Entering the Greek Market: Country Culture Study for Business

Introduction

This report has been prepared for Denali Products and their decision on whether to launch their products in Greece, based on the present economic, political, and cultural scenario of the country. Information has been drawn from various surveys and reports to assess how well the country is doing and what chances of success Denali would have in a market like Greece.

Country Demographics and Key Statistics

Greece is a modern country located in the European region. It has a developing economy and a powerful democratic government. The country is situated on the southern end of the Balkan Peninsula (also known as the Haemus Peninsula), at the southeastern region of Europe. Greece lies at the meeting point of three continents: Asia, Africa, and Europe (Country Information: Greece, 2014).

Greece covers an area of approximately 131,957 sq. km. Athens is the capital. The population of Greater Athens is 3,566,060, while the municipality of Athens has a population of 772,072. Thessaloniki has a population of 824,633, and the province of Thessaloniki has a population of 1,057,825. Piraeus has a population of 182,671, while the total population of the province of Piraeus is 880,529. The total populations of Patras, Iraklion, and Larissa are 170,452, 132,117, and 113,090, respectively. The country has more than 1,400 islands and contains many mountains and coastal plains. The climate is hot and dry in summer, while winters are wet and mild (Country Briefs: Greece, 2014).

According to 2013 estimates, the population of Greece was 11.1 million (Greek Business Culture, 2014). Of these, 61.4% lived in urban areas. The official language is Greek, and the primary religion is Christianity. The Greek Orthodox Church is followed by 97% of the total population, while the remaining 3% are Muslim, Catholic, or Jewish. Ethnically, 95% of the population is of Greek origin, 4% are Albanian, and 1% are of other origins (Greek Business Culture, 2014).

The literacy rate in Greece is 97.5% (Country Information: Greece, 2014). Total life expectancy is 79.08 years. Approximately 12% of the population derives its livelihood from agriculture, 68% from services, and 20% from industry (Greece, 2005).

In 1974, with the removal of the monarchy, Greece became a parliamentary republic. The constitution was approved shortly afterward, in 1975. The president is the chief of state and is elected by the parliament for up to two five-year terms. If a majority is not won by a candidate, a general election takes place. The prime minister is chosen by the president and heads the parliament. The parliament (Vouli) is composed of 300 deputies, elected for four-year terms by popular vote.

The judicial system in Greece consists of a Supreme Court, a Supreme Administrative Court, an Auditors Court, Appeals Courts, and First Instance Courts. Supreme Court judges are appointed by the president for life (Tahir, Nagy, & Eastman, 2013).

Corruption remains a significant problem in Greece. In October 2009, Prime Minister George Papandreou declared Greece to be "the most corrupt nation in Europe" shortly after assuming office. Transparency International's Corruption Perception Index, published in 2011, similarly rated Greece as the most corrupt country within Europe and ranked it 78th out of 178 countries worldwide (Pulito, 2012).

Greece is considered a high-income economy. From the 1950s through the 1970s, the country experienced significant social and economic growth — the fastest in the world at the time after Japan. However, the already-struggling Greek economy suffered greatly from the Great Recession of 2009, and conditions were further worsened by the Greek government debt crisis.

The national debt increased substantially from the mid to late 2000s, but has stabilized since 2012, largely due to debt restructuring deals and stimulus packages from other European nations. Financial aid was offered by many EU countries to prevent Greece from becoming dysfunctional, though these aids were provided to such an extent that full repayment may remain difficult.

Within the service sector the Greek economy performs reasonably well, and the tourist industry plays a significant role. However, the deterioration of the tourist industry and mismanagement of imports and exports have increased economic struggles. There is an immediate need for structural reforms and cost-cutting measures to bring the economy back to stability (Statista, 2014).

GDP breakdown by market sector (2013 estimates): agriculture accounts for 3.5% of GDP, industry for 16%, and services for 80.5%. Major agricultural products include corn, sugar beets, barley, wheat, wine, tomatoes, potatoes, tobacco, dairy products, and beef. Strong industries within Greece include tourism, textiles, food and tobacco processing, chemicals, mining, petroleum, and metal products (Greece, 2005).

Major export commodities are manufactured goods, chemicals, food and beverages, petroleum products, and textiles. Export partners include Turkey (11.6%), Italy (9.9%), Germany (6.5%), and Bulgaria (4.9%) (2013 estimates). Significant import commodities are machinery, fuels, transport equipment, and chemicals. Import partners include Russia (13.8%), Germany (9.5%), Iraq (7.8%), Italy (7.9%), France (4.5%), the Netherlands (4.7%), and China (4.5%) (Greece, 2005). The manufacturing sector in Greece is relatively weak, consisting primarily of processed foods, cement, and textiles (Greece, 2014).

The civil legal system in Greece is based on a judiciary divided into civil, administrative, and criminal courts, and on codified Roman law. The current legal system is founded on the Greek constitution of 1975, which has been revised twice — once in 1986 and again in 2001. French and German legal systems have exerted considerable influence on Greek law, which is largely codified.

Commercial law in Greece originates with merchant law, itself strongly influenced by French law. The role of merchants forms the underlying framework, meaning that people engaged in commercial transactions and working in commerce are the primary subjects of this body of law. Greek law protects industrial property, as Greece is a signatory to the Paris International Convention of 1883 on the Protection of Industrial Property.

