The Significant Areas of Business Opportunities in Spain - Assignment Example

Doing Business in Spain INTRODUCTION In the present competitive business scenario, business organizations are required to conduct an effective analysis of a market segment before commencement of business operations. Business organizations with the assistance of market analysis are facilitated in identifying different information in relation to culture, education, labor market and economy. Additionally, certain relevant information is required to be obtained in order to commence business operations effectively that include business culture, legal aspects, investment climate and business opportunities. In this respect, a new business venture with the assistance of the marketing analysis is able to conduct operations in accordance with business opportunities (Katz, “Negotiating International Business – Spain”). Spain is a member of the ‘European Commission Community’ and the membership of European Union (EU) facilitated the country to conduct barrier-free trade operations. In this context, the country is able to perform business operations with better growth opportunities. Moreover, with the advent of globalization, the country has been able to perform sustainably with better transparency as well as efficiency (Katz, “Negotiating International Business – Spain”). THESIS STATEMENT The assignment intends to highlight an overview of Spain with regard to culture, education, labor market and economy. Additionally, an analysis is conducted with the aim of obtaining adequate information in relation to the business environments in the Spain on the basis of business culture, investment climate, major industries, legal aspects i.e. labor laws and other laws, business opportunities, process of starting a business in Spain. The analysis further helps to understand the significant areas about business opportunities. 1. OVERVIEW OF SPAIN Spain is a member state of European Union and the country is officially recognized as Kingdom of Spain (Compare Infobase Ltd., “Spain Map”). Spanish culture is widely known for its Flamenco dance and music, beaches, bullfights and sunshine. Additionally, the people believes in developing relationship as well as respect (Don Quijote Salamanca S.L., “Spanish Culture”). Around 12% of the overall populations of Spain are foreigners of which around 47% belongs to European origin and rest is non-European. According to the article published by EURES, 60% of the overall populations of the country are identified as active workers. Spain has the fourth largest economy in the Eurozone in terms of business operations. Additionally, in terms of nominal GDP, the country is identified to possess a fifth and twelfth position in the Eurozone and global context respectively. In the past few years, the country suffers due to crisis in high job losses and negative growth. The article published by EURES revealed that GDP growth increased by 0.1% as compared to previous quarter of 2013, mainly because due to tourism sectors and development of service sectors. Labor market of the country faces severe structural problems due to unemployment and low-level education, which led towards an increased level of employee turnover and temporary jobs (EURES, “Short overview of the labour market”). The educational system in the country is segregated into three level nursery, primary and compulsory secondary educational system (AngloINFO Limited, “An overview of the Spanish educational system”). Around 54% of people, aged 25-64 possess a high-school degree. Correspondingly, around 53% of men and 55% of women are identified to complete high-school education (OECD, “Spain”). Financial crisis during year 2007 and recession during the period of 2008 have adversely affected the economic condition of Spain. However, in the late 2013, the growth trend with respect to GDP of the country is recognized to be around 3.7% t due to the contribution of private sectors and development of service sector. Additionally, barrier-free trade operations have assisted the country in conducting trading activities effectively, which helps the country to offset the decline in the domestic consumption and raise current account surplus. However, the unemployment rate persists to be a major problem in the country, which rises from 8% to 26% during the period 2007 to 2013. The Spanish government continuously provided ongoing efforts to uplift the economic growth of the country (EUbusiness Ltd, “Spain: Country Overview”). 2. BUSINESS ENVIRONMENT IN SPAIN Spanish business culture is identified to be homogeneous in nature, which have a significant impact on the business environment of the country. The Spanish people are very open-minded and communicative to develop a strong personal relationship. In Spain, the business culture has changed to a large extent owing to the fact that Spanish companies adopt techniques of modern management and foreign investment. However, certain business sectors operate business operations based on traditional style. Respect as well as relationship plays an important role for businesses, as Spanish people conduct businesses with trustworthy people. In this respect, business relationship exist people and not amid companies. In addition, personal relationship is recognized to play an effective role in developing a better business network for conducting business operations successfully. Thus, social and cultural values in the business environment of the country raise difficulty to establish new businesses or companies. The industrial sector in the country includes various plants of industrial equipment, food, automobiles, textile, railroad foundries, electrical engineering and diesel among others. Manufacturing centers are mainly established in the capital of the country, Madrid and some other parts of Catalonia Barcelona, Asturias and Basque. Furthermore, the northern region of the country is famous for its steel and iron works, engineering industries, shipbuilding facilities and chemical plants (Katz, “Negotiating International Business – Spain”; Passport to Trade 2.0, “Spanish Business Culture”). In