OPENING A SUBSIDIARY IN SPAIN

Opening a Subsidiary in Spain

Table of Contents

Introduction3

Marketing Entry4

Analysis of Business conditions in Spain4

Political Environment4

Legal Environment4

Economic Environment5

An image of Distribution of Foreign Trade by Geographic Areas5

Technological Environment5

Socio-cultural Environment6

Strengths and Weaknesses6

Worldwide patented product6

Lack of Presence in Spain's market and brand awareness6

More expensive than conventional Surf Ski7

Opportunities and Threats7

Established ties with the member countries from EU7

Spain's location as a hub site to penetrate other markets7

Increase fuel prices7

Majority of Spain's imports are from the EU8

Language Barrier8

Subprime crisis facing Spain8

Recommendation and Conclusion8

References9

Opening a Subsidiary in Spain

Introduction

This paper is based on foreign market entry for an Australian firm that is eager to launch a new Surf Ski in the Spanish Market. The company in Spain will operate as a subsidiary of the parent company. During the year 2000, International Australian Enterprise has successfully invented and patented a Surf Ski that will revolutionize the conventional Surf Ski that is being employed by many currently. Their invention is a track-based, ultra flexible Surf Ski which can be widely used in winter sports.

Marketing Entry

International Australian Enterprise recently won a Bronze award from IDEA (International Design Excellence Award) and its design and innovation was announced in the July edition of BusinessWeek both in print and online (Nussbaum 2008, 151).

Though the Spanish government welcomes foreign investors, the bureaucracy accompanying entry into that market is significant. Since usually Spaniards cannot be found in a hurry, it may take some time and effort to get certain results by the deadline.

Respect of the country's language, history and traditions is highly valued by the hospitable citizens. As for communication, it is normal for Spaniards to speak fast and interrupt each other.

Analysis of Business conditions in Spain

Political Environment

Spain is under parliamentary monarchy, with King Juan Carlos I as head of state. The ruling party is currently the Spanish Socialist Workers Party (PSOE) lead by Prime Minister, José Luis Rodriguez Zapatero, the party recently won a second term (Socialists take big lead in Spain election 2008).

Legal Environment

There is a corporate income tax of 35% for Spanish resident companies and a 25%withholding tax on income for non-resident companies. The income tax (residents) is subjected to individuals income brackets of a maximum of 45%, Patrimonial tax is at a maximum of 2.5%, non-resident will pay Capital Gains Tax (CGT) at 35% and residents will pay at 15%. (ICL Directory .n.d.).

Economic Environment

As reported by Wall Street Journal, Spain is currently on the brink of a possible recession due to the housing slump that was being experienced in both USA and Britain. The GDP of Spain grows by an annual rate of 3.75% over the last decade; however its economy was left in shambles due to the burst of the housing bubble. (House 2008, 12)

Technological Environment

Spain has a well established transport infrastructure to compliment its dynamic economy, with well over 15,015 kilometers of railway, 45 commercial airports, and1 heliport, which in the year 2005 transported 625,872.9 metric tons of commercial goods. Spain also sports 46 state-owned general interest ports which in 2006 the commercial ...