Brexit's Impact On The Scotch Whisky Industry: An Essay.

In this assessment, you are required to critically analyse and evaluate the Scotch Whisky and Brexit (2017) case study to be able to complete the following tasks:

1. Carry out an environmental analysis of the Scotch Whisky and Brexit (2017) case study and using international marketing theory justify your analysis of the case study and discuss the key strategic issues facing the UK and the Scotch whisky industry after the UK leaves the EU.

2. Apart from the UK, choose ONE country that is currently a member of the EU and evaluate the specific opportunities and threats for the Scotch Whisky Industry trying to maintain its market share and grow its business in your chosen member country. Students are expected to carry out some secondary research of their chosen country and to use international marketing theory to support their answer to this question. 

What is Globalization?

Globalization can be defined as the process by means of which an increasing interaction between the various people or companies is achieved by means of the improved communication as well as the transport facilities (Omar and Band, 2012). It is to be noted that the term gained popularity in the 1970s and its rise is generally associated with the introduction of the telegraph system as well as the steamboats which facilitated the process of transport and communication between the people from the diverse parts of the world (Wright, 2016). It is to be noted that the large scale use of the process began in the 1820s and helped in the improvement of the economies of the various first world nations of the world (Mowforth & Munt, 2015). However, it should be noted that the concept is a very ancient one and even in the traditional times the various civilizations like the “Indus Valley Civilization”, “Egyptian Civilization” and others used to trade with their neighboring civilizations (Mowforth & Munt, 2015). A new dimension to the concept of globalization was added by the “International Monetary Fund (IMF)” in the year 2000 when it described four important precepts of the concept of globalization namely, “trade and transactions, capital and investment movements, migration and movement of people, and the dissemination of knowledge” (The Economist, 2018). The Economic Online (2018), on the other hand, defines the concept of globalization as “the integration of markets in the global economy, leading to the increased interconnectedness of national economies” (Economicsonline.co.uk, 2018). It is to be noted that the various companies as well as business organizations follow the path of globalization to expand their business in other foreign lands to increase the amount of their annual profit as well as sales. Therefore, taking about the significance of the concept of globalization Bill Clinton, the ex-President of the United States of America said, “No generation has had the opportunity, as we now have, to build a global economy that leaves no-one behind. It is a wonderful opportunity, but also a profound responsibility.”

Paul Krugman in his “Brexit: The Morning After” said “It seems clear that the European project – the whole effort to promote peace and growing political union through economic integration – is in deep, deep trouble” (BBC, 2018). In the opinion of Guy Verhofstadt, the EU negotiator “All British citizens today have also EU citizenship. That means a number of things: the possibility to participate in the European elections, the freedom of travel without problem inside the union. We need to have an arrangement in which this arrangement can continue for those citizens who on an individual basis are requesting it” (BBC, 2018). It is to be noted that government of the United Kingdom proposed to join the “European Economic Community (EEC)”, the prototype of the EU in the years 1963 and 1967. However, the proposal was rejected by Charles de Gaulle, the then French President. However, the appeal of the United Kingdom was approved under the leadership of the next President of France, Edward Heath (European Union, 2018). It is to be noted that the treaty provided several economic as well as trade benefits to the United Kingdom. It is interesting to note that “under the Maastricht Treaty, the European Communities became the European Union on 1 November 1993, reflecting the evolution of the organization from an economic union into a political union” (Inglehart & Norris, 2016). However, the United Kingdom government under the leadership of its then Prime Minister David Cameron proposed a veto to exit the EU. It is significant to note that the vote was supported by a majority of 51.9% of the voters out of the 72.2% of the people who voted in the process (CNN, 2018). According to a source, the exit of the United Kingdom is likely to adversely the future prospects of the United Kingdom not only in terms of the economy but also in terms of the population density of the nation (The Guardian, 2018). According to another source, the deal is likely to lower the per capita income of the individual citizens of the United Kingdom by at least 404 pounds I addition to the 1.3% of the overall GDP of the United Kingdom  (BBC, 2018). In addition to this the deal is also likely to effect the higher educational policies of the government and also the students who wish to pursue their higher educational over there. It is to be noted that “The European Union is the second-largest economic bloc in the world, with a gross domestic product (GDP) of $16.2 trillion in 2015 compared to the United States (U.S.) at $17.9 trillion and China’s $10.9 trillion. Without the United Kingdom (U.K., 2015 GDP of $2.8 trillion), the EU and its 27 remaining countries will still be the second largest with a GDP of $13.4 trillion” (Dr Thomson and Gebbie, 2017). Therefore, it would not be too far-fetched to say that the divorce bill is likely to affect the economic climate of the United Kingdom in an adverse manner without causing much significant damage to the economy of the European Union (Goodwin & Heath, 2016). However, many people use the famous lines of the 18^th Century poet Alexander Pope to justify the move of the United Kingdom- 

