European Monetary Union’s effect on Europe

A currency is a form of money and is used when purchasing goods or services. Coins and paper money are both forms of currency. There are different types of currency for each country, for example the UK has the Pound (£), the USA has the US Dollar ($) and 15 member states of the European Union use the Euro (€). There are other currencies used all around the world. A person can exchange one currency for another but there is a rate at which it must be done, these are called exchange rates. Exchange rates are the rate at which one currency is worth in another currency, for example at today’s current exchange rates £1 will by a person $1.46. Businesses exchange money every day and in large amounts, this effects how much a currency is worth. Businesses exchange money to purchase goods in other countries, if there are a lot of businesses purchasing from one country their currency value will raise. This means the businesses will have to pay more of their currency to import goods. Even though the value of a currency can rise they can also fall in value as well. This happens when a currency is not in demand. Because the value of the currency is high businesses will not import from that particular country because it will be possible to get what they want from another country for less money. This will cause the value to fall. Even though people exchange money when going on holiday they do not play a big part in exchange rate fluctuation, it is businesses which cause the exchange rate of countries to change every day. The exchanges rates have two effects on businesses. One of them is that businesses need them to import and export goods to other countries, without them it is not possible because each country has a different form of type of currency. The other impact is that businesses make the exchange rates fluctuate making it more expensive or cheaper to purchase goods in other countries.
The US dollar started to rise in value quite swiftly against the Euro and the Pound between July and September causing the value of the Euro and the Pound to plummet to all time lows.
Before the euro was introduced the member states of the EU still used their own currencies, but the exchange rate of these currencies were always fluctuating. Following an Arab-Israeli war in October 1973. Middle Eastern oil production companies forced high prices and restricted sales to certain European countries, consequently this created economic problems throughout the EU. This gave birth to the European Monetary System (EMS). The EMS was an arrangement between the member states to link their currencies to prevent large fluctuations. The essential fundamental of the arrangement was the creation of the exchange rate mechanism (ERM) which was a system to help maintain stability for the currencies of the member states. This was done by setting limits an exchange rate could fluctuate in. The limit was 2.25% (6% for Italy), for example the pound’s exchange rate could not increase by more than 2.25% and could not decrease by more than 2.25%. All currency values within the EU were tied to the German mark because at that time their currency value was the Strongest. This was good economically because business could cope with small fluctuations. But what happened when a countries exchange rate reached its limits? This happened in September 1992 when the UK was forced out of the ERM. The value of the pound was decreasing and the government tried to keep the value within the ERM limits. They raised interest rates from 10% to 12% to 15% in one day and they spent large amounts of other currencies to buy pounds to try and increase the value of the pound. But it did not work and had to leave the ERM. Other currencies in the EU devalued and the French franc was the only currency to successfully defend itself from devaluing. The establishment of the ERM was the first time a single currency was thought possible.
The signing of the Maastricht treaty in 1992 was when the EU made it an objective to bring a single currency (The Euro) to pass. The euro was launched in 1999 but only for commercial and financial transactions. Notes and coins were introduced in 2002.
There were strict conditions to be met before a country could ascend to the euro. These included targets for inflation, interest rates and government debt. A European central bank was created to set interest rates for all member states that ascended to the euro.
With the ongoing integration between the members of the EU and the continuing effort to make the trade of goods, services, people and capital easier, it was only a matter of time until the euro was launched. The ERM was designed to maintain the stability of exchange rates within the EU and was not very successful in doing this, so the EU had to come up with a better idea. This was the euro; this would remove the exchange rates when trading within the EU and make things more simple because businesses didn’t have to worry about how much their currency was worth in another currency within the EU. This is also written on http://www.civitas.org.uk/eufacts/FSECON/EC9.htm, it says

“Yet it was not an entirely successful move because it posed many technical difficulties in setting the correct rate for all member states and because some members were less committed to it than others”

Introducing the euro was inevitable because the ERM was not very successful in keeping all the exchange change rates within the EU stable and it was an objective for there to be a free movement of capital (money) between the member states of the EU. If there is to be a free movement of capital between the EU they would have to do away with exchange rates and create a currency for the member states to use.
There are 5 economic tests for the UK to join the Euro. These were created by the Chancellor of the Exchequer in 1997, this was Gordon Brown. The tests are a set of conditions the UK has to pass for it to join the Euro. The key notion behind the test is whether the UK is able to handle the same monetary policy as the countries within the Euro zone. The first test is economic harmonisation. If the UK joins the Euro the UK will be in sync with the Euro zone. But if the UK was growing at a faster rate than the EU then the UK interest rates would have to be increased but then that would increase the interest rates of all the other countries within the Euro zone. This is because the interest rates in the Euro zone are controlled by the European Central Bank. But if there were harmonisation there is no guarantee that it would be on a permanent basis. The second test is flexibility and whether there would be enough of it. For example if the UK went into a recession would it be able to cope. The UK would have no authority over monetary policy and fiscal policy would be limited by the growth and stability pact. This would restrict the amount of government borrowing and consequently restrict the scale for expansionary fiscal policy. The third test is investment and the effect the Euro will have on it. Would the Euro create a better setting for firms making long-term decisions to invest in Britain? The fourth test is financial services and what affect the Euro will have on it. What influence would the Euro have over the financial services industry considering London’s financial sector has thrived in recent years would the Euro effect it in a bad way? The last test is growth and employment. Will the Euro encourage higher growth and stability? Also how will it affect employment, will it create a permanent increase in jobs or not? There is no evidence that it would.

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With all this said will it be in the national interest for the UK to join the Euro? There are advantages to joining the Euro. The advantages are, the Euro would end currency instability within the Euro zone and lower it outside it because the credibility of the Euro would increase because it is being used in most of Europe. Another advantage is people travelling from the UK would not have to exchange their money, encountering fewer restrictions when transferring large sums of money when going across borders. A further advantage is businesses won’t have to pay hedging cost to insure themselves against the threat of currency fluctuations. Another advantage is there will be a lower interest rate. Also the stability pact will force EU countries into a system of fiscal responsibility. This will enhance the Euro’s credibility, which should lead to more investment, jobs and lower mortgages. Even though there are advantages there are also disadvantages to joining the Euro. The disadvantages are, if the UK government is required to conform to the stability pact they may be unable to battle a recession using fiscal policy. This is because the government will not be able to borrow as much money or cut taxes. Another disadvantage is the UK will have no control over interest rates as the European Central Bank controls interest rates within the Euro zone. A further disadvantage is the UK will lose its sovereignty. This means that the UK will have to work with other economically weaker countries, which are more tolerant to higher inflation. Another disadvantage is that the transfer between the pound and the Euro will cost a great deal. The British Retailing Consortium estimated that all British retailers will have to pay between £1.7 billion and £3.5 billion to make the essential changes. These changes include educating customers, changing labels, training staff, changing computer software and adjusting tills. The last disadvantage is the exchange rate would no longer balance Britain’s trade and capital flow with the rest of the world.
It is difficult to say if it would be in the national interest of the UK to join the Euro as there are advantages and disadvantages. But nobody knows what will happen if the UK joins the Euro, we can only predict possibilities. It is wrong to say the UK will never join as there are advantages to joining the Euro but the UK will not be joining anytime soon.
[1] http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/11/12/twelve_month.stm
[2] http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/11/13/twelve_month.stm
[3] http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/13/12/twelve_month.stm
 

How Does Capital Structure Affect the Performance of European Shipping Industry?

Research Topic: How does capital structure affect the performance of European shipping industry?

Table of Contents

Introduction:

Research aims and objectives:

Research question:

Research hypotheses:

Purpose of the research:

Literature Review:

Capital Structure theory:

European shipping industry:

Conclusion:

Bibliography:

Shipping industry is considered as the lifeblood of the economy around the globe. Most of the industries in the world rely heavy on the shipping industry, either for export or import of goods and services. Shipping industry is therefore considered as a backbone of global economy (Davis, 2012).

Margaritis, & Psillaki (2010) have presented the fact that more than 80% of the world goods are transported through ships. The shipping industry provides benefits such as the greenest mode of transport, and the cheapest transport solution to the global business. It is because of these privileges attached to transportation of goods through ships majority of the global business consider ships as their first choice for transportation.

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The increasing awareness about the benefits of ships as a mode of transport the shipping companies face increasingly fierce national and international competition.  In this scenario, it is important for shipping companies to ensure that they have an effective and efficient capital structure in place so that the performance of the shipping companies are not affected negatively (Drobetz, Gounopoulos, Merikas,& Schröder, 2013).

Capital structure, which means the ratio of debt and equity, is one of the most important aspects for any business. In the case of shipping industry, financing is a sensitive problem. The optimal capital structure has become a serious problem for shipping companies in this fierce global competition. The shipping companies need to produce significant savings from the existing expenditure (cost reduction) and increase competitiveness by increasing the number of fleet. In the theory of Modigliani and Merton Miller (1958), they explained that there was a perfect world (without taxation, without any agency costs, every efficient markets with perfect knowledge and most importantly no bankruptcy distress) because of which there was no relevance of debt and equity or the performance/value of the shipping companies. However the global market is not perfect anymore and in this imperfect market the importance of the optimal capital structure has increased. The shipping companies need to have an optimal mix of capital so that they can maintain the balance between debt and equity. The imbalance (debt more than equity) in the capital structure can lead the shipping company fall behind its competitors (Paun, & Topan,2016).

Research aims and objectives:

The research aims to understand the effect of capital structure on the performance of European shipping industry. With this aim the research looks to achieve the following objectives:

a)     To understand the capital structure in European shipping industry

b)     To understand what makes capital structure optimal in the context of the European shipping industry.

c)     To examine the affect of capital structure on the performance of European shipping industry

Research question:

The main research question of the research is to find out,”How does capital structure affect the performance of European shipping industry?”

Apart from this the sub research questions are:

What are the variables that are included in capital structure?

How the European shipping companies can make the capital structure optimal?

Research hypotheses:

The theory on capital structure and form performance had been discussed since 1958, when Modigliani and Miller proposed irrelevance theory. There have been significant changes in the market and dynamics of shipping industry. The main theories regarding the optimal capital structure can be divided into “trade off hypothesis” and “pecking order hypothesis”. The “trade off hypothesis” states that an optimal capital structure for a company is based on a trade off between tax shield and costs with financial distress while “pecking order hypothesis” states that there is no optimal capital structure for companies because the companies need to establish a continuous balance between internal and external financings based on the need and also availability of the cash flow in the companies (Zeitun, & Tian, 2014).

 In order to reassess these and get the answer for the research questions the following alternative hypotheses are tested:

H1a  The size of the shipping company has positive impact on the financial leverage of  that company

H2a  The profitability of the shipping company has positive impact on the financial leverage of  that company

H3a  The tangible assets of the shipping company has positive impact on the financial leverage of  that company

H4a  The growth potential of the shipping company will decrease the financial leverage of  that company

H5a  The higher non debt tax shield of the shipping company will decrease the financial leverage of  that company

H6a  The higher tax rate of the shipping company will increase the financial leverage of  that company

The null hypothesis are;

H1o  The size of the shipping company has positive impact on the financial leverage of  that company

H2o  The profitability of the shipping company has positive impact on the financial leverage of  that company

H3o  The tangible assets of the shipping company has positive impact on the financial leverage of  that company

H4o  The growth potential of the shipping company will decrease the financial leverage of  that company

H5o  The higher non debt tax shield of the shipping company will decrease the financial leverage of  that company

H6o  The higher tax rate of the shipping company will increase the financial leverage of  that company

Purpose of the research:

The purpose of the research is to understand the effect of capital structure on the performance of European shipping industry. The shipping industry is considered as a sensitive economic sector. The industry requires high capital for investment in the fixed assets such as shops and vessels so that the shipping companies can expand their operations. In order to do so the shipping companies need to establish an optimal capital structure system so that they have important financing sources and financing strategies. Shipping industry is considered as a backbone of global economy and there is a need to strengthen this backbone so that the global economy is not impacted negatively. Apart from this, the shipping companies face increasingly fierce national and international competition, so in an individual level the companies need to ensure that they have an effective and efficient capital structure in place so that the performance of the shipping companies are not affected negatively.

