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Integrated Project on Global Business

INFOSYS

Vision
"To be a globally respected corporation that provides best-of-breed business solutions, leveraging technology, delivered by best-in-class people."

Mission
"To achieve our objectives in an environment of fairness, honesty, and courtesy towards our clients, employees, vendors and society at large.

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

INFOSYS BUSINESS-LINE:

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

SHAREHOLDER PARTNERS-2008:

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

FINANCIAL SUMMARY:

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

McKinseys 7 S Model:

Leadership Style: Infosys believes that leadership is one of the most essential ingredients of organizational success which is provided by its Chairman, N R Narayanmurthy. Leadership is based on high business vision and predominantly supportive styles. There is emphasis on developing leadership qualities among employees. For this purpose, it has established Infosys Leadership Institute. Top management emphasizes on open door policy, continuous sharing of information, takes inputs from employees in decision making, and builds personal rapport with employees. As we have seen over last few years, we have seen smooth transition from N R Narayanmurthy to Nandan Nilakeni and from Nandan Nilakeni to Kris Gopalkrishnan without any adverse effects on the company outlook and each one has proved to be an able leader taking company forward. Staff (Human Resources): Since Infosys is in knowledge-based industry, it focuses on the quality of the human resources. Out of total personnel, about 90 per cent are engineers. At the entry level, it emphasizes on selecting candidates who find the companys meritocratic culture satisfying, superior academic records, technical skills, and high level of learn ability. The company emphasizes on training and development of its employees on continuous basis and spends about 2.65 per cent of its revenues on up gradation of employees skills, and around 50% as employee costs. In spite of thousands of people joining every month, Infosys has been able to maintain its training standard mostly due to its highly matured processes capabilities and investment in infrastructure. Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

Strategy: Infosys has adopted a client-focused strategy to achieve growth. Rather than focusing on numerous small organizations, it focuses on limited number of large organizations throughout world. In order to cater its clients, the company emphasizes on custom-built softwares. Another differentiating factor for Infosys is that it commands premium margins. Company does not negotiate over margins beyond a certain limit and some time prefers to walk-out rather than compromise on quality for low-cost contracts. This has helped in building an image for quality driven model rather than cost-differentiating model. Increase business from existing and new clients: Infosys has focused on expanding the nature and scope of engagements for the existing clients by increasing the size and number of projects and extending the breadth of its service offerings. For new clients, it provides value added solutions by leveraging its in- depth industry expertise. It increases its recurring business with clients by providing software re-engineering, maintenance, infrastructure management and business process management services which are long-term in nature and require frequent client contact. Expand geographically: Infosys plans to establish new sales and marketing offices, representative offices and global development centers to expand its geographical reach. It plans to increase presence in China through Infosys China, in the Czech Republic and Eastern Europe directly and through Infosys BPO, in Australia through Infosys Australia and in Latin America, through Infosys Mexico. Enhance solution set: Infosys focuses on emerging trends, new technologies, specific industries and pervasive business issues that confront our clients. In recent years, it has added new service offerings, such as consulting, business process management, systems integration and infrastructure management, which are major contributors to its growth. Develop deep industry knowledge: Infosys has specialized industry expertise in the financial services, manufacturing, telecommunications, retail, transportation and logistics industries.

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business Enhance brand visibility: Infosys invests in the development of its premium brand identity in the market place by participating in media and industry analyst events, sponsorship of and participation in targeted industry conferences, trade shows, recruiting efforts, community outreach programs and investor relations. Pursue alliances and strategic acquisitions: Infosys is known for its organic growth (risk averse) strategy though it has strategic alliance with leading technology providers take advantage of emerging technologies in a mutually beneficial and cost-competitive manner. Shared Values: Values are important part of Infosyss organizational culture. In fact its tagline depicts how much emphasis it lays on core values. The core values are: Customer Delight: A commitment to surpassing customer expectations. Leadership by Example: A commitment to set standards in business and transactions and be an exemplar for the industry and teams. Integrity and Transparency: A commitment to be ethical, sincere and open in our dealings. Fairness: A commitment to be objective and transaction-oriented, thereby earning trust and respect. Pursuit of Excellence: A commitment to strive relentlessly, to constantly improve ourselves, our teams, our services and products so as to become the best. Organizational Structure: The company has adopted a free form organization devoid of hierarchies. Everyone is known as associates irrespective of his position in the company. Software development is undertaken through teams and the constitution of teams is based on the principle of flexibility. A member, who might have been team leader in one project, may be replaced by another member of the same team for another project. This system not only helps in creating the feeling of equality but also helps in developing project leaders.

Skills: From last year, Infosys has made it mandatory for every employee 7uto clear a predefined certifications, domain as well as technical, in order to be eligible for appraisal. This is just one of the initiatives taken by Infosys which signifies the efforts taken for building competencies. Apart from internal initiatives like knowledge management, Infosys has been CMM-Level 5 certified for its process capabilities. Infosys has entered the Balanced Scorecard Hall of Fame for Executing Strategy for achieving breakthrough performance results using the Balanced Scorecard (BSC).

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

SWOT ANALYSIS:

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

BUSINESS MODEL:

FIGURE: NEXT GENERATION BUSINESS MODEL

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

INFOSYS BCG MATRIX:

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

ANALYSIS OF STRATGIES:

Actions Taken: 1. To maintain low-cost advantage they have opened offices in Czech Republic, Mauritius, Poland, Philippines, Thailand and Mexico. 2. Invested in developing training centers 3. Improved quality capabilities CMM level 5i company. 4. Infosys Consultancy established to provide high end services in value chain. 5. Has hedged currency for more predictability of revenues (risk management).

GENERIC STRATEGIES: 1. Low cost Global delivery 24/7 Model. 2. Little differentiation in low-end services of value chain; high differentiation in high end services of value chain like software products and package solutions. 3. Focus on quality, customer relationship management, timely-delivery.

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

GRAND STRATEGIES:
ANSOFFs Matrix:

MARKET PENETRATION STRATEGY: Current Markets: USA and Europe Current Products: ADM, BPO, KPO, consultancy services (in BFSI, manufacturing and retail) and software products (financial products). Recommendation: As most large clients in US and Europe are cutting costs, Infosys needs to be more aggressive on cost and quality front. Result of strategy: Unlikely to yield good results MARKET DEVELOPMENT STRATEGY: New Market: India, Middle-east and Australia Current Product: ADM, BPO, KPO, consultancy services (in BFSI, manufacturing and retail) and software products (financial products). Recommendation: Since these are fast developing IT market, Infosys needs a paradigm shift in focus from US and EU markets to these markets. Result of strategy: Likely to yield good result. PRODUCT DEVELOPMENT STRATEGY: Current Market: USA and Europe New Product: Consultancy and package implementation services in relatively growing sectors esp. healthcare, life sciences and aviation sector, and KPO services. Recommendation: Concentrate on building expertise in these domains by strategic acquisitions. Result of Strategy: Likely to have good result. (better the company acquired, thebetter the result). DIVERSIFICATION: New Market: India, Middle-east and Australia

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business New product: Consultancy and package implementation services in relatively growing sectors esp. healthcare, life sciences and aviation sector, and KPO services. Recommendation: Changing Brand image from low value service provider to high value service provider. Result of Strategy: Difficult to achieve overnight (possible in long term) OTHER STRATEGIES: CONCENTRATION: 90% of Infosys revenues from American and European nations. VERTICAL INTEGRATION: Infosys recently made a bid to acquire a European major Axon consultancy to improve its business in European markets, but finally called off the deal due to high valuation. Otherwise, Infosys has always believed in organic growth. INNOVATION: The Software Engineering and Technology Labs (SETLabs) at Infosys is the center for applied technology research in software engineering and enterprise technology. SETLabs conducted 24 Innovation Workshops with customers from the US and Australia, to identify research collaboration possibilities. Infosys promotes a favorable work environment that encourages innovation and meritocracy.

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

COUNTRY ANALYSIS: SPAIN & MEXICO

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business

SPAIN Country Analysis


Located at the crossroads of the Atlantic and the Mediterranean, Europe and Africa, Spain's history and culture are made up of a rich mix of diverse elements. Through exploration and conquest, Spain became a world power in the 16th century, and it maintained a vast overseas empire until the early 19th century. Spain's modern history is marked by the bitterly fought Spanish Civil War of 1936-39, and the ensuing 36-year dictatorship of General Francisco Franco.

Overview
After Franco's death in 1975, Spain made the transition to a democratic state and built a successful economy, with King Juan Carlos as head of state. The constitution of 1978 enshrines respect for linguistic and cultural diversity within a united Spain. The country is divided into 17 regions which all have their own directly elected authorities. The level of autonomy afforded to each region is far from uniform. For example, Catalonia, the Basque Country and Galicia have special status with their own language and other rights. Andalucia, Navarre, Valencia and the Canaries in turn have more extensive powers than some other regions. Asturias and Aragon have taken steps to consolidate language rights. In 2006 a Catalan referendum backed by the central government gave the region greater autonomy. The Catalans won nation status within Spain and the region's parliament gained extra powers in taxation and judicial matters. The country's regional picture is a complex and evolving one. One of Spain's most serious domestic issues has been tension in the northern Basque region. A violent campaign by the Basque separatist group ETA has led to nearly 850 deaths over the past four decades. Eta declared a ceasefire in March 2006 saying it wished to see the start of a democratic process for the Basque region. The move divided opinion in Spain. Tentative moves to negotiate a lasting peace were dealt a blow when Eta carried out a deadly bomb attack at Madrid's international airport at the end of the year. In June 2007, Eta called off its ceasefire. The group announced another ceasefire in September 2010, but this time, the government said it was not prepared to enter into negotiations unless Eta renounced violence for good. International negotiators urged Eta to lay down its weapons at a conference in October 2011, seen as a possible prelude to Eta's dissolution. Neither the Spanish government nor Eta was officially represented.

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business Until 2008, the Spanish economy was regarded as one of the most dynamic within the EU. However, the mainstays of the economy were tourism and a booming housing market and construction industry, and so the global economic crisis of 2008-9 hit the country hard. The bursting of the housing bubble tipped Spain into a severe recession and by the end of 2011 the country had an unemployment rate of nearly 23% - the highest jobless rate in Europe. Austerity measures imposed by the government in an effort to reduce the level of public debt sparked a wave of protests. Spain shares the Iberian peninsula with Portugal and its territory includes the Balearic Islands, the Canary Islands and two North African enclaves. From Velazquez in the seventeenth century, through Goya straddling the eighteenth and nineteenth, to Picasso in the twentieth, Spain has the proudest of traditions in art. Flamenco music and dance are widely admired around the world while Cervantes' novel Don Quixote is one of the most popular ever written. Cinema is much loved and the films of directors such as Pedro Almodovar attract huge audiences.