Brexit’s Impact on Europe

“And see, my son! the hour is on its way,

That lifts the Goddess to imperial sway;

This favourite isle, long severed from her reign,

Doveline, she gathers to her wings again”

However, the most significant threat which the exit poses to the United Kingdom is “relations with the Republic of Ireland, and the borders with France and between Gibraltar and Spain are uncertain” is likely to get affected by the “divorce bill” passed by the government of Theresa May (The Independent, 2018). The impact which the divorce bill is likely to have on the educational climate of the United Kingdom has been adequately summed up in the words of Ken Mayhew, “Emeritus Professor of Education and Economic Performance at Oxford University” when he said about impact of the divorce bill, “Brexit poses the following threats to higher education: loss of research funding from EU sources; loss of students from other EU countries; the impact on the ability of the sector to hire academic staff from EU countries; and the impact on the ability of UK students to study abroad” (The Independent, 2018). In addition to this the divorce bill is likely to have significant effects on the trade relations of the United Kingdom with the other European nations of the world as well (Hobolt, 2016).

This essay intends to provide an overview of the Scotch Whisky industry and the impact of the Brexit on the industry. It is to be noted that the whisky manufactured by the Scotch Whisky exports helps in the maintenance of the “balance of trade” in the European Union. Another interesting fact to be noted about the industry is that more than 90% of the whisky manufactured by this particular industry is exported to the other member countries of the European Union (Dr Thomson and Gebbie, 2017). Therefore, the deal is likely to affect this particular industry in a significant manner. It is to be that the company in the year 2016 manufactured around £3.8 billion worth of whisky out of which around £1.2 billion were exported to the various member nations of the European Union (Dr Thomson and Gebbie, 2017). The industry conducts its business on the precepts of the “European Single Market” of the European Union which states that there should be “no barriers to trade among the member countries” (Dr Thomson and Gebbie, 2017). An environmental analysis of Scotch Whisky in the context of the Brexit deal would reveal the following facts-

Brexit’s Impact on the UK’s Educational Climate

It is to be noted that the Brexit as well as the other political factors are likely to affect the Scotch Whisky exports industry in a significant manner. As already mentioned the divorce bill is likely to affect to the industry in a significant manner as almost 90% of the whisky manufactured by the industry is being exported to the other member countries belonging to the European Union. Therefore, this will have a significant impact on the productivity of the concerned industry as well. It is significant to note that one of the precepts of the deal with the European Union of the United Kingdom was the free trade within the European nations who are a part of the deal and also the export of labor from those nations (Dhingra et al., 2016). Therefore, if the divorce bill is passed this will have significant repercussions on the whisky industry as the concerned industry will not be able to export labors from these nations which are very essential for the manufacture of the surplus whisky which the industry used to export to these member nations (Becker, Fetzer & Novy, 2017). Another significant impact which this divorce bill is likely to have on the Scotch Whisky industry is the lack of free trade options which the industry used to enjoy in the earlier times when it was a part of the European Union (Becker, Fetzer & Novy, 2017). This particular feature is likely to affect the industry as the industry will not be able to conduct free trade in those countries belonging to the European Union. Therefore, to conduct trade in those countries the industry will have to pay extra amount of capital which is likely to increase the production cost of the whisky manufactured by the industry and thus the industry will have to raise the price of the whisky manufactured by them which is likely to affect their customer base in an adverse manner. In addition to this, one of the stipulations of the divorce bill is that the United Kingdom will not be able to import the extra number of labors from the European nations which are a part of the European Union and this will create a shorter in the industry in terms of the amount of labor (Wadsworth et al., 2016). This is likely to affect the industry in a significant manner as the lack of labor means that the productivity of the industry will get hampered in a direct manner. 