The study contributes to the previous literature of capital structure and performance of firms through the example of shipping companies. The research explains the impact of capital structure on the performance of shipping companies through various variables such as size of the company, profitability, assets, growth potential, non debt tax shield, and tax rate (Xiaoyue, & Xiaodong,2001). 

Capital Structure theory:

The studies of capital structure started with the Modigliani and Miller’s irrelevance theory. They explained that there was a perfect world (without taxation, without any agency costs, every efficient markets with perfect knowledge and most importantly no bankruptcy distress) because of which there was no relevance of debt and equity or the performance/value of the shipping companies. However, there is more and more market imperfection, which is explained, in different variables such as bankruptcy costs, agency costs, taxation, asymmetrical information and shipping industry related factors (Berger & Di Patti, 2006).

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The shipping industry is considered as a dynamic, capital concentrated and recurrent business. It is because of the dynamic, capital concentrated and recurrent nature of shipping industry this industry need financing alternatives to ensure the availability of important capital resources for longer period of time.  The shipping companies need to produce significant savings from the existing expenditure (cost reduction) and increase competitiveness so that the shipping companies have financing sources to expand and also competitive advantage among their competitors (Majumdar, & Chhibber,1999). The shipping industry has changed a lot in recent times. There is a huge growth in the shipping industry as the shipping companies provide benefits such as the greenest mode of transport, and the cheapest transport solution to the global business. Apart from that the industry is considered as the lifeblood of the economy around the globe as more than 80% of the world goods are transported through ships (Hadi, 2016).

The shipping industry has transformed into more globalised industry, fuel cost sensitive industry, high tangibility of assets, and business with high leverage.  The access of credit is limited to the shipping companies because of the external factors such as financial crisis, and environmental calamities. The banks are financial institutions are reluctant to finance in the adverse economic climate and even the promoters and investors limit their financing during the off seasons. The shipping companies need to have other financing sources so that they can have access to long-term finance. The role of capital structure is very important in getting the shipping companies the access to long-term finance (Bowen, Daley & Huber,2008).

The theory of capital structure as the Modigliani and Miller’s irrelevance theory stated that there is no relationship between a firm’s capital structure and its performance. Modigliani and Miller (1963) further revised their theory and stated that the effect of corporate tax and tax deduction have impact on the performance of the firm. The firm’s performance is increased when the debt of the firm is increased and this increasing amount is also the value of the tax shield. This essentially suggests that the firms will have more benefit from taking more debt as it increases the leverage of the firm. However this theory is applicable only for imperfect market (El-Sayed Ebaid, 2009).

The imperfect market includes various variables such as bankruptcy costs, agency costs, taxation, asymmetrical information and shipping industry related factors.

The theory of capital structure and performance of firms further developed “trade off hypothesis” and “pecking order hypothesis”.  The “trade off hypothesis” states that an optimal capital structure for a company is based on a trade off between tax shield and costs with financial distress while “pecking order hypothesis” states that there is no optimal capital structure for companies because the companies need to establish a continuous balance between internal and external financings based on the need and also availability of the cash flow in the companies.

After “trade off hypothesis” and “pecking order hypothesis” were developed in Kraus and Litzenberger (1973) and Myers (1984) respectively. Jensen and Meckling (1976) come up with the agency theory. The agency cost theory explained that due to division of control and ownership the agency of firm would not always work for the benefits of the shareholders. When a firm raises the debt there are chances of conflict between shareholders and other party of the firm. The situation of conflict would result into added cost for the firm in operating, investing and financing activities. The increase of debt might help the firm to leverage but the managers who are interested into personal benefits might not be happy leading to a situation of conflict in the firm.

European shipping industry:

The European shipping industry is a global leader in the shipping business. The European union is the home to the world largest shipping. The European shipping industry controls more than 40% of the global tonnage. The industry is also the world’s youngest and the most innovative shipping industry, which has more than 23,000 vessels ((ECSA,2018).

In terms of economic contribution, the European shipping industry contributed more than €145 billion to the GDP (Gross domestic product) of European union (EU) in 2012 . The European shipping industry had also created 2.3 million jobs in EU region in 2012. The European shipping companies transport more than 90% of the products such as clothes, oil, gas, cars, electrical appliances and many other items. Since the European shipping industry not only contributes to the GDP of EU but also create employment for the people of EU , the industry is considered as backbone of not only EU economy but also that of globalised economy (IMDO Strategic Review of Irish Maritime Transport Sector, 2018).

The European shipping industry is not only the cheapest transport solution to the global business but also the greenest mode of transport. The size of the vessels and even improving efficiency in the European shipping industry are the two important factors which allows the European shipping industry to ship at a minimal cost of 2% of the shelf price of any product.

The shipping industry has been the facilitator of trade all these years and in order to remain the facilitator of trade the European shipping industry need to compete among the all the global shipping and establish an effective and efficient capital structure so that the European shipping industry has the access to finance for longer period of time. 

Conclusion:

The European shipping industry is a global leader in the shipping business and considered to be the backbone of EU economy because the industry had contributed more than €145 billion to the GDP (Gross domestic product) of European union (EU) and also created 2.3 million jobs in EU region in 2012.  Since the shipping industry has transformed into more globalised industry, fuel cost sensitive industry, high tangibility of assets, and business with high leverage the importance of access of credit has increased. The shipping companies need to produce significant savings by cost reduction and increase competitiveness so that the shipping companies have financing sources to expand and also competitive advantage among their competitors.

The shipping industry is considered as a dynamic, capital concentrated and recurrent business. It is because of the dynamic, capital concentrated and recurrent nature of shipping industry this industry need financing alternatives to ensure the availability of important capital resources for longer period of time. Apart from that the shipping companies face increasingly fierce national and international competition, so in an individual level the companies need to ensure that they have an effective and efficient capital structure in place so that the performance of the shipping companies are not affected negatively.

The shipping industry has travelled a long way from being a perfect market to an impact market. The imperfect market includes various variables such as bankruptcy costs, agency costs, taxation, asymmetrical information and shipping industry related factors. It is because of these changes in the nature of the business there have been various theories that are proposed to establish effect of the capital structure on performance of firms. From the perfect market to imperfect market there have been various factors such as size of the company, profitability, assets, growth potential, non-debt tax shield, and tax rate that should be considered while examining the e impact of capital structure on the performance of shipping companies.

Berger, A. N., & Di Patti, E. B. (2006). Capital structure and firm performance: A new approach to testing agency theory and an application to the banking industry. Journal of Banking & Finance, 30(4), 1065–1102.

Bowen, R. M., Daley, L. A., & Huber Jr, C. C. (2008). Evidence on the existence and determinants of inter-industry differences in leverage. Financial Management, 10–20.

Davis, R. (2012). The rise of the English shipping industry in the seventeenth and eighteenth centuries. Oxford University Press.

Drobetz, W., Gounopoulos, D., Merikas, A., & Schröder, H. (2013). Capital structure decisions of globally-listed shipping companies. Transportation Research Part E: Logistics and Transportation Review, 52, 49–76.

ECSA (2018). Retrieved from https://www.ecsa.eu/images/Studies/ECSA_brochure.pdf

El-Sayed Ebaid, I. (2009). The impact of capital-structure choice on firm performance: empirical evidence from Egypt. The Journal of Risk Finance, 10(5), 477–487.

HADI, N. S. (2016). FACTORS INFLUENCING FINANCIAL PERFORMANCE OF SHIPPING COMPANIES IN KENYA (A CASE STUDY OF MOMBASA COUNTY, KENYA). Strategic Journal of Business & Change Management, 3(4).

IMDO Strategic Review of Irish Maritime Transport Sector (2018). Retrieved from http://www.dttas.ie/sites/default/files/node/add/content-publication/IMDO%20Strategic%20Review%20of%20Irish%20Maritime%20Transport%20Sector.pdf

Majumdar, S. K., & Chhibber, P. (1999). Capital structure and performance: Evidence from a transition economy on an aspect of corporate governance. Public Choice, 98(3–4), 287–305.

Margaritis, D., & Psillaki, M. (2010). Capital structure, equity ownership and firm performance. Journal of Banking & Finance, 34(3), 621–632.

Paun, C., & Topan, V. (2016). Capital structure in the global shipping industry. Panoeconomicus, 63(3), 359–384.

Saunders, A., & Thomas, H. A. L. (1997). Financial institutions management. Irwin Boston.

Shen, G., & Rin, M. (n.d.). How does capital structure affect firm performance? Recent Evidence From Europe Countries. 2012. Retrieved March 12, 2013.

Xiaoyue, C., & Xiaodong, X. (2001). Equity Structure, Firm Performance and the Protection for Investers’ Interest [J]. Economic Research Journal, 11(6), 3–11.

Zeitun, R., & Tian, G. (2014). Capital structure and corporate performance: evidence from Jordan.

Environmental And European Airline Industry Analysis

History
Ryanair has grown since 1985 with only 25 staff members and a single 15-seat turbo-prop commuter plane flying between Waterford and London. By 2001 there are more than 1500 employees working for Ryanair and more than 10 million passengers are carried to 56 cities in 13 European countries. Nowadays the company is named as the most popular airline on the web by Google and also passed out British Airways to become the UK’s favourite airline in United Kingdom and throughout Europe.

