Western Europe Essay

The United Nations defines western Europe as nine countries that include Austria, Belgium, France, Germany, Liechtenstein, Luxembourg, Monaco, the Netherlands, and Switzerland. The Western European Union adds the United Kingdom, Portugal, Spain, and Greece to this list, from which the organization excludes Switzerland, Monaco (considered holding special status within France), Austria, and Liechtenstein. For global business interests, western Europe consists of a quantity of markets that are consolidated into market groupings of different natures. These market groupings are characterized by partly harmonized market conditions. The most advanced group is the European Union, in Europe and in the world, in terms of degree of economic integration that spills over into such fields as social policies and politics. Western Europe is therefore a particularly interesting example for business in today’s world.

The European Union

Western European markets and business interests benefit from a long-term process of integration that spans the past 60 years, from historical postwar understandings to harmonized policies. Because the European Union is both deeply integrated and counts numerous members, the legal business environment includes many national, regional, and European authorities, and it lays the basis of the role of the EU internationally. The fundamental treaties of Paris and Rome, signed in the 1950s and 1960s, defined the institutional structure and policy objectives of the European Communities in the areas of coal and steel (European Coal and Steel Community [ECSC]), atomic energy (European Atomic Energy Community [EAEC]), and economic integration (European Economic Community [EEC]).

Europe has elaborated its market conditions into a single market of now more that 500 million consumers. The Single European Act of 1986 made the customs union evolve into this single market, extended the scope of qualified majority vote in European decision making, and cleared the way to facilitate the Europeanization of business across Europe. The 1992 Maastricht Treaty changed the denomination of this unique organization to the “European Union,” expanded former treaties allowing for the simplification of cross-border business further, introduced a codecision procedure, and flexible cooperation mechanisms for the member states that use the EU institutions to decide upon common goals and conditions. In 1999 the Amsterdam Treaty prepared the widening of the union through enlargement, that is, the integration of yet more members into its single market, and deepened the free circulation of people, goods, services, and capital. Each treaty has made the European business environment more efficient and more accessible as an entity. While constitutional efforts appear difficult at this stage, the 2008 Lisbon Treaty attempts to simplify a market grouping that has yet to adapt its institutional framework to the great breadth and depth of its own integration.

Treaties establishing the single market and its numerous common rules and policies have deepened the integration of members. At the same time, the market is geographically enlarging. The most extensive enlargement of the European Union took place in 2004: For the first time, former Soviet-ruled countries joined the community. This fifth EU enlargement had thus taken a strategic dimension that is prolonged through the accession of Romania, Bulgaria in 2007, and further members from this region applying for accession. Member states of the European Union since 2007 are Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and United Kingdom, of which Belgium, Italy, Luxembourg, the Netherlands, France, and Germany are the six founding members.

European Union Institutions

The institutions governing the European Union find their roots in the Treaty of Rome, establishing the European Communities (EC) in March 1957, enforced on January 1, 1958, among six western European countries. The European decision-making process is mainly dependent on the actions of three institutions: the European Commission, the European Parliament, and its Council. The European Commission (Commission of European Communities [CEC]) is the driving force and executive body of the structure; the European Parliament (EP) is the only directly elected body, elected by the people of the member states, and is gradually experiencing an increase in power. The Council of the European Union represents the governments of the member states. The Court of Justice guarantees compliance with the law, while the Economic and Social Committee has a main role in the representation of opinions of organized civil society on economic and social issues.

Other institutions, agencies, and bodies complete the structure that operates on three alternative decision-making modes, depending on the policy area and issue that is to be decided. The consultation, assent, or codecision procedures shape the legislative tools that the EU is in charge of and that regulate the business environment for both European and non-European firms in the single market, as well as international affairs of the EU. The EU budget is an essential tool in the management of the given EU objectives. It is sustained by value added tax (VAT), agricultural levies, customs duties, and its own resources, and benefits the business environment through, for instance, sector and regional spending and funds.

