The Czech Republic as a location for European call center operations

Economic Environment Analysis

For a variety of companies, the global financial crisis and recession, would force a number of organizations to reexamine their underlying business strategy. Where, managers and executives would look at different ways they can stream line operations, to increase profits. In the financial services industry, the effects of the recession have been more severe. As some of the largest and most well respected financial institutions; has fallen into reorganization or outright liquidation through bankruptcy. This is because these organizations were not aggressively trying to reduce costs as much as possible. To adapt to the current recession and to be prepared for future growth opportunities requires: that all corporations strategically place their various resources, in locations that will help them to maximize their profits. As a result, our organization must be able to reduce costs as much as possible, by placing various call centers in locations that are business friendly and economically viable. In the case of serving customers in Europe a number of locations are being considered. One of the possible locations, the Czech Republic, has a number of distinct advantages such as: it has been delivering positive growth for the first two quarters of 2010. Where, the GDP rate would grow at: 1.5% in the first quarter and 2.3% in the second quarter. (GDP Growth Exceeds 2%, 2010)2 This is significant, because it follows a period of economic decline that the country would experience, as the GDP rate would fall by 4.3% in 2009. (OECD 2010)3 This follows several years of having consistent growth rates of 6% annually. For our organization, the recession is presenting the opportunity to set up a possible call center in the Czech Republic. However, to determine if it is financially and economic prudent, requires conducting an assessment of the country itself. To achieve this objective we will examine: the different opportunities and risks of establishing call center operations in the Czech Republic. Together, these different elements will provide the greatest insights, as to if placing call center in this location will help to reduce costs and increase profit margins.

Opportunities

The Czech Republic has been able to have a successful transition from a planned to a market economy. Where, the country is currently a member of the EU and it is at the cross roads between Russia and Europe. The geographic location of the Czech Republic makes it an ideal spot for exporting a variety of goods and services. As far as the financial sector is concerned, the country's banks have been protected from the financial crisis because of the conservative lending standards that the government has in place. An example of this can be seen by looking at a report on the state of the banking sectors during the middle of the recession from Price Waterhouse Cooper. Where, they said, "The banking sector in the Czech Republic is a performing and profitable business, playing a key role in the development of the Czech economy. During the global financial and economic crisis in 2008-2009, it showed a high degree of stability along with significant levels of innovation and development of banking services, while maintaining business profitability." (S, Zorbrazit 2010) 5 The reason why this is occurring, is because the country intelligently applied EU banking standards to its financial system independently. This increased the overall amounts of trenchancy, while limiting the ability of bankers to take above average financial risks. When you look beyond the banking sector, it is clear that labor costs in the Czech Republic are below the average for the EU. Evidence of this can be seen by looking at the PPP, with the Czech Republic ranked 53 (as they have a PPP of $24,900.00). This is below the EU, where they have a rating of 42 or a PPP of $32,500.00. (Czech Republic 2010) 1 When you compare the two numbers, the purchasing power is lower in the Czech Republic in comparison with the EU. This means, that labor costs are much lower in relation to the rest of Europe. When you put this together with the increases in the GDP over the last two quarters and the fact that the banking sector, was undamaged from the financial crisis; means the Czech Republic has outstanding opportunities for addressing the needs of the company. As the country's costs, the business friendly atmosphere and prudent practices of government policies are creating the ideal environment for a European call center to flourish.

Conclusion

Clearly, establishing a call center in the Czech Republic will help to effectively address the issues that company is facing for its European operations. Where, the organization needs to have a call center in an area that labor costs are low and there is great poet entail for long-term growth. This can be seen by looking at: the PPP, the report on the financial sector (from Price Waterhouse Coopers) and the GDP; which are all confirming how the country has lower costs, with the above average economic growth. The biggest risk that is faced from engaging in such actions is that labor costs are not the absolute lowest, in comparison with other EU members. This can cause some executives to believe that the same results could be obtained, by relocating to one of these countries. The problem is that the low PPP has not been confirmed with consistent amounts of above average growth and the government policies, this could allow various businesses to engage in undue amounts of risk (such as bankers having liberal lending standards). In the case of the Czech Republic, they have consistent above average growth and the government polices have protected the economy against the uncertainty. When you combine this with the lower PPP rate in comparison with the EU average, it is clear that the opportunities outweigh any kind of potential risks. Therefore, it is recommended that the company begins implementing a strategy to open a call center in the country.

Reference List

1. Czech Republic, 2010, CIA World Factbooks. Available from

2. GDP Growth Exceeds 2%, 2010, Prague Monitor. Available from [28 August 2010].

3. OECD, 2010, 'Assessment and Recommendation,' OECD Economic Surveys, OECD Publishing, pp. 9-19.

4. One if Five Companies Consider Moving, 2010, Eurofund. Available from [28 August 2010].

5. Zorbrazit, S, 2010, Banking, Price Waterhouse Coopers. Available from [28 August 2010].