International marketing strategies and applications

International Marketing Comparison of Spain and Czech Republic

This paper is written out in the form of a comparison between the two countries of Spain and Czech Republic. In all the sub-heads, the situation in Spain is first discussed and that is followed by the relevant description about the Czech Republic. In all reasonableness, Spain has been a poor country with low employment, and this is being solved with temporary employment of the citizens. The unemployment was as high as 20%, and this certainly does not give much hope for a new product. The unemployment problem has been somewhat controlled, but this has led to a very high temporary employment, and these people are very poorly paid, and this also does not give much hope for purchases. Comparatively, the Czech Republic has been a country with a stronger economy due to the developments of the country over the last fifteen years. It is also a country with a history of industrialization which Spain is not. The atmosphere in the two countries are not similar with Spain being full of people with an autocratic bent of mind, and Czech Republic being full of people who are uncertain of the future.

As a country, Spain has been independent for a long time, whereas the Czechs have been free for only 50 years out of the last 1000. Thus there are a lot of cultural and economic differences. The similarity is in the fact that both are going to be a part of the European Community shortly and thus subject to the same or very similar sets of laws. Thus in terms of the legal position there will be little difference, but more than the letter of the law there is a difference in the understanding of the law by citizens, and in this aspect, Spain is clearly a superior country. The other aspect is the view to countries outside the home, and in this there is a clear indication that the people in Spain, in spite of their internal differences, would like to be well connected to the outside world. Regarding the Czechs, this attitude is uncertain as most of the time it is only the outsiders who have come to their country. The appeal of the Internet is thus expected to be higher in Spain than in the Czech Republic, at least during the next ten years or so.

Introduction

The point to be noted is that these countries have different backgrounds in the sense that Spain has been a country in Western Europe with less of communist influence as compared to the Czech Republic. Yet, the general rule in Spain was also the autocratic rule of Gen. Franco for a long time. In economic terms, the countries were not materially different, but Czech Republic has a better history of engineering and technical background. The problem with the Czech Republic has been that it has ad very little of independence for a long time, and this has kept in the mind of people a lot of uncertainty about the future.

1. Country analysis

Economic/competitive environment

In Spain there has been slow growth of the economy and the growth was around 2% in 2002. The difficulty with the country is high inflation and this is higher than the rest of the Euro area. The activity has been better from the second half of 2003, and this has led to the lowering of increase in unemployment and expected high growth in GDP. The growth of inflation in the country can be stopped only through reforms in the structure of the country, and fiscal policies were not expected to be of much use. Another required method for growth was the required changes to the system of bargaining for wages and this can be achieved only when the rigidity in the wage structure is reduced.

The consumption at the public level is increasing, but the growth in demand of the domestic consumers was slow at 2% during the second half of 2002. The only sector where growth was steady was in the area of constructions, but the investment in equipments was dropping for three quarters, but started on a recovery in the second half of 2003. There was a rapid growth in exports in the third quarter of 2002, yet the increased foreign demand did not make much difference to the total economy, as the imports also grew at a very fast rate. The growth in terms of GDP was only around 2% during 2002. Employment which was growing fast earlier also did not grow very fast, and the unemployment rate was high at 11.5%. The growth in terms of wages was relatively stable and the total growth in wages was around 3%, and this is not a real growth, since there was a high inflation.

The situation may change at the end of 2003, when the wages will be revised as per many wage-inflation agreements. The budget had forecast a growth of 3% for 2003, and also included a cut in personal income tax, and the total rate was to result in a loss of revenue of around half a percent point. This in practice may be considered to be a neutral financial position. Totally the GDP is expected to have a better growth of 2% in 2003, and the growth in 2004 is expected to be over 3%. The labor force is growing rapidly in the country and the unemployment rate is on the rise, but due to the total financial picture, the inflation should be falling to around 2.5% by the end of 2004. In the meantime, there is a continuous worry about the continuing inflation as it is reducing the competitiveness of the country. (Developments in individual OECD countries: Spain)

Though Spain has been one of the first to be in the European community, the Czech Republic has shown interest in being one of the members and through the result of the Nice summit that was held in December 2000, the citizens of Czech Republic should a part of the electorate for the elections to the European Parliament in 2004, June. The growth of the economy in the country has also been high and nearly 70% of the exports of the country are directed to the European Union, and that too mainly Germany. Those economies had not been doing so well, but the growth rate of the Czech economy has been quite high at around 3.6% for quite a long time now, from 1996. This rate of growth is higher than the average of the European Union countries. There has also been quite a high export of goods and the growth has been at 13.3% per annum in 2001 and the imports have grown by 11.6%.

