Doing Business in Germany - Coursework Example

Doing Business in Germany Table of Contents I. Introduction II. Discussion III. Conclusion References 2 3 I. Introduction Legal systems shape the way organizations and companies evolve and grow in different geographies, and the same can be said in Europe especially, where the legal systems are robust, mature and sophisticated enough to cater to the complex needs of its member countries. Moreover, generally speaking, one can say that European laws bring about different sets of dynamics in terms of organizational interactions and even the kinds of products and services that are eventually served to both the domestic markets and the international markets. The laws also impact quality, the kinds of ingredients and materials that are used, and even the way the products and services are priced. In the hypothetical case, where the laws prescribe a certain level of wages for workers, then those wage levels come to determine how much companies are to charge for their products and services in the end. There are many ways, small and large, that the laws in general impact businesses and organizations, and the above are just surface examples. The laws for instance in Europe also determine how and how much raw materials are sourced from other countries, what the rates of taxation are, whether certain raw materials that may be toxic to the environment are allowed or disallowed, and also what kinds of materials are actually allowed for use in the production of the different products and services that businesses are able to offer (Bridgeman, 2014; The Middle East Monitor, 2014). Laws on the airing of ads, whether or not genetically modified organisms or GMO’s are allowed or not for use as raw materials, and whether certain chemicals are allowed or not are legal aspects of business operations in Europe, and in Germany in particular, that have far-ranging impact on the way organizations and businesses constitute themselves and prosper or wither in the long term. These are just examples (Randolph, 2014). Elsewhere we see, in small and big ways, legal systems have guided and shaped the way companies such as Siemens, Airbus, HP have grown and evolved in Europe and in Germany in particular. Issues such as taxation, for instance, impact the bottomlines of these firms, and no doubt because of that laws on taxation shape the way multinationals strategize on branching out and operating in Germany and other European nations (Ratner, 2011; Pfanner, 2012). In other words, the legal systems in Europe and in Germany in particular matter in a very fundamental way to organizations and businesses, shaping who they are, what products and services they offer, the kinds of profits that they generate, and how they plan for the future. The laws even also dictate how companies do business with other companies both inside and outside Europe, and how companies deal with other territories in general as well (Bridgeman, 2014; The Middle East Monitor, 2014; Sabbah, 2011). The rest of the paper explores these aspects of doing business in Germany, from the context of the legal system in Germany and how that impacts businesses and organizations in general (Lewis, 2014; Dow Jones Business News, 2014). 4 II. Discussion Laws define what is possible for businesses and organizations in Europe can undertake. Those laws in turn are shaped by specifics of preferences and politics, as well as social factors, in Europe and also in Germany in particular. There are many cases to substantiate this point. For instance, in the case of crops, food, and inputs to food production, Europe has been traditionally averse to the use of GMO crops, and that aversion finds its way into European law, to the extent that in places like Germany, GMO crops are disallowed for cultivation and for use for human consumption and other purposes. This aversion in turn has deep historical roots in the politics and history of Germany. In particular, the earlier rise to power and political success of German political parties that ran on environmental and ecological platforms meant that Germany in later years would be sensitive to those issues. This has implications for businesses that push for these kinds of products, and the same holds for many different kinds of companies and products as well (Randolph, 2014; Sabah, 2011). For instance HP, being an American company, means that the greater scrutiny of its tax payments and the way it does its accounting for tax purposes, by way of the stricter and more stringent applications of tax laws in many countries in Europe including Germany, means that HP’s competitiveness relative to other companies in the technology industry is compromised in some way. Given this, the renewed vigor with which European countries are pursuing HP with the intent to collect more taxes will definitely factor into how and how much HP decides to grow and expand its business in Europe, relative to other markets in other countries (Pfanner, 2012; Ratner, 2011). To cite another example of how legal systems impact other corporations and the way they evolve and do business, Airbus, a European company, has to undertake its research and development and go to market efforts with an eye to following the law in many different countries in Europe. As an example, Airbus has to make sure that its newly-developed airplanes meet stringent legal standards for safety and other relevant certification criteria, and there have been historical and very recent cases of Airbus’ financial viability being threatened by regulators giving failing grades to new aircraft undergoing certification. A recent example is the A400M military plane, which due to some performance failures during testing, has been