France: The Feasibility of Establishing a Business   Term Paper ID:27727 Click to get this paper

Essay Subject: Analysis of the feasibility of establishing a high-tech business in France. Provides overview of economic, governmental, & social conditions, & other demographic information.... More...

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Paper Abstract: Analysis of the feasibility of establishing a high-tech business in France. Provides overview of economic, governmental, & social conditions, & other demographic information. Paper Introduction: TABLE OF CONTENTS Introduction 1 Size of Market 2 Sociocultural Acceptance of Market 3 Legal-Bureaucratic Environment 4 Competition 6 Economic and Political Climate for Foreign Business 7 Methods for Marketing and Distribution 10 Managerial and Labor Climate 11 Financial Viability 12 Recommendations 13 Annual Flows of Direct Foreign Investment Into France 14 France: Important Facts 15 Bibliography 16 Introduction The intention in this paper is to explore the feasibility of establishing a hightech business in France by looking at some of the most important factors involved in business success in another country. A company, such as one that deals primarily in information technology and other related products, would be the best choice for entry into France. It would probably be beneficial if the company has a well-known presence on the international Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. In addition,technologically sophisticated equipment may need to meet testing andapproval standards in France itself before it can be sold (France, 1995).Competition In general, French business favors French citizens. In addition, labor tribunals,which are similar to the NLRB in the U.S., have equal numbers of union andmanagement representatives. (1994B). However, clearly major telecommunications efforts still operatethrough France Telecom. Because there are so many choices, it is important that thebusinessperson conduct sufficient research to discover the most appropriatemethod for his or her product. These documents include such things asthe commercial invoice, the bill of landing, and a certificate of origin.In terms of tariffs and import taxes, these are uniformly appliedthroughout the European Union in order to preserve its competitiveadvantage over non-EU countries. France is a moderately-sized European country located in a centralposition within the European Union. The U.S. || | ||1986 |19.2 || | ||1987 |27.9 || | ||1988 |42.8 || | ||1989 |6 .9 || | ||199 |49.3 || | ||1991 |62.5 || | ||1992 |84.3 || | ||1993 |68.8 | Source: Financial Times, July 12, 1994 France: Important Facts| | ||Urbanization |74% || | ||Area |2 ,668 Square Miles || | ||Population Density |257/Square Mile || | ||Purchasing Power as % of US's |68% || | ||Cost of Living as % of New York City's |122% || | ||Corporate Tax Rate |34% || | ||Number of Telephones Per 1 |49 ||Inhabitants | || | ||Literacy Rate |99% || | ||Education as % of GNP |5.9% || | ||Defense as % of GDP |3.6% || | ||UN Human Development Index |97% || | ||Human Freedom Index ( -4 Scale) |35 || | ||Life Expectancy |Female 82 || | || |Male 74 || | ||Infant Mortality per 1 Live Births |6 || | ||Principle Airline |Air France || | ||Principle Exchange |Bourse de Paris |Source: Hoover's Handbook of World Business, 1993 BibliographyBuchan, D. While trade barriers arebeing gradually lowered in the European economic community, there is notthe same agreement between the U.S. In addition, there areimportant restrictions on the TV broadcast of non-European programs, whichcould impact certain kinds of marketing efforts (France, 1995). French is the officiallanguage of France and there is a great deal of pride in French languageand culture. All major corporate decisions must be considered by thisCommittee, although it has no veto power over actions that it disagreeswith (France, 1995). Again, this is a well-educated population, with literacyrates at approximately 99%. businesses to succeed in France if they wereparticularly innovative, and if they had outstanding quality and service tooffer. Clearly a high-tech telecommunicationsbusiness would find a market in France. The material culture is congruent with a high-tech business sellingtelecommunications equipment. Thus, thefollowing recommendations seem important in order to raise the potentialfor success: 1. 