International Entrepreneur Project: Green Charger Limited - Case Study Example

Green Charger Ltd. Green Charger Ltd. Executive Summary Green Charger Ltd. is the of the company. The team has developed the idea of starting our company officially in Lisbon, the capital and the largest city in Portugal. Being the westernmost capital city and also the largest city in continental Europe, Lisbon is one of the best markets for businesses in Europe. It is one of the global cities in Europe being important to all sectors of business including media, entertainment, commerce, international trade, and tourism (Rath, 2007). Green Charger Ltd. came up with an idea of manufacturing and supplying solar powered mobile phone chargers and supplying them in Lisbon city. The business is expected to be a success. After making demographic calculations, the company discovered after some analysis that the city was perfectly situated for the business. Portugal’s behavioral patterns will affect the starting up of the business since the timing must be perfect for the launching. The research before the launching of the business had to consider the currency conversions regulations, ownership restrictions, the legal forms and tax structure of Portugal (Oviatt & McDougall, 2007). Introduction Lisbon attracts a great number of people priding itself with a million residents and an overall 2.8 million in the Lisboa Region. The city has an influx of 600,000 people reporting to work daily. Tourism is also a prime asset for this city, a reason that Green Charger Ltd. found it convenient to start up its business there (Rath, 2007). Mobile chargers are very important to busy cities like Lisbon since most people lack the time to recharge their phones or overuse them thus needing recharging. Green Charger Ltd. however, does not plan to deal in retailing these chargers, but rather in manufacturing them and selling them in wholesale to the big electronic stores in Lisbon. In this way, the city’s population will get to the gadgets easily. This will additionally make it easier for the firm to supply their products since the city has lots of electronic stores. The factory’s location will also be in Lisbon’s agglomeration since it will be cheaper and easier to get a location. With this being a new innovation in Portugal, Green Charger Ltd. expects great returns in the investment amid the challenges and barriers that must be dealt with so as to attain a successful launch of the business. The Business Idea The business idea came up after the company’s team discussed about the smart phones and the freedom of movement. Since the sun is found pretty much everywhere, this kind of chargers did not limit ones movement, meaning that users could go on with their businesses as they charged their phones. The company planned to start up an unbeatable solar powered phone chargers’ manufacturing company. The chargers have a warping 2000mAh battery capacity and can be charged through USB ports on computers or by solar power and store the energy for up to three months. It is a two in one slice of brilliance. There is a compact unit containing 2000mAh rechargeable battery that charges the phone in case it goes dead and an inbuilt photovoltaic cell allowing the user to recharge the battery using sunlight (Craddock, 2008). As it saves a phone’s charge, it also saves the environment through its use of a solar system. It is small enough; hence, portable and has seven power adapters, meaning that it can boost any phone type or any other device charged by USB. Lisbon being a busy city is full of people who need such devices due to lack of time for charging their phones and also due to nonstop communication that brings about the loosing of mobile phone power when they are out and about. There are also subtler benefits of solar powered chargers above the ones that always use an electrical source. One such benefit is that this type of chargers will not generate any emissions, by products or waste since the unused photons just pass through the silicon or bounce off it like any other material. The chargers are therefore environment friendly (Craddock, 2008). Since the sun is only around for around 12 hours a day, Green Chargers Ltd. came up with a storage method that could keep the energy for at least three months unlike other chargers that will only work when there is sunlight. There is also the case of bad weather and heavy cloud cover, which the device counters by having a long storage (Craddock, 2008). The business idea will be a success in Portugal since it is the first of its kind. Not only will the model be conducive for all mobile phones and devices using USB ports, but it will also be the first one to be produced in Lisbon and Portugal at large. Portugal has been importing the solar chargers from USA and the UK. This means that the company’s charger will be cheaper and readily available since it is locally manufactured and thus is likely to earn the preference of consumers. In order to reduce the production cost, the material for making the charger is imported from the United States. This is cheaper than coming up with local manufacturing firms. The imported material is then locally assembled. This process makes the development of the charger pocket friendly for the company, and easier to manage as well. The Market The long term trend of the businesses in Europe will be due to globalization. Businesses that started investing in Europe in the past few decades, those investing and future investors will enjoy diversification benefits, higher returns, better understanding of foreign markets, more opportunities, and the elimination of exchange rate risk due to the Euro zone. In Portugal, globalization has not only extended the spatial borders but also temporal, cultural and conceptual ones making Lisbon a hub for business and entrepreneurship. Unlike other cities where the local elite of a country control most of the businesses, Lisbon relies most on its global networks with locals and foreigners doing business together. The actors and the institutions that make decisions on the market have bridged the local and international businesses making globalization not alien in the city (Rath, 2007). Setting up a business in Portugal is not a difficult process and could be done in a single day. The registration and license requirements vary for different types of businesses and across business sectors. The Portuguese nationals and the foreigners could both set up businesses through intermediaries by lawyers, solicitors or notaries in possession of digital certificates. There is also a good transparency in the governance and business world in Lisbon and