The total economic situation slowed down during the second half of that year, and again the reasons for that are well-known. In spite of a troublesome international situation, the country has progressed well and there are expectations that the country will do even better in the coming years. The total aim of the country is now concentrated on the attempt to become a member of the European Union. This country had to adopt and implement the legislations that were required for the purpose. There were also the methods to be adopted for the same and the changes of standards and procedures, etc. If the country is able to become a member of the Union, it is expected to help the country conduct business in a more transparent manner and also bring in a suitable environment for investment. This is expected to help the country to attract foreign investment. The country needs foreign investment to enable it to speed up the development of the economy and then catch up with the position that other countries of the European Union are now in. (Exclusive Interview)

Socio-cultural environment

Spain has been a poor country for a long time, but at the end of the twentieth century, Spain had a period of rapid growth. For four years from 1997, the country's economy grew at a very high annual rate of growth of 4%. At the same time, the unemployment rate also fell from a higher than 20% figure to less than 14%. These made the IMF say in its report of July 2000, "Decisive management of macroeconomic policies, together with structural reforms and wage moderation, has contributed to an unprecedented combination of strong output and employment growth with price stability." Along with this there was also praise for the labor market reforms that were instituted by the Prime Minister Jose Maria Azner and his party as the steps in the right direction.

The steps taken were to reduce the changes in the laws during 1994 and 1997 which loosened restrictions on temporary and part-time employment contracts. These helped by reduction of the labor costs of the firms. This has made the businesses in Spain to use temporary and part time employees on a large scale. This has helped them by increasing their profitability, and the total unemployment has been coming down. At the same time, there is now the threat of the country becoming economically stagnant, and according to Financial Times of London, the rate of growth is expected to fall below 3%. Earlier, the same economic programs had led to rapid growth of the economy. Some of the reasons are the high growth of temporary and part-time employment. (A Cracked Foundation for Spain's Economy)

In Spain there is a distinct tendency of the people in Catalan area to refer to the rest of Spain as Spain. They do not say that they are going to Madrid, but say that they are going to Spain, as if it was a different country. This attitude is also reflected in the elections to the local government where the nationalist parties are only now beginning to gain control over the provinces of Catalonia and the Basque regions. Yet these nationalists have a sense of loyalty to the European unity and would like to hand over the control of the region to Brussels. Thus they are quite wiling to accept the authority of the super state at Brussels instead of the state at Madrid. The other part of Spaniards in Andalusia, Valencia, Asturia and the rest, are also emotionally integrated to the control by the European authorities. It is thus an important question as to whether the country will remain together as one political unit. The decision will probably be made by the youth of today. The enthusiasm for a united Europe and regional sovereignty are probably the after effects of the rule for 40 years by Gen. France.

During the period of his rule, he followed a principle of sticking to the brand of obscurantist Catholicism that Spain has been following for 500 years, and thus Spain was not remaining connected to the rest of the modern world. At the same time, the people of Spain saw the development of the regions north of the Pyrenees, and wanted to join them. Franco had also banned the Basque and Catalan languages during his rule, and this made these regions more conscious of their differences with the rest of Spain. There is now a process of change in Spain and in ten or fifteen years, the rule of the country will pass to the new generation born after the passing away of France. These people will not have memories of the stern rule of Franco, or the feeling of inferiority as compared to the other countries of Europe like Britain, Germany or France. The oppression of the regional languages have also stopped, and now the languages are developing with regional newspapers, TV stations, old street names, and the languages are also being used in conversation.