2. In other words, theU.S. It also noted that demand in 1995 wouldcontinue to be strong for telecommunications equipment, computer hardware,software, and related technology.Economic and Political Climate for Foreign Business Since the recession of 1993, the French economy has been slowlyrecovering. Although theFrench market is well-served by businesses locally, regionally, andglobally, there is still a strong market for U.S. The corporate tax rate is at 34%.Thus, taxation is favorable. This indicates that themarketer would be able to reach a substantial percentage of the populationthrough targeting campaigns to urban areas. France is an overwhelmingly Catholic country,although with pockets of Protestantism and an immigrant Islamic population. businessperson is not simply competing with local French businesses,but with an entire community of businesses that are becoming increasingly"local" to the French population. It has some naturalresources, including iron ore, coal, and bauxite. It comprises three major physicalregions, including the lowland basins, the Hercynian uplands and plateaus,and the high Alpine mountains and valleys of the Alps and Pyrenees. (1994C). Thus, there is a total of more than 1, companies involved in this effort, with more than 16, engineers andtechnicians occupied at the science park (Ridding, 1995). The New York Times, June 16, p. I.Buchan, D. Financial Times, July 12, Special Section - France, p. In both instances, the government currentlyowns approximately 3/4 of the capital (Ridding, 1994). In1991, the purchasing power of the average French citizen was at 68% of theaverage U.S. To start with the population, as of 1991, it was 56.7 million. In general, export and import limitations are few and documentation ismoderate, rather than excessive. Thus, unions wield great power in somefields. (1995). So, competition is quite high inthis industry and both quality of product and marketing efforts would needto be exceptional in order to be successful. International Trade Administration: Country Commercial Guides.Hoover's Handbook of World Business. Distributionsystems involve use of both specialty stores and discount suppliers, andthat distribution is in-place and well-utilized by citizens. dollars of approximately $19,59 . This is not the only cost to the U.S. The government planned to divest itself of 21 major companiesover a period of time, with those bought out by French and internationalinvestors. In addition, there is easy flow throughoutthe country and in the European community because of continuing relaxationof trade barriers and other regulations. There is a complete road system, airports, ports, truckingindustry, television, radio, telephones, newspapers, magazines, and books.All the elements of marketing and distribution systems that are availableto the businessperson in the U.S. In socioeconomic terms, France is a highly developed modernindustrialized country in which most of the population is educated andmonocultural. Conservative politiciansare under some pressure to adopt such protective measures in regard to theU.S. Thus, a company thatconducted research and development efforts in France would be able toobtain patent protection for its efforts. International Trade Administration (France,1995), competition is remarkably intense in France. According to the U.S. France may offer new promise. It, however, has still been in the situation ofbeing able to take greater advantage of new technology than other, smaller,companies, but it continues to face competition from these new groups. Nonetheless, there have been continuing efforts toreduce the budget deficit and stimulate employment (Buchan, 1994). Nonetheless, the U.S. However, FranceTelecom has been forced into the position of competing with other smallercompanies since the deregulation efforts which were demanded by theEuropean trade community. nationals on the same basis as its own citizens. For example, software designed specificallyfor French needs would find a place in the computer industry (France,1995).Sociocultural Acceptance of Market The sociocultural acceptance of the business should be quite high inmost respects. In looking at one of the most important areas for the business person,the taxation rate seems quite feasible. The French government apparently approves of this kind ofarrangement and encourages it by offering a number of incentives. In addition, there have been slow economic and politicalmovement in a conservative direction, although nothing resembling what hasoccurred in the U.S. are available in France. products, with nichemarkets the most available. The ITA advised businesses to look for niches in French societythat are currently unfilled. The two high-tech companies that the government seeks toprivatize include Groupe Bull, which is in computers, and Thomson, which isan electronics corporation. and other trading partners and that may be an ongoing issue (France,1995).Methods for Marketing and Distribution This is a very sophisticated population with modern technologyavailable to it and a wide selection of media. business bringing manufacturedgoods into the country. Annual Flows of Direct Foreign Investment Into France (FFrbns)| | ||1982 |1 .3 || | ||1983 |12.5 || | ||1984 |19.3 || | ||1985 |2 . Sprint, gained a customer networkfrom de Wavrin, and by itself, gained a supermarket chain of 52 stores. There have also been moves toward privatization and away fromgovernment subsidies for important firms, including at least two high-techcompanies. The total number of jobs involvedhere is approximately 3,812. This is