Business in Portugal - Case Study Example

Business in Portugal

Introduction

Portugal is a country that is geographically located on the western side of the Europe continent and it is bordered by the Atlantic Ocean and its neighboring country Spain. This country has been experiencing clashes with Spanish over the border since ancient times, which is the longest in the European fraternity. The country becomes the victors of the war that made it become one of the strongest countries on the western side of Europe, thus gaining the first global empire leading it to become the globe’s major political, economic and military powers. The trade in the state was monopolized during the 16th and 17th century affecting the general functioning of the businesses in the country. The independence of Brazil, Napoleonic wars, and liberal wars affected Portugal negatively, leaving it in a physically challenged and diminished on its global power. Later in the 1900s, the country started to regain is an economic state after the first republic state was formed after which the right-wing regime outdid it. The carnation revolution and the colonial war in Portugal restored democracy in the country (Buckley, 2009).

The currents status of Portugal is stabilized, thus being termed to be in the 11th position of the most peaceful states in the entire globe. The economy of this particular state is stabilized, and it has a high-income and advanced standards of living. This fact indicates that it is a nice environment for investors to conduct businesses. This practice will be followed by several challenges from the established businesses people in the country. Gaining customers will be a tough task for the investors, forcing them to forgo the zeal for profits for the purpose of using strategies like discounting to win the confidence of the customers. It has several qualities as the maintained semi-presidential government form, keeping the country peaceful and democratically enhanced. The social progress status has put this country in a state ahead of other European countries like Italy, Spain, and France. The Portugal state is a member of several international bodies like the European Union, United Nations, NATO, OECD and CPLC that help it in its growth and the economy control ("Journal of the Early Republic: Volume 35, 2015", 2015).

According to the current state of Portugal, it has an excellent climate for doing business due to the stability of the economy. International investors are highly encouraged to extend their investments internationally to this European based country. The country social status reduces the risks involved in businesses thus raising the chances of success for the individuals doing businesses in its premises (Mathur & Waheed, 2011). It is very challenging to do business in socially challenged and unstable states, because of the insufficient social security. Insecurity is one of the largest risks that investors consider before they initiate any business in any geographical location. The economic status is also crucial because the purchasing capability of the citizens and the international clients highly depends on to the national's economic balance. The economy of states depends on to a lot of factors ranging from social, academic and the Portugal state of the particular country. This paper will outline the project report of doing business in Portugal and then a discussion provided on the dimensions that are germane to doing business in this particular country (Kessler, 2011).

Economic Situation

A mixture of functions and nature support the high-income in the economy of Portugal making it among the top fourth countries with the most stabilized economy. According to a global competitive report done by the World Economic Forum generated between 2014-2015 financial years, Portugal was ranked as the 36th country of the best economies. Although it has been dropping gradually from the other years, this was a positive change as compared to the 51st position in the previous year, 2013. This shown a great improvement indicating that the non-profitable activities in the country had been dropped, and the income of the citizens stabilized upon adoption of development methodologies. This country is economically advantaged because of its involvement with the European Union, which administers most of the European exports giving it a through pass to the international market. This state of business is too great health to the businesspeople in the country. Through the European Union platform in the undertaking, imports is also an economically friendly task in comparison to the personal importation responsibility (Kessler, 2011).

The Portuguese currency is highly influential in Europe because Portugal was one of the pioneers of the Euronext Lisbon stock exchange that is belonged by the New York Stock Exchange (NYSE), which is the first worldwide stock exchange to be initiated. The economy of Portuguese has been growing lately since the last quarter of 2014 to the second quarter of 2015. This has led to the improvement of the county’s Gross Domestic Product (GDP) achieving a growth of 1.5% (Ivanov, Kabaivanov & Bogdanova, 2016). This general development has resulted in the fall in the rate of unemployment in the state, thus lowering the rate of dependency in the country. The rise in the national level of employment enhances the status of purchasing power of the country, which translates to the success of the business investors. The unemployment dropped down by 2% from the 13.9% in 2104 and the rate of 11.9% in the second quarter of 2015. The government’s budget has been having a great deficit, which has fallen between 2010 and 2014 from 11.2% to 4.8%, thus making the economy more favorable to the residents, both the businesspeople, manufacturers and the users of the products ("Doing Business 2015", 2014).

