Preperation for Transferring 25 Employees to France for Business - Research Paper Example

? Preparation for Transferring 25 Employees to France for Business October 7, Dr. Bob Pryor Shondrea A. James Subject: Proposal to Research and Make Recommendations on the Feasibility of transferring employees to France Dear Sirs, With regards to your request for research into the feasibility of transferring twenty five employees from your company Viva Electronics to work in France, please find below a detailed report of the research and subsequent recommendations. The recommendations were made after weighing the pros and cons of doing business in the country, which was necessary for the study to determine how attractive France as a market would be for your company. With the knowledge of this, the company will also be better prepared for any uncertainty and eventualities in the French market. Per the request made to determine the current political, business, and economic conditions in France, this research report gives a detailed account of the same in light of its importance to the ability of the employees to function in a new culture. The request necessitated a survey of the socio-cultural environment in France, including details of communication protocols and etiquette, French social life, and their business etiquette. These three factors will have a significant effect on the ability of your employees to be productive in France. Communication is especially important given that the French consider good communication skills as a sign of education and intelligence. For this reason, I investigated how written, verbal, and non-verbal practices can affect daily life, social interaction, and business operation. My preliminary recommendation is that the transfer of employees is feasible, particularly because your company already has some presence in the French market. If you do decide to go act on the recommendations and transfer the employees, the research findings and recommendations cover possible scenarios and eventualities. It is my hope that the research report will form part of your guidelines in preparing your employees for the challenging but exciting socio-cultural changes and new business practices. V/r Shondrea A. James Executive Summary This research report sets out to attain three major objectives; to determine the economic situation in France, to find out the best business practices that employees moving to France would need to adhere to, and to identify opportunities and risks that would come with expanding the company in France. The paper also discusses the economic situation in France, French labor laws, and the country’s socio-cultural environment with information on these collected via primary and secondary means. As a senior member of the European Union, France is one of Europe’s and the world’s leading economies. The government maintains strong presence in some industries like public transport, power, and defense, which means that the electronics industry will have to make with some government regulation. The research study found that the labor costs in France have been increasing steadily over the past ten years, while their tax rates are similar to those of other countries with similar GDP to theirs. France is made up of a Latin and Celtic majority with several minority communities including Basque and North Africa. When communicating in France, it is important to note that verbal, non-verbal, and written communication is very important and have specific rules. With regards to their social life, the French value their food, take care of their families, take parenting seriously, and are generally private people with social stratification. Finally, business etiquette is very important with appointments being mandatory and their cancellation or delay requiring communication. The electronics industry is highly competitive in France with examples of the top brands including Mdp Finance, Navimo Group, Ten Power Industry Co., Laboratoire Biopharne, and Sealing Package Industrial. While the competition is tough, the French electronics industry has been losing steam in the last two years although the first two quarters of 2013 have seen improved sales and revenues for electronic companies. Finally, the paper also makes some recommendations in case the company decides to move on with the transfer of its employees. PREPARATION TO TRANSFER 25 EMPLOYEES TO FRANCE FOR BUSINESS 1. Introduction A number of companies from around the world have expanded into France in the last few years, particularly in the electronics and electronic component industry. However, French laws in the same time have tended towards anti-immigration, which has disadvantaged foreign workers seeking employment in France, particularly during the mandate of the political right (Weigand, 2011). The government of President Hollande has loosened the nationalist control on labor somewhat and it is now easier for Viva Electronics to transfer their employees to France. It is now possible to work in France if the company can prove that the employees possess specialist skills. In addition, since the company is registered in France as well, the employees can transfer them to France since they can obtain work permits much easier than foreign companies can (Weigand, 2011). Since the employees the company is sending to France are specialists with excellent academic credentials, there does not seem to be a reason to believe that they will be denied work permits. The research report set out to attain three objectives. First, it was important to determine the economic situation in France. Second, the research study set to find out the best business practices that employees moving to France would need to adhere to. Finally, the research study also set to identify opportunities and risks that would come with expanding the company in France. By focusing on the economic situation in France, French labor laws, and the country’s socio-cultural environment, the report seeks to provide a detailed view of what the employees should expect. The information was collected through primary and secondary research to gain insight of the country’s general situation and current information. 