International Business Strategy

Week 9

November 2023

Diana Owusu-Yirenkyi

1 28 November 2023 International Business Strategy-Lecture

 Review of lecture on Brexit
&
Impact of global pandemic on international business

International Business Strategy-Lecture

2 28 November 2023
 Learning Objectives

1 2 3 4 5 6
Define and explain the Explore the historical Identify and analyse Understand the Examine the various Analyse the impact of
concept of a global context of pandemics the economic disruptions in supply strategies and policies government
pandemic. and their impact on consequences of a chains and their effects implemented by interventions on
international business. global pandemic on on businesses across governments international business
international trade and borders. worldwide in response operations and trade
investment. to the pandemic. relations.

International Business Strategy-Lecture

3 28 November 2023
 Review of lecture on Brexit
Economic Integration and EU Framework:

We examined the fundamental principles that underpin the EU, emphasizing the significance of shared
policies, common markets, and the free movement of goods, services, and people.

The EU framework is a complex web of relationships and agreements that bind member states
facilitating the development of a seamless internal market, encouraging the flow of goods and services
across borders and promoting economic growth.
International Business Strategy-Lecture
4 28 November 2023
 Review of lecture on Brexit
Drivers of Brexit:

The decision by the United Kingdom to pursue Brexit introduced a dynamic shift the union.

The reasons behind the Brexit decision is a complex interplay of political, economic, and social factors.

Political considerations, such as national sovereignty and the desire for greater autonomy, played a significant role, as did economic concerns
about regulatory frameworks and trade arrangements.

Additionally, societal factors, including immigration and cultural identity, contributed to the nuanced landscape that fuelled the Brexit debate.

International Business Strategy-Lecture

5 28 November 2023
 Statistics on UK-EU trade: Export
• UK goods exports to the EU fell sharply when
the transition period ended at the end of 2020.

• While they have recovered to some extent,

exports to the EU remain below 2019 levels in
real terms.

• In 2019, UK goods exports to the EU were

around £170 billion and In 2020, they were
£158 billion.

• From January 2021 to February 2023, monthly

exports of goods to the EU have consistently
fallen below the 2019 average of £14.2 billion.

International Business Strategy-Lecture

6 28 November 2023
 Statistics on UK-EU trade: Import

• Following the end of the transition period, imports of

goods from the EU experienced a significant decline.

• However, unlike exports, goods imports from the EU

have rebounded to reach pre-pandemic levels.

• In 2022, imports from the EU amounted to £274

billion, reflecting a real term increase of 1.4%
compared to 2019.

• It is noteworthy that the UK has not implemented full

border controls on goods imports from the EU.

• The government has recently announced its intention

to introduce these controls later this year.

International Business Strategy-Lecture

7 28 November 2023
 Post-Brexit landscape:
Navigating Challenges and Embracing Change

In the aftermath of the United Kingdom's departure from the European Union, the business landscape
has undergone a significant transformation, presenting both challenges and opportunities for
businesses across various industries.

One of the immediate and obvious impacts of Brexit has been felt in supply chain dynamics.

Companies have faced with changes in customs procedures, border controls, and tariffs, leading to
disruptions in the seamless flow of goods.

International Business Strategy-Lecture

8 28 November 2023
 Brexit the primary disruptor to supply chains

Ivalua Survey findings

• In November 2022, a study by Ivalua

found that 80% of UK businesses
identified Brexit as the main disruptor
to their supply chains in the past year.

• The impact of Brexit is said to

surpasses that of the war in Ukraine,
rising energy costs, and COVID-19.

International Business Strategy-Lecture

9 28 November 2023
 Brexit the primary disruptor to supply chains

Supply chain disruptions have led to revenue losses for 28% of UK

businesses, with an average drop of 18%.

The late product arrivals have resulted in fines and reputational

damage.

Concerns include potential supplier bankruptcies (69%), business

closures (51%), and delayed innovation (83%).
International Business Strategy-Lecture
10 28 November 2023
 The Impact of Brexit on Trade Costs

The changes in trade costs can be examined into three distinct areas:

Firstly, tariffs, which typically manifest as ad-valorem taxes (tax based on the assessed value
of an item) imposed at the border.

Secondly, barriers at the border, encompassing checks and declarations.

Thirdly, barriers behind the border, such as EU Declaration of Conformity, a required

document for manufacturers to sign, affirming that their products adhere to EU requirements.

