Blok H4 Business Abroad European Law Content The Dutch membership of the European Union (EU) means that EU-‐Law has become an integral part of the Dutch legal system. The process of European integration, economically, legally and politically, has a lot of consequences for The Netherlands. Basic knowledge of the EU and its system of law is therefore indispensable for a BKM-‐student. From an even wider point of view we can see that Europe in general is a very important player in the international community. ‘Brussels’ influence in the world at large cannot be overestimated. Another reason for a BKM-‐student be introduced in the basics of EU-‐Law. Objectives • Week 1/2: You are capable of using the Treaties, explain their content and write
down articles correctly. • Week 1/2: You are familiar (identify and explain) with the main concepts of EU
Law; • Week 3: You are capable of applying the rules of the internal Market to a complex
case, make up solutions and argue with solution for the case is preferable from your point of view.
• Week 4:You are capable of applying the rules of European Competition Law to a complex case, make up solutions and argue with solution for the case is preferable from your point of view.
Literature
• Karen Davies, Understanding European Law, 5th edition, Routledge:2013, New York, Cornwall
• Treaties • Literature and sheets on BB
Curriculum Art. 3 Exclusive competence (volle bevoegdheid) They can do anything they want Art. 4 Share competence (delen) Not only the EU but all the countries together are allowed to make rules on the topics mentioned. Art 5 The Member States shall coordinate THEIR economic polcies. They say they don’t have influence but the DO. Art. 6 Union has the competence ONLY to support, coordinate or supplement Member States are allowed to make rules on the topics mentioned and the EU have the competence to support, coordinate and supplement.
Art. 288 TFEU 1 Regulation: (verordering) If Brussel makes a regulation all member states moeten zich hier aan houden! It’s just the Law! STRONGEST 2 A Directive: (richtlijnen). It gives a direction to a final goal. The form is up to the member states. Example: make sure that in about 5 years all men and women are equal. The way doesn’t matter, the bar needs to be the same direction. Goal is men and women equal. Member states are allowed to choose their own form and methods to achieve the result. ALSO TOUGH BUT STILL SOME FREEDOM To implement a directive a law will be formed. BV: vrouwen en mannen gelijk op de werkvloer binnen 5 jaar, dan zal er oer 5 jaar een wet zijn met gelijkheid van mannen en vrouwen op de werkvloer. 3 A Decision: Specific law for a specific country or company. But is Never EU wide. TOUGH BUT SPECIFIC. 4 A Recommendation: (aanbeveling) more like an advice to someone. I advice you to…. (not very important for our exam.) Secundary Law!!! Institutions
Free movement of Goods
1) Non-‐Financial: -‐ Quantitative restriction: art. 34 TFEU -‐ Measure having equivalent effect: art. 34 TFEU MHEE: Distinction between: -‐ Selling arrangements (Marketing stuff, all rules related to advertising, opening hours of shops, pricing, remarks on packaging of cigarettes) -‐ ‘Product-‐related rules’ (Keck-‐case) Hence: Selling arrangements: Not forbidden Product related rule: Forbidden (MHEE)
MHEE that discriminates MHEE that don’t discriminate Justified by art. 36 TFEU + proportionate art. 36 TFEU : its still allowed Not to be justified Always forbidden! RULE OF REASON (Protection of consumer and environment) -‐> example 2) Financial -‐ Duties (heffing) + CHEE Art. 30 TFEU (charge having equivalent effect) Forbidden -‐ Taxes Does the tax of the product Discriminate? Yes: Forbidden No: Not forbidden
English Week 1 Summary Writing Write down the important things First and last sentence of a paragraph Topic sentence! They reveal what is the paragraph about What else is important? A title, headers, subtitles. Thesis statement Indicates the thesis (subject and the message) of the text. If you don’t have much time, you just scan the text and write a short summary. Scamming = scanning for one particular word in a text. Close reading = Het goed lezen van een tekst Privacy and mobile phones -‐ Why does location service keeps the information for such a long time? -‐ Why do we have to accept cookies? -‐ Why aren’t there any rules for taking a picture of someone with your mobile phone? -‐ Can we still live without our mobile phone? -‐ Do we still have privacy with all these mobile phones around? What’s your opinion about this matter? Could you elaborate on that? I totally disagree with that! I would like to ask …. point of view about this question 50 words summary A new international currency appears: frequent-‐flyer miles. These frequent-‐flyer miles started as a marketing gimmick, but they have become a lucrative business. The frequent-‐flyer miles could even be said to be the world’s second-‐biggest currency after the dollar. But the only issue is that excessive money growth can lead to hyperinflation and devaluation.