2. Economic Survey of France As a senior member of the European Union, France is one of Europe’s and the world’s leading economies. The government maintains strong presence in some industries like public transport, power, and defense, which means that the electronics industry will have to make with some government regulation (Deloitte, 2012). The country is also ranked 34th with regards to ease of doing business. a. Cost of Labor In France, labor costs increased from 115.111 index points in 2012 to 117.40 index points in the current year. From 1960 to 2012, the labor costs index points averaged at 62.71 with its lowest point in 1960 at 9.66 and its highest point in 2013 at 117.40 (Deloitte, 2012). Country Category Dates Actual Highest Lowest Unit Frequency France Labor Costs 1960 - 2013 117.40 117.40 9.66 Index Points Yearly In the 2nd quarter of 2013, salaries and wages appreciated by 1.0%, while the same had only increased by 0.1% in the first quarter. The labor cost index appreciated by 2.2% in year-on-year changes for salaries and wages (Deloitte, 2012). The hours worked did not change with year-on-year changes at 0.0%.Wages appreciated in the electronics industry by 1.2% in the 2nd quarter of 2013, while the year-on-year changes were +2.5%. Wages, however, decreased in storage and transportation, which reduced the logistics cost (Deloitte, 2012). The graph below shows the trend in minimum wages for France between mid-2007 to mid 2013. Figure 1: Trend in the Rise of Minimum Wage in France (The World Bank, 2013) b. Paying of Taxes In France, the Parliament determines taxation via a vote on the yearly budget. Parliament determines the quasi-taxes and taxes, as well as rates, which are to be applied. The taxe d’habitation is a local property tax that is charged to all living in a French residential property (Carroll, 2012). The taxe fonciere is another local tax paid by those who own French homes. In addition, residents of France pay income tax on their worldwide tax, while non-residents have to file annual income tax returns fro income made from property in France. There is also the Capital Gains Tax at 16% for people selling property. A foreign country’s taxation policy has a direct effect on the ease of doing business (Price Waterhouse et al, 2009) (Carroll, 2012). From the table below, French taxation ranges on the average of other high-income countries. Summary of French administrative burden and tax rates Indicator France OECD High Income Average Payments (number per year) 7 12 Time (hours per year) 132 176 Profit tax (%) 8.2 15.2 Labor tax & Contributions 51.7 23.8 Other taxes 5.7 3.7 Total tax rate (% profit) 65.7 42.7 (The World Bank, 2013) 3. Social Cultural Environment France is made up of Celtic and Latin majority with Basque, Indochinese, North African, Slavic, and Teutonic minorities. Majority of religious people are Catholic with minority Protestant, Jewish, Muslim, and pagan. French is the official language of the country with 3% speaking German dialect, 0.2% speaking Flemish, 1.7% speaks Italian, and 0.1% speaks Basque (Pybus & Sims, 2008). Arabic is the third largest spoken language at 3%. a) Communication In France, verbal communication is conducted in a questioning, direct, and probing style and most prefer to communicate in French despite their knowledge of English (Pybus & Sims, 2008). Lack of fluency in French could count against a foreigner and it is essential to learn French. In business, the French prefer to use titles and, therefore, the surname is used after Madame and Monsieur, and no first names are allowed. Non-verbal communication is just as important and they judge people according to how one is dressed. It is, therefore, important that foreigners are conservatively, stylishly, and tastefully dressed as this reflects status and success. Lunch, which normally consists of coffee, dessert, cheese, and the main meal with wine, is used for business relationship building. Finally, written communication is formal and follows protocol. The ability to write correctly is a sign of intelligence and education (Pybus & Sims, 2008). b) Social Life The French treat food passionately with careful preparation, high refinement, and use of fresh ingredients. The French also take family seriously and extend financial and emotional support to family members (Pybus & Sims, 2008). They also have a practical approach to marriage despite their romantic reputation, while they take their parenting roles quite seriously. Finally, the French have different behavioral rules for different social classes and are generally private people. While they are usually polite, they are rarely free when surrounded by strangers. Friendship among them involves frequent contact (Pybus & Sims, 2008). c) Business Etiquette Business meetings require appointments that should be made some two weeks in advance. These appointments must also be made by telephone or in writing, which is dependent on the level of authority one is meeting (Sabath, 2010). In addition, August and July are normally considered vacation periods and only essential business is transacted then. The French also expect delays to be communicated via telephone and explained, while their meetings are meant for discussions, rather than decision-making. Finally, the French do not appreciate hyperbole or exaggerated claims (Sabath, 2010). 4. Industry Survey a) Competition One of Viva Electronics’ biggest competitors is Mdp Finance, which makes and distributes hand-held video games, fire cards, amplifiers, consumer electronics, and video game accessories. Navimo Group is another competitor in the same industries and they deal in general industrial equipment, garden filters, home filters, and consumer electronics (Price Waterhouse et al, 2009). Ten Power Industry Co. sells consumer electronics, cameras, filters, and chemicals. Laboratoire Biopharne and Sealing Package Industrial are also major competitors in this market and deal in consumer electronics, camera and camera accessories, and film packaging (Price Waterhouse et al, 2009). In order to be competitive, Viva Electronics will have to diversify its product range. b) Legal Requirements The Waste Electrical and Electronic Equipment Directive requires that all electronic equipment manufacturers provide their consumers with free collection and free recycling of their electronics equipment (Campbell & Campbell, 2011). The Restriction of use of hazardous substances in electronic or electrical equipment Directive bans use of lead, cadmium, PBB, PBDE, hexavalent chromium, mercury, and flame-retardants. In addition, American nationals will be required to have valid French work and residence permits (Campbell & Campbell, 2011). Finally, knowledge of French is mandatory for one to work in France. c) Suppliers The main suppliers of electronics components in France include CTR Manufacturing Industries Ltd. and MFR Electronic Components Private Ltd. CTR is based out of India and produces and distributes plastic film capacitors, electronic