Facts
Full name: Kingdom of Spain Population: 46.4 million (UN 2011) Capital: Madrid Area: 505,988 sq km (195,363 sq miles) Major languages: Spanish (Castilian), Catalan and its variant Valencian, Gallego (Galician), Euskera (Basque) Major religion: Christianity Life expectancy: 79 years (men), 85 years (women) (UN) Monetary unit: 1 euro = 100 cents Main exports: Transport equipment, agricultural products GNI per capita: US $31,750 (World Bank, 2010) Internet domain: .es International dialling code: +34

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Integrated Project on Global Business

PESTEL Analysis Political Analysis


Overview Spain presents a successful example of transition from monarchy to dictatorship, and finally to democracy. The initial years of democracy were dominated by two distinct parties, the center right PP and the center left PSOE. The PSOE received popular support in the early years of democracy but the PP emerged as the largest single grouping in the 1996 elections, and came to power again in 2000. The PP government initiated a number of policies for economic reforms along with the process of fiscal discipline. Despite the economic successes that it enjoyed, the domestic popularity of the PPs two-term Prime Minister Jose Maria Aznar declined, due of his support of the USs Iraq policy. He was subsequently voted out of power. The PSOE won the elections in 2004 and 2008 under the leadership of Mr. Zapatero. The country has witnessed both conservative and liberal regimes, and the policies framed by such regimes have maintained continuity in economic and social reforms. However, there have been differences in foreign, defense and immigration policies. The reformist policies have slowed down to some extent since the PSOE came to power in 2004. In the 2008 elections, the party was not able to garner enough support for an absolute majority, falling short by seven seats. Therefore, it has to depend on other regional parties, or smaller parties, to pass through important legislations.

Current Strengths Effective democratic system of governance Spain has been successful in making a transition from dictatorship to a democratic form of government. Since 1978, when the new constitution came into effect, democratic principles have taken firm root. Although the initial years of democracy were dominated by the PSOE, it later lost power and was replaced by the PP in 1996. Despite changes in the ruling regime, successive governments have maintained a continuity regarding economic policies. The targets set under the Maastricht Treaty bind the government and do not allow it much room to diverge from EU practices. Therefore, a continuation of the economic policies aimed at fiscal consolidation will continue. On the World Governance Indicators 2009, Spain has a strong percentile rank of 86.5 on voice and accountability in 2009, which measures the extent to which a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media. This indicates the effectiveness of the republican constitution.

Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business Improved relations with EU partners EU membership has provided an opportunity for the Spanish government to integrate itself closely with other EU members. The nation has prospered due to the large amount of inflow of economic aid from the EU nations. The incumbent government formed by the center-left PSOE has become closer to European countries in political terms, mainly France and Germany, and is moving away from the US in regards to extending support in the international sphere. This strategy is expected to work well for the government as the EU nations become a partner in the development of Spain. As is already evident, Spain has been able to achieve remarkable progress under the influence of EU regional and agricultural subsidies.

Current challenges Thin majority of the incumbent government The PSOE came to power for a second term in the 2008 elections, despite perceived support for the PP. However, the PSOE fell short of an absolute majority in the parliament by seven seats. Thus the government is dependent on the support of Catalan or Basque regional parties to pass important legislations. This restricts the government's ability to carry out the significant reforms that will be essential to negate the process of economic recession. There is also an element of uncertainty with respect to the legislations to be carried out as the prime minister will need support from other smaller parties. The final form of policies will depend on the political party the prime minister seeks support from.

Presence of terrorist groups Spain has been subjected to terrorist violence in the past and there is a continued presence of suspected terrorist groups in the country. ETA, considered a violent terrorist group by the US and the EU has been held responsible for large scale killing over four decades in its fight for an independent Basque homeland. Islamic extremist groups are also suspected to be involved in terrorist activities in the country. ETA resumed its campaign of attacks after breaking its last ceasefire in June 2007, and has been responsible for a number of killings. In 2008 anti-terrorism judge Baltasar Garzon indicted 24 people on charges of extortion on behalf of ETA. Furthermore, in March 2010, a policeman was killed in a shootout in a Paris suburb in France. France and Spain have blamed ETA and subsequently the Spanish government raised its terrorism alert level in the country. ETA continues to be a potent threat to the country.

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Integrated Project on Global Business Future prospects Cross party anti crisis commission In March 2010, the prime minister launched a cross-party "anti-crisis" commission aimed at securing a broad political settlement on measures to address the severe and ongoing recession. Some key issues have been excluded from the talks and dividing lines have already emerged during February March 2010, suggesting that any far-reaching consensus is unlikely. However, some concrete measures are expected to emerge from the negotiations in the areas of competitiveness, industrial policy, fiscal consolidation and improving firms' access to finance. With public opinion strongly in favor of cross- party co-operation, King Juan Carlos called for a national pact to agree on future policy plans in March 2010, in which all the main parties participated in the negotiations. The commission is expected to bring in measures to fight the ailing economy.

Future risks EU presidency The country assumed the EU presidency in January 2010 and got off to an inauspicious start. In early January 2010, Prime Minister Zapatero launched a proposal that the EU should consider imposing "corrective measures" on countries that fail to meet commonly agreed economic objectives. This met with a dismissive response from a number of EU member countries and widespread skepticism from international media, which have questioned whether it is appropriate that Zapatero should be leading plans for an economic recovery program for Europe, given the poor state of the Spanish economy.

Slowdown of the legislative reform process The Spanish government is caught in the midst of recession, which leads one to believe that the process of reform will be slowed down. In the early part of the nineties, Spain was one of the top economies in the European region, which gave the government enough scope to maneuver with economic and social policies. However, since the beginning of 2009 the government has faced economic recession, rising inflation and unemployment, and its surplus budget is expected to turn into a widened deficit in the future. Besides, the government is dependent on the support of other parties as it does not have a majority. These conditions may prompt the government to refrain from taking any harsh measures for fear of political instability.

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Integrated Project on Global Business

Economic Analysis
Overview The Spanish economy has been on a downturn since the later part of 2007, which follows a period of continued growth lasting 13 years. The economy, which was underdeveloped until the 1980s, was liberalized after Spain became a member of the EU in 1986. Subsequently, the government undertook a number of economic reform programs and initiated measures to improve fiscal discipline in order to meet the objectives set under the Maastricht Treaty. Spains economy showed steady progress during the 1990s, driven primarily by mass tourism and European subsidies. In fact, since the mid1990s, Spain outperformed the rest of the Eurozone, particularly the larger countries. The average economic growth between 1997 and 2000 was above 4%, but declined to 2.7%3% during 200203. Although, the average economic growth increased to 3.54% during 200406, it came down to 0.4% during 200709.The economic growth lost its momentum and a decline began in the second half of 2007. In 2008, the country's economic growth declined to 1.1%. The speculative price rise in the real estate market and the property boom came to an end. The Spanish economys excessive dependence on the real estate sector has been exacerbated by the impact of global financial turbulence and the US subprime crisis. The economic crisis deepened following weak domestic demand and rising inflation. However, since the second half of 2008 with declining prices, the country went into deflation (-3% in 2009). The governments budget also ran into a deficit in 2008 and 2009. Exports have also come under pressure because of deteriorating economic conditions in major markets.

Current strengths EU membership The economy of Spain has become closely integrated with the EU. As a result, the government is committed to maintain fiscal and monetary stability, as required by the Maastricht Treaty. The government is on track with respect to product market liberalization. A limited degree of competition has been introduced with respect to energy, electricity, and telecommunications markets. The country also enjoys geographic advantages as it provides an easy gateway to both European and Latin American markets. These factors work in favor of improving the trade and investment climate in Spain. Furthermore, with Spain taking over the EU presidency has much higher influence over the economic prospects of the region.

Strong FDI flows Despite the economic slowdown in the EU region, Spain continued to absorb foreign direct inflows into the country. The countrys FDI increased from a level of $28 billion in 2001 to more than $65 billion in 2008. The Netherlands was responsible for 20% of FDI inflow into Spain in 200708. The UK and the US were responsible for 6.65% and 4.95% of investment, respectively, during the same year. Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business Telecoms, real estate, hotels, manufacturing, and the agro-foods industry witnessed a large amount of FDI inflow. According to UNCTAD, Spain is the 7th most attractive country in the world for investment. Despite current recession in the country, it is expected that the country would still get considerable amount of FDIs.

Current challenges Economic recession The Spanish economy recorded steady growth for 13 years until 2006, but the rate of growth has declined since the second half of 2007. The decline started with the bursting of the housing bubble and the conditions worsened with the deteriorating US sub-prime crisis. The housing sector was one of the significant drivers of the Spanish economy, accounting for more than 9% of the countrys GDP in 2007. During 200106 property prices doubled, with 60% of the increase coming during 200506 alone. However, since 2007 property prices have fallen and it is estimated that prices declined by a further 8% during 200809. The slump in the housing sector has spread to both manufacturing and services sectors, with business confidence survey results indicating a negative trend. Spain suffered the greatest drop in annual economic growth of all developed nations, with growth falling to 1.1% in 2008 and -3.7% in 2009. Furthermore, the GDP is expected to shrink by 0.8% in 2010. There are little chances of an early revival, as consumption and investment expenditure will remain poor and exports will also be undermined by the slump in international markets.

High unemployment The Spanish government faces the major economic challenges of high unemployment and falling inflation since the end of 2008. An economic slowdown has led to a downturn in industrial activities and the level of unemployment has continued to rise. From a high of 20% in 1990, the unemployment level had fallen to 9% in 2006, but increased again to 18% in 2009 10. By the end of 2009, nearly 4 million people were unemployed, resulting in a year-on-year increase in unemployment reaching 66.4%. The employment situation may further deteriorate, as estimates suggest that unemployment is expected to reach 19.3% by the end of 2010. Unless structural measures are undertaken to improve the labor market, there is a possibility of an increase in unemployment.

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Integrated Project on Global Business Decrease in spending Due to economic recession and loss of jobs, the consumer spending has come down in the country. Furthermore, consumers are unable to maintain previous levels of spending, given that they can no longer finance as many purchases through loans. Lending to households fell by 0.7% year on year in the final quarter of 2009, the third consecutive quarter of decline, which was much lower than 3.8% growth seen in 2008. There has also been an increase in instances of domestic indebtedness and reduced spending, further aggravating the economic slump.

Future prospects Austerity plan The Spanish government announced an austerity plan for 201113 and a revised Stability Programme to the European Commission for 200913, which projects a significant decline in the general government budget deficit and includes a "sustainable economy" programfirst announced in November 2009that aims to improve Spain's competitiveness over the next ten years. The stability plan acknowledges the rapid and unsustainable deterioration in the governments fiscal position over the past two years, and sets out details of an exit strategy, beginning this year. The plan lays outs a framework to reduce the deficit by an average of 2.1 percentage points of GDP per year between 2010 and 2013an effort that will be particularly challenging this year, when the risk of undermining a tentative and fragile economic recovery will be substantial. Moreover, the government's GDP forecasts look plainly optimistic given existing economic imbalances and the anticipated hit to domestic demand from higher taxes and lower spending. Liberalization of government dominated service sectors In line with the EU directives, sectors which have been government dominated are now being opened for private investment. The government has introduced measures to liberalize services sectors such as energy, telecommunications and transport. Despite privatization, private entities are finding it tough to compete with publicly owned organizations because of government policies. It is expected that with the introduction of competition policies, the services sectors will throw up more opportunities for investors.