There is another reason for the expectation that a healthy balance will be obtained and that is the practicality of the Spanish people. The talks of the Spaniards do not match their real nature and in general they are conformist with orthodox eating habits and dressing styles. They also try to be politically correct. The waves of different feelings sweep through the country, like being anti-war, or even anti-Spain. This causes differences between the government and the people as was the situation during the Iraq war, when the government was in favor of the war, but the people were protesting in the streets against the war. This also led to the feeling that the war would probably affect the fortunes of the center-right government of Jose Maria Azner, yet the results of the elections did not show that. This only showed that the Spaniards are practical people. (An ethical nation, full of bluster: Spaniards love Europe because they hate each other. So will the country fall apart?)

In spite of being a part of continental Europe from time immemorial, other countries from all over the world like Japan, South Korea, and Taiwan have come and given Spain competition in the markets of France and Germany. The strength of these countries has been that they are able to compete not only in their own markets, but in all parts of the world. These countries, along with France and Germany have proved that they can prepare the goods according to the requirements of even consumers according to the desires of the consumers. The attempt of Spain is also to achieve the same, and to achieve it, they are now ready to form a team with their partners abroad. There is often a feeling that the average Spaniard is lazy as a worker, but it is just that their daily schedule is different from the schedule of the Americans and they work till late in the evenings.

When there is collaboration between Americans and Spaniards, certain issues are insignificant to Americans, but very important to Spaniards, and these are issues like getting the personal pagers, company paid cellular phones, facilities like company cars, the allotment of offices, the allotment of special furniture and so on. This sort of differences between the treatment of Spaniards and Americans often cause difficulties between the two groups. These differences may seem to be insignificant, but they have to be solved if a company has to be run in Spain and if the company is collaboration between Americans and Spaniards, but in Spain, then these problems have to be sorted to the satisfaction of the Spaniards. In Spain one has to realize that the country and the society have been autocratic for a number of years, and the concerned attitudes will not change rapidly. (Creating a New Business Culture for Success in a Foreign Marketplace)

In the case of the Czech Republic, the government has been going through a period of two years after the revolution when they had a distinct aim and during which they passed a large number of new laws. Most of these laws are useful and very modern and they also demonstrate a sincere desire on the part of the Czech government to conform to the legislation that is prevalent in the Western countries. Since the process of passing these laws were quite fast, there are some inconsistencies and oversights in these laws. One such law is a law called the Waste Act (No. 238/1991), and this law ends up only restricting certain business activities like the import and export of waste. The government is even now in a process where there is a sincere attempt to harmonize all existing legislation so that they are in line with similar to legislation in the European Union. Most of the work in this regard has already been done. The only difficulty in the adoption of such laws is the feeling of some Czech officials who feel that the Czech economy may not be able to comply fully with the legislation. (Czech Republic: Workshop Summary)

Political/legal environment

The largest share of workers in Spain is of temporary workers under contract and these workers are mainly women and young people. They do not get the benefits of the permanent workers. The regular workers are entitled to severance pay when they are terminated, and that is at the rate of 33 days for year of completed work, but the temporary workers are not entitled to these benefits. These workers provide a flexible source of workers for employees, and they can hire or fire according to their requirements. They serve as the loopholes through which the organizations can remain competitive and this is through the shifting of the cost of layoffs onto the workers. This has been noted by the European Industrial Relations Observatory and the Spanish employers are known to practice chain fixed term contracts and rotation of temporary contracts though these practices are illegal under the Spanish law.

These methods are essentially the creation of a labor force of permanent temporary workers. These workers are permanent in the sense of their not requiring retraining when they come for working, but are still on a temporary contract, so they do not get the benefits of permanent workers. The United States also has similar workers in Silicon Valley, and these workers there are called perma-temps. This is now being countered by the government through the lowering of the costs of discharging permanent workers during the reforms of 1997 and March 2001. This has only resulted in giving employers more powers over the permanent employees, but not reduced the practice of temporary contracts. There had been an initial increase in the growth and job creation due to these reforms as these provided an increase in flexibility and reduced the costs of labor.

