European Business - Coursework Example

European Business Table of Content Introduction 3 Methodology 4 Findings 5 Recommendation 10 Conclusion 10 Reference 12 Introduction The present global economic turmoil has disturbed economic fundamentals of almost all the countries around the world, though the degree of its impact was different on different countries. European Union, because of its strong fundamentals and proactive governmental policies managed to face the economical slowdown in much better way as compared other big economies. Effect of this economic slowdown was strongly seen on labour market in European Union. The economic output contracted marginally by 0.2% in the third quarter of the year ended on 2008 and numbers of unemployed peoples has increased due to downfall in economic growth. All these factors had negative effect on labour market; thus employment growth rate came to zero on quarter to quarter basis (E.C. “Economic slowdown hits labour market”). The slowdown in labour market clearly indicates that manufacturing sector got most affected and effect of financial crisis is clearly visible on the trade sectors. Thus the risk related to businesses has increased by many folds, but there are many sectors which have shown sign of opportunity even in such gloomy economical environment, one of such sector is tourism sector. Just before the onset on global economic recession, this sector was booming in EU, and even in the present state, it has possibilities to maintain a sustainable growth. Methodology The most important question at present is that, what are the opportunities and risks which a business is facing at present? From the data released by different government agencies around the world it has been found biggest threat at present is financial crisis. In US lots to people have lost their job and the ones who still managed to retain their jobs are facing cut in their salaries. Thus they are left with very little disposable income. At present demand for consumer durables and for FMCG products has gone down; companies have to cut their production rate and to boost demand they have to compromise with their profit margin. Condition is equally bad for service industries, as they too are facing reduction in demand. Almost all the sectors are facing a sharp competition within their own sector and also with other industries. Impact of global crisis is not that harsh on developing countries like India & Indonesia who still managed to have moderate economical growth. Reason behind is simple, as their economy is not too much dependent on export, unlike Japan and few other South East Asian countries, hence effect of global crisis is mild on them. In the developing nation per capita income is increasing so people’s living standard is also going up. Demand still being high, made them center of attraction for all major multinational companies. So these markets provide great opportunities to both the market giant multinational companies as well as to the new entrants (Bloomberg press. “Asia, EU Can Weather Economic Slowdown, Officials Say”). Like other industries, these developing courtiers are center of attraction for hospitality industry. Through travel and tourism a nation can earn huge foreign currency, can create new job opportunities, and hence can overcome their economical downfall. So tourism industry can be the best suited industry for Bulgaria. Findings To analyse the future opportunity which tourism industry offers in Bulgaria, PESTLE is conducted. Political Environment- Bulgaria had faced political coalition, financial crisis and dried investments for many year, but thing got changed after Todor Zhivkov tool control of People’s Republic of Bulgaria who had considered as the most loyal of Soviet satellite states. In Bulgaria top tax rate is just 10% and the country provides highly attractive pro-business fiscal regimes. Also from 2007, the country has become member of European Union, which helped the country to attain stability in their political environment (Lynn. “Rich Bankers Have Ways to Escape U.K. Tax Bite: Matthew Lynn”). The general election of this year has won by Bulgarian opposition leader Boiko Borissov, who is head of GERB party and he will soon be making the next coalition party. The new government has plans to uproot corruption which is one of the biggest problems of nation from last 11 years. New government is trying to take loan from International Monitory Fund (IMF) & World Bank for economical development and from 2012onward country will adopt Euro as their official currency. New Bulgarian government is also making plans to reduce huge fiscal deficit so that pressure on government can be reduced down and they can make new investment for setting up better infrastructure (Konstantinova. “Borissov Plans New Bulgarian Cabinet After Election”). Economical Environment- it has been found that economical environment is improving in Bulgaria and rate of economical development will accelerate as soon the new government comes into action in their full form. As per the data provided in Global Enabling Trade Report 2009 published by World Economic Forum, rank of Bulgaria is 