Global Business Planning for Spain
The development of increasingly sophisticated communication technology has created an interesting global platform for business and trade. Unfortunately, such trade does not occur on equal grounds, with some countries and entities languishing in third-world poverty, while others are increasingly prosperous. This has created “seemingly contradictory economic conditions around the world,” according to Kelly (2006, p. 131). The author also notes that, while prosperity and opportunity will rise for millions over the next decade, others will be the victims of friction and economic decline.
With the current worldwide dynamic of business and global communication, the question is if the phenomena of friction and decline are in fact unavoidable. Surely, with communication technology and business prowess being at their current levels, there must be a way to manage the global economy in such a way that prosperity is possible for all.
To investigate the issues surrounding prosperity and decline, several examples of both will be considered, while also providing a model for the management of global prosperity. As such, it is suggested that entities such as the EU and NAFTA be utilized, expanded, and/or supplemented with similar institutions to target problem areas and streamline prosperity. Furthermore, the energy provider Scottish Southern Energy will be used for possible suggestions to manage prosperity across the globe.
II. ECONOMIC PROSPERITY and OPPORTUNITY
The recent economic recession across the globe has placed new perspective upon the concept of prosperity. As will be seen, some countries have survived the recession better than others. In Europe, two countries who have not collected too many financial scars from these difficult times are Spain and France. When these two countries are examined, factors can be identified that contribute to economic prosperity within a global perspective.
Spain’s economy is the 9th largest in the world, although it does not boast membership in the Group-of-Eight (G8) industrial nations. Nevertheless, its economy appears to be thriving, with inflation rates amounting to 3.5-4% per year for the last few years. The country’s economy depends upon its tourism, metal and metal manufacture, textiles, clothing and apparel, food and drink, chemicals, ship-building, machine tools, automobiles, and electronics. The country also has a thriving export market, including machinery, chemicals and electronic devices. Spain imports fuels, industrial equipment, and foodstuffs. The growth forecast for 2010 is 2.7%. Most importantly in terms of prosperity, Spain’s banking system is given credit for being the most robust and well-equipped to handle the worldwide recession (Bank of Spain, 2008).
The banking system then appears to be the most important contributing factor to Spain’s current prosperity. Because of its healthy banking system, Spain was able to remain fairly stable during the recession.
Further contributing to its financial wellness is Spain’s diversity of industries. This diversity has provided the country with a sound basis for perpetuating its economy. If one industry for example shows decline, the others can absorb this and maintain the average health of the economy.
A further contributing factor is Spain’s relationship with the foreign market. It is both an importer and exporter of goods and services, which provides a steady basis for supplementary income for both Spain and its import and export partners. The success of the country’s banking system, concomitantly with its domestic and foreign business connections, has resulted in more or less stable conditions in the country.
The French economy is interesting, because it finds itself in the midst a transition. The current transition is to move the French economy from generally government owned to an economy that relies on market mechanisms (CIA 2010). For its prosperity, France relies upon its agricultural heritage, as well as industries such as machinery, chemicals, automobiles, electronics, textiles, and tourism. The country also enjoys the 19th overall rank in conducting business in the Organization for Economic Cooperation and Development (OECD) region (Doing Business — World Bank Rankings 2010).
Like Spain, France and its economy survived well during the economic crisis, and even more so than other European Union (EU) countries. The main reasons given for this include resilient consumer and government spending, as well as less susceptibility to the global demand downturn. Although the French GDP dropped by 2.1% in 2009, the country’s presence in power, pubic transport and defense remained strong, as did its tourism sector (CIA 2010).
Although not reporting the same strong banking system as Spain, France nonetheless shows a strong economy in terms of its various industries, and particularly tourism. The last-mentioned industry — tourism — appears to a common factor in the prosperity of both countries. Together with the industries of both countries, this factor contributed to their survival during the recession, as well as to their current prosperity. This prosperity can then be translated to the rest of the world by means of the countries’ respective relationships with the foreign markets surrounding them.
c) Agents of Global Prosperity Management
In addition to specific countries, there are also agencies and paradigms that can facilitate the management of global prosperity. Two of these include the European Union (EU) and the North American Free Trade Agreement (NAFTA).
