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(solved) Impact of Brexit - PDF

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Added on  2020-12-10

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Executive summary IntroductionBrexitThis simply means British exit referring to the United Kingdom (UK) leaving the European Union (EU). The EU is a financial and political association with 28 European nations. The purpose of the EU is to promote economic, social, and political harmony among the Western European nations. Brexit was proposed in the 23rd June 2016 referendum with 52% vote to leave EU and 48% vote to stay back. It was announced formally that country should withdraw in March 2017 but it was delayed by the British parliament due to election, then later the UK left EU on 31st of January 2020 at 11.00 pm. But a transition period was set from that day to 31st December 2020 for the UK and EU to negotiate their future relationship. During this period the UK remains under the laws of the EU, be a part of a single market andcustoms union but not part of the EU’s political side or institutions.Reasons for the declaration of Brexit are:EU threatens UK sovereigntyEU strangling the UK in harder regulationsEU allows a higher number of immigrantsUK could have more immigration systems outside the EU.UK could keep the money that is being sent to the EU.Major reason for Brexit are:To make stronger trade deals with nationsTo control their national bordersTo maintain a special legal systemTo improve the economy of the British and generate jobsTo restore the customs and traditions of the British.It is clear that Brexit does not just mean the UK leaves the EU. It also comes with greater consequences to various manufacturing sectors including automobile companies that would be affected, not just in the UK but also it may affect global markets. It is reported by HIS Automotive that the movement of the UK from EU may cost more than 2.8 million sales for the vehicle manufacturers in the next few years (How Brexi could affect the Automobile industry, 2020).Jaguar Land Rover (JLR) Automotive PLC
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Jaguar Land Rover (JLR) Automotive PLC, holding company of JLR limited which is an automotive multinational company and also the subsidiary of the Indian Tata Motors Limited. This was founded in 1922 in the black pool and identified as swallow side Car Company. It is a global premium automotive business with two iconic car brands of British. JLR globally sells around 375,000 units and works in morethan 170 markets. This is the only car company that researches, manufactures, and designs in UK.The current economic climate of JLR by the impact of BrexitThe biggest automotive company of the UK, Jaguar Land Rover is exposed to the risk at a greater level since the Brexit announcement. JLR obtain 40% of their materials from EU and generates more than 80%of their sales abroad (Peter and Michael, 2017). When the UK departs from EU this would ensure problems such as customs delay, rules of origin, regulatory diversions, and tariffs which could affect the production of JLR. Under the rules of trade after Brexit, the car producers can catch tariff about 10% on the movements of the vehicle between EU and UK and 4.5% through imported parts where it additionallycost up to £2,372, affecting JLR’s profit per car collapsing their profit margins (SSMT, 2017).Post-Brexit the JLR is found to be with car shortage around 120,000 due to the cut in the production leading to a drop in sale and with lower profit at the end. Other major economic issue is the fall of the pound during this period against the Euro has both boon and threat for cars. It may make UK exports more competitive and at the same time, it may increase the cost of imported things from the EU which account for 60% of parts of the cars manufactured in the UK. It is estimated that JLR’s annual income may be cut by £1bnby the end of 2020 and this would apply if British accept to WTO rules implemented on trade with Europe which is 10% export tariff and 4% inbound tariff as the sources say (Anon, 2020) sothe current economic state of JLR is lower than the previous years before Brexit as shown below:Figure 1.0 Shows the slaes growth of JLR after brexit announcement (Sharekhan, 2018)
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An organization could be changed by a planned approach or an unplanned approach. Planned change comes from an intentional decision made to change the organization and unplanned change is imposed onthe organization and it is often envisaged. Both planned and unplanned change can be external as well as internal as shown below.But in JLR, Changes could be both planned as well as unplanned. Because the Brexit is already known since 2016 till now, therefore, changes needed in order to overcome this can be planned and at instances, it can be unplanned approach as there are sudden changes that might occur when there is a change in government policies, technologies, natural calamities and other competitive moves from opponent companies. Automotive industries usually plan everything in advance but with this Brexit, it was hard with the 2016 June referendum to do things unplanned and with high uncertainty as said by MacDuffie said. The automotive companies slowed their works, learned about Brexit hit and tried to adapt, make changes accordingly as the years passed and that’s how JLR also should make changes.Planned changeplanned internal changeChanges in service/ productChange in administrative systemChange in organisational strucrure/sizeplanned external changeTechological changesChange in communication, information processingunplanned changeunplanned internal changeChange in demographicsChange in performancesunplanned external changeGlobal economical competitionsChange in government regulations
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Planned approaches that may help to go forward through BrexitCost-cutting by arranging new warehousesWarehouse helps to reduce fluctuations in price by saving goods/ products when there is plenty ofsupply of it and then release it when there is a demand for that product rather than producing it newly. This warehouse also ensures that there is a proper supply of products in the market. Therefore by having a new warehouse the JLR can maintain the products and sell them when there is a high demand which could lead them with higher profit.Initiate job cuts When there is a drop in sales it is difficult to pay for a huge number of workers, therefore to shrink and save a certain percentage of economy, job cuts could be initiated for a certain period until the sales turn back to normal.Join with other companies to develop new models As they previously joined forces with BMW to develop electric cars (BBC, 2019) if they could join hands with some other company to innovate a new product or newly design a preexisting model with deals. This may create a good picture in the customer’s opinion, thereby sales may increase which would lead to good profit.Increase the prices of their productsSince JLR’s vehicles have a good brand image, increasing prices of them will be neglected Therefore by selling vehicles at higher prices the economic loss due to Brexit could be retrieved.Slow down manufacturing or new productions. As the sales are down, the products would be still available at the store. Therefore by slowing down or cutting production the manufacturing, production costs could be saved rather than spending on production and having the products stocked up without sales.Invest capital in other companiesBy investing in other companies they can earn a return on their investments which could help them retrieve some amount of the money lost due to Brexit.Shutdown plants within the UKThey can close plants for a short time to reduce disruption to their supply chain until everything settles down to minimize the further unwanted loss in income.
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