England Nation Economics

1.INTRODUCTION

England is the largest part and most populous nation of the United Kingdom. As a part of the United Kingdom, England is a major centre of world economies and one of the world’s most highly industrialized countries (Fuller 2005). In fact, it is the first country in the world to become industrialized. Therefore, England seems to be a good market with plenty of opportunities for international business in terms of foreign direct investment, joint-venture in particular. Before entering England, however, there are some factors that may affect the business environment, and these factors need to be considered such as, the political system, legal system, economic system, social issues, cultural issues and so on.

2.POLITICAL SYSTEM

Firstly, political stability is very important as it is a major force providing confidence for firms and also determining whether the business could develop to its full potential or not.

The political system of the United Kingdom consists of a constitutional monarchy and national government (parliamentary democracy). Constitutional monarchy means that the king or queen has a predominantly ceremonial role as head of state and restrained by parliament, by law or by custom (Fuller 2005). The current monarch is Queen Elizabeth the second. A body of parliamentary elected members selects the England’s government through elections and the elections are held every five years (Fuller 2005). The party with the most votes forms the government and the leader of that party becomes prime minister.

England is a developed country and the political condition is stable which encourages smooth business operations and guarantees less risk. Having a parliament democracy also allows its people to have freedom of speech, full civil and property rights, and so on. People have the freedom to capture business opportunities as well as run the business activities with confidence.

England has an open economy, in which international trade and foreign direct investment plays a vital part. Yet, political risks come in numerous forms such as nationalization, changing tax rate, local content requirements and so on. The government intervenes and sets regulations for foreign investments such as equity restriction policy, and domestic content requirement policy.

The 1987 Banking Act is an equity restriction policy in the UK. This act gives the government the power to prevent foreigners from acquiring a controlling interest (15% or more) in a UK bank. Outside the financial sector, full foreign ownership is limited only in a few industries, such as aerospace, broadcasting and media ownership (Jensen 2003). There is no formal domestic content requirement in England, but foreign investors must ensure that a specified percentage of output value is added locally (Jensen 2003). Therefore, foreign investors have the advantage of being able to employ cheaper raw materials from another country to gain profit and so on.

Besides the issues addressed above, it is also crucial to know about the issue of “National Enforcement Service”. This signifies that nowadays the UK government has the power to confiscate business property for its people from those firms that have liability owed to the government in the form of unpaid taxes (Falconer 2005). Thus, foreign investors should be aware of this issue and make sure that they are able to meet financial needs and definitely not try to avoid paying taxes because the government has power to take over all the business property.

3.LEGAL SYSTEM

Legal system is a rule or law adopted by a country to settle an argument, control unfair business practices and so on. Each legal system adopted by a country, whether it is common law, civil law, or religious/theocratic law, will affect international business activities.

The legal system that is practiced in England is Common law. Common law is a legal system which the ruling is based on a country’s legal history (tradition), past cases that have come before its courts (precedent), and the way in which laws are applied in specific situations (usage), as well as the decision of judges rather than from laws made by parliament (Wild et al 2006). However, in addition to this body of law, there is a legislation passed by parliament and known as equity law. Equity law emphasizes on fairness, flexibility and provides remedies for modification of contract, injunction, and so on (Britain 1997)

Based on the British legal system, it can be stated that it is safe to do business in England because the laws are fully functioning and the common law system is flexible and is able to protect foreign investors from unfair business treatments. In practice, it is recommended to verify the terms of business contracts carefully because business contracts must be clearly understood and have a legal binding agreement between the parties involved in order to avoid any business dispute or unfair business practice.

4.ECONOMY

3.1Economic Performance Overview and Leading Industries

The United Kingdom’s economy has maintained the longest period of economic expansion ever since its recovery from recession in 1992. Remarkably, since 2004, it has enjoyed a steady growth in the range of 2-3%, surpassing most of the other European countries and making it a leading financial center as well as a giant trading power. England is the main key to its strong economic performance (CIA 2008).

