The selected company for the assessment and analysis is Julius Meinl, which is a major Austrian coffee retailer and manufacturer. It is a private company with a multimillion revenue, and it seeks to move its production and sales representation offices to more appealing environments. The given analysis focuses and justifies Mexico as a new site for services and manufacturing due to the local state support for foreign businesses and a more superior workforce, which is more specialized and industrious. It was also derived that Netherlands should be a place for new sales representation offices because it is the most competitive economy in the EU, whereas the UK is no longer a member of the union.
It is important to note that the company is considering both Mexico and India as locations for coffee production and service locations as well as offices. The incentive is evidently driven by the fact that these nations provide a more favorable environment for manufacturing the coffee beans, which are essential for the successful operation of the business. In order to have a full understanding of employment relations in Mexico, it is critical to assess trade unions, collective bargaining, and the overall role of the state. One of the most prominent traits of the given nation’s trade union features is the fact that about 90% of all industrial enterprises with a staff larger than 25 are unionized (Grajeda, 2020).
The Confederation of Mexican Workers or CTM is the central host of 11000 labor unions, which protects Mexican workers, especially in the industrial sector (Grajeda, 2020). Although the labor force is greater in India, the industry based labor force is ranked higher in Mexico, which is 67% more than the alternative location (Nation Master, 2021). Therefore, it is evident that Mexico possesses a more specialized workforce accompanied by a unified labor union, which is more organized than sporadic Indian structures.
In the case of service locations, the emphasis needs to be put on the coffee production-related aspects. The main reason is that Mexico deliberately separates its coffee agricultural segment from other sectors due to its significance to the local economy (Grindle, 2019). The jurisdictions in regards to service locations are favorable for businesses due to the country’s inherent trade policies, which is partly due to its geographical location (3ECPA, 2020).
The nation is bordering with the largest world economy, which is the United States, and it has access to the South American continent, which also has Brazil. In addition, the Mexican market itself is substantial in size, where consumers are accustomed to foreign brands (3ECPA, 2020). However, one of the most critical advantages of Mexico is its cheap labor costs, which are also accompanied by a more specialized industry workforce (3ECPA, 2020). Mexican government allows companies to dominate the markets, and it is especially true in regards to first-movers (3ECPA, 2020). Therefore, both the state and the local market is favorable for employing the population, opening production units, and establishing service locations.
Moreover, Netherlands is one the major European nations, which possesses a wide range of favorable factors for opening sales representation offices alongside the United Kingdom. It is important to note that the Netherlands is ranked the highest in terms of its competitiveness as well as happiness indexes (Nijland, 2021). One of the main advantages of the Netherlands over the UK is the fact that the latter is no longer a member of the EU due to Brexit (BBC, 2020). Therefore, recent reports suggest that many companies, such as transportation ones, are refusing to do business with Britain due to an additional financial burden imposed by the nation (O’Carroll, 2021).
For example, regular consumers are charged more for EU-based products due to a value added tax (Jones, Snowdon, and Mustoe, 2021). In other words, UK can be considered as an isolated country, which has limited access to the EU’s resources as other non-EU states. In contrast, Netherlands is one of the most prominent members of the EU, which makes it easy to access the entire EU since there are almost no strict regulations for business expansions. In addition, it is the strongest economy in the EU, which makes it appealing options in comparison with UK or Austria.
Subsequently, opening sales representation offices in the Netherlands can be an appealing endeavor, which would benefit Julius Meinl substantially. The nation possesses one of the most effective government integrity and property rights laws, which are accompanied by a relatively lower tax burden and improved business freedom (The Heritage Foundation, 2020). In addition, consumers of the country have high purchasing power metrics, which are driven by a large GDP per capita (Societe Generale, 2021). Therefore, it is safe to assume that opening sales representation offices in the Netherlands is a plausible option, which can result in a wide range of benefits for the company.
Advice for the CEO
The CEO should make a decision to make Mexico its new production and manufacturing site. The main reason lies in the fact that the country offers cheap labor, which is industrious and specialized. Although there are many economies with a relatively inexpensive workforce, they lack the necessary metrics, which would make them equivalent to Mexican workers in terms of specialization. In addition, the country respects its industry sector and offers favorable production conditions. It is justified by the notion of its geographical locations, where it neighbors with the largest economies.
The government also aids foreign companies in their pursuits for establishing production sites in Mexico. One might argue that India has cheaper and larger labor, but the quality of the workforce is significantly poorer in contrast with Mexico. Lastly, the nation has strong labor unions and confederations, which means that workers are well-protected, and it will benefit the company in the long run due to fewer violations and improved company image. This fact is also accompanied by the more direct and softer employment regulations due to the confidence in the labor unions, which are able to protect the rights of the workers.
