Business Environment Analysis Report : Greece

Introduction

The growth and development of any business is highly determined by its business environment. Business environment in this case refers to all internal and external aspects that impact a business. Internal factors are basically organizational based. They may include aspects such as ownership, management, culture, organization structure, and operation value among others. External factors are basically locational based which include the country in which the business is located. They may include political, economic, social, and legal aspects that influence a business. These external business factors can be used to define country’s business environment. The growth and development of a business is highly influenced by the country the business is located. If its legal, political, economic, and socioeconomic factors among others are not conducive, then, most businesses located in the country may be unable thrive as anticipated. The papers main purpose is to analyze business environment in Greece. Some of the aspects to be considered include environmental and natural resources sustainability, political forces, legal forces, economic and socioeconomic forces, financial forces, and labor forces among others. The paper focuses on developing an academic standard report that demonstrate a high level of research and writing skills to fit the graduate level of learning.

Greece is a European country that is situated in the far southeast of Europe. It covers an area of about 51000 square miles and it boarders Bulgaria, FYROM, and Albania to the north, Ionian Sea to the west, the Mediterranean Sea to the south and Turkey to the east. The country is situated at the European Union (EU) entry point from North Africa, Middle East, and a number of Balkan nations. The country has a population of 11.03 million people based on 2013 statistics. It has a parliamentary republic political structure where the government and the prime minister hold executive powers. The country official language is Greek though English is also widely spoken. The Greece countrymen values friendship and family ties, and the two can highly influence decision making even in business environment. Greece is currently experiencing economic problems with increase in the level unpaid debts. It is also experiencing a high rate of unemployment among other problems (Enterpricegreece.gov.gr, 2008).

Natural Resources and Environmental Sustainability

With increase in the rate of emission and pollution in the world, various countries have employed various environmental rules to safeguard their natural resources and environment and also to enhance sustainability. These rules have highly influenced business operation in various parts of the world as more measures need to be employed to meet the newly set standards. The new environmental rules have highly impacted the manufacturing companies, logistics systems, and also products packaging and disposition of the company waste products in different parts of the world.

Just like many other countries Greece has also established environmental laws that govern business operations in the country. Some of these laws include the emission law. This law is enacted through Greece air quality policies. The country also operates under European Union laws and thus, its environmental laws are highly governed by the EU requirements. Quality air policies dictate on the level of emission that should be produced by companies in all sectors including agricultural, energy, transport, and manufacturing companies. These laws are also used to dictate on waste management in any industry, providing the minimum level of emission that should be accommodated from disposed waste. This dictates on the manufacturing methods to be employed in the country. Thus, all investors intending to start any business in the country must comply with the set rule and regulation. This implies that the companies must incur extra cost to establish a production plant or processes, and business management process that will enhance the attainment of the country quality of air requirements (Un.org, 2006).

Economic and Socioeconomic Forces

The public sector in Greece accounts for about 40% of its GDP, with approximately two-third of the GDP per capita being from Euro Zones. The country major economic sectors include shipping, agriculture, tourism, and construction. Greece most economic activities are based in the country’s main cities that include Thessaloniki, Anthens, and Piraeus, where the highest part of the country’s population resides (Baltas, & Chair, 2013). About 15% of the country GDP is contributed by tourism. About 3.3% of the country annual GDP is the benefit the country gets from the EU. The country recorded a growth rate of about 4% for 2003-2007 year mostly due 2004 Olympic Games infrastructural spending. However, the economy went to crisis from 2008 onwards due to the global financial recession. The economy constrained to 2.3% in 2009, 6.0% in 2012, 3.5% in 2010, and 6.9% in 2011. The deficit in 2009 attained 15% of the country’s GDP. This resulted to the employment of austerity measures in 2012 that lowered the debt at around 8%. The country I 2009 was downgraded by main credit rating agencies due to inaccurate and incorrect statistics, weak public finances, and persistent inadequate reforms performance. All these pushed Greece into financial recession, and consequently had to impose austerity measures and detested reforms from Euro-zone governments and International Monetary Fund so as to offer the county medium and short term loans to be able to repay their creditors. In response, Greece assured to present more austerity measures for 2013 to 2015 period. Although these massive austerity measures are increasing the country’s economic crisis and lowering tax revenues, the country’s lenders are still pushing Greece to make extra effort to restrain health spending, privatize public enterprises, and to increase their efforts in raising taxes. The country is still experiencing huge debts which are highly impacting its financial abilities. The country thus experiences a huge economic threat, with low level of private sector competition (Lachman, 2015).