Agriculture in England is crucial, highly efficient by European standards, and technologically advanced and mechanized, using less than 2% of the labor force to produce over 60% of food needs (CIA 2008). Thus, since agriculture is so intensive in England, there are good opportunities for business investments in farming equipment and machinery. Besides, agriculture, England is also a world leading country in fishing and primary energy production which accounts for 10% of its overall GDP (CIA 2008).

Business services, banking, and insurance are the leading mechanism of England’s service sector and the largest contributing to its GDP. Over 70% of the working population is employed in the service sector (CIA 2008). Consequently, with London as one of the major financial centers in the world, conducting business in one of these service industries, particularly banking, will result in a high guarantee of success as the city is well equipped with a highly skilled workforce and major financial transactions take place everyday because of the London Stock Exchange, as well as many other exchanges.

Tourism is also a major industry in Britain with London being the largest centre for tourism. The sector contributes roughly about 76 billion pounds to the economy (CIA 2008). Millions of international tourists come to London every year to see attractions such as the Tower of London, and Westminster Abbey. Therefore, thoughtful consideration should be given to this sector before making final investment decisions. Opportunities in tourism may include investments in travel agency, accommodations (for example, hotels), restaurants, and many more.

3.2Economic System

England has a capitalistic economic system whereby the private sector is the dominant force contributing to high economic growth. However, England, just like any other capitalistic country, does have a small degree of government intervention. Thus, to be precise, England actually has a mixed economic system, but because it has a stronger private sector and the capitalistic side is more prominent, England is considered having a market economy (CIA 2008). This concludes that most of England’s land, industries, factories, and other essential economic resources are privately owned, either by businesses or individuals. Hence, there are heaps of benefits and opportunities for business under a market economy. Significantly, it is a very positive indication that the government of England endorses full ownership of property for foreign investors, except for a few industries. Furthermore, since a market economy is driven solely by the forces of demand and supply, firms have the freedom of operating at their own success or failure based on their capability of satisfying customers by producing the products that consumers want and selling those products at reasonable prices that meet the competition they face from other firms without being pressured by the government. Interestingly, in England at the moment, there are high demands for Islamic Schools in Bristol (BBC 2007), York-stone paving by the construction industry in the south-east of England (HighBeam Research Org 2008), and IT security skills (Muncaster 2008). Consequently, making business investments in these areas sound promising and would likely result in a high success rate.

3.3Economic Freedom

England is one of the few countries in the world today to be considered as having full economic freedom. In fact, according to the 2008 Index of Economic Freedom, the United Kingdom is ranked tenth based on the measurements on some factors such as business freedom, trade freedom, government intervention, property rights, as well as labor freedom (The Heritage Foundation 2008). By having a great deal of economic freedom, it not only represents the level of prosperity relating to per capita income, economic growth, and material wealth of that country, but it is also an important indication for companies and organizations to evaluate the risks before entering and starting to do business in that country (Schultz et al 2003). In the case of England, in light of its strong economic freedom, it provides plenty of opportunities for business growth and expansion, especially for international trade and international business. Moreover, recent numbers have shown that foreign direct investment grew 5% globally in 2007, and the United Kingdom still remains in the Top 4 countries, in which forms of foreign direct investment, such as setting up a subsidiary operation or establishing a joint-venture, continues to flourish, particularly in London, South East and North East England (Finfacts Business News Centre 2008). This continuous growth is due to the fact that investors have comfort and faith in obtaining high returns from doing business there, apparently because of its stable economic growth, as well as the large degree of economic freedom.