International Business Strategy-Lecture

11 28 November 2023
 The Impact of Brexit on Trade Costs
Barriers at the Border:

In the absence of membership in the customs union, firms engaged in trade between UK
and the EU will need to adhere to Rules of Origin (RoO) requirements if they intend to
benefit from preferential import tariffs under a Free Trade Agreement (FTA).
RoOs, employed by customs authorities, verify the origin of traded goods, ensuring proper
import tariffs. Administrative tasks are crucial to confirm that goods predominantly
originate within the free trade area; otherwise, tariffs may apply.
Compliance check costs are estimated at around 8% of the goods' value, with 85% of the
expense linked to extra paperwork.

International Business Strategy-Lecture

12 28 November 2023
 The Impact of Brexit on Trade Costs
Safety and Security Declarations:

• EU members don't need customs declarations for trade within the bloc, but
starting from January 1, 2021, declarations are mandatory for UK-EU trade.

• In July 2020, the UK government outlined steps for GB-based companies to

comply with Safety and Security declarations. These include obtaining a GB EORI
number, engaging a Customs Intermediary for complex declarations, and
ensuring drivers have International Driving Permits.

• For businesses less experienced in international trade, external support may

increase administrative costs, with import declarations alone estimated at around
£4 billion annually.
International Business Strategy-Lecture
13 28 November 2023
 The Impact of Brexit on Trade Costs
Check Times:

After Brexit, ports with a focus on EU trade, like Dover and Holyhead, face challenges with increased checks,
potentially resulting in longer travel times.
Research indicates that even slight delays in vehicle checks, like a 70-second extension, could lead to six-day queues
at Dover.
Imperial College London estimates that each extra minute for checks per vehicle could result in roughly 10 miles of
peak-time traffic queue, equivalent to around 1.4 hours of waiting time.
Extended waiting times due to increased checks will immediately impact wage costs associated with exporting.

The mean hourly wage for an LGV driver is £12.02. UCL research suggests a 70-second delay causing a six-day wait
could raise transportation costs by over £1000 per container in labour expenses, especially with overnight waits.
A 7-minute delay, according to Imperial College estimates, could imply a labour cost increase closer to £120.

International Business Strategy-Lecture

14 28 November 2023
 Global Pandemic

Global Pandemic: refers to the

widespread occurrence of a
disease, typically infectious, that
affects people across multiple
countries.

Examples, Spanish Flu, H1N1 and

COVID-19.

International Business Strategy-Lecture

15 28 November 2023
 Major pandemics and Implications on trade, commerce,
and global relations
The Spanish Flu (1918-1919):

Impact on Trade and Commerce: The Spanish Flu coincided with the end of World
War I, and its economic impact was significant as the global economy recession.
The flu strained healthcare systems and disrupted production and supply chains.

Global Relations: The pandemic occurred during a time of geopolitical upheaval

this contributed to changes in international relations and influenced the course of
the 20th century.

International Business Strategy-Lecture

16 28 November 2023
 Covid-19 pandemic impact on global trade

• The Covid-19 pandemic has significantly impacted global trade,

causing disruptions in supply chains, a sharp decline in trade
volumes, shifts in consumer behaviour, and an increased emphasis
on bolstering trade resilience.

International Business Strategy-Lecture

17 28 November 2023
 Major pandemics and Implications on trade, commerce,
and global relations
COVID-19 (2019-present):

Impact on Trade and Commerce: Lockdowns, travel restrictions, and supply chain
disruptions led to economic contractions. Some sectors, like technology and e-commerce,
thrived, while others, such as tourism and traditional retail, suffered.
Global Relations: The pandemic highlighted both international cooperation and
competition. Countries collaborated on vaccine development and distribution, but there
were also instances of vaccine nationalism and geopolitical tensions.
The pandemic accelerated trends like remote work and digital transformation, impacting
global economic structures.

International Business Strategy-Lecture

18 28 November 2023
 The economic consequences of a global pandemic on
international trade and investment
Trade disruptions:

Trade disruptions refer to the interference or disturbance in the regular flow of goods and
services across borders.

While this interdependence of the global economy enhances the efficiency and cost-
effectiveness of global trade, the interconnected nature intensifies the impact of trade
disruptions.
Pandemics like COVID-19 highlight this vulnerabilities as during the crises, a ripple effect
on supply chains results in delays, disruptions, and shortages.

