Doing Business in Northern and Western Europe
Doing Business in Northern and Western Europe
Having been the birth place of modern science and the industrial revolution, Europe has for many decades been a leader in economic activities and business activities in the world. Throughout the eighteenth and nineteenth centuries, Europe’s superiority in technology gave it dominance in trade and business activities. In more recent years, the formation of organizations such as the European Union and the European Free Trade Association served as an impetus to even further strengthen commerce in Europe. They have helped strengthen trade between countries in the continent and with other countries outside Europe. Business in western and Northern Europe is of particular interest to different stakeholders globally, notably investors, current and future business partners and individuals and companies seeking to explore business there. Many factors influence business in Northern and Western Europe.
Factors to Consider while doing business in Northern and Western Europe
The Region’s Economy
One of the most fundamentally important factors to be considered when evaluating a region to determine business viability is the economic climate of the region. The key reason for this is that businesses are inextricably linked with the economy of the region in which it operates ( ). This is true regardless of the kind of business conducted, its size and its target market in the region. The economy of a region takes into considerations matters such as a region’s financial capabilities, gross domestic products of countries in that region, purchasing power parity, expenditure capacities and its general ability to support itself financially.
Northern and Western Europe, like the rest of Europe, has for a long period of time been one of the most stable regions financially. This is due to that fact that the region’s political dominance of the world during the most part of the eighteenth and nineteenth gave it power to control most of the world’s resources. This facilitated the amassing of considerable wealth which in later years spurred the region into infrastructural, technological and economic development ( ).The region’s immense wealth in natural resources has also contributed to its economic stability through the years. Almost all Northern and Western European countries conduct large amounts of international trade. Much of the trade is intra-continental, especially among members of the European Union, but they also engage in large-scale trade with nations of other continents. This is an ideal climate for business because customers are able to afford needs as well as luxuries, largely due to the economic stability of the region. In such a place, a wide array of business ventures, both in sale of goods and services are viable. Entrepreneurship is likely to quickly succeed. Indeed, entrepreneurship is a key component of Northern and Western European business, providing approximately 66% of private employment. This accounts for two thirds of all the enterprise sector jobs (McDonalds &Harris, 2004).
In general Northern and Western Europe hold the strongest economies in Europe and therefore are able to support profitable commerce. The region presents highly lucrative opportunities for businesses that break into it, fronting a stronger currency than most countries. The size of the market is enormous. The region presents good opportunities and has a good economic climate for businesses. There are however differences in terms of business climate indifferent countries in the region. Netherlands, the U.K. and Germany rank among the most appealing destinations for an investor (xxxx). Smaller countries such as Ireland provide smaller markets, a fact that makes them less attractive for business. In France and Belgium, businessmen are faced with tough entry regulations as well as an unfriendly general business climate ( ).
The economy of most countries in Northern Europe , as well as that of most developed nations, operates according to the principles of the free market as opposed to communist-run states or mixed economies ( ).As such, businesses set up inside the region benefit from certain fundamental rights and freedoms. All people in free-market societies have the right to own, use, buy, sell, or give away property, thus permitting them to own and operate their own businesses as private, profit-seeking enterprises. Business owners in the U.K., Sweden, Finland, Norway and other countries in Northern Europe may choose to run their businesses however they like, within the limits of other, mostly non-business-oriented laws. Businesses in the region have the authority to hire and fire employees, invest money, purchase machinery and equipment, and choose the markets where they want to operate. In doing so, however, they may not violate or infringe on the rights of other businesses and people. Free-market businesses also have the right to keep or re-invest their profits. All these factors are very appealing to investors and business owners in the region. In recent years however, the occurrence of the global financial crisis set economies all over the world in turmoil. Countries in Northern Europe were affected by the credit ‘crunch’ to one degree or another. This has since led to some changes in various parts of Northern Europe. This has led to unemployment as businesses try to maintain profits margins amid declining sales. Businesses in the region have had to re-adjust their human resource pools, management styles and general profit margins in response to the crisis. The region is however sailing through the crisis relatively well in comparison to the U.S.A and other nations hit by the crisis. The effect of the global financial crisis and its implications for business in the region is a significant factor to consider.
