Doing Business in Spain - Case Study Example

Doing Business in Spain Doing Business in Spain Introduction Running a business overseas involves numerous challenges, and it demands extensive knowledge in the socio-economic and cultural background of the destination as well. In other words, it is important to know the factors that may hinder or foster the proposed business abroad. This paper finds that Spain is a potential destination with unfathomable resources for any aspiring businessman or organization. Obviously, obtaining information about the country’s vast resources alone would not be sufficient; instead, one should look into the social factors as well as the cultural elements, which too play a significant role in the country’s overall economy and business environment. It is also important for an organization/individual to compare the business opportunities of two or more selected countries before it determines the location, because a close market analysis would bring out the manifold opportunities available in the selected countries. The Second Phase Once the business destination is decided, the next important step is the selection of the possible items on which the business might have a sustainable growth. It is to be noted that the culture and lifestyle of the land can also affect the business very much. For example, if the land has a vegetarian culture, then it will be disastrous to start a business that deals with non vegetarian items. On the other hand, it will be a wise decision for a firm to start up something that deals with vegetarian food and Beverage. Although food and beverage is a potential industry in Spain, it is not an easy task for a new entrant to get into the business because of several reasons. The Spanish Culture & Political Economy The Spanish culture is very much connected with their way of living and the food and drink they take. It is the Spanish custom to eat mostly fresh vegetables, and they seldom go for anything that is not fresh or stale. Their food normally includes fresh vegetables and fish products. They like to go to e pubs and have a beer in the evenings. Knowing their own culture very well many native entrepreneurs have undertaken great business tasks across Spain. There exist a large number of hotels and restaurants mostly run by the natives (Countries & their cultures, n. d.). They really pose challenges to new market entrants. The Hotel Murmuri, located in the very center of Barcelona, the Hotel Majestic at Paseo de Gracia, Eurostars Hotels etc. are some of the most prominent hotels in Spain. They even have an innovative decor in tune with the exterior image of the building, so as to attract the tourists. They know the pulse of the tourists and arrange everything for their happy and comfortable stay over there. The modern constitution has defined the land into seventeen autonomous regions having their own regional governments and budget; and the secretario local or civil recorder, in each municipality, is ‘the most local representative of national government’ (Countries & their cultures, n. d.). This new division in fact gives a boost for the local entrepreneurs to start small level hotels at their local levels. Since they know the eating habits of the people, it is easy for the local entrepreneurs to deal with the food and beverage industry. Spain being a member of NATO (the North Atlantic Treaty Organization) follows European economic policy. Now the land is open to the global market and anyone can take any sort of business in it provided that one complies with the regulations of the country. Earlier this was not the case as only a few countries were able to have trade with Spain (Business in Spain, n.d.). This indicates that Spain offers a favorable business environment for foreign investors as well. However, there are certain things a foreign investor should be careful about. In Spain the intensity of corruption is very high. Their norm is non-documentation which means that they scarcely settle down in written documents but only through undocumented cash. The vast majority of the people prefer to make no bills for their purchases. Thus both consumers as well as the dealers seek every means to get rid of VAT in its entire form. As Chan and Sparkes (2012) reported in the Telegraph, in order to raise €22 billion, and put Spain on track to meet its EU-agreed deficit targets until 2014, the government made a hike of value-added tax. But this act of the government still proves to be in vain as Spain continues to be on the top of the list of those most corrupted countries of the world. This is clear from the information we get from the Transparency Agency. It is estimated that around €18 billion a year is lost due to VAT fraud.(1) Evidently, this situation will raise notable challenges to new entrants. Business in Spain: Main Scopes The following diagram reflects the industrial position of Spain in the world (Source: Economy Profile: Spain, 2012) The chart indicates that Spain is rapidly developing to be a potential destination for doing business even though the country’s current position is not satisfactory as compared to other industrially developed economies like US and UK. The vast scope available in the field of industry includes textiles and apparel as well as foods and beverages. The productive industry also includes metals and metal products, chemicals, ships, automobiles, machine tools, clay and refractory products, footwear, pharmaceuticals, and medical equipment. Most of the textile industries are situated in the Madrid region; in Valladolid or in Catalonia. Tourism constitutes a major part of Spains income. Tourists from all over the world visit Spain for its marvelous beauty and charming coastlands of the Atlantic Ocean. Millions of people are undoubtedly attracted to the charm of this fascinating country. However, all these elements and dimensions are hardly used by the locals, and that adds to the scope of new business enterprises. As mentioned earlier, Spains most significant industry is now constituted by hotel, restaurant, and other service sectors related to tourism, which in turn has influenced every nook and corner of the nation. Thus we see that the native Spanish- business people are more interested in doing business in Tourism and Travel. Business in the United States: A Comparison Americans were expert in the field of business from the very beginning. They were on the top of the industrial area since the World War II. Their position as the leaders of business now is a consolidated fact. Seeing their growth one may wrongly infer that they had been self sufficient from the beginning. But this was not so because they too had to face a number of obstacles in their path to heights. This era also witnessed the growth of an increasing number of industrial centers across the US. The situation is entirely different in Spain. The culture and customs are different and so are the economic policies of the land. The most important thing about this country is that they are so self dependent in its economic policy. Basically, the Americans are interested in manufacturing modern weapons as well as new and newer models of electronic gadgets. This is their area of strength as well. They are superior to any other country in this field and about their supremacy in those areas is never questioned by any other country. They never seemed to show any interest in having any kind of agricultural or tourism centered economy. However, for a US entrepreneur, the scope for the export of mechanical goods or electronic gadgets to Spain can be higher as they are not produced much in Spain. Moreover, since Spain produces agricultural products, people are likely to purchase them for the domestic purposes. But this would not be an easy task for any U.S business magnet to build up an export –import relation with Spain. The main thrust of U.S. economy is that it will certainly look more for professionals. The U.S. business people who want to do some good business in Spain must prioritize the needs and interests of the natives. The most favorable thing is that Spain offers a wide pool of workforce, for Spanish people still prefer to have money achieved through their hard physical labor. Evidently, the successful stories of the U.S business people who run five star hotels in Spain, invite the attention of new entrepreneurs to the region. This might be the reason why the number of U.S based hotels is increasing in Spain. Conclusion In total, Spain is a potential destination for anyone to conduct business despite the issues like high intensity of corruption. Spain opts for an economy based on tourism and the related areas whereas the US interest lies in infrastructure and industrial production. Food and beverage is the most potential industry for one to consider while thinking about Spain as the business destination. However, an American entrepreneur who wants to do some sorts of business in Spain must be well aware of the culture and political economy of the land before he determines the size and nature of the business. References Business in Spain. (n. d.). SpainExpat.com. Retrieved from http://www.spainexpat.com/spain/information/business_in_spain/ Countries and their cultures. Spain. (n. d.). Retrieved from http://www.everyculture.com/Sa-Th/Spain.html#b Chan, S. P & Sparkes, M. (2012). Debt crisis: as it happened. The Telegraph, August 3.retrieved from http://www.telegraph.co.uk/finance/debt-crisis-live/9448380/Debt-crisis-as-it-happened-August-3-2012.html Economy Profile: Spain. (2012). Doing Business. The International Bank for Reconstruction and Development / The World Bank. Retrieved from http://www.doingbusiness.org/~/media/fpdkm/doing%20business/documents/profiles/country/ESP.pdf Read More