The euro area or euro zone comprises of all those countries, which have accepted euro as their currency. Currently, 18 European countries are operating under the euro zone, and the multinational companies of these countries are facing the positivity’s and negativity of working under the euro zone. The main aim of the euro zone is to maintain stability and economic growth in the respective countries by the use of a single currency.
Talking about the pros for a multinational which work under the euro zone, one advantage is single currency have encouraged trade between different countries within the euro zone which increase the production of the company thus resulting in profits. Euro zone eradicates exchange rate uncertainty. More trade can be carried easily as business will not have to think about different exchange rates, which result in high exports. Euro zone saves the company from the hassle of maintaining different pricing for different countries according to their currency. Costing is made, and one price is set on which the product of the company are available to all countries. Furthermore, euro zone maintains same monetary policy for all euro countries. The aim is to increase business and to achieve this; the interest rates are kept low which act as an additional advantage for the company. Euro zone encourages trade between different countries, and there are no barriers or additional cost of trading within the euro zone. Therefore, multinationals take full advantage of this scenario and earn maximum profits by increased trading and low interest rates.
Euro zone is built to give the benefit to all countries and their companies through one currency and increased trading benefits, but there are some negative aspects of working with the euro zone. In a recent period, the position of the euro zone is weakening and if the union desolates; the companies will suffer greatly. The country will lose trading benefits and advantages provided by the euro zone that will lead the country into depression; thus affecting the multinationals of the country. Moreover, multinationals working under the euro zone does not have strong bargaining power regarding their pricing or demands. All the companies have to adhere to strict rules of the euro zone and this domination by the euro zone sometimes become a trouble for companies. They cannot charge their own prices or do trading and exports on their own terms. Therefore, this dominating attitude by the euro zone restricts many companies to work under the euro zone.
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