In June 23rd, 2016, a historic referendum was done in Britain to leave the European Union. Over the years, the UK has been rated as one of the best countries to begin a business, but this could change due to the unknown effects of Brexit. Supporters of Brexit have optimistic predictions for Britain and its business, but there are still skeptics who predict that Britain made a mistake which will have severe impacts on many factors including business operations of Multinational Enterprises.
If the UK eventually leaves the European Union, a lot of MNEs, are going to be negatively impacted by this move which is of great concern. To begin with, the cost of running these businesses will be very high. For instance, if you are running your business in UK and sourcing most of your raw materials from France, the cost of the supplies will increase. This is because the free trade between the UK and the EU will not be valid anymore. Also, the export business may take a hit due to hiked costs and tariffs. Eventually, this will render multinationals less competitive in the EU markets and may end up with low profits.
One of the concepts of international management is globalization. Brexit will affect the business relationship between the UK and the EU countries where the key players in the International business are Multinational corporations, SMEs and Born Global firm. For instance, in chapter 1, globalization refers to the process of integration between nations worldwide; socially, politically, economically and technologically. Brexit will affect the integration between the UK and European Union countries. However, on the positive end, it will open up trade with the rest of the world outside the regional bloc (EU). This will result in increased interconnection due to increased trade and cultural exchange, leading to a rise in the production of goods and services.
The main lesson learned from this is that however much Brexit will have a significant hit on MNEs within EU countries, it will open up the trade with the rest of the world and procure more benefits, for example, low prices. Intensifying globalization and internationalization yields more than tying a country within the strict economic blocs.