Globalization has facilitated cross-country trade and business and as such most people are seeking to establish businesses in foreign countries as they offer opportunities for geographical expansion as well as a greater market for the products and services of such businesses. To set up business in a foreign country, the organization or business in question considers several factors, among them the economic, political, social, and legal issues that are most likely to affect a company’s business operations. This paper seeks to analyze these and other factors in carrying on international business in Austria which is my country of focus.
Political and Economic Climate for Foreign Business in Austria
Since Austria became a member of the European Union in 1995, the republic has continued to catch the attention of foreign investors and in as much as this has been beneficial to the economy; it also comes with challenges (US Department of State para. 26-28). Despite this fact, Austria has been able to maintain stable economic growth and development over the years making it a preferred destination for people wishing to conduct international business.
Austria is among the richest nations in the world making it economically viable for businesses wishing to invest in the republic. The republic’s most viable industries are the freight transport industry, oil and gas, automotive, pharmaceutical and healthcare, telecommunications, and the food and drink industries. Though the republic’s economy slowed down in 2008 following the global economic crisis, it is expected to pick by the end of this year meaning that international businesses investing in the country will also start experiencing growth.
Austria has experienced a great deal of political stability since 1955 with successive governments holding with high regard the best interests of the nation in terms of economic and social development. For example, the government which was in power before the 2008 general elections carried out broad economic reforms which were aimed at making the republic’s business environment more competitive with other countries, thereby making it more attractive to foreign investors. This kind of political stability and goodwill makes the republic a good place for conducting business as the risks and economic instabilities associated with constant political uproars are minimal.
Marketing and Distribution
Austria has a large population of people with high standards of living due to the country’s thriving economy and thus offers a good market for an organization’s products and services. With the right marketing strategies, organizations are set to achieve their sales targets as long as their products are in line with the demand trends, tastes, and preferences of their target markets. The distribution channels for such products are also clear between the producer and the consumer and as such an organization can be assured that its products will reach the consumers as long as the right processes and procedures are followed and are in line with the republic’s international business laws.
Labor and Managerial Climate in Austria
Austria is characterized by a strong labor movement made up of a large number of the republic’s workers who are either on permanent or casual employment. Austria’s Trade Union Federation (OGB) is made up of several workers’ unions and its main duty is to pursue fair wages for the republic’s union workers based on mutual agreements between the union and the different industrial sectors (US Department of State para. 29).
For an international organization wishing to set up business in the country, it would be important to ensure that it is aware of the policies and regulations of the union as it engages in the employment process, to avoid any legal issues that may arise from failure to comply with such regulations. Managing workers especially in different countries have its challenges which arise from differences in labor laws as well as the business culture trends in the foreign country.
Human resource management styles and the organizational structure of international businesses are thereby greatly influenced by such laws (Gooderham & Nordhaug 1). Austria faces a lot of competition from other EU member countries in terms of labor provision as their Labor Laws are stricter and to make the republic competitive in labor provision, it should adopt more flexible laws.
Financial Viability (profit margin, currency translation, profit repatriation)
The financial viability of Austria as a host nation for international businesses is guaranteed as it has a well-managed and strong financial system. Back in 2002, the republic adopted the use of Euro coins and notes as a replacement for its former currency, the Austrian Schilling (US Department of State para. 27). This has translated to increased benefits for the republic’s economy as it now shares a common currency with the rest of the Euro-zone members. This makes it easier for international businesses to trade in the country as it is now easier to translate their currencies into Euros and also measure the strength of the currency in comparison with the other world’s major currencies.
In terms of profit repatriation, the republic does not have unreasonable restrictions, and as such international businesses can be able to take back their profits to their countries of origin without major problems. Tax reforms introduced in the republic via the Tax Reform Act 2005 offer low taxation for corporate income to make Austria more competitive, meaning that corporations only have to pay a 25% tax as opposed to the 35% that was charged before (Gahleitner Ratzinger 509). Refinancing interest for international businesses has also been made deductible against taxable income meaning that the profitability margin of international corporations has gone up. Double taxation treaties signed with partner countries allow no taxation for foreign investments meaning that the profits of international businesses are not taxed.
Austria offers a great political, social and economic environment for foreigners wishing to invest in the country, and as such, any international business owners should take advantage of the available business opportunities to reap the benefits associated with such investments.
Gahleitner, Gerald and Ratzinger, Stefan. International Group Taxation: An Overview of Austria’s New Tax Incentive. New York: Cengage Learning, 2005.
Gooderham, Paul and Nordhaug, Odd. International Management: Cross-boundary Challenges. Oxford: Willey-Blackwell Publishing Limited, 2003.
U.S. Department of State. “Background Note: Austria”. 2009. Web.