I will also write letters/emails to the people in the retail industry of mobile communications, and ask them how the EMU will affect them and their dealings and retailing of Vodafone UK. The EMU should however not affect the much because of the industry they are dealing in; mobile communications because it is a invisible good and cannot be exported or imported (i.e. a French person in France cannot buy a Vodafone mobile phone, because it would not operate in his country)
Primary Research
For primary research I did things such as:
- I emailed many letters to people including the ‘UK office of the European Commission’ (see letter on appendix) asking for all there information on the Euro, EU, EMS etc.
- I emailed another letter to ‘Vodafone UK as well as their competitors in the UK’ asking what they had done towards the Euro see questionnaire in appendix) and measures they had taken and their view on the Euro.
- Finally I carried out a survey to see what the public thought about the Euro and if they have made any changes towards it (see in appendix).
Secondary Research
I have used a wide variety of secondary resources like:
- The Newspapers
- The Internet
- Teletex / Ceefax
- The Library
- Economics Books
- TV
- The News
- Encyclopaedias
The exact sources I used will be in my bibliography.
Hypothesis
I think that the UK will be affected by the Euro enormously as more and more of UK business takes place between the EU and less and less between the rest of the world. This is because of common external tariffs within the EU and protectionism; this makes it cheaper for Britain to buy from Europe than from the rest of the world.
The main sector that will be affected by the introduction of the Euro is Imports and Exports, and any other business associated directly with it, as the move to a EMU involves major changes in exchange rate systems and mechanism. And as we all know imports and exports depend greatly on the right environment and stable exchange rate.
However this is not the case wholly with Vodafone UK, as the major part of their work does not involve importing any goods or services from abroad, the only things they import from abroad are the actual handsets which they sell to customers which they import from Japan which is not a Euroland country or a European country for that matter. So for Vodafone UK the Euro in Europe wont affect them directly but Britain not joining the EMU will affect them in the long term as Vodafone in Europe starts to make more money and the Vodafone in UK get under pressure to perform or to stop business in the UK forcing Vodafone UK to close down and therefore a loss of jobs and because Vodafone is such a big company and operates on such a big scale, it will mean the loss of many jobs and damage to the economy due to the reverse multiplier effect. As most of Europe will be using Euro, if UK does not join then Vodafone UK who get all the from their European business put into british accounts will mean that the cost to Vodafone UK to change currencies into the pound from the Euro will be high compared to nothing in the Euroland countries so Vodafone Airtouch PLC who receive all the money will have to either push up prices or move abroad which will affect Vodafone UK as they will be undermined as the major trading branch of Vodafone Airtouch PLC it will also affect the UK as Vodafone UK might lose all faith in the UK and think that if they move abroad to a Euroland country they will make more money and will do that seeing their Euroland colleagues are making money, so they will close down and the inevitable will happen the reverse multiplier effect. If Vodafone UK doesn’t move abroad then they will be isolated from Europe. Isolation will also lower foreign interest in investment resulting in the government handing out grants to keep the industry going, until it collapses, which would signal the close of all communication industries I the UK and especially Vodafone UK as they have so much incentive to move abroad.
The single monetary and currency could also benefit the consumer by exposing price comparison and make plain that UK consumers are being cheated. This is because mobile communications in the UK have the highest prices around the world even though the basis of most most mobile communications is from the UK. In simple terms Brits are being ripped off. When price transparency kicks in this will become very obvious to UK consumers. This could be a good thing for Vodafone UK even though they may not realise it, because even though they will have to reduce prices in the UK so that consumers still buy their service and not think they are getting ripped off and be put off (if this was not a mobile communications company they could buy from abroad), so this will mean that due to lower prices the demand for Vodafone UK will increase in the UK and the growth rate of Vodafone UK will be the same as Vodafone in Europe, so they will not have to move abroad and do all the things I mentioned in the above paragraph, but also this could backfire on them because people might see that European prices are lower and communication companies in Europe might want to set up in the UK increasing competition for Vodafone UK which they have to fight off which will mean another problem for Vodafone UK as if they didn’t have enough already.
