Eco/561

The Cultural Challenges of Doing Business in the Czech Republic

Renee Dzuiba

ECO/561

Dr. George Sharghi

Abstract

An American of Czech origin named Steve is considering expansion of his pizza franchise into the Czech Republic. There are many circumstances and scenarios that must be considered when opening new business overseas. Cultural values and understanding must be recognized as well as customs, labor practices and government regulations. Trade Barriers may play a role as well as setting the correct price point for the product.

Incompatibilities

The main issue when considering expansion into a new land is understanding communication through language, in the Czech Republic 95% of the population speaks Czech. Our American franchise owner speaks the language fluently, however he needs to understand the country’s cultural values and how they relate to employment. Here, they are obligated to care for their immediate family and are a very private, responsible society. They are known for their work ethic and are formal, reserved and humble. Another factor involved is the income tax structure and the VAT tax that consists of 5% on the sale of food products. By identifying with the people who will be employed, this is one way to establish trust with his potential employees. Another suggestion may be to hire an attorney familiar with Czech business law.

Comparative Advantages

The Czech Republic has a stable political and economic environment, (Hello, Czech Republic, 2014). They have a growth-stimulating investment climate where economic policy is consistent and predictable. Their accounting and bankruptcy laws are compatible with Western Standards (BusinessInfo.cz, 2014). The low labor costs and highly intelligent Czech workforce along with the ease of real estate acquisition will allow Steve to expand into this unique environment since this country has the ability to produce goods at a lower opportunity cost than competitors.

Hofstede’s...