Week 2 Adjectives and Adverbs Beautiful – beautifully Good – Well He drives very Adverb (bijwoord) He is a driver Adjective (bijvoeglijk naamwoord) Week 3 Portfolio English Put the first version of your summaries in! Do both tasks fully completely and comprehensively (complete). The summary is around 75 words. Make a very good structure Title – Introduction – Main part (Body to explain the problems) – Conclusion (can be 1 sentence) Gerund = make a verb in a noun (het werkwoord zelfstandig maken) Book page 289 + 290 Also see Sheets James Nortan who is a CEO of an international company was accused of fraud. Expanding relative clausile. I will send you the slides which you need for the presentation as soon as possible. No kommas Last night I met my old college professor who I had not seen for years. Expanding relative clausile -‐ Restricted relative clausile
Country Analysis Week 1 Companies are forced to cross boundaries -‐ Because of economies of scale; -‐ Foreign consumers. -‐ Maybe it’s cheaper to go abroad. -‐ Labour can be cheaper. -‐ Lower costs in foreign countries. The world has globalized. International economics are important. Learning objectives lecture 1: After this lecture you: -‐ Know the different reasons for globalisation;
- Know how the filtermodel works; fill in a simple example - Understand the different parts of the balance of payment (movie); - Can interpreter the balance of payment.
Self-‐study: you:
- Know how trade pattern can be explained with comparative and absolute Cost differences; (movie Black board and exam questions BB) -‐ Know how protectionism works. (See movie BB) Trade off = balance between risk and potential return The attractiveness of a country can be measured with a filter model Import tax is very important criteria in the filter model. Because if these costs are very expensive, the particular country isn’t attractive any more. Example Filter model SHEETS Ranking Filter Model Weight x Ranking = score Score + Score = Sum weighted score For example South Africa 1,3 Nigeria 1,7 So South Africa is the most attractive company. How closer to the 1 the better. Balance of payments United States have a negative saldo on the balance of payments because of For almost 30 years. US have a big dept. They consume more than they can consume. Americans buy everything on credit. US lend money from china en japan. And china and japan have a positive saldo.
Analysis Balance of payments: Surplus on current account (more export than import) : NL
- Positive because of strong competitive position; - Negative: can also be a sign of weak investment
and consumption. Deficit on current account: India, China, Brazil
- Negative because of weak competitive position; -‐ Strong because of high incoming investments
(emerging countries) A negative current account can be very positive. You need to spent money in order to earn money. So import a lot and then make your own money. NL: We have a surplus on our current account. We have a positive saldo. So in certain industries we are the best and we export products. For example -‐> music, tulips, dike builders. Week 2 After this lecture you: -‐Know how trade patterns are determined by absolute and relative cost differences between countries.
- Know why exporters should take into account risk and return; - Know which variables determine risk. - Know how to calculate these variables. - Know what’s the link between the balance of payment
and country risk. -‐Know what variables determine potential return (self study And home work) Risks can be calculated in certain ways and variables. Assignment balance of payment Difference between Income and income transfer: Income transfer is no related work for something; you don’t have to do anything for an income transfer, for example money for charity in Nepal (earthquake). Income transfer is used for consumer goods: food and water. Capital transfer is used for building roads and buildings. Direct investment is not negative, it is indeed an outflow but on the long period money will return to NL. Portfolio balance: obligations, stock, loans etc. International reserves: a saldo of the total balance of payment Comparative costs
Export risks 1. Currency shortage (= country risk) 2. Exchange rate risk (lecture 3) 3. Cultural risks (for instance, payment behavior: in every country people do have
other payment behavior, if people don’t pay their bills in certain countries) 4. Transport risk (often large distance)
5. Liability (law) Country risk This is the risk that a government blocks payments to other countries because of a currency shortage or unwillingness.