Future risks Labor market rigidities and unrealistic wage hikes The governments regulations have led to much rigidity in the labor market. Inflexible employment regulations have hindered overall productivity growth and employment opportunities. Moreover, the existing rigidities in hiring and firing a worker have made employers cautious in providing employment. According to Doing Business 2010 indicators of the World Bank, the country is ranked Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business 157th out of 183 countries under the Employing Workers criteria, signifying a very strict labor regime. There have also been unrealistic wage hikes, which are unmatched by labor productivity. The decision to link wages to price index has imparted inflexibility to the labor market, as it is not related to improvements in productivity. It is likely to further deteriorate in the absence of significant measures to revamp the labor market.

Prolonged recovery period following global financial crisis The Spanish economy has become closely integrated with the global economy. As a result, the turbulence in the global financial market has adversely affected the Spanish economy. The crisis has made access to credit tighter, which is a serious concern for an economy with excessive dependence on loans. Like many other European banks, large Spanish banks have found themselves embroiled in a crisis, which necessitated the central banks intervention. In March 2009, the Bank of Spain took control of regional savings bank Caja Castilla La Mancha (CCM), replacing its directors with its own nominees and providing up to E9.0 billion in liquidity. Spanish banks have not been nationalized like banks in other European countries as strict regulations protected them from US high risk or "sub-prime" assets. Nevertheless, the number of non-performing loans has been increasing in Spain following a rapid rise in unemployment and the collapse of the property boom. In such a scenario, there will be a slowdown in lending, which will prolong the recovery process.

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Integrated Project on Global Business

Social Analysis
Overview The economic growth achieved by Spain during 19952006 has also positively impacted some of the aspects in the social landscape of the nation. The social issues in Spain are similar to those in many European nations, as it is facing the key challenges of an aging population and unemployment. The birth rate has been continuously declining and there are fewer people entering the work force. The Spanish education system has undergone significant reform processes, which has led to its above average performance in terms of tertiary education. The healthcare needs of its population are also being adequately met by the public sector; recent initiatives have been undertaken to increase the involvement of private sector players. The government is currently grappling with the problem of economic recession, which may not turn around in the short- term. Social security expenditure is expected to be cut as the government struggles to maintain a surplus budget. Proposed education reform measures aim at the decentralization of decision making and to reduce universities' dependence on grants and loans. In the near-term, universities may be asked to raise their fees, which will add to the funds for the development of tertiary education.

Current strengths Prudent social welfare measures Spain has made good progress in developing social welfare measures, despite being a late starter. The countrys social security framework is comparable to other EU nations. The Agreement for improvement and development of the social security system laid the foundation for security reforms, especially to overhaul the pension system and encourage people to work beyond the age of 65. The Toledo Pact, which was signed by the government and trade unions in 1994, has worked towards the rationalization of public social security system. These measures have continued to deliver positive results for the welfare of the Spanish society.

Well developed tertiary education system Spain has performed well in terms of imparting tertiary education compared to some other EU nations. During 1995 2003, Spain made major investments in tertiary education, leading to an increase in expenditure per student. Spending on education institutions in tertiary education has risen by 62%. During the same period, expenditure per student on tertiary education institutions rose by 67%. This is well above the Organization for Economic Co-operation and Development (OECD) average of a 9% increase during the same period. A well developed tertiary education system is the prerequisite for a qualified labor force and for easy absorption into industrial activities.

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Integrated Project on Global Business Current challenges Aging population Spanish society is facing the challenge of an increase in the number of aged people, which hasnt been balanced by a proportionate increase in birth rates. Furthermore, the birth rate has been continuously declining and there are fewer people entering the work force. The country has the lowest fertility rate in Europe at 1.31. Besides the problem of a lower number of people contributing payments for social welfare measures, the pressure on government finances will increase manifold to meet the social security and healthcare needs of an aging population. The OECD estimate suggests that by 2050, the government will have to spend as much as 7% of GDP on pension funds and 4% on health. Meeting these social security needs will exert additional pressure on government finances.

Growing income inequality The economy of Spain grew rapidly after it became a member of the EU. Although, the per capita income of the nation increased, the distribution of income was unequal. Class divisions have become starker, making Spanish society an unequal one. Despite economic liberalization, the percentage of the population in different income groups has not changed. During 200009, the percentage of the population in the top income group increased from 8% to 8.3%, whereas in the lowest income group it has decreased from 40.7% to 40.6%. These figures imply that economic growth has done little to change the pattern of income distribution.

Future prospects Stimulus package for better employment opportunities The Spanish government has announced an E11 billion economic stimulus package, which is expected to create 300,000 jobs in 200910. This fund will be used to invest in public works and infrastructure. Furthermore, the government has proposed new measures to increase employment. Some of these measures are: subsidies for companies that hire unemployed people; lower social security contributions for companies introducing flexible working hours instead of firing workers; fiscal incentives for companies to hire on a part-time basis; Allowing workers made temporarily redundant to access jobless benefits.

These measures are expected to make a significant reverse the trend of growing unemployment. Furthermore, the government announced in February 2010, that the country is on its way to overcome the current economic crisis and will do so without cuts to the social-welfare system. The government

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Integrated Project on Global Business will approve an extension for another six months (starting April 2010) of an E420-a-month extraordinary payment to the unemployed without any other coverage.

Labor market to move toward permanent contracts The Spanish government has initiated a number of reforms to reduce rigidities in the labor market. The move towards reducing the number of temporary contract workers will have far reaching consequences on the labor market as it will provide long term predictability to employers with respect to available employees. The scope of Spanish firms to adopt new technology was also restricted because of the large number of temporary workers on payrolls. Larger proportion of permanent workers will enable Spanish firms to undertake more investment in technological advancement. This, in turn, will lead to the creation of quality jobs.

Future risks Social tension caused by the growing number of immigrants The contribution of immigrants to the economic development of Spain cannot be undermined. Given the economic recession, along with rising unemployment, a social backlash against the immigrant population has become almost inevitable. The issue was also became an important matter of debate in the 2008 elections. In the past decade Spain was second only to the US in the number of immigrants it attracted; almost five million migrants arrived in Spain. Between 2000 and 2009, the share of the foreign-born population has increased from 4% to 12%. However, as the economy faces recession and rising unemployment, anti-immigration sentiments have gathered momentum. The government has also proposed changes in the immigration laws to limit an influx of foreigners. The said legislation, once approved by the parliament, would allow police to hold illegal immigrants for up to 60 days pending deportation and make it harder for foreigners to bring relatives over to live in Spain. Furthermore, the proposed reforms would impose higher fines for employers recruiting foreigners without proper legal papers. These legislations are evident of growing social tensions caused by the growing immigration.

Imbalanced rural and urban development As with individual income, income distributions between regions have been unequal, which has also emerged as a catalyst of social tension. There are accusations about the government favoring the 'rich north and east' at the cost of other regions. The northern and eastern regions are substantially industrialized and urbanized; whereas, in the southern and western regions agriculture continues to dominate. The ACs of Catalonia, Basque and Madrid account for half of Spains GDP, indicating the widespread disparity among regions.

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Technological Analysis
Overview Spain has been slow to adopt technological advancements compared to the other EU countries, although policy measures have been undertaken in this regard. Spain ranks 16th on the European innovation index in a list of 27 nations. Total expenditure on R&D as a percentage of GDP stood at around 1.2% in 200708. Although it performs well in terms of knowledge creation, the innovation climate in Spain has not been very forthcoming. The situation has arisen because of the larger role of the public sector with respect to R&D development. The private sector has limited participation in enhancing R&D levels in the country. There is a need for unified R&D policy across regions as the autonomy of regional governments with respect to the R&D policy has led to the slackening of innovative practices. The increase in the number of authorities and the diversity of funding programs has increased the complexity of the innovative system. The level of coordination among different levels must improve if the desired results are to be achieved. The country has set a target to reach the R&D expenditure level of 2% of GDP by 2010, which is well below the 3% target fixed by Lisbon agreement for the EU nations. It is expected that recent initiatives of the government under the program INGENIO 2010 will help in raising the private sector expenditure on R&D to 55% of total investment by 2010, as well as improving the overall innovation climate of the nation. The government has initiated measures to address the shortfall in innovation by revamping the educational system and introducing new technologies. The lack of innovation and entrepreneurship has emerged because of a low percentage of SMEs getting involved in innovation and co-operation, along with the low participation of the private sector and venture capitalists. A positive environment could be created by enhancing incentives and making the venture capitalist funding procedure simpler.

Current strengths Well developed ICT sector The country has a strong communications equipment market. The Spanish communications equipment market generated total revenues of $521.2 billion in 2008, representing a compound annual growth rate (CAGR) of 9.7% for the period spanning 200408. In 2013, the Spanish communications equipment market is forecast to have a value of $577 million, an increase of 10.7% since 2008. Electricals and electronics retailers proved the most lucrative distributors for the Spanish communications equipment market in 2008, generating total revenues of $249.8 million, equivalent to 47.9% of the market's overall value. The countrys strong communication equipment market is expected to post healthy growth rates in the medium term.

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Integrated Project on Global Business Well developed infrastructure Spain has a well developed infrastructure to facilitate development of technology-intensive industries. The railways system is considered to be one of the best in Western Europe. In 2008, the Spanish railway system covered a length of 15,288 km, 8,847 km of which were electrified. Air and water transport are equally well developed with around 55 state-owned general interest ports and 58 commercial airports. These factors are important determinants for the development of other technology-intensive sectors.

Current challenges Gross expenditure on R&D remains low The total expenditure on R&D, as a percentage of GDP, stood at 1.2% in 2007, which is much less than that of other developed nations. In comparison, Frances expenditure was 2.13% of the GDP, 2.68% for the US, 3.18% in Japan and 1.8% for Canada during the same year. The low expenditure on R&D has restricted related activities in the country. With an increase in the Spanish innovation budget and access to the European technology fund, which aims at meeting the financing needs of research, development and innovation of enterprises, there will be an improvement in the funding of R&D activities.

Involvement of the private sector R&D activities in Spain have been spearheaded by the public sector with little involvement from the private sector. The lack of innovation and entrepreneurship has emerged because of a low percentage of SMEs getting involved in innovation, co- operation, and the low participation of the private sector and venture capitalists. The government focused more on the technological expansion of existing large firms rather than early stage investments for startups. This has also retarded the innovation climate of the country.

Future prospects Government policies promoting R&D The Spanish government has taken several initiatives, including the adoption of liberal policies to promote R&D activity in the country, and has drawn up a new legislative framework for R&D. It has been taking measures to expand the R&D infrastructure and to improve the operations of all agencies involved in the system. The government has set a target to increase the R&D expenditure as a percentage of GDP to 2% by the end of 2010, from 1.2% in 2007. The private sector contribution to R&D expenditure is expected to be 55% of total expenditure by 2010. Ahmedabad Management Association PGP-IBM 2010-2012

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Significant opportunities in energy and ICT sector Spain presents significant opportunities in the emerging sectors of energy and ICT. The process of liberalization of the energy market was started in 1998 and by 2003 it brought major changes to the electricity sector and consumers were allowed to purchase power freely in the open market. The government shifted its focus to renewable energy under the Promotion of Renewable Energy plan (200510). The government also approved the Action Plan for the Spanish Strategy of Energy Efficiency to increase investment in renewable energy technology. Spain achieved its 29.4% target for renewable energy in 2009, although the target was set for 2010 by the EU. The governments energy plans include greater reliance on wind energy and hydroelectricity. In the telecoms segment, a number of IT sub sectors have been opened to private players. Mobile telephony, broadband services and broadcast equipments (such as Wi-Fi) are the growing segments, as the sector is being gradually opened up for competition.