The EU consists of 27 member nations, whose membership is both economic and political in nature. Originally known as the European Economic Commission, it consisted of 5 members, including Belgium, France, Germany, Italy, Luxembourg, and the Netherlands. In order to be included as a member state, applicant countries were to accede to the treaties and submit their sovereignty to the collective representation of the EU. Furthermore, the Copenhagen criteria requires member countries to demonstrate a stable democracy, respect for human rights and the rule of law, and also a functioning and competitive market economy.
The EU is a well-organized entity, ruled by the European Council, and served by one representative from each member nation. The European Commission initiates legislation and oversees the Union’s daily operations. The EU is therefore a complex system of economic and political leadership, aimed at promoting the principles of democracy and fair trade among its member states.
In terms of foreign relations, these only became formal during 1987, by means of the Single European Act. According to this Act, the EU applied itself to create a single economic market across its member countries. One manifestation of this aim is the Euro, the single currency used by 16 of the 27 member countries. As such, the primary objective of the European Union is a common market (Mirea, 2009). In general, this has been favorable not only in terms of investments among the different member notations, but also for self-employed individuals, who are allowed to move freely among the member nations and thus increase their prosperity.
In this way, the European Union provides an economic platform for the prosperity of its member states and the individuals living in these states. It is a system where goods and services can be freely offered for profit and prosperity. In times of economic hardship, such as the recent recession, member states can also rely upon each other and the business conducted within the Union to form a buffer against economic hardship. The EU is however focused only upon the prosperity of its specific concerns, which are the European countries that are its members. It is not as concerned with alleviating poverty or promoting the economy of non-member states. It does however provide a good model of the successful management as well as the creation and perpetuation of multi-state wealth.
The North American Free Trade Agreement (NAFTA) focuses upon the United States, Mexico, and Canada. In terms of its purchasing power GDP, NAFTA is the largest trade bloc in the world. Its design was aimed at eliminating any barriers that hindered trade and investment between the three member nations. In other words, NAFTA operates on much the same principle as the EU, but only on a smaller scale.
However, NAFTA is representative of the above-mentioned friction and possible concomitant economic decline that threatens in cases of such friction.
III. ECONOMIC FRICTION and DECLINE
NAFTA has for example failed to adequately address the controversy surrounding agricultural trade, or indeed the issue of poverty in Mexico. Furthermore, friction has occurred as a result of the discrepancy between agricultural trade involving Canada and the United States, and that involving Mexico and the United States. Part of the reasons for the dispute is Mexico’s lack of investment in sufficient infrastructure for exports to the United States. Mexico’s lack of efficient highways and railroads is for example a barrier to competition. Despite this, the country’s agricultural exports increased substantially between 1994 and 2001 (Lederman, 2005).
A further problem is that, despite the increase of agricultural exports, Mexico’s poverty levels were not only perpetuated, but even exacerbated during this time. As a possible remedy, one suggestion has been lower commodity prices. A further factor that plays a role is the emigration. NAFTA also does not appear to be as well organized as the EU, in that periods of phasing in and phasing out tend to be very long and extended. Also, the infrastructure across the continent and between the member countries is problematic. People and services are not easily moved among the various countries. Although securing work and permits in the United States for Mexican and Canadian immigrants, NAFTA has also caused considerable concern in terms of legislation.
This is particularly the case in Canadian lawmaking. Several disputes resulted from NAFTA trading activities in the country. Such disputes for example include gasoline additives and possible related health concerns and nerve damage (Weintraub, 2004). Canada was also engaged in a long dispute regarding a 27% duty on softwood imports to Canada. This lasted for years before it was finally resolved in 2006. Significantly however, the decision was not ratified by either Canada or the United States (Weintraub, 2004). According to the U.S. Court of International Trade, imposing the duty was contrary to the United States law.