Business Environment

The European business environment has been subject to a rapid transformation ever since the mid-1990s. The introduction of a common currency in 1999, the extension of the single market rules to new areas such as e-commerce, and the ongoing trend toward supranational business taxation regulations are evolutions that have largely contributed to the construction of an increasingly harmonized business environment. On the business side, these evolutions have led to a diversification of firm structures: a Europeanization where more and more multinationals evolve into European transnational companies that compete worldwide, from a sound and vast home market. Small and medium-sized enterprises (SMEs) frequently operate on a European scale (as micro-multinationals) and are locally, nationally, and internationally exposed to large-scale competition and market harmonization rules formulated for all actors within the single market. Some of these structures are “born European,” that is, they fully benefit from economic integration and Europeanization advantages from their start-up origins in terms of structure, markets, and operations, and can be created under European (rather than national) company law.

European integration has increased the pace of developments throughout Europe and its neighboring countries; in a similar fashion to that of globalization, it has created a rising compression of the time and space factors that rule the business environment. For a better understanding of this compression, consider the following example: During the Cold War era it was difficult, if not virtually impossible, to export goods, services, or capital from western Europe, already integrating, to some eastern and central European countries, still under oppression from the Soviet system—politically, logistically, and also culturally. Given the developments during the 1990s and the enlargements of the EU, politically and culturally the member states have become closer than ever, while logistically both virtual and real means of transport and infrastructures seem to have reduced distances dramatically and take less time. Mapping the business environment as “European” has the clear advantage of an EU-scale communication to the world level: along the lines of power that result from a “unity in diversity.” A filtering or screening of its diversity (virtually or by means of maps) through specific search parameters allows any given corporation to target specific market opportunities.

Europeanization

The Europeanization of the business environment is based on the effects of globalization as well as geohistory and geoeconomic evolutions. International trade theory makes a strong case for the internationalization of firms that can obtain important advantages from going abroad. Also, the theories sustain the argument that integration is beneficial for the competitiveness of a nation or, in the case of Europe, a market grouping. The European business environment has been subject to major harmonization, liberalization, and deregulation efforts that are illustrated in the common policies that govern important policy areas and their outcome on an EU basis (in agricultural, industrial, competition policy, and numerous other fields). Nevertheless, income distribution is not equal, and the EU promises huge potential if harmonization efforts continue.

The dynamic though streamlined corporate sectors in the single market prove that Europeanization increases business efficiency and effectiveness. Most governments sustained their “national champion” expansion with nontariff trade and investment barriers directed against foreign competitors and strong borders protecting national markets. However, these policies failed and caused low growth, unemployment, and inflation after the first oil shock in 1973. The European Commission then decided to work on an integration program to eradicate the main trade and investment burdens.

The Single Market Program implemented in 1987 had a positive effect especially from the mid-1990s onward. The manufacturing industry was the main target of EU initiatives; this focus shifted toward the service industry around 2000. Consequently, “national champions” and championing governments had to adapt to a focus on becoming European leaders. Over the period of 1987–97, competition became EU-wide. Firms with a high dispersion of their activities at the outset benefited more than the others from the single market by rationalizing and concentrating their operations on the EU market. In all other cases, the EU’s role is to monitor and stimulate competition and fair trade. This includes, for example, the fair access to third (i.e., non-EU) markets.

Globalization

Altogether, the globalization phenomenon has evolved in three consecutive steps: first, the internationalization of trade (particularly in the 1950s); second, the transnationalization of capital flows (in the 1980s); and third and more recently, the globalization of information flows. The development of the information society has become a reality with the installation of global digital networks, in particular throughout the 1990s. Technology developments especially in communication improve the productivity of all sectors of activity in the manufacturing and in the services industries.

The 2000s have brought major evolutions in innovation and competitiveness convergence through the European Lisbon/Gothenburg agenda that set the objectives (dimensions) for research and innovation to help the EU catch up in sectors in which it is not sufficiently competitive. For example, EU corporations outperform the United States in telecommunications, social protection, and sustainable development, but are outperformed by the United States in seven out of eight Lisbon dimensions, in particular research and development (R&D) and start-up conditions for SMEs. Compared to Asia-Pacific, western Europe excels in chemicals, pharmaceuticals, and services, but is outperformed in most manufacturing sectors (in particular office equipment and multimedia manufacture).

