write short note on the European company of 10 lines
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With reference to international trade and investment theory, briefly outline the main purpose of the European Union and the significance of the Single European Market for an EU-based business.
International trade is the exchange of goods and services between countries. International trade is distinguished from domestic trade since it takes place entirely within a single country. International trade is sometimes called as ‘world trade’ or ‘foreign trade’ (International Trade).
While studying about the investment theory we need to analyze why nation’s trade and gain a competitive advantage, why and how firms internationalize and how do they sustain competitive advantage in the international arena. When we talk about a country Comparative advantage, they are the Superior features of a country which provide it with unique benefits in global competition derived weather from national endowments or deliberate national policies. It is concept that helps answers the question all nations can gain and sustain national economic superiority. Competitive Advantage of a country’s firm is distinctive assets or competencies of a company derived from its size, assets, innovation strengths which are difficult for its competitors to duplicate or imitate. In other words the concepts tells us how a firm can gain and sustain distinctive competence vis a vis competitors. (Theories of International Trade and Investment, 2008) Single Market – European Union
The European Union is a group of Western European nations working to unite the economic resources into a single economy. It is a group of 27 member states which have been united to create a political and economic community throughout Europe. The European Union imports and exports more than any one country in the world. The community’s chief trade partner is the United States. The community have special trade agreements with many other countries (European community).
The main purpose behind European Union is to provide better economy to the poorer countries in Europe. It also means that trade between these countries is cheaper. Apart from this the European Union aims to promote economic and social progress and a high level of employment opportunities, thus maintaining sustainable development and a better standard of living and Gross Domestic Product of the economy. Through the establishment of economic and monetary union, they create an area without internal frontiers, which includes a single currency and it makes trade much easier. One of the reasons behind the formation of European Union was to provide a common defence phenomenon. In this way all the members will be secure in terms of defence. Through the introduction of the citizenship of Union, the rights and interests of the nationals are strengthened and protected (Folketinget).
Internally the European Union has abolished trade barriers, experiencing a common currency and is constantly striving towards the convergence of improved living standards. The European Union faces a lot of difficulty in devising and enforcing common policies because of the differences in the per capita income among member states. Between 2004 and 2007, 12 countries were added to the European Union which are generally less advanced than the remaining 15 countries. Being a large Union, it has a couple of transnational issues. The European Union itself has no border disputes with the neighbouring countries. But technically Estonia has no land agreements with Russia; on the other hand Slovenia disputes its land and maritime boundaries with Croatia. Similarly Spain has territorial and maritime issues with Morocco and with the UK over Gibraltar (Central Intelligence Agency).
A single market is basically a trading bloc which is composed of a free trading area, which has common policies and it there is freedom of movement for the factors of production namely land, labour, capital and enterprise. The main objective is that these factors of production are mobile. All the trade barriers, whether it be in the form of taxes which are fiscal, physical such as the borders and technical barriers are removed so that trading policy becomes easier. In this way the countries can form a common economic policy. The formulation of a single market leads to the freedom of movement of all the factors of production because of which the factors become economically efficient further increasing productivity. A single market economy can prove to be competitive as it makes the existence of monopolies very difficult. This means that those companies who are producing inefficiently have to close down and as a result will suffer loss of market share.