International business concepts and practice

International Businesss

PESTEL analysis of the macro-environment in Ireland

Political factors. Political factors in 2004 continued to be extremely flexible and favorable of the business sector. The taxes remained significantly small, somewhere around a threshold of 10%, which continued to encourage numerous foreign investors. Further than this, the government offered incentives in key economic sectors, such as the it sector or high manufacturing sectors, which maintained a high economic growth contribution coming out of these sectors. Unfair policies such as the transfer pricing accountability technique, while disavowed by U.S. And EU regulatory systems, are encouraging companies to maximize their profits in Ireland. The trade policies in Ireland reflect the governmental encouragement of an export-oriented policy, which has been characteristic in Ireland for the past 20 years.

Economic factors. The country's presence in the Economic and Monetary Union (Ireland joined the Euro currency system in January 1999) ensure that, by abiding to the EMU regulations in terms of specific interest rates and inflation rates thresholds, these variables are generally stable within the country. Nevertheless, the high economic growth rates that characterized the Irish economy throughout the 1990s and 2000s also impacted the inflation rate and consumer prices. The high demand on the market led to a small increases of these rates, with the annual rate of inflation being reported at 4.4% and running in July 2008 (Guider, 2008). This however does not, at this point, deter in any way the foreign direct investment in Ireland or the business environment. On the other hand, as mentioned, Ireland is now a member of the Economic and Monetary Union and, as such, has adopted the Euro in 1999. The Euro is recognized as a stable currency on the international markets, often a currency of reference, and the exchange rates do not affect the development of business in Ireland. One will note, however, that in 2004, the Euro followed a steep appreciation trend against the U.S. Dollar, which meant that the U.S. companies doing business in countries that had adopted the Euro, such as Ireland, encountered higher production costs.

Social factors. Ireland follows the rest of European trends in a growing segment of the elderly and ageing populations. This has some impact on the policies that companies have in terms of pension payment, including an increased period during which the companies need to pay contributions for governmental social funds. On the other hand, the governmental factors do not necessarily impact too much on the social factors, which means that the impact of social factors on the company activities is not too great.

Technological factors, With the presence of so many high technology and it companies in Ireland, including companies such as Intel or Microsoft, the application of new inventions and the rate of technological change is obviously very high. Starting with the end of the 1980s and up to the analyzed period of time, the government has significantly had policies aimed at encouraging research and development. Further more, given the competitiveness on the international market, companies had the necessary incentive in order to invest heavily in research and development, in all areas.

Environmental factors. The climate in Ireland is reasonably stable and not likely to affect the business sector in any way. Despite changeable seasons, the temperature is relatively moderate, without going to extremes in either winter or summer. The precipitations are light enough not to trigger unexpected floods or other similar phenomena. On the other hand, the government does impose environmental regulations, which tends to increase the costs of companies operating in sectors such as the chemical industry.

Legal Factor. Ireland needs to abide by the EU legislative framework, which fixes specific and rigorous laws in terms of competition and market policies, including state aid to companies. On the other hand, at a national level, the governmental authorities have adopted laws that encourage foreign investment. However, the numerous incentives, especially fiscal ones, that the Irish government has been able to successfully sustain throughout the past two decades, will probably erode as the EU will tend to be more firm on imposing fiscal rules and regulations.

CAGE Analysis

Cultural. Ireland tends to be culturally close to the United Kingdom and Europe and this explains why the main trading partners are represented by the UK, the EU and the United States. First of all, Ireland, the UK and the U.S. share a common language, English, which makes trade and commercial cooperation easier than, say, between Ireland and Japan. The ease of communication also encourages companies from the mentioned countries to invest in Ireland and one can notice that the main foreign investors are also the U.S. And the UK. On the other hand, Ireland, similarly to the U.S. And the UK, is an Anglo-Saxon country, with Anglo-Saxon traditions and social norms. It shares similar customs with the UK. Further more, the significant wave of Irish emigres to the United States had an important impact on the evolution of the U.S. And the development of society took account of the influence that the Irish community has had on it. Many U.S. citizens still have an Irish ascendancy and feel a close connection to Ireland.

Administrative. The ties between the United Kingdom and Ireland are still very strong because of the former administrative ties. Ireland has been a British colony for over three centuries and, certainly from an administrative point-of-view, under significant English influence through much of its history. Nevertheless, the conflict in Northern Ireland has tended to stress the relations between the two countries, but this has definitely taken a positive turn in the last couple decade. Ireland is part of the European Union, as a trading and commercial block, which explains why much of the volume of its external trade is done with countries within the EU (motivation here includes lower custom taxes, greater accessibility on the market etc.).

Compared to the United States, as the case study points out, there were more governmental regulations on the Irish labor market, however, these were still reasonably more flexible than in other EU members.