Understanding the business environment of Belgium

The analysis of a country’s business environment helps in determining the feasibility of Belgium is a western European country that boarders France, Germany, Luxembourg and the Netherlands with its capital located in Brussels, a temperate climate characterized by “mild winters, cool summers, rainy, humid and cloudy”, seasons (Kwintessential 1). Further the country’s estimated population was 10, 348, 276 persons in July 2004 with Roman Catholics being an approximate 75% and the remainder (35%) comprising mainly of protestant groups (Kwintessential 1). The Belgians use French, Dutch and German as their official languages with a “federal parliamentary democracy under a constitutional monarch” being their mode of governance (Kwintessential 1). A 2009 co-publication of the International Finance Corporation (IFC) and the World Bank (2) ranks Belgium being the 22nd country as regards to the ease with which business can be carried out in 2010, with its ranking as regards starting a business, issues of construction permits, employing workers, property registration, and closing a business being: 31, 46, 48, 167, and 8 respectively. Such analyses inform the CAGE analysis of the Belgian industry to find out the strategy that Bombardier should employ for its expansion plans into the country.

Table 1: CAGE analysis of Belgium

Distance Aspect Sub-aspects Belgium specifics
Cultural distance  Language Not homogeneous: Flanders in the North mainly Dutch, Walloons in South, predominantly French, Northeast inhabitants primarily German, and the non natives [Italian, Spanish, Greek, Arabic and Turkish] official – French, Dutch and German (Kwintessential 1). A good investor should be able to effectively operate in these differing regions (languages).
Religion Roman Catholics (75%), protestants and others [25%] (Kwintessential 1).
Social andConnective norms Households take cognizance of green amenities and thus locate in areas far away from the city centers where the prices of houses are lower (Vandenbulcke, Steenberghen, and Thomas 50). Could have an implication on the preferable mode of transport.High level of courtesy and punctuality applies with official titles (professor, Dr, etc) being used in correspondence and meetings (NZTE 10)
Administration distance Union memberships “Member of the European Union (EU) and the Benelux Economic Union.” The latter provides for the ease mobility of human resource, capital and trading products in the region (New Zealand Trade & Enterprise [NZTE] 2)
Monetary association Euro, Exchange rate compared to US Dollar [1Euro = 1. 5071 USD] (x-rates.com 1) A common currency among the 13 member countries of the European Monetary Union (EMU). Success of the euro signaled by the growth of “ Euro bond markets” (Mckinsey Global Institute; cited in Rogoff 442)
Government Policies “Pro-foreign investment” government with a tax reform program but “high corporate tax rates” (33.99%) are deterrents to setting up an office in the country (NZTE 3)The government does neither require prior authorization nor restrict capital transfer into or from the country (EALG 2).

A 0.5% Registration tax on the subscribed capital for a subsidiary but no such taxation for branches set up in Belgium (EALG 4).

Interests and royalties paid by subsidiaries to parent companies are subject to withholding tax but such does not apply for branches (EALG 4).

Geographical distance Physical Location Centrally located in the EU hence an “important transit and distribution center for other EU countries” (NZTE 2).
Size of country Land area of 30,528 square kilometers, population of 10.4 million – second most densely populated country in Europe after the Netherlands[2005 estimate] distributed in Flanders (57.9%), Wallonia (32.5%) and Brussels [9.6%] (NZTE 2)
Transport & communication Network Extensive infrastructure that is “very well-developed” and with second largest port in Europe (Antwerp) and a second port [Zeebrugge port] also important in agricultural products (NZTE 10)Extensive rail and road networks are also present with “freight terminal at Brussels national airport” being among the “top five cargo airports in Europe” (NZTE 10).
Economic distance Economic indicators GDP was US$ 371.4 billion with a growth rate of 1.55% in 2005. The inflation rate in 2005 stood at 2.8%, the unemployment rate at 8.4% while the total imports amounted to “Euro 211.66 billion [and exports of] 222.64 Euro billion” for the estimates in august 2006 (NZTE 4-5).Limited natural resources and mainly imports the required raw materials and intermediate goods that are processed to finished commodities for export e. g. diamond trade in Antwerp (NZTE 3).
Financial and human resources Limited source of inexpensive capital with the citizens being in favor of “lenient payment terms” (NZTE 6)Approximately a fifth of the human resource have “a tertiary qualification and works in the science or high technology areas” (NZTE 2)
Competing industry Automotive industry well developed in Belgium with most European manufacturers having their production units in the country and products ranging from passenger vehicles to trailers (NZTE 6).

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