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Mission and Objectives
Ryanair does not publish a formal vision or mission statement. Due to the increase of passengers, the company has re-launched as a “no frills” airline to meet the needs of travelling at the lowest price. It aims to expand its market share, and increase more routes and destinations. Therefore it can become the 1st largest airline and maintain the position in the industry.
Reasons for success
The reason of Ryanair success because it implements different marketing strategy to make the company survive in the competition and to be able to gain competitive position in the airline market. For example, it’s “no fills” strategy. In order to position itself in the marketplace, Ryanair controls own its costs to offer the lowest fares possible and remain profitable.
Chapter 2 Environmental & European Airline Industry Analysis
2.1 The PESTEL Analysis
The Political Factors
The Europe Union (EU) has expanded in the past few years, and it will be a big factor affects the direction and strategy planning for Ryanair. And some countries give preferential treatment to companies from their own country, i.e., France government has the policy to support its own national carriers which affects the expansion of Ryanair.
The Economic Factors
The unstable fuel price is affecting the business. In the face of rising fuel, hedging on future buying of fuel to stable the cost as fuel is a major cost for every airline. Also, the depreciation of US dollars affects Ryanair because customers from United States will cut their orders as US dollars are depreciating.
The Socio-cultural Factors
The increasing travelling lifestyles become a factor to affect the business of Ryanair. Nowadays people are more enjoy a travelling lifestyle, i.e., graduation trips, backpack trips etc. They love to travel all around the world. Therefore, these people become the major customers for the company.
The Technological Factors
Technology is rapidly improving means the whole industry is changing, becoming more environmentally friendly and efficient. More effective infrastructure in the airports means that some airports can charge the airlines more for landing there.
The Environmental Factors
Under the new law, the airline industry has to be more environmentally friendly. Therefore the manufacturers, designers and airline companies have to combat this together to reduce carbon dioxide emissions and less harmful to the environment so it’s order to comply with EU regulations.
The Legal Factors
The whole industry is heavily regulated due to laws and they have to constantly adapt to new changes in the law, such as not allowing liquid on board. After 911, the tighten security measure has also affected the business, the government reinforce security, it increases costs, and forcing to push the airline ticket prices up.
2.2 The Five Forces Analysis
Competitive Rivalry
Ryanair has highly competitive rivalry because the large number of competitors and especially since the airline industry market is completely saturated. There are already many “no frills” airlines, i.e., easyJet, Monarch Airlines, and Air Berlin etc. If those companies decide to compete on the same basis as Ryanair, there will be a heavy pressure on prices and margins to Ryanair.
Suppliers bargaining power
The bargaining power of suppliers is high for Ryanair. Price of aviation fuel is directly related to the cost of oil. The costs from one supplier to the other are high because all mechanics and pilots would have to be retrained. Therefore, Boeing is the main suppliers of Ryanair. For those bigger airports where Ryanair’s competitors operate, have greater bargaining power. Ryanair’s policy is tried to avoid these airports and focus on the regional airports.
Buyers Bargaining Power
The bargaining power of buyers is medium. As customers are price sensitive to choose Ryanair, they only choose for cheapness not quality. Therefore if the prices are increased or a competitor has a lower price then they will switch to another airline.
Threat of New Entrants
The threat of potential entrants is low because set up an airline is high capital investment and the risk is high. Also there are some barriers to entry, such as a lot of regulation and the pressure to reduce carbon emissions.
Threat of Substitutes
The threat of substitutes is high because of the competition with buses, trains, cars and ferries. These can all substitute the low-cost airlines like Ryanair.
2.3 The Scenario Analysis
According to the socio-cultural factors, the market is becoming more competitive because of having the emerging and developing countries, more people want flights therefore more airlines in order to accommodate this and it might decrease the profits in the market share. Furthermore, Ryanair is facing the increasing trade-union pressure in Europe. Some of the countries in Europe have formed a trade-union among each others, thus it gives the pressure for Ryanair to do business in these countries.
Chapter 3 SWOT Analysis
3.1 Strengths
Ryanair has developed a very well recognized brand name by leading low cost airline. It provides high seat density and high service performance: punctual, high rate of flight completion, low baggage loss, these give a good image of the company’s reliability. Ryanair has first mover advantage in strong bargaining power in airport deals and reduces barriers to its entry into new markets and airports. Over 94% of all seats are sold online so the cost of distribution by using internet booking is lower than phone booking, also eliminates the need of travel agents. Furthermore, the single model of Boeing aircraft saves on training, maintenance and supervisory costs.
3.2 Weaknesses
Ryanair is based on “no frills” strategy, it restricted expansion possibility. The long distances of its airport from city centers can become less attractive as markets mature. Over time customers may find this a big inconvenience. Besides, the morale of employee is low. The weakening employee relations are detrimental to success in any services industry. Other weakness of Ryanair is high turnaround would increase the fuel consumption and carbon dioxide emissions, therefore the costs will be increased.
3.3 Opportunities
As the EU enlargement, there will be a lot of new destinations opened up and complete deregulation of airline industry in all EU markets. During any financial downturns, the new fleet could be leased out to undercut other sources and increase entrepreneurial activities will be a source for economy air travel.
3.4 Threats
There are several threats on Ryanair. First, impending legislations for environment protection and customer compensations increase costs. Secondly, the increase in market share at the cost of network airlines could also increase airport service charges which are currently low. Then, traditional airlines are also cutting fares and costs which could affect the market share of Ryanair. Finally, additional fleets may require new terminals and secondary airports which mean Ryanair would need to bear higher cost.
Chapter 4 Evaluations & Recommendations
4.1 Evaluation
There is a point-of-difference between Ryanair and larger airlines such as British Airways (BA). Ryanair is the Europe’s largest low-cost carrier and provide only basic-level service but BA is a high-class airline company which provides high perceived service, and they focus on difference position and target customers so it is quite difficult for larger airlines to imitate the strategy. More than that, Ryanair’s “no frill” strategy is sustainable for identifying their target customers who are price-sensitive and wish to spend low price to fly safely.
4.2 Recommendations
A low-cost image of Ryanair that has become its brand tag will be difficult to erase when it wishes to moves up the value chain, and the upper-middle class economy travellers may seek greater value proposition, not just for low fares. I suggest Ryanair add more routes to their already extensive network and plan for expanding operations into non-European markets in the near future. Furthermore, consolidation and integration would become necessary to grow further in maturing markets which could help Ryanair to offset pressure on its costs and fares.
Reference Lists
Case Study on Ryanair, the biggest low-cost European Airline (Jan, 2008) [online]Availablefrom [Accessed 21/07/10]
Thomas M. Box (2005), RYANAIR (2005): SUCCESSFUL LOW COST LEADERSHIP, [online]
Available from
[Accessed 20/07/10]
Yahoo Knowledge (2007), Assignment for strategic analysis, [online] Available from
[Accessed 20/07/10]
 

Global Forces And The Western European Brewing Industry

The PESTEL framework categorizes environmental influences into six main types: political, economic, social technological environmental and legal. Where by the politics highlight the role of government; economic refers to macroeconomic factor such as exchange rates, and differential economic growth rates around the world; social influences include changing culture and demographics; technological influences refer to innovations as the internet; environmental stands for issues such as pollution and waste; and finally legal embraces legislative constraints or changes such as health and safety legislation or restrictions on company mergers and acquisition.
The Western European brewing industry is highly penetrated; too many companies due to which the competition is very steep which is causing consolidation through acquisition, alliances and closures within the industry. The PESTEL framework can be used to help identify the key forces that are driving the change in the market.
Political
Factors could be the active campaign of European government against drunken driving, binge drinking, and consequently the long term health and fitness problems. These campaigns have the potential to push for law changes surrounding what alcohol can be purchased in restaurants, pubs, bars and retail outlets in terms of both quantity and alcohol volume %
There is an overall decline of consumption of beer in Europe as many traditional key markets have been made increasingly aware of the social problems associated with alcohol consumption.
Restrictions on packaging such as the usage of cans in Denmark.
Economic
Economic recession in 2009 has also lead to an effect on beer sales mainly in the United Kingdom where an estimate of 50 pubs closed per week due to recession.
Beer consumption per capita varies widely between countries, for example being four times higher in Germany than in Italy. Some traditionally low consumption European markets have been showing good growth, for example with reference to table 1 comparing year 1980 to 2000 the consumption of beer has increased from 3534000 hectoliters to 6453000 hectoliters which is approximately 82.60%.
Social
Lifestyle in emerging market has changed due to the increase in the availability of disposable income, leading to an increase in beer consumption. The new trends like wines, non alcoholic beers, extra cold lagers and fruit flavored beers will adversely affect the consumption of beers.
Education and health; there is an increasing awareness of the effect of alcohol on health and fitness. Particularly in the United Kingdom there is increasing hostility to so called ‘binge drinking’ excessive alcohol consumption in pubs and clubs.
Technological
Rate of technological change; as seen in the Anheuser Busch InBev (Belgium) company that efficiency gains will come from more central coordination of purchasing, including media and IT from the optimization of its inherited network of breweries and from the sharing of best practices across sites internationally.
Innovation of new products; the case witnesses that the introduction of higher priced premium products such as non alcoholic beers, extra cold lagers or fruit flavored beers has led to increase in sales.
Environmental
Pollution; people are getting more and more aware of the environment and it is necessary that the companies do everything to prevent environmental pollution. It is important that the environmental load through the brewing process is as low as possible.
Waste and recycling; reusability and recycling is important, the brewing industry for example treats their effluents so that they can use it again for irrigation. Through this they save energy and minimize sludge disposal.
Legal
International law; when comparing Europe with the United States we have witnessed that in America it is forbidden to drink in public places in contrast to Europe where you can drink alcohol wherever you want. This could lead to new laws that forbid drinking in the public place.
Acquisition, licensing and strategic alliance have all occurred as the leading brewers battle to control the market. The global pressures for the consolidation due to over capacity within the industry, the need to contain costs and benefits of leveraging strong brands. For example in 2004, Belgian brewery Interbrew merged with Am Bev, the Brazilian brewer group to create the largest brewer in the world.

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A five forces analysis
The five forces analysis was originally developed by Michael Porter in 1990, as a way of assessing the attractiveness of different industries or sectors in terms of competitive forces. The five forces constitute an industry’s structure, although initially developed with businesses in mind the industry structure analysis with the five forces framework is of value to most of the organizations. As well as assessing the attractiveness of the brewing industry the five forces can help set an agenda for action on the various areas that they identify. The five forces are:
Threat of new entrants
Threat of substitutes
Bargaining power of buyers
Bargaining power of suppliers
Competitive rivalry
POTENTIAL ENTRANTS
COMPETITIVE RIVALRY
Threat of entry
Threat of substitutes
Bargaining power
Bargaining power
SUPPLIERS
BUYERS
SUBSTITUTES
FIG 1
THE FIVE FORCES FRAMEWORK
Threat of substitutes
The threat of substitute is high because there is an availability of wine, fruit flavored beer and also extra cold lagers. From table 1 and 2 in the case study we can witness the negative effect of the substitute on beer; taking an example of Denmark table 1 shows a decline in the beer consumption and in table 2 shows increase in the importation of exotic beers from overseas.
Threat of new entrants
Threat of entry depends on the extent and height of barriers to entry; barriers of entry are factors that need to be overcome by new entrants if they are to compete successfully. According to the case I think the threat of new entrants is very low because the industry is very much penetrated and mergers taking place, also there are global pressures for consolidation which sustain their competitive position in the industry. There are very few big brewery companies which makes them dominate the market, so for a new entrant would be hard to have that financial effort.
Bargaining power of buyers
Customers of course are essential for the survival of any business, but sometimes customers can have such high bargaining power that their suppliers are hard pressed to make any profits at all. The bargaining power is high due to the government campaign strongly against drunken driving, and binge drinking which has led to an increase in off trade (retail) than on trade (beer consumed on premises as in pubs or restaurant). The off trade is increasingly dominated by large supermarket chains such as Tesco and Carrefour which gives them the bargaining power.
Bargaining power of suppliers
Suppliers are those who supply the organization with what it needs to produce the product or service. The main purchasing costs are packaging, raw material such as barley and energy. The European packaging industry is highly concentrated, dominated by international companies. The case shows that the bargaining power of supplier in packaging is high because there only three can makers and shifting cost from one can maker to the other could be high either in terms of money or even technology.
Competitive rivalry
Competitive rivalry is organizations with similar products and services aimed at the same customer group. The competitive rivalry in the brewing industry is very high because almost all companies have the same product/ product differentiation is low, high rate of acquisitions, alliances and strategic alliance and also consolidation due to over capacity within the industry.
Conclusion
With regard to the PESTEL analysis and the Porters five forces analysis I conclude that in order to sustain the competitive position and market share in the brewing industry, one should acquire, license or strategic alliance with an existing company could be small, medium or already a large company.
Question 2
For the three breweries outlined above [or breweries of your own choice] explain:
How these trends will impact differently on these different companies; and
The relative strengths and weaknesses of each company
Anheuser-Busch InBev [Belgium]
A-B InBev is the largest brewer in the world; it achieved this position when InBev acquired the leading American brewer Anheuser Busch for 52bn. The company now has nearly 300 brands and approximate 50% share of the US market and owns 50% of Mexico’s leading brewers. The company is frank about the strategy to transform itself from the biggest brewing company to the best.
STRENGTH
WEAKNESS
Largest brewer in the world
Inherited network of breweries
Strong financial power
The merger of Belgian Interbrew and Brazilian Am Bev in 2004
The company’s strategy to transform itself from the biggest to the best by:
Building strong global brands
Increase efficiency through more central coordination of purchasing including median and IT.
Greene King [United Kingdom]
Greene King is now the largest domestic British brewer, which was established in 1799. It has expanded through a series of acquisition including Ruddles [1995], Morland [1999] and Hardys and Hansons [2006].
STRENGTH
WEAKNESS
Brew high quality beer from an efficient single site.
Medium size brewing company
Focused brand portfolio which is minimizing the complexity and cost of a multi brand strategy.
Less financial power
2000 pubs across the UK with a particular dominant position in its home region of East Anglia.
Expansion through acquisition, which led to critics calling the company greedy king.
Tsingtao [China]
Tsingtao brewery was found in 1903 by German settlers in China, after state ownership under communism Tsingtao was privatized in the early 1990s and listed on the Hong Kong stock exchange in 1993. Tsingtao has 13% market share of its home country, the company has described its ambition thus; to promote the continuous growth of the sales volume and income to step forward the target of becoming an international great company.
STRENGTH
WEAKNESS
It is the Chinese brand leader in United States
Small brewing company
It’s now sold in more than 62 countries.
Less financial power
Almost 50% of exports
Home market share is very low {13%}
A bottle of Tsingtao appeared in the 1982 science fiction film blade Ronner.
 

European Attitudes Towards Benin Bronzes

The Art of Benin
Read Reading 2.3 ‘On the British loss of antique works of art from Benin’ in AA100 Book 3, Chapter 2 and look closely at Plate 3.2.25 ‘Display for Benin bronzes at the Horniman Museum, London, 2007’ and Plate 3.2.26 ‘Display of Benin bronzes at the Horniman Museum, detail, 2007’ in the Illustration Book. Drawing on your understanding of these sources, discuss the ways in which European attitudes to the Benin bronzes have changed over time.

