Investing in foreign hospitality industry in Switzerland - Research Paper Example

?Investing in Foreign Hospitality Industry in Switzerland  Introduction Switzerland is a Headquarter for many international companies. A recent survey finding by (Swiss Statistics, 2000) shows that 74% of European countries would prefer to make Switzerland their companies’ home. Business executive rates Switzerland at 71% in terms of quality of life (Swiss Statistics, 2000). Swiss Statistics observes that the uncountable benefit has attracted more than 6,500 international foreign companies that are currently located in Switzerland. It has an attractive market, offers unique production skills, and serves as a gateway to Europe. It is strategically located at the centre of Europe, which ensures easy accessibility of all European markets. It is referred to as the centre of competitiveness in Europe, as it plays an important function in financial markets internationally. It is also the center for many international organizations like World Trade Organization, WHO and UN, among others. Therefore, the hotel industry can do well here as there are many potential customers who have to eat and spend in hotels. Presence of international trading companies, law firms, and insurance companies, freight forwarding companies, security firms and surveillance firms certify Switzerland as a true global business center. Switzerland has greatly improved over the past years as an investment center. It continually enhances foreign and domestic investments through improvement of circumstances and conditions. The improvement over the past years as an investment center is rated as follows; Improvement of Swaziland as business location center Improvement level Rating (%) Significantly improved 9 Fairly improved 61 Fairly deteriorated 13 Significantly deteriorated 2 Neither improved nor deteriorated 15 The Effect on the Reputation of the Hotel due to the Expansion Expansion of Mirvac group of hotels to Switzerland will improve the company’s reputation and image. Switzerland is an international country and presence of these hotels will ensure its loyal customers get their services, away from home. It will also make it be recognized internationally, as many foreigners come here. Therefore, it will market it internationally, and hence, investing in other countries will also be easy. Investing in Switzerland is therefore an important strategy for the company’s future prospects. Current Global Trends Globalization has had various effects on the industry of hospitality. The positive impacts are exposure to diverse cultures, large market, economy development, technology advancement, promotion of creativity, increased job opportunities, development of travel industry, and availability of international services. Exposure to different cultures will help managers in the hospitality industry to learn different cultures as they interact with people from different walks of life. Globalization has increased customer base, as people travel for businesses and holiday, health and other purposes (Swiss Statistics, 2000). This increases the market for the industry of hospitality, with major income from international visitors. Visitors from various cultures, cuisines, customs and languages ensure variety of services that meet their needs. This greatly improves the hospitality industry, and Mirvac Group of hotels will reap this benefit. Globalization also has negative effects on the hospitality industry like language barrier, cultural barrier, disasters or events in other countries, seasonal environment, bad habits, and crime rate increase. Though these may be a barrier to the hotel investment in Switzerland, the management should still invest here but employ people with wide language and cultural knowledge. These employees will effectively handle and serve different people from different cultural and language backgrounds. PESTLED Analysis of Switzerland Political System The tri level political system in Switzerland is very effective, because county and state governments are highly controlled. They are very understanding situation as well as solving problems compared to the federal government. Due to the small nature of political offices, they are able to quickly react and make appropriate decisions. To ensure that all citizens easily access government information, government offices are set up in both rural and urban areas. Furthermore, 100,000 signatures of popular referendum allow them to demand for changes relating to business practices, law, and environment among others (Confederation Helvetica, 2000). This acts as a very important base that ensures business success in the area. Therefore, Mirvac should invest in this country, since this offers strong potentials for business success. Switzerland is a country that is very politically stable. In addition, its institutions are also stable which is greatly attributed to the presence of Federal Council’s Collegial System of Swiss Government. Swiss National Bank has also ensured stability and strength of its currency, Swiss franc’s (CHF). Its education system has also been stable, unlike in many other countries. This stability ensures business success as well as high