The Euro zone crisis is yet another factor that has in recent years become an issue of concern among investors and other business stakeholders in the region. Europe has been experiencing a lot of economic upheavals which have almost led some countries to bonafide bankruptcy (xxxx).The crisis is mainly affecting the region’s economy and business. The crisis, which has affected Greece, Portugal and Italy has negatively impacted the strength of the region’s common currency –the Euro- and has increased inflation rates. Existing businesses have encountered difficulty as a result. Inflation creates a hostile business climate, significantly raising the cost of doing business (xxxx). Investors seeking to start up businesses in the region would therefore need to front more capital for entry and maintence. Austerity measures taken by affected countries, such as Greece have largely impacted customers’ purchasing capabilities (xxxx). This is an issue to consider for newly starting businesses, as the availability of customers is fundamental to the success of the business. In spite of all the turmoil however, Northern and Western Europe still remains a relatively stable market. Its size is also among its main forces.
The stability of the European market lets potential investors determine the predictability of the markets (xxxx). As such the stability of the market in Northern and Western Europe is a factor that ranks highly among those to be considered in business. Consideration needs to be taken concerning the developed status of Northern and Western European economy and the implications of this on market saturation. The region is made up of developed nations and this means that there is the possibility of product saturation its markets. The markets in the region are mature fronting well-established companies and brands. Businesses being introduced to the area therefore need to demonstrate innovative techniques, solutions and products. The markets here would respond more to new innovative solutions as compared to introduction of more of already existing products and services.
The cost of starting up and maintaining businesses in the region is significantly higher than in emerging markets such as those in Africa , Asia, South America or even in Eastern Europe. Labor costs are also relatively high. Remuneration of workers is higher than in emerging markets. Many companies in the region outsource labor so as to cut down on production costs ( ).A newly starting business would do well to outsource certain services from well-established companies as it might prove cheaper. In the end it is essential that considerations be made regarding specific country attractiveness in relation to type of business desired by potential investors. Issues of market attractiveness and country-specific impediments to entry should be thoroughly examined.
Government Policy, Legislation and Taxes
Prior to the establishment of a business in any particular country , considerations about the policies, laws and legislation governing business and other related activities in that country are worth taking. Businesses seeking to set up in Northern or Western Europe have a number of factors to consider when it comes to the same.
First and foremost licensing and start –up requirements by the government or relevant bodies have to be met by potential investors. The more complex and bureaucratic, the process is, the less attractive it is to investors. The Northern and Western European region mainly consists of a mature market (xxxxxxxx). In this regard the region has had the time to stream line its policies, laws and regulation concerning licensing so as to facilitate smoother and more efficient setting up processes for businesses as long a all requirements are met.
Another essential factor to consider when considering business activities in the region is the tax expectations for businesses. Businesses in most Western European countries are faced with high corporate taxes, roughly between forty and fifty five percent, in addition to income tax. In Northern Europe, income tax levels range from forty to fifty percent. Sweden demands the highest levels of income tax with percentages rising to 56 ( Asongu & Marr, xxxx).
As regard the law, any businesses operating in Northern Europe or Western Europe comes directly under civil laws set by its host country ( xxxxxxxxx). In addition to this the business must also adhere to laws set by larger bodies to which the country belongs. In the case of Northern and Western Europe, such a body would mainly be the European Union (EU). Businesses that operate within countries in this region which are member countries of the EU come under direct jurisdiction of those laws. It is therefore necessary for potential business starters to educate themselves on the content of particular country legislation as well as EU legislation in reference to business. Advice would need to be sought concerning such legislation and its implications.
To the extent in which the region enjoys free markets, where prices are left largely to the forces of demand and supply, government policies do not generally interfere with commerce (xxxxxxxx). However, in certain circumstances the government sets directives in place that may interfere with the running of businesses. Taxation and legal frameworks that prove to be complex and bureaucratic in many parts of the region represent a form of barriers to the expansion of businesses.
Political Stability
Europe in general and Northern and Western Europe in particular has enjoyed a long period of political stability due to the large democratic space given to all the political players. Doing business in this region has always been free from political risks, a factor which has contributed to a lot of investors showing interest in setting-up their businesses here. Political stability is a key factor for any successful business venture, not just because of the security of the investment but also because it ensures the smooth running of the business and protects the investors from political risks associated with a politically volatile environment. Traditionally Northern and Western European democracies have to some degree always exerted an influence on business activities. The offering of incentives, control of currency and exchange rates as well as the control of trade and commerce regulations enable governments to exert some influence in business activities (Campbell,2009,pp.5).