Other problems include the fact that Canada has lost more than 10,000 companies to foreign takeovers since NAFTA has been implemented. Furthermore, the agreement has been regarded as subject to a basic lack of democratic oversight and public opposition. Labor movement is both temporary and restrictive, particularly in the case of unskilled workers. When compared with the EU, it is clear that NAFTA has many more restrictions, while also not promoting the democratic and free implementation of trade agreements among the member countries.
NAFTA is therefore an example of a defective trade agreement among nations. It is modeled upon the ideals of the EU, but far from imitating them. NAFTA appears to perpetuate not only conflict, but also poverty. It does not impose any sort of consistent, measured, or democratic oversight in terms of economic activities within any of its member countries. As such, Mexico is allowed to perpetuate its poverty by means of unsound economic activity, while Canada continues to experience considerable conflicts regarding its trade agreements with the United States.
When contrasted with this, countries such as Spain and France are not subject to such problems, although they are certainly not free from problems or conflict. However, it must also be said that the United States is one of the most prosperous nations in the world. Indeed, some have gone as far as referring to the country as an economic world power. There is therefore no reason why it cannot arrange its international affairs in such a way as to manage wealth rather than cause conflict and poverty.
IV. RECOMMENDATIONS for MANAGING GLOBAL PROSPERITY
When considering recommendations for managing global prosperity, it is a good idea to conduct a comparative study of models that have proved successful as opposed to those that have not. The EU for example has worked well, whereas several factors surrounding NAFTA have resulted in considerable challenges.
A specific example of what might work well in terms of managing global wealth is companies that plan to export their services to other countries. Once again, this must be thoroughly regulated by entities such as the EU to remain as democratic and beneficial for all involved as possible.
In this regard, Scottish Southern Energy (SSE), might be seen as a model of a favorable foreign venture. The energy provider’s current business area is mainly the UK. Its plans are to expand to Spain and France not only to increase its own wealth, but also to provide a valuable service to the foreign market. Before SSE can do this, however, it must be aware of the various forms that such a venture could take, along with factors such as EU laws surrounding foreign ventures (CIA 2010), and also of the language and culture of the countries considered for investment. Hill (2009, p. 238) for example mentions the Foreign Direct Investment (FDI), where a company invests in foreign premises to produce or market a product in that country. This could occur either by merging with an existing company in the target country (Greenfield investment and acquisition), or by means of a Greenfield investment, which refers to the establishment of a new company. In the case of Canada, to name an example, many companies have been lost to Greenfield investments and acquisitions. It is most likely that SSE will prefer the Greenfield investment to maintain control of its own operations and technology.
In such a case, various issues need to be considered in the foreign country. When entering France for example, the company will need to translate its marketing campaign into French, as this is the country’s conversational language. Most French will therefore relate more easily to an advertisement in French than one in English. As selling points, the SSE can use its own reliability as a factor, while providing both reliable and renewable energy to customers.
As for Spain, Britannica (2010) notes that the culture and atmosphere are very relaxed. However, it is important to be punctual for appointments, although there is not much emphasize on time or deadlines. Furthermore, SSE officials would do well to prepare themselves for disorganized business negotiations. While English features more prominently as a conversational language in Spain than France, it is also a good idea to remember than documentation such as business cards should be printed in both Spanish and English. A note should also be made of business attire, which tends to be more formal in Spain than the other European countries.
In general, Spain and France are good targets for the SSE, as both countries are experiencing energy shortages. Spain’s rapid economic development specifically has placed it in a position of needing more fuel and coal, while being unwilling to obtain this from many foreign sources. If the SSE were to open a new business in the country, the import problem would be resolved.
The SSE is therefore representative of a company as vehicle for sharing global prosperity. It has enough resources to provide energy for its home country as well as foreign partners. Furthermore, it has a commodity that is needed in the foreign market, and can therefore viably expand to the global market. Furthermore, it has the advantage of a well-organized EU entity behind it.
