International Business Climate Essay
International Business Climate
Business climate refers to the economic environment in general which depicts how businesses and business activities are supported by the government as well as the lending institutions. Business climate is also a reflection of the attitude of the labor unions toward inflation rates, taxation rates, employers and other issues which affect business activities in a given region or country. Switzerland ranks the most attractive country in terms of having the most conducive international business climate which has attracted tremendous investments and highly skilled labor from all over the globe. The country enjoys a safe and stable working environment and most small and medium enterprises are located in the Greater Geneva Berne area (GGBa) which has an excellent international business track record (ggba-switzerland.ch, n.d).
Switzerland experienced one of the weakest economies in the Western Europe in the 1990s during which the annual GDP growth averaged 0% between the years 1991 and 1997. A gradual economic growth was witnessed in the beginning of late 1997 and it reached a peak in 2000 with a GDP of 3%. Between 2001 and 2003, the economic growth slowed down but began to grow at 2.5% per annum since the year 2004 until the latest global economic crises which have had a great impact on its economic growth (state.gov, 2010). Being at the heart of Europe, Switzerland is a hub for the crucial communication systems which are indispensable in the industrial Europe. Therefore, the expansive modern and reliable infrastructure encompassing the country facilitates an extremely high number of international and local business activities. The good international business climate of the country has been influenced by several factors which entails economic, cultural, legal, and political issues. It is therefore the objective of this paper to discuss these issues with reference to Switzerland as a country.
2.0 Economic Climate
Trade is the backbone of Switzerland’s prospering economy which has made its per capita income be among the highest globally. International climate highly favors the export markets upon which the country depends for generating enormous income while at the same time facilitating the imports of raw materials which are essential for the expansion of the range of goods and services available in the economy. Economic climate is also made better by the liberal trade and investment policies which has attracted many investors in addition to the well defined commercial law and well developed legal system. Switzerland is a member of several international economic organizations including the International Monetary Fund (IMF), World Trade Organization (WTO), Organization for Economic Co-operation and Development (OECD) and The World Bank (state.gov, 2010).
Important sectors of the economy include tourism, engineering, banking and insurance which have a heavy influence in the economic policies of the country. The existing trading companies enjoy unique expertise from Far East, Africa, Middle East and Eastern Europe. The highly developed tourism industry gives the country’s market the opportunity to trade in services and equipment related to tourism. The export industry provides the economy with about half of the country’s corporate earnings with the largest trading partner being the European Union. The trade and economic barriers between Switzerland and the EU are minimal hence facilitating more business activities. The U.S is a major export destination of products from Switzerland and also a major source of imports of raw materials for the country. U.S is the second-largest importer of Swiss goods after Germany and also is the largest foreign investor in Switzerland (state.gov, 2010).
3.0 Legal Climate
The business regulatory system in Switzerland is highly transparent and regulations affecting the activities of both local and international investors are applied with no discrimination. Previously, cartels were common in the economy whereby companies in various industrial and service sectors through industrial and trade associations organized themselves into vertical and horizontal cartels. The new law governing the formation of cartels ensures that such cartels do no harm to the society and the economy. The adoption of this law which includes the authority to stop anti-competitive behavior without prior warning has facilitated an extra GDP growth of 0.5-0.8% per annum following the reduction of harmful cartels (Dimireva, 2010). The legal system governing international and local business activities has propagated an efficient capital markets and portfolio investment.
One of the largest markets for foreign borrowers is the Swiss franc dominated foreign bond market and generally there are no restrictions on the sale or purchase of foreign equities and currencies. Forward transactions between Swiss nationals and foreigners can be carried out at the prevailing market rates. The liberal market of Switzerland is protected from being misused as a platform for criminal activity and money laundering by regulations which serve to adjust particular aspects of portfolio investment. A good example is the signing of OECD Anti-Bribery Convention in 1997 which started operating in 2000 (Dimireva, 2010). The effective legal and policy framework of Switzerland has excelled in combating corruption which if unchecked can adversely impact the international business climate. Following implementatation of laws deterring corruption, for instance the U.S firms which have invested in Switzerland have not issued any complaints about cases of corruption. There are highly effective investigative and enforcement mechanisms which deals with any domestic corruption and this has attracted more international investors who have developed confidence in the Swiss economy.
4.0 Political Climate
The Swiss political system is highly stable and effective since both the county and state government bodies possess high levels opf control. The system has been structured in such a way that all the rural and urban areas of the country have access to government officials for requests or essential information. A referendum which requires a popular one million signatures is enough to give people the power to demand certain changes concerning business practice, the established law or the environment. One of the main contributors to the country’s political stability is the stability existing within different institutions.The Swiss National Bank for instance is a highly steadfast finanacial institution which has strengthened and stabilised the Swiss Franc. Political stability is further stabilised by the fact that Switzerland is a representative democracy in which the major governing body is the Federal Council made up of seven persons. The government is considered to be trustworthy and honest by the populace (mkeever.com, n.d).
5.0 Cultural Climate
International business climate in Switzerland is greatly influenced by the etiquette and cultural expectations in the Swiss professional environment. In order to develop productive working relationships and successful business strategies, it is a preriquisite to understand and respect the various aspects of Swiss culture. The country offers Communicaid’s Doing Business cultural awareness courses to enhance the creation of fruitful business relationships between foreign business professionals and the Swiss clients partners and colleagues (Guliyev, 2007). Such courses are essential in ensuring competitive advantage which offers foreign business people with the ideal opportunity to comfortably do business in the country. In addition, there are a wide range of cultural and leisure activioties which has further facilitated the progress of the country in doing intyernational business. The ideal cultural climate has prompted a large number of sports lovers, business travellers and nature enthusiasist to visit the country all year round which has elevated international business relations a notch higher.
The creation of an enabling international business climate is a collective task of various institutions and aspects of the society. These aspects must comprehensively address cultural, political, economic, and legal situations of the particular country which is willing to create a conducive business environment. Switzerland is a good example of a country in the heart of Europe which has embarked in creating such an environment which consequently has attracted huge investments. The creation of an excellent international business climate may not be as challenging as sustaining it and therefore firm political, legal, cultural and economic strategies are indispensable in achieving it.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 26 September 2016
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