Brexit’s Impact on the Scotch Whisky Industry

It is to be noted that the European Union is the second largest economic bloc in the world just after the economic bloc of the United States of America. The economic contribution of the European Union towards the world economy is about 16.2% in comparison to the 17.9% contribution of the United States of America (Wadsworth et al., 2016). It is significant to note that the economy of the European Union is not going to get affected in a serious manner after the divorce bill gets full sanction and on top of that there are several countries which are willing to join the economic bloc of the European Union (Pisani-Ferry et al., 2016). However, this particular divorce bill is likely to affect the economy of the United Kingdom in a significant manner. According to an estimate the divorce bill is likely to decrease the per capita income of the citizens of the United Kingdom by almost 404 pounds and will reduce the national GDP of the United Kingdom by almost 1.3%. Therefore, this particular change in the economic climate of the United Kingdom is likely to affect its one of the major industries the Scotch Whisky industry in an adverse manner. It is to be noted that this will have a significant impact on the buying pattern of the customers as the less amount of capital which they will be having at their disposal post the divorce bill is likely to make them spend a considerably lower amount of capital on luxury items like whisky. Another problem which this particular economic problem is going to cause in the economic framework of the United Kingdom is the Scotch Whisky exports industry will have to spend more amount of money for the procurement of the war materials as the economic recession is likely to raise the cost of the raw materials necessary for the manufacture of the whisky (Pisani-Ferry et al., 2016). This is expected to significantly raise the manufacturing cost of the whisky to cover up which the industry will have to raise the cost of the whisky sold by it. However, as the entire United Kingdom will be facing the same economic recession post the sanction of the divorce bill this is likely to affect the buying pattern as well as the sale of the whisky manufactured by the industry.

The divorce bill is likely affect the social structure of the United Kingdom which in turn will affect the whisky industry as well. It is to be noted that the people of the United Kingdom generally like to indulge in hard drinks like whisky and others and they form an important part of their social world (Irwin, 2015). In addition to the citizens of the United Kingdom the immigrants from the various diverse nations who normally come to the United Kingdom in search of better job prospects and educational opportunities also like to indulge in whisky and other hard drinks once in a while. It is a reflection of this that the whisky manufactured by the Scotch Whisky is highly appreciated by the citizens as well as the other immigrants of the United Kingdom (Jensen & Snaith, 2016). However, the divorce bill is likely to affect not only the amount of whisky manufactured by the industry but also the consumption rate of the product. It is to be noted that the various immigrants who form an integral part of the social framework of the United Kingdom will not be allowed easy access into the nation post the divorce bill (Irwin, 2015). Therefore, this is likely to impact the whisky industry in a significant manner and is also likely to reduce the sale of the products manufactured by the industry. 

Technology is another sphere is likely to get affected by the divorce bill which the United Kingdom has proposed for the process of the Brexit under the leadership of the Prime Minister David Cameron (Jensen & Snaith, 2016). It is to be noted that before the divorce bill was passed by the government of the United Kingdom the nation used to have free access to the latest technological as well as the innovations of the various member nations belonging to the European Union. However, after the sanction of this particular bill the United Kingdom will not be able to use the technological advancements as well as the innovations of the countries belonging to the European Union and will have to depend solely on the technological advancements and innovations of its own. It is to be noted that the Scotch Whisky industry is one which requires the use of latest technology and innovations not only for the manufacture of the whisky which forms an important part of the life of the citizens of the United Kingdom but also for the process of the sale of the product (Goodwin & Heath, 2016). Therefore, this change is likely to affect the business of the Scotch Whisky industry in an adverse manner. Moreover, in addition to that as the United Kingdom is closing its gates to the various immigrants from diverse parts of the world who come to the United Kingdom for better job prospects or educational prospects will not be able to add to the technological advancement of the United Kingdom and this is likely to affect the productivity of the industry in a significant manner.

Legislation is another factor which affects the Scotch Whisky industry in a significant manner. It is to be noted that one of the significant reasons for the economic growth as well as the development of the United Nations. The various precepts of the legislations belonging to the European Union like the free trade policy, the immigration policy, the labor policy and others have contributed significantly to the overall growth as well as the development of the Scotch Whisky industry (Goodwin & Heath, 2016). Therefore, these factors are likely to have an adverse impact on the Scotch Whisky industry. Thus, post the acceptance of the divorce bill the United Kingdom will not be able to conduct free trade in the various member nations of the European Union. In addition to this, the United Kingdom will not be able to get cheap labor from the various member countries belonging to the European Union. Therefore, it would not be too far-fetched to say that the divorce bill is likely to affect the business activities of the Scotch Whisky industry in a negative manner.

It is to be noted that in the recent times the environmental factors also affect the business of a particular company or business organization in a significant manner. It is also to be noted that in the present times the various companies a well as business organizations need to take the diverse environmental laws or legislations into consideration for the conduct of their overall business. The European Union being the second largest economic bloc of the world needs to follow the various environmental legislations like the “Paris Climatic Deal”, safe environment legislations and others which are necessary for the safety of the environment (Shipman, 2016). It is to be noted that before the divorce bill passed by the United Kingdom the various members countries of the European Union used to share the cost of the environmental regulations. However, post the divorce bill the United Kingdom will have to share the burden alone and this is likely to affect the various industries of the United Kingdom. Therefore, this is likely to have serious repercussions for the Scotch Whisky industry of the United Kingdom as well since the industry will have to make its contributions towards the various environmental costs (Shipman, 2016). It is to be noted that this is likely to increase the manufacturing cost of the whisky. Therefore, this is likely to affect the annual profit margin of the company as well in a significant manner.