Future risks Lack of innovation and low number of patents The low level of innovation in Spain is reflected by the low number of patents registered. Although the number of patents is on the rise, it is still far behind the levels seen in other EU nations, and it compares poorly to some EU and developed countries, as illustrated in the table below. A continuation of the trend is likely to hamper the scientific prospects of the country. Spain was ranked 16th according to the European Innovation Scoreboard (EIS) 2008 among the list of 27 EU countries. The private sector R&D expenditure lags behind the EU average by 45% and the rate of patenting is below the EU average by 20%.

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Legal Analysis
Overview Spains economic reform programs were coupled with regulatory changes to meet the challenges in the new economic landscape. The Spanish government initiated legal reforms to ensure integration with the EU and has taken a number of steps to ensure this integration. Tax rates have been reduced, investment regulations have been eased, and hitherto restricted sectors are being opened up to encourage private investment. However, the country has not been able to completely free itself from government intervention. The government continues to play a critical role in the economy by interfering in the labor market and restricting access in some sectors. The Spanish legal system is federal in nature; however, for jurisdictional purposes, Spanish territory is divided into municipalities, judicial districts, provinces and autonomous communities (ACs). The ACs has wide ranging legislative and executive powers.

Current strengths Legal framework comparable to other EU nations Legal and regulatory aspects are crucial to create a successful business environment in any country. They reflect the policy framework and the governmental structure of that country. The regulatory regime in Spain has comprehensive and transparent laws for establishing companies and carrying out operations in Spanish territory. These laws are in line with most of the other EU nations, making business operations smooth.

Openness to foreign investment Spain, as a member of the EU, provides a reasonably hospitable climate for foreign investment. According to the World investment prospects, Spain is projected to be the ninth foreign direct investment (FDI) destination in the world by 2011. Portfolio investment has been a major source of FDI inflow in the country and total foreign investment in Spain has grown at a CAGR of around 23% during 200008. Spanish law permits foreign investment of up to 100% of equity, and capital movements are completely liberalized. Foreign investment has been recorded in various sectors, such as telecoms, real estate, hotels, manufacturing, and agro-based products.

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Integrated Project on Global Business Current challenges Labor market regulations The labor market regulations in Spain are rigid compared to other EU nations. The Spanish government has been trying to implement measures aimed at reducing the number of temporary contract workers. Although, the number of such workers has reduced, one-third of all employed workers are still classified as temporary hires. The prevalence of collective bargaining in both the public and private sector has restricted implementation of reform measures, as wages are not directly related to labor productivity. Such wage rigidities are directly affecting the nations competitiveness, which will worsen as Spain is faced with increasing competition from other low wage nations.

Government intervention in the market Spain began liberalization of its market in 1996. However, there are still sectors that are dominated by the government, and competition is restricted. For instance, in the retail segment, regional regulations restrict the operation of private players. Similarly, tariffs in the energy sector are government regulated, which has led to distortion in prices. The entry of international players is restricted and the sector is dominated by domestic firms. Regulatory restriction in the telecoms segment restricts competition in mobile telephony and broadband internet services, which still suffer from comparatively high prices. Other market operations, such as procurement services and other professional services, are suffering from market distortion because of government intervention, which restricts competition in goods and services market.

Future prospects Competition policy to reduce market rigidities The Spanish government has initiated a process to strengthen product market competition by mooting a competition policy in February 2009. As well as promoting competition, the adoption of a leniency program will be effective in promoting competitive forces. The government has partially opened up sectors such as telecoms, energy and transport by selling off government stakes in government-owned enterprises. The new competition commission is expected to be more independent with regard to the political authorities, particularly in the case of mergers. Since the commission will be more accountable, the links between investigations and enforcement will be stronger. To increase competition in various sectors, there is a proposal to set up sectoral regulatory bodies. All these steps will go a long way toward reducing market rigidities.

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Integrated Project on Global Business Government measures to reduce corrupt practices and tax evasion Spanish society is free from corrupt practices to a large extent; with government measures to combat corruption, the investment climate will further improve. Spain ranks 28th out of 180 countries in Transparency International's Corruption Perceptions Index for 2008. A tough law to combat tax evasion was passed, which has made it difficult to avoid paying taxes in Spain, and penalties have become stiffer. The government also issued regulations to fight money laundering to reduce cases of malpractices in the banking and financial sector.

Future risks Plethora of national and regional regulations The recent trend in Spain has been that of regionalism, as ACs are given more authority with regards to legislation and implementation of regulations. Varied regulations make working in the country cumbersome for investors and act as major deterrents. There are occasions, when regional regulation runs parallel to national law, which results in patchy implementation.

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Environmental Analysis
Overview Spain has been a late starter with respect to tackling environmental issues. The subject received the governments attention after Spain became a member of the EU. Following the setting up of the Ministry of Environment in 1996, the legislative process gained momentum. Spain has participated in important environmental agreements and is committed to meeting its obligations. However, Spains performance on environmental parameters has been found to be lagging behind other EU countries. While the country focused on economic growth, it made some compromises with regard to the implementation of environmental regulations. Nevertheless, the governments commitment to international agreements and the EU directives is reflected in the improvement in environmental indicators. The continued effort of government units coupled with participation from the private sector has allowed the country to meet with partial success in improving its environmental conditions. A new strategy for sustainable development has now been drawn up. It aims at speeding up the process of meeting the countrys targets for the Kyoto Protocol, which requires limiting its emissions by a maximum of 15% during 200812, compared to the 1990 levels. There are reservations that in the absence of stringent measures and the current level of high emissions, the government may fail to achieve the target.

Current strengths Environmental policy based on the EU guidelines Spain has ratified a number of international environmental treaties and has been at the forefront among the EU nations, as far as the implementation of the environmental agenda goes. Its basic environmental policy adheres to the EU norms. The strategy on sustainable development and on climate change has been approved to reduce GHG emissions by developing a technical construction code and a bonus system to enhance the purchase of energy efficient vehicles. According to the climate strategy of the Spanish government, it plans to achieve this target by cutting its GHG emissions to 37% above 1990 levels by 200812. It will then achieve the balance by buying carbon credits from clean energy projects in other countries. Furthermore, the government is planning to use carbon sinks, such as reforestation projects.

Commitment of national and regional governments Both the national and regional governments are responsible for the implementation of environmental regulations. Spains strong environmental policy framework has delivered results in the past as environmental authorities at both levels are functioning as per the EU directives. These authorities are focusing on environmental infrastructure investment and financing. These authorities have also successfully managed to increase enforcement activities. Ahmedabad Management Association PGP-IBM 2010-2012

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Current challenges Poor performance on environmental indicators Spain has turned out to be a poor performer on environmental indicators. Despite its progress in international commitments, Spain faces important challenges concerning marine environment, climate change and regional air pollution. The country's marine environment performance has also remained unsatisfactory. Although over 400 proposed climate change-related measures are under consideration, very little has been achieved at the implementation level. The government has failed in limiting CO2 emissions. In 2007, the country released 50% more CO2 emissions than in 1990, far above its 15% limit of 1990 levels. Furthermore in 2009, the country released around 359 million metric tons of CO2, which was much higher than 349 million metric tons released in 2002.

Lack of financial measures to improve the environment The government of Spain has resorted to subsidies and financial assistance to ensure compliance with environmental regulations. The government has made little use of environmental taxes or other instruments, which will result in better implementation. Many municipal governments do not charge for services like water and sewerage. A high proportion of industrialized nations meet their financial needs by using the 'polluter pays' principle. The principle was introduced in the new climate change strategy but the desired results are yet to be achieved. Because of lack of implementation, the government has been devoid of funds that may have been used for bringing improvements in the environment.

Future prospects Moving towards sustainable tourism Spain occupies the second position in the world for both the number of tourists received, and travel and tourism contributed around 12% of the countrys GDP in 2008. In order to fully utilize the potential of this sector without harming environmental prospects, the government has initiated the sustainable tourism program. The new Tourism Plan 2020 has identified ways to develop tourism using sustainable resources. The sustainable tourism program, 'Plan Futures', implemented by national and regional governments, resulted in shifting tourism demand from congested coastal areas to more isolated and inland rural areas.

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Integrated Project on Global Business Meeting energy needs through renewable energy Spain has developed a strong dependence on sources of renewable energy. Electricity consumption has increased over 65% during 19972008. To reduce the countrys energy dependence, the government wants renewable energy to account for 12.1% of primary energy in 2010 and 30.3% of electricity. Biofuels should cover 5.83% of transport fuel by that year. According to EU stipulations on the renewable energy targets for 2020 set in 2008, renewable energy has to make up a minimum 20% of the energy mix. Spain has already reached its target for renewable energy by 2010, by producing 29.4% of its energy from renewable sources. Furthermore, the federal, regional and local governments are also very active in renewable energy development and offer incentives to attract investment. Using renewable energy for their domestic and industrial needs will go a long way toward improving the energy usage condition of the country.

Future risks Curtailing environmental expenditure The challenge to balance economic growth and environmental policies is faced by any growing nation. The economic recession will prompt the government to reduce expenditure on the environment as the government strives to meet other economic and social priorities. The governments expenditure on environmental issues was at 0.6% of GDP in 2005, which was below the average EU level of 0.7%. The country undertook official development assistance on the environment, which is expected to be axed with the slowdown in the economy.

Increasing desertification Spain has been facing the worst drought in 40 years with reservoirs standing at 46% of their capacity and rainfall below 40% of the average during 200708. Living conditions have deteriorated as regional governments try to reduce the consumption of water. In regions such as Catalonia, a fine is being imposed for excessive use of water in gardens or swimming pools. According to the environment ministry report, global warming is likely to speed up desertification by drying up soil moisture quickly, and 30% of Spain's land is already at high risk of desertification. According to a new study, 37 out of every 100 hectares of land in Spain could turn to desert as unsustainable agricultural practices. Furthermore, over- development and climate change take their toll on the country's forests and grasslands. In October 2009, Spain's most important inland wetlands at Las Tablas de Daimiel national park were burnt, due to deep cracks and fire in the soil. There have been several such incidents in other regions of the country, which are causing further deterioration in the environmental conditions.

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Country Analysis: MEXICO


Mexico is a nation where affluence, poverty, natural splendour and urban blight rub shoulders. Its politics were dominated for 70 years by the Institutional Revolutionary Party, or PRI. But elections in 1997 saw a resurgent opposition break what was in effect a one-party system with a democratic facade. Elections in 2000 confirmed the trend when Vicente Fox became the first president to come from the opposition. Mexico has the second-largest economy in Latin America and is a major oil producer and exporter. Though production has fallen in the last few years, about one-third of government revenue still comes from the industry. Much of the crude is bought by the US. But prosperity remains a dream for many Mexicans, and the socio-economic gap remains wide. Rural areas are often neglected and huge shanty towns ring the cities. In recent decades many poor Mexicans have sought to cross the 3,000-km border with the US in search of a job. At one point more than a million were being arrested every year, but since 2007 there appears to have been a dramatic fall in numbers, mainly attributed to changing demographics in Mexico itself.