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To discuss the ways, in which Europeans attitudes to the Benin bronzes have changed over time, we need first to go back to the period when they first were discovered, in 1897, following the British invasion of the Benin kingdom. We will also look into how the Victorian viewed the bronzes, and their craftsmen. Since the discovery of the artefacts, the bronzes have caused lots of debates and different opinions. It has been debates who produced the bronzes, when and for whom, and as a consequence museums and anthropologists have debated how they should be displayed.
The Benin bronzes were discovered in 1897, during the time period, when the great interest in the British empire was flourishing, and stories of the imperial adventures around the world were very popular by the people in Britain. In the 1880s and 1890s, when Africa was heavily and brutally colonised by the Europeans, a new trend developed back in Europe. The deeper the colonists expanded into Africa, missionaries, civil servants, capitalists were not far behind. Letters, pictures and unusual objects were sent home to Britain, to later be shared and reproduced in books, newspaper and museums. Tales of estranged encounters and experiences with the natives, in particular primitive rituals, involving sacrifices and cannibalism, were very much on the agenda at the time.
When the Kingdom of Benin was conquered by the British in 1897, it resulted in a traumatic end of the centuries-old kingdom and their ruler, Oba, the ‘god-king’. The news travelled fast about the British invasion, and the frontline journalists arrived just a few days later after the conquest. The weekly illustrated newspaper The Illustrated London News (ILN) was particularly interested in reporting stories that created a sense of drama. Artists along with journalists were at the frontline to convey in pictures about the events within the British empire. There were lots of eyewitness accounts of the events around the conquest. However, it needs to take into consideration, that they are somewhat biased as they were written by the British for the British, which resulted in a style of reporting that portrayed scenes of savagery and brutality by the natives.
In the extract from the ILN, written in March 1897, for example, Benin is described as a ‘city of blood having its pit full of dead and dying; human sacrifices were strewn about on every hand (Reading 2.1 in Loftus and Wood, 2008, p. 79). Taking those eyewitness accounts into consideration, with the findings of the artefacts, it is not strange the bronzes were described as ‘having the most grotesque appearance’ (Reading 2.1 in Loftus and Wood, 2008, p. 79), and that the Africans were seen as ‘dark and dangerous people’ (Loftus and Wood, 2008, p.45), a stark contrast to the white ‘civilised’ Europeans.
As a result, the significance of the bronzes was somewhat tainted by the preconceptions of the primitive and uncivilised African culture that little attention was given how the bronzes had been displayed or used before they were removed from the scene as the photograph shows (Figure 2.2 in Loftus and Wood, 2008, p. 50). Afterwards, the artworks and objects were brought to Britain, to the frustration of Henry Ling Roth, anthropologist who wrote in his book; ‘and sold for a few hundred pounds a large number of castings which had cost thousands to obtain, as well as much blood of our fellow countrymen.’ (Reading 2.3 in Loftus and Wood, 2008, p. 80).
But, it did not take long for collectors, scholars and art historians in Europe and America to realise the pure craftsmanship and the value of the Benin bronzes, thus tried to obtain the finest pieces. Roth points out; ‘From what I can ascertain, the bulk of these bronzes has been secured by the Germans’ (Reading 2.3 in Loftus and Wood, 2008, p. 81) suggesting if the British government have had the proper knowledge of the study of anthropology, the Bini articles would be represented at British Museum, instead of the Royal Museum for Ethnography, in Berlin where the largest collection of 580 Benin artworks was acquired.
Art historians and scholars were at first somewhat dubious that the bronzes had been produced by the craftsmen of Benin. Instead they were looking for other explanations, even so far as whether there was a possible link between Benin and ancient lost civilisations such as the Gnostics. The British Museum had to rush and to produce research about the Benin artworks as the popular interest in the African culture corresponded with the growing debates about the history of the human race. The debate about the origin of the Benin bronzes was considerable. Questions were raised about how the aesthetic qualities shown in the bronzes could possibly been created by a society such as Benin, which was perceived backwards and primitive, with stories of human sacrifices and brutality.
When the British Museum held an exhibition of the Benin bronzes in September of 1897, the Times wrote a report, that no evidence or links, between Benin and lost ancient civilisation had been found, and the report concludes unexpectedly, with a surprise, that the magnificence bronze work was made ‘by negro craftsmanship’ (Reading 2.2 in Loftus and Wood, 2008, p. 79) and not by any ancient lost civilisations. Subsequently, this new information caused somehow confusion for the British Museum, as the Benin plaques did not fit into the chronology of events as first presumed, and therefore the choice to display the Benin bronzes in the Assyrian basement can only be seen as an alternative option, given the difficulty of placing them among already existing artefacts with established chronological narrative. The Times describes the choice of display; ‘An exhibition of a remarkable kind has been arranged in the Assyrian basement in such uncongenial surroundings’ (Reading 2.2 in Loftus and Wood, 2008, p. 79). Consequently, when the Benin bronzes entered museum collections, both anthropologists and museum curators had difficulty to explain how these uncivilised primitives could produce something equivalent, in technical mastery, like the sculptures from the Italian renaissance for example.
The way the artefacts and objects are displayed and described in museums are important for communicating the skilled knowledge about history and art to the general public. However, it is always difficult for the historian to know how the material has been interpreted by the viewer. Even tough, the facts about the new knowledge of the Benin artworks had been presented, it did little to change the racists ideas. Artworks were seen as evidence of civilisation, something Africa did not demonstrate in terms of progress, and therefore was seen as ‘backward’ by the Europeans. The ethnographic museums, were likely to put together the display of what we regard today as artworks, together with functional items; like tools and weapons and utensils, which used to represent ideas how the ‘primitives’ lived. Non-western objects were seen as scientific evidence and provided cultural knowledge, but not as art.
One of the biggest changes that the modern movement brought, was the way art was displayed. One can probably say for certain, that the change evolved naturally, as art is always receptive to outside influence. Ann-Christine Taylor says in the interview about the exhibition in Paris; ‘French museums with large ethnographic collections, were deserted by the public. Nobody knew what to do with these collections anymore.’ (Taylor, A. speaking in The Art of Benin, 2008). The problem they had on their hand, developed into the idea, to create a brand new cultural institution. Their aim was to try to capture people’s attention and interest by using visually spectacular objects.

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Their idea resulted in the exhibition, Benin, Five Centuries of Royal Art, shown in Musee de Quai Branly, in Paris. The museum made use of space and lightning, to emphasise each of the object’s artistic quality in its own rightful way. There is some anthropological information about the plaques, to not solely adopt an aesthetic route. Nevertheless, many anthropologists were angry, as the exhibition was presented as works of art, emphasising on the visual impact rather than ‘testimonies of cultural diversity’ (Taylor, A. speaking in The Art of Benin, 2008)
While the debate how to best display the Benin bronzes continues, many museums were adopting the cross-referencing, bonding the gap between art and anthropology. However, some museums, such as The Pitt River Museum in oxford for example, has resisted and deliberately kept the traditional way of displaying objects with explanatory labels in glass cases. (Figure 2.9 in Loftus and Wood, 2008, p. 72).
The Horniman Museum on the other hand, decided to take a step further and changed their display of its Benin bronzes, and incorporated both anthropological and aesthetic aspects. (Illustration Book, Plate 3.2.25 and Plate 3.2.26) Most significantly, it does not stop at the moment of aesthetic contemplation, it continues deeper into the entire culture of Benin, in the past and present. Making use of a variety of texts and photographs with new information based on contemporary research by Joseph Eboreime, a Nigerian historian. (Loftus and Wood, 2008, p. 75)
The controversial views of the Benin bronzes have undergone a natural evolution since the discovery in 1897. But it is not only the bronzes, it is the whole transformation of western views towards Africa that has taken place. The Benin bronzes were mystifying for the Victorian anthropologists, and not easy to fit into a racist representation of ‘primitive’ ways of life. Later throughout the twentieth century, the works of art started to become almost solely of aesthetic admiration rather than as a kind of historical evidence. There are signs, like those, that can be seen in The Horniman Museum, that the world of art is in for a new movement. Primitive art has become world culture, and the Benin bronzes stands as evidence of a shared human history.
(word count 1633)
Bibliography
AA100 Illustration Book: Plates for Books 3 and 4
Loftus, D. and Wood, P. (2008) ‘The Art of Benin: Changing Relations Between Europe and Africa II, AA100 Book 3, Chapter 2.
‘The Art of Benin’ (2008) AA100 DVD ROM

European Union Countries

Introduction
European Union itself reflects globalization by changing laws of European countries, and also European Union is very important in world’s economy strategies. What does globalization mean, indeed? By definition, globalization is a process of change in some kind of area such as technology, trade market of war, which affects the whole world. Sometimes globalization can bring a great gift for the people of the world, sometimes not. The main idea of the European Union means to bring the peace to the whole world by respecting human rights and by uniting people together. As I said above the globalization has to affect at least few countries or whole world, other wise it is not globalization. The point is that European Union consists of twenty seven sovereign countries. And decision which comes from the European Union affects all this twenty seven countries. Also European Union has big influence in world trade market, because of the currency of the European Union is in the second place in trade market. Also, economy of the European Union stays on the second place by the world’s rates. In addition, the European Union has voice in United Nations organization, and it can change most of the decisions either in good way or bad.