Therefore, from the above discussion it becomes apparent that the divorce bill as well as the Brexit deal is likely to affect the various industries related to the United Kingdom in an adverse manner. As a matter of fact, this is likely to increase the manufacturing cost of the whisky produced by the industry and thereby reduce the annual profit percentage of the industry. In addition to that, the divorce bill is also likely to affect the annual sale of the whisky manufactured by the industry and also its customer base.

France has been a member of the European Union ever since its foundation in the year 1951 through the “Treaty of Paris” (Hunt & Wheeler, 2017). It is to be noted that France has been a key player in the political as well as the economic aspects of the European Union. It is interesting to note that it was France which granted the United Kingdom the approval to join the European Union (Hunt & Wheeler, 2017). An environmental analysis of the Scotch Whisky exports in the nation of France would reveal the following facts-

It is to be noted that the political climate of the country of France is a very stable one and very congenial for the overall growth as well as the development of trade and commerce. France is a member of the European Union and therefore it enjoys various facilities or advantages which the United Kingdom post the divorce is not going to enjoy like the policy of free trade in the European Union, the immigration policy and various others (Möller & Oliver, 2014). Therefore, the company would be able to export the surplus amount of whisky manufactured by it to the other member countries of the European Union without any extra trade tax or others. Another significant fact to note is that the nation can easily procure the surplus amount of labor needed for the industry from the various member nations of the European Union. Therefore, the easy availability of the labor will significantly make the manufacture of the whisky much easier for the industry. It is to be noted that the industry will be able to procure raw materials needed for the manufacture of the whisky from its neighboring countries in a much easier manner (Möller & Oliver, 2014). It is to be noted that all these factors are likely to provide a better opportunity to the industry for the process of its overall growth as well as development.

The social climate of the nation of France is a very liberal one and drinking forms an important part of their lifestyle (Barrett et al., 2015). Therefore, it would not be too far-fetched to say that the industry is likely to have a much larger customer base in the nation of France in comparison to the United Kingdom. In addition to this, the society of France is a mixed one consisting of diverse entities from the various nations of the world (Barrett et al., 2015). Therefore, the whisky manufactured by the Scotch Whisky exports will find a suitable environment where it will be able to sell the products manufactured by it in a much better manner. 

It is to be noted that France is one of the first world countries of the world with fairly developed technological environment. Therefore, the Scotch Whisky industry will be able to utilize the latest technology as well as the innovations of the nations for the process of its overall growth and development (Ottaviano et al., 2014). It is to be noted that the productivity of any company depends on the kind of innovations as well as technologies which it is using for the manufacture of its products (Ottaviano et al., 2014). Therefore, the whisky industry will enjoy a superior technological environment in the nation of France and will be able to further increase the amount of whisky manufactured by it.

It is to be noted that the nation of France has liberal legislations towards the conduct of trade as well as commerce in their nations and also in the member nations of the European Union. The free trade policy which the nation of France by means of being a member of the European Union is likely to further the prospects of the Scotch Whisky industry in a positive manner (Clarke, Goodwin & Whiteley, 2017). In addition to this, the nation of France by being a member of the European Union enjoys liberal immigration legislations. These immigrants are a source of cheap labor which the whisky industry can utilize in their business process (Clarke, Goodwin & Whiteley, 2017). It is to be noted that labor is one of the most fundamental part of any business process and any business organization to further the process of its overall growth as well as development the organization needs surplus labor resources. The nation of France will be able to provide labor resources to the industry easily by being a member of the European Union.

The nation of France is a pioneer in the field of environmental legislations and the recently conducted “Paris Treaty” among the various member nations of the European Union is a case in instance (MacShane, 2016). It is seen that the cost of the various legislations as well as campaigns developed by the nation of France are shared by the member nations of the European Union (MacShane, 2016). Therefore, the economic burden on the various companies as well as business organizations of the nation of France is considerably lower in comparison to the economic burden on the companies and the business organizations in the United Kingdom.

Therefore, from the above discussion it becomes that there are various factors which affect the business of any company as well as the business organizations in any nation. The same factors also apply to the business as well as the operations of the company Scotch Whisky as well. It is to be noted that this particular industry is one of the major contributors towards to the economy of the United Kingdom. The association of the United Kingdom with the European Union provided several economic, social and other benefits to the nation of the United Kingdom. Therefore, the present divorce bill which the nation is proposing to implement is likely to affect the business environment of the nation in a considerable manner. This becomes apparent from the comparison of the environmental analysis of the market of the Scotch Whisky in the United Kingdom post the divorce bill with the current business of the nation of the country of France which is still a part of the European Union. 

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