Introduction
This article concerns the business expansion plan of Y Company in Iceland. It is a company that assembles computers and distributes the final products to different destinations across the world. The increasing demand of the computers, especially in Europe has necessitated the company to consider looking for an ideal location where another assembly point can be established. Basing on various factors, Iceland has been selected as an ideal location for the new assembly branch.
Overview
Before delving into the specifics, it is essential to provide a background of Iceland. According to Ingimundarson, Urfalino & Erlingsdóttir, (2016), Iceland is one of the oldest democracies in the world. It is an island country located between Greenland (Scandinavian countries) and Europe. It has not witnessed any major political upheavals neither does it have enemies. That means that the country has not witnessed any major terrorist attack or threat. Therefore, it is a relatively peaceful country. The economic freedom score for Iceland is 77.0, which makes the country to be ranked as the 11th freest according to the 2018 index. According to Index of Economic Freedom (2018), the score rose by 2.6 points from the 2017 score. The rise in the score portrays various aspects. Some of the aspects that the rise represents include investment freedom, financial freedom, fiscal health, and government integrity. Overly, Iceland assumes the fifth position among 44 countries in Europe.
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In 2008, Iceland witnessed a collapse of its financial sector. As a result, the government attempted to come up with measures aimed at restoring the financial situation. Some of the measures included the reduction of the high budget deficit, stabilization of the corona, curbing of inflation, implementation of capital controls, and diversification of the economy. After the implementation of such measures, the situation improved and even resulted to creation of employment opportunities.
Civil and Common Law
Nevertheless, the efforts of the government in an attempt to improve the financial sector of the country resulted into undesirable consequences, especially for foreign investors. One of the prominent things that the government of Iceland immediately came up with after the financial crisis was to put controls on Foreign Exchange. That means that capital and monetary exchange is highly regulated in the country. The aim of the amendment dubbed “The Foreign Exchange Act No. 87/1992” is to help reduce the rate of inflation in the country (International, 2008). Under the act, foreign investors who wish to transfer any forms of capital across the borders ought to obtain permission from the ministry of trade. However, outward capital investments are not restricted. The objective of the exception is meant to allow the Iceland citizens to invest in other countries, considering that the country relies heavily on trade.
In regard to the type of businesses investors can venture in in the country, there are no restrictions except for a few exemptions. Some of the sectors where restrictions apply include energy production, fishing, primary fish processing, and aviation. The restrictions mainly apply to non-residents. If non-residents wish to invest in such sectors, the relevant minister ought to be notified. In case institutions such as foreign municipalities, foreign states, or other foreign authorities wants to invest in Iceland, they must obtain special permission from the relevant minister. Still on the subject of restrictions, stricter restrictions apply to investors that come from countries that are not part of the following; European Economic Area (EEA), European Free Trade Association (EFTA), Faroe Islands, and the Organization for Economic Co-operation and Development (OECD). Nonetheless, special permission can be obtained by investors that come from countries which fall out of the mentioned trade blocks and regions.
Intellectual Property, Copyright Infringements, and Legal Ramifications
As already mentioned, Iceland prioritizes the protection of its citizens. Although Iceland protects private property, actual property rights are mainly reserved to the citizens of Iceland. The country has a robust legal framework that not only enforces but also tries to protect intellectual property. The protection of patents in Iceland is only given for inventions. The invention ought to be a practical solution to a problem and the solution needs to be technical such that it cannot be reproduced. However, the protection of patents in Iceland does not include artistic work, computer programs, discoveries, and business methods (Blöndal & Sigurdardóttir, 2014). Trademarks, which include symbols. Signs, and logos are protected. Regarding copyrights, the government protects people or institutions original work. It is uncertain why the Iceland government protects people’s original writings and not business methods.
Violation of Human Rights of Employees and Child Labor Law Violations
Iceland also subscribes to the guidelines of the International Labor Organization (ILO) in regard to employee rights and child labor. That means that investors need to remunerate their employees fairly, and provide conducive working environments (Hughes & Haworth, 2013). However, owing to the various foreign investment restrictions, the reception of foreign employees may not auger well with the public. That means that if Y Company opens its operations in Iceland, it will have to consider hiring local people. On average, people employed on a permanent basis in Iceland earn about US$3,000 per month. However, there are no minimal wages for the unskilled workers. Another important thing about Iceland is that compulsory schooling stops at 16. As a result individuals below the age of 18 years can be employed, something that is not permissible in a majority of countries in the world. Companies can employ such young individuals on a temporary basis but once they attain the age of 19, they have the right to renegotiate their employment terms to be hired on a permanent basis.
Public Perception on Computer Assembly Company
Iceland, just like a majority of the countries in the first world, are very cautious about the environment. Therefore, people in Iceland also try as much as possible to conserve the environment. The dominant perception of people in Iceland about the introduction of a computer assembling point in the country is that it will contribute to environmental pollution. It is because many people think that the company will dump several parts of the computers irresponsibly.
Impact of the European Union on the Business Environment
Although Iceland withdrew from the European Union in 2015, the country still enjoys free trade and movement of labor, capital, goods and services, with the EU. The withdrawal of its membership means that Iceland prefers having a partnership with the various countries in Europe. While the country restricts the transfer of foreign capital into the country, other countries within Europe do not have very strict restrictions. That has played to the advantage of Iceland because its citizens can do business in any country that they find preferable. The trade has led to the surge in the country’s economy.
Opportunities for Y Company
Iceland is a strategic country because of its proximity to other European countries. It seems to link both the Greenland countries and the other countries in Europe such as the UK, Germany, among others. The other factor concerns labor. There are relatively high unemployment rates especially among young people. The low mandatory schooling age of 16, has even escalated the situation. Most prominently, the government regulates the minimum wage less. That gives Y Company to negotiate the salaries with the employees to a figure that is favorable. The company can take advantage of the situation and come up with a policy of employing young people and release them once they attain the age of 19. The company can defend the strategy by stating that its intention is to help as many young people as possible.
References
Blöndal, E., & Sigurdardóttir, R. M. (2014). Labour law in Iceland . Alphen aan den Rijn: Kluwer Law International.
Hughes, S., & Haworth, N. (2013). International Labour Organization (ILO): Coming in from the Cold . Routledge.
Index of Economic Freedom (2018). Iceland Economy: Population, GDP, Inflation, Business, Trade, FDI, Corruption. Heritage.org . Retrieved 8 May 2018, from https://www.heritage.org/index/country/iceland
Ingimundarson, V., Urfalino, P., & Erlingsdóttir, I. (Eds.). (2016). Iceland’s Financial Crisis: The Politics of Blame, Protest, and Reconstruction . Routledge.
International, B. P. U. (2008). Iceland investment and trade laws and regulations handbook . Place of publication not identified: Intl Business Pubns Usa.