In the recent past however, there has been some concerns over the security of the people and property in some countries in this region. The region has experienced some street clashes occasioned by the euro-zone crisis and the resultant austerity measures adopted by some governments (xxxxxxxxx). Greece was worst hit by this type of civil unrest but remedial actions are already being taken by the new government to rectify the situation. Democracies in Western Europe are also known to have well-developed professionalized bureaucracies (John, 2001, pp.159). This can interfere with business activities. In Northern Europe there is a declining level of trust in the government. Sweden and Norway are particularly experiencing decreasing trust the government and government institutions (John, 2001). Some cases of racial tension have also been experienced in some parts of London bringing into sharp focus the economic struggles of some of the minority groups in different parts of Europe. Europe has also become a target for terrorist activities in the recent past and will inevitably become a cause for concern for many investors if it is not urgently and conclusively addressed. In general however, this region of Europe is comparatively very stable politically and investors should therefore not shy away from setting-up businesses in Northern Western Europe.
Competition
Competition refers to the number of businesses dealing in similar products and or services and targeting a common market. The more the players the thinner the market and consequently the lesser the returns ( Walker, Walker & Schmitz, 2003). New entrants will therefore be advised to carefully study the market before venturing into existing fields. Like most mature markets, the Northern and Western European markets have reached an almost saturation point in most of the traditional goods and services. A new level of innovation is therefore required from new players if they are to compete effectively for the existing market share. Arguably however, competition can be beneficial to both the investor and the consumer, in that it spurs innovation and improves and lowers the cost of products getting into the market. The investors should also make due consideration of how effective their products can compete against the cheaper alternatives from countries such as China. Since the cost of labor is way higher in Europe than in China or in Africa and parts of Asia and South America, a lot of companies are now outsourcing off shore for cheaper manpower. In conclusion, in a region with so many competing, ideas, products and services, one should always look for a business strategy that gives them a competitive edge over their competitors. In most cases this usually entails diversification, a relentless search for superior products and competitive pricing. Globalization, changing technologies, learning and development are some of the factors that affect competition in the region (Walker, Walker &Schmitz, 2003, pp.6).
European Union
The European Union (EU) is a geographic, political and economic amalgamation of independent states seeking to promote similar economic ideologies. The EU consists currently of about twenty seven members and commands a population of about 500 million people. The common market protocol and the adoption of one currency (the Euro) has fostered a strong economic bond among member states ( Suder, 2008,pp.3). This provides a number of opportunities and challenges to the investors. The investors are not only provided with a large varied and widespread market but they also enjoy a large space to try out new products and services across the diverse cultural spectrum. The common currency makes trading across countries easier and the common market eliminates most of the traditional trade barriers hence making movement of goods, services and people within the region smoother. A common market however, comes with its on challenges, key among them being that since the economies of these countries are inter-linked it poses the risk of an economic crisis in one country affecting other member states such as experienced in the ongoing Euro-zone crisis. The economic crisis in Greece have since found itself in countries such as Portugal, Spain and Italy and it’s threatening many more member states. That coupled with the effect the crisis has had on the value and dependability of the euro, the unprecedented high inflation rates and the down grading of the credit standings of some of these countries has dealt a severe blow on the business reputation of this region and made investors weary. The potential investors should therefore be more cautious and take time to learn and understand the micro and macro dynamics of the business environment of this region.
The role of the European Union on legislation and business-related policies in the region is a factor that cannot be ignored. Almost all countries in both regions are member states of the Union. As such, legislation and policies passed by the EU have to be implemented in member countries. Some of these policies work in favor of businesses in the region, protecting them from exploiters and opening up larger markets as a result of expanded trading options. The EU for instances made a move to insulate foreign service providers from unpleasant legislation that applies only to them, and not to local business people. Changing EU policies often result in implications for businesses operating within member countries( Darmer &Kuyper, xxxx).such changes affect different kinds of businesses differently from others. It is prudent therefore that a potential or existing business owner in the region find out how EU policies and directives might adversely or otherwise impact them. It is also business-savvy to try an determine to what extent such directives and policies affect a business’s ability to compete in the market (Darmer&Kuyper, xxxx, Pg.139).Other benefits of business within EU member countries includes the enormous customer pool that a business is exposed to. This is because the EU is dedicated to increasing economic integration and strengthening cooperation among its members. Therefore, a business is able to have access to people in other EU member countries. Businesses benefit in the absence of trade barriers, reduced operation costs, eradication of monopolistic business activities and cartels and general improved efficiency. The E.U. has also brought about the ‘Europeanization ‘ of the region, whicbmenas it has made efforts to integrate the economies of EU member States’ economies (Suder, 2008,pp.7).