components, special applications capacitors, power electronics capacitors, standard film capacitors, and X and Y capacitors (Campbell & Campbell, 2011). MFR Electronics is also based in India and it manufactures all kinds of resistors. d) Performance of the French Market In 2012, the French electronics industry’s output dropped by 1.7%, although this has climbed in the first and second quarters of 2013 by an average of 0.7% (Price Waterhouse, 2012). The introduction of EU fiscal consolidation in 2012 resulted in the output drop and this is expected to recover as the fiscal consolidation’s effects putter out. It is expected that the electronics industry will benefit from 2013’s improving economic environment, although this is expected to really take hold early next year. It is also expected that the electronics industry in France will be dominated for the foreseeable future by wireless and fixed communication with both accounting for 30% of 2012’s total output, which was, however, a drop from 2002’s 40% (Invest in France Agency, 2012). 5. Pros and Cons of Transferring Employees to France I would recommend that it is feasible to transfer the employees to France. There are some impediments to the transfer of these employees that should be considered, however. One of these is that, if any of the employees is earning over eighty five thousand USD a year, they will have to file their taxes with the IRS (Weigand, 2011). Even those who do not earn this much will still have to file with the IRS, although they do are not taxable. In addition, it will be important to speak French and if any of the employees does not speak passable French, they could suffer a cultural hangover as French is the official and national language used in all business dealings and contract issues. While the French do speak English, they are not very tolerant of those who they feel are not putting in the effort to learn French. However, even with these challenges to transferring the employees successfully, I feel that these problems are not peculiar to France alone. These are problems, which people and companies can face when moving to any new country, such as homesickness, distance from loved ones, and culture and language barrier (Weigand, 2011). Various advantages will come with transferring the employees to France for business. First, the change of location, meeting new people, and seeing new technologies may lead to innovative practice. Second, it is very easy to access EU countries from France in case there is transnational business to be carried out. Finally, it will also be possible to expand to other countries in the EU once the employees have French work permits (Weigand, 2011). 6. Conclusion and Recommendations Viva Electronics finds itself at a crossroad, as it must decide on whether to transfer employees to its French operations. The cold economic climate that swept through France and the world in 2008 has challenged the traditional social and social models of the country. However, much of French culture remains alive and well it will be essential to be versed in the French way of life if the employees are to succeed in France. The economic situation in France is improving as the EU fiscal consolidation favors the bigger economies and France is due to benefit greatly. The climate is also positive for the electronics industry with forecasts of growth. The employees would also have to adhere to French best business and social practices in order to fit in. the labor laws have been relaxed, particularly for foreign workers, with the exit of President Sarkozy and the entry of the Socialist President Hollande. Therefore, overall, the climate at present is right to transfer the employees to work in France. a) Recommendations It is my hope that this report has made a good case for the feasibility of transferring your employees to work in France. If so, below are some of my recommendations; It is important to note that the French refer to each other by their surname and title, i.e. Madame and Monsieur. It is important that they realize that the French do not use their first names except among friends and when is invited to do so. The employees must also understand the French working week, which is thirty-five hours. These working hours do not have any lunch breaks. This thirty-five hour week is suitable for employees who have tasks equal to the time allotted. In addition, all employers respect these working hours. One’s qualifications are more important than their experience and this should be stressed when creating social business networks. The country’s organizations can tend to be more technocratic and this infects foreign companies. Hierarchy is very important in French business structure. Viva Electronics must be aware of the wage structure in France since government regulations sets these minimums and they must be respected by local and foreign companies. Speaking French is a must so the employees must have sufficient French vocabulary. It would also be prudent to take out insurance for the employees. Opening bank accounts would also be a good idea to save off commissions and charges from US banks. For employees planning to stay for more than a year, setting up a long-term bank account is a good idea. References Campbell, D., & Campbell, C. T. (2011): Legal aspects of doing business in Europe. Salzburg, Austria: Yorkhill Law Pub. Carroll, M. B. (2012). Taxation of business in France. Washington: Gov. Print. Off. Deloitte (2012): Doing business in France: A guide for the foreign investor. New York: Deloitte Haskins & Sells. Invest in France Agency (2012). Doing business in France: Retrieved on 10/6/2013 from; http://www.invest-in-france.org/Medias/Publ:cations/862/doing-business-in-france-english-version-october-2012.pdf Price Waterhouse (Firm): (2009). Doing business in France. New York: Price Waterhouse. Price Waterhouse (Firm), Price Waterhouse (Firm), & Price Waterhouse World Firm Services BV, Inc. (2012): Doing business in France. New York: Price Waterhouse. Pybus, V., & Sims, J. (2008): Live & work in France. Richmond: Crimson. Sabath, A. M. (2010). International business etiquette: What you need to know to conduct business abroad with charm and savvy. Franklin Lakes, N.J: Career Press. The World Bank (2013): Doing Business 2013: France. Washington: The International Bank for Reconstruction and Development. Retrieved on 10/6/2013 from; http://www.doingbusiness.org/~/media/giawb/doing%20business/documents/profiles/country/FRA.pdf Weigand, R. E. (2011). Doing business in France. Chicago: DePaul University, College of Commerce. Read More