International Business Strategy-Lecture

19 28 November 2023
 Trade disruptions

The change in consumer behaviour, driven by changing priorities such as

safety concerns lead to mismatches between supply and demand, posing
challenges for businesses and contributing to trad disruptions.

https://www.youtube.com/watch?v=zB27A8ej3nc

International Business Strategy-Lecture

20 28 November 2023
 Disruption of Supply Chains
Supply chains encompass the global production and distribution of goods, often
involving various countries in different stages.

Lockdowns can lead to the closure of manufacturing facilities, transportation hubs,

and distribution centres, disrupting the seamless flow of goods across borders.

Travel restrictions impede the movement of personnel crucial for managing the
supply chain, exacerbating delays and logistical challenges.

Quarantine protocols may further disrupt the workforce, leading to labour

shortages and hindering production capabilities

International Business Strategy-Lecture

21 28 November 2023
 Disruption of Supply Chains
Manufacturing processes are often halted or slowed down due to a
lack of raw materials, components, or a sufficient workforce.

The transportation of goods faces obstacles, causing delays and

inefficiencies.

This creates a ripple effect across the supply chain, affecting both the
immediate production stages and the timely delivery of finished
products to consumers.
International Business Strategy-Lecture
22 28 November 2023
 Volume of world trade and industrial production

International Business Strategy-Lecture

23 28 November 2023
 How has Covid affected global trade?

In 2020, global trade fell by

8.9%, the steepest drop since the
global financial crisis.

Services trade fell by more than

20% in 2020, almost four times
the decline in goods trade.

International Business Strategy-Lecture

24 28 November 2023
 Summary of lecture
Disruptions in the Global Supply Chain:

Lockdowns and restrictions led to widespread disruptions in production and distribution networks.

Dependency on specific regions for critical goods exposed vulnerabilities, emphasizing the importance of supply chain diversification.

Decline in Trade Volumes:

Reduced demand, economic uncertainty, and travel restrictions contributed to a substantial decline in international trade volumes.

Sectors such as tourism and aviation experienced severe setbacks

Changes in Consumer Behaviour:

Shifts in consumer preferences and behaviour influenced the demand for goods and services.

The pandemic accelerated trends such as the rise of e-commerce and digital trade, transforming traditional business models.

International Business Strategy-Lecture

25 28 November 2023
 Outline to help structure your answer for Question 1

a. Explore the ways in which cultural differences impact firms'

negotiations, relationship building, communication, and
decision-making processes in international business operations.

b. Examine effective strategies and approaches for overcoming

the challenges associated with cross-cultural management in the
complex international marketplace.
International Business Strategy-Lecture
26 28 November 2023
 Outline to help structure your answer for Question 1

Introduction:
• Briefly introduce the significance of cultural differences in
international business operations.

• Provide a roadmap for the essay, outlining the focus on

negotiations, relationship building, communication, and decision-
making processes.

27 28 November 2023 International Business Strategy-Lecture

 Outline to help structure your answer for Question 1
Cultural Differences in International Business
A. Negotiations:
1. Discuss how cultural nuances influence negotiation styles.
2. Provide examples of negotiation approaches in different cultures.
3. Explain the implications of cultural differences on the success of negotiations.
B. Relationship Building:
1. Explore the role of cultural norms in relationship development.
2. Highlight how trust is built or eroded in diverse cultural contexts.
C. Communication:
1. Analyse the challenges of cross-cultural communication.
2. Discuss high-context vs. low-context communication cultures.
3. Offer strategies to enhance effective cross-cultural communication.
D. Decision-Making Processes:
1. Examine how cultural values shape decision-making.
2. Discuss the influence of individualism, and collectivism.
3. Address the implications of diverse decision-making processes on business outcomes.

International Business Strategy-Lecture

28 28 November 2023
 Outline to help structure your answer for Question 1

III. Effective Strategies for Cross-Cultural Management

A. Cultural Intelligence (CQ):

Discuss the importance of cultural intelligence in contributing to effective
cross-cultural management.

B. Training and Education:

Highlight the role of training programs in promoting cultural awareness.

C. Diversity and Inclusion Policies:

Explore the benefits of diverse teams in mitigating cultural challenges.

29 28 November 2023 International Business Strategy-Lecture

 Outline to help structure your answer for Question 1

Conclusion:

Summarize key findings regarding the impact of cultural differences

on international business operations.

30 28 November 2023 International Business Strategy-Lecture