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The history of the European community is incredible, and it had experienced almost everything. European community had experienced wars between neighbor countries, revolutions, colonialism and many other things. However, now European community is one of the strongest economical powers in the world. Most of the time the European Union was an international organization, but now it has big influence in military services, also it functions in monetary system of the European countries, and it has big importance in economy. The European Union is a part of the government for each European country. Also, the monetary system of the European Union is one of the significant systems in Eurasia, which provides economic stability in European Countries.
European Union
All the great and powerful unions were not made at once. Unions were made step by step, and improving their visible and weak factors. In our days one of the powerful and influenced unions is European. “Europe will not be made all at once, or according to a single, general plan. It will be built through concrete achievements, which first create a factor of solidarity”. (Robert Schuman). With this words Schuman declaration accurately predicted the way in which the Community has become the Union today.
When the European countries created the European Union, the first target of the union was to gain a peace between European countries. In 1950 the European organizations such as European Coal and Steel Community started to unite countries, because this organizations wanted to keep the peace between European countries, and also it was big benefit to European countries in economical and political spheres. Belgium, France, Germany, Italy, Luxemburg and the Netherlands were the countries which formed first European Union. The speech given by French Foreign Minister Robert Schuman inspired European countries to unite. (The history of EU).
One of the successes which European Union gained was stopping of custom charges between European countries. Also, the member countries of the European Union made contract between each others to control production of food. This decision was made to improve agricultural structure, and the European Union wanted to produce enough food for the member countries. (The ‘Swinging Sixties’ – a period of economic growth). “1962 The Council of Europe adopts the first directive. It establishes the EEC global foodstuff regulation by defining which colorants can be added to food.” (BBC News, 5 December, 2000). In 1967 the European Union had united the main ruling institutions, such as European Parliament, Commission and Court. (History of the European Union). Which meant that European institutions work as one system, and each member country of the European Union had a person who presented the county’s interests. In 1992 the Treaty of Maastricht offered to have one single army, which in the situation of the threat they can protect each others interests as one power (History of the European Union).
The European Union consists of twenty seven sovereign countries. Member countries of the European Union: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxemburg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom (Member State of the European Union). As the facts shows there are more countries which want to join European Union, and one of the main candidate is Turkey. The main achievement of these counties is democracy. Democracy means to protect human values, and it means freedom. These are the main values which European countries store.
For over half a century, the European Union has: delivered half a century of stability, peace and prosperity within its member countries. European Union raised its citizen’s standards of living to unprecedented levels, and even strengthened Europe’s voice in the world. The European Union has given its member countries citizens many different benefits in different aspects of life. It has made life easier and more convenient in many ways. It has even promoted peace and a spirit of brotherhood between old rival nations. Another benefit of the European Union is a single currency. Joining European Union has many benefits, such as political, economical, social, and environmental. Republic of Poland, for example, gained all these benefits joining the European Union. The political benefit of Republic of Poland is to participate in acceptance of the laws in European institutions. Also, joining to the European Union provides Polish people to travel without visa in Europe, and Polish people can find the jobs in any part of the European Union. In addition, Republic of Poland can count on European Army’s support in a situation of war conflict. The economical benefits are open market, changes in agriculture, and Poland can stabilize their inflation. Open market will provide Poland to sell their products in every European country, which will help to increase competition between companies, and it will decrease the prices of goods. (Joining European Union, List of Benefits)
The social benefit which Poland gained was European standards of life. Also the Polish students who study in other parts of European Union can get scholarship, and they can provide their knowledge about Poland to student abroad. Another important benefit is environmental benefit which Republic of Poland gained joining European Union. The Poland should follow the environmental aspects of European Union, which means they will improve their environmental problems. (Joining European Union, List of Benefits).
The European Union has given its citizens greater freedom of movement. Traveling within the European Union nations is now very convenient. In most of the European Union you can travel without carrying passport and without being stopped for the checks at the borders. A citizen of the European Union can travel, study and work wherever she or he chooses to in any of the European Union countries.
Departments and policies of European Union
The European Union has a very complex system. It has different bodies carrying different important jobs that make the system work properly. Each job has its significance. While all the member countries of the European Union work as one, and its system function well as one body, they become very successful as they take on many difficult tasks of accomplishing a united, integrated Europe.
The countries that make up European Union are all committed to the same fundamental values, such as peace and democracy. And in this bases all ruling institutions has been made. The main institutions of the European Union: the European Parliament, the Council of the European Union, the European Commission, the Court of Justice and the European Court of Auditors. (EU institutions and other bodies).
The European Parliament is one of the main institutions of the European Union. The main job of the European Parliament is to introduce the new legislations. Also European Parliament gives opinions on new legislations, and it makes decisions about new legislations together with the Council of Ministers. The final decision of the new legislation has to be taken by the European parliament and the Council of Ministers. In addition, the name of the European Parliament is “watch dog” of the European Union. They named European Parliament as “watch dog” because it monitors all operations in European Union. Also European Parliament monitors budget of the European Union, because the money of the EU budget has to be distributed lawfully. The locations of the European Parliament are Brussels, Strasbourg and Luxemburg. The Members of the European Parliament are elected by the people whose country they represent. Also, the European Parliament is elected every five years by the citizens of the European countries. (The European Parliament)
The Council of the European Union is a main institution which takes final decisions passing new legislation. The Council of the European Union consists of twenty seven ministers. Every minister represents the country in which he or she has been selected to represent country. When the Council of the European Union is going to accept new legislation which can affect sphere of transportation, then the Minister of Transport will attend, and so on. (The Council of the European Union)
The European Commission’s main job is to prepare new legislation and laws before the legislation will be accepted in the European Parliament. The European Commission also does a job as the peacemaker. When the member countries of the European Union argue between themselves the European Commission will solve their problems. Every member of the European Commission has to put the interests of the European Union first, rather than their own country. When some kind of problem or situation happens in European Union the members of the European Commission have to solve these problems as uniform system. (The European Commission)
The European Court of Justice’s location is in Luxemburg. The European Court of Justice consists of one judge from every member country of the European Union. Most of time thirteen judges take part in court to solve the problem. The main job of the European Court of Justice is to monitor the laws. Every citizen of the European Union has to obey the Court of Justice and laws of the European Union. (The Court of Justice)
The European Court of Auditors work is to monitor the budget of the European Union. This organization makes sure that documentations of the taxpayers are legal and right. In some cases if the documentations are wrong the European Court of Auditors have right to investigate any types of economical operations. In additions, the European Court of Auditors doesn’t depend on other institutions; however, it keeps touch with other institutions. (The European Court of Auditors)
European Union Monetary
When the European Union created monetary system for whole European countries, the first target of the monetary system was to prevent economic damage, and stabilize economic situation in a moment of need. When the European Union created European Monetary Institute the first target of it was to create uniform currency for European member countries. (European Monetary System). The main idea of the European monetary system is to create more jobs for citizens of the European community, and to make European economy function better.
On 1st January, 1999 the European Union has let out uniform currency, named Euro. The number of the first member countries of European Union which made Euro their national currency was eleven. On the other hand, member countries such as United Kingdom, Denmark and Sweden did not adopted Euro as their national currency, they decided to keep their own national currencies. After the adaptation of the Euro, it did not show the success compared to other currencies. In addition, at the beginning the Euro felt down to 30% in world trade market. (BBC News, 5 December, 2000). “The Euro symbol – @ -, developed by the European Commission, was inspired by the Greek letter epsilon and also denotes the first letter of the word “Europe”. The two parallel lines refer to the stability inside the Euro area.” (The Euro)
Every system has its weaknesses and benefits. According to the economists of the United States and Europe the last analyses shows that European Monetary Union has advantages. The first benefit is that European countries do not need costs of current exchange. The second benefit is exclusion of the currency’s destabilization between member countries of the European Union. The third benefit is the fast growth of economy of European Union countries. The fourth benefit is the solvency of the more complicated monetary problems. (“Benefits and Costs of European Economic and Monetary Union”, Gerhard Fink; Dominic Salvatore)
With the advantages every monetary system also has problems, such as inflation. Inflation is a rise in the general level of prices overtime. It may also refer to rise in the prices of a specific set goods or services. In either case, it is measured as the percentage rate of change of a price index. According to the “EuroStat” statistics the inflation has made 2.3% in European Union in August. Compared to 2006 the inflation norm was 2.2% in 2005. In 2006 the norm of inflation rose 0.1 percent every month (Gian Luigi Mazzi and Rosa Ruggeri Cannata, August 2006). In a low inflationary spheres have got countries such as Finland, Sweden, and Poland. The inflation average in these countries was 1.5 percent. (2006). In a high inflationary sphere have got countries such as Latvia, Estonia, Slovakia and Spain. The inflation average in these countries was 4.9 percent. (2006)
The European Union always wanted to avoid the misunderstandings between member countries, and it always wanted to advance the unity of European community. Also, the main raisin of the European Union is the European Monetary System. On the other hand, today’s trade market showed to European community that it is difficult to maintain current single currency. In addition, the main problem of the single currency for the European community is instability of Euro. When the leading companies of the Europe invest money abroad it can change the income of the companies, because when the currency is unstable it will change the amount of the money when they expressed to Euro. (Richard W. Stevenson, July 31, 1993)
Conclusion
In conclusion, the European Union is one of the powerful organizations in the whole world. It has influence in military, world’s economy and so on. Before the unifying Europe had gone through the difficult times, such as war, economic disasters, and unemployment. European countries gain many benefits by unifying. European countries realized that they can not succeed along, the unity of these countries was the great step which they gained. The economy of the member countries of the European Union increased to many times after the unity. Still remains the question will the European Union stay the same or will it change the directions of unity. People of the Europe has big pessimism about European Union, people say unemployment is still stays unstable. However, Europe would never gain these kind of success if they were not united.
Can you imagine what European countries could gain if they had been united in ancient times. They could have avoided the wars between European countries. However, European countries are united now, and this is a huge success in a history of Europe. “A day will come when all the nations of this continent, without loosing their distinct qualities or their glorious individuality, will fuse together in a higher unity and form the European brotherhood. A day will come when there will be no other battlefields than those of the mind – open marketplaces for ideas. A day will come when bullets and bombs will be replaced by votes” (Victor Hugo, 1849)
 

Politics of the European Union: Literature Review

Nugent, N. (2003) The Government and Politics of the European Union, Palgrave.
Nugent offers an analysis of the European Union in a historical context. He argues that many of the problems that sceptics tend to rely upon as criticism for EU membership were, in themselves, already present before the integration of the EU actually occurred. Many critics assume that the EU has significantly eroded and displaced the sovereignty of states. Nugent, however, posits that this occurred much earlier, and that integration into the EU cannot solely constitute the basis for erosion of sovereignty in nation-states. He suggests, in a historical analysis, that “the member states of the EU were seeing their sovereignties being steadily eroded long before the EC / EU was established” (1), and the rest of the book is informed by this view. He argues that the EU plays only a minor role in eroding state sovereignty, as broader economic factors such as movements in financial markets, multinational corporations and the general side-effects of dominance by the U.S. tend toward this model. In fact, Nugent suggests that the EU may in fact help to preserve autonomy in some ways because it provides a voice, albeit one marred by bureaucracy and corruption, that can compete economically with America and the emergent China.