Excessive taxes and red tape have made establishing a business in Greece prohibitive to most investors in the country. This has also highly limited the number of foreign investors wishing to establish their business in the country. The country courts are said to be considerably slow in resolving cases related with contract disputes in the country. Courts are said to take almost twice the amount of time taken in other EU countries to resolve contract related disputes. Despite this, the country has been experiencing frequent cases of tax increase among the business operation, with the most recent increase being VAT sales tax to all businesses including taxis and restaurants. This normally affects consumers demand and eventually the extensive growth of the country’s economy (Angelou, 2015). According to the recent analysis conducted by the World Bank on 189 nations regarding ease of doing business, Greece was found to drop by two places from 58^th position to 60^th position in 2015. Nevertheless, the country was found to improve slightly; by 0.08% with regard to employment of enhancement of business environments best practices. In the 10 assessed sectors, Greece was found to lower its performance in seven sectors and to remain stagnant in three of these sectors. The country dropped its ranking in easiness to start a business, clearing an enterprise, safeguarding minority investors, contracts implementation, obtaining electrical power, taxes, and obtaining credit. However, its position remained unchanged in aspects that include real estate property transfer, construction permits, and external commerce. This demonstrates that the country’s easiness of conducting business is still going down based on the growing financial crisis which affects the company’s economy greatly (Zikakou, 2015).

Greece current GDP is at 195 billion dollar, with GDP per Capita of 18036 dollars. It GDP is 14 times more than the globe median value of 13.9 billion dollars, and its GDP per capita is thrice the world median value of 6056.15 dollars. This demonstrates that the country has a high living standards and economic productivity. Nevertheless, the country’s GDP dropped from 2014 value by 0.23%. The country’s GDP per capita is ranked as 56^th globally, and 9^th in the 16 nations in the Southern Europe. Its GDP is ranked 47^th globally, and 4^th in the Southern Europe out of 17 nations. The country also records a high gross national income (GNI); 196 billion dollars, and gross national income per capita of 20290 dollars. This figure is higher than the GDP of the country which implies that Greece has invested more in foreign nations than foreign nations have invested in it or within its territories. The country inflation rate is recorded as -1.31% which demonstrates that the country is experiencing deflation. This normally happens when the level of supply is more than the level of demand in the market. This business situation results to a reduction in the market prices. Deflation persistence would result to a number of negative effects that include reduction in industrial production, increase in the rates of unemployment, and declining profits (Country-facts.findthedata.com, 2016). The country has been experiencing budget deficit, with 2015 deficit being recorded at 1.9%. The total public debt in 2015 was said to be 171.3% of the country’s GDP and taxes contribution to the GDP was at 27.7%. The country imports more than it exports with its exports in 2015 being 25.31 billion dollars while imports were recorded at 47.21 billion dollars. This has also contributed in suppressing the country’s economic growth. The main exported commodities in the country include textiles, food and beverages, chemicals, manufactured goods, and petroleum products. The country’s most imported products include chemicals, machinery, fuels, and transport equipment (Cia.gov, 2016).

The country has a considerably high rate of unemployment. Its rate of unemployment is at 26.3% which is said to be 19.4% higher compared to the global average rate. This high rate of unemployment can be harmful to the economy since it can intensify underemployment, social unrest, and augment strain on government benefits program. The country contains adult literacy rate of 97.47%, making it among the highest literate nations in the world. The high rate of employment has highly initiated the emigration outside the nation in search for jobs. The number of the country’s population that lives below poverty line is 36% which is considerably high, for a developed nation. The country total dependency ratio is at 52.9%, where elderly accounts for 30.5% dependency ratio. This is considerably high for a low working population. It increases individual burdens and thus, affecting their living standards. The country’s rate of urbanization is at 0.63% per year with 61.4% of the population being urban dwellers (Index Mundi, 2015).