Infrastructure
The link between a proper business environment and a well developed and maintained infrastructure network cannot be overemphasized. From transport, communication, banking, housing, education, social amenities and internet to business regulations, taxation and incentives investors are always drawn to countries that assure them of easy, smooth and friendly business environment. As mentioned earlier, the Northern and Western Europe region is the birth place of modern civilization, and this has precipitated the development of the state-of-the-art infrastructure to match the rapid growth and development of these and the previous century. AS such businesses already in operating in the region enjoy the advantages that come with developed infrastructure. Companies doing business with countries in the region also enjoy the benefits that come with improved transport, and other facilities. The region offers businesses improved communication and transport, a thing that is essential for all businesses. Ultimately, high levels of infrastructure result in more efficient running of businesses and eventually to higher profits.
In this light, the business also presents business opportunities for businesses in the transport and other sectors involved within infrastructure such as transport businesses, building repair businesses and even real estate. It is important for consideration s to be made concerning the implications of the developed infrastructure to their particular line of business.
Technological Factors.
Business owners interested in Northern and Western Europe should take into consideration the overwhelming levels of technological development of the region. Of particular interest is the development and rapid advancement of ICT. In knowledge –based economy, such as make up most of the economies in the region almost everything is dependent on ICT. The main tools of communication are high- tech gadgets. The majority of the populations are in possession of one kind of ICT gadgets or another. Complex ICT systems are used to run almost all machines and run large and small industries. It is in the best interest of potential investors in the region to seek to find out how developed ICT and high ICT literacy levels may be of benefit to their businesses. Any potential effects of the same should be thoroughly considered. The larger and more powerful countries like Germany and the United Kingdom have huge markets for technology-related products as well as services(Asongu & Marr, xxxx).These are therefore good choices to consider for businesses of such a nature. The innovativeness and speed of innovation in the technology industry in Northern Europe and Western Europe is an important issue in regard to business (Asongu &Marr, xxxx). This is because it has implications for new businesses and existing businesses. New innovations have the potential to render existing businesses in the same industry as useless and backward and put them out of business.
People and Culture
Western and Northern Europe presents a market of people with varied tastes and preferences due to the constant migration and integration of people from all over the world into the general cultural fiber of Europe. Among the first things to consider in the region is that it is essentially made up of many countries, which are different from each other as informed by their particular histories. Walker, Walker &Schmitz (2003, pp.39) observe that the simplistic habit of attributing a homogenous culture to entire regions or nations is both unrealistic and unproductive. Each country’s history is important to it as it has a bearing on its politics, economics, culture and social life. As a result of the diversity at play in the region it is hard to pin down one single culture that determines how businesses are run. However, there are still some things that are relatively common across borders and throughout most of Europe, especially Northern and Western Europe.
As a result of diverse historical and political backgrounds of countries found in the region it is important to note that countries that were previously subjected to soviet-style governments, may present a divide within the country demographics regarding how to conduct businesses. The older generation may be more heavily influenced by such regimes in business while younger people may be more welcoming of entrepreneurship. (Asongu& Marr, xxxx). Culture may be viewed as shared patterns of ideas, emotions and behaviours (walker, Walker & Schmitz, 2003)
As regards business etiquette, a lot of practices are country-specific. Across the region, business is generally considered as a serious thing over which unnecessarily joking is generally not unappreciated. In some countries it is even frowned upon. The seriousness and formal nature of business in Northern and Western Europe is clearly perceivable as compared to other places such as the United States. The degree of formality varies across the regions and indifferent countries (Walker, walker &Schmitz, 2003, pp.100). Business also has a hierarchical nature where interactions between superiors and subordinates are strictly adhered to and respected. As such, Walker, Walker & Schmitz (2003, pp.101) further observe that, people with strong hierarchical orientations may clash with those who are otherwise oriented. Formalities extend to things like interpersonal distance while in business contexts as well as greetings. Time consciousness in both the Northern and Western part of Europe is regarded very highly. Tardiness is perceived as a lack of seriousness and is generally seen as incompetence and poor time-management skills (Morrison & Conaway, 2006). Matters of modesty are regarded highly. It is important to consider the specific culture of specific countries of interest. Manner of dress and ways in which to address people is important to most Europeans and as such has an impact on the potential number of clients one may attract, as well as dealings with suppliers .Such dressing includes outward raiment and adornment (Moran, Harris &Moran, 2012,pp.7). In Germany for instance, the use of first names in business contexts is frowned upon. In Spain however, emphasis is placed on the importance of personal relationships in business success (xxxxxxxxxxx).