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Nugent looks at the question of the EU in a historical way. He provides a historical analysis of state relations prior to the instigation of the EU. In this analysis, he insinuates that, while prior to the war states were notably more different in economic, cultural and in political ways, the period after the war signalled a significant shift in the ways the European states tended to interact. The integration of the EU was therefore defined by these factors, and present criticisms about the overwhelming bureaucracies that operate in Brussels merely represent something that is necessary.
Bache, I & George S (2006) The Politics of the European Union, 2nd Ed., Oxford University Press
The Politics of the European Union provides a detailed and comprehensive overview of the operative and dynamic processes that determine how the EU functions from day to day. While some historical analysis is supplied, the focus is also focussed upon certain key issues in government. The book is split into five discrete sections. The first section looks at the theories of European integration, and essentially provides the background as to why European integration should (or shouldn’t) happen, dependent upon a number of different views. It also looks at how the European Union should be organised based upon these theories, and looks at ways in which the European Union should go in the future if it is to be adherent to these particular theories. Part two looks at the history of the European Union, and upon how certain developments in European politics led to the integration of the EU. Part three provides an atomised look at the various member states of the EU, with a particular focus upon Germany, France and Britain. Although other member states are mentioned in a brief chapter, the absence of analyses of other significant countries in the EU, and more detailed analysis of Eastern European, Spanish and Scandanavian member states gives the book a certain biases toward the previous three countries. Part four provides an interesting analysis of how the various institutions of the European Union operate, with a focus upon the nuts and bolts of the day to day functioning of policy change and implementation, rather than more detailed historical analysis. Finally, Part 5 looks at how the EU has implemented certain policies and why, ranging from its policies on agriculture, on the single market, on the monetary union and on external relations. Overall, the book provides a good textbook overview of the basic functioning, purpose, and theory behind the EU.
Bomberg, E & Stubb A. (2003), The European Union: How Does it Work?, Oxford University Press
Again, The European Union: How Does it Work? provides an interesting and detailed analysis of the various ways in which the European Union has come to be what it is, and also focuses upon the institutional, theoretical and historical factors that have determined how and why it operates. The book is organised in a similar way to the previous book, insofar as it focuses first upon the historical and theoretical basis for European Integration, and then looks in more detail at the various policies that have been implemented, and the member states that act as players in the EU. Of particular importance is the analysis of how member states operate within the complex framework of the EU. Bomberg and Stubb concentrate upon the complexities of the EU, and try to rationalise the often overwhelmingly complicated issues at stake, using simple logical statements. They argue that, far from being an institution racked with bureaucracy which serves neither the interests of the EU nor the interests of individual states, that the mechanisms and institutions in place create a series of checks and balances that allow the opinion of every participant state and political parties that operate within these states to function more appropriately. They argue that “What emerge as national interests from domestic systems of preference formation remain central to how the EU works”, and also suggest that what is implemented officially is also affected by considerable and sophisticated “horizontal networking” behind the scenes. This tendency to look at the actual, rather than the theoretical or institutional realities of the EU is a strength of this book, however, this intrinsically makes the project of the book more ambiguous and difficult to pinpoint. Rather than providing a coherent overview of the surfaces of the European Union, the book delves into the complexities and the awkward issues that inform and orient decisions surrounding policy, power and practice.
Describe how Politics comes into the Process of European integration
The process of European integration is a very complex one, and if a nation state chooses to integrate itself into the complex political arena of the European Union, one has to consider the effects that this will have upon the given state internally, and externally. In essence, the integration of European states means that a given state will take its interests from the domestic front and into the European Union. As Bomberg and Stubb (2003, p. 70) comment, “once a state joins the Union, politics may begin at home but no longer end there. National politics, polities, and policies become ‘Europeanized’.” As such, the externalisation of internal quandaries that, previously were a matter for the sovereign state, now have to be considered as an integral, institutional and political whole. While Nugent argues in The Government and Politics of the European Union that sovereignty was being eroded anyway before the processes of European integration took place, the political processes that operated within nation states to deal with problems concerned with globalisation were not. A political climate emerges in the process of European integration as a result of conflicting or combined interests that interweave. Such issues as the integration into the single market, the single European currency, and agricultural policy levelled to prevent the overt exploitation of free markets and the production of substandard goods.
The question of governance is also a complex political one regarding the EU, and the question of who governs shines light upon how politics tends to function and become a part of the process of European integration. The policy process of the EU is extraordinary in global political affairs, because it is not governed by a central body, moreover, it is governed by a series of nation states Stubb and Bomberg (2003, p. 148) comment that “No state or other international organization makes policies through such a complex, transnational process in which politicians, officials, and interested groups from across a continent interact to shape – sometimes to prevent – shared policy outcomes.” As such, politics becomes intertwined into European integration because of the melange of interests that operate under the umbrella of state, governmental, or political interest. Because no state, political or official group is in overall control of the policy making process, politics is essentially a part of European integration because it is via the institutions and the backroom political wrangling that the European Union makes its overall policy and political decisions.
The political process in Europe enters the system through a variety of means. While supranational organisations tend to confirm political issues, it is often left to the member states and elected representatives of these states to conduct policy based upon how they would like political developments to proceed. The EU is an example of “networked governance”, and the ways in which the member states, individuals, pressure groups and other officials interact in the EU act to determine overall political policy. While a coherent political policy based upon the interests of these states tends to be cumbersome and bureaucratic, this is how politics tends to become instigated into the process of European integration. By becoming a member of the European Union, states have to recognise that their own sovereignty has been reduced by a political process that operates within a more European context.
What are the challenges facing European integration today?
The EU faces a number of significant challenges as it changes to adapt to new economic, political and supranational factors that determine and legitimate its efficacy as a political institution. Firstly, the expansion of the EU poses significant challenges for both existent member states and those that are new to the European Union. For instance, the integration of Eastern European member states such as Poland and the Czech Republic have proven to be controversial issues, because both these countries have a significantly different economy than those that are currently established. The challenges that face the EU is to consider the political climate of these emergent countries while making sure that the interests of those states currently in the European Union are considered. The policy processes and changes that take place in the European context must juggle these interests, while remaining firm to previous trade policies. As such, in the words of Bomberg and Stubb (p. 71), expansion and continued expansion into Eastern Europe and possibly Turkey and Cyprus, facilitates the importance of tolerance within the European Unions institutional framework: “managing difference is thus a key challenge to the Union.”
Secondly, the economic challenges facing the European Union on a global basis will undoubtedly prove to be extremely important, especially following the successful implementation of the Euro into economic affairs. The EU is a significant global player on the economic field, and trade with the emergent countries of China and India as well as with established superpowers such as America and Japan have to be considered very carefully if successful relations are to be established. The presence of global aid programmes and other benevolent factors such as an easily mobilised team of peacekeepers is also an issue that is linked indirectly to processes of globalisation. The recent crisis in the Balkans was marred by the inability for the EU to make a coherent decision on troop assignment to the region. As such, issues of defence and aid may prove to be one of the central challenges facing the EU in the future.
The relationship between the EU and the states outside of the EU may prove essential to determining a process whereby aid or trade can be granted to developing countries in a system of integrated change. The EU’s response to global crises has been far from efficient in recent years, and changes in the dynamic of the EU, which includes its expansion into regions of Eastern and Central Europe have further exacerbated tensions on this issue. While the EU have always been relatively generous in the giving of aid to other countries, the general trend posited in the WTO report is that the giving of aid is simply not enough to resolve problems on a global scale. Instead, the EU have to implement foreign trade more effectively into its policy, and, because of varying interests from its different participants, this may prove to be a stumbling block for more successful European integration. Lax spending programmes and bureaucracy concerning the giving of foreign aid may also hamper developments in the global context: “the Commission had far to go before it escaped charges that it was the ‘worst development agency in the world’ (Bomberg & Stubb 2003, p. 204).
Does spill-over imply that there are no limits to the number of policies that can be dealt with at the European level?
The concept of “spill-over” is defined as a process whereby the integration in one sphere of policy begets a residual impact in other spheres of policy, and creates a more generalised integrated series of policies in all areas of the European Union. For instance, the integration of agricultural policy in Europe tends to affect the internal policies of that sovereign state in ways that harmonise it with other nation states. Naturally, this facilitates the integration process because it allows for discrepancies and disagreements between various regions, officials and member states to be ironed out more generally. As such, it can be argued that this concept of ‘spill-over’ allows for significantly greater integration to occur, and the gradual homogenization of European member states may provide a forum by which all member states operate on a very similar basis. Therefore, by this method, all policy decisions can be discussed in the European Union.
However, this system of spill-over is not without its flaws or its criticisms. For instance, political processes in some powerful member states that feel directly affected or marginalised by processes in the European government may not succumb to the integrative factors of spill-over, and regional, geographical and political factors still require consideration. While domestic policy is further eroded by the concept of spill-over, some tenets of policy that impede upon concepts of sovereignty, or perhaps indirectly attack or influence one particular region or nation-state operating within the framework of the European Union may disallow an invasive series of policy making decisions to be integrated into the European agenda. While a great many issues have been affected by the concept of spill-over, and the general process of unification that occurs as a result of spill-over into other policies on a European level tend toward a process of unification, some policies still remain too sensitive or regionalised to implement into European political processes.
Bibliography
Bache, I. & George, S. (2006), The Politics of the European Union, 2nd ed., Oxford University Press.
Bomberg E. & Stubb A., ed. (2005), The European Union: How does it work?, Oxford University Press.
Nugent, N. (2003), The Government and Politics of the European Union, Pelgrave.
 

Should Turkey be allowed to join the European Union?

Executive
Summary
The membership of Turkey is one of the most controversial external relations issues of the European Union (EU).  Turkey is an important trading partner for the EU and provides many economic advantages to the union.  Additionally, it has a strategic location, allowing it to play an important regional and foreign policy role.  However, there are issues related to Turkey’s accession, such as large migration flows to more economically developed EU-15 countries as well as a substandard human rights situation within the country (Gerhards and Hans, 2011: 751).  Overall, this policy note recommends that Turkey should be allowed to join the EU on the basis of EU economic development and foreign policy advantages.  Despite the issues related to accession of Turkey into the EU, this paper argues that EU-membership will work as a catalyst for Turkish institutional reforms.