72, which is above many big economies like Mexico, Egypt and India (Babic. “Singapore Tops WEF’s Global Trade Ranking Index”). The new government has planned to make improvement in economical sector, as the economical growth has reduced to 3.5% for the year ending 2008. The country had many big plans for developing the industrial sector, but due to global recession many of them got postponed. One such project was Black Sea Steel Plant which an Austrian company, Voestalpine AG that was to star shortly, but considering the present economical state Voestalpine AG made a decision to delay it until global economical condition improves. As per this agreement, the country was to provide land and infrastructure facilities where as Voestalpine AG was to make investment. When ever this project starts, it will improve the economic condition and will generate employment opportunity. IMF has made forecast that Bulgarian economy might face deeper recession and economy will sink to 7% in 2009. Due to fall in demand of export, Eastern European economies has faced the heat of recession; Bulgaria’s industrial production dropped to 22.1% in May, which was eighth consecutive monthly fall; metals, mining and quarrying are also suffering with weak demand and retail sale dropped to 10.4% in May 2009. New government will get loan from IMF and World Bank at the end of 2009 or in the beginning of 2010, so there is a possibility that economical condition will improve at faster rate (Konstantinova. “IMF Sees Deeper Recession in Bulgaria on Output Slump”). Social Environment- Bulgaria occupies central Balkan Peninsula of South Eastern Europe. Bulgaria shares its boarder with Romania, Danube, Yugoslavia, Turkey, Greece and Macedonia. The country got beautiful mountains, which are one of the tourist attractions and biggest asset for Bulgaria. In the south east of the country there are two alpine ranges called Rila and Pirin and in the further east Rhodope Mountains. Strandja form the largest mountain in southeast with few hills in Dobrudja. Along with these, country got extremely beautiful landscapes and beaches like the Black Sea Coast, situated on the eastern coast which is famous for its fine sand beaches and perfect temperature. Many small and large resorts, sea town and villages provide tourists an opportunity to enjoy their sea holiday in the best possible way. To add to the beauty of place, there are 600 natural mineral springs whose water temperature ranges from 20 to 60 degree Celsius and tourists find many baths and spa resorts at these sports (Guide-Bulgaria. “Bulgaria”). Bulgaria occupied an important position in transportation regarding its geographical location. Many Trans-European corridors run though the country; with total length of its roads around 102,016 km and many motorways are under plan which will soon be started. Till date, length of Bulgaria’s railway tract is 6,500 km where almost 60% got electrified. A high speed railway will operate from 2017and government have already undertaken some big project for modernisation and electrification of tracks. Bulgaria has 6 official international airports and few major extension plans are to be started in future. Country also has some important ports to support fishing fleets. In Bulgaria people are close to each other and to their native culture. Most Bulgarians follows Christianity and few are followers of Islam. The country has slow population growth with low fertility rate in women. Their culture is full of colourful customs and rituals which is one of the major attractions for tourists. Due to warm environmental condition, its ideal for vegetation and country offers exotic range of fruits, vegetables and herbs. Bulgaria does not have large reservoirs of oil and natural gas, but the country is rich in metals and mineral. They also produce electricity, but due to economical turmoil going throughout the world, demand in these sectors has gone down. Technological Environment- The technological environment is not highly developed in Bulgaria. Its high-tech industries can be grouped into three categories: high-tech manufacturing sector which comprises of machinery & computers, radio, television, communication equipment& apparatus; medium high-tech manufacturing sector which includes chemicals, machinery & equipment, medical & optical instruments, watches, clocks, motor vehicle and other transport vehicles; high-tech sector of services takes into account post & telecommunication, computer related activities and research & developments. To attain high economical growth, a country has to be competent in technological sector. There are several factors which have positive as well as negative impact on Bulgaria’s technological environment such as co-operation between institutes, foreign trade regime liberalization, average level of customer tariff, stable currency exchange rates, stable banks, well distributed telephone lines; where as the factors which make negative impact on growth of technological environment are intellectual property protection, hindrance in distribution of personal computers, import barriers, difficulty in getting credit for technological up-gradation, poor