At that stage the unions were just satisfied to have jobs, but the attitudes have changed now due to the effect of inflation, and the unions cannot agree to low cost jobs. This is causing a lot of strikes due to the demand for higher wages as was seen in the airports at Balearic Islands. This also affected the tourists in coming to the country. Yet the economy has grown a lot in tourism and other service industries due to this supply of relatively cheap labor. The increase in employment has not however instilled greater confidence in the economy as it has not resulted in a broad-based market that would sustain economic growth. The only result has been a reduction of long-term unemployment, and easier employment of workers, but the consumption is still low and the economy is also weak. (A Cracked Foundation for Spain's Economy)

Some of the legislation that is used in Spain is even better than the laws used in Britain and they use a variety of protective measures for protection like extensive laws, imperative laws, special laws and control through public authorities. For these laws, the nature of the right as right is first made, and this ends up protecting the third parties even better than the contractual rights. This also has the result in international litigation which directs the jurisdiction and applicable laws to the country where the development has taken place. This helps the legislator by reducing his own problems. (How legislation may effect product decisions. The specific examples of Spain, United Kingdom and Finland)

The laws of the Czechs are a little peculiar as the country has been occupied by many foreign countries and that includes Austria, Germany and till very recent times, Soviet Russia. It was only in 1989, there was the occurrence of what is now called the Velvet Revolution when the Communist leaders resigned without a battle to protect their superior powers and there was the installation of a democratic government without any pitched battles for independence. This gives us an idea of how long the Czechs have been independent - a total of about 50 years during the last 100 years of their existence. This lack of independence has given them a feeling of inferiority, and a distinct lack of patriotism. The Czechs thus have a complex mixture of passive-resistant- pessimism and that is almost a part of their character like their love of comfort.

The people are in general peaceful, and love their national food, as also sitting in pubs for very long periods. Yet, they are not very humorous and happy, but they have instead a sense of dark humor. They have various sayings and one of that can be roughly translated to "Things could always be worse." Yet it is not that they do not know how to make friends with others, and on getting friendly with one Czech, the relationship will soon spread with other Czechs. Yet one should not make any attempt to suddenly develop the total network with use of a lot of business meetings and e-mails. That sort of action is more likely to arouse suspicion than gather business. The people there prefer to slowly get friendly with people, and collect the information about individuals from others, and the company that you work in.

Then if the people think that they would be comfortable with you, then there may be meetings for making of deals during dinners, along with the dessert or even later at separate meetings. The people are very generous and will always open a meeting with an offer of coffee, tea, water, juice and even cookies when they are the hosts of business meetings. The only thing is that they are not going to interrupt their weekends and holidays as those are reserved by them for the family, and they do not permit business to interfere with their family time. (Moving to Czech Republic)

Technological environment

The technology in Spain is relatively modern and there have been presentations showing Spain into the digital age in 2000. This exhibition showed what was then available for consumers and what was expected to come next. The exhibition was visited by over half a million visitors, and the numbers are continuously increasing. The display was conducted by more than 114 companies for both digital audio-visual equipment as well as Internet equipment. The exhibitors included Sony, Pioneer, Sharp, Epson, Kenwood, Planeta, Warner Home Video and Columbia. The advance of DAB has been going on in Spain, and the first tests were carried out in Madrid, Barcelona and Valencia in April 1998, but the operations started only in 2000. The delay was due to the definition of the rules and regulations of the transmissions on the ground.

Only after the laws were clearly defined, did the investors invest. There was a comprehensive study of the electronics industry in Spain, done by Aniel and released at the exhibition. The industry is apparently in a good position due to the conversion to digital equipment and the Internet. There has been increase in production, imports and exports and there have been a number of new companies to take advantage of the change in the industry. The market for industrial electronics and telecommunications has reached 5.3 billion pesetas in 1999, and out of this, 3 billion pesetas were due to the telecommunication services and industrial electronics was 2.4 billion pesetas.