Summary of hypothesis: So Vodafone UK has a whole will be affected and trade for them of money in particular because of the change in exchange rate systems. Price transparency will ensure competition. This will be good for the consumer and for Vodafone UK as foreign interest will still be there, but it could backfire on Vodafone UK, but if Britain joins the Euro these risks are eliminated and everyone stays happy. So in my view, Britain should join the EMU, it will benefit the consumers and in whole benefit Vodafone UK.
Pros and Cons of the Euro for Vodafone UK
In the table below are a number of arguments for and against a single European currency for Vodafone UK. For the success or failure of the single European currency much depends on the size of the effects described below. Do the gains from reduced transaction costs, the disappearance of exchange rate instability, and greater price transparency outweigh the losses from the cost of introducing the new currency and possible macroeconomic adjustment costs:
What will the affects of Britain joining the euro be on Vodafone UK?
Well for Vodafone UK, they have to look the following to assess how Britain joining the Euro will affect them:
- Would joining EMU create better conditions for Vodafone UK to invest in the United Kingdom?
- How would adopting the single currency affect Vodafone UK?
- Are business cycles and economic structures compatible so that Vodafone UK could live comfortably with euro interest rates on a permanent basis?
- If problems do emerge for Vodafone UK, is there sufficient flexibility to deal with them?
- Will joining EMU help to promote higher economic growth for Vodafone UK?
Advantages for Britain of joining for Vodafone UK
If Britain were to join the European single currency, the benefits would be felt throughout the whole economy. Vodafone UK will be able to compete on level terms with the rest of Europe - the biggest market for our goods in the world. And inflation would probably fall, bringing interest rates down with it which is good for Vodafone UK as they can invest in the UK more cheaply and with more incentive which could be good for the UK economy too as more investment could lead to jobs and the multiplier effect. If Britain joined the single currency, interest rates would be as low as the best around the world.
Jobs
Lower interest rates mean that there would be more money to invest in development in Vodafone UK. This would lead to Vodafone UK being even more competitive and unemployment would fall.
In addition, an end to exchange rate changes will save a lot of money for Vodafone UK per year. And by joining the single currency, Britain would remain an attractive location for investment for them meaning a security on jobs.
Disadvantages for Britain of not joining for Vodafone UK
The consequences for Britain of ruling out joining the European single currency would be very severe indeed for Vodafone UK.
It would put Vodafone UK at a permanent competitive disadvantage compared with their competitors in France and Germany: Vodafone UK would have to face transaction costs and the uncertainty of fluctuating exchange rates which their Euroland competitors no longer have to deal with.
Vodafone UK would lose one of the main reasons for them to base themselves here other than a Euroland country-- Britain is currently seen as a gateway to Europe, with around 1 million jobs dependent on overseas investment. More than half of this investment comes from the United States - the transatlantic relationship depends on our membership of the EU.
Britain will not be represented at meetings of the Euro-11 council of finance ministers, where key decisions about the economy of the EU are taken: the present eleven member states between them constitute a qualified majority on the full Council of Ministers, and could if they wished take certain decisions against Vodafone UK’s interest. They will not act in this way as long as they think that Britain is on route to membership of the Euro itself.
So is Britain joining the Euro a bad thing or a good thing for Vodafone UK, the advantages weigh out the disadvantages, and the disadvantages are permanent and severe.
Their seems to be a clear understanding that the Euro is a good thing for Vodafone UK, however to make sure I surveyed and questioned Vodafone UK about their views on the Euro, I also surveyed consumers as well as other mobile communication companies and retailers in the UK.
I made a simple questionnaire asking them what their view of the Euro is, the questionnaire look like this:
Questionnaire
- How will the single currency affect you?
……………………………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………………………
- What are the advantages of the single currency to you personally? To the UK?
…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………
- What will be the affect of the single currency on major high street stores?
…………………………………………………………………………………………………………………………………… ……………………………………………………………………………………………………………………………………
- Are you in favour of the European single currency?
