Visit Czech Republic - Case Study Example

1.0 Executive Summary This report is a detailed analysis about a European country Czech Republic which is located in central Europe. The country borders with Germany, Poland, Slovakia and Austria. The purpose of this report is to analyse how Czech Republic can be a potential market for Telecommunication products. In order to completely analyse Czech Republic as a potential market, we will also look into the history of this area, their general behaviour with other countries in terms of trade, their demographic and geographic situation and the Government situation there as if it has strong government, easily approachable way & encouraging trade policies only then we would be able to see Czech Republic as a good market. Later we will also analyse the opportunities of import and export related to Czech Republic. We will highlight their economic situation and how they have changed to be where they are today because their strong economy is also very important when we are considering exporting our telecommunication products. We will also profile the telecom companies currently operating in Czech Republic and to see what kind of response they get from the market. 2.0 Country Overview According to an estimate of 2009, the population of Czech Republic is around 10 million which makes Czech Republic the 78th largest country by population. The area of Czech Republic is 30,450 square mile and with that Czech Republic becomes 116th largest country National language of Czech Republic is Czech, currency is called Czech koruna and Capital & largest city of Czech Republic is Prague. Most population here are of non-believers while a few are Roman Catholic & Protestants. 2.1 Historical Overview For centuries Czech Republic was known as Bohemia but when in 1918 this nation got independence then the new name was Czechoslovakia as after World War I two territories (Bohemian and Slovak) were merged together. Later in 1993 Czechoslovakia was again renamed and since then we call it Czech Republic. As per the history, history of human beings living in Czech Republic goes back till the 3rd century BC which makes it one of the most ancient histories. A lot of different nations such as Germanic tribes known as Quadi and Marcomanni, then Slavic people, Magyars, Huns, Bulgars, Avars, lived in this area till the 9th century. It was in the 9th century that the Czech state appeared on the globe and during the middle ages; “Kingdom of Bohemia” was a well known icon for supremacy. During the whole time of union, Bohemia was an important part of the “Holy Roman Empire”. It was the time of Mongolian army’s plan to conquer Europe that “King Premysl Otakar II” lost this area to a Roman King, “Rudolph I of Germany” in 1278 at the “Battle on the Marchfeld” From 13th Century till the time of World War I, a lot of wars were fought in this region and this area kept bouncing in control of different crowns. It was when “Austro-Hungarian Empire” ended after World War I; the independent Czechoslovakia appeared on the globe in 1918, Bohemia, Slovakia, Moravia, Carpathian Ruthenia and Silesia were merged to form this state with a major population of Polish, German, Ruthenian and Hungarian minorities. There was no political authority given to the minorities which lead to the minorities form together for a movement of breaking Czechoslovakia. The movement was supported by Adolf Hitler along with his allies and they gained support from the large number of German minorities. This whole movement also helped in some of the minorities gaining some area for themselves. From 1938 to 1946 a lot of changes took place in this region in terms of minorities seeking their independence from Czechoslovakia; however it was after the elections of 1946 that a communist government was formed in this region. The economy of Czechoslovakia grew rapidly till 1977 under the communist government but later the popularity faded due to the problems faced by Soviet Union. Democratic government got restored in Czechoslovakia after 1989 and in 1993; once again there was a split between Czech Republic and Slovakia. 2.2 Geographic & Demographic Overview The geographic importance of Czech Republic is evident from the number of wars that have been fought in the past over the control of this area. Located in central Europe, today this country is surrounded by Poland in the north East, Slovakia in the East, Austria in south and Germany in North West & West. For centuries this region has played as the bridge between East & West due to its Geographic location. This country is mostly hilly areas which give it a very beautiful landscape. People from a lot of ethnicity are living in Czech Republic, however as per the census of 2001 Czech people are the majority with 94.24%, Slovaks are second at 1.89% and Poles at third with 0.51% population. Other than that, there are Germans (0.38%), Ukrainians (0.22%), Vietnamese (0.17%), Hungarians (0.14%), Russians (0.12%), Romani (0.11%), Bulgarians (0.04%), and Greeks (0.03%) living in Czech Republic. Another Estimate in 2008 says that there are around half a million of foreigners living in Czech Republic who belong from, Uzbekistan, Germany, USA, Japan, China, Slovakia, United Kingdom, Italy, Austria, Serbia etc. 2.3 Government / Political Structure Overview The government setup in Czech Republic is of democracy with the head of government as Prime Minister. Parliament is divided into two, one is Senate and other is Chamber of Deputies. The President who is the head of state is elected for a term of five years by the joint parliament session and no one can be a president for more than ten continues years (i.e. twice). Prime Minister has more powers and he’s the one who performs all the major things while the president has comparatively lesser powers but he is in control and also performs important decisions. 