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School of Management

BSM 414 04 MM:
International Management
Arnold Candray

Political Risks of Global Strategy and
Implementation in a selected Global Market

Cecilia Acevedo Espinosa

Course start date: 09/30/2013
Date submitted: 10/31/2013

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Political Risks of Global Strategy and Implementation in a selected Global Market

When a company wants to extend into other global markets it is vital to make an
extend analysis of the multiple variables of the different culture, population, geographical
circumstances, political ideology, economy and Human resources ranking of the country
where we want to establish. This is the main reason of why there exist different associations
that provide enough information in order to make the best decision. During this paper, it is
intended to analyze one country and decide whether is proper to start a new business there
or not. The nation about to be analyzed is one of the most powerful nations in Europe,
which has grown during the last years.

Since the German-speaking people inhabited Europe, they have not been united.
The territory was divided into many states with different
governors. The medieval Germany is known as an era of
divisions, many other lands like France and England
started to unify the divisions into one huge state but the
Germans could not succeed in this. There were constant
wars between the kingdoms that left the division of the country into three different
religions: Roman Catholics, Lutheran and Calvinist. These divisions gave more ferocity in
the thirty years war.

The peace of Westfalia of 1648 left Germany divided again into different parts with
two main states: Prussia and Austria, the small states tried to make alliances with them
depending on the local conditions until 1813 in the battle of Leipzig where Napoleon was
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driven out of Germany. In the next 50 years the unification of Germany grew and started
the formation of democracy in the country. There were revolutions that rejected the union.
States like Prussia and Austria denied the idea of letting the power. It was until 1871 when
Germany was unified and transformed into an empire. Sensing the power of nationalism,
emperor Bismark of Prussia started the search of the preservation of a social feudal order
and the triumph of his country, Prussia, in the long contest with Austria for preeminence in
Germany. After military campaigns, Bismark achieved a united country without Austria.

After loosing world war I the country ended in an economical crisis with the
obligation of paying the victors all the damages caused as well as other critical measures
which cause the formation of the Nationalist, Socialist Germans Workers party (NAZI)
which, with the chancellor Adolf Hitler, caused world war II.

After six years of war, Germany was defeated and Economical and political
destroyed. Again, the country is divided and controlled by the allies. With only 78 years of
unity, the nation was divided into west and East Germany with a physical barrier called the
Berlin Wall. In an attempt to not repeat the same mistake
as in 1919, the western countries helped West Germany
to stand and recovery. With a slow economic collapse of
the Communist world, the nation is, in 1990, reunified.

The Federal republic of Germany, best known as Germany is considered as the
Europes largest economy and one of the most populous countries in the continent. This
Nation is well known as a vital member of the continents defense, political and economic
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organizations. After the world war II and the division into two German states, this nation
has evolved gaining power trough the years.

Germany is located on North European Plain and near the entrance to the Baltic Sea.
It has a total area of 357,022 square meters where the climate is mainly cold, cloudy and
wet providing the advantage of Eolic energy production. According to the CIA data base
(2013), this nation has a population of 81,147,262 persons where 13.1% are between the
ages of 0-14 years, 10.8% between 15-24 years,
42% between 15-54 years, 13.13% between 55-64
years and 20.9% are over 65 years old. In the
graphic it is shown the classification of the
population according to their gender and their age.

The economic Ideology or freedom in Germanys different states must be adjusted
depending on the institutional characteristics. The authority in Economic making has been
limited by the Laender governments; those limits affect the states because they are not
autonomous in setting tax rates, however, they policy responsibility in shaping corporate
taxation. The economic freedom for the nation does not have many components than the
world economic freedom indices and take resemblance to the Canadian provinces and the
US states.

There are two main political parties in the republic: the social democratic party and the
Conservative Christian Democratic Union. These parties do not compete against each other;
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they work together in the federal parliament. There are two other parties that have taken
strength in West Germany which are the Green and the free Democratic Party.

Germany is a federal republic formed by 16 states. Its capital city is Berlin. The
Executive branch of the government is formed by president
Joachim Gauck, Chief of state, Chancellor
Angela Merkel, the head of Government and
the cabinet or Bundenministers, which are
chosen by the president on the
recommendation of the chancellor. The president is elected every 5
years and can be eligible for a second term.

The legislative branch is conformed by the federal councils or Bundesrat who
represent the 16 states of Germany and the federal parliament or Bundestag. This branch is
in charge with law that affects the state competences and the constitutional changes that
affect the country. The third and last branch is the juridical one that consists of a Federal
Court of Justice and the federal Constitutional Court. Its main task is judicial review
focused on constitutional issues and the compliance of all governmental institution with the
constitution.

The German Economy is defined as the fifth largest of the world; it is a leader
exporter of Machinery, vehicles, chemicals, and household equipment from a skilled labor
force. Because of the demographic conditions of low fertility rates and declining net
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immigration, reforms had been launched to address the chronically unemployment and the
replacement of nuclear with renewable energy.

The republic of Germany is the sixth higher country in purchasing power parity with
3.25 trillion USD. This rate represents the services and goods given and produced in a
given year giving a number to interpret the living conditions of the citizens.

