This document contains notes from a tutorial on the global context of modern business. It discusses several topics: - An activity where students debate whether Turkey should be allowed accession to the European Union. - Why low-cost airlines have grown in the EU and why state aid is a particular problem for the European airline industry. - Issues around mergers and acquisitions in the music industry, including a proposed merger between EMI and Universal that raised antitrust concerns but was eventually cleared by EU and US regulators with certain commitments made to divest assets.

1. Global Context of
Modern Business
Tutorial 5
European Union
23/01/2014

2. Turkey
Activity 1
• Read Mini-case 13.1 ‘Turkey and the EU’
p349
• Groups of 5/6
• A brief debate within the group
• Half of the group argues for and the
other half of the group argues against
accession
23/01/2014

3. Industry and Competition Policy
and the European Airlines
Activity 2
• Why have low cost airlines grown in
significance within the EU?
• Why is state aid a particular problem in
the context of the European airline
industry?
23/01/2014

4. Industry and Competition Policy
and the European Airlines
•
•
•
•
•
Move from regulation to competition
Struggle by incumbents
Required by the economic growth
Major airports are dominated by flag carriers
Local authorities are under pressure to grant
aid
• Local development and employment
• National politics (Alitalia)
• 300 million-euro capital hike and credit
lines worth 200 million euros (Economist)
23/01/2014

5. Industry and Competition Policy
and the European Airlines
•
National politics (Alitalia)
•
300 million-euro capital hike and credit
lines worth 200 million euros
(Economist)
•
Competition between the big and low-cost
•
Mergers and acquisitions
23/01/2014

6. EMI/Universal
•
•
•
Large number of retailers offering online music
CDs <----- > online, almost equal share
Competition problems in the EU by the merger of
two
• Higher prices
• Licensing restrictions
• Concerns raised by the large retailers
• Small retailers will not be able to compete
• Impact on consumers
• Entry problems for new entrants
• Expansion problems faces by existing firms
• Reduced consumer choice
23/01/2014

7. EMI/Universal
•
Commitments to divest catalogues and assets
•
Lower level of maintained control and power
•
Divestment on EMI
•
Divestment of classical music labels
• Now music
23/01/2014

8. EMI/Universal
•
•
•
Gives consumer more choice to buy from
Competitiveness
Greater control and influence as consequence
of part-sale of EMI to new or existing business
• Based on the above measures, merger will
have lesser impact on consumer choice and
new entrants
• EMI-Universal deal cleared by EU and US
regulators
• £1.2bn ($1.9bn)
23/01/2014