2.4 Economic Strategies and Country Reforms Economy of Czech Republic is among world’s most developed countries of high-income with their GDP per capita as 82% on the average of European Union. Czech Republic has faced 6% growth per year for continues 3 years now which makes it listed among the most stable post-communist economies. This recent growth is due to the exports to European Union and foreign investments when the demand of domestic market is stimulating. Most of the economy including banks, telecommunications and energy sector has been privatised and in December 2007 Czech Republic became a member of World Trade Organisation. The government of Czech Republic also plans to adopt Euro in the near future. 3.0 Exports of Czech Republic Exports of any country pay a very important role in the economy of that particular country. Czech Republic is rich in production as well and thus a very strong element supporting the economy is the exports of Czech Republic. Mainly Czech Republic is into iron and steel products such as transportation equipment, heavy machinery, metal working and electronics etc. but other than that, textile, chemicals, pharmaceuticals, glass, china, brewing and ceramics are some of the exports. Czech Republic is also exporting potatoes, hops, sugar beets, wheat and fodder roots in agriculture products. As per an estimate in 2008, all of the exports are done in European Countries like Germany (30%), Slovakia (9.2%), Poland (6.5%), France (5.3%), UK (4.8%), Austria (4.7%) and Italy (4.6%) 4.0 Imports to Czech Republic Czech Republic is importing a few things like machinery and transport equipment, fuels, raw materials and chemicals from Germany (30%), Slovakia (6.6%), Poland (6.4%), Russia (6.2%), Netherlands (5.6%), Austria (5.2%), China (4.9%) and Italy (4.1%) 4.1 Trade Balance The trade balance of Czech Republic has been growing so rapidly and the surplus with EU has crossed the mark of EUR 3 million. Till 1989 the time was not very favourable due to the communist government setup but ever since the democratic setup, the economy of Czech Republic has been seeing some major improvements. Previously only the option of direct supply was available to the eastern buyers but since the democratic setup, the market has opened up which lead to some positive signs and the manufacturers were able to enter the more booming western neighbouring market. Czech Republic was formed in 1993 after a split and in 2001 i.e. after only 8 years; Czech Republic recorded a positive balance of trade. The best trade balance was seen in 2006 while in the recent years due to the financial recession faced by major trade partner European Union, Czech Republic is still seeing some significant positive attitude in their trade. 5.0 Direction of Trade Czech Republic has a major advantage of being in central Europe and it has been a member of European Union since 2004. The major trade partner for Czech Republic is European Union since then. Being a trade partner of European Union gives a big advantage that all the imports and exports are mostly among the EU countries which enables in saving of a lot of foreign exchange. 6.0 Balance of Payments As per the release of 2008, there was a shortfall of CZK 58.2 billion at net account however there was an inflow of CZK 53.2 billion at net capital however the international reserves increased by CZK 1.8 billion leaving the shortfall at 3.1% of GDP which was owed to the current transfers shortfall and thus the final surplus came out at 5% of GDP. 7.0 Foreign Direct Investment in Czech Republic Czech Republic ranks at 8th among the 25 members of European Union, as per the stats of last year; Czech Republic was able to get 8.8 billion Euros in FDI which was 5.2 billion euro more than last two years and if we look at over all, then this is the highest recorded in any members of European Union. 8.0 Czech Republic and its GDP The economic indicator of the performance of the economy in a given country or economic area is GDP. GDP not only helps us to compare the economic condition of a country but it also lets us compare with other countries or regions. GDP is measured by the local production, service sector, import & export, local usage & normal expenses. GDP has positive a positive impact whenever a huge foreign investment takes place. Since 1993, economy of Czech Republic has undergone a lot of changes, on a general glance a decrease can be seen in the proportion of agriculture and industry which decreased the GDP in service sector. This was seen mostly in different areas of whole country. GDP is the basic gauge to see how a country is performing. 