performance of stock exchange, slow development of financial market and venture capital, administrative and bureaucratic barriers in starting new businesses, ill developed taxation system and high degree of corruption, insufficient use of internet and e-trade are the few factors which are responsible for lack of competitive technological environment (Ministry of Economy. Pp 11). But there is a high possibility that new government will bring some vital improvements in technological sector of the country. Legal Environment- As per World Bank, before actual compensation against a lawsuit filed is made; it requires 34 procedures and 440 days. Court fee and cost for enforcing a contract is as high as 14% of the actuate debt; it takes 3.3 years to file bankruptcy in court; creditors recovery rate is $0.34 per USD in Bulgaria. According to the report provided by CGAP, Bulgaria lacks a special court for micro finance and for financial activities there is only one article in the Act. In the report given by the Peoples Group, Microfinance Institution (MFI) is not regulated by Bulgarian National Bank (BNB) and MFIs and credit cooperatives cannot accept any deposits. There are some banks which provide microfinance credit to small and medium enterprises (SME) through government guarantee fund. The new government has to introduce necessary changes in country’s legal structure so that economical development can occur at much faster rate (Year Of Micro Finance. PP 2). Good thing about the legal environment is that corruption which was the biggest threat to county’s development is now under control, so peace and prosperity are back in Bulgaria. Environmental Environment- Bulgaria is a beautiful country of mountains, sea beaches and natural springs. Because of low environmental pollution, its natural beauty is still preserved. All this make Bulgaria an attractive tourist sport. Recommendation On the basis of PESTLE analysis, it has been found that Bulgaria’s economic growth rate has declined due to global economic crisis. Demand for minerals, metals and electricity has gone down and downfall in export will not be recovered until the financial crisis in all major developed countries is over. Industrial sector may take longer phase to overcome the impact of global downfall, so other growing opportunities should be taken into consideration. As compared to developed countries, condition is comparatively better in developing countries in terms of economical stability and growth, thus tourism industry of Bulgaria should come up and set their focus on these developing nations. Conclusion The new government of Bulgaria is trying to over come corruption problem which is prevailing in country from many years. Government is also trying to arrange loans from IMF and World Bank so that they can improve infrastructure with in the country. Government has a plan to bring some alteration in present legal system and to revive financial market. Easy credit facility will be introduced to benefit Small and Medium Enterprises. Airline industry has reduced their fare and different offers are being provided to increase the number so travelers. Also, many renowned hostels are giving huge discounts to attract more and more peoples. All this creates a positive environment for tourism industry to grow and to flourish. By taking advantage of these changing situations, they can arrange different tour packages to further attract tourist from developing countries. It’s true that Bulgaria has many beautiful locations to attract tourists around the world, but by taking the changing taste of people into consideration, different theme parks can develop, which will offer more fun to thrill loving people; different restaurants can come up who will not only offer the traditional food, also different international cuisine will be served. Small and medium size resorts can attract more tourists if they set their interiors as per the Bulgarian culture so that tourist can have an experience that how colourful is the countries culture. Thus it can be concluded that tourist industry have bright future in Bulgaria even in the phase of economic recession. Reference European Commission. December 19, 2008. Economic slowdown hits labour market. July 15, 2009. Bloomberg press. Asia, EU Can Weather Economic Slowdown, Officials Say. June 16, 2008. Bloomberg com. July 15, 2009. Lynn, Matthew. “Rich Bankers Have Ways to Escape U.K. Tax Bite: Matthew Lynn”. April 28, 2009. Bloomberg com. July 15, 2009. Konstantinova, Elizabeth. “Borissov Plans New Bulgarian Cabinet After Election”. July 6, 2009. Bloomberg com. July 15, 2009. Babic, Marco. “Singapore Tops WEF’s Global Trade Ranking Index”. July 9, 2009. Bloomberg com. July 15, 2009 Konstantinova, Elizabeth. “IMF Sees Deeper Recession in Bulgaria on Output Slump”. July 10, 2009. Bloomberg com. July 15, 2009. Guide-Bulgaria. “Bulgaria”. 2006. VisitToBulgaria.com. July 15, 2009. Ministry of Economy. “Analysis of the Bulgarian Technology Development”. 2001. German Agency for Technical Co-operation (GTZ) Center for Economic Development (CED). Year Of Micro Finance. 2005. Country: Bulgaria. July 16, 2009. Read More