profitability due to its stable currency, which does not often fluctuate like that of other countries. Democracy in the Swiss Government also ensures political stability that consequently allows businesses to thrive well. A political survey shows that 75% of the respondents said that Switzerland has clear and stable political, administrative and legislative environment, standing at 65% stability level in social environment (World Fact Book, 2000). Economic Analysis The monetary policy of the country is controlled by Swiss National Bank, which is independent from the central bank. Its competition and fiscal policies creates a healthy environment that stimulates economic growth. The constitution requires that the decisions made by Swiss National Bank to be beneficial to the interests of all citizens. Stability of prices is a primary goal, which ensures that businesses can comfortably operate without unpredictable price fluctuations. This ensures stable profits that then ensure business prosperity. The financial system is also very stable as a result of good commercial banks’ management. This results into sufficient monetary supply, and financial stability. In 1998, when many nations were seriously affected by inflation, the inflation rate in Switzerland was only 1% with $32.66 billion, while expenditure totaled to $34.89% (Swiss Statistics, 2000). However, in 1999, Switzerland was facing international debt crisis that amounted to 199 billion CHF, about 51.2% of its GDP (Swiss Statistics, 2000). However, good financial management has ensured that national debt currently amounts to approximately 7.12 billion CHF (Swiss Federal Banking Commission, 2000). It has no external debts because of government consolidation efforts. Switzerland strongly relies on foreign trade. This means that its international relations are very strong and therefore, investing in hotel business can be very profitable because of large influx of foreigners who reside in big hotels. Trade promotion by federal government is also very beneficial to business enterprises. The federal government employs a team of people who are responsible for trade promotion, both nationally and internationally. Therefore, investing in Switzerland is likely to be very prosperous as this will cut down promotion costs. Switzerland’s market is of modern economy with highly specialized and skilled labor. Unemployment rate is very low and its budget deficit is also low. It is among countries with the highest GDP per capita in the world. It’s financial and service sectors are very developed, with trade and industry as the economy’s main sources of revenue. Tourism and banking sectors are the most developed. These are enough benefits that will make Mirvac invest in hotel business in Switzerland. Social Cultural All citizens of Switzerland are equally entitled to education and are free to move within the country. Families are also financially stable because they are usually offered grants by the government. On the other hand, public sector jobs are offered on merit basis, and hence there is no corruption, but equal opportunities. The official ethnic groups in Switzerland are Germans, French, Italian, and Romansch, who account for 65%, 18%, 10% and 1%, of the population respectively (Swiss Statistics, 2000). Swiss Statistics also shows that it accommodates many refugees and immigrants who account for approximately 20% of its population. Fortunately, they are also have the freedom of movement and are fairly distributed. The most prominent region is the German region, followed by the French speaking region. In Switzerland, there are different traditions and cultural beliefs. However, the heterogeneous nature of culture and language has never caused any misunderstandings or conflict between them. Their problems are peacefully solved and therefore, there is peaceful coexistence between them. This ensures a potential area for hotel investment. Their culture calls for hospitality that is essential to the hotel industry. Switzerland has a tradition that is diverse and multicultural, consisting of approximately 0.5 million inhabitants. It is also inhabited by diverse multinational companies that have comfortably made Switzerland their home. Language and cultural diversity means that it is very hospitable to a wide range of foreigners, who feel at home when in Switzerland. Culture and languages in Switzerland are fairly attractive. According to Swiss Statistics, Switzerland’s geographic location and history, the four languages spoken in Switzerland make it a meeting cultural point. The following table shows attractiveness of these languages and culture. Switzerland’s Languages and Culture Attractiveness Level % Rating Very attractive 26 Fairly Attractive 48 Little attractive 22 Not attractive 4 Technological Analysis Switzerland is well developed technologically. It is well covered with modern communication system. There are approximately 4.82 million telephone lines while lines of mobile cellular phones are approximately 810,170 (The World Fact book, 2000). The domestic system comprises of microwave radio relay networks and cables. On the other hand, the international system consists of two stations of intelsats. There are