Since Eurozone crisis eruption in late 2009, Greece has lurched into deep depression. The country employed austerity measures that augmented taxes on property and income, taxes of sale increased from 19% to 23 %. The country income tax-free threshold was significantly lowered. All population sectors suffered, particularly the middle class. Property holders were focused by huge property tax increase, making a huge number of people to lose their properties. Salaries particularly in pensions and public sectors were reduced significantly, where in some cases the reduction rate reached 50%. The two more monthly salaries which are provided every year as the 13^th and 14^th salaries was abolished by the Greek government. Public subsidies and investment for local government were lowered along with health, and education spending, as well as other welfare advantages. Unemployment that was at the rate of 9.6% at around 2009 is currently at 26.4% (Harari, 2015).

Based on the above analysis, it is evident that Greece is economically and socioeconomically unfit for business. The country’s economy is deteriorating due to high rate of depts. The rate of unemployment is considerably high as well as the dependency rate. This simply implies that the most of the employed people focus more on sustaining their basic needs and those of their dependents. This makes it hard for most of the people in the country to make extra purchases. In addition, the level of individuals living below poverty level is also considerably high. The country is also experiencing high supply in the market than demand as a result of deflation. This reduces business prices and eventually business profits. All this makes it hard for business to prosper in the country. In addition to this, the country has employed a high rate of taxation as a way of raising its revenue. This has highly added to the company’s expenses and thus, reducing the chances of making profit in a business. This decreases the investors desire to invest in the country (Bitzenis et al., 2011).

Political Forces

Greece operates under parliamentary republic form of government, with a president who is elected by 300 legislators after every five years and acts as the head of the state. The country is a member of NATO, EU, UN, Eurozone, WTO, and Eurozone. The president in the country contains a huge ornamental role. Greece government also contains a prime minister who acts as the head of the government. The country recent election took place in 2015 with SYRIZA in coalition with ANEL managed to with the election with total majority seats of 153 over the 300 total seats. Based on the current economic crisis facing the country, the current governance is experiencing a number of governance issues which include citizens’ rivalry. The citizens accuse the government of its inability to provide public services to its citizens (Gov.uk, 2015).

The current Greece government is perceived to be highly inefficient and unstable, with most of citizens doubting its capability to enforce order and law, and to offer public services. The system legitimacy has also been highly questioned. The government is considered to be unable to create functional economic policy, and it is also perceived to be based on post-dictatorship era in Greece. This perception makes it hard for any investor to risk conducting business in the country. The current political climate demonstrates that the citizens are already fed up, and they can take any measure to liberate themselves from all kind of oppression they feel has been caused by the government. Beside this, Greece is a member of EU and Eurozone, which have been shipping in to reduce its debts. This has made a number of countries uncomfortable with its financial situation particularly Germany. Greece is already considered weak in the EU. The debt state of the country also demonstrates that its legislators may consider imposing more laws to maximize on money generation in the country at the expense of the citizens, particularly, in case the country is to be discarded by Eurozone. In this regard, business in the country will have to handle more legal requirements that demand more contributions to the government, either before business establishment or for a business to continue operating (Gov.uk, 2015).

Beside this, Greece is faced by terrorism threats among other political crisis. The country is prone to indiscriminating terrorist attacks that include foreigners frequented places. The country has experienced a number of attacks that involve automatic and explosive weapons. These attacks have been launched against the police, Greek institutions, diplomatic individuals, media houses, and shopping malls. They tend to create security tension in the country, and interrupt businesses in the affected regions. Moreover, the attacks are normally abrupt, and in most cases the victims are caught unaware. This cans highly disrupt business activities and if directly affected it can highly results to huge loss of properties and to some extend loss of prominent human resources in a business. The current political situation in the country therefore reduces investors’ preferences of the country as their business investment field ().

Legal Forces

Greece has developed a number of laws that govern business operation in the country, whether a local based business or a foreign investment. The most usual way to develop a business in the country is either by registering a limited liability company, register a corporation, or a branch of an existing company. Foreign shipping firms can as well be developed offshore based on the 89/67 law where based on the law, income from any business activity conducted outside the country is tax free. Companies based on Greek domestic law get permanent establishment in case it has at least a single workshop, branches, factories, agencies, warehouse, office or natural resources exploiting facility. A foreign enterprise, even when it is not registered formally in the country can obtain permanent establishment resulting to corporate tax on revenue arising from Greece operations, and other accounting and tax obligations. The companies and other business operating in the country are also subject to the new taxation laws employed in 2010 to assist in handling the financial crisis in the country. These new provision may remain or even be restrained more strictly until the country is able to overcome its current financial crisis situation. Nevertheless, the taxation laws also offer exception based on various situations which include double taxation, and relief from business expenses.

