Opening a Business An Analysis of the Political and Legal Environment for a Clothing Business in Germany Today

The purpose of this study is to determine the viability of establishing a clothing outlet in Germany today based on the existing political and legal climate for business. At first blush, it would appear that Germany represents an exciting opportunity for virtually any type of commercial enterprise; for example, the German economy is the largest in Europe and the fifth largest in the world, and Germany has more people than any other nation in Europe (Germany 2005:1). Further, the country remains a key member of the continent's economic, political, and defense organizations and has assumed a new leadership role in world affairs today. For a clothing business, Germany would also seem a logical choice since the German people have always expressed a keen desire to keep up with the latest fashions from London, elsewhere in Europe and abroad, particularly New York (Griffiths & White 2000:137). Despite these considerations, though, the country has experienced some fundamental shifts in demographic composition and profound economic problems since reunification in 1990; however, Germany has also invested an enormous amount of resources to bring the former Eastern Germany's productivity and wages up to Western standards -- but not without some serious consequences for multinational companies looking to extend their operations there. These considerations are discussed further below as they concern the country in general and Germany's political and legal climates in particular.

Review and Discussion

Background and Overview. The German economy is becoming more integrated with the European Union's as a result of the introduction of a common European exchange currency, the euro in January 1999 (Germany 2005:1). Nevertheless, the German economy has become one of the most sluggish economies in the entire euro zone with no resolution to the country's problems in sight; in fact, economic growth during 2001-2003 was less than one percent as a result of the enormous resources being devoted the modernization and integration of the eastern German economy. Much like many other industrialized nations today, the German population is rapidly aging; these trends, combined with chronically high unemployment rates, have resulted in government expenditures surpassing private contributions (Germany 3).

Some key statistics for Germany today are provided in Table 1 below; these data show that the German population is overwhelmingly...

Overall, the country is fairly mature with a 41.7-year median age and a birth rate that is insufficient to maintain its current population levels; however, these data also show that Germans live a long time, with the average female reasonably expecting to live to be at least 81 years old.
Table 1. Key Statistics for Germany Today (Source: Germany 2005:3-5).

Population:

82,424,609 (July 2004 est.)

Age structure:

0-14 years: 14.7% (male 6,197,490; female 5,879,052)

15-64 years: 67% (male 28,119,536; female 27,132,713)

65 years and over: 18.3% (male 6,096,106; female 8,999,712) (2004 est.)

Median age:

total: 41.7 years male: 40.4 years female: 43.2 years (2004 est.)

Population growth rate:

0.02% (2004 est.)

Birth rate:

8.45 births/1,000 population (2004 est.)

Death rate:

10.44 deaths/1,000 population (2004 est.)

Net migration rate:

2.18 migrant(s)/1,000 population (2004 est.)

Sex ratio:

at birth: 1.06 male(s)/female under 15 years: 1.05 male(s)/female

15-64 years: 1.04 male(s)/female

65 years and over: 0.68 male(s)/female total population: 0.96 male(s)/female (2004 est.)

Life expectancy at birth:

total population: 78.54 years male: 75.56 years female: 81.68 years (2004 est.)

Legal Climate for Business in Germany Today. The current high unemployment rates being experienced in Germany have been further exacerbated by some structural rigidities in the labor market that serve to adversely affect new companies. For example, German labor regulations are strict when it comes to laying off workers, and wages are established on a national basis (Germany 4). Long-term expectations for Germany remain sound though; the investments being made today combined with the corporate restructuring initiatives are expected to allow Germany to regain its leadership position in the strengthening European markets, particularly if the problems with the German labor market are resolved. In addition, the German government has already taken some positive steps toward reforming the country's economy, although these are not expected to help offset the nation's short-term economic needs, and the decline in government revenues combined with the increase in expenditures have resulted in the…