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Discuss the benefits and challenges of European Union membership for Irish businesses. - Leaving Cert Business - Question B - 2017
Question B
Discuss the benefits and challenges of European Union membership for Irish businesses.
Worked Solution & Example Answer:Discuss the benefits and challenges of European Union membership for Irish businesses. - Leaving Cert Business - Question B - 2017
Step 1
Benefits of EU Membership for Irish Businesses
Answer
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Free Movement of Goods, Services, and Labour: The creation of the Single Market in 1993 has eliminated trade barriers within the EU, allowing for the free movement of goods, services, labour, and capital among member states. This significantly benefits Irish businesses by providing access to high-quality products from the EU.
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Larger Market/ Increased Sales: EU membership provides Irish businesses access to a larger market, leading to increased sales potential. By expanding their offerings and operations in other EU countries, businesses can experience growth and diversification, ultimately enhancing profitability.
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Economies of Scale: Irish businesses producing for the European market can reduce costs. The increased volume of production allows them to lower the average cost per unit, making them more competitive in pricing.
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Spin-off of Foreign Direct Investment (FDI): EU membership attracts FDI, with the current value of FDI in Ireland exceeding €30 billion. This creates job opportunities and enables many Irish businesses to supply raw materials and services to multinational corporations.
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Benefits from the Common Agricultural Policy (CAP): Irish farmers benefit significantly from CAP, which has provided substantial income support. Between 1973 and 2008, farmers received about €44 billion, crucial for maintaining farm viability.
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Single Currency Advantages: The introduction of the euro has made it easier for foreign investors to set up operations in Ireland and it simplifies trading within the Eurozone.
Step 2
Challenges of EU Membership for Irish Businesses
Answer
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Extra Regulations: The EU imposes various regulations on businesses, which can increase operational complexities and costs.
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Increased Competition: Globalization and competition from other EU markets mean that Irish businesses must become more efficient, often requiring increased investment in research and development (R&D) to innovate and compete effectively.
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Currency and Exchange Rate Fluctuations: The strength of the euro against other currencies can make exporting more challenging. For example, as the euro strengthens against the US dollar, Irish exports may become costlier, potentially reducing demand.
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Difficulty in Trading with Non-EU Countries: Trading outside the EU can involve tariffs and other trade barriers, adding complexity and costs.
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Language and Cultural Differences: Exporting to different member states can require knowledge of varying regulations and cultural nuances, which may pose additional challenges for Irish businesses.
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Increased Distribution Costs: Geographical location and distribution patterns can lead to higher costs compared to competitors based in the EU.Commonly, distribution costs will rise, impacting pricing strategies.
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Brexit Implications: The repercussions of Brexit have made trading with the UK more complicated, necessitating Irish businesses to adapt to new trading patterns and regulations, potentially increasing costs and decreasing market access.