many radio stations, which are about 113, and 108 stations of television broadcasting (Swiss Statistics, 2000). All these ensure that advertisements can easily access all people at very low costs. High competition among the stations also promotes high quality promotion skills. The infrastructure in Switzerland is very reliable in terms of telecommunication, logistics and transportation. Therefore, the hotel will receive many customers from various parts, since transportation is efficient. Air, rail, road, auto and telecommunications are properly developed and maintained to ensure timeliness and reliability. Since it is a small country, road transport, either by public or private means, is very reliable, efficient and easy. Public transport is also very modern, cheap and reliable, making movement from location to location very easy. Its main centers are well served by airports. Major towns are hardly 90 minutes away from airports (Swiss Statistics, 2000). Within the cities, intra city public transportation is very fast and efficient by use of trams, buses, or electrified trains. Therefore, it has a world class infrastructure. The levels of attractiveness according are rated as follows. Transport and Logistics Infrastructure Level of Attractiveness % Rating Very attractive 55 Fairly attractive 26 Little attractive 17 Not attractive 2 Legal System Switzerland has always achieved top ratings in its legal system because of its efficiency. Its companies work for the longest working hours. Switzerland has a legal and political system with long-term stability, and substantial industry clusters. Accessibility to government services and agencies is also effective. Environment Analysis Switzerland is one of the world’s top tourist destinations. It has very attractive physical features that attract tourists from the whole world. Infrastructure is also well developed. For efficient management of its landscape and forests, economic instruments that allow industrial and environmental growth is applied (Swiss Agency for the Environment, 2000). These instruments offer financial incentives in terms of price adjustments. Economic and ecological needs are also enhanced as sustainable development instruments (Swiss Agency for the Environment, 2000). Demographic Analysis Though Switzerland is a small country, it is highly populated. Infant mortality rate is only 4.8 deaths for every 1000 births, which is very low, according to 1997 statistics (SFOPH, 2000). The life expectancy is very high, at 82.5 years for women and 76.5 years for men (SFOPH, 2000). The population consists of educated and highly skilled labor force that ensures high quality services. Therefore, the hotel business will reap valuable benefits from such labor force, many of business courses like hospitality management. Therefore, highly qualified employees will not be a problem and this will ensure smooth running of the business. Conclusion Switzerland has much potential that will ensure business prosperity like prosperous economic growth, multicultural and diverse languages, political stability, favorable environmental conditions, fair and efficient legal system, as well highly developed technological advances. It is a location for many international companies, and foreign investors. Its improvements as a business location center are also encouraging. Therefore, Mirvac should invest its group of hotels here. However, high land cost, strong lobbies and market protects and cartels are weaknesses that may it unattractive to foreign investors. Recommendation Swiss government should increase measures like simplification of administrative procedures, and reduced taxation in order to attract more foreign investors. Mirvac group of hotel should also invest in Switzerland because it has valuable benefits, which will ensure its profitability and prosperity. Though there are weaknesses like high cost of land and restrictive environmental protection may impose serious disadvantages, the management of Mirvac group of hotels should just invest there, even if it means renting premises before the business starts picking. Though globalization’s disadvantages may be a barrier to the hotel investment in Switzerland, the management should still invest here but employ people with wide language and cultural knowledge. These employees will effectively handle and serve different people from different cultural and language backgrounds. References Confederation Helvetica, The Federal Authorities of the Swiss Confederation. Retrieved on 23rd July, 2011.www.admin.ch CIA, The World Fact book, Organization for Economic Co-Operation and Development. Retrieved on 23rd July, 2011. www.cia.gov. www.eocd.org. Swiss Agency for the Environment. (2000). Forest and Landscape. Retrieved on 23rd July, 2011. www.saefl.ch. Swiss Federal Banking Commission. (2000). Swiss National Bank. Retrieved on 23rd July, 2011. www.ebk.admin.ch. Swiss Federal Office of Public Health (SFOPH). (2000). -Swiss Statistics . Retrieved on 23rd July, 2011. www.statistik.admin.ch. www.admin.ch/bag/, 11/26/00. Swiss Statistics. (2000). Organization for Economic Co-Operation and Development. Retrieved on 23rd July, 2011. www.eocd.org. , Retrieved on 23rd July, 2011. Read More