YES NO
The completed questionnaires are in my bibliography.
These questionnaires show a clear understanding that not only Vodafone UK who operate in 8 of the countries joining the Euro but also the consumers and other competitors of Vodafone UK are in favour of the Euro.
But why can this work:
This can work because as the Euro gets stronger and the synchronicity between member states increases and long term advantages are felt then the real money saving will be felt and then we will see that the benefits of Britain joining the EMU for Vodafone UK are much greater than the costs:
The diagram below shows the costs/benefits against the synchronicity of the EMU.
The cost curve shows that the cost of EMU would decrease as synchronicity increases, while the benefits increase with synchronicity. Meaning that as the EMU gets more synchronised then the EMU will move from S1 to S2 and the benefits of the EMU will outweigh the costs.
Costs Benefits 1
C1 Benefits 2
C2
Costs
0 S1 S2 Synchronicity
Therefore if the UK joined at S1, it should move onto S2 very soon and therefore benefits will increase and the costs of the EMU decrease EMU. However at this time the UK is not even at S1 because the UK is not a typical EU economy, this is bad for Vodafone UK, as it will take a long time for them to profit from the EMU. For example interest rate changes affect the UK quite differently from the rest of Europe, because of their high interest rates at the moment, if it was reduced to 3% the EMU interest rate, their would be too much of a boom in the economy and nothing to stop it like change interest rates or exchange rates, causing the economy to go bust, like is the situation in Ireland at the moment as their rates were halved from 6% to 3% when they joined the EMU. So in order for the UK to join they must reach S1 first and then they can advance to S2.
Conclusion
In my conclusion I must sum up my investigation and comment on my hypothesis and give explanations for each comment.
I believe that it is more beneficial for Vodafone UK of Britain joining the Euro as we can see from my simple prediction and the advantages of in the long term of the Euro that the Euro will get stronger and soon if Britain does not join Vodafone UK will lose all their basis of setting up in the UK and will want to move abroad this along with pressure from Euroland colleagues will I think persuade Vodafone UK to move abroad as business here is not worth it, this would mean a loss of jobs and the reverse multiplier effect.
Britain is not doing the right thing at the moment by sticking with the pound, as they will surely find out in the future. Britain are waiting for un till the Euro matures and becomes more stable then it promises prosperity and unity. But this is wrong as by the time the Euro has reached its high point Britain will be left back to much and it will be a long and big up hill battle which Vodafone UK just cannot wait for so they will move out and so will others and so the UK will be in crisis and therefore Britain not joining would be very dangerous.
Currently joining the single currency would mean a chance of lower inflation, price transparency which is good for customers and Vodafone UK, a decrease in unemployment and many others factors. For now the pros out weigh the cons.
This means for Vodafone UK Britain joining the single currency would be not only crucial for them but also for Britain itself as both would lose out if they did not join, so this coincides with my hypothesis, as it was correct.
Evaluation
Overall I feel that the coursework went well, I worked efficiently and to my maximum ability for the time that I had. I was able to gather a more than sufficient amount of useful information from a wide variety of sources. In my opinion I could have bettered this coursework by getting some statistics together and creating some graphs or tables. I could have tried looking for them on the Internet, I did look for some more graphs but I couldn’t find any. Even though I have included a couple of tables and graphs, I don’t think that there were many opportunities in this coursework to include graphs, because most of this coursework was writing.
My time management has been very good for this course work I think could have spread this coursework out a bit more tough in terms of less research and more writing. For the first month I left the writing alone and did only research with notes on relevant extracts. I think that if my time was managed better I could have done this course to far greater standard.
Bibliography
Books
- Economics for GCSE Second Edition By Alan Anderton
- Penguin Dictionary of Economics
- Oxford Dictionary of Economics
- Britannica
CD’s
- Encarta 2000
- Hutchinson Reference Suite
- Grolier 97
Internet
Papers
- The Times
- Metro
- Daily Mail
- Financial Times
Research Follows Plus Questionnaires