10.0 Internet and Telecommunication Market of Czech Republic Like any other field, when it comes to the internet and mobile phone users; Czech Republic once again stands beyond the world’s standards. As per a survey, the maximum number of Wi-Fi users in one country are in Czech Republic. There were almost 800 local WISPs till the beginning of 2008. Czech Republic has a market of around 350,000 internet users. There are three mobile network companies in the private sector; T-Mobile, Vodafone, Telefonica O2. All three mobile network providers are also offering mobile internet packages on the technology of EDGE, CDMA2000, GPRS or UMTS. The government owned telecom company; Cesky Telecom slowed down with their internet infiltration to encourage the companies in private sector. At the moment, there are three different types of internet services being offered in Czech Republic, namely Wi-Fi, Mobile & Wired. Wired internet is further divided into two types i.e. ADSL & Cable. As in the early days, ADSL was expensive for an average users to a lot of WISPs surfaced with cheap and affordable plan in 2003. By the time of 2008 there are approx 800 WISPs which were mostly local. These WISPs have a major share in the market and as per an estimate of 2007 there were around 350,000 WiFi customers all over Czech Republic. Then mobile internet is also very popular in Czech Republic, all the mobile phone service providers offer plans on GPRS, EDGE, UMTS & CDMA2000 technology. On an average, an unlimited plan costs around 25 Euros/ month and they are various plans to suit the needs of the customer. Cesky Telecom launched the first ADSL services in Czech Republic in the beginning of 2003. ADSL was quite expensive in the early days so the start was comparatively slower than expected. It was until the beginning of 2004 when local loop unbundling was offered when other companies also started offering ADSL services followed by the privatization of Cesky Telecom which helped in lowering down the prices for ADSL plans and then ADSL services also gained popularity in Czech Republic. Cable internet is gaining fast popularity due to the high speed of their services which is up to 100 Mbit /s. The biggest ISP, UPC is offering cable internet in all the major cities on very attractive prices to compete with the market. In the beginning of 2004 Czech government started offering local loop unbundling which gave a chance to private companies to come in and offer the services of SDSL and ADSL. Later Cesky Telecom was also privatized and a Spanish company Telefonica group took over under the name of Telefonica O2 Czech Republic. This is considered as a major step in lowering down the prices. Since 2006 another major step took place when the speed of up to 10 Mbit started being offered in ADSL2+ technology with a lot of different tariffs to suit the needs of customer. As the passing time cable internet is also getting very popular among the users as they’re able to get better download speeds ranging from 2 Mbit up to 100 Mbit. Largest ISP is called UPC which has won a few awards and now operating in three cities of Brno, Ostrava and Prague. Total number of mobile phone users in Czech Republic is 13,780 million which makes it 133.54% infiltration rate. There are three main mobile phone network providers; the largest of them is T-Mobile, Telefonica O2 Czech Republic and then Vodafone in the end. 9.1 T-Mobile T-Mobile is owned by Deutsche Telecom and it works in many parts of Europe and the United States. At present, T-Mobile has a network of around 350 million users around the globe which makes it the 3rd largest mobile service provider in the world by number of customers. T-Mobile started working in Czech Republic since 1996; initially it used to be called Paegas in the Czech Republic and today it has the largest customer base mobile phone company in Czech Republic at 5,273 million users. T-Mobile offers services in GSM, (900 and 1800 band) and also UMTS network. For internet they offer GPRS, EDGE & UMTS technology. T-Mobile was also the first company in Czech Republic to offer 3G mobile phone technology in 2005 by the brand name of Internet 4G. 9.2 Telefonica O2 Czech Republic Telefonica O2 used to be called SPT Telecom which was the state owned telecommunication company and the only company to provide landline telephones. It was named Cesky Telecom in 1993 after the separation of Czech Republic. Eurotel was founded in 1990 as the sister concern of to offer mobile phone services. Eurotel was a joint venture between SPT and an American company called Atlantic West. At that time Eurotel got an exclusive licence of 5 years to provide mobile phone services in Czech Republic as public data network and another licence to provide analogue NMT mobile phone network was also awarded for 20 years with an automatic right to buy the license of GSM technology (when available in future). The company got the license to operate as 3G network in 2001 however it was late 2005 when they started offering their services on UMTS platform, soon after that in the beginning of 2006 the company launched their HSPDA services as well along with UMTS services. They also launched their CDMA & EVDO services for wireless broadband in 2004 as they were the only ones having NMT license. Today Telefonica O2 Czech Republic is the largest telecommunications company for it provides Landline services, one of the 3 mobile phone carriers and one of the 3 UMTS carriers in Czech Republic. Previously the fixed line wing was called Cesky Telecom and mobile phone wing was called Eurotel until in 2005 when Spanish company Telefonica took over both and named Telefonica O2 Czech Republic. As per the stats of 2008, this company has the customer network of 5.16 million users. 