The development of multinationals under these market forces enhances competition. An international corporate structure and an externalization of productions are phenomena that are well founded in the evolution of both globalization and Europeanization. The very performance and nature of the business environment constructed in Europe is motivation to companies worldwide in their call for more regional integration. In the area of business management, this market holds many cultural differences but also some degree of similarities: a European strategy makes sense as long as it is not based entirely on standardization and in which diversity management holds an important place.

The Euro

European economics are characterized by the harmonization of rules that attempt to maximize the benefit gained from trade and financial integration through risk sharing (the main traditional argument for crossborder asset trade), spillover of macroeconomic fluctuations as well as product and consumption comovements. A main step toward common measures was the introduction of the single currency in 1999 that provided the Eurozone members with a unique chance for economic cohesion. Also, it stimulated financial flows in an unprecedented manner. In regard to cross-border equity flows, geographical proximity is a strong stimulation factor, increasing flows even if informational asymmetries may increase transaction costs, and vice versa. Proximity affects asset holdings across borders because trade in goods has a significant impact on asset portfolios and stimulates their engagement. This confirms that institutional and cultural proximity affect cross-border bilateral asset holdings positively. It appears therefore that financial Europeanization and globalization is financially beneficial.

Unsurprisingly, western Europe shows some extent of convergence of the European finance sector, with some significant impact on the economy and corporate activity. Following the argument that investments and movements of financial assets are more frequent and intense when conditions of economic and political proximity grant stability, two main phenomena can be observed in the 2000s: On the one hand, national interests—of governmental income, of electorate considerations, and of social policy—have a significant impact on the willingness to negotiate the consolidation of financial markets and harmonized market conditions. On the other hand, public and private initiatives and interests across Europe drive a Europeanization for compatibilities that increase balance of payments (BOP) stability; it enhances the liquidity of financial markets in Europe. Also, a European approach in monetary, fiscal, and financial policy altogether can hamper economic and financial crises under the condition that it preserves the flexibility necessary in times of recession.

This has an impact in which the single currency, harmonization and convergence efforts, and diversity influence the purchase and sales of products and services in western Europe and on European marketing. The introduction of the single currency and the relative harmonization of financial management tools illustrate an increasingly competitive EU market. Transparencies, thanks to easier price comparisons, have increasing impact on pricing strategies and marketing investment. The need to excel through innovation and creativity, in the goal to differentiate one’s product, is a determinant force of marketers in Europe. It is reflected in communication and brand building strategies. Harmonization and diversity in Europe establish paradigms in marketing that are shaped on the basis of European-wide strategy and on the opportunities of standardization versus niche positions. These strategies depend on, in a similar fashion as in international marketing, the definition of the product, the market, and timing.

European Marketing

European marketing has been recognized as different from the typical “international marketing” theory. Marketers are positioning their product or service into a highly integrated market, facing Europe-wide levels of competition. All developments in the political economy and in the frame of business transactions and relationships in the market have a direct consequence on the work of marketers. This concerns marketing departments, advertising agencies, and market-research companies on a level that encompasses all European Economic Area (EEA) countries (in which we find three of the four European Free Trade Area [EFTA] member states: Iceland, Liechtenstein, and Norway, but also all EU member states) and Switzerland (linked to the other western European states through EFTA and Swiss-EU bilateral agreements), whether the concerned firms or products be of European origin or not—covering thus all of western Europe.

European marketing translates into far-ranging, long-term marketing strategies in which diversity management and strategic partner relationships are key. Also, the high rates of adoption of new communication technologies in Europe force the marketing manager to reinvent or readapt strategies in accordance to Europe-wide adoptions. For example, the internet and third-generation telephoning have significantly altered the panoply of marketers’ tools in advertising and promotion, and also for the management of commercial transactions. A European market study is the collection of information on a market that is particularly diversified, but that also benefits from market group similarities for efficient marketing. These advantages are based on EU integration as well as on conditions that shape the perception of people in Europe, including politico-legal, economic, demographic, and sociocultural conditions. These conditions help the marketer identify opportunities and challenges according to a product’s or service’s needs, to demand, and to the environment.

