2)1989 (#4)
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| 16-11-2010 |Sample presentation34 |
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Need for specialisation and market expansion
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| 16-11-2010 |Sample presentation36 | Top 50 manufacturing firms divested about half of their activities between 1987 and 2005
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Refocusing: De-diversification of major European firms % of divested business units All Leading Non-leading 18% 70% 14% 40% 31% 74% Core Non-core Core Non-core Core Non-core
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The use of M&A in the adjustment process Source: Presentation of Mr. Barroso to the Informal European Council Rationalisation * Concentrate production in smaller number of sites * Development of better integrating mechanisms * Plant closure Defence * Price competition to defer entry * Marketing & distribution investments * Closer concentration on local markets Expansion * Expansion into niches targeted by entrants * Reciprocal access into competitor market * Selected targeting of overseas markets * Increased exporting foreign direct investment Mergers & alliances Joint ventures & alliances
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Is the single market complete?
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For your organization, to what extent are the following a barrier to business?
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Hofstede’s Cultural Differences : Large variation across EU member states Power Distance Index (PDI) Uncertainty Avoidance Index (UAI) Individualism (IDV) Masculinity (MAS) Long-Term Orientation (LTO)
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Hofstede Dimensions of Culture 43
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Source: Presentation of Mr. Barroso to the Informal European Council
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