Doing International Business

A case study of UK

Adil Awan Roll#30

Muhammad Azeem Roll#04
Hira Munir Sunbal Roll#13

Department of Commerce,
Bahauddin Zakariya University,
Multan
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 The United Kingdom is renowned for its colorful history and strong sense of tradition that has
been shaped by a colonial empire, both civil and European war and a constitutional monarchy.
The fourth largest trading nation, the UK is fast becoming Europe‟s leading business centre.
Supported by a long-established system of government and economic stability, the UK is an
attractive base for overseas business, offering skills in areas such as research, development and
technology. However, in order to operate successfully in the UK business e nvironment, there are
a number of important issues to take into consideration both before and during your time there.

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Basic Facts of UK 04
British Government 05
Overview of the UK economy 05
Rates 06
FDI 06
Trade 08
Taxation 08
Major UK-owned companies 08
Labor Environment 09
British Business Structure 09
British Management Style 09
Family 10
Education 10
Status of Women 10
British Costumes 10
Culture 11
Communication Style 11
Business Etiquette 12
Summary of UK culture 12
UK Trade & Facilitation 13
Trade Barriers and Policy 14
Major Issues 14
Conclusion 15

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 UK

Official Name United Kingdom of Great Britain and Northern Ireland

Population 60, 609, 153*
Official Languages English, Welsh (about 26% of the population of Wales), Scottish Gaelic
(About 60,000 in Scotland)
Currency Pound sterling
Capital City London (Wales: Cardiff, Scotland: Edinburgh, Northern Ireland: Belfast)
GDP Purchasing power parity $1.903 trillion*
GDP Per Capita Purchasing power parity $31,400*
Land Area 242,534 sq km
Population density: 244 sq km
Life expectancy: Men 76 yrs
Women 81 yrs
Adult literacy: 99%
Average per household 2.4
Divorces per 1,000: 3

The Economy
GDP: $2,124bn
GDP per heads: $35,760
Employment (% of total): Agriculture 1%
Industry 24%
Services 75%
Unemployment: 5%
Main Exports
Type: Finished manufactured goods
Semi manufactured products
Food, beverages & tobacco
Fuels
Basic materials

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Destinations: (% total) United States 15%
Germany 12%
France 10%
Netherlands 6%
Ireland 7%
EU25 58%
Main Imports
Type: Finished manufactured goods
Semi manufactured goods Food,
Beverages & tobacco Fuels
Basic materials
Main countries of origin: Germany 14%
USA 9%
France 8%
Netherlands 7%
Belgium 6%
EU 55%
The British Governme nt
Parliament decides the laws and make decisions on running the UK. (Some issues in
Scotland, Wales and Northern Ireland are now dealt with by their respective parliaments and
assemblies.) There has been a parliament at Westminster since the 13th Century.

The UK government is normally formed by the leader of the party that wins the most seats in
the general election. All actions by the government - and particularly its proposals to amend
or create laws - are scrutinized within parliament.

Overvie w of the UK Economy:

The UK is the sixth largest economy in the world, with a gross domestic product (GDP) of
US$2,646 billion (Source: World Bank, 2009).
In summary, the UK:
a) Has a population of 61.4 million (Source: ONS, 2009),
b) Received the highest number of foreign direct investment (FDI) projects in Europe in 2008
(Source: Ernst & Young, 2009),

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c) is a leading global trading nation, being the second largest exporter and third largest importer
of commercial services, and the tenth largest exporter and sixth largest importer of merchandise
(Source: World Trade Organization, 2009),
d) is a member of the European Union, the world‟s largest trading entity, with nearly 500 million
consumers and a GDP of over US$18,000 billion (Source: IMF, 2009),
e) is one of the most competitive locations in Europe for business and personal taxation,
f) Has low unemployment (with an unemployment rate well below the European Union
average),
g) Has the best European city – London – in which to do business (Source: Healey & Baker,
European Cities Monitor; October, 2009).
Economic Growth
Economic growth in the UK was 0.6 per cent in 2008 (Source: HM Treasury, 2009). Over the
last ten years, GDP growth in the UK has regularly outpaced or matched growth in the European
Union (see Figure 1).