In order to establish a proper sales representation office, it is important for the company to move from Austria to the Netherlands. The country is placed at the heart of the EU, and it has a wide range of advantages over both the UK and Austria. The former is no longer an EU member, which makes it an isolated nation with trade barriers. It cannot have a similar degree of access to the EU’s market as EU members are able to, which makes it an unappealing option. In addition, Netherlands has a highly competitive economy, which ranks as number one in the EU. The UK also imposes poorer financial incentives, such as value added tax, which makes the EU accessibility even less plausible in contrast to the key EU member.
The process of sales representation transition, which involves the relocation of Austrian sales managers, is a classical option. However, it is important to note the key implications of such actions, where they can range from minor acclimatization issues to legal ramifications. The company needs to take new employment laws into a consideration when relocating a sales manager. A recent employment law called the Labor Market in Balance Act, which was introduced and enacted in 2020, makes it more restrictive for businesses to employ local employees (Keijzers, Olthof, and Haaren, 2020).
These new regulations are important to consider since they force newly entering companies more attentive towards their workers (Wiarda, 2019). It is an ethical and correct move, but an Austrian sales manager needs to learn about these changes and utilize his or her strategy properly. He or she should not use an exactly similar approach as in Austria, which has less restrictive employment laws. The same advice applies to the hiring process of local sales representatives, which need to be properly employed through full compliance with the laws of the Balance Act.
Another important factor to consider, which makes the Netherlands an appealing option, is its competitiveness. At the same time, an important factor in maintaining and increasing competitiveness is the development of new industries and adaptation to changing technological processes. Therefore, an additional task was to identify in the international arena changes in the sectors that are key for the competitiveness of the Netherlands, associated with changes in the economic structure and the development of new technologies. The competitiveness of national economies is the essence of the concept and approaches to determining the key factors.
Competitiveness is one of the key and, at the same time, the most complex, complex, and contradictory indicators of the success of national economies in the modern globalized world. The peculiarity of this indicator is that its components are not universal. Each country makes its own optimal set of factors that should enable it to achieve the desired level of competitiveness.
This set is formed both from external conditions and from internal factors that the country has, such as the size of the territory and the availability of natural and human resources, geographical location, historical features of development, capital-labor ratio, the capacity of the internal market and much more. Thus, in the period of the global crisis and recession, other competencies are in demand than in the period of economic stability and growth.
There are many approaches to both the definition of the term competitiveness of the national economy and to the assessment methodology, the analysis of the value of this characteristic for the country’s economic system. The classic definition of the competitiveness of a national economy is its ability to achieve sustainable economic growth and greater growth in the welfare of the population than other countries.
At the same time, it is important to focus on firms as a basic element of a country’s competitiveness on the world stage. Only that state can be considered successfully competing with the rest, whose companies are among the world leaders in one of the industries. Another fundamental provision is the artificial nature of the competitive advantages of states. In other words, the success of a particular economy is determined not by objectively given factors but by the benefits created by the efforts of people. These efforts must be made on an ongoing basis, and these gains achieved today may be lost tomorrow if one does not continue to work on modernizing and improving the economic mechanism.
Competitiveness is individual, and each state creates its own unique recipe for competitiveness, based on its capabilities, goals, and a common vision of its place in the global economic system. As the main indicators affecting the competitiveness of a country, Porter names factor conditions, domestic demand, the structure and strategy of firms, intra-industry competition, and the state of related and supporting industries. Competitiveness in the international arena can be seen as a derivative of domestic competitiveness. If a company is forced to constantly participate in a tough struggle in order to maintain its position in the domestic market, then its product is likely to be in demand in foreign markets. The competitiveness of firms, as noted above, ultimately directly correlates with national competitiveness.
In conclusion, the given analysis focuses on the key elements for making a well-calculated and weighted decision for production and services sites as well as sale representation offices. The first recommendation is centered around selecting Mexico as a new site for manufacturing, production, and services. The main reason is the fact that it has a better labor workforce, which is cheaper and higher quality compared to India. The second recommendation revolves around choosing the Netherlands as a new location for opening sales representation offices. It is justified because it is a member of the EU and has a strong economy and consumer purchasing power. In addition, UK is no longer a member of the EU, which makes the latter inaccessible for the former.
3ECPA. (2020) Financial opportunities of doing business in Mexico: positive, yet demanding. Web.
BBC. (2020) Brexit: what you need to know about the UK leaving the EU. Web.
Grajeda, J. (2020) A look at labor unions in Mexico. Web.
Grindle, M. S. (2019) Searching for rural development: labor migration and employment in Mexico. London: Cornell University Press.
Jones, L., Snowdon, C. and Mustoe, H. (2021) Brexit: ‘I was asked to pay an extra £82 for my £200 coat’. Web.
Keijzers, I. V., Olthof, S. and Haaren, K. V. (2020) Netherlands: significant changes to Dutch employment law take effect. Web.
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