having difficulty passing the stringent certification requirements under the law. This has resulted in Airbus and its partners going into panic and scrambling to fix the problems, under pain of large financial losses. Financial losses of course translate to Airbus’ very viability as a business being threatened. It is thus a kind of life and death issue that Airbus meet the legal requirements for certification, and this is just one of the many examples by which companies in this industry have to face the legal consequences of their failures in the form of heavy financial losses which in turn threaten their very existence (Traufetter, 2013). Still another example of how legal structures affect the performance and shape the way companies evolve and establish themselves in Europe and in Germany is the example of Siemens. Siemens used to be a pillar of the German economy, but of late it has been cited as a company in decline, or at least tainted by serious allegations of corruption and therefore of suspect viability moving forward. Those corruption charges include, for instance, violating laws on bribing other countries to get into business contracts, and establishing cartels with other companies to jack up contract prices for projects in other countries. In another country where no such laws prohibiting these exist, then Siemens arguably would evolve in a different way, and make these practices standard. On the other hand, because Siemens operates in Germany and in Europe, and is based there, then it has to answer to allegations of breaking the laws against such practices. These slow down Siemens and affect its long-term viability, because the allegations have led to investigations and possible indictments of people up to the very top of the organization. It is easy to see that where this becomes a normal way of doing things for the company, that over time what happens is that Siemens adopts by allocating large resources to addressing the probes and putting their top management at the hands of the regulators, who may sue them. Also, the result is that Siemens may become severely handicapped financially and legally that they are unable to compete well for international work. The implications are clear, that even Siemens, a very large multinational, has to conform to the law, and must answer to and own up to the consequences of actions that are found to be transgressing the laws of Germany. This being the case, Siemens is a powerful example of the great extent to which companies in Europe and Germany are subject to the legal structures and regulations in place in the continent and the country (Kaufmann and Ignatzi, 2013). III. Conclusion In the preceding discussion a case was developed for viewing legal systems in general as providing the atmosphere as well as directing the constitution and growth paths of companies operating within those legal systems (Bridgeman, 2014). In the case of Germany, this is the case. Large American multinationals like HP demonstrate for instance that European and German laws may impact profitability because of the way taxes are computed and collected and the way tax laws are strictly enforced (Pfanner, 2012). European companies, meanwhile, such as Airbus and Siemens, have found out that stringent laws on passing certifications for new products and dealing with other companies and countries have life and death implications literally, when it comes to curtailing how and where they can engage in business, and how much financial resources they must be able to allocate towards making their products certifiable under the law (Kaufmann and Ignatzi, 2013; Traufetter, 2013). 5 References Bridgeman, G. (2014). Towards a single European business investment environment. Euractiv. Retrieved from http://www.euractiv.com/sections/eu-priorities-2020/towards-single-european-business-investment-environment-302728 Dow Jones Business News (2014). Germany defies EU on energy policy. NASDAQ. Retrieved from http://www.nasdaq.com/article/germany-defies-eu-on-energy-policy-20140627-00397 Kaufmann, D. and Ignatzi, C. (2013). Cartels and corruption with Siemens. Deutsche Welle. Retrieved from http://www.dw.de/cartels-and-corruption-with-siemens/a-17070541 Lewis, B. (2014). EU’s Almunia says deal on German green energy law possible in July. Business Insider. Retrieved from http://www.businessinsider.com/r-eus-almunia-says-deal-on-german-green-energy-law-possible-in-july-2014-03 Pfanner, E. (2012). European Countries Seek More Taxes From US Multinational Companies. The New York Times. Retrieved from http://www.nytimes.com/2012/11/19/technology/19iht-tax19.html?pagewanted=all&_r=0 Randolph, E. (2014). Why does Europe hate genetically modified food? AFP/Rappler. Retrieved from http://www.rappler.com/science-nature/environment/62528-why-does-europe-hate-genetically-modified-food Ratner, J. (2011). Europe threatens US multinationals. Financial Post. Retrieved from http://business.financialpost.com/2011/12/09/europe-threatens-u-s-multinationals/ Sabah, P. (2011). Manage risks when doing business in Europe. The Washington Post. Retrieved from http://www.washingtonpost.com/business/on-small-business/manage-risks-when-doing-business-in-europe/2011/11/23/gIQART0BwN_story.html The Middle East Monitor (2014). 17 EU countries warn against doing business with Israeli settlements. MEMO. Retrieved from https://www.middleeastmonitor.com/news/europe/12554-17-eu-countries-warn-against-doing-business-with-israeli-settlements Traufetter, G. (2013). Clipped Wings: Berlin Struggles to Certify Military Plane. Spiegel Online International. Retrieved from http://www.spiegel.de/international/germany/berlin-runs-into-trouble-with-certification-of-a400-military-plane-a-912412.html Read More