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Introduction
Turkish entry into the European Union is a
highly contentious issue.  Turkey has
progressed on the way to EU membership in spite of persistent and increasing
divergence of membership preferences (Schimmelfennig, 2009: 413-415).  Turkey, with its
large, dynamic economy, is an important trading partner for the EU, it also has
a strategic location, including on energy security, and plays an important
regional role. Equally, the EU remains an important anchor for Turkey’s
economic and political reform (Progress Report, 2013: 1). 
This paper will first
provide an analysis and outline of the different factors relating to the
accession of Turkey into the EU.  It will
explore economic factors, cultural factors and political factors.  Finally, this paper will recommend that
Turkey should be allowed to join the EU due to its positive affect on EU
economic development, as well as the fact that Turkey has made good progress in
meeting a lot of the Accession criteria set out in the Copenhagen agreement.  This paper will also make recommendations on what
Turkey must do in order to fully meet EU standards for accession.
Context
Turkey first became affiliated with the EU in
1963 after signing an associate membership agreement with the then European Community.  The decisions to give
Turkey a membership perspective and to open accession negotiations have been
highly controversial among member state governments and have tended to produce
long and conflictive negotiations as well as uneasy compromises
(Schimmelfennig, 2009: 414).  A major breakthrough came at the
Helsinki meeting of the European Council in 1999, when Turkey attained status
as a candidate for membership. It now has a so-called Accession Partnership
with the EU, which means that the EU is working
together with Turkey to enable it to adopt the acquis communautaire, which
is the legal framework of the EU (Togan, 2004: 1013).
The Copenhagen Criteria cover a
state’s ability to take on the acquis communautaire, the economic
criteria for a functional market economy, and above all, ‘stability of
institutions guaranteeing democracy, the rule of law, human rights and respect
for and protection of minorities’ (Schimmelfennig, 2009: 420).  Overall, Turkey has made
significant efforts to fulfil requested accession criteria through
socio-economic and cultural convergence with EU Member States.
Analysis
Economic Factors
Many studies have shown that economic factors
play a significant role in shaping attitudes towards different aspects of
European integration. Turkey’s
progress on meeting the requirements of the Copenhagen Criteria is confirmed by
socioeconomic indicators that describe the level of modernization of the
country (Alber, 2007).  Turkey is the 17th
largest economy globally, and the most current EU progress report states that
Turkey has sufficient macroeconomic stability and the medium-term capability
for integration into the single European market (Gerhards and Hans, 2011: 744).  Turkey is a large and fast expanding market,
it is the largest market in the Middle East, Balkans and Caucasus. According to
the World Bank, Turkish GDP is as large as 80 per cent of Russian GDP (Togan,
2004: 1043). 
Turkey, located at the crossroads between
Europe, Eurasia and the Middle East, has the potential to act as a major link
between these markets.  With
harmonization of commercial legislation, EU companies will be able to use
Turkey as a joint investment and export base for the Middle East and Eurasia.  Moreover, Istanbul is emerging as
transnational corporations’ headquarters for operations in the Caucasus and
Central Asia. The EU will derive potential gains from increased trade in the
region (Togan, 2004: 1043-1044).
Overall, the Progress Report on Turkey’s EU
Accession (2013: 4) states that Turkey is a functioning market economy, and
should therefore be able to cope with competitive pressure and market forces
within the Union in the medium term. 
Additionally, with Turkish accession current members will derive welfare
gains from standard comparative advantage sources and also from growth effects
of integration.
This report argues that accession of Turkey
to the EU will bring economic benefits for Turkey as well as to the EU
itself.  The largest economic gains can
be obtained through reforms of national institutions in Turkey that improve the
functioning of the public sector and provide transparency to investors and
traders (Lejour and Mooij, 2005: 117).  Integration will remove the
distortions in the price system, boosting the allocative efficiency in the
economy, which in turn will make the country a better place to invest.  Furthermore, with accession Turkey will be
eligible for EU structural funds. The increase in infrastructural investments will
contribute to economic growth in Turkey. In addition, Turkey will reap benefits
from monetary integration, and finally, Turkey will benefit from migration of
Turkish labour to the EU (Togan, 2004: 1042).
The key theoretical constructs investigated
to explain opposition to Turkey’s EU membership are related to rational
economic self-interest and group-level interests and concerns (McClaren, 2007:
251).  Turkey is relatively poor and
agricultural, it can therefore be argued that Turkish membership is likely to
increase the divergence of living standards in the EU, create a high potential
for labour migration and instigate demand for high net payments from the structural
and agricultural funds.  Welfare gains
that will be derived by Turkey from integration will have a price. The price
will be the adjustment costs associated with the attainment of macroeconomic
stability, adoption of CAP, liberalization of services and network industries,
and complying with EU environmental directives (Togan, 2004: 1042).
Migration/Cultural Factors
In addition to direct fiscal implications,
EU member states are subject to another possible economic consequence of
Turkish accession, immigration. 
Hostility to Turkey’s candidacy can be explained by the threatening
context of Turkish migration (McClaren, 2007: 251).  It can be argued that migration flows could
have negative economic consequences, such as increased competition in
particular segments of the labour market. 
In particular, countries in the more economically developed EU-15 are
likely to be affected to the highest degree (Gerhards and Hans, 2011: 751),
moreover it will likely take decades before Turkey attains an income level
comparable to these countries.  This will
continue to be a strong incentive for migration from Turkey to other EU
countries, EU-15 countries fear that the immigrants will ‘depress wages, boost unemployment
and cause social friction and political upheavals’ (Togan, 2004: 1031-1032).
However, one assumption in the
analysis of Turkish migration is that all labour is homogenous.  In reality labour is highly differentiated
according to many factors, which results in the effects of migration for income
distribution and social welfare becoming less clear-cut.  The empirical research on the economic effects
of immigration indicates fairly small and on the whole positive effects.  ‘Employment opportunities are not affected
much, the wage of low skilled labour is depressed somewhat but that of skilled
labour is raised, and the net present value of public transfers is positive’ (Togan,
2004: 1043).  Therefore, this paper
argues that with appropriate measures, immigration is not necessarily a
negative consequence of Turkey’s accession into the EU.
It is not just the threat to resources
presented by Turks that affects feelings about the Turkish candidacy, threats
to culture and way of life are likely to be particularly strong in the Turkish
case (Ivarsflaten, 2005).  In addition to
the possible problem of being perceived as traditional or backward, Turkey
faces the potential difficulty of being predominantly Muslim (McClaren, 2007:
258).  The recent drawbacks in the
negotiations of the EU with Croatia, Serbia, and Turkey have been caused by
issues of national identity related to legacies of ethnic conflict that are
likely to create high political costs to the target governments. As a result,
whereas consistency has remained high, effectiveness is reduced (Schimmelfennig,
2004: 918). 
Nevertheless, sociostructural
differences between Turkey and the EU Member States have been shrinking.  The percentage of the Turkish population
working in agriculture has sunk, education levels have risen and the overall
standard of living has increased (Gerhards and Hans, 2011: 744).
The commission critiques Turkey
on its human rights situation, on its limited freedom of speech and on its lack
of gender equality.  However, according
to the Freedom House Index, Turkey has improved consistently in its level of
democratization, political freedom and civil liberties over recent years
(Gerhards and Hans, 2011: 744).  Overall,
these improvements represent measurable developments regarding Turkey’s convergence
with the EU and its fulfilment of EU accession criteria.  Additionally, Freedom in the Press has
improved, however, it still has a long way to go in order to reach the levels
of freedom held by EU-15 countries.  Key
provisions of the Turkish legal framework and their interpretation by members
of the judiciary continue to hamper freedom of expression, including freedom of
the media (Progress Report, 2013: 2).
Foreign Policy
The
commission emphasized Turkey’s
increasingly important foreign policy significance for Europe, for example its
intermediary role between Syria and Israel, its diplomatic approaches with
Armenia, and above all, its role in the military conflict between Russia and
Georgia (Schmid, 2008).  Turkey has
continued to play an important role in its wider neighbourhood, for example
expanding its activities as a non-traditional donor in the Horn of Africa,
supporting democratic transition in North Africa, and enhancing cooperation
with and between Afghanistan and Pakistan. It has played a particularly
important role on Syria, supporting the development of a more unified
opposition and providing vital humanitarian assistance to large numbers of
Syrians fleeing their country (Progress Report, 2013: 3).  This suggests Turkey is meeting criteria of
the Copenhagen Agreement such as the rule of law and the respect for and
protection of minorities. 
According to the Commission (2008b), expansion in general
and Turkish membership specifically would strengthen the EU’s foreign policy
weight in the world.  Furthermore,
Turkey’s geographic location makes it well-suited as a transit country for oil
and natural gas and it could therefore play a strategic role in securing the
EU’s energy supply (Gerhards
and Hans, 2011: 744).  Turkish membership could help to secure
stability and security in the Balkans and Caucasus. The EU could then increase
its energy security and also decrease its defence expenditures (Togan, 2004:
1043-1044).  This paper argues that this
is indication that Turkey should be allowed to join the EU.
Recommendations
In order to maintain its impact on political reform under
the conditions of political unrest, the EU will need to reassure applicant
governments of the credibility of its commitment to enlargement and move
negotiations with Turkey closer to the endgame. 
Creating uncertainty about admission even after full compliance destroys
this credibility and will reduce the effectiveness of conditionality even further
(schimmelfennig, 2008: 933).  Overall,
this policy note recommends that Turkey should be allowed to join the EU on the
basis of EU economic development and foreign policy advantages provided it
agrees to make continued efforts in the realm of human rights. 
The issues with regards to human rights in Turkey underline
the importance for the EU to enhance its engagement with Turkey.  This paper recommends that the overall legal
framework and practice on the intervention of law enforcement officers should
be brought in line with European standards to guarantee under all circumstances
the right to freedom of assembly. 
Additionally, an ECHR-compatible legal framework has yet to be
established on matters of faith and conscientious objection.  Substantial efforts are needed to effectively
guarantee the rights of women, children and LGBT individuals (Progress Report,
2013: 2).  These shortcomings need to be
addressed in order for Turkey to be a successful member of the EU.
In regards to immigration associated with the accession of
Turkey to the EU, this paper recommends that government leaders will need to
adopt measures to allay fears among EU citizens, perhaps including provision
for a waiting period on the free movement of labour provision (McClaren, 2007:
274, Gerhards and Hans, 2011: 763).
In conclusion, this report argues that
EU-membership will work as a catalyst for Turkish institutional reforms.  Turkey has made progress towards meeting a
good amount of the accession criteria, and by becoming a member of the EU,
Turkey has to conform to all EU legislation and enforcement by the European
Court of Justice.  Furthemore, via the
method of open coordination, Turkey will regularly be assessed by the European
Commission and other member countries on its economic policies.  EU membership can thus trigger institutional
reform in Turkey and reduce widespread corruption (Lejour and de Mooij, 2005:
101). 
Bibliography
Alber, J. (2007)
‘Where Turkey Stands in Europa and why it Should Be Admitted to the EU’.
Discussion Paper SP I 2007-205, Social Science Research Center.
https://core.ac.uk/download/pdf/6628025.pdf Accessed 11 Nov 2016.
Commission of the
European Communities (2008b) ‘Enlargement strategy and main challenges
2008–2009. Communication from the Commission to the Council and the European
Parliament’. COM. Pp.
1-66.
http://ec.europa.eu/enlargement/pdf/press_corner/keydocuments/reports_nov_2008/strategy_paper_incl_country_conclu_en.pdf Accessed 7 Nov 2016.
European Commission working document (2013) – ‘Turkey 2013 Progress
Report’.
http://vle.exeter.ac.uk/pluginfile.php/724824/mod_resource/content/1/European%20Commission%20working%20document%20-%20progress%20on%20Turkeys%20EU%20accession%202013.pdf Accessed 2 Nov 2016.
Gerhards, J. and Hans, S. (2011) ‘Why not Turkey? Attitudes towards
Turkish Membership in the EU among Citizens in 27 European Countries.’ Journal of Common Market Studies. Vol.
49 (4), pp. 741–766.
http://vle.exeter.ac.uk/pluginfile.php/724823/mod_resource/content/1/j.14685965.2010.02155.x.pdf  Accessed 5 Nov 2016.
Ivarsflaten, E.
(2005) ‘Threatened by Diversity: Why Restrictive Asylum
and Immigration
Policies Appeal to Western Europeans’. Journal of Elections,
Public Opinion
and Parties. Vol.15(1), pp. 21–45.
http://www.tandfonline.com/doi/abs/10.1080/13689880500064577 Accessed 8 Nov 2016.
Lejour, A. M. and
de Mooij, R. A. (2005) ‘Turkish Delight: Does Turkey’s Accession to the EU
Bring Economic Benefits?’ Kyklos. Vol.
58 (1), pp. 87-120.
http://0-onlinelibrary.wiley.com.lib.exeter.ac.uk/doi/10.1111/j.0023-5962.2005.00279.x/epdf Accessed 6 Nov 2016.
McClaren, L.M.
(2007) ‘Explaining opposition to Turkish membership of the EU.’ European Union Politics. Vol. 8 (2), pp.
251-278.
http://vle.exeter.ac.uk/pluginfile.php/724821/mod_resource/content/1/European%20Union%20Politics-2007-McLaren-251-78.pdf Accessed 1 Nov 2016.
Schimmelfennig, F. (2008) ‘EU political accession conditionality after
the 2004 enlargement: consistency and effectiveness’. Journal of European Public Policy. Vol. 15 (6), pp. 918-937.
http://dx.doi.org/10.1080/13501760802196861 Accessed 8 Nov 2016.
Schimmelfennig, F. (2009)’Entrapped again: The way to EU membership
negotiations with Turkey’, International
Politics. Vol. 46 (4), pp. 413-431.
http://vle.exeter.ac.uk/pluginfile.php/724822/mod_resource/content/1/ip20095a.pdf Accessed 3 Nov 2016.
Schmid, F. (2008)
‘Strategiepapier zur EU-Erweiterung. Brüssel lobpreist die Türkei’. Financial
Times Deutschland, 28 October.
Togan, S. (2004)
‘Turkey: Toward EU Accession’, The World
Economy. Vol. 27 (7),  pp. 1013–1045.
http://0onlinelibrary.wiley.com.lib.exeter.ac.uk/doi/10.1111/j.03785920.2004.00641.x/abstract;jsessionid=915358403C934900F4FE9BD17D95BEE2.f02t04 Accessed 12 Nov
2016
 

Microsoft vs. European Union

Microsoft was accused of by the European Commission of the European Union for abuse of its dominant position in the market. Inquire into this event which started at about 1993 and still continues to the present day. As a guide, think of the underlying reasons and laws leading to this event, the consequences of breaking these laws and other points that could have influenced it.

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When Novell complained over the Microsoft for anti-licensing practice in 1993 and continued with European Union ordering Microsoft to divulge certain information about its several product and launch a new version of Microsoft windows without media player, form that situation Microsoft was accused by the European Commission of EU for abuse of domain of its dominant position in market and this situation was such a tempering situation for Microsoft.
If we look on cases against Microsoft starting from 1998 to 2009 then we can many argues and points to consider against Microsoft and its strategies. In 1998 Sun Microsystems had complained against Microsoft for the ‘Server Interoperability’. Then in next 2 year, Commission started investigation on Microsoft for integration of media playback capability in Windows. In 2004 Microsoft was commented by Commission that Microsoft had abused a dominant market position. The Commission issued a statement of objection starting that, those documents were not in submission with 2004 decision by 2005 end. Microsoft announced in 2006 that it would be provided all the technical documentation required but Commission fined Microsoft for inadequate technical certification. In 2007 Commission issued a statement for objection starting that pricing of Microsoft for patents reading on its protocol specification is not reasonable and discriminatory. In 2008 Commission announced that two new investigations one was complained from industry association of Microsoft competitor related to interoperability and other was from European browser maker opera relating to inclusion of IE in windows and it was fined by Commission. In 2009 Commission another statements for objection of IE in windows since 1996 was an abuse of Microsoft’s dominant position. Therefore Microsoft was been announced for the proposal of market research and testing then in last it was formal adoption. Then Commission formally accepted the proposal of the Microsoft the market testing then it was fully resolved to Commission’s competition law concern relating to the Internet Explorer in windows and interoperability.
As per the few last decades the relations between the Microsoft and the European Union were not good because of few complain and action on Microsoft my EU, and in this situation Microsoft come to know few new thing from that situation, and as a result Microsoft and European Union has got the compromised under the tight competition rules of the European Union, this was only because Microsoft was just wanted to reduced the fines and competitive behaviour, and finally it was agreed for barter exchange. To spread the spirit of the European Union, Microsoft has decided to shell the product with the collaborative flag of EU and Microsoft in the next Windows 7 logo, it was just great solution decided by the Microsoft as cost-effectiveness, and European Union was also agreed with this deal and to create new and strong relation.
Then for breaking the law of anti-trust or competitive Microsoft was accused by the European commission in two cases. The first case was for the interoperability in relation to a complained by the European committee for interoperable system while in other case was in the field of the tying of separate software products following inter ALIA a complaints from OPERA.
Law of competition was broken by the Microsoft and proper information was not passed in market by the Microsoft and competitor were also reduced and almost all the companies were using Microsoft products in their one, and they are aware about information which is provided to customers. In 2004 Microsoft launched new, it decided to publish paper on Microsoft website and for it EU created new rule that it will had adverse impact on intellectual property rights and the ability of dominants firms to innovate because it effects direct on Europe. And so it Microsoft was fined of near $600 million by European commission and was ordered to share technology with competitors.
Microsoft business model is based on the customer paying money to licensed software that were developed and distributed. Annual report of the Microsoft business shows that customers paying the charges to license the software and distribution. Taking the idea of license based the software model; software developers bear the costs of converting original ideas into software product original ideas into software products through investment in research and development offsetting these costs with the revenue received from the distribution of their products.
Microsoft failed for maintaining the RELIANCE on mimicking the features and functionality of other same product as Microsoft like Apple, word perfect, Sony play station etc. that was the working of the worlds, Microsoft. Its based on the its progressed of it as an industry rather then being the forced for reinvent the wheel next and next. Microsoft has getting benefits as much as other competitor and even more.
As we all know that Microsoft is the strong and developed company world wide, if has been leading in the good software product over other company, so it has large competitive market, as per the notes the breadth of its product line s biggest differentiator currently but it’s also a potential Achilles’ heel. So Microsoft just wants to bee in its old markets.
As we can see from above discussion that Microsoft break many law of European union and for developing its own business Microsoft has worked tried and launched new ideas in the market but it was not good for other and same business but it was also controlled by the European union, all its competitor works under the law and regulation of the European union than Microsoft should also work as same as competitor. For market development Microsoft and European Union are collaborated for the new product of Microsoft but Microsoft broke the law of anti-competitor, fore that it was fined from European commission it was compatible for any one and also other. So laws of European Union have given many socked to the Microsoft but it is not good as much as because in competitor market anyone can be affected by small or large competitor and keeping in mind excuses of them European union should not react to wards the Microsoft.
 