Greece has also established labor laws that dictate on how human resources should be treated in any business organization. These laws include restriction on the payment based on individual academic achievement and level of experience, working hour regulations, though the country is known for adopting long working hours than other European countries, it also has restrictions on maximum working hours per day or annually. It is also important for the investors to understand that the country sets minimum pay rates every one or two years through the National Collective labor agreement. Some trades and industries have created their own collective labor agreements that offer their own salary rates and wage based on individual working period. Laborers are also allowed by the law to form unions which assist in bargaining for their rights. In addition, businesses are required to insure their employees via social security funds that offer pension and sickness benefits. Additional special contributions are demanded by this law for employees who work in hazardous environments. These workers are also required to have an early retirements compared to other industries, and an employer is expected to adhere to these laws. The law also dictates on the days to be provided for vacation based on individual official working days, and also based on the work experience (Psychogios & Szamosi, 2007).

The laws governing business operation in the country are also highly restricted by its membership in EU, UN, Eurozone, WTO, and Eurozone. The country business operations are highly guided by business laws that govern the members of the above organizations and thus, different investors from different regions may face different legal requirements in business operations. For instance the EU and WTO members experiences some duties exceptions while exporting to the country or when establishing a business in the country compared to other countries, based on the partnership agreement dictated by these organizations. Imports from member states of EU are exempted from all importation duties, while imports from countries that are non-EU are controlled by the community customs code, the Greek customs code, and common customs tariff that have been harmonized with customs legislation community. The country also operates under EU anti-dumping law which protecting the country’s developing companies from unhealthy competition from foreign companies.

Just like other countries in European Union, Greece has highly managed to offer favorable business related law which can encourage investors to invest in the county. Nevertheless, the prolonged financial situation in the country has highly resulted to the employment of extreme measures through new policies and tax laws amendments. This has made it extremely hard for most small and medium sized companies to survive in the country. It has also made it hard for new investors to establish a business in the country. The extensive tax demands have as well reduced the profitability of the developed companies in the country. This has created unfavorable business environment in the country. As a result, the country has been found to invest more in outside countries than how other countries have considered investing in it (Gsevee.gr, 2014).

Financial Forces

Greece is a full member of EU, and thus it has a full European Monetary Union (EMU) membership. Thus the country operates with Euro (EUR) currency, after replacing its initial monetary unit referred to as drachma (GRD) in 2002. The country does not have any control restrictions on foreign exchange. Nevertheless, all international monetary transfers have to be conducted via Greece commercial banks. During the transfer approval, commercial banks are required to guarantee that the payment has been exempted from tax withholding or subjected to tax withholding. In addition, payments as well as other transfers associated to currency transaction between non-residents and residents have to be conducted via the same channel. Greece also contains well-structured banking system that comprised of both private and state banks. There are also a number of foreign banks in the country that focus on enhancing banking operation in the country, particularly targeting corporate customers. They offer financial advice and capital to newly business ventures. The central bank discount rate in the country is at 0.05%, which is the rate of European Central Bank on the marginal lending facility that provides overnight banks credit in the Euro area. The prime lending rate of the commercial bank in Greece is at around 6%. The country stock for narrow money is at 118.4 billion dollars while that for broad money ranges at around 260.9 billion dollars. The entry of money supply for the country is founded on European Union monetary policy controls that are governed by European Central Bank (ECB) based on the fact that Greece is in the Euro area.

Based on this analysis, Greece financial forces are highly guided by the European Union monetary system which governs all the 17 members of the EU and thus, it does not have any exceptions. This implies that the preferences of performing business in Greece based on the financial forces are almost similar to that of other European Union members. There are no internal forces that influence a business, apart from the discussed financial crisis situation that is extensively discussed in the economic and socioeconomic aspects above. This implies that despite of controlled financial measures, business establishment and development in Greece will extensively be impacted by the current financial crisis that the country is facing. Thus, the business preferences in Greece still remain low despite having similar employment of financial aspects as other EU members.