Economic recovery
The Mexican economy is heavily dependent on the money sent home by the millions of migrant workers in the US, and was hit hard by the downturn in its neighbour's economy in the wake of the credit crunch of 2008. On a more positive note, Mexico has recently been emerging from its deepest economic slump since the 1930s, with foreign companies pouring billions of dollars of fresh investment into the country. Foreign direct investment climbed nearly 30 per cent in the first six months of 2010 from a year earlier. Violent crime though remains a major concern; Mexico has one of the highest rates of kidnappings in the world, and over 35,000 people have died in drug-related violence since December 2006. Powerful cartels control the trafficking of drugs from South America to the US, a business that is worth an estimated $13bn (9bn) a year. Mexico's northern border towns are experiencing the worst of the violence. Ciudad Juarez (just across from El Paso in Texas) is the city suffering the most. There are also high levels of violence in Michoacan and Guerrero states. However, Mexico is a large country, and there are still many areas which do not experience high levels of serious crime. The overall murder rate is lower than several other countries in the region, including El Salvador and Honduras.

Native rights
Another persistent issue has been the pressure for greater rights for Mexico's indigenous people. A law passed in 2001 fell short of giving Mexico's Indians political autonomy. However, demands for indigenous rights have been largely peaceful since 1994, when at least 150 people died during an uprising in the southern state of Chiapas, led by the Zapatista rebel movement. Writers such as Octavio Paz and Carlos Fuentes, the mural-painter Diego Rivera, and popular ranchero and mariachi music mean that Mexican culture is known throughout the Spanish-speaking world and beyond.

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FACTS

Full name: United Mexican States Population: 114.8 million (UN, 2011) Capital: Mexico City Area: 1.96 million sq km (758,449 sq miles) Major language: Spanish Major religion: Christianity Life expectancy: 75 years (men), 80 years (women) (UN) Monetary unit: 1 peso = 100 centavos Main exports: Machinery and transport equipment, mineral fuels and lubricants, food and live animals GNI per capita: US $8,890 (World Bank, 2010) Internet domain: .mx International dialling code: +52

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PESTEL ANALYSIS: MEXICO


Political Environment

Talking about the political history of Mexico is to talk about a long and hard transition period of the country. For a country brand the political situation is important, but how the political situation in a country can affect in the experience of a tourist? If the political situation is not stable, that is, if there are movements against the government, marches, riots, all of them leads to violence which in turn bring insecurity and a very bad image of the country. However, in this research it will be presented only the most relevant events in order for the reader to understand the influence of the political environment in Mexicos brand.

Political Parties.
In Mexico there are eight legally registered political parties, but the political activity is dominated mainly by three: the National Action Party (PAN by its acronym in Spanish), Institutional Revolutionary Party (PRI) and Democratic Revolutionary Party (PRD).(Neves 2007)

The federal elections are organized by the Federal Electoral Institute (IFE), which is an autonomous body, administered by a city council that does not respond to interest of any party or government. They are carried out in accordance with the requirement of the Political Constitution of the Mexican United States and the Federal Code of Electoral Institutions and Procedures (COFIPE)(Instituto Federal Electoral National Institute of Statistics and Geography)

Another important part of the political life of Mexico is its judicial system. The federal system is constituted of a set of federal and regional courts, led by the Supreme Court of Justice. The Judges of the Supreme Court are selected by the President of Mexico and ratified by the Senate. The principal duty of the judicial power is the application of law.

But the main event in the Mexican political history was 10 years ago, when; in the year of 2000 the presidential candidate for PAN, Vicente Fox, was elected as the new president of Mexico. This was a historic episode in the country's political career, because for the first time (after 70 years) a person that was not from PRI was assuming the presidency of Mexico. As every significant transformation, that

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Integrated Project on Global Business meant a new era in the Mexican democracy, as well as the country's political maturity; the PAN victory ended a long rule of the Institutional Revolutionary Party (PRI).

As every significant transformation, that meant a new era in the Mexican democracy, as well as the country's political maturity; the PAN victory ended a long rule of the Institutional Revolutionary Party (PRI). But despite of the good intentions of the new governor, Vicente Fox failed to accomplish a large part of his projects because of an absence of majority in the Chambers (Neves 2007). After Vicente Fox period (2000-2006) the story was repeated in the 2006 presidential election. The presidential candidate for PAN, Felipe Calderon Hinojosa won the elections with a margin of 57% against the PRD candidate Andres Lopez Obrador. This replacement of head of State came to represent again a new phase in the Mexican political life and constitute a qualitative change for the country's democratic consolidation. Four years have passed since the President Felipe Calderon is in charge of the presidency of the country, Mexican democracy had been strengthened, government action had become more transparent and freedom of expression is much more than before. For the first time in Mexico political history, a strict separation of powers was established.(Neves 2007)

Economic Environment
The economic aspect of a country is very important because the progress and competitiveness depends on it. The importance of economic information for the brand as well as tourists lies on the expectations of the last ones, that is, when one choose a holyday destination various characteristics of the place are taken into consideration, as infrastructure, transportation and the economic position of the country; based on those aspects, one knows what kind of conditions expect; so on that will depend the visitors opinion of the brand.

This section presents some indicators of the functioning of Mexican economy. The Mexican financial system is constituted by a set of institutions that capture, manage the savings and investment from both domestic and foreign organizations.(Delgado de Cantu 2003) Mexico is an economically developing nation. The Mexican economy is a combination of private, state and mixed-capital enterprises. The country is one of the most industrialized countries in Latin America; this sector accounts for one-fourth of the gross domestic product. (Mexicos 2009 GDP 922.78 US million dollars) (Instituto Federal Electoral National Institute of Statistics and Geography) Ahmedabad Management Association PGP-IBM 2010-2012

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Due to its geographic location, exotic cultural diversity, tropical portraits, relatively low prices, and easy accessibility, Mexico exerts a strong attraction on international tourists. Hence tourism is a key industry and Mexicos second largest economic asset after petroleum((Encyclopedia Britannica 1995) .

Aware of that, the government has invested heavily in this sector. Highways are the main mode of transporting passengers and goods. Air travel has become a significant mode of transportation within Mexico. Largely in response to the needs of tourism, new airports have been built throughout the nation. Unfortunately, there are still major flaws that need to be corrected; one of the most important is the unequal distribution of wealth. In Mexico it is possible to find people in extreme poverty and on the other hand, extremely rich people; according to the last census in 2009, over 50 million Mexicans live in extreme poverty.(Camara de Diputados del Congreso de la Union 2009)

The enormous inequality in Mexico, cause a reduced domestic market; therefore, few companies can cover it, as a result more competitive markets are created which originate inefficiency and high prices. Inequality is a serious economic problem. Mexico is one of the most unequal countries in the world. It is not the same being unequal as being poor. Mexico is not a poor country, but an unequal one, which implies that a large number of Mexicans are poor, in a country that is not (Schettino Yaez 2000).

Social Environment
The social situation, as the political and economic, is essential for the growth of a nation. Issues like education, literacy, social security and recreation centers as museums, zoos, nightclubs, theaters, aquariums, libraries, gardens among others are part of a community's social environment. In order for the reader to have a clearer picture, here are some statistics on certain sections of the service sector business.

Hotels: During the period 2000-2008, 182,201 hotel rooms were available for the national and international tourism in 5.480 hotels of which 84.58% were occupied by Mexican tourism and 15.42% by foreign.(Confederacion Nacional Turistica (CNT)) Restaurants: 243,000 formal establishments participated in the national GDP of

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Integrated Project on Global Business 2% in the year of 2007.(Confederacion Nacional Turistica (CNT))(Camara Nacional de la Industria de Restaurantes y Alimentos Condimentados (CANIRAC)) Airlines: 56,175,801 national and international passengers in 772,770 flights operated by 17 national. Airlines and 84 foreign.(Confederacion Nacional Turistica (CNT))

According to the UN, education is one of the most valuable assets of economic development, and also part of what UN considers in the human development index. Along with health, education is another aspect the UN considers part of the human and socioeconomic development of any country (Schettino Yaez 2000).

Cultural diversity is also an element of the social patrimony of a society, in this case Mexico is a country rich in cultural diversity, as a proof, there are more than 62 indigenous languages spoken in Mexico today(Instituto Nacional de Estadstica y Geografa (National Institute of Statistics and Geography) 2005).

The care, attention and maintenance of it are responsibility of the government. The large number of indigenous languages and customs still present, especially in the south, also accentuate cultural differences. In an attempt to integrate the nation culturally by identifying a unique Mexican culture, the government has supported indigenous folk arts and crafts.

According to the National Institute of Statistics and Geography in Mexico, 6 of every 100 residents (aged 5 years and older) spoke an indigenous language. By 2005 there were 6 011 202 persons (aged 5 years and over) who spoke an indigenous language: 2 959 064 were men and 3 052 138 women.(Instituto Nacional de Estadstica y Geografa (National Institute of Statistics and Geography) 2005)

Because of its ethnic and regional diversity, as well as the socioeconomic divisions within the population, Mexico is a country culturally heterogeneous. Another subject that is related with the social environment is the security. How safe the tourists (locals and internationals) feel in the country? Security is a primary need, it is indeed an important point for the country; and it can be a great ally or the worse enemy for country branding concept as it represent an extremely significant subject for the image of a nation out and inside the country.

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Technological Environment
Last but not least in this analysis, is the technological environment.Despite the importance of technological development in the country, Mexican authorities has not given the proper attention to the subject.

To illustrate that, some facts that prove the lack of attention to this sector will be presented: According to the National Council of Science and Technology, in 2006 the report of the World Economic Forum, which include 125 countries, the indicator of Higher Education and Training places Mexico in the 71st place, in the availability of technology in place 56, and innovation in position 58. Mexico has lost competitiveness in going from 36th in 2000 to place 58th in 2006.(Sistema Integrado de Informacin sobre Investigacin Cientfica y Tecnolgica (Integrated System of Information on Scientific and Technological Research) 2008)

One factor that somehow, has benefited the development of science and technology is the government impulse and support to this area. In Mexico the main contribution of investment in science and technology comes from the public sector. The 2007-2012 National Infrastructure Program set as a global goal for 2030 , place Mexico within the group of the 20 best evaluated countries (according to the index of competitiveness of the infrastructure prepared by the World Economic Forum).

The country's competitive position is far from corresponding to its economic importance, is unquestionable that there are more serious problems to solve in the country, but the authorities cannot abandon the aspect of science and technology education because on it depend largely the growth and development of the economy.

The technological environment of a country and tourism are highly related. But what is this relationship about? The expansion of computer networks and communications has made possible to provide more options for the tourists as well as facilitating the work to travel agents and visitors. Tourism is an activity that promotes and sells activities offered in different locations where the client is, on the other hand being part of an industry that involves entertainment it is a necessity to base the promotion in a way that is attractive to the customer. The new technologies have influenced and modified various tourismrelated industries, as travel services which increase the competitiveness and promote the creation of new areas of work relating to the tourism industry. So it is obvious that the previous information

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Industry Analysis: Information Technology

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Major Industry Trends


Information technology (IT) is both a huge industry in itself, and the source of dramatic changes in business practices in all other sectors. The term IT covers a number of related disciplines and areas, from semiconductor design and production (also covered in the profile of the electronics sector), through hardware manufacture (mainframes, servers, PCs, and mobile devices), to software, data storage, backup and retrieval, networking, and, of course, the internet.