Rising Treelines in the European Alps

Rising Treelines in the European Alps and their Role in Alpine Lepidoptera Population Decline

Will Treeline Elevational Shifts of 300 m cause decline of Alpine Lepidoptera?

Changing climate, as a result of greenhouse gas emissions, caused global temperatures to increase by 0.8°C in the 20th Century [1]. This acted as a driver for increasing altitude of treelines, as it modified alpine zones to be successfully invaded [2]. Local winter warming is particularly important as a driver of these elevational shifts [3]. In the European Alps, an acceleration in the rate that the treeline is shifting altitude has been observed, although this effect is expected to vary throughout the mountain range depending on what species dominates the treeline [4,5]. In some parts of the Alps, Larix decidua, a species that can disperse rapidly, dominates the treeline and will facilitate a strong response to climate change [4]. Other parts are dominated by Pinus mugo, which disperses poorly and will respond to climate slowly [5]. Regardless of dispersal abilities, treeline shifts will lag behind changes in climate, as seen by the disequilibrium of current distributions in the Alps and climate predictions [4]. This means even if warming did not continue, treelines would continue to rise. By the year 2100, temperatures are modelled to increase by a further 2-3°C, and treelines could move up by 300 m [1,6]. As a consequence we expect at least 25% of alpine habitat in the European Alps to be lost by 2050 [7].

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Alpine habitats in the European Alps host an estimated 5,500 species of Lepidoptera, many of which are endemic and restricted to small populations [8]. Lepidopterans, the insect order including moths and butterflies, often have specific habitat requirements during the larval stage and will not be able to adjust to changing habitat [8]. This means they will be particularly affected by increasing altitudes of treelines. If these species are disrupted, it will bear consequences within alpine ecosystems such as decreased pollination services and grazing intensity [9,10]. This review will explore how a treeline elevation increase of 300m in the European Alps by 2100 would contribute to population decline in Lepidopterans. In particular, attention will be given to habitat loss and habitat fragmentation as causes of decline, what the consequences of these will be both to insects and the wider ecosystems, and how land-use could be utilised to modify treelines.

Habitat Fragmentation Threat with Upwards Shifts in Treelines

Habitat fragmentation can cause decline in butterfly and moth populations [11]. The treeline in the European Alps is shifting up into alpine grassland [4]. Due to geomorphological features of the Alps, treeline shifts will be uneven [7]. This will lead to pockets of alpine grassland being separated by forest. Some of these will act as a connection between other grasslands. As the treeline rises, patches of alpine grassland will be lost entirely, and the connections between remaining habitats will be lost [11].  When habitats are fragmented, it can reduce the ability for individuals to migrate between populations and share genes [11]. Populations that were isolated because of invading forest are at an increased risk of local extinction, but it could lower the risk of large scale extinctions [11]. This is because when stochastic events cause decline or extinction in one population, the effects will be isolated from other populations. The risk of extinction will be spread between multiple small populations, instead of a single large population [12]. When local extinctions occur in isolated populations, it is possible for the habitat to be recolonized through dispersal from nearby populations [11]. Parnassius smintheus in the Rocky Mountains had five local extinctions between 1995 and 2005, but dispersal consistently allowed recolonization within two generations [11]. This dispersal ability is lost if the amount of forest between grassland is increased, with population linkage effectively lost after a distance greater than 1 km [11]. However, it is also suggested that fragmenting populations can increase the likelihood of a migrating individual encountering a suitable patch of habitat, thus increasing functional connectivity [12]. This suggests that as forest continues to divide grassland, the ability for Lepidoptera populations to disperse and recolonize will be lost. This will also make inbreeding depression and local extinctions more common [11].

It is possible that climate change may help butterflies and moths overcome this. Alpine Lepidoptera utilise solar radiation to increase body temperature and remain active longer [13]. As alpine zones become warmer, they may be able to increase their activity and ability to migrate [1,14]. The United Kingdom has seen an influx of new species as warming allows migratory Lepidoptera to travel greater distances [14]. This increased capacity for migration may help alpine Lepidoptera to counter the difficulties of dispersal brought by expanding forest.

Alpine Habitat Losses with Rising Treelines

Shrinking alpine habitat will cause a decline in species richness of alpine Lepidoptera [15]. Forest plant species have been moving uphill an average of 29.4 ± 10.9m per decade [2]. Although alpine plant species have been moving up at a similar rate (27.8 ± 14.6m per decade) [2], because of the conical shape of mountains and the presence of alpine plateaus, the expected treeline rise of 300 m will cause a pronounced decrease in available habitat for alpine Lepidoptera [7]. If the treeline rises by only 100 m, 41% of alpine habitat is expected to be lost [6]. Changes in habitat that have already occurred will continue to affect alpine insects, as there is a time lag between habitat change and population dynamics [16]. The area of alpine habitat available correlates to the number of species that inhabit it [17]. This is because a smaller area contains less resources, has a smaller carrying capacity and can support fewer individuals. Less individuals in a population poses a threat through the risk of inbreeding depressions [18]. The alpine butterfly Erebia epiphron silesiana demonstrates that a small population has less genetic diversity than a large one, with the smaller population having a lower proportion of heterozygosity and fewer rare alleles [18]. Individuals showed no increased risk of deformity, but did have an increased incidence of albinism [18]. This is indirect evidence for inbreeding, as albinism in alpine insects can prevent camouflage and reduces energy absorbed to increase body temperature, making it an unfavourable trait [13]. This trait should be selected against and is evidence of reduced viability of the population due to inbreeding [13,18].

The larval stages of moths and butterflies require very specialised habitats [19]. As alpine habitat is lost, the risk of extinction of alpine species correlates to the ability to find new habitat [15]. With very specific habitat requirements, and increasing difficulty in dispersal from habitat fragmentation, it will become difficult for populations to establish in new places [20]. Human intervention to relocate butterfly and moth populations is a possibility to ensure the survival of a species with habitat loss. Relocation of Erebia epiphron silesiana, with 50 females,to a similar habitat outside of natural dispersal range has been successful [18]. There were no significant differences in genetic diversity found between the original population and the relocated population [18]. This offers a possible salvation for alpine insect species, with only a small proportion of the population needed [18]. Relocation may offer a temporary solution to habitat loss caused by the rising treeline, but as the alpine zone continues to shrink it is likely that chosen refuges will be lost too. The potential risks of relocation, such as introduction of diseases or competition with established species [14], may outweigh any hope of saving a species.

Mitigation of Treeline Shifts by Land-Use as Summer Pasture

If the treeline does experience an upward shift of 300 m it will undoubtedly damage populations of alpine Lepidoptera, through both habitat loss and fragmentation [11,18]. However, treelines can be difficult to model and often do not account for all contributing factors [4]. Different dominant tree species, such as Pinus mugo and Larix decidua, have different dispersal models and can move up hills at different rates [4,5]. Geomorphological features, including unconsolidated soil, can also influence the ability of treelines to invade higher altitudes [4]. Perhaps most significant, and most often unaccounted for, is the conflicting impact of land-use for summer pasture [4,15]. Grazing by livestock can prevent trees from establishing, thus slowing forest expansion and providing refuges for alpine systems [7,15]. It may be possible to prevent the invasion of alpine zones through the establishment and maintenance of summer pasture [7,15]. Despite these potential benefits, use of summer pasture has declined and is expected to continue declining [4,21].

Land-use is reported to provide refuges for alpine species and maintain biodiversity [7,15,21]. It offers economic benefits to livestock owners, as it provides more land for summer grazing and thus allows more livestock to be kept [21]. It also makes grazing animals more robust [21]. Without alpine grazing, numbers of livestock kept must be reduced, and treelines will face less resistance to their invasion of the alpine zone [15,21]/ Although summer pasture prevents the treelines from shifting upward, it may still force alpine species to higher altitudes [22]. Use of land by pasture caused an upwards shift in the range of Zygaena anthyllidis by 60 ± 74 m per decade [22]. In addition, grazing may modify habitat and alter competitive dynamics [19]. Live-stock grazing in England resulted in shorter shrubs, which favour the butterfly Polyommatus bellargus, a species that had been in decline, over Thelymicus acteon [19]. The subsequent recovery of P. bellargus and decline of T. acteon demonstrates how changes in grazing intensity have rapid and varying consequences for Lepidoptera populations [19]. We must then take caution when establishing pasture in hopes to mitigate land use, and in abandoning pasture in hopes to restore alpine insects’ range, as both actions could bear negative consequences for Lepidoptera populations [19,21,22]. While mitigation of treeline advances through land-use offers an interesting solution, climate change is the primary driver of treeline shifts and should be the focus of any preventative efforts.

Significance of Alpine Lepidoptera Decline in the European Alps

The loss or reduction of butterflies and moths in the alpine zone will impact other organisms in the ecosystem. Lepidopterans can contribute to ecosystems as both pollinators and herbivores [9,10]. Moths are significant nocturnal pollinators for a range of species [10]. Pollination is a critical ecosystem service and allows increased dispersal and gene flow of plants [10]. Disruption of this pollination relationship will negatively influence the reproductive success of the plant [10]. If generalist insect pollinators, such as alpine moths, are lost, a number of plant species may also experience decline. Lepidopterans also contribute as herbivores. Grazing by moths and butterflies can prevent one plant species from dominating and help maintain plant species composition [9]. For example, the Australian alpine Lepidopterans, Lomera caespitosae and Oncopera alpina, are associated with extensive grass death, allowing shrubs and other plants to survive the alpine zone [9]. If herbivores are lost, competitive dynamics of plants will be disrupted and a previously controlled species may thrive and outcompete other flora [9]. Through pollination and herbivory, alpine insects contribute to plant diversity.

The short life cycle of Lepidopterans also makes them useful as indicators [19]. Butterflies can be used as a proxy to model declines in habitat [23]. They are especially useful as they are conspicuous and there are large amounts of historical data surrounding them [20]. Butterflies and moths have short life cycles so respond quickly to environmental changes [19]. This makes them a valuable tool for modelling populations of other alpine species, and indeed any other species undergoing habitat loss. Plants and animals with longer life cycles will have populations that lag behind habitat changes [16]. This can result in species going extinct generations after a habitat is modified [16]. As butterflies have short life cycles, there will only be a short time lag between habitat changes and any potential extinction [16]. This will make them useful for modelling the responses of other species to climate change and to upward shifts in treeline.

Concluding Remarks and Future Perspectives

Upwards shifts of the treeline in the European Alps in the next century will cause decline and extinction in populations of alpine Lepidoptera. While a number of proposed models for treeline rise and alpine contraction exist [4-7], an average rise of 300 m in the next century is a reasonable prediction that would result in extensive loss of the alpine zone and fragment habitats for moths and butterflies [9,11]. In future, more refined modelling surrounding the European Alps, and the heterogeneity in regards to plant composition and geomorphological features, would be useful for predicting the response of many endemic insects it houses.  The rising treeline will cause populations to experience inbreeding depressions and lose viability [11]. As butterflies and moths are lost, the loss of key services they provide such as pollination and herbivory will cause decline in alpine plant species [9,10]. Population dynamics of butterflies and moths under changing habitat can be used to model responses of longer-lived alpine species [16,19].

The effects of changing land-use may counter upwards shifts in the treeline, but will have their own consequences for alpine ecosystems. At present, there are conflicting views as to whether land-use for summer pasture is helping or harming alpine Lepidoptera [7,15,21,22]. More research should be done to assess whether this is a viable option to help manage Lepidopteran populations. The most important actions that should be taken are ones that reduce emissions of greenhouse gases and mitigate climate change.

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