Exchange Rates
The UK Government has policies that encourage a stable and competitive pound; consistent
with the objective of price stability (for example, the Government is committed to holding a
referendum on the euro once it decides economic conditions are right for the UK to join).

Inte rest Rates

The official Bank Rate in the UK, set independently by the Bank of England, is 0.5% as of
December 2009 (although the rate is subject to review on a monthly basis. ) Figure 2.
Inflation
The Bank of England has full operational independence in setting interest rates to meet the
Government‟s inflation target of 2 per cent for the annual increase in the Consumer Price Index
(CPI). The CPI is based on the internationally comparable „„Harmonized Index of Consumer
Prices‟‟. In October 2009, the CPI stood at 1.5 per cent.
Foreign Direct Investment
The UK has a very strong track record in attracting foreign investment. In 2008, the
cumulative „„stock‟‟ of foreign investment in the UK was more than US$983 billion, the third
highest level of FDI stock globally (Source: UNCTAD, 2009).

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 Similarly in 2008, the UK attracted the fourth highest amount of foreign investment globally,
receiving US$97 billion of FDI inflows, representing 19 per cent of all FDI inflows into the
European Union (Source: UNCTAD, 2009).
The UK attracted a record number of foreign direct investment projects in 2008/09, with
1,744 investments being made by international companies, up by 11 per cent on the previous
year (Source: UK Trade & Investment, 2009).
In addition, the UK is the second largest single destination globally for US investment and in
2008 accounted for 26 per cent of all US investment stock in the European Union. Indeed, the
UK has attracted more US FDI than the combined totals of Germany, France, Spain and Ireland
(Source: US Department of Commerce, 2009).
Trade
The UK is one of the leading trading nations in the world. It is the second largest exporter
and third largest importer of commercial services, and the tenth largest exporter and sixth largest
importer of merchandise (Source: World Trade Organization, 2009).
Leading destinations for UK products and services include the US (17 per cent of all
exports), Germany (9.4 per cent) and France (6.6 per cent). Exports of goods and services to the
European Union as a whole accounted for 49.7 per cent o f all UK exports (Source: ONS, The
Pink Book, 2009).
Taxation
The UK has a relatively lightly taxed economy, with the overall tax burden well below the
average for the European Union and, in particular, countries such as Germany, France, Spain, the
Netherlands, Belgium, Sweden, Denmark and Italy (Source: Eurostat, 2009).
The main corporation tax rate in the UK, at 28 per cent, is lower than in other major
European economies. The UK also has one of the lowest standard rates of VAT in the European
Union (at 17.5 per cent from January 2010) and, unlike many other European co untries, does not
impose VAT on a wide range of essential goods, including food and children‟s clothing.

Major UK-owned Companies

A substantial proportion of the world‟s leading companies are UK-owned. The “Financial
Times Global 500” survey (www.ft.com/ft500), which identifies the largest 500 global
companies by market value, calculates that UK companies comprise the third highest number of
the world‟s largest companies, behind only the US and Japan. Major UK companies in the list

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include BP, Vodafone, GlaxoSmithKline, HSBC, the Royal Bank of Scotland, Barclays,
Standard Chartered, AstraZeneca, Tesco and Diageo. The major UK companies account for the
third highest market capitalization in the world, only bettered by the US and China.

Labor Environment
The UK has a highly skilled, flexible and dynamic labor market, with less labor regulation
than most other European countries. Skills are particularly strong in the UK, with many world-
class universities and centers of research and development located across the country. London is
consistently ranked as the leading European location for the availability of qualified staff
(Source: Healey & Baker, European Cities Monitor, 2009).