9.3 Vodafone Vodafone Czech Republic is a subsidy of Vodafone Group which was established in 1982 and today they are offering services in 27 countries around the globe and partners in another 33 countries. Initially it was called Cesky Mobil and it was first company to become a dual band GSM services provider when they acquired their license in 1999. Their mobile services were launched under the name of Oskar in the early 2000 as third GSM service provider in Czech Republic. Within a year from its launch, Oskar became a strong competitor by gaining 14% of market share with the customer base of 1.139,600 users. In 2001 & 2002 Oskar was nominated for Best Mobile Operator at the Prestigious World Communication Awards. The company launched its 2in1 SIM, VPN firma service in 2003. Their focus was on small & medium business. The only 3D theatre in Prague has only been possible due to the IMAX sponsorship by Oskar. Oskar was accepted as the most dynamic company in 2004 by the Czech Top 100 Association. Oskar became a part of the Vodafone group in 2005 with the launch of their EDGE technology, Unlimited Internet Service and they also got their license of UMTS for their 3G services. Today Vodafone has a customer base of 2,950,000 users and they have coverage in 99% of Czech Republic area for about 4 years now. Till now the company is only offering GSM & EDGE service and their launch of UMTS services is on hold based on their commercial feasibility. 10.0 Entrance Methods Czech Republic has seen a lot of changes in their trade policy; they were under the communist influence till 1989 so definitely their trade policies were a little closed according to that. Since 1993 they’ve been able to undergo a lot of progress as the diplomatic government offered open trade policies. Now that Czech Republic is a member of European Union so they’re following the trade policy of European Union which is by far the most beneficent in their interest. Now in 2009; the economy of Czech Republic stands as 37th most free economy after scoring 69.4 on the score of freedom. Out of 43 European countries, Czech Republic is on number 21 and their economy is far beyond the average of the world’s standards. Ever since Czech Republic joined European Union they have implemented the common trade policy (CTP) which is the standard policy for EU countries as an agreement that the country windrowed its right to trade any country on independent trade policy out of EU. So the condition now is that either Czech Republic can submissively accept the EU trade policy or it can vigorously contribute in its arrangement in harmony with its foreign commercial interests toward third countries. Czech Republic has right to improve their global competitiveness of businesses as this also is the aim of the strategy in interest of commercial-economical encouragement of the Czech Republic within the EU.  This approach is based on the EU document "Trade and Competitive Ability." EU is facing tough competition from both developed & fast developing economies for they did not fully realized the worth of the CTP. There was discussion between the European Commission and member states held by the working bodies of the EU to discuss the questions of the common trade policy. The result of these talks was the document "Trade and Competitive Ability.” This document highlights as vital the requirement for EU to have a competitive position worldwide and it is the common trade policy that offers as an appropriate tool to improve such competitiveness of the EU. This policy will help to get access in the markets of third countries and also allowing EU to trade in the markets for foreign subjects. Czech Republic summarizes their basic theories to protect their interest by following: Czech exporters will be allowed to import cheap raw materials to help them lower the cost of the finished produce which may give a better margin of profit. Second option that they require in order to reduce the tariffs of import on saw materials and semi-finished products from third countries is to pursue such requests through mutual talks. Through the trade policy of the EU, Czech Republic will gain access to the markets in third countries. To promote agricultural improvements with the WTO and the EU itself. International trade and form the performing inner (EU) markets will be open. The defence of rational rights will be guaranteed The abuse of protecting trade tools for wasteful productions will be protected The importance of economy and trade of China, Brazil, India & Russia will be looked at as these countries have a huge potential markets waiting to be penetrated. There will be reasonable competition among the internal (EU) market.   11.0 Conclusion On the basis of above, Czech Republic without a doubt stands among the most developed countries on the globe. With a very high GDP growth rate, has all that is required to be a good market for the imports of our telecommunication products. The various trade policies of the country are also a sign of its growth and prosperity. The Geographic & Demographic location is of great importance being in Central Europe. Even in history this place was given a lot of importance. Right now the economy of Czech Republic is among the most developed in the world and it is above the average on any standards. Czech Republic has the membership of NATO since 1999. Czech Republic stands at 21st among the 43 States of EU as for development. Czech Republic got membership of EU in 2004 and held the Presidency of the Council of the European Union from January to July 2009. The GDP of Czech Republic has been 6% lately and they made fact economic improvements through privatization. Czech Republic was declared at top in HDI among the former Comecon countries. Then the internet & mobile phone users are also in a very large number which shows that the trend of telecom products is not new to the market and market is already favourable for the same. Lastly Czech Republic is also encouraging the foreign trade with other countries in terms of import as well as export so that also acts as a very good sign for our products in this market. 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