Laws covering copyrights, patents, and trademarks must be followed by all commercial organizations. The act governing unfair competition lists specific prohibitions designed to prevent discriminatory and unjust competitive practices. A general prohibition forbids any act that opposes morality in agricultural, commercial, and industrial transactions. Additional laws regulate commercial papers such as promissory notes, bills of exchange, bills of lading, warehouse receipts, and commercial money orders. Laws governing monopoly power also exist, and the government has the authority to set price ceilings on products. The Hellenic Competition Commission oversees cartel arrangements, and all cartels must be reported to it.

Both domestic and foreign entities have the right to own and establish business enterprises. They may acquire, establish, or dispose of businesses and participate in all kinds of remunerative activities. Private enterprises enjoy the same access to business operations and markets as public enterprises. A screening procedure applies when an investor seeks to benefit from government investment or tax incentives, and the same procedure applies to both foreign and domestic investors. Business enterprises may be formed as corporations, general partnerships, limited partnerships, or limited liability companies (Legal Landscape, 2012).

Business Characteristics and Suitability

Greece has an open economy that relies heavily on the service sector, which accounts for approximately 85% of GDP. The agricultural and industrial sectors together account for the remainder of national economic output — agriculture for 3% and industry for 12%. Although Greece is a significant producer of fisheries and agricultural products within Europe, the tourist industry is the primary driver of the economy. According to a survey conducted by the United Nations World Tourism Organization, Greece is the 7th most visited country in Europe and ranks 16th globally (Greek Business Culture, 2014).

In 2012, the average unemployment rate in Greece was 23.6%, rising to 26.8% by October 2012 due to the recession. While the number of skilled, semi-skilled, and unskilled workers is large, finding workers with very high technical abilities can be difficult. There are approximately 1.2 million immigrants in the country, of whom about one-fifth are part of the workforce. About 30% of these immigrants are either undocumented or hold expired residence permits.

Worker rights are protected through approved ILO Conventions. Specific legislation provides the rights to organize, strike, and bargain collectively, as well as freedom of association. Greek labor laws set the minimum working age at 15 and establish standards for employment wages, acceptable working conditions, workplace health and safety, working hours, and the rules governing employee dismissal. In 2012, much of this legislation was amended by executive orders to make the labor market more flexible. There is also a restriction limiting mass dismissals: no public or private company may dismiss more than 20 employees at one time (2013 Investment Climate Statement — Greece, 2013).

The minimum wage in Greece did not change between June and December 2013 and remained at €683.80. The average minimum wage from 1999 to 2013 was €692.69. It peaked at €876.60 in December 2011 and was at its lowest — €522 — in June 1999 (Greece Minimum Wages, 2014).

According to multiple studies, Greek consumers are among the most pessimistic in Europe — and understandably so. In 2012, the Greek economy contracted for the fifth consecutive year, unemployment rose to 24.3%, and levels of disposable income declined significantly. These conditions produced a drastic reduction in consumer spending (Euromonitor International).

Consumer confidence fell from -51 in July 2014 to -54.70 in August 2014. The average consumer confidence reading from 1985 to 2014 was -35.62. It reached its highest point in May 1985 at -3.20 and its lowest in October 2011 at -83.80 (Greece Consumer Confidence, 2014).

Consumer spending in the fourth quarter of 2013 was €26,383.50 million, rising to €27,885.90 million in the first quarter of 2014. The average consumer spending from 2000 to 2014 was €32,294.55 million. It peaked at €38,755.90 million in the second quarter of 2008 and reached its lowest at €26,383.50 million in the fourth quarter of 2013 (Greece Consumer Spending, 2014).

The country's infrastructure is modern, featuring up-to-date railways, airports, and well-developed highways and roads. Greece has 80 airports, of which 64 have paved runways. The railway network spans 2,548 kilometers, while the highway network totals 117,000 kilometers, of which 107,406 kilometers are paved. There are 12 ports and harbors in Greece and a merchant fleet of approximately 700 ships (Greece — Infrastructure, Power, and Communications, 2012).

Since 2007, renting and buying accommodation has become much easier. Foreigners who invest more than €250,000 in Greek property are eligible to apply for residency. For a two- or three-bedroom apartment with air conditioning, a water heater, an electric cooker, and a family of four, electricity costs average €50 to €80 per month, including local taxes. The emergency property tax is collected through the electricity bill but is the responsibility of the property owner, not the tenant. Starting costs for both landline service and fast broadband internet packages are approximately €20 per month (Avgerou, 2014).

The basic taxation rules in Greek law are established by (A) Article 4 §1 and §5 of the Greek Constitution, which state that "in the eyes of the law all Greeks are equal" and that "contributions are made by the citizens of Greece to the public fees according to their authority and without any discrimination"; and (B) Article 78 §1 and §2, which provide that (1) no tax may be collected or imposed without a formal law specifying the object of income, the nature of the property, or the transactions related to the tax, and (2) taxation may be imposed only on income produced in the preceding year.

Under the country's income tax code, a foreign company is considered to have a permanent establishment in Greece if it engages in any of the following activities:

a) Running a warehouse, shop, branch, workshop, office, factory, or installation for the purpose of using natural resources;

b) Processing agricultural products or raw materials;

c) Rendering services or conducting business through an agent authorized to conclude and negotiate contracts in the company's name;

d) Maintaining a stock of merchandise from which orders are executed; and

e) Participating in a Greek partnership (EPE).