The current economic situation of Portuguese country shows how the government id is creating an enabling environment for the people, both local and international who wish to start a business. A good economy needs to be a low dependency ratio which is achieved by the increased rate of employment. Portuguese country has been working on reducing the number of the unemployed citizen, which also reduces the rate of social insecurity. This is because the unemployed persons are the same individuals who take part in the criminal activities and classes invoked by political wrangles. Achievement of the high level of social security has raised the number of investors making the country have companies like Portucel Soporcel that are leading in the global reputations. Such companies contribute much in the foreign exchange by profitably managing the international markets. The improvement in the modes of practicing business activities has captured the attention of the international investors making them prefer doing business in this state over other countries. Performing a cost analysis of conducting business in this state, it will be reasonable for other persons from various parts of the globe to extend their business to this country. More profits will be gained because the living standards of the Portugal citizens are high and due to that there are higher chances of selling more.

Culture of Portugal

Portuguese people are welcoming and friendly, thus giving room to the foreigners into their beautiful country. Therefore, for a person wishing to situate businesses in Portugal should not be worried about the negative reaction of the people in this country. The relationships between the people in a location and the investors are as important as the services and products involved in the business. A person having bad relationships with the residents have low chances of succeeding in the business activity being administered. The people in Portugal believe in trust, therefore for people investing in the country need to be trustworthy so that they can engage in the corresponding business activities. It is a Portuguese culture to engage in profitable activities with people who are not hooligans and are reliable and responsible. The general approach of business in Portugal relies on flexibility and creation of long-term business relationships. People who are not ready to make durable business relationships in this country are not having enough capability in doing a successful business.

Back in the 1970s, the Portuguese thought everything that came from other countries to be ‘new’ because of the existence of the fascist government. Starting a business in this country will be a good business because the citizens prefer to purchase products based on their country. This strategy promotes the businesspeople in the country, rather than importing products. The culture of a particular location can be of great effects to the model of business for the local and international investors. It is good for a person to research on the cultural rules and regulations to avoid messing up. A person might do activities that are not within the cultures or are termed as taboos thus losing it all over leading to mistrust from the customers. It is the culture of the Portuguese to welcome strangers but not a through pass for the foreigners to do what they want. It will be wise for a new foreign investor to consult from people who know more about their culture to be able to conduct themselves in the right manner.

To generate prosperous business relationships, it will be good to create nice business communication. Language barriers might be a great challenge for the people who do not speak Portuguese, but it will be crucial for a person to find a way on how to make effective communication. In face to face communication, individuals should understand that it is not clever for a person to induce personal questions and compliments, otherwise other things should be a story point. Most cultures rely on ethics and etiquette, requiring a businessperson to follow the country’s rules and regulations for good relationships. The specific location of the business needs to be understood together with the residents to make sure that what the people like will be relevant to the business created for hire sales leading to business growth. Culture can be learned through observation and reading books that explain the specific cultures and a particular person can practice them, thus being able to conduct the practices in the same way to fit in that particular society. Instead of learning the culture manually, observations can be used by the foreigners to be able to understand the behavior and practice to live like them at all times (Kwarciński, 2012).

Legally Starting a Business in Portugal

The government of Portugal has created rules and regulations that make the procedure of starting a business to be very easy. It is ranked to be number thirty-two in consideration of the ease of starting a business. There is service known as a one-stop shop that enables people to generate a legality of starting a business within a period of less than an hour. This service does not exclude the presence of foreigners, thus creating a nice and favorable platform for the individuals wishing to start a business. This law was set up in 2005 that states that a person has a right to start in one place developed by the government provided that they have the required documents. These spot firms are available all over the country to ensure that every person living in the country can easily access the service. For a person to be able to start a business in this country, need to have several legal documents provided by various bodies of the government. These documents include an identity card or corporate tax identification, minutes of the previous meeting of the group and the current entry of the commercial entry. The availability of these documents enables a person to register in the government’s business registry and have a legal confirmation of starting a business (Debrulle & Maes, 2015).