the lowest among all the Western European nations(Hurtado, 1995). It uses centralplanning and provides large-scale social support services (Hoover'sHandbook of World Business, 1993). Insome respects, as will be discussed, France is a difficult market to enterand ultimately success may take some time. In reality, however, the cost to the company ofdisregarding strong disagreement by the unions and by the Committee as awhole would be quite high in protest and negative public reaction. (Hoover's Handbook ofWorld Business, 1993). Financial Times, July 12, Special Section - France, p. (1994). D8.Ridding, J. They were essentiallydesigned to make technology transfer easy, and to help companies to thriveand prosper in an environment particularly designed to be supportive.While this is particularly advantageous to French businesses, which aresupported by the government and linked to each other through majornetworks, the fact that there are foreign companies in the science parksindicates that there is a place for them, and that they, too, can takeadvantage of the environment of the technopoles. In addition, privateindustry devotes considerable funding to electronic and telecommunicationsefforts, making those industries among the most modern technologically(Buchan, 1994C). The countryitself is smaller in size than the U.S., which should make bothdistribution and marketing coverage somewhat easier for any nationalcampaigns. The GNP for France was at 1,1 5 billion in 199 , with GNP per capitain U.S. VI.France. There are 5 companiesfrom Germany, 2 from Spain, 48 from North America, 2 from Asia, Japan, andKorea, and 7 from Italy, among others. 4. Thismay vary with more sophisticated, high-technology items, however. Ingeneral, though, a distribution system must be set up that involves eithera distributor, agent, or salaried representative (France, 1995). It has a democratic government with elements of a free marketeconomy, although government subsidizes many industries and also hasextensive ownership in much of transportation and banking. One potentially problematic area is that of technical standards.Goods sold in France must conform to French and EU standards. As a consequence, pricing and deliverymechanisms need to be well-thought-out for the new business to have achance of success. citizen. As noted earlier,the government does directly subsidize some heavy industries, as well asimportant research and high-tech firms. According to French labor law, union members holdthe majority of slots on Occupational Health and Safety Committees whichare mandatory in medium and large companies. In addition, France is ademocracy, although of a different form than the U.S. In general, French buyers prefer purchasingthrough an intermediary, with end-user sales a less common practice. A brief overview of the French economy is promising. For example, there are restrictions on the legal services thatnon-French lawyers can enact in the country. There is heavy competitionin industrial and consumer goods, and there is a particular emphasis onbuying within the European Union economic community. Development of an exceptional marketing plan that could make aU.S. The capital city is Paris and general urbanization is at 74%, withpopulation density of 257 people per square mile. The ITAnoted that this can be quite a beneficial arrangement as long asmanufacturing decisions can be made independently.Managerial and Labor Climate The managerial and labor climate is somewhat mixed. V.Buchan, D. In looking at the political climate for foreign business, it seemsquite positive for the U.S. The import duties arecalculated on an ad valorem basis, or a percentage of the value of theimported goods. Telecommunicationsequipment is important to French business itself, and increasinglyimportant to consumers. On the other hand, thereis considerable racism in France in contemporary times, and the immigrantpopulation tends to be at the low end of the socioeconomic scale. So, to someextent, financial viability is not really predictable, since it isdependent on how well each of the elements of the business plan are carriedout. Not everyone can be a star. These are designed to mediate and resolve labordisputes (France, 1995).Financial Viability It is difficult to determine whether or not such a business would befinancially viable in France. The market is acentral one and market share is highly coveted. In addition, labor has two major institutional roles in Frenchgovernment and society. There is a very little in the way of a niche for competitors,particularly those from other countries who do not benefit from favorablegovernment policies or subsidization. Thatpopulation was spread out throughout the country, with several major urbanareas. The growth rate is not very high, at about 3 percent per year, but thecountry is certainly quite stable, infrastructure is already built, anddemocratic institutions are functional. This tax is added to the price of all goods and services soldin