Employment is currently at high levels with 28.92 million people in work, comprising 21.26
million in full-time work and 7.66 million in part-time work (Source: ONS, 2009). The
employment level (the proportion of working age people in work) is also high in the UK at 72.5
per cent, compared with the European Union average of 64.8 per cent (Source: ONS, 2009).
The UK‟s unemployment rate (using the internationally comparable “standardized” rate) of
7.8 per cent is significantly lower than the European Union average o f 9.3 per cent (Source:
ONS, 2009).
The annual rate of growth of average earnings across the UK economy stood at 1.2 per cent
in September 2009 (Source: ONS, November 2009).
British Business Structures
Although traditionally hierarchical in structure, many British firms have moved towards a
flatter, less bureaucratic approach. This has also resulted in a certain lack of shape, with
boundaries and responsibilities being blurred. It can be difficult to get a clear picture of the
structure of a British company, with even employees being unclear as to the exact remit of their
jobs. As a result, job descriptions tend to be somewhat vague and imprecise with little clear
guidance on specific tasks to be undertaken.
British Manage ment Style
British managers tend more towards generalization than specialization. The proposition that
the manager needs to be the most technically competent person would receive little support in
the UK. Therefore, pure academic education is afforded much less respect than in other countries
(notably Germany and France) and the emphasis is on relevant experience and a 'hands-on',

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pragmatic approach. Titles such as doctor or professor are rarely used outside academic circles
and can even be seen a sign of affectation. The British find it difficult to be direct and British
managers often give instructions to subordinates in a very indirect way, preferring to request
assistance than to be explicit. This use of language can be very confusing for the non-British.
Family
English families are small (one or two children are the norm) and often tightly knit. Fewer
people are getting married and those who do are marrying later. Women are having fewer
children and are waiting longer to have them. In the past three decades, a substantial number of
women have begun working outside the home. In recent years, the divorce rate has risen, as has
the number of single-parent families.
Education
Education is an important part of British life. There are hundreds of schools, colleges and
universities, including some of the most famous in the world. Education is free and compulsory
for all children between the ages of 5 - 16. Some children are educated at home rather than in
school.
Status of Women
Women make up a large percentage of the workforce - almost 50% - but are often found in
low paid and part-time jobs. More female managers will be found in service and hi-tech
industries than in the more traditional engineering sectors - this is largely due to the small
number of women in the UK who graduate with technical degrees.

1-It is ok for women to eat alone in a restaurant.

2-It is ok for women to wander around on their own.
3-It is ok for women to drink beer.
Costumes
Some people think men in England wear suits and bowler hats, but it is very unusual these days
to see anyone wearing a bowler hat. Business attire is conservative.
1-Men should wear a dark colored, conservative business suit.
2-Women should wear either a business suit or a conservative dress
Climate
England has a temperate maritime climate meaning that it is mild with temperatures not much
lower than 0 °C (32 °F) in winter and not much higher than 32 °C (90 °F) in summer.

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Culture of the UK
The British are rather formal. Many from the older generation still prefer to work with people
and companies they know or who are known to their associates. Younger businesspeople do not
need long-standing personal relationships before they do business with people and do not require
an intermediary to make business introductions. Nonetheless, networking and relationship
building are often keys to long-term business success. Rank is respected and businesspeople
prefer to deal with people at their level. If at all possible, include an elder statesman on your
team as he/she will present the aura of authority that is necessary to good business relationships
in many companies.
Indirectness – The British, in particular the English, are renowned for their politeness and
courtesy. This is a key element of British culture and is a fundamental aspect of British
communication style. When doing business in the UK you generally find that direct questions
often receive evasive responses and conversations may be ambiguous and full of subtleties.
Consequently, it is important to pay attention to tone of voice and facial expression, as this may
be an indication of what is really meant.
„Stiff upper lip‟ – This is a term often used to describe the traditionally British portrayal of
reserve and restraint when faced with difficult situations. In British culture, open displays of
emotion, positive or negative are rare and should be avoided. During meetings, this means your
British colleagues will approach business with an air of formality and detachment.
Humor – A vital element in all aspects of British life and culture is the renowned British
sense of humor. The importance of humor in all situations, including business contexts, cannot
be overestimated. Humor is frequently used as a defense mechanism, often in the form of self-
depreciation or irony. It can be highly implicit and in this sense is related to the British indirect
communication style.
British communication styles
The British have an interesting mix of communication styles encompassing both
understatement and direct communication. Many older businesspeople or those from the 'upper
class' rely heavily upon formal use of established protocol. Most British are masters of
understatement and do not use effusive language. If anything, they have a marked tendency to
qualify their statements with such as 'perhaps' or 'it could be'. When communicating with people
they see as equal to themselves in rank or class, the British are direct, but modest. If

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communicating with someone they know well, their style may be more informal, although they
will still be reserved.