marketing of goods is open for all (Rath, 2007). Some of Europe’s biggest shopping malls in Europe are situated in Lisbon. Amoreiras, Colombo and Armazens do Chiado are the best examples of malls that make Lisbon a global business hotspot. The major electronics goods and appliances among the malls and other buildings include Domotron, Candy Hoover Portugal, Media Markt and Lidl in which none of them have stocked any solar powered chargers in their counters. This is a good sign because with good advertisement, consumers will be flocking the shops to acquire the chargers (Rath, 2007). When the two method s of analysis were employed; one for the short-term which is the market adjusted abnormal returns (MAAR), and one for the long-term which is buy and hold abnormal returns (BHAR), the results suggested the existence of low efficiency in the Portuguese stock market which eventually generates underpricing for the Initial Public Offerings. This happens in both the short-term and the long-term with positive MAARs and BHARs. This shows that good returns are guaranteed. Currency Conversions Banco de Portugal, the foreign exchange authority of the Portuguese Republic is responsible for the licensing and controlling of external payments in accordance with the Treaty. The Treaty which establishes the European Community and the definition of principles governing gold and foreign exchange operations regulates external economic and financial operations, and the buying and selling of currency including transfers from and to foreign countries. The Treaty allows the conduct and settlement of external economic and financial operations to be carried out freely with no bias to any exclusion on the basis of grave political causes or urgency (Banco de Portugal & European Central Bank, 2004). If an entity is authorized to carry out foreign exchange activities, will follow the rules but will not be stopped to carry out their businesses. The residents are authorized by the law to carry out their payments, receipts, or extinguish their duties towards non-residents through the use of any payment methods made in foreign currency. It is therefore possible to do business in any currency, to convert currency which could be freely negotiated and to send and to send and receive money from abroad in foreign currencies (Banco de Portugal & European Central Bank, 2004). Foreign Ownership and Legal Forms In general, the Portuguese Republic has no restriction on real property if the property is for personal use. There is however a needed approval from the Portuguese Institute of Foreign Trade if the purchase is for investment or business purposes. The foreigners will be required to be legal residents of Portugal, with necessary work permits and minimum capital investment for the company. They should also have a residency card issued by the Portuguese Immigration Service. They also need a Tax Number regardless of whether the process of starting up the business has begun or not while those intending to work must be registered for tax purposes. A social security number is also needed because all foreigners intending to stay and work in Portugal for more than 180 days must pay social security. All these legal forms are important for any business (Manners & Whitman, 2000). Tax Structure Portugal offers an excellent quality of life for the modern businessman and investor. The individuals’ tax regime is very attractive and enhanced by the non-habitual residents’ regime. The free remittance of funds and the friendly residence permit regime, the EU passport and the possibility for the application of Portuguese nationality all make the country very welcoming. Foreign workers will give a flat income tax rate of 20%. Portugal also has no inheritance tax, gift tax or wealth tax. Foreign corporations are taxed on the earnings made. They are taxed with the same rate as the corporate of Portugal but only taxed on Portuguese-source income. The tax rate on investment returns obtained from non-resident companies and is subject to privileged tax regimes in their countries and included on Portugal’s blacklists is 35%. The tax rates include the IRC or the Portuguese corporate tax which is 23%. There is also the Surtax. This is the surcharge levied by the state on taxable profits on the rates: 3% for profits over 1.5 Million Euros up to 7.5 million Euros, 5% on profits between 7.5 million Euros and 35 million Euros and 7% on profits exceeding 35 million Euros. There is the Municipal surcharge levied on taxable income at the rates of 1.5%. The maximum possible combined tax rate is however 31.5%. Since Green Charger Ltd. is not starting as a small company, the expected taxes to be levied include the municipality, the surtax, the IRC and will therefore most likely fall under the maximum possible combined tax rate. There are also the personal taxes of all foreign workers that the company carries from the USA and the leaders of the company. Though Portugal offers one of the best deals for foreign workers, the company will have to employ more local workers for the casual jobs to make the company more diverse and reduce the taxable incomes. Conclusion Green Charger Ltd. choice of market seems to be perfect for the product to be manufactured. Lisbon is a great city with more and more people from many regions of the universe coming to reside here. There is an unending market for a good product and settling here as the first local producers of even better solar powered chargers for mobile phones, Greener Charger Ltd. will definitely succeed. The perfect business idea, backed by the modern market of Lisbon who very much need such devices, guarantees Green Charger Ltd. good returns after it has crossed the other barriers of setting up and launching the business. The location of the factory must be strategic for transport and security purposes and the human resource management must acquire a diligent, effective and efficient work force. With that in place, the company will register growth in no time to become one of the best Lisbon companies. References Banco de Portugal., & European Central Bank. (2004). Financial stability report. Lisboa: Banco de Portugal, Economic Research Dept. Craddock, D. (2008). Renewable energy made easy: Free energy from solar, wind, hydropower, and other alternative energy sources. Ocala, Fla: Atlantic Pub. Group. Manners, I., & Whitman, R. G. (2000). The foreign policies of European Union member states. Manchester: Manchester University Press. Oviatt, B. M., & McDougall, P. P. (2007). International entrepreneurship. Cheltenham: Edward Elgar. Rath, J. (2007). Tourism, ethnic diversity and the city. New York: Routledge. Read More