5.ENVIRONMENT

5.1Climate and Topography

5.2Current Issues and International Environmental Agreements

The United Kingdom has already met the Kyoto Protocol target of reducing greenhouse gas emissions of 12.5%, but yet it still continues trying to reduce even more (CIA 2008). Despite that many environmental matters are global concerns, the government has established very striving targets regarding environmental issues. By 2010, it aims to move toward a domestic goal by further cutting down emissions level by 20%. Moreover, by 2015, it intents to recycle 33% of household waste and lessen the amount of industrial waste disposed of in landfill sites (CIA 2008). Impressively, the United Kingdom is also involved in many international environmental agreements as well, such as, Air Pollution-Persistent Organic Pollutants, Antartic-Environmental Protocol, Biodiversity, Hazardous Wastes, Law of the Sea, Ozone Layer Protection, and many more (CIA 2008). Due to the UK’s strong environmental regulations and restrictions, in order to avoid trouble with the government or getting heavily fined, it is strongly advised to monitor and control the level of emissions and wastage released if involved in manufacturing or any type of business that could produce high levels of pollution. Another notable factor regards organic food. The people of the United Kingdom have major resistance to genetically modified crops because of concerns of the environmental damage that they may cause. Instead, they prefer and choose to purchase slightly more expensive organic farm produce (Fuller 2005). Therefore, doing agricultural business with the aid of chemicals or fertilizers is strongly not recommended as this would result in losses for the business. Nevertheless, opportunities for foreign investments as a result of this increase in demand for organic food include bringing good farming expertise so as to be able to grow crops and rear animals in a natural way. In doing so, the business is able to gain a competitive advantage in this sector and would definitely have the support from the UK’s consumers.

6.SOCIAL

For more than two decades, the government has focused immensely on the growth of social welfare programs, expansion on healthcare services, improvements in research and development, education, social security and affordable housing (Else 2007). A few important social issues that could have strong impacts or effects on business are discussed as follows.

6.1Immigrant Races

England’s population accounts for over 80% of the overall population of the United Kingdom and included are immigrants from many different races and countries such as Central Europe, Poland, Russia, Hungary, India, Bangladesh, Pakistan, China, Vietnam, and many more (Augustin et al 2006). England’s towns and cities, London in particular, are considered multiracial with many South Asian immigrants owning small sized and medium sized general stores (Fuller 2005).

England has strict laws regarding racial discrimination and minority rights on the grounds of civil equality and employment. Business activities indicating racial discrimination, for example, advertising job vacancies on the basis of creed, color, or sex, would lead to the business being dragged down to court for discriminatory practices. Therefore, going into England to do business, it is important to be aware of this issue and accept its multiracial society in order to avoid the breach of any racial laws. Furthermore, since England’s market is so varied and not homogenous, it provides plenty of opportunities for businesses to focus on a particular sub-market, come up with a unique product, and cater specially for that sub-market, for instance, perhaps opening an Indian cuisine restaurant or catering halal produce to the Muslim community. Nevertheless, doing business with a product that has a universal appeal is advisable so as to reduce the costs of having to employ more than one marketing strategy. Even opening a Chinese take-out restaurant would be a good business opportunity because the trend of ordering Chinese take-out food in the towns and cities of England has increased notably for the past few years (Fuller 2005).

6.2 Class Divisions

England has a class system of social stratification consisting of the upper class, middle class, and lower class. Classification of people in England can be determined based on their accent, clothes, the type of food they eat, and how they educate their children (Fuller 2005). Television superstars, sports celebrities, and other high-powered people are considered at the top tier of society because of their fame and wealth (Fuller 2005). Being aware of the different social classes in England, would benefit businesses in terms of making the right choices in advertising, production-site selection and other major business decisions.

6.3Education

England has a very high rate of literacy. In fact, 99% of its total population are considered literate and have completed a minimum of five years of schooling (CIA 2008). Mainly in London and North East of England is where a huge majority of the working population is perceived to be highly skilled. However, other cities of England also have highly skilled workforces as well (Augustin et al 2006). Therefore, conducting business in England can be assured to reach topmost performance since there are plenty of opportunities to employ people who have good knowledge, know-how expertise, and the capability to carry out the given tasks. Nonetheless, if the intended business is focused chiefly on manufacturing or using physical strength rather than intellectual strength, setting up factories in the outer suburbs is recommended.

6.4Communications and Transportations

Telecommunications and transportation infrastructures in England are very favorable for business. The Internet and telephone system are technologically advanced for both domestic and international usages which makes global communication very convenient at a low cost. The whole country is complete with sophisticated roadway, railway, airway, and waterway systems connecting all parts of the country. The main ports and terminals are in Dover, Teesport, Felixstowe, Southampton, London, Liverpool, and Immingham. Having a very strong and good transportation system is very important for doing business because poor infrastructure could lead to delays in business operations which results in both time and money wastage.