British business etiquette (Do's and Don'ts)

DO respect personal space. The British value their space and keeping an acceptable
distance is advised.
DO remember to shake hands on first meetings. It is considered polite to do so.
DO make direct eye-contact with your British counterpart, however remember to keep it
to a minimum or it could be considered impolite or rude.
DON‟T ask personal questions regarding your British counterpart‟s background,
occupation or income.
DON‟T underestimate the importance of humor in all aspect of business in the UK.
DON‟T forget that instructions are often disguised as polite requests.

Business meetings
Punctuality is a very British trait. It is especially important in business situations. In most
cases, the people you are meeting will be on time. Always call if you will be even 5 minutes later
than agreed. If you are kept waiting a few minutes, do not make an issue of it.

Summary of UK culture

The concept of self is high in UK. The Queue is highly adopted.

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Prefer direct communication. More punctual

Power distance is low Courage to face and ability to solve the problem

UK Trade
Consists of the movement of goods and services within the European Union (EU), of which it
is a member, and to non-EU countries. International trade in the UK is assisted by UK Trade &
Investment (UKTI). This government organization focuses on enhancing the competitiveness of
UK companies through overseas trade and investments. It also aims at continuing to attract high-
quality foreign direct investment (FDI).
Trade Facilitation

“The harmonization, simplification and automation of procedures for importers, exporters and
Customs through the systematic rationalization of controls and documentation for international
traders and administrative agencies in order to facilitate the international trade transaction
process or more simply reducing the procedural barriers that get in the way of trading across
borders”

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Trade barrie rs & Policy
It is extremely difficult to estimate the actual size of the barriers that a trade facilitation
agreement is designed to reduce. Estimates of the global average costs of compliance with
present procedures range from 2% to 15% of the overall value of international trade, one widely
quoted UNCTAD study estimates that all trade transactions costs amount to 7-10% of the total
value of trade. Individual studies strongly suggest that the costs are higher for trade involving
developing countries than for those involving just developed countries, and for SMEs compared
to TNCs.
These costs can be seen as equivalent to tariffs. Unlike tariffs, they cannot be eliminated
completely. But the evidence suggests a considerable difference between the most and least
costly systems, implying the potential for considerable cost savings in some areas. It is certainly
possible to argue that a trade facilitation agreement could deliver global benefits at least
equivalent to those for the tariff negotiations.
Many of the world‟s poorest countries are landlocked. As with tariffs therefore, the benefits
should be proportionally greater for developing countries as barriers come down.
There are also benefits from trade facilitation over and above those from an equivalent tariff
reduction. inefficient border procedures can also raise the cost of a country‟s exports. Border
delays make FDI (particularly in “just- in-time” processing) less attractive. The government
revenue loss for developing countries is less than for tariff reductions (and indeed increased
imports from trade facilitation may well raise customs revenues).
Major issue of politics

The recovery and the election-The politicians prepare to fight over the economy
Iraq war issue-Investigation from the Tony Blaire & Cabinet

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 UK is the fastest growing economy of the world. It is becoming the centre of international
trade. The UK was the first country in the world to industrialize in the 18th and 19th centuries,
and for much of the 19th century possessed a predominant role in the global economy. However,
by the late 19th century, the Second Industrial Revolution in the United States and the German
Empire meant the they had begun to challenge Britain's role as the leader of the global economy.
The extensive war efforts of both World Wars in the 20th century and the dismantlement of the
British Empire also weakened the UK economy in global terms, and by that time Britain had
been superseded by the United States as the chief player in the global economy.

The UK economy now need the products in service sector, because of being the capital
intensive and expensive labor the economy is unable to make offerings in service sector. So by
choosing the Imports/Exports as a mode of the International business a firm can capture a greater
market share for its services in UK, as china did.

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