Developing countries have a high country risk. Country risk: an exporter runs the risk that a foreign client can’t pay: Currency generating capacity (how many euros can a country earn):
• Degree of political and social stability; • Domestic economic situation (unemployment. inflation, stable or instable, export
market) • External economic situation: à
How can we calculate the country risk?
1. Import cover (= international reserves / import) 500/100 = 5 2. Debt export ratio (= foreign debt/ export) 1500/500 = 3 (bad, it should be below
1) 3. Debt-‐service ratio (= interest+principal/ export) = 175 / 500 = 0.35 (good)
buitenl. schuld
Country risk
Economic Risk = currency
shortage
Political risk
External economic position
Balance of payment
Foreign debt
International reserves (= international currency)
Example: International reserves and high import is a safe country! Calculate the import cover and the debt-‐ratio for this country: International reserves 500 External debt 1500 (interest 5%, principal 100 per year) Import (2013) 100 Export (2013) 500 What can you conclude about the country risk? 1500/500 = 3 Foreign debt compared to the export = 3 -‐> Why is it not sensible to export to countries with a structural deficit on the Balance of Payment?
- Shortage international reserves (country risk!) - Government devaluates it’s currency (because of a deposit/shortage on the
balance of payment); - Government introduces import restrictions (just block the borders); - Interest may rise! (explain!)
These countries do not have enough reserves, US shows a trade deficit with China…. year after year. This can be maintained because Chinese companies are willing to lend money to the US; that’s the only way the US economy can maintain a deficit on the current account.
How can the US maintain a deficit on the current account for so many years? Week 3 Currency shortage = country doesn’t earn enough money. Political risk = war, natural disasters etc.
For SUP: GDP, Economic Growth, Inflation. For foods these variables aren’t important, but population growth is more important! US keep on lending money from China to pay al the import from China. The problem is this cant go on forever. Why can US maintain deficit? -‐ China is wiling to lend money to the US -‐ US is selling assets (firms or other things like obligations etc.) in order to earn money to finance expenditures Why doesn’t the RMB (Chinese currency) appreciate against the dollar? They want to keep the RMB low, in that way the Chinese export industry gets a boost. The spot exchange market: Delivers currencies within two working days. (wisselkoersmarkt) Spread: The difference between the buying and selling rates Appreciation: A rise in the rate of a system with flexible exchange rates Devaluation: A decision to decrease the value. Than your currency declines in a fixed exchange rate market. Forward market: An over the counter marketplace that sets the price of a financial instrument or asset for future delivery. Transparent market: If the currency traders can be aware of the prices in the various financial centres at any time of the day. Spot rate: rate you get now, current rate. Forward rate: if you need dollars two months later you can buy them now. If the Euro becomes more worth than the dollar the Euro appreciates against the dollar. What happens with the deficits on current account of Europe? EU import more than they export. Eventually the euro will decrease in value. This will lead to more export. The Euro becomes more attractive for Americans. Inflation EU 2, US 4 Euro decreases. You can buy more in EU than in US. A Bad investment climate in Europe. Euro declines. If the interest rate in Europe is 2% and in USA 4% Euro will decrease. It is more interesting to have dollars instead of euros.