the current scenario, Spains is one of the largest economies with high potentiality of growth and accordingly, many foreign companies are attracted to commence businesses in the country. In Spain, the automotive industry is an entirely foreign-owned, which operates in its market segments for better business opportunities. Additionally, different multinationals companies are controlling around half of the food production industries whereas, one-third part and two-third of chemical firms and cement sector are respectively privately owned. Furthermore, in the banking sector, there are several foreign banks performing banking operations and one third of its insurance market is under foreign firms control and ownership. During the period of 2012, the U.S. automobile firm Ford developed their production plant from Belgian to Spain. It reveals that Foreign Direct Investment (FDI) and globalization have the played a significant role in the growth of the country in the recent years. Finance Minister of Spain stated that the main object of the government’s is to increase attractiveness of various foreign investors towards the country. The legal system of the country provides an opportunity to foreign investors to conduct operations with 100% ownership facility and free capital transfers benefits. The country in the recent years has received substantial foreign investments in the sector of knowledge-intensive owing to its openness to global trade operations. FDI also tends to be an essence in sectors including energy, financial services and manufacturing. The business sector of Spain with the assistance of opportunities and advantages of co-operative working environment has been able to boost its economic conditions by developing better trade association with the US. In order to overcome from the financial and economic crisis in the period of 2007-2009, the Government of Spain (GOS) has significantly implemented reforms to enhance the labor market, reduce spending on health care and enhance the banking sector for better significant growth. In this context, it can be ascertained that the Spanish economy has countless scope and opportunity for business development (U.S. Department of State, “2013 Investment Climate Statement- Spain”). During the year 2014, it has been forecasted that 90% of the MNCs will increase or maintain investment levels in the country, which facilitates in improving employment ratio (1Invest in Spain, “Improved Foreign Investor Perception of the Business Climate in Spain”). Madrid, Valencia, Asturias, Oviedo, Catalonia, Biscay, Valladolid and Navarre are the major industrial regions situated in the northern and eastern part of Spain, which produces more than half of the industrial output for the country. A major industrial unit of the country is situated in Barcelona, due to which Spains economic is becoming one of the most important and emerging industrial regions in the European regions. In olive oil production, Spain holds the largest share in production apart from crops that include barley, tomatoes, sugar beets, wheat, vegetables, fruit, grapes, citrus and cork. Industrial segment in Spain has diversified business operations in different sectors which include machinery, iron and steel, food-processing and textile. Automobile and tourism sectors are the key contributors towards the GDP growth of Spain. In 2009, the contribution of automotive industry is estimated to be around 3.5% in GDP and provides 9% employment to total labor force while, tourism industry of Spain ranked 2nd largest GDP contributor, which is the main source of income for the nation (Economy Watch, “Spain Industry Sectors”). Madrid, Catalonia and Valladolid are the main industrial regions of the country for electronics manufactures, textile and automotive parts. Additionally, Valencia, Asturias and Basque Country are regions with enriched material resources. Atlantic coast regions are important source of economic development and source of livelihood for people due to the development of fishing industries (Diehl and Schumann, “Spain: Company & Industries”). Spain is the largest producer of lemons, orange and strawberries in Europe. Agriculture sector of the nations’ contributes around 3.4% towards GDP. The economy with the assistance of foreign investment and globalization have led towards its growth and become heavily depends on its industry and service sectors. The industrial sector contributes around 27% in the GDP of the nation while, 70% of the total productions were contributed by service sector (Economy Watch, “Spain Industry Sectors”). During the year 2012, Act 3/2012 was implemented in the labor law of Spain, which reformed the old Labor law to regulate the preexisting norms and flexibility in relation to various internal and external affairs of the business. The new regulation instantly changes the payment system of workers and modifies the legislation. The new legislation enables flexibility measures in terms of lowering various unfair trade practices. The Act surpasses the Royal Decree-law 3/2012, which aimed towards promoting various provisions such as employment of young people and reduce employee turnover for promoting efficiency in the labor market in order to reduce labor duality (Adarve Abogados SLP, “Current Framework of Labor Law in Spain”). Additionally, there are certain other laws, which are to be considered by companies in order to setup business unit in Spain are provided hereunder. Act 19 of 12 July 1988 on Auditing of Accounts Act 19 of 25 July 1989 on Partial Reform and Adaptation of Commercial Legislation to EEC Company Law Directives Commercial Code Restated Text of the Public Limited Companies Act Regulations governing the Act on Auditing of Accounts General Chart of Accounts Limited Liability Companies Act Mercantile Register Regulations Source: (PKF, “Doing Business in Spain”) Spain is 13th in terms of its size and an attractive target for FDI due to which the economy is identified as one of the potential opportunities for businessperson and investors. In a worldwide context, Spain is 9th largest recipient in term of FDI. The opportunity