Like most mature markets, this region has a consumer culture mostly characterized by people with educated tastes. Consumers are generally more aware and possess some deeper understanding of the products on the market than consumers in many other regions of the world (Campbell, 2009). This type of sophisticated market requires that the potential investors take note of the markets demands and tailor their products to meet the consumer requirement. Market differentiation is also necessary if one is to satisfy the consumers on both sides of the continuum. The investors would also benefit from learning and understanding the current and emerging consumer trends defining their target market. The growing awareness of the importance of maintaining healthy lifestyles for example has resulted in the growing preference for organic and whole meals over fast foods ( ). The concern for the environment has also yielded a renewed interest in environmental conservation efforts and as a result, the advocacy for Green products has gone a level higher. The investors should thus take measure to ensure that not only their products but also the process of producing and packaging them is not harmful to the environment.
Other issues of concern include human rights abuse, and the funding of terrorist activities by some unscrupulous businesses. The potential investors should therefore adhere to strict ethical and moral standards regarding the treatment of their workers all along the production chain. The service industry is also bound by the same ethical code regarding the treatment of both consumers and the service providers. The diamond industry serves as a reminder of how a seemingly innocent venture can be used as a haven for human rights abuse. It eventually emerged that the huge sums of money accruing from this industry went to fund the civil wars in countries such as The Democratic republic of Congo. The industry has since established stringent measures to streamline and regulate the operations of the miners and traders of the diamonds (xxxxxxxxx).
Consumers are also hugely aware of their rights and the investors should therefore be very aware to the risks of putting substandard or harmful products into the market. Quality of products, high levels of customer service, delivery speeds and ease of access. They usually also require services or product support after buying the products. The growth and shift to ICT has created new opportunities not only for consumers but also for investors to venture into new territories. The investors can now advertise and showcase their businesses online and in turn the consumers can benefit from easy access of a wide array of products and services, as well as their quality. The ICT has also created new opportunities for direct investment by interested entrepreneurs and investors (xxxxxxxxx).
Language
Mole (2003) asserts that Language is the most important competence in international business. Since Northern and Western Europe is made up of a mixture of cultures and languages. This is a fact that affects businesses in individual countries in the region. English is the most common language in the region and at least half of the residents are able to engage in basic communication involving simple expressions ( Asongu &Marr, xxxxx). There are however many countries in the region where English is not the native language. The Scandinavian countries for instance mostly speak English, if at all, as a second language. In such countries, a lot of business is done in the native languages. As such it is worth considering when seeking to start a business in the region, how the owner of the business would be able to cope if native languages were unknown to them. The option of translators should be considered. Some countries are multi-lingual. Entrants into these markets need to have strategies to deal with the challenge. The use of body posture and gestures to communicate, whether consciously or otherwise is a fact that should be considered relative to different culture (Mole, 2003, pp.20). Greek, which is spoken in Greece typically incorporates energetic gestures and what may appear combatant to a visitor may actually be a pleasant conversation (Mole, 2003,pp.235).
Risk Factors
Much of the elements of risk involved in doing business in both Northern and Western Europe depend on the acceptance of the new product or services. Products or services or their delivery may be particularly unappealing to the customer populace. Expectations need to be met in terms of Quality, pricing and customer service. Kalb (1993) asserts that it is necessary for a business owner to clearly define the type and purpose of business he is starting. In this way he is able to perfect skills and product quality so as to better meet customer expectations.
Terrorist threats and threats resulting from the global financial crisis and the euro zone crisis ought to be considered and calculation on level of risk made. The potential effect of changing EU policies or country-specific policies on businesses in the region should be considered. Consideration should also be made concerning the demographics of the region. The rapidly ageing population’s potential adverse implications on businesses should be considered. Concerns about racial bias in some areas of the region may need to be worth considering.
2012 Olympic Games
Special opportunities sometimes present themselves that have significant implications for business in a region. London is set to the Olympics in the year 2012. Such an event has enormous implications for existing and potential businesses both in the U.K. and most countries around it. The Olympics is set to bring large sums of money into the entire region, especially in Europe .This presents a unique opportunity for existing and new businesses in the region. A lot of products and services will be required in the run up to the games, during and slightly after the games. Businesses men may benefit by taking the opportunity to meet these needs. The games are set to provide immense exposure internationally to business.
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http://books.google.co.ke/books?id=4tfyYjb8McEC&pg=PA39&dq=mind+you+manners-john+mole&hl=en&sa=X&ei=zE8NUKVKpNfRBcuOrLUK&ved=0CC0Q6AEwAA#v=onepage&q=mind%20you%20manners-john%20mole&f=false- mind your manners.
