Business Essays - Geographical Relocation

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Geographical Relocation

The following report will explain, analyse and evaluate the recent decision of this company to open its new office in Madrid and the selection of the new manager from our midst.  The company’s decision was not made in a haphazard way or on the spur of the moment.  The key issues were decided upon with their relative importance being analysed and rated in order of priority.  Of these key issues the senior management then discussed the relevance and the integration potential for each key issue in turn.  The senior management team then explored the different strategic implications of the alternative courses of action that could have been be taken instead of the course subsequently adopted.  We then explored the business environment that our Madrid office will have to survive, operate and hopefully thrive in.  Our findings are presented below with the justifications for the decisions made.

Analysis and evaluation assisted in the identification of the key issues that needed to be addressed to make the expansion of the company in Spain via the Madrid office a success.  Initially the first key issue to require attention was the availability of offices to let or buy, their operating costs and the facilities available such as telephone and computer connections had to be discussed before deciding on the actual location. The company researched the availability of all these services, the best providers of them and their actual costs (Grantham, 2000 p.154).

We also considered whether the company could qualify for grants or tax breaks from the Spanish government or EU regional funding if locating the office in certain areas of Madrid. There was also the related issue of local facilities being able to support our office and the needs of the company and our staff.

Another key issue we evaluated was the skills of the people that could be recruited to join the company in Spain and how much guidance they would need from the company’s British offices.   We hoped to find staff that were computer literate, had a reasonable command of English and had marketing experience. There is the potential of using the Internet to make the company’s training, trading and marketing more effective (Cartwright, 2004 p. 136).

Having people that understood Spanish consumer tastes and preferences was seen as being important so that they could direct the company’s marketing strategy. It was noted that another issue was that an office manager that already knew the company and the a proven track record in marketing, project management and establishing offices from scratch was vital for co-ordinating the whole plan (www.practicalspain.com/Work.htm).

That led to the next key issue of whether that manager should be recruited externally or promoted or seconded from within the company. The company placed job adverts in the Spanish media and international magazines to attract the highest standard of possible recruits. Once it became clear that despite the skills of the people recruited for the Madrid office that the secondment of a senior manager was the most effective means of making the office successful.

The key issues described above required a study of their relevance to the expansion plans and they could be integrated to achieve the most successful results for the company.  Spain had a high standard of education provision, which means that the company should not have too much trouble in recruiting appropriately qualified and adaptable staff. The Spanish now have similar working patterns to the rest of the EU, it is no longer the place for a long siesta for office workers. As Madrid is already for the base for multinational corporations and offices it gives this company the opportunity to headhunt management and other staff. It is intended that in future the manager of the Madrid office shall come from that office rather than other parts of the company (Golzen and Kogan, 2000 pp.240-41).

Spain deregulated its labour market at a later stage than Britain.  However such changes assist the company because it makes the workforce more flexible. It means that the company can use productivity and profit related bonus schemes (Rodriguez-Pose, 2002 p. 128).  There is strong evidence that such bonus schemes can be successful in improving staff incentives, performance and the level of customer service (Bannock, Baxter & Davis 2003 p. 313).

However, without the necessary infrastructure the staff in the Madrid office would find it very difficult to do their jobs properly. Therefore before the office opened all the desks, computers and telephones etc were fitted and installed. The use of the Internet has been much talked about in the media yet it has proved very useful for improving the company’s internal and external communications. The use of Internet web sites can be a highly successful method of increasing turnover and projecting any company’s image, for example Dell and Toyota (Shaw and Ivens 2002 p.1).

Information and sales can be achieved in seconds saving time whilst increasing the potential for additional sales. Information technology can have the advantage of training the Madrid staff online or via computer training packages rather than spending extra money on sending trainers to Spain when their time could be spent on marketing roles. We brought computers in the Madrid region and negotiated maintenance with the suppliers (Grantham 2000 p.155).

The senior manager appointed for the Madrid office had extensive knowledge and would be able to train and advise new staff as needed. That manager is seconded for an initial two years with the option to either extend or shorten the secondment depending upon the performance of the Madrid office. The manager has the role of recruiting his deputy and then grooming them to take-over the office. Back in Britain the company decided to second another manager to fill in for the manager that went to Madrid rather than go to the expense of trying to recruit a replacement for just a two-year period. The tax rates in Spain were slightly higher than Britain although that had to be measured against the health and education provision that the manager and their family were able to use whilst in Spain (Golzen and Kogan 2000 p. 240).  The cost of living in Spain is lower than in Britain with lower duties on cigarettes and alcohol as well as petrol.  Buying supermarkets own brands can save even more (www.practicalspain.com/Work.htm).

All EU citizens working or intending to work in Spain have the same employment rights as the Spanish. However they need to have a work permit that last six months and then has to be renewed every five years. The company will arrange all work permits needed. For non-EU citizens the process is different, as they would have to obtain work permits in their home country or the country they currently work in from the Spanish consulate. The company will help any staff members to obtain work permits from the Spanish consulate in London, Manchester or Edinburgh if or when needed (www.practicalspain.com/Work.htm).