There is also an internet based service for the people who wish to start companies, which has been enabled by the development of a degree-law number 125/2006 that enables the resident to start up a company in less than two days. This is significant progress for the state of Portugal in making sure that the investors can easily start entrepreneurship. This improvement also helps in the economic development of the country, by the provision of jobs from the created companies. The Portuguese government has digitalized most of its services to avail all the services to the residents in an easy manner, thus reducing corruption in government offices. The payment of the levies has also been digitalized, and business only needs to log into their websites to pay the required fees. It is a requirement to register with the social security department so that the employers can inform the social security admissions upon employments. This factor helps in protecting the citizens from mistreatments that can be induced by the employers.

Several government bodies have been created to manage the international investors in the country. These organizations include E.P.E and another agency set for managing the development of the global business. These agencies help the investors to acquire the required information like government’s data and other needs. They also encourage them to invest as much as they can in the country because they understand that it is for the benefit of the state’s economy. Some other institutions have also been created to support the small scale enterprises investments with relevant information and guidelines. This shows that Portuguese government has legally offered enough support to the investors to avoid the irrelevant hardships experienced by the business people.

Personal Knowledge about the Industry

Competition is one of the factors that entrepreneurs check before making decisions on which business should be implemented. This means that individuals need to have a significant knowledge of the industry they are being engaged. In the markets other people are already doing the same way in a better was, thus requiring the new investors to have full knowledge to avoid being outdone by the other experienced individuals. A person might not be an expert in a particular field but bringing up the help of the managerial factor, it might be of great help to exploit all the requirements. Having a managing group will be easy because it will be a collection of various professionals who might help in developing strong ideas and methodologies. Having different mind in initiating a business, it reduces the chances of failure thus increasing the probability of creating profitable strategies. Some trustworthy agencies and individuals can be approached for a partnership, to enable the entrepreneur to achieve the business objectives. These partners might be more experienced with the type of business being initiated thus bringing new ideas on board to be absorbed by the business(Mackenzie, 2016).

Partners are of great importance to the partnership, considering that they might be having contacts to other specialists who are already in the society. These contacts might be used as consultants and advisors in the business, thus increasing the chances of success for the investment. It is not profitable for an entrepreneur to jump into business without discovering their strength and weaknesses. Discovery of the best performed task should be within the first steps of business planning to avoid starting an investment that has high chances of failing. Skills in hand are highly important in making decision of the type of business to be developed. Working on a best known and skilled environment gives an investor ease of production and business processing, rather than starting a business that will be strenuous and demanding to the management thus providing insignificant profits. Given that the location of the business Portugal will be profitable, high production will be required that is determined the skills and knowledge of the industry.

Market Research

Entrepreneurs together with their partners are supposed to gather information about the business practices in Portugal. This information includes the customer and the target market, to be able to understand the entire business expectations. Market research is a very important in business development strategy because it helps the planners have ideal and real ideas about the type of market expected. Through this intensive research, it is easy to identify the strong points of the market, thus giving the investor ideas of the chances of succeeding in the business. The best performing type of business is also identified and the challenges to be expected are also outlined. Gathering all the information related to the business helps in making reliable business ideas considering the progress of the existing businesses (Grüner, 2016).

Through market research, the competitors and the level of competitions in the existing markets will be identified, helping the upcoming businesses have an idea of the size and the need of the market. This enables them to work on satisfying the market and providing the demand expected from the company. The investors will perform a specific market research regarding the field of interest to be able to understand its market requirement and its contribution to the country’s economy. The research is done from reliable sources like the government’s website platforms and other non-governmental organizations. Examples of some of the market research done on some commodities include the research done on organic beverages, which showed that it has posted a 7% of growth in 2015, thus remaining as a niche in the overall soft drinks market.

Quantitative and qualitative techniques are used in conducting the market research, which ensure that all the information is gathered, concerning the national market, local and the involved customers. In the qualitative research method, in-depth interviews, focus groups and ethnography are used to exploit all the potential sources of profitable information about the markets. Analysis of the existing data and customer surveys are conducted, constituting to the quantitative methodologies (Sharma & Kharub, 2015). All the data and information obtained will be incorporated with the existing knowledge about the level of business in the specific area to make a firm package that will help an entrepreneur progress in business successful(Rios, 2015).