The situational analysis of the European environment, customers, other actors such as distributors, suppliers, competition, opportunities, and threats can be based on a multitude of freely accessible data. The main challenges for market studies may be language barriers for in-depth studies in some of the newer member states. In accordance with the firm’s internal objectives, strengths, and weaknesses, a segmentation of target markets may be undertaken or a standardized European-wide marketing strategy adopted. The latter option is certainly the most cost-efficient but applies to only a relatively few products and services. Among them, we have found those characterized by strong cross-border brand images and internet services that allow for high mobility and flexibility. Also, when logistics are unimportant and European harmonization is required, an EU-wide strategy makes sense.

In conclusion, the leakage effects of traditional marketing approaches in a European context make national approaches less effective, but still somewhat useful because of important diversities in perceptions by European peoples. Any corporation is well advised to market its goods or services on the European level, because the flows of trade, investment, and sourcing in the EU reduce the specific advantages that a firm would achieve from outsourcing or foreign supply. Marketing can, hence, be an underpinning of a sound European strategy wherever possible in terms of adapted product or service. Because all efficient marketers use the possibilities that the single market provides (on a regional or EU-wide basis), only those firms that still act only locally lose out on these opportunities.

Opportunity Networks

European business and international corporations from non-EU countries have recognized the importance of institutional opportunity networks at the EU level. These opportunity networks can be defined as more or less loosely organized relations among business and governmental authorities that are potentially beneficial to the involved parties. These networks play an important role in the search for sustainable competitiveness. In western Europe, the most efficient and recognized ways of how a business’s voice may be “heard” focus on lobbying in Brussels, and to some extent in Strasbourg and Luxembourg, that is, in the locations of the three main decision-making institutions in European politics. This is a key to the essential competitive advantages for any firm that is doing business in Europe. Efficient multi-networked public affairs management is part of doing business in today’s world and has grown in impact and size in Europe during the past two decades. It helps corporations reduce risk and uncertainty in the political economy that they are part of and recognize the strategic importance of Europeanization, vis-à-vis the traditional exclusively national focus on the political economy.

Any firm operating anywhere in western Europe is regulated by an increasing number of actors, on a state level as well as multilaterally, in the competition of the two for power through the expression of redistributive welfare, and hence, among others, the benefits from wealth creation through corporate activity. Each wave of European integration has given rise to ever-more EU-level lobbying activity, at the speed at which the EU public policy and the power of institutions have expanded. The landmarks of European integration incrementally fostered lobbying activity, in 1986 with the Single European Act, in 1992 with the Treaty of European Union at Maastricht, with the 1997 Amsterdam Act, and in particular through the waves of enlargement.

The Europeanized business environment and management have increased corporate awareness of the opportunities that lobbying can bring. Corporations need to build a message and transfer this message with the help of other actors in the arena. This happens through, at a minimum, replies to consultations, and at a maximum, EU lobbying that has to be committed to the EU process, procedures, and objectives. The EU policy network consists of national and EU institutions and nongovernmental actors. It is also heavily influenced by non-EU international organizations and foreign governments that exercise power. Hence, the lobbying activity involves interaction at different levels with directly or indirectly concerned state actors, policy professionals and experts, companies, and interest groups of different kinds.

In Europe, lobbying means simply that a person or a group of people tries to influence legislators so that an individual’s or organization’s point of view is represented in the government. A lobbyist is a person who is, most of the time, paid to influence legislation and public opinion. Most large corporations hire professional lobbyists to help promote their activities as agents, or open their own representation in Brussels, and their main objective is to maintain a positive regulatory environment for their organization, along codes of conduct established by the European Parliament. The many access points in the European opportunity structure offer the possibility for all actors to lobby the arena, whether directly or indirectly, whether individually or through partnerships and federations, whether in Brussels or at any other location in Europe, or where the European actors are represented, and finally, whether European or from a third country.

Altogether, western Europe is a fast business environment that is strongly integrated, deeply harmonized, and yet characterized by diversity and a “single” market only on the level of free flows of market conditions and common policies. The area is strongly integrated with the rest of Europe and a great variety of partners on bilateral, multilateral, and market group level in trade. In particular, the Euro-Mediterranean partnership (“Barcelona process”) and relations with the Association of Southeast Asian Nations (ASEAN) and African, Caribbean, and Pacific Countries (ACP), and Gulf Cooperation Countries (GCC) underline European political, economic, and business directions for the future.

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