BUSI1323 Leadership in Organisations - Tariffs on Dairy Products Assignment Help

Introduction

Due to trade tensions between the EU and the US, the price of dairy products imported from EU is increasing. The increased tariffs are creating difficulty for both the US indigenous companies which utilize dairy products as their input, and the EU exporters for whom the price of their products is rising. Managers are going to have a difficult time analysing what management decision to make.The dairy producing companies themselves are not related to this business problem, as they are the direct competitors of the the EU dairy producing companies, upon whose products tariffs are placed (BBC, UK). 

Therefore, this management decision concerns only those companies who utilize dairy products for their final products, and also affects the business decisions of EU dairy producing company managers who now have an unnecessary tariff placed on their goods, making them more expensive and hence despite their high quality becoming less desirable on the market; simply because they are now much expensive to acquire, and that too via artificial pricing. This means that for the EU managers, they have witnessed an increase in their price despite any fault of their own, but rather due to external pressures, hence they cannot simply bring the cost down via their management decision and hence they have to adopt a different strategy. For the indigenous US companies, they have to discover substitute inputs to this now expensive costing input of theirs. These management stances are cooperative, however geographical distances coupled with global trade politics has constricted their ability to interact and cooperate. One aspect of business ethics that the managers have to comply with, is the tariff restriction, for both kinds of companies despite their disapproval of it, simply because they have to adhere to and follow domestic policies and international practices.

Globalization

Globalization is the biggest most impactful reason behind a managerial decision being impacted in the modern day and age. With regards to this case specifically, the US’ imposition of a tariff on EU products, specifically their dairy range if broken down can be understood mathematically as a non-linear pricing strategy with an interdependent demand (Oren, Smith and Wilson, 1982). What Oren, Smith and Wilson are essentially focusing on is the fact that in the global domain, both national markets will be linked, and this linkage will impact the demand via its non-linear, complex pricing strategy. This increase in prices will prove detrimental to both the EU exporters and the US importing companies which used dairy products as their input. The former will have to find a cheaper way to produce their dairy products, and find an alternative market to sell, whereas the latter will have to find an alternative input source, as a rise in prices will in-turn reduce the demand for their product amongst the consumers. Globalization also induces either a cooperative or competitive environment depending upon the actors. For instance, according to Adam Lupel’s (2004) example, where he illustrated democratic coordination being absent in the face of greater global governance. Essentially, what this means for states is, and applying it to the US scenario, is that they feel their authority challenged as the scope of their territory attains a global rather than national feat, and so their ability to influence decisions is compromised. To ascertain this very authority, the government induces decisions in its national interest, which may be against business interests (for EU exporters and US importers) as they operate outside of the national context, and for them a competitive relationship id formed with the government. Conversely, applying Lupel’s idea, a cooperative relationship is formed between EU exporters and US importers as they aim to cooperate for the purpose of increasing their sales, as a “non-linear demand”  requires a “non-linear” business solution. 

There are obviously some “normative challenges” as highlights Higgott (2000), which go against the norms of justice, in this case the imposition of tariffs being an unfair imposition upon the the EU exporters, the US importers and the ultimate customers themselves, as it is an unnatural restriction placed on a border-free market. The US government disagrees obviously, as globalization is deleterious to its sovereign authority. Mittleman (2004) has interesting deductions to contribute, namely in the form of  “critical globalization studies” in the instances that globalization outcomes, or the backlash they bring forth might not be of advantage to the business managers, and therefore they must critically analyze these contexts, especially if the government/s is/are yielding negative outcomes for the company itself. It is important however to keep business ethics in mind, to maintain corporate social responsibility and also to keep stakeholders on board when operating in a global context. As Kydd (2000) rightfully quotes, international conflict is majorly caused by mistrust and in this case, it is that of the US government which mistrusts the EU itself, and hence also the EU exporters. Business is impacted by government decisions, as it operates on the macro scale, especially with regards to the globalization phenomenon. Governments have historically been known to use different factors as trade barriers (Taylor, Walsh and Lee, 2003), and in this case, the trade barrier is the imposition of a tariff, which has unnaturally impacted the product popularity in the american market, via its unnatural increase in price. As Taylor, Walsh and Lee rightfully note the US beef controversy with the EU is an apt example of the already present tensions and the country’s ability to impose tariffs and taxes in times when they wish to promote their national interest, impacting the business domain adversely.