Business Economics Summary During this course we will focus on three important reports in finance : the balance sheet, the profit & loss statement and the liquidity forecast. We will also have a look at the relation between these statements. We will start repeating what was offered in course P4 and will insert the VAT (value added tax) into the figures and reports. The last two weeks we will use Excel in order to understand how complex statements can easily be put together. Learning objectives At the end of the course the student is able to : • construct a balance sheet, a P&L and a liquidity forecast based on financial data • explain the relation and differences between these reports • insert the VAT correctly into the figures • understand and explain the influence of VAT on the figures • create well-‐structured financial information sheets in excel Literature There is no specific literature. Some background information will be available through blackboard. Models There are no specific models.
International Marketing Curriculum Export planning is the whole process of international strategy formulation, detailed internal and external analysis, international marketing planning and implementation. To realize a good export planning the so-‐called 10-‐step plan structure can be used. This 10-‐step plan exists of four different phases: export policy, export audit, export plan and export rollout. These four phases are divided into ten steps . The first step provides a short overview of the company. In this step the vision and mission as well as the business definition and objectives. To define the business definition the model of Abell (also PMT model) can be used. With this model the position of an organisation can be defined using three dimensions: product, market and technology. The second step is describing the internal and external analysis. The internal analysis can be described using the Business Model Canvas. This model gives a clear view of the business aspects using nine segments. The external analysis can be done using the filter model and a trend analysis, which will lead to a TOWS matrix. The filter model describes several environmental factors: political, economic, social, climatic, topographic and other environmental factors. The result of the internal analysis combined with the filter model analysis is the trend analysis. This can be turned into a TOWS matrix describing the company’s threats, opportunities, weaknesses and strengths in a particular country. Step three of the export plan structure shows the SWOT matrix with the different business strategy options. In order to align the business strategy first the competitive environment needs to be described using the five Forces model of Porter. This model analyses industry attractiveness and consists of five factors: entry barriers, substitutes, customers/buyers, suppliers and rivalry. Second the growth strategy of the company needs to be described. To define this strategy the growth model of Ansoff with four product/market combinations can be used. The different combinations are related to the market and the product and lead to four different strategies: penetration strategy, product innovation strategy, market development strategy and diversification strategy. Third is the product portfolio analysis. This analysis can be done using the BCG matrix, a tool to analyse the performance of the individual product lines or strategic business units within a company. The product lines are clustered in two dimensions: market growth (high/low) and market share (large/small). Using these two dimensions the BCG matrix divides a companies products into four categories: stars (high/large), question marks (high/small), cash cows (low/large) and dogs (low/small). Fourth in aligning the business strategy is the competitive strategy. To describe this strategy Porter’s generic competitive strategies can be used. This model is based on two dimensions: competitive scope (broad/narrow) and competitive advantage (lower cost/differentiation). Using these two dimensions the model divides the companies strategy into four global strategies: cost leadership (broad/cost), cost focus (narrow/cost), differentiation (broad/differentiation), differentiation focus (narrow/differentiation). An advanced version of this model is the value disciplines by Treacy & Wiersema. This model exists of three strategies based on the company’s key values. The strategies are operational excellence, product leadership and customer intimacy.
Step four in the export plan is the selection of an attractive company to. To make this selection the filter model can be used. This model consists of three filters (pre-‐filter, filter 1 and filter 3), which will lead to the possibility to make a well-‐informed choice. After you selected the country or countries it’s important to create an overview of the value chain and supply chain for the new selected export markets. In order to describe the value chain the value chain model of porter can be used. This model is a tool to analyse value creation trough a company’s primary activities (inbound, operations, outbound, marketing & sales and service) and secondary activities (infrastructure, HRM, R&D and procurement). The decision of a company’s export market entry strategy can be made using the Export Market Entry Framework by Solberg. The choice depends of the preparedness for internationalisation (immature, adolescent, mature) and the industry globality (local, potentially global, global). When the market strategy is set it’s important to take the consumer needs into account. In order to discover the consumer needs the 4P’s and 4C’s are useful methods. The four P’s consist of: product, price, place and promotion. The four C’s consist of customer, cost, convenience and communication. The 4C’s are more customer driven instead of company driven. Models
BCG Matrix
Ansoff Growth Strategies
5 Forces model of porter
SWOT Analysis