of growth and investment are opened in different market segments (2Invest in Spain, “Guide to business in Spain”). In order to raise the economic growth of the nation the government through various privatization programs controlled as well as regulated the entire market. In this respect, the market segments of Spain provide opportunities to the various investors and businessperson globally to setup business units in the country. Mostly due to high tourism industry based economy, it provides opportunity for developing tourism sector. Buying and renting property that include hostels, guesthouse and restaurants has led to the growth service sector immensely. Restaurants industry is one of the most popular business opportunities in Spain, as the tourism trade plays a significant role in the growth of the country in the recent years. Additionally, the development of various supermarkets for foreigners, computer repair shops, estate agencies, bookstores and bedding shops amongst others have assisted in building employment opportunity. (Startup Overseas, “Why Start a Business in Spain?”). The process of starting up new venture in Spain includes a series of step that are to be considered by an entrepreneur or businessperson. The following steps are involved in process of starting a business in Spain. An entrepreneur is required to obtain a ‘certification of uniqueness’ in the company name from the Mercantile Register, which take 2 days to complete and cost around €13.52 After which the proposed owner in the name of the company is required to open a bank account with depositing capital and obtain a certificate of deposit from the same Before notary, the public and owner must provide ‘deed of incorporation’, which consist of information regarding the shareholders, shareholders’ disbursement and share value nominated, ‘certificate of uniqueness’ in the company name and other needful information’s. The associated charges are approximately €500, depends on the complexity and share capital of the company Obtain the ‘Tax Identification Number’ (TIN) and submit ‘public deed of incorporation’ to Tax Authority Obtain declaration of exemption of tax from requisite authority. Spain government adopted Royal Decree 13/2010 article 3 Decree states that all the businesses regardless of size, the business unit’s setup with the aim of removing obstacles regarding competitiveness, growth and creating job are exempted from the Asset Transfer and Legal Documented Acts Tax File ‘public deed of incorporation’ to Mercantile Registry for registration, which takes 6 to 15 days of time and charge is based on the complexity of business and share capital, which is generally between €155 to €300. Once the process of registration completed company gets its legal entity and find its existence in the official journals of Mercantile Registry Legalization of the company book, which is a formal obligation not prerequisite In order to start the operation, company must notify and submit the declaration to various private authorities of municipality, which cost around €350 depends on the size and area of operation Registering social security of the company and affiliate the employees with ‘General Treasury of Social Security’ Notifying the autonomous community within the 30 days of opening or starting up of activities Source: (International Financial Corporation, “Starting Business in Spain”) CONCLUSION From the above discussion, it can be comprehended that Spain is one of the largest and emerged economy in the world with high potentiality of growth for foreign companies to setup in the country. Tourism and industrial sectors are the key driving sectors behind the growth of the nation in the recent years. However, the unemployment is still the major problem in the nation. In order to overcome issues relating to financial consideration, job market and economic crisis in the country, the government has significantly taken major reform through legislating privatization programs. In this regard, business opportunities have attracted large number of investors and business units to setup business and invest in the country for better growth prospects. It has been observed that investors in making investment decision and to setup businesses are required to conduct a market analysis in order to have immense knowledge about the business environment of Spain. Nevertheless, process of developing a new business in Spain involves a series of steps that must be considered, so that business operations are conducted legally. Thus, it can be concluded that focus on the business environment is essential in order to identify business opportunities and accordingly, starting business to ensure high potential growth while, mitigating the risk factors thorough effective uses of available opportunities and resources. Works Cited “An Overview of the Spanish Educational System.". AngloINFO Limited. 2014. Web. 21 Jul. 2014. “Current Framework of Labor Law in Spain.” Adarve Abogados SLP. 2014. Web. 21 Jul. 2014. “Spain Map.” Compare Infobase Ltd. 2014. Web. 21 Jul. 2014. “Spanish Culture.” Don Quijote Salamanca S.L. 2014. Web. 21 Jul. 2014. Diehl, Jenny and Schumann, Jack. Spain: Company & Industries. 2014. Web. 21 Jul. 2014. “Short Overview of the Labor Market.” EURES. 2014. Web. 21 Jul. 2014. “Spain: Country Overview.” EUbusiness Ltd. 2014. Web. 21 Jul. 2014. “Spain Industry Sectors.” Economy Watch. 2010. Web. 21 Jul. 2014. “Improved Foreign Investor Perception of the Business Climate in Spain.” 1Invest in Spain. 2014. Web. 21 Jul. 2014. “Guide to Business in Spain.” 2Invest in Spain. 2013. Web. 21 Jul. 2014. “Starting Business in Spain.” International Financial Corporation. 2014. Web. 21 Jul. 2014. Katz, Lothar. Negotiating International Business – Spain. 2008. Web. 21 Jul. 2014. “Spain.” OECD. n.d. Web. 21 Jul. 2014. “Doing Business in Spain.” PKF. n.d. Web. 21 Jul. 2014. “Spanish Business Culture.” Passport to Trade 2.0. 2013. Web. 21 Jul. 2014. “2013 Investment Climate Statement- Spain.” U.S. Department of State. 2013. Web. 21 Jul. 2014. “Why Start a Business in Spain?” Startup Overseas. n.d. Web. 21 Jul. 2014. Read More