On top of this, there has been a convergence between IT and telephony, driven by transforming voice traffic from an analogue signal to a digital packet, indistinguishable from other data packets travelling through a computer network. IT in the leisure sector is already about enabling interaction with video, movies, and TV, and this trend is increasingly carrying over into the business space.

Each of the major sub-areas in IT is itself capable of being divided into its component parts. Storage, for example, breaks down into disk drives, tape drives, and optical drives, and into attached storage and networked storage. PCs break down into utility-business desktop PCs, high-end work stations, and extreme gaming PCs for games enthusiaststhe computer and console games industry has already produced blockbusters that outsell top releases from Hollywood.

Software subdivides into numerous specialist areas, from relational database technologies to enterprise applications, to horizontal office applications characterized by Microsoft Office 2007, for example.

Somewhat off the main track of IT at present, but very much related to both increases in processor power, and to work in simulation and artificial intelligence, is the field of robotics. This lies outside the scope of this profile, but the linkages between robotics and IT are already transforming both manufacturing and defense.

In addition, the IT arena is characterized by a number of key trends and emerging technologies which, again, have the potential to transform the way businesses currently use IT, and carry out their operations. An example of a trend would be the outsourcing of IT services, such as desktop PC support, or whole IT-supported functions, such as accounts processing. An example of a technology trend would be virtualization. This refers to the ability of large servers to be subdivided into a number of virtual machines, which can be either virtual PCs or virtual servers.

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All these trends have enabled the IT industry to continue to generate a strong demand for the next generation of servers, PCs, and laptops. However, in a recession, companies of all sizes generally postpone upgrading their IT, or implementing major IT projects that are not already in hand. This makes the sector vulnerable to downturns in the economy, and the current global downturn is already having a major impact on revenues in the sector worldwide.

Market Analysis
According to the IT market analysis firm, Gartner, worldwide IT spending is forecast to reach US$3.4 trillion in 2010, a 5.3% increase from IT spending of US$3.2 trillion in 2009. The IT industry will continue to show steady growth with IT spending in 2011 projected to surpass US$3.5 trillion, a 4.2% increase from 2010.

Following strong fourth-quarter sales, an unseasonably robust hardware supply chain in the first quarter of 2010, combined with continued improvement in the global economy, sets up 2010 for solid IT spending growth, said Richard Gordon, research vice president at Gartner. However, its important to note that nearly four percentage points of this growth will be the result of a projected decline in the value of the dollar relative to last year. IT spending in exchange-rate-adjusted dollars will still grow 1.6% this year, after declining 1.4% in 2009.

Worldwide, computing hardware spending is forecast to reach US$353 billion in 2010, a 5.7% increase from 2009. Robust consumer spending on mobile PCs will drive hardware spending in 2010. Enterprise hardware spending will grow again in 2010, but it will remain below its 2008 level until 2014. Spending on storage will enjoy the fastest growth in terms of enterprise spending, as the volume of enterprise data that needs to be stored continues to increase. Near-term spending on servers will be concentrated on lower-end servers; longer-term, server spending will be curtailed by virtualization, consolidation and, potentially, cloud computing, Gartner said.

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Integrated Project on Global Business Worldwide software spending is expected to total US$232 billion in 2010, a 5.1% increase from 2009. Gartner analysts said the impact of the recession on the software industry was tempered and not as dramatic as other IT markets. In 2010, the majority of enterprise software markets will see positive growth.

The infrastructure market, which includes all the software to build, run, and manage an enterprise, is the largest segment in terms of revenue and the fastest-growing through the 2014, according to Gartner. It adds that the hottest software segments to 2014 include virtualization, security, data integration/data quality, and business intelligence. The applications market, which includes personal productivity and packaged enterprise applications, has some of the fastest-growth segments. Web conferencing, team collaboration, and enterprise content management are forecast to have double-digit compound annual growth rates (CAGR), in the face of growing competition surrounding social networking and content, according to Gartner.

Cost optimization, and the shifts in spending from mega-suites to the automation of processes will continue to benefit alternative software acquisition models, as organizations will look for ways to shift spending from capital expenditures to operating expenditures, said Joanne Correia, managing vicepresident at Gartner. Because of this, vendors offering software as a service (SaaS), IT asset management, virtualization capabilities, and that have a good open-source strategy will continue to benefit. We also see mobile-device support or applications, as well as cloud services driving new opportunities.

The worldwide IT services industry is forecast to have spending reach US$821 billion in 2010, up 5.7% from 2009. The industry experienced some growth in reported outsourcing revenue at the close of 2009, an encouraging sign for service providers, which Gartner analysts believe will spread to consulting and system integration in 2010.

We continue to see a long-term recession hangover as a more cautious mind-set continues as the norm among a lot of buyers who keep looking for small, safe deals where cost take-out is a key factor, said Kathryn Hale, research vice-president at Gartner. In the face of that ongoing strong pressure to renegotiate contracts, and in the absence of equivalent pressure from stockholders, we believe vendors will generally choose to maintain margins over revenue growth.

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Longer term, the global enterprise network services market is expected to grow modestly, largely on the back of growth in internet services, such as hosting, said Peter Kjeldsen, research director at Gartner. Ethernet services will also grow significantly, albeit at the expense of both legacy services, and multiprotocol label switching (MPLS).

Worldwide PC shipments totaled 84.3 million units in the first quarter of 2010, a 27.4% increase from the first quarter of 2009, according to preliminary results by Gartner, Inc. These first-quarter results have exceeded Gartners earlier market outlook. Gartner had been expecting first-quarter PC shipments to grow 22%.

The stronger-than-expected growth was led by a robust recovery in the Europe, Middle East, and Africa (EMEA) PC market, which grew 24.8% in the first quarter of 2010, said Mikako Kitagawa, principal analyst at Gartner. All other regions recorded double-digit growth rates, although the US and Latin America were slightly lower than what we had expected.

These first-quarter results indicate that the professional PC market is gradually picking up, driven by PC replacements in mature markets, Ms Kitagawa said. With a relatively positive macroeconomic outlook, business demand was more forthcoming. Major PC replacement demand, driven by Windows 7, will become more apparent in the second half of 2010, and the beginning of 2011.

HP continued to be the leader in worldwide PC shipments, but its growth was below the worldwide average in the first quarter of 2010. HP faced continued pressure from its Asian rivals that are gaining share. However, HPs strength could be apparent as the professional market rebounds, according to Gartner.

Gartner said that Acer had strong shipment growth across all regions. Acers business model allows it to meet price points that other vendors find difficult to match. Dell achieved year-on-year growth above 20% for the first time in two years. Dells growth was attributed to strong international sales.

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Integrated Project on Global Business Lenovos PC shipments increased 59.2% in the first quarter of 2010, according to Gartner, which added that Lenovos commitment to expand into the consumer segment seems to have brought positive results, although its high dependence on Chinas market remained unchanged. ASUS joined the worldwide top 5 ranking for the first time, sharing the position with Toshiba. ASUS had PC shipments increase 114.8% in the first quarter. The company quickly increased market share with its mini-notebook launch in 2008, but it has also successfully expanded into the traditional mobile PC market.

In the United States, PC shipments totaled 17.4 million units in the first quarter of 2010, a 20.2% increase from the first quarter of 2009. The US market has registered two consecutive quarters of double-digit shipment growth.

Although the first quarter is not typically a strong quarter for the consumer market, growth in the consumer segment was strong. We are expecting about 30% growth in the US consumer PC market in the first quarter of 2010. The positive economic outlook and affordable system prices drove US consumers to buy more PCs. These purchases either replaced aging PCs or became additions to buyers households, Ms Kitagawa of Gartner said. In the professional segment, we are seeing gradual signs of improvement, and we are expecting about 10% growth in the professional market in the first quarter.

HP maintained the top position in the US market, but its growth was below the market average, according to Gartner. Dell retained the number 2 position in the US market, but continued to face challenges in the consumer market. Toshibas shipments grew 50% in the US market, as it became more competitive with pricing and promotions. Toshiba also did well in the value segment of notebooks. Apple created major attention with its media tablet, the iPad, which launched in April. The hype around the iPad added positive sentiment to the companys PC shipments. Early estimates showed that Apple grew 34% in the US market.

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Mexico: Information Technology Analysis


Market Overview
The report projects that the value of the Mexican IT market will increase from around US$12.5bn in 2008 to around US$18.8bn in 2013. In the current global economic climate, Mexicos close economic ties to the US represent both vulnerability and an opportunity. While market growth is expected to dip into negative territory in 2009, fundamental drivers remain, including low PC penetration and growing PC affordability, as well as US corporate demand for IT outsourcing. The Mexican IT market is expected to grow at a CAGR of 10% over the 2008-2013 period, faster than expected GDP growth. Mexico certainly has plenty of potential for progress across a range of information and communication technology (ICT) indicators, including a computer penetration level of about 15%, and under-developed e-services. IT spending as a percentage of GDP at around 1.3% remains well below OECD levels, and the report projects that per capita IT spending will raise from US$117 to US$177 by 2013. Government initiatives should help to fill some of the gap left by declining investment and consumption. In the retail segment, more creative financing plans and better access to credit will gradually help bring computer ownership within the reach of millions more lower income Mexicans. In the enterprise segment, IT adoption should continue to spread from larger companies to their smaller partners and customers.

Industry Developments
Mexicos government has launched three initiatives designed to promote technology adoption among enterprises. The three programmes will allocate hundreds of millions of pesos to businesses that incorporate technology into their operations. The new initiatives followed a plan launched in December 2008 to provide MXN5.78mn in subsidies to IT firms in states Guerrero, Hildalgo and Tlaxcala. In early 2009 the Mexico electronics industry and market was facing the challenge of the US credit crunch and a slowdown in global consumer electronics markets. Order cancellations began in Q407 with the US economic downturn and accelerated throughout 2008. The most affected facilities were those located in the US/Mexico border regions. Meanwhile, the Mexican government recently introduced a 10% tariff on notebook computers. The impact of the governments austerity decree on the IT market, which set a target of cutting operational expenditures by 5%, has yet to be fully evaluated. IT was identified as a core area for potential savings, and some vendors reported fewer projects and longer sales cycles. However, in 2008 there were signs that the decree was coming to be understood as a vessel to promote a focus on services, and some vendors were adapting their behavior accordingly. Ahmedabad Management Association PGP-IBM 2010-2012

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Competitive Landscape In 2009 Mexicos PC vendors were adapting their strategies to the advantage of increased sales through resellers and retailers. Dell has implemented a shift from concentration on the corporate market to expansion in the consumer segment through new partnerships with retail chains. Meanwhile, Lenovo is also looking to expand its retail sector presence through expanded channel partnerships. In HPs case, indirect sales currently represent about 90% of units shifted in the Mexican market. Small and medium-sized enterprises (SMEs) are considered a major potential growth segment for software vendors despite the economic downturn. Local software developer Microsip said that it would continue to focus on local SMEs and expected revenues to grow 20% this year. In Q109 growth areas for Microsip in 2009 included inventory control and point of sale software. Meanwhile, SAP was also targeting SMEs with a new online delivery solution Business All-in-One Fast-Start, as part of a partnership with HP. In the past three years, IT services companies have escalated investment levels in Mexico. Among recent investments, Unisys committed to spend US$50mn in the next three years to construct a new software development centre in Mexico. Meanwhile, IBM has established a Global Archive Solutions Centre in Mexico, with an initial investment of US$10mn. Satyam recently announced plans to expand its Latin American operations with a new IT-business process outsourcing (BPO) services development centre in Mexico.