6.5Media

In 1996, the government introduced a new legislation to provide a regulatory framework for digital terrestrial broadcasting (Central Office of Information 1996). Extraordinarily, ever since the Broadcasting Act 1996 was introduced, media businesses in the production and broadcasting industries have benefited significantly in terms of new developments in digital broadcasting while at the same time also receiving heaps of opportunities in expanding their scope and improving extensively in all aspects of the media, including television, teletext, radio, cable, and satellite (Porter & Prince 2007). As the media business continues to grow and new ideas and concepts are needed, there would always be an opportunity for international business in this area. A true example is that of the popular reality television show, “Big Brother”, which originated in Holland. The show is originally produced by a television production company in Netherlands known as Endemol (Endemol 2008). In 1999, the show was broadcasted domestically only. But due to its massive success, Endemol introduced the show in numerous countries around the world and set up joint ventures in 23 countries, including the United Kingdom. The popular show premiered in England in July 2000 (Schiffman 2000).

7.CULTURE

Certain cultural issues may have important impacts on conducting business. Hence, it is very vital to understand the culture, particularly the business culture, of England. As follows are highlights of the some major cultural issues which should be understood and adapted to.

7.1Religion

England allows the freedom to any religion. Furthermore, the country has presences of several religions, including Christianity, Islam, Hinduism, Buddhism, Sikhism, and Judaism (CIA 2008). Malaysia also has an enormous diversity of religions as well, including Islam, Buddhism, Christianity, Taoism, Confucianism, and Hinduism (CIA 2008). Additionally, Malaysia is perceived to be a Muslim country and the official primary religion is Islam. In England, on the other hand, it should be noted that roughly 71% of its population declare themselves to be Christians and Christianity is regarded as the main religion of England (Else 2007).

Religions do have a major impact on how the business is allowed to present itself in terms of advertising for example. Interestingly, while certain commercials and advertisements in Malaysia are restricted or prohibited based on Islamic religious reasons, England is more open and less conservative on this issue. Firms have more freedom to decide on how they want to make their advertisements with fewer restrictions (Else 2007).

Religious holidays should also be taken into consideration while operating business in England. International firms conducting business in England should compromise with England’s religious celebrations and ceremonies which are always often accompanied by holidays. Moreover, since Christianity is the dominant religion in England, most of the main national holidays are related with Christianity. For example, one of the most important nationwide celebrated festivals is Christmas. The whole country shuts down on December 25th and many citizens take a full two-week off from work to celebrate the joyous event. Hence, marketing and promotional strategies during this season should be associated with Christmas so as to keep up with the trend. In addition, it should be understood that Christmas lights and other Christmas associated products would have no market in other countries where Christmas is not celebrated. Consequently, it is significant to accept the different religions and know about the different holidays in England, such as, Guy Fawkes Day, and Battle of Britain Day, in order to sell the appropriate products and also arrange suitable company policies in terms of employee holidays and so on.

7.2Business Etiquettes and Business Behavior

7.2.1Gift Giving

In negotiating business deals in Malaysia, gift giving may be perceived as a bribe, if there is no personal relationship between the giver and the recipient (Dray 2001). Moreover, business gifts should be inexpensive yet appropriate, such as desk accessories or quality pens. The gifts should not be wrapped in white, blue, black, or yellow color. Similarly, gift giving in England should also be inexpensive. In fact, gift giving is not mandatory in England as the British business people are rather reluctant and embarrassed to receive gifts (Dray 2001). Nevertheless, there is still a suitable moment to give a gift and that is usually at the closing of a business deal. Recommended gifts include any gold, porcelain, or sliver item that is unique, tasteful, and does not seem to be highly expensive. The item should also come with an appropriate inscription. Alternatively, it is also appropriate to invite the hosts to the opera or out for a pleasant meal.