France itself. (1995). This pride also translates into a certain amount ofsnobbishness regarding other countries and a certain unwillingness to beflexible with those who do not speak French. On the other hand, cost of living was extremelyhigh, with a rate at 122% of the cost of living index of New York City,which is certainly one of the highest in the U.S. Forexample, Euroteleport, working with U.S. Detailed research on the telecommunications market in Francewith the intention of locating some niche that is not currently filled, oris filled inadequately. This move was designed to bring the government short-termfinancial gains, while also moving it out of the business of privatebusinesses, such as the automobile industry, banking, insurance, andelectronics. Goliath gives way. Assuming, however, that research on market niche and location,pricing, distribution, and marketing are all well-done, along with qualitycustomer service and follow-up, then the business should be financiallyviable.Recommendations In looking at all the information available regarding the Frenchmarket for high-tech telecommunications equipment, it seems apparent thatthis is a good country in which to market such equipment, but that there isalso considerable competition, often with government support. The possibility of phasing-in the business gradually, startingsmall in one region of France and avoiding serious competition and slowlybuilding business based on quality of product and service. At the same time, the rate of unionization in France is only abouthalf that in the U.S. It has both coastlineand interior and a large tourist industry that draws from all over theworld. The population itself isextremely literate, with a literacy rate of approximately 99%. One problem might be the language issue. Income per capita is also an important measure of buying power. If the business involves importingmanufactured items from the U.S. Labor is an integral part of the systemof the country which is neglected at the peril of politicians or businesspeople. TABLE OF CONTENTSIntroduction 1Size of Market 2Sociocultural Acceptance of Market 3Legal-Bureaucratic Environment 4Competition 6Economic and Political Climate for Foreign Business 7Methods for Marketing and Distribution 1 Managerial and Labor Climate 11Financial Viability 12Recommendations 13Annual Flows of Direct Foreign Investment Into France 14France: Important Facts 15Bibliography 16Introduction The intention in this paper is to explore the feasibility ofestablishing a high-tech business in France by looking at some of the mostimportant factors involved in business success in another country. technology or funds. Duties are moderate, with manufacturedgoods taxed at rates of between 5-17 percent. However, capital investment was expected to increase by 1 percent during 1995 and the inflation rate is anticipated to be less than 2percent. The only politicalissues that could impact the conduct of business are those involving theadoption of any protectionist trade measures. International Trade Administration noted that itwas still possible for U.S. While this certainly provides a great deal of concentrated competitionfor any company involved with high technology, it also provides for easycross-fertilization and strong support networks. While France isfundamentally a conservative country, bolstered by long-term institutions,,the church, and a relatively conservative governmental structure, it alsohas some relatively radical elements that are built in to the system. Itwould probably be beneficial if the company has a well-known presence onthe international scene, and is financially large and stable as well. Research and development efforts in France aresecond only to those in the U.S.. France. Considerationof whether this should be a regional or national campaign. Strategic vision needs to be restored. and France are allies who worktogether on a number of different fronts. Finally, in looking at religion, there is no conflict with religion inregard to this business. France is thefourth largest industrial nation with a diverse economy that includesagriculture, industry, services, and research. (1994). However, there are someprivatization efforts underway which would impact competition. and France. Both imports andexports were over $2 , million (Hoover's Handbook of World Business,1993).Size of Market Although the final size of the market depends upon the productactually offered for sale, the market potential depends on many factors,including population size, population density, urbanization anddistribution of population, and market segments. These are only foreign companies, however.Most of the companies at this business park, which is called a"technopole", are French. Consideration of a partnership with a compatible French firmthat might benefit from an influx of U.S. In addition, modern infrastructure is available at all levels of thecountry. Exports and imports wererelatively balanced, with a trade balance of ($18,667). III. There are smaller numbers of people involved, and asmaller percentage of the entire working population. Thelowland basins include most of northern and Western France, while the Alpsare situated in southeast France and the Pyrenees form the souther borderof France with Spain (Winchester, 1993). Discussions of privatization of Renault industries, for example,have drawn such intense opposition from the unions, and from the generalpublic through demonstrations, that that privatization effort has beendelayed and may not even occur. Although there has been an influx of immigrants, this isstill not a large percentage of the population. In general, the economic situation in France seems to be improving,although there is still a high unemployment rates of approximately 12percent. In search of global diversity? Financial viability depends,however, on the success of the business in marketing its products, and thequality of those products, along with some chance elements. Financial Times, July 12, Special Section - France, p. (1993). There are a few problems involved in conducting business in thecountry. However, there are certainly major costs to consider depending on theway that the business is operated. By1998, voice telephony is to be totally opened to new competition (Buchan,1994B). This, at least, is thepopular belief about French culture and it seems to be an accurate one.Thus, it seems imperative that those who found and operate the business areFrench speakers and at least conversant with important elements of Frenchhistory and culture. Financial Times, July 12, Special Section - France, p. 3. Nonetheless, much of the population is receptive to high-end high-techequipment, with demand particularly high in the cities. International Trade Agency (France, 1995) recommended thejoint venture with a French firm as a sound and appropriate choice for wide-scale marketing. Forexample, labor unions are quite strong in some sectors of the economy andpolitical and labor demonstrations frequently arise in response togovernment actions that do not meet with the approval of the liberal andradical sectors of the population. French citizens have relatively highpurchasing power in comparison to much of the world and they are in themiddle of Western European civilization and trade. There is also serious competition in France for high-tech industries.Research and high-tech are important aspects of the economy, unlike in mostdeveloping countries. for sale in France, then there are dutiesto be considered and transportation costs to add on to the original cost.If the business involves manufacturing goods within France itself, thereare other factors that must be considered. Nonetheless, for the most part, it is traditionally Catholic and thereare no conflicts between that religion and the development and sale of hightechnology telecommunications products.Legal-Bureaucratic Environment There are a number of factors to explore in thinking about the legaland bureaucratic environment, including labor laws, environmental laws,requirements of foreign ownership, import-export regulations, banking laws,permitting, etc. In terms of GNP, education represents 5.9%,which is greater than the percentage for defense, a promising sign onpriorities (Hoover's Handbook of World Business, 1993). The reason that theywield such disproportionate influence, however, is that French law providesimportant protection for union workers and guarantees them an importantvoice in decision-making For example, in companies larger than 5 people, a joint management-employee Enterprise Committee must be formed to which union representativesare elected. While much of this research funding goesto the defense industry, there is also considerable public funding providedfor telecommunications, computing, and electronics. There is also an internal tax called the ValueAdded Tax which is charged at the standard rate of 18.6 percent in mostinstances. One interesting aspect of French technological life is that a numberof science parks and research centers have been created in the country tocentralize research and development efforts in the high-technology fields.For example, in one important science park, Sophis Antipolis, there are atotal of 97 companies from many different countries. Acompany, such as one that deals primarily in information technology andother related products, would be the best choice for entry into France. A revolution in a state of slow motion. Thus, although the potential forgrowth is clearly not as large as in some of the developing countries, therisk is much lower and the potential for success much higher. The telecommunications industry itself has long been dominated by onelarge corporation, similar to Bell Telephone in the U.S. The U.S. NY; Hoover's Business Publications.Hurtado, R. firm competitive with one centered in France already. France does provide for protection of intellectual property rights forU.S. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.