The main causes for the growth were the boom in cell phones as also a rapid increase in demand for radios and videos for the house. The growth of imports was very high at roughly 27% and the exports were static at around 2% growth. The growth in demand of consumer electronics was high during the year at about 16% and the main reason for this was probably the general development of Spain. The production of goods in this sector was low as there was a drop in the production of TV sets which were being manufactured for exports to Eastern Europe, and there the economy was not doing well. (Spain's Digital Fiesta: Industry Trend or Event)

The technological situation in the Czech Republic is much more advanced both from the position of the country and the long industrial culture that it has. The question has now come as to whether the Czech citizens remain as good skills as they had earlier of being qualified, skillful and creative in their capacities. There has been a lot of development of technology in the past decades and especially in the area of information and communication technologies more than the other areas of technologies. The development of skills in this area will require them to develop quickly and adjust their abilities, skills, knowledge and attitudes for the tough and inevitable challenges that will come in the near future.

For the development of these technologies it will require the development of their networks for the schools as also Internet for the students at school, home and at the student hostels. This will face difficulties due to the regular problem that the schools have for funds. In all sections of the system of education in the Czech Republic there are continuous problems of funds. The support given to adult education in information literacy and the attention paid to the question of literacy is also low when compared to the prevalent situation in the other European Union country. Another major shortcoming of the Czech system is the lack of knowledge of English among the general population which is required for achieving information literacy. This is a very important factor for the competitiveness in the international sphere for the labor of different nations.

There was a survey made in the Czech Republic which showed that only 15% of the people can speak English and a total of only 55% can speak any foreign language. The advantage with the employees in the Czech Republic was that they had a high proportion of tertiary and secondary technological schools of good capacity. This gave in the workers a high proportion of skilled workers and employees. This advantage is getting reduced during the past few years as the younger generation are not entering the required schools and colleges which can provide the same high quality of education. At the same time, there has been a rapid increase of unemployment in the country and in some parts of the country the unemployment rate is even more than the benchmark figure of 20%. These are the difficulties and problematic steps that Czechs are going through. In spite of this there are now many Czech businesses and their managers who have built up systems which are very competitive.

In certain cases, the businessmen from Czech country have become renowned for their professional expertise in foreign companies. Still there is little connection of the education system of the Czech Republic to the requirements of the businessmen. The system of education is highly conservative and this is the situation even in technical education. The system has not changed even after the change of the system in the country. This situation calls for urgent change and making the secondary schools international. Only this can provide the youth with education that will be comparable to the general standards in Europe. There should also be alarm at the fact that among the twenty-year-olds in Czech Republic there are only 24% of students, whereas in the total of the OECD countries, the average is 44%. (Human Resources Development Strategy - Czech Republic

2.Product and market analysis

Marketability

To determine the marketability of any product, there is a requirement of high knowledge of the functions of the product and the relevant requirements of its functions in the market. It is being assumed that the growth of the new Information Technology will be helped by the use of this product. There is a high growth of this technology in most countries, and that is the reason why this product would be of great use in those countries. Regarding the two countries being considered, the Czech Republic and Spain, the penetration of new information technology is low as compared to the rest of Europe, and so the market may not be viewed to be as good as the rest of Europe. It has been the decision to discuss the introduction of the product in only these markets, and so the discussion will be limited only to a comparison of these markets.

Advantages/disadvantages of trying to market this product in Spain or Czech Republic

In Spain there is a clear attempt for observation of international laws on trade marks as was seen in the case of Anheuser-Busch vs. Budjovicky Budvar. The brand name of Budweiser was being used by both the parties in Spain, but the Spanish Provincial Court of Appeals ordered Budvar to stop using the name. The ruling of the court was that the Czech brewer, Budvar has to stop sales of beer in Spain under the trademark of Budweiser Budvar. There was also a further ruling from the court that Anheuser-Busch is entitled to damages caused by the use of trademark by Budvar (Budvar must stop using Bud name in Spain). This shows that it is clear that marketing in Spain is safer from a brand name protection point-of-view than in Czech Republic. This is not a major difference in terms of the product which is an intermediate product and will be of use only to distributors of the facilities, and not the consumers. Thus this difference may not be of much significance, but the protection of the technology is important, wherever the product may be manufactured. This protection may be safer in Spain than in the Czech Republic, and so it may be said that Spain may end up being a better market.