Giving gifts to junior colleagues at the workplace in order to show appreciation for their services is appropriate as long as the gifts are small, simple, and should be suitably inscribed, such as a book or a pen. Champagne or flowers is also proper, but white lilies, red roses, and chrysanthemums should be avoided. Intriguingly, inviting colleagues and buying them a round of drinks after work is also a common practice and a good form of showing genuine gratitude (Dray 2001).

During holiday seasons, Christmas in particular, it is advised to send a card as a means of expressing gratitude and sustaining good contacts with business associates. However, exchanging business gifts have never been practiced (Dray 2001).

In the case of being invited to a British home after business negotiation for a meal or a short drinks party, it is suggested to bring flowers, wine, and/or chocolates for the hosts as this is a standard practice. Significantly, it is also strongly recommended to send a handwritten thank-you note to the hosts afterwards as a thoughtful gesture to thank them for their hospitality (Dray 2001).

7.2.2Business Attire and Appearances

In the English business culture, conservative dress is the standard procedure for both men and women. Business suits with darker colors such as black, grey, or dark blue are preferred. Men should always keep their shirt pockets empty and avoid wearing striped ties. However, a solid or patterned tie is quite acceptable. For women, on the contrary, it is still essential to reserve a conservative image, but the choices in styles and colors are not as limited. In fact, women may also wear trousers or trouser-suits. Denim clothing should be avoided by both men and women in the working arena. Interestingly, it seems that the business attire required in the English business culture is very formal, but yet also somewhat relaxing at the same time because employers are allowed to wear casual smart or simply just wear the traditional pinstripe (Dray 2001).

In contrast to England, Malaysia’s standard formal business attire for men includes light-colored long-sleeved shirts and dark colored trousers; a jacket is not necessary. Women may wear light-colored long-sleeved blouses and skirts, or dresses. Business suits for both men and women are essential for very formal offices only (Dray 2001).

7.2.3Greeting

The standard greeting for business occasions and general salutation for both men and women in England is a firm handshake. When greeting a woman, it is polite to wait for the woman to proffer her hand first. In Malaysia, on the other hand, the official method of greeting is “namaste”, which involves making a slight bow while touching both palms at heart level (Dray 2001).

7.2.4 Introduction

For business relationship to foster fast in Malaysia, a letter of introduction from a mutual associate will be helpful (Dray 2001). Otherwise, normal personal introductions have to be made and the woman’s name should be introduced first. Fascinatingly, the British also prefer third-party introductions when meeting for the first time, but as it is not always feasible, it is the norm to introduce oneself first before the host does. The phrase, “how do you do?”, is a greeting statement and should only be used when people are introduced for the first time. It is a must to respond back by repeating “how do you do?” The phrase, however, does not imply the same meaning as the phrase, “how are you?” At the end of the business meeting, it is not wise to leave by saying “have a nice day”. The British believes that this phrase underlies insincerity (Dray 2001).

7.2.5Correct Addressing

In Malaysia, it is customary to address businesspeople with a title (Mr. or Mrs) and followed by their first name (Dray 2001). In England, however, it is acceptable to address the British businesspeople by their first names immediately, but it is sensible to wait for an invitation first before doing so spontaneously. In the course of a conversation, it is impolite to constantly repeat someone’s first name and it is recommended to follow strict protocol, be respectful and humble when dealing with older members (Dray 2001).

In writing business letters or even emails, it is important and recommended to start off formally by addressing the last names of the correspondents until he or she hints that it is appropriate to use first names. Nevertheless, when it comes to official documents, conferences, or meetings, it is a common practice to always be formal and use full titles (Dray 2001).

7.2.6Punctuality

It is expected for businesspeople to be punctual in Malaysia. Likewise, it is also very important to be punctual for appointments in England, especially for business meetings. It is advised to arrive a couple of minutes early for safety and good impression (Dray 2001).

7.2.7Decision-Making

Similar to Malaysia, in negotiating business in England, it is not wise to rush the English into making a decision as this is deemed as aggressive. Decision-making is rather a bit slow in England. Patience is therefore needed (Dray 2001).