Labor Forces

Greece has a total number of 4.832 million of labor force, where by 12.6% of them work in the agricultural sector, 15% work in the industry, and the remaining 72.4% work in services rendering businesses. The country also has q high rate of an employment and at the same time a high adult literacy rate in the country. The country’s working population is aged between 15 and 64 years. The rate of the employment in the country has been going down since the 2008 world recession, as the rate of unemployment increases, with more men being employed than women. Job security in the country has also gone down with more people facing the risk of losing their job as the time goes. In addition, more women are facing high level of job insecurity in the country as compared to men.

Trained individuals in Greece are experiencing prolonged unemployment period. According to statistics, about 73.5% of the unemployed individuals in the country are experiencing continuous unemployed period that goes even beyond a period of one year. In this regard, the country has a high rate highly skilled labor available to handle any kind of business requirement, with the highest percentage of this population being comprised of women. In this regard, any employer is assured of competent skills to assist in enhancing business operations. The country is said to have a higher rate of unemployment among women than men. In this regard, companies requiring soft-skills may be at a higher advantage of obtaining quick labor. Nevertheless, it is important for investors to understand that Greece has enacted labor law that is used to govern the terms of employment in the country. This includes minimum salary based on individual experience, minimum working hours, holidays and leaves, and employees’ benefits. The law also dictates on minimum employment age to be 15, on condition that all individuals aged less than 18 years should not be involved on dangerous manufacturing and industrial work or provided with night shift duties. The maximum working hours are limited to 40 hours a week, with guarantee of annual paid vacation, where individual working for 5 days a week are required to be provided with 20 working days annual vacation and those working or 6 days a week are required to be provided with 24 working days for the first year of employment. An extra vacation day is added in each employment year and thus, the vacation period increases with increase in work experience. The country’s labor law also dictates workers bonuses payment requirements which include bonus to be paid during holidays that include Easter, and Christmas (Papadimitriou et al., 2013).

The employees are also required to pay overtime for any time worked beyond the legally set working hours. The overtime is computed as 25% more than the normal hourly working rate. In addition, the law limit overtime to exceptional cases. The employers should also be aware of sickness leave and maternity leave, dismissal legal guidance, employees benefits, industrial injuries compensation laws, and employees benefit payments which include social security funds. In addition to that, an employer working with foreign employees must also ensure that the employee is eligible to work in the country based on immigration laws. Based on the above analysis, it is evident that Greece has concrete laws governing the labor force in the country. However, these laws are not extremely tough or unique compared to other nations and thus, they do cannot be said to discourage investors from investing in the country. Beside this, the country has high labor availability and thus, investors can easily obtain individuals with different skills and educational background from the country without much struggle. It can therefore be said that the country’s labor force create a favorable business environment.

Implications for US Managers

U.S. has a direct relationship with Greece, though in a limited manner. Nevertheless, Europe serves as a main U.S. economic partner and thus, the growing economic uncertainty created in Europe by Greece condition may highly impact the U.S. economy. The current situation threatens Europe financial stability which would make dollar to grow stronger and thus, making exports from the United States to be less competitive in the region. This simply means that the U.S. managers may have to consider looking for better market. This is because, increase in dollar strength would make the American exports to appear to be more expensive in the European market compared to those of other nations or Europe produced countries. With financial crisis, it is obvious that most consumers will go cheaper products and consequently purchases from American based companies will go down (Nelson et al., 2015).

Greeks has considerably different business culture compared to the Americans. Their culture highly embraces friendship and family relationships, which simply implies that their business decisions can highly be influenced by relationships. Greeks are highly friendly even in business environment. They are hospitable and warm compared to Americans. They tends to establish relations even in the first meeting where firm handshake, direct eye contact, and smile are considered normal even in the first meeting. Good friends normally go to an extent of kissing and embracing each other. This is considerably different from Americans who can settle greeting with just a word of mouth or a simple handshake. In addition to this, Greeks base their trust deals on trust. Most of their businesses are family based and seniors in the company are probably seniors in the family. Thus respect is highly anticipated. On the contrary, Americans business is normally done based on legal requirements and in most cases contract documents are signed for any business negotiation. Business are normally lead based on individual potential which is measured based on academic achievements, portfolios or track record, and expertise (Myloni et al., 2003).