Computer Sales
Mexicos computer hardware sales were estimated at US$5.95bn in 2008 and are projected to reach around US$8.4bn in 2013. Estimated 2.1mn computers were sold in Mexico in 2008, but following on from a slowdown in H208, 2009 is likely to be a difficult year because of the impact of the global financial crisis. Long-term market drivers including greater affordability combined with more credit options, lower interest rates and tax concessions should help to avert stagnation. Notebooks are the main growth area, and the share of mobile computers in PC sales should be above 50% in 2009. The biggest barrier to higher PC penetration remains low annual average incomes, of about US$5,000 a year, and financing has long been a bottleneck to faster growth of PC penetration. Distributors and retailers are becoming more flexible at devising new financing options, and this has resulted in them accounting for a larger share of the market. The financing and unified bill options offered by Telmex for its bundled PC offers have clearly unleashed fresh demand.

Software
The software market in 2008 was estimated at US$2.4bn, with imported software accounting for at least 80% of the total. The figure for 2009 is projected to dip to US$2.2bn, as a result of the current economic headwinds. However, software CAGR for 2008-2013 is put at around 9%, outpacing general IT market growth. Business sentiment showed signs of a sharp decline in 2008, leading to the possibility Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business that investment in systems upgrades will be suspended. Other companies, however, will see IT as a way of bringing greater efficiencies and increasing competitiveness in difficult times. The software sectors current growth is being driven partly by increasingly strong demand for enterprise resource planning (ERP) solutions from SME. Lack of IT infrastructure is thought to contribute to the high failure rate among SMEs in many parts of the country. As the government turns its attention to overcoming Mexicos longstanding under-investment in software, there should be more opportunities.

IT Services
The IT services market grew around 14% in 2008, to a value of around US$4.2bn, but conditions are expected to be difficult in 2009. Despite near-term economic exigencies, the market should ultimately grow at a CAGR of 10% through 2013. The economic situation is expected to contribute to negative growth in 2009, but early signs were that only around 30% of companies were cutting budgets. The increasing number of multinational companies operating in the market is an important driver for spending. IBM has recently stated that it considers the Mexican market as one with high-growth potential for installation and services. Growth opportunities also reside within the SME sector, where companies are trying to use computing resources more effectively. Meanwhile, Mexico is becoming an increasingly important hub for provision of BPO and outsourcing services.

E-Readiness
According to estimates, the number of Mexican internet users reached 25.8mn in 2008, representing 24% of the population. The percentage of broadband subscribers in the general population was 5.7%. The World Economic Forums latest annual survey found Mexico continuing to make steady progress on network indicators. The survey had Mexico climbing six positions in the rankings from 55th. The report attributed the improvement to the adoption of more efficient electronic strategies for digital networks and infrastructure connection nationally and regionally.

E-Government
The 2008 UN e-government survey found that Mexico had the most advanced e-services development in Latin America, due to a strong national government portal, which encouraged online consultations between government and citizens. Recent state and municipal statistics have highlighted gradual progress in the implementation of egovernment in Mexico at a federal and state level. In 2001 the government launched an e-government initiative that prioritized providing health, education and other government services online, as well as the development of e-commerce. Since then, however, funding has rarely been sufficient for much progress to be made given the substantial task involved, and state and municipal governments are increasingly seeking to launch their own initiatives. Many states are seeking funding from the private sector to make good gaps in public funding.

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TECHNOLOGICAL LANDSCAPE: SPAIN


Summary
Spain has been slow to adopt technological advancements compared to the other EU countries, although policy measures have been undertaken in this regard. Spain ranks 16th on the European innovation index in a list of 27 nations. Although it performs well in terms of knowledge creation, the innovation climate is not particularly productive. The situation has arisen because of the larger role of the public sector with respect to R&D. The private sector has limited participation in enhancing R&D levels. The total expenditure on R&D as a percentage of GDP in 2008 stood at around 1.2%. In comparison, Frances expenditure was 2.13% of GDP, the US spent 2.68%, Japan spent 3.18% and Canada spent 1.8%. Spain aims to reach a level of 2% by 2010, which is well below the 3% target fixed by the Lisbon agreement for the EU nations. It is expected that the government's initiative under the INGENIO 2010 program will help in raising private sector expenditure on R&D to 55% of the total investment by 2010, as well as improving the overall innovation climate of the nation.

Evolution
Spains sudden boost in performance in the 1960s, characterized by the 'Economic Miracle', had more to do with the economy and political factors than the R&D and technology development of the country. In the early years of industrialization, Spain depended on foreign technology. However, the countrys policy makers soon realized the drain on countrys resources because of this dependence and worked towards self sufficiency. Particularly after the period of self- sufficiency under Franco, enterprising endeavors were undertaken by the government to modernize its industries. The University Reform Law was enacted in 1983, followed by other Science Laws and Procedures in 1986, such as the Patent Law. Since then, a lot of effort has gone to stimulate scientific and technological development. These efforts gathered momentum with its accession to the European Community. The Spanish companies and the scientific communities have been participating in the European programs such as the Framework Program, EUREKA and European Space Agency. In the late 80s and early 90s, the focus of the government policy was on 'science-technology-industry system', and funding research was prioritized according to the needs of the economy and society. However, there was a lack of co-ordination and consistency in implementation of policies. A shift in technology policy occurred in 1996 when the conservative government assumed office. The policy became pro-business and the government moved to a more innovation-centered approach. In 2000, a new Ministry of Science and Technology was created, which was made responsible for the development of science and technology, as well as its application in industry.

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Structure and Policies


The Spanish regulatory framework is decentralized; like other legislations it allows regional governments to develop their own R&D innovation and entrepreneurship policy. Each AC has created its own 'regional development agency, the main activities of which include the establishment of science and technology parks, and technology transfer organizations, as well as the initiation of university enterprise interfaces. The INGENIO 2010 program, funded by the government, is the main program aiming to increase the interface of R&D measures with industry. The program includes a number of measures, such as increased funding of government research, the stimulation of technology transfers by encouraging public-private partnerships, and enhancement of the incentives for private sector research and the diffusion of new technologies. The main agencies involved in the development and implementation of strategy and technology (S&T), and innovation policies are the Ministry of Education and Science, and the Ministry of Industry. The Inter-ministerial Commission on Science and Technology co-ordinates the R&D activities of different ministries and plays a key role in the Spanish National R&D and Innovation plan. The Spanish National Plan for Scientific Research, Development and Technological Innovation (NPRDI Plan) covers a broad range of scientific areas, and develops policies for innovative practices by supporting technological innovation and R&D excellence. The national R&D plan is the embodiment of various technological development plans, which includes strategic R&D programs, and the general funding mechanisms for non-oriented and non-prioritized research activities.

Intellectual property
Spain has well developed intellectual property rights (IPR) legislation, which is similar to the system followed in the other EU nations. Spain has ratified the 1973 Munich European Patent Convention, which made the country a designated nation for European patent application. The IPR law provides for both product and process patents. A non-renewable 20 year period for working patents is granted. Spain is also a signatory to the Universal Copyright Convention which protects all literary, artistic and scientific creations, including computer software. The Spanish office of patents and trademarks is responsible for the protection of trademarks, which, once registered, receive protection for 10 years and can be renewed. Spain compares unfavorably with the other EU nations in regards to the number of patents received by it, which is less than 20% of the EU average. This figure is far less than that of other developed nations. Spanish companies applications to the European Patents Office (EPO) are also less frequent than the EU average.

Research and development


The national R&D and innovation plan is the cornerstone of the R&D policy. Since 2008, a program named INGENIO 2010 has been included in the National Reform Plan (NRP). This program reflects the Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business changing priorities of the Spanish government to meet the Lisbon agenda objectives. Under INGENIO 2010, a number of new measures were introduced to complement the national R&D and innovation plan. The plan proposes to increase public funding for R&D and innovation activities, which are expected to reach 2% of GDP by 2010. There are also other programs, such as the Human Capital Program, that are being implemented to increase the quality of higher education. The entrepreneurship program aims to help the growth of entrepreneurship by improving the legal and administrative environment. The organizational structure has also been made more systematic by putting different national evaluation bodies and agencies into place, which are specific to the sector they evaluate. This includes CDTI for industrial R&D and technical projects, ANEP for academic R&D, CNEAI for individual research activity, and ISCII for biomedical and health system research. At a regional level, all the ACs have created their own agencies for the evaluation of research and the quality of education in universities.

Technology agreements/pacts
Spain is signatory to most of the international technology agreements. Being a member of the EU, the country has access to the technology fund and the targets set under the Lisbon agreement are applicable for the country. It has entered into scientific and technological cooperation agreement with the US as well as Asian and African nations. Performance

Telecommunications
The information and communication segment witnessed fast growth during 200206, fuelled by the demand for mobile subscriptions. The country boasts a technologically advanced infrastructure with high mobile subscription. The telecom regulator has taken steps to foster competition in the market and increased competition has not only reduced the cost of services, it has also made prepaid services popular. Telefonica Moviles is the market leader, followed by Vodafone and Amena. Mobile subscription peaked in 2002, registering a year-on-year growth of 33.3%. However, the growth rate subsequently declined but an average rate of 8.2% was maintained during 200209. Fixed line demand was comparatively low, which is characteristic of a mature market, with a negative growth in 2008. The number of internet subscribers increased at a fast rate in the beginning of the decade, recording an average growth of 15.2% during 200209. Although broadband subscription has been increasing, it has remained low compared to the EU average. It is expected that broadband infrastructure will be the key to competition in the next wave of modernization.

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Opportunity Sectors
Research and development R&D expenditure
The R&D expenditure in Spain was 1.26% of GDP in 2007 and the government aims to reach 2% by 2010. The INGENIO 2010 program also encourages the private sector to increase its contribution to R&D expenditure to 55% of total investment by 2010. The level of expenditure on ICT as a percentage of GDP is targeted to reach 7% by end of 2010. In October 2009, the Ministry of Science and Technology allocated E50 million ($73 million) for bio-medicine R&D projects within six different campuses in Madrid, Cataluna, Andalucia, Comunidad Valenciana and Galicia. The main objective is to improve Spain's position as an R&D leader within the EU. Projects are expected to emphasize synergies between the sectors of education, investigation, innovation and production. According to the EIS 2008, Spain was ranked 16th within the EU in terms of innovation.