The company is happy to encourage any of its employees to move to the Madrid office and will assist them in obtaining work and residence permits.  We will also make Spanish language courses available to them that go to Madrid on a secondment or permanent basis. Being able to use even a basic level of Spanish will improve communication with our Spanish colleagues and customers. The Spanish usually like people that attempt to use their language (www.hlbi.com/dbifiles/SPAIN.asp).

From a managerial perspective the company was looking at the strategic consequences of locating the office in Madrid weighing up the possible advantages against the possible disadvantages. In particular the gains of such a move were compared to the costs of setting up the required infrastructure and recruiting the most suitable staff.  As far as infrastructure is concerned the main priority was ensuring that the computers and telephones were compatible with the ones in our other offices.  It would have been a waste of money to install equipment that could not be used to link up with the company network or cope with a heavy workload and not improve the service to our customers.  Therefore we had the exact specification of the equipment we needed before buying it. The company website in Spanish was also set up ready for the opening of the Madrid office as the company could not assume all our potential customers could understand or wish to use English (Grantham 2000 p. 155).

However the company also hoped that it could gain extra sales through the number of British tourists and holidaymakers that go to Spain each year. The increasing number of British ex-patriots living in Spain is also a potential source of skilled recruits and customers (Golzen and Kogan 2000 p. 240).

From the point of view of greater productivity and improved efficiency it was considered essential to instigate a fully effective training programme. This will be done on the basis that the extra investment now will reap the rewards of better profits and a more productive yet content workforce.  The basis for this training package was the one used throughout the company with parts of it also having some text in Spanish (Cartwright, 2000 p.111).    

As a company we must not be afraid to embrace change. It is best for the company if it directs that change itself to gain the most advantage.  Opening the Madrid office is a prime example of enacting change to increase our profits and our international share of trade (Hornby, Grammie & Wall, 1997, p.250).

It was decided to establish the Madrid office as a fully owned subsidiary of the company as this gave us complete control of the office whereas taking over another company could have proved more complicated and expensive. It was more straightforward to arrange the long term letting of office space than to buy out a rival. The Spanish government was not opposed to our plans for an office in Madrid as it would bring further investment into the country and create jobs (Hornby, Grammie & Wall, 1997, pp.271-72).

The company needs to understand its position in comparison to other similar or rival companies.
Whilst the full intentions of our rivals cannot be known, estimations of their future strategy can be made by understanding their past and present decisions. However, the company must primarily base it strategy on working to its strengths and taking advantage whenever favourable opportunities or circumstances are available. Improvements in technology and other developments have made it easier for businesses to undertake geographical relocation or expansion into other countries (Bannock, Baxter & Davis 2003 p. 127). In the EU the advent of the single market and single currency have presented business greater opportunities, a single currency has saved businesses (and holidaymakers) money in reduced currency conversion costs. The companies that operate solely within the Euro-zone have saved the most. Given that Britain is unlikely to join the single currency in the near future this company decided that it was a sound strategy to open an office in the Euro-zone and increase sales (Rodriguez-Pose 2002 p.100).

The advent of the European single market has boosted not only trade but also the migration of the most skilled around the EU and gives the company greater opportunities to recruit and employ the best staff available. That also means that many companies have to offer their employees similar terms and conditions of employment throughout the EU (Rodriguez –Pose, 2002 p. 99).

If the Madrid office is a success then the company will consider the opening of offices in France and Germany. Madrid was selected because the Spanish government was supportive of us opening an office there. Madrid offered good facilities with workers of a high standard available for recruitment with Spaniards and ex-patriots. Madrid offers good transport and communication links that assist the company whilst allowing workers to reach the office without any problems. Madrid offers an international airport, an extensive rail network linked to the rest of the country and a metro system. Madrid also has two universities that produce well-qualified graduates. Spain also offers the chance of increasing the company’s sales and turnover. The use of Spanish would help to increase sales in Spain; it could offer the potential of opening up sales in the Hispanic countries of Central and Latin America (Crystal, 2003 p. 561).

Bibliography    

  • Bannock, Baxter & Davis (2003) Penguin Dictionary of Economics, Penguin Reference, London and New York
  • Cartwright R (2004) The Globalization of Business, Palgrave Masters Series
  • Crystal, D (2003) The Penguin Concise Encyclopedia, Penguin, London
  • Doing Business in Spain from www.hlbi.com/dbifiles/SPAIN.asp
  • Golzen G and Kogan H (2000) The Daily Telegraph Guide to Working Abroad 22nd edition, Kogan Page Limited, London
  • Grantham C (2000) The Future of Work, Commerce Net Press, New York
  • Hornby W Grammie B & Wall S, (1997) Business Economics, Longman, London and New York
  • Rodriguez-Pose A (2002) The European Union – Economy, Society, and Polity, Oxford University Press, Oxford
  • Shaw C and Ivens J (2002) Building Great Customer Experiences, Palgrave, Basingstoke and New York
  • Work Permits and Job Opportunities in Spain from www.practicalspain.com/Work.htm

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