Impact of Brexit on Jaguar Land Rover: Benefits and Threats

Global Economic Environment and Marketing 2
Table of Contents
Introduction...................................................................................................................... 3
Economic Integration....................................................................................................... 3
Future economic integration for UK and 27EU.................................................................6
Impact of Brexit on Jaguar Land Rover: Benefits and threats..........................................7
Free movement............................................................................................................ 7
Volume and margin concerns.......................................................................................8
Currency Risk...............................................................................................................9
Manpower issues..........................................................................................................9
Strategy for future............................................................................................................ 9
Conclusion..................................................................................................................... 10
References.....................................................................................................................12

Global Economic Environment and Marketing 3
Introduction
23rd June 2016 is considered as a historic date, due to the landmark referendum
of UK (United Kingdom) being passed, where the nation decided to leave the European
Union (EU), and this was known as Brexit. As soon as the results of this referendum
were declared, the pound fell at its lowest since 1985, and this was the fear of the world
showing in face of the uncertainties surrounding Brexit (MacKay, 2017). Till the time
Brexit had not taken place, UK had been positioned at the top for starting up any
business, but with the uncertainties which continue to be present on the topic of Brexit,
the position of UK is in question. The possibility of a hard Brexit has shaken the most
well established businesses, so much so as to force them to think of going overseas
(Hobolt, 2016). However, there are those who think that Brexit would only result in
improved conditions for their businesses, and are therefore optimistic about the whole
thing. This is particularly in comparison to the ones who predict that, for UK, Brexit is a
big mistake (James, 2017). Where UK is set to bear negative impact of Brexit, EU is set
to gain a lot. However, some proponents of Brexit believe that the reverse would
happen.
Jaguar Land Rover Automotive PLC (Jaguar Land Rover) is amongst the leading
multinational automotives companies, who fear of the impact of hard Brexit (Kumar,
2017). This discussion is focused on highlighting the possible impact of Brexit on Jaguar
Land Rover, and the benefits and threats faced by it, in addition to drawing up a
strategy for the purpose of exploiting the possible opportunities and averting the threats.
Economic Integration
Economic integration is an agreement which allows the nations, in a particular
geographic region, in removing/ reducing their barriers, in order to promote free flow of
goods and services, and the other factors having an impact on the business (Baier,
Bergstrand & Feng, 2014). This involves any such type of arrangements where the
nations agree on coordinating their fiscal, monetary, or/and their trade policies
(Liepmann, 2017).

Global Economic Environment and Marketing 4
When it comes to the relation between UK and EU, it becomes clear that UK is
highly economically integrated with the rest of EU nations. The extent of economic
integration between EU and UK can be elucidated by making use of the World Input-
Output Database of the University of Groningen. This database provided insights into
the exports of Britain to WU, and the supply chains which provide the intermediate
services and goods for the exporters. In context of all of such effects, the UK’s share of
output sold to the EU covered 9.8% in 2011. To bring these figures into perspective, the
share of London in UK output stood at 22% and that of the South East, excluding
London, stood at 15%. However, every other region of UK contributed less towards the
GDP of the nation in comparison to the share which was sold to EU. Trade with China
and US contributed way less to the economy of UK in comparison to EU. The figures for
China stood at 1% and for US stood at 3.4% (CER, 2016).
UK gets a comparative advantage when it comes to financial services and
production of businesses, in addition to the designing, marketing, engineering and
various other services. The service exports of Britain, as per the Groningen database,
along with the services which are provided to the exporting companies by the domestic
firms, are very heavily skewed towards EU. EU alone accounts for 2/5th of the UK
services demand by foreign nations. The share of US in this is just 17%, and the
emerging economies under BIRC only contribute to 10% (CER, 2016).
The close proximity of UK with the EU member states is another major reason for
the high economic integration between the two. A gravity model was constructed by
CER for quantifying how much trade goes down to EU. It demonstrated that the EU
membership of UK resulted in boosting of its trade in goods with the other member
states by 55%. Back in 2015, the goods trade of UK with the remaining EU member
states stood at £364 billion. The EU effect thus amounted to nearly £130 billion.
Comparing the bilateral trade, which Britain has with China, it was only £43 billion for
that year (CER, 2016).
There are other ways also in which UK is highly integrated with Britain. Back in
1997, the member states of EU contributed to 30& of accumulated stock of FDI in UK,