Effect of Brexit on International Businesses in Uk

Running head: EFFECT OF BREXIT ON INTERNATIONAL BUSINESSES IN UK
Effect of Brexit on International Businesses in Uk
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1EFFECT OF BREXIT ON INTERNATIONAL BUSINESSES IN UK
International business, as the name suggests, is a business that involves two or more
countries trading goods, services, technology, resources. It involves cross border transaction,
multinational companies, overseas business and global marketplace. In other way,
international business can also be described as the study of the process by which
multinational enterprises become internationalized. Brexit is the abbreviated form of British
Exit. It refers to the withdrawal of UK form the European Union to become an autonomous
territory, on 23rd June 2016. A decision of this magnitude is bound to effect on the country’s
economy and politics. The political and economic changes of a country bring change in the
business relationships between that country and other countries, which further change
situation for that country’s foreign trading. This essay is prepared to discuss the vastness of
the effect that the Brexit has brought to the international business in UK.
When a company deals with companies from other countries to export or import goods,
services and resources, it falls under the category of international business. The forms in
which international business works are quite diverse. Other than exporting and importing
goods; opening franchises in other countries, giving contractual licenses to firms to use a
countries resources; researching, developing, manufacturing and distributing products in
foreign countries are also considered as a part of international business (Shenkar, Luo and
Chi 2014). In order to understand the impact of Brexit on international business in UK, one
must understand the factors that are related to international business and what are its benefits.
Making a business successful on foreign soil depends on recognising the correct opportunity
and scope in the market. Market recognition includes full knowledge on the diversity of the
market and understanding of how to handle that diverse market demand. In the context of the
benefits that can be gained from international business, comparative advantages have crucial
part to play. The concept of comparative advantage comes from the advantages that a country
possesses, in comparison to other countries, to get lands, labours, capitals and resources on a

2EFFECT OF BREXIT ON INTERNATIONAL BUSINESSES IN UK
very affordable price. International business gives a country the opportunity to utilize both
the resources and markets in other countries. In addition, it creates a better competition in the
markets within a county and motivates to be innovative in products and services.
International business also has its own challenges to face.
There are four environmental aspects, on which the success of international business
depends – economic environment, political environment, cultural environment and
competitive environment. The economic environment includes economic stability and the
economic structure of the country, as in whether the country has a free market or a centrally
planned market. The free market economy interferes less in the activities of international
business, whereas the centrally planned economy is controlled by the government and hence
gives less opportunity to companies from other countries to trade in their country
(Internationalrelationsedu.org 2018). Economic stability of a country supports the
organizations of that country to create a strong business outside the country as well as invites
foreign investors to invest in their market. The relationship that a government has with the
business of its country is the political environment of that country. This factor also includes
the political risks regarding that country. The political structure of a government plays a
crucial part in international business, as a politically stable and friendly country will let
foreign firms to grow in their land. When a country is going through a political structural
change, it evidently is taken as a risk for foreign organizations to grow their business in that
country (Brink 2017). Both domestic and international legislations have an important role in
international business for they govern how an organization will do business in a foreign
country. Cultural environment is probably the most difficult factor to understand, as it covers
various dynamics of a country such as the history, location, geography, language, religion,
education, and other. Therefore, a thorough cultural analysis of a country before trying to do
business there is evidently significant. The most interesting factor is the competitive