Potential and problems

There is a lot of growth of the electronics industry in Spain and the company Manufacturers' Services Ltd., also known as MSL has finished putting up a second plant in Spain. This is the fourth plant of the organization in Europe and it will be based in the center of the consumer electronics manufacturing facility in Catalonia, which is 100 km down the coast from Barcelona. The aim of this new plant was to support the demand from OEMs for manufacture of electronic components. The plant will have core manufacturing services like PCB assembly and system integration. There will also be value added services like designing for manufacturability. The place where the plant was set up is an active business center and is also historical city having been an imperial city of the Roman Empire. The specific city of Tarragona was chosen as it is near to the large number of European customers.

The European Community is a significant growth market for EMS and there is a prediction that the OEMs in the area will gradually shift further to outsourcing their manufacturing activities. There is an estimate by a research group that OEMs in Western Europe will spend $21 billion on electronic manufacturing services in 2000, and that was a growth of 23% in one year. The company will now have two facilities - one in Tarragona and one in Valencia, which is 250 km away from Tarragona. The production is to be utilized by customers in networking, peripherals, industrial and consumer electronics and the list of customers include IBM, Philips, Ericsson and Gilat Satellite Networks Ltd. The plant in Valencia is now operating for nine years and is the primary source for the company's European Product Engineering.

This also has a design center with the capacity to help OEM customers speed up their products for introducing new products. The facility in Valencia will provide a wide range of integrated services which will help the product through the entire life-cycle. There will be assistance in basic design, and manufacturing of any component required for the product in electronics, circuit boards and cards; final assembly; distribution; after sale repairs and services. The unit will compete with other companies in Europe and Southeast Asia and this has compelled the company to reduce the client's time for entering the market, and also produce it at a competitive price. The unit at Valencia has a strong group for R&D which was started by IBM in 1992 and taken over by MSL in 1995. The company is expanding the production facilities very fast as during the same year it had started the third European operation in Galway, Ireland for the clients in that area. (MSL Expands in Spain)

Whereas there seems to be a clear potential for growth of the electronic industry in Spain, in the Czech Republic there seems to be a climate of corruption. This was due to the changes that took place in the political arena in 1989. There were a lot of changes in the area of corruption to new areas due to the economic and legal changes that took place and this has also led to large growths of corruption in some areas. Earlier corruption was high in the general services of the country as also sales, due to the shortage of goods, but with the change corruption has started in the areas of clerical and administrative services. There were the earlier practices f corruption based on the services, small gifts and small bribes and this has continued even today though the system has evolved during the communist rule in the country. This has become the norm of behavior and process of negotiation with the administrators at the state level.

The earlier image of the state administration was that of a repressive body by the general public, and the image has not changed much. This image of the state body led to a situation where the state was an enemy, and this led to the feelings that small thefts and misuse of public property was a sort of passive opposition against the state government. The process had continued for forty years during the regime, and the behavior had gradually become a social norm, and had become a part of the accepted behavior pattern at the administrative level in addition to being accepted at the citizen's level. The general view of the public of the state administration does not have much of prestige or value as an occupation. Comparatively, the income of the administration is quite low and the difference in incomes within the administration is low.

This has led to a situation where the jobs in the state administration do not carry much prestige, or attract intelligent people in the job market. This has made the total system extremely bureaucratic. Thus the officials in the administration do not belong to the middle class at any level. The reduction in competence of the staff has now led to a situation where the lower level staff are mostly unqualified and thus not able to take any decisions, or able to take personal responsibility for the decisions. This has made the system one in which the regular practice is to pass on the responsibility of taking decisions to higher levels within the administration. Thus there are delays in decision making, and this may be a difficulty in the new information technology industry. (Corruption and Anticorruption in the Czech Republic)

Entry strategy

For entering into the Spanish market, it is assumed that the product will be manufactured outside Spain and only a marketing organization is needed in Spain. This is generally done through a branch, and in practice, any organization with its head office situated abroad is treated as a branch in Spain. This organization will not be a legal entity and is controlled by the laws which are in force in the country where the organization has the head office, especially in relation of its deals with the third parties. To set up a branch, the requirement is to complete a public deed and enter the deed in the Commercial Register. The operation of the branch has to be within the declared objects of the branch which means that it has to operate within the purposes mentioned for the branch.