COSCO Group’s planned investment of approximately USD 1 billion in a large Greek port, Piraeus, serves the company’s strategic goals. Through this initiative, the enterprise will obtain a chance to facilitate access to European markets and, thus, increase the volume of exports to the region (Paris, 2019). To understand whether the foreign direct investment (FDI) in the Greek market is promising, the analysis of the local macro-environment and business environment is conducted by using PESTLE and Porter’s Five Forces framework.
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Background Information of the Business Environment: Greece
The political environment in Greece has been unstable for a significant time as the country experienced several “administrative shake-ups” (Bush, 2019, para. 2). Nevertheless, recently held elections led to favourable outcomes in terms of the country’s economic development. Kyriakos Mitsotakis lifted capital controls and thus made the market more competitive and attractive to investors (Coumidis, 2019). On the downside, Greek is regarded as one of the most corrupted states in Europe (Bush, 2019). The latter factor may threaten the survival of foreigner enterprises and induce the risk of financial loss.
Recession and economic decline that took place in Greece within the last decade have been the major sources of concern for investors. The country still has an enormous public debt, yet the situation in the country started to improve since 2017 (Banco Santander, 2019). According to recent statistics, “Greece’s economy grew by 1.9 percent in the second quarter of 2019,” and the situation is expected to get even better with the rising export, tourism, and consumption rates (Coumidis, 2019, para. 6; Banco Santander, 2019).
Recent statistics show that at least one in three individuals in the county faced the risks of social exclusion and poverty in 2016 (Mavridis, 2018). The unemployment rate among young people has increased twofold between 2008 and 2016 (Mavridis, 2018). Sufficient economic deprivation is a threat to human capital development and reduces the availability of talents and competent workers in the labour market.
The technology markets in Greece has been strengthening after 2017 yet, in contrast with other EU member states, the rate of the country’s advancement has been slow (Greece, 2019). Although 44% of Greek adult population is highly educated, the country’s youth is among the most illiterate in mathematics in Europe (Bodewig and Fengler, 2019). Besides, the number of job opportunities in the technology sector has been limited (Bodewig and Fengler, 2019). These factors may substantially decrease Greece’s opportunities for innovation.
In 2013, the government enacted Investment Law 4146/2013 in order to attract investors and stimulate economic growth. Greece is also a party in the Paris Agreement and is required to comply with environmental protection initiatives, which may impact business operations.
The country faces several ecological problems, including industrial pollution and deforestation (Greek News Agenda, 2018). However, the country still has no clear plan for the reduction of emissions and transition to cleaner energy systems (Greek News Agenda, 2018). Still, the public demands the tightening of the environmental regulations in the country (TNH Staff, 2018). Thus, adherence to sustainability initiatives provides advantages for businesses.
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Analysis of the Business Environment
|Competition||The shipping industry is highly competitive in the Greek market with a large number of both international and Greek-based competitors operating in Piraeus: Grebel Maritime Agencies Ltd., K&P Management Inc., ALKMARE, ARKAS, Medcargo D Theodorikas Shipping SA, and so forth.|
|Potential of New Entrants||The entry into the industry is complicated because it requires substantial funds and technological capacity (Chowdhury, Hasan and Islam, n.d.). However, with the focus on the stimulation of FDIs in Greece, more foreign and experienced enterprises may enter into the local market.|
|Power of Suppliers||China has been the major producer of its own ships and, as a state-owned enterprise, COSCO has facilitated and uninterrupted access to ships. However, COSCO may be depended on the manufacturers of such disruptive technologies like AI and automation which currently drive competition in the industry (Si, 2019). Thus, the power of suppliers can be viewed as moderate.|
|Power of Customers||Clients may choose among a large number of transportation and logistics service providers. However, customers in this sphere normally tend to develop long-term relationships with shipping enterprises due to significant costs of switching between them (Chowdhury, Hasan and Islam, n.d.). Thus, the bargaining power of customers can be defined as moderate.|
|Threat of Substitutes||Maritime transportation faces a threat of substitutes from other shipping modes, including rail, road, and air yet they may be viewed as less significant and more costly in the context of China-Europe shipping (Chowdhury, Hasan and Islam, n.d.). Thus, the threat of substitutes may be viewed as insignificant for COSCO.|
Based on the analysis results, COSCO has a strong and sustainable position in the Greek maritime shipping market. It faces some rivalry in the industry, which means that its overall competitiveness will depend on the level of its technological advancement and service quality. However, COSCO is “a major shipping firm on the China–Europe route” and, therefore, it has a chance to capture significant revenue advantages at Piraeus (Putten and Meijnders, 2015, p. 25). As for the macroenvironmental factors in Greece, they are favourable as well. The economy continues to improve steadily, primarily due to the governments’ current openness to foreign investors and its focus on the provision of the favourable legal environment for them. Moreover, China enjoys strong and positive political relationships with Greece and has the necessary resources to overcome the drawbacks in the Greek technological environment. Therefore, it is valid to expect that COSCOS’s FDI will lead to fruitful results.
Banco Santander (2019) Greece: economic and political outline. Web.
Bodewig, C. and Fengler, W. (2019) ‘Thriving with technology in Greece’, Brookings. Web.
Bush, T. (2019) ‘PESTLE analysis of Greece’, PESTLE Analysis. Web.
Chowdhury, M. M. H., Hasan, K. R. and Islam, M. S. (n.d.) ‘Michael Porter’s five forces analysis in shipping industry: Bangladesh’, BMJ, 1(1), pp. 1-11.
Coumidis, A. (2019) ‘The international view: is Greece now a bona fide option for foreign investment?’, ekathimerini.com. Web.
Greece – information and communications technology (2019). Web.
Greek News Agenda (2018) ‘Greece – state of the environment report 2018’, Greek News Agenda. Web.
Mavridis, S. (2018) ‘Greece’s economic and social transformation 2008–2017’, Social Sciences, 7(9), pp. 1-14.
Paris, C. (2019) ‘China’s Cosco pours more money into Greek port’, The Wall Street Journal. Web.
Putten, van der F.-P. and Meijnders, M. (2015) China, Europe and the maritime silk road. Web.
Si, K (2019) ‘Marintec China 2019 to highlight smart shipping and technology developments’, Seatrade Maritime News. Web.
TNH Staff (2018) ‘Tougher environment laws backed by 91.1% in Greece’, The National Herald. Web.