Effects of the Euro Crisis on Multinational Business Sales
Open Access
- Author:
- Williams, Zachary Tyler
- Area of Honors:
- International Business (Behrend)
- Degree:
- Bachelor of Science
- Document Type:
- Thesis
- Thesis Supervisors:
- Kenneth Louie, Thesis Supervisor
Kenneth Louie, Thesis Honors Advisor
Xin Zhao, Faculty Reader - Keywords:
- Multinational Business
Euro Zone
Eurozone
European Debt Crisis - Abstract:
- The European Debt Crisis hit Europe in late 2007, early 2008, and wreaked havoc on both the general population as well as multinational companies with operating segments on the continent. One of the reasons why the crisis hurt so badly had to do with the fact that 17 countries in Europe share a common currency and are therefore considered a currency union, known as the Euro Zone. Those 17 countries began planning for a common currency more than half a century ago, and the public began using the euro in 2002. The 17 countries collectively are strong, and make up the largest trading partner of the United States, and many other countries around the world. The idea of a currency union arose years ago with Robert Mundell, who published the Theory of Optimum Currency Areas. The theory specified three requirements that must be met in order for the proposed currency union to be successful. Those requirements were: 1. The savings from adopting the currency must be higher than the expected costs. 2. The countries that will be sharing the currency must trade often with each other. 3. Factors of production, which include labor, capital, and entrepreneurship, must be mobile. Perhaps the Euro Zone wasn’t truly qualified to be a currency union. Regardless, they formed the union and the crisis occurred nonetheless. The hypotheses that this thesis sets out to test are: (A) whether or not European sales of multinational companies decreased following the crisis, (B) whether or not European sales of multinational companies with more than 32.66% of sales in European segment(s) decreased at a greater rate than sales of European companies with less than 32.66% of sales in Europe, and (C) whether or not European sales of multinational companies with more than 32.66% of sales in European segment(s) decreased at an even greater rate than the European sales of companies with less than 10.3% of sales in Europe. The three years prior to the event years were compared to the three years following the event years; the event years being 2007 and 2008. Once the averages of the sales prior and post were calculated, statistical analysis was conducted on both sets of data to get a better understanding of the impact of the crisis. Once the summary statistics were completed, a two-tailed t-test was conducted to test the significance of the change. This was important because the results of hypothesis A were not as strong as one might have assumed. The t-test showed that the decrease in overall sales, although relatively minimal, was significant, and was not the result of the choice of companies or a fluke. Therefore, companies with European segments, on average, did see sales decrease after the European Debt Crisis. Hypotheses B and C saw more significant results, which indicated that in general, companies with greater than 32.66% of sales in European segments saw sales decrease at a greater rate than companies with less than 32.66% of sales in European segments, and they decreased at an even greater rate than companies with less than 10.3%.