The spending of the economy in Germany is divided in consumers, businesses,
government and foreigners; this data provides the percentage contribution to the total GDP
and is divided in: Household consumption: 57.5%; government consumption 19.5%,
investment in fixed capital 17.6%, investment of inventories -0.4%, exports of goods and
services 51.5% and imports of goods and services -45.8%.

The economic activity of Germany is mainly the offer of services with 71.2% of the
production, 28% of industry and only 0.8% of agriculture. The unemployment rate detected
in 2012 is 5.5% a smaller number compared to the 7.1% of the year 2011. With the
information provided by the CIA, Germany has an inflation rate of 2.1% establishing it a
good place to invert and to install facilities of a foreign company.

The country has acquired strength in exports and imports in the last few years,
exporting motor vehicles, chemicals, machinery, metals, transport equipment to France,
UK, Netherlands, US, Australia and Italy. In 2012, the Nation imported data processing
equipment, vehicles, oil and gas, electric equipment and agricultural products from
Netherlands, France, China, Belgium, Italy and the UK mainly.
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The European union was set up with the intention of ending with the constant
conflicts of power, which ended in the WWII. Belgium, Germany, France, Italy,
Luxembourg and Hungary launched the European Union, which increased in the next years.
Actually, the members of the EU are:
Austria (1995)
Belgium (1952)
Bulgaria (2007)
Croatia (2013)
Cyprus (2004)
Czech Republic (2004)
Denmark (1973)
Estonia (2004)
Finland (1995)
France (1952)
Germany (1952)
Greece (1981)
Hungary (2004)
Ireland (1973)
Italy (1952)
Latvia (2004)
Lithuania (2004)
Luxembourg (1952)
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Malta (2004)
Netherlands (1952)
Poland (2004)
Portugal (1986)
Romania (2007)
Slovakia (2004)
Slovenia (2004)
Spain (1986)
Sweden (1995)
United Kingdom (1973)

Because of the big amounts of exportation, Germany is one of the most involved in
global economy country and it is interested in the open markets. Its principal economic
allies are the USA, UK, Netherlands and France. The growth of relationships has increased
with the recent agreements with Asian countries like China.

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A human development report represents a
ranking of the human resources in countries around the
globe. In these reports it is important to evaluate the
results given with previously studies of the same
country in previous years and with other nations with
almost the same social structure. This report
summarizes aspect of human lives such as health,
education and standards of living. According to the human development report of the UN
(2013), In Germany, the rank for 2012 is of 0.92, which means that this nation has a very
high human development category. Positioning the country at 5 out of 187 countries. The
graphics show the trends in Germanys HDI since 1980.

The gender equality index evaluates three different aspects: reproductive health,
empowerment and economic activity. This rate is qualified with different measures that
show the loss in human development due to discrimination between genders achievements
in the dimensions explained above. Germany has a value of 0.075, which show a high grade
in it.

According to the international finance Corporation (June 2013), Economies are ranked
on their ease of doing business, from 1 189. A high ranking on the ease of doing business
index means the regulatory environment is more conducive to the starting and operation of
a local firm. These averages the rankings of the countries into 10 different topics, made up
of a variety of indicators, giving equal importance to each topic. The ranking for Germany
is:
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Ease of doing business rank: 21
Starting a Business: 111
Dealing with construction permits: 12
Getting electricity: 3
Registering property: 81
Getting credit: 28
Protecting investors: 98
Paying taxes: 89
Trading across borders: 14
Enforcing contacts: 5
Resolving insolvency: 3

It has been reviewed the main information on Germany and it can be concluded that,
because of such a strong economy and culture, it can be hard to establish a company there.
It has a low inflation rate but the economic ideology puts a lot of obstacles that do not let
the Enterprise progress so easily. However, such a big nation represents a big challenge but
if taken in the appropriate manner it might offer big rewards it is not impossible, there have
been a lot of companies that have succeeded in the country. The more powerful industries
in Germany are of manufacture but there are other markets that can fit in the nation.


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References:
European Union (2013). The history of the European Union. Retrieved October 30, 2013
from: http://europa.eu/about-eu/eu-history/index_en.htm

Facts about Germany. Economy. Retriever October 30, 2013 from: http://www.tatsachen-
ueber-deutschland.de/es/economia/main-content-06/reordenacion-de-la-arquitectura-
financiera-internacional.html

International Finance Corporation (June, 2013) Doing Busines. Economy Rankings.
Retrieved October 30, 2013 from: http://www.doingbusiness.org/rankings

One World Nations Online (1998-2013). Outline of Germanys History. Retrieved October
30, 2013 from: http://www.nationsonline.org/oneworld/History/Germany-history.htm

Potrafke N. (October 19, 2011). Department of Economics, University of kontanz.
Economic freedom and government ideology across the German states. Retrieved
November 1, 2013 from: http://www.uni-
konstanz.de/FuF/wiwi/workingpaperseries/WP_41-Potrafke-11.pdf

UNDP (2013). Human Development Report. The rise of the south: Human progress in a
diverse world. Germany. Retrieved October 30, 2013 from:
http://hdrstats.undp.org/images/explanations/DEU.pdf