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Outlook
Spain was a late starter with respect to R&D and innovation, but the country has done well in recent years to come up to the standard of the other EU nations. Although, it is far from matching the performance of the developed EU nations, it compares favorably within its peer group. The government has initiated measures to address the shortfall in the innovation system by revamping the education system and introducing new technologies. The lack of innovation and entrepreneurship in the system has emerged because of a low percentage of SMEs becoming involved in innovation, and the low participation of private sector and venture capitalists. A positive environment could be created by enhancing incentives and making the venture capitalist funding procedure simpler. The governments decision to promote early stage investments, rather than focusing on expansion, is a step in this direction, and will show positive results in the long-term. Furthermore, the new policy on tax incentives for R&D enterprises will also boost efforts in this direction. The economic crisis has affected science and innovation policy, especially since the last quarter of 2008 However, in the beginning of 2009, a budget of E22 million was provided for new projects. During the year, three new measures have been contemplated the Interempresas program, the InnoCash program and the Avanza2 plan. Out of these three measures, Avanza2 plan has been formulated to contribute to the economic recovery of Spain through the intensive and general use of ICT technologies, with special emphasis on projects of sustainability and energy saving. These three measures are expected to bring in greater development in scientific and IT arena of the country.

Information, communication and technology (ICT)


The usage of IT communications has been picking up in Spain. The Spanish communications equipment market generated total revenues of $521.2 billion in 2008, representing a compound annual growth rate (CAGR) of 9.7% for the period spanning 200408. In 2013, the Spanish communications equipment market is forecast to have a value of $577 million, an increase of 10.7% since 2008. Electricals and electronics retailers proved the most lucrative distributors for the Spanish communications equipment market in 2008, generating total revenues of $249.8 million, equivalent to 47.9% of the market's overall value. The Spanish software market generated total revenues of $4.8 billion in 2009, representing a compound annual growth rate (CAGR) of 7.8% for the period spanning 2005-2009. Cross-industry and vertical application sales proved the most lucrative for the Spanish software market in 2009, generating total revenues of $1.3 billion, equivalent to 27.8% of the market's overall value.

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Integrated Project on Global Business The performance of the market is forecast to decelerate, with an anticipated CAGR of 3.2% for the five-year period 200914, which is expected to drive the market to a value of $5.6 billion by the end of 2014. The Spanish government has implemented a series of initiatives to promote the development of information society, such as the implementation of the electronic identity card, closure of analogical broadcasts on national television channels, as well as grants to expand services and applications. There are three carriers that operate their own network. Along with mobile telephony operators, these firms are vying to offer customers a wide range of services at competitive prices.

Porters Five Forces: Internet Software and Services

Internal Industry Rivalry


The five forces model is one of the simplest tools to analyze external threats from other companies. According to English, the first parts of the SWOT analysis to consider are: internal industry rivalry, threat of new entrants, threat of substitute products, bargaining power of suppliers, and the bargaining power of customers. These factors are each analyzed below.

Internal Industry Rivalry: High


The rivalry between firms in the internet software and services industry is very intense. An example would be between the most popular search engines, Yahoo! Google, and Microsofts new Bing. Early on, Google and Yahoo began offering email services with limited amounts of storage space, however due to intense competition both websites now have so much storage space that the average consumer is not likely to ever come near filling it up. In most cases, the switching costs between software providers in this industry are relatively nonexistent. Currently most of the internet services are free to the user, so switching from one search engine to another is as easy as clicking a mouse. These companies must direct their focus heavily on research and development. The high level of competition ensures that companies must stay at the technological forefront in order to keep customers using their services.

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Threat of New Entrants: Low


The threat of new entrants in the Internet Software and Services industry is relatively low for several reasons. Several very large firms dominate the industry. Anytime a new competitor begins to rise up with a newer and better product or service they are usually bought out by one of the existing large firms in the industry, before they pose any real threat. In 2006, online video sharing became very popular and showed strong future growth potential. Google quickly recognized this and instead of trying to create a competing online video sharing website, they bought YouTube for $1.65 Billion. Companies such as VeriSign Inc. operate a wide range of network infrastructure. This includes two of the internets thirteen root name servers. VeriSign also runs the .com and .net internet domains. It would be virtually impossible for a new competitor to come to the market with a new product and take this business away from VeriSign, as the switching costs to do so would be astronomical. This makes the threat of new entrants to this sector rather unlikely. There are simply too many large established firms, which would be difficult to compete with. Many of these large established firms could simply buy new entrants out at the first sign of a threat.

Threat of Substitute Products: Moderate


The Internet Software and Services industry is not really threatened by new products. At this time, there is no substitute for the internet. There is, however threats to software and service providers in the sense that other companies may develop better software and service products rendering current ones obsolete. The increase in the use of newer devices has created a threat for software providers in the sense that they must make their software compatible with these new platforms. This is especially true when websites like WebMD develop apps which allow users more direct access to their services. Most apps are only compatible with certain devices and must be constantly updated and changed so that consumers can use them with newer devices.

Bargaining power of suppliers: Moderate


The suppliers in the internet software and services industry do have a good amount of bargaining power; however, the main driver of this industry is the development of new technology and product innovation. There is really no substitute for the products in this industry, there is currently no other internet but the suppliers must stay focused on improvement to keep their customers. Another major limiting factor for these companies, due to the massive increase in the use of the internet, is that the current internet infrastructure needs to be upgraded to handle the increase in demand. If this does not happen the internet itself may become slow and inconvenient and this could drive consumers elsewhere. It is also relatively difficult and expensive for businesses to change their online software and service packages. Thus, suppliers do have a good amount of bargaining power in this respect.

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Bargaining power of customers: Low to Moderate


In parts of this industry, customers have a fair amount of bargaining power, whereas in other parts, they have less. WebMD is not the only medical information site; there are many others. So for most customers, they can express their bargaining power by just using other websites if suppliers do not provide them with what they want. Businesses that contract to use the services of various internet software providers have less bargaining power due to high switching costs. It would be very costly for EBay to cease their use of VeriSigns transactional security services. EBay and other internet shopping websites must heavily secure their online transactions, with ID theft being such a large problem. There are not many security companies like VeriSign to design such a comprehensive security programs. This considerably reduces the consumers bargaining power and their choice of products. Most websites and online service companies usually set a price for their product or service. If one wants to use this service or product, they must pay what the company sets as the price. Due to its competitive nature, this industry must constantly innovate and offer its customers with the best products at the best value. The industry itself will push out companies that are inefficient and do not offer good products. This provides customers with a little bit of bargaining power, and definitely plays in their favor.

Porters Five Forces: Software


Porters five forces are the basic tool of analyzing the competitive threats and essential for SWOT analysis. The logic of the Porter system flows directly from industry structure to competitive positioning to company product and market strategy. These five forces determine the average profitability for the industry (English 63). The five forces consist of: internal industry rivalry, threat of new entrants, threat of substitute products, and bargaining power of suppliers and bargaining power of customers.

Internal Industry Rivalry: MODERATE


The rivalry within the software industry is moderate. Companies are spending massive amounts of money on research and development in order to keep up with competition and the newest technologies. In order for a company to keep a large share of the market and remain profitable, it is absolutely necessary to employ the newest and most efficient technologies in their products. Also, the software industry is very specialized and not all companies compete directly with each other since they offer differentiated products. For example, in the graph below, these nine companies listed have the highest market capitalizations in the software industry. Not all of these companies, however, compete directly with each other because they specialize in different products. First, Microsoft Corporation provides software and hardware products and solutions worldwide. SAP AG, together with its subsidiaries, develops, markets, and sells enterprise application software products for corporations, government agencies, and educational institutions. Intuit Inc. provides business and financial Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business management solutions for small and medium sized businesses, consumers, accounting professionals, and financial institutions. Symantec Corporation provides security, storage, and systems management solutions to secure and manage information. Finally, Oracle Corporation, an enterprise software company, engages in the development, manufacture, distribution, servicing, and marketing of data base and application software (Yahoo! Finance). These companies all manufacture software but it is distributed to different consumers and meets different needs.

Threat of new entrants: LOW


The threat of new entrants into the software industry is pretty low. It would be very difficult for a startup software company to have large success and steal significant market share from software giants such as Microsoft. Most businesses that have purchased computers that come prepackaged with Microsoft Office and Windows operating system. This is a huge advantage to Microsoft since consumers who buy machines such as Dell, Toshiba, HP, Acer and Lenovo have a familiarity with Microsofts products. It would be difficult for another company to score a deal with computer manufacturers as well as develop a product as efficient as Microsoft Office. Another reason why there is a low threat of new entrants is the high start-up and R&D costs. Software architecture is expensive; you need many programmers, market researchers and other specialized talent to produce a widely circulated software product. Also, businesses and households are brand loyal. They are unlikely to switch their software unless they are truly unhappy with it. Consumers want reliable and dependable software to meet their needs and they are less likely to try new products if their current solution is working well for them. Product differentiation also contributes to the low threat of new entrants. As mentioned above, the top nine companies in the software industry through market cap produce and distribute different products. A new entrant would have difficulty in developing a product that is not currently meeting consumer needs in a new market segment. Software is very specialized and these companies are very established; it would be difficult to steal significant market share from these companies.

Threat of substitute products: HIGH


There is a high threat of substitute products in the software industry. Some companies are looking for basic software with limited capabilities to meet their needs. These customers could potentially switch to cheaper options, especially as technology increases and becomes more advanced. Software companies are also threatened by the media through which its programs operate. As computers become more advanced, a new substitute for software may develop. People are also using their phones, such as PDAs and smartphones, to answer email and use the web. Companies such as Microsoft and Apple have responded to this growing trend by creating operating systems and applications for wireless phones. A big threat to software companies such as Microsoft and Oracle is internet software and open source software. Open source software, which some may call unreliable, consists of programs that perform Ahmedabad Management Association PGP-IBM 2010-2012

Integrated Project on Global Business basic functions such as word processing, spreadsheets and other applications. These services are usually free and could eat into Microsofts market share as it becomes more popular. Internet software is also a big threat to software companies. There is a greater trend toward doing business online, especially with the growth of social networking websites. Increasingly more companies use the internet for their investments, banking services, data and access to the web. There is a threat that they could be switching to internet software as well. Google, who plays a major threat to companies such as Microsoft, are using the growing internet trends to develop products such as Google docs and the social networking feature Buzz.

Bargaining power of suppliers: MODERATE-HIGH


The bargaining power of suppliers is moderate to high. Software suppliers must stay ahead of the game as far as technology to keep their customers and develop high quality materials. Although there are limited substitute products in the industry, suppliers do have to keep improving on technology and innovation. Suppliers have do have moderate power with big technology companies through high switching costs; it would be costly for big companies such as Microsoft to find a new supplier and start from scratch.

Bargaining power of customers: LOW-MODERATE


The bargaining power of customers is low to moderate. Computers have become a necessity for businesses, governments as well as households. Software has helped business become more efficient and has created a standard for competition. Therefore, it is crucial in the business world for companies to invest in up-to-date computers and software. Compatibility also limits the power of buyers; the dominance of a few companies limits bargaining power if consumers are interested keeping consistency with its software use. Also, since there are limited options for a substitute for computer software, customers dont have a large bargaining power. Buyers do have the option however to choose between the specific products and make a decision to cater to their needs.

Ahmedabad Management Association PGP-IBM 2010-2012