Greeks are highly conservative in their business dressing code. Men are anticipated to settle on something conservative and of dull colors, while women are anticipated to be officially dressed. Punctuality is considered important in Greeks business meetings but it never given much importance. One can be late for a meeting without creating much negative perspective as it would ever be in Americans business meetings. Business meetings are normally based on defined agenda, though it is not considered unusual to introduce aspects that are not part of agenda and to discuss them passionately. The initial business meetings are normally held with a high level of official protocols, though the following meetings may be unofficial with no set of agenda to be followed. This is considerably different to the American culture where all business meetings are considered official and held with equal level of seriousness. Business deals are considerably slow in Greece. Greeks people are normally slow in making decision in business deals and they require a lot of consultation and opinion seeking prior to making a decision. On the contrary, Americans can be quite fast in making business based decisions based on whether they find it favorable or not. Thus, to be able to work with Greeks, one needs to be considerably patient.

Greeks have highly embraced the culture of offering gifts in various occasions including business dinners. This culture has highly nurtured the growth and development of corruption in the country’s business environment. A common kind of corruption in the country is referred to as “Fakelaki” where bribe is passed to various officials using small envelops to acquire some favors. This is despite of the country having anti-corruption law. Such behaviors may not be tolerated in American business environment. In this regard, American managers have to be careful on when to give gifts and the meaning of any received gift to avoid being entangled in corruption deals. In addition, American managers need to be familiarized with Greeks culture to be able to work effectively with them. For instance, respect is highly upheld based on the age. In this regard, a young manager may consider respecting his or her juniors more based on their age and not their work position. The manager should also try to wear warm attitude which can foster friendly relationship between him or her and the workers. In addition, the manager should consider organizing a number of social events or team building activities to be able to win employee trust. This is due to the fact that Greeks based their business relation on trust which is highly fostered by enhancing their social relations (Myloni et al., 2003).

Integration of Faith and Learning

Greek people have highly embraced Christianity with orthodox being the main denomination in the country. About 98% of the population is Christians Orthodox. The remaining 2% comprises of Jewish, Catholics, and Muslims. In this regard, most individual in the country would highly employ Christianity values taught in Orthodox Church when engaging in business deals. Some of those issues include honesty, business compliance with the law, business deal consideration of human rights, respects for Christianity values and teaching which include respect of important Christian holidays, and the fear of God. The things that Christian managers should not consider include corruption or bribes, prioritizing on profit while compromising human dignity and rights, giving in to business culture that compromises Christians’ teachings, taking advantage of the partner’s weaknesses, and despising or discriminating the partner based on any aspect of life.

Conclusion

Greece is one of the EU member states, and is located in the Southern east part of Europe. The country highly acts as an entry point to EU from different points. The country is defined as one of the developed nations in the world and thus, most investors would consider it as one of the best countries to advance their businesses. Nevertheless, this is not the actual case on the ground. Greece has been experiencing serious financial crisis from 2008 after the emergency of the world greatest recession period in 2007-2008. Greece was unable to recover from that shock and since then, the country has been struggling to pay its debts which keep on constraining its economy. The EU and Eurozone tried to assist the country out of debts, but this has not been of much help. Thus the country has been forced to create its own strategies to handle the situation. Some of the employed measures include raising the country taxation to generate more governmental revenue. This has highly affected the country’s business environment by increasing the cost of starting and running business in the country. Other measures include reduction in public sector salaries and cutting on salary benefits related spending. This has highly reduced the workers income, and hence affecting their social life, and spending behaviors. As results, most of companies have lost their ability to sell their products at high level to create enough profits to enhance the company’s running. Consequently the government has experienced even less revenue from industries. The poor economic situation has also affect the rate of unemployment, and job security in the country. It has also resulted to an increase in the rate of poverty in the country. This reduces consumer purchasing power and hence creating unfavorable business environment. Based on the country situation, it would be highly improper for any investor to consider investing in Greece. Apart from normal laws that limit international business ventures in any country such as the environmental laws, labor laws, import and exports laws among others, the country change of taxation laws has highly influenced its business environment, making it completely uneconomical for any investor to consider establishing a business in the country.

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