Language Barriers

Language barrier is one of the biggest factors that can affect a foreigner in businesses, reducing their general performance and productivity. There are various ways of curbing this problem, some being long-term and others continual. The decision made by the entrepreneur in solving this problem might either produce an adverse impact on the business or be a profitable decision for the progress of the business activities. A foreigner might decide to hire a translator, whose work will be translating the customers’ needs from the foreign to the language of the employer. Economically, this might not be helpful because the translator personnel has no input to the business, only increasing the expenditures, thus reducing the percentage of the profits. The employer should analyze this situation in that manner to be able to come up with an idea that profitable to the business in a direct way (Besser & Miller, 2010).

The objective of a business is to raise the sales, which proportionally increases the profits thus reducing the expenditures. Basing on the argument of the translator, the expenses should be avoided by incorporating another criterion, for example; multilingual personnel can be adopted, who will help in doing translations when necessary and at the same time working in the same business thus having no extra cost from the business’ accounts. This will be a business strategy that will be helpful in solving multiple problems at the same time enabling the employer to work for minimized expenses (Hefer, Cant & Wiid, 2015). There are some other methodologies of ensuring that the language barrier is not an issue for the business. The entrepreneur can decide to learn the new language, although it might take a lot of time but upon being fluent, it will provide a long-term solution to the persisting problem. The ability to conquer the problem of language differences, the service time will reduce, which increases the level of sales and it also reduces the challenges encountered in conducting business as a non-native speaker.

The Incorporation Process

The World Bank and International Finance Corporation has provided an informative page that gives a comparison of the amount of time, costs and the number and format of procedures used in starting a business that consists of employees between ten and fifty. This information is provided for around 183 countries around the world. Therefore, investors wishing to invest abroad can visit this particular page to get insights of what they should expect in their process of starting the investments in the foreign country. This information might be helpful for the individuals who have decided to move to Portugal for a business opportunity. People will opt to invest in countries that have minimal activities to be done in creating a business, avoiding the prolonged process that might be costly (Aksyanov & Sorokina, 2014). Some useful information is that in New Zealand a business can be opened in a period of two days, whereby Portugal takes less than five days involving less than five procedures. It will also be important to understand the risks in the selected country; like in Portugal, the general economic progress is not so much promising (Staniewski, Szopiński & Awruk, 2016).

A business name needs to be selected, and it cannot be identical to an existing business in the same country. The business names are confirmed by the board that manages the businesses in the country, and if the name provided has been already been used, the client is advised otherwise. There some regulations that guard the generation of the name, like the requirement of having a designation at the end of the name like Inc., Corporation or Limited among others to indicate the corporate status. There are some names that cannot be included in the name because of confidentiality issues. Such words include; Bank, Cooperative, National and name of a country among others. Some articles of incorporation like the certificate of incorporation to be filed in the government files. This indicates that the business corporation has been initiated legally thus giving it the mandate to conduct their businesses in the country.

Lucy Heckman Help to the Research Work

Lucy Heckman is a business and economics personnel who is interested in research works related to her field. She was of great help to my research in assisting me to develop my research outline, thus being able to identify the most crucial sections to be identified in situating a business in Portugal. Using some of her previous research works, I could be able to relate to the requirement of generating a successful plan of activities in a foreign challenging environment. Challenges and solutions of investing in a foreign country had been outlined from her previous works, thus making my work simple to identify the most relevant in Portugal and incorporating that information to other researchers. Information about how to gather information concerning the businesses in Portugal was also provided by Heckman, through her research guidance on business and investments. Market research and other dimensions of the business need to be outlined by the use of real information about the targeted country to ensure that the investor is not misguided on their business planning process.

Conclusion

The project of doing business in Portugal has been discussed in the above-outlined research work. General information about the historical development of the economy of the Portuguese has also been provided showing the up and downs, which have been experienced by this country until it achieved an economic stability. Several requirements of starting a business in a foreign country have been stated and discussions concerning the same provided. Based on the findings, it is very economical for an investor to extend their business to Portugal because of the welcoming investments environments. It is very easy to open a business in Portugal because there are no requirements of visiting the governments offices, rather a single office is visited that helps in conducting all the procedures in the same area, taking a person less than three days to complete the whole processes.

Portugal is one of the best states with a stabilized economy, having high-income society and minimal unemployment rates leading to increased purchasing power. Analysis of various difficulties and benefits of conducting business in this country has been outlined, with language barrier becoming one of the main challenges of individuals who do not speak Portuguese. Some reliable solutions of the persisting problems have been provided to ease the process of doing business in Portugal.