While only the EU and NAFTA countries were considered, the principle of sharing global prosperity can be applied worldwide, and particularly in countries that are plagued by poverty and conflict issues. The EU provides the best model to do this. It is a politically and economically sound entity that provides its member states with both safety and freedom in all their ventures. It does not however specifically address the issue of poverty or other forms of conflict, either within its member states or in the rest of the world. Instead, and perhaps rightly so, the EU concerns itself primarily with enforcing its laws and regulations in order to maintain a sense of free trade and benefit for all.
A possible recommendation in this regard is then that several forms of the EU be brought about across the globe, and that one of the functions of these should be investigative. Personnel should for example be trained to investigate any poverty issues across their assigned area, country, or even continent. Such personnel could also work in teams or work groups in order to better investigate the issues concerned. Such investigations should then identify the areas of greatest need in terms of poverty or conflict issues.
Once this has been established, the business world should form the second leg of the investigation. The stricken areas will have to be investigated for viable industries that could create a supply basis for a demand. The size of this demand can range from regional to global. Once this has been established, established companies from more prosperous areas can be called upon to lead the way for a new company in the areas of concern.
Such investigations can also be implemented by the EU in order to ensure the even spread of industry and business across its member countries.
A futher possibility for managing world prosperity can also be in terms of non-tangible assets, such as peace or ideology. Many countries and their citizens are suffering not only as a result of the recession, but also of political conflict. The European Union and other entities like it can help to regulate such conflicts. Rather than for example imposing restrictive rules regarding membership, it could instead be concerned with mitigating political difficulties and imposing measures to force perpetrators to stand down.
There is no doubt that enough wealth exists on the globe to ensure than no hunger or poverty sees the light of day. However, powerful hindering factors that perpetuate poverty and hunger remain in existence. These include the inability to properly manage not only the asset of wealth in terms of money, but also in terms of organization and targeted research and mitigating measures.
In conclusion, successful entities and companies such as the EU and SSE should be closely investigated for factors that result in prosperity. This knowledge should then be applied on a worldwide scale in order to properly manage global prosperity for the benefit of all rather than just a few.
CIA. (2010). CIA — the World Factbook — France. Retrieved February 16, 2010 from https://www.cia.gov/library/publications/the-world-factbook/geos/fr.html
Dow Jones Sustainability Index. (n.d.). Retrieved January 10,2010 from http://www.sustainability-index.com/
Glass, a. (n.d.) World Economy Vertical vs. Horizontal FDI. Department of Economics,
Texas a&M University. Retrieved February, 22, 2010, from http://econweb.tamu.edu/aglass/VerticalVsHorizontalFDI.pdf
Hill, C. (2009). Global business today. New York: McGraw Hill. Part Four. Global Monetary System. Chapters 9, 10.
Kelly, E. (2006). Powerful times: Rising to the challenge of our uncertain world. Upper Saddle River, NJ: Wharton School Publishing. Chapter 7. Prosperity and Decline.
Lederman, D., (2005). “NAFTA’s Impact on North America the First Decade.” CSIS Press: Washington, USA
Mirea, S., (2009). “EU Structural and Cohesion Funds,” Business 2000. Retrieved on February 27, 2010, from http://www.business2000.ie/cases/cases_8th/case12.htm.
Scottish and Southern Energy [SSE]. (2010). About Us. Retrieved February 1, 2010, from http://www.scottishsouthern.co.uk/SSEInternet/index.aspx?rightColHeader=4&id=272&TierSlicer1_TSMenuTargetID=56&TierSlicer1_TSMenuTargetType=4&TierSlicer1_TSMenuID=6
Scottish and Southern Energy [SSE]. (2010). 2009 Annual Report. Retrieved February 18, 2010 from http://www.scottish-southern.co.uk/SSEInternet/uploadedFiles/Corporate_Responsibility/Our_Performance/Reports/Report_items/SSEAnnualReport2009.pdf
Scottish and Southern Energy [SSE]. (2010). Corporate Responsibility. Retrieved February 17, 2010 from http://www.scottish-southern.co.uk/SSEInternet/index.aspx?rightColHeader=40&id=290&TierSlicer1_TSMenuTargetID=80&TierSlicer1_TSMenuTargetType=4&TierSlicer1_TSMenuID=6
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