7.2.8Privacy and Personal Space

To a certain extent, it is acceptable to ask personal questions regarding marital status, weight, or even income in Malaysia. Nevertheless, some Malaysian people also have a strong degree of personal privacy and may not answer such questions like income. Thus, it is better to solely focus on business matters (Dray 2001).

In England, it is considered disrespectful to ask personal questions as privacy is a very important issue to the English people. Other factors such as, personal space is also very important. When conversing, it is best to leave a wide physical space because standing too close to another person while speaking is considered to be aggressive and impolite. During conversations, eye contact is seldom kept and staring at a person intensely is considered invading personal space and privacy. Touching others in public is regarded as offensive and unacceptable (Dray 2001).

7.2.9Signals and other Important Communication Guidelines

While negotiating business deals and to signal team members that something is to be kept secret or confidential, the only acceptable sign in England is tapping one’s own nose. Other signals may lead to vulgar gestures and the other party may not even want to continue business negotiations. For example, making the V sign for Victory with the palm facing inward is a very rude gesture and is considered very offensive. Maintaining eye contact is only necessary when emphasizing important points (Dray 2001). In Malaysia, pointing at someone with the forefinger or pounding one fist into the palm are considered rude behaviors and should be avoided. Passing or reaching for an object should be done by the right hand as the Malaysians believe that the left hand is unclean (Dray 2001).

Malaysians do not appreciate aggressiveness or bluntness. They admire good etiquette, politeness and would go for the soft sell (Dray 2001). Likewise, during conversations in England, disruptive behaviors including loud talking, shouting and making angry disagreements should be avoided at all times. Other gestures such as hugging, backslapping and talking with one’s hands in the pockets are discouraged (Dray 2001).

7.2.10Food and Business

The norm in conducting business negotiations in Malaysia is through a formal meeting at an appropriate place, such as an office (Dray 2001). In England, however, it is not uncommon for business deals to be conducted during lunch at a pub or restaurant. The lunch normally consists of a light meal with a pint of ale. It is somewhat relaxing, but also formal at the same time because behaviors such as, loud speaking and staring intensely are still frowned upon. Toasting the host is considered impolite, especially if they are older (Dray 2001).

7.2.11Role of Women

Legally, women in England nowadays have the same freedom as men in terms of being able to receive education, go to work, and perform other social activities. It is interesting, however, to note that only 10% of women hold senior positions in both the private and public sector although the number of women working is nearly half of the total workforce now (BBC 2006). This statistic does not represent gender inequality at the workplace though. The minor percentage of women holding high positions in the workplace is the result of many factors including parenting role.

According to official statistics, women represent about 36% of the working population in Malaysia (Women’s Aid Organization 2001). By and large women that are economically active work in middle or low level jobs. Women who manage to enter the professional sector are restricted to teaching and nursing professions. The government is committed to women’s equality.

8.CONCLUSION

After analyzing England’s overall national business environment, it is safe to conclude that England is an attractive country in which to do business in. Its history of long economic freedom and political stability is a major plus in addition to its countless business opportunities from agriculture to tourism, to IT infrastructure, and many more. Government support for foreign direct investments is strong and the government continues to assist foreign investors by even providing online support through a website where there is rich information on how to set up a business in the UK. Consequently, setting up a joint-venture in England under the protection of its property rights law and intellectual property law is a very wise choice. Even though England is a developed country and many of its markets may seem to have reached maturity stage, the country is not stopping at this point. The country continues to grow and strive to perform even better. Therefore, business opportunities will always exist in England.

9.RECOMMENDATIONS

Based on extensive analysis, it is recommended to set up a joint-venture in the banking and finance field in London or either set-up other types of joint-ventures in North East of England because this area has many support organizations to help new companies in the commercialization of research and marketing new products. But importantly, it is crucial to understand that to be successful in England, an international arena, it is vital to be competitive, competent and being able to distinguish from the competition by developing effective cross-cultural communication, project a confident, respectful and positive business image, as well as, build strong teamwork within a multicultural environment. Clearly understanding business etiquette and protocol in England and by conducting business in a respectful manner will help propel the business to grow even further and will also minimize barriers to business.