| 2013 | | Department of Management Studies
IIT Roorkee |

[Country report: france] | The report contains an overall analysis of France as a business destination for trade and new business ventures. We have adopted the PESTEL Analysis methodology to arrive to our conclusion. |

INDEX 1. Introduction 2. Timeline: France 3.1 History 3.2 Present 3.3 Future 3. PESTEL Analysis 4.4 Political 4.5 Economic 4.6 Social 4.7 Technological 4.8 Environmental 4.9 Legal 4. Summery 5. Conclusion 6. Bibliography

Introduction

France – officially known as the ‘French Republic’, is one of the most influential nations and has dominated the world with its art, culture, fashion, economy and military. Located in Western Europe, France is spread over an area of 640,000 Sq. Kms and shares its borders with Spain in south and Belgium, Luxemburg, Germany, Italy, Switzerland, Italy, Monaco and Andorra in north. Capital city of France is Paris, and other major cities and industrial centres include, Bordeaux, Strasbourg, Valence and Nimes. Paris, the capital city of France is one of the four fashion capitals of the world, also famous for Eiffel Tower – One of the seven wonders, this city boasts of hosting some of the biggest fashion related events of the world. France is a major player in political affairs of the world and is of the permanent members of UN Security Council. Economy of France is 5th largest in the world and 69 of the Fortune 500 companies are headquartered in France.

One of the popular tourist destinations in France include Cannes, the coastal city in southern France which hosts the annual film festival in which ‘stars’ from over the world participate. Known for its wineries, France produces best of the wines in the world and can boast of many artists like Pablo Picasso and Jean Clouet who have shaped the art to its present form.

Timeline: France
History
Modern Humans are believed to have occupied the region of France 40,000 yrs ago, first significant historical mark is 100yr battle fought between 2 factions which reaffirmed the rule of central monary.
Renaissance meaning rebirth was a cultural movement that originated in France in 15th century and spread to all the countries of Europe. This period also marks the development of new techniques in the field of art, science and literature and some of the most influential personalities of humanity were born in France during this era including Leonardo Da Vinci. Renaissance also marks the beginning of modern history of France. In the year 1789 ‘The Declaration of the Rights of Man and Citizen’ was signed on the lines of ‘declaration of independence’ of the United States.
In 1804, Napoleon Bonaparte, one the greatest military leaders of modern history also came into power in France and fought wars to spread the French revolution across the Europe. His legal reform ‘The Napoleonic Code’ is still a reference text for many civil law jurisdictions worldwide.
France was part of the allied forces which fought World War II against Germany and its allies and emerged victorious.
Colonial Era in France began in 1534 and continued till 1980 when Independent Nation of Vanuatu was created. At its peak, Major French colonies were United States, Most of Northern Africa, Madagascar and Indo China, at present France occupies less than 1% area of pre World War II colonies.

Present
France is a secular country and is home to almost 65 million people, out of whom there are roughly 5 million people are of Italian ancestry and 2 million people of Algerian ancestry. According to an estimate 40% of population of France is ethnically not French. The average life expectancy is 78 years for males and 85 for females which is higher than most of the countries of Europe.
Energy - France derives 79% of its energy from nuclear power, the highest percentage in the world and is also ranked as the smallest emitter of greenhouse gases in the world amongst the 7 most industrialized nations in the world. is the third largest exporter of agricultural products in the world.
Unemployment rate in France as of June 2009 is 9.4 % which is attributing to the high minimum wages in France.
With more than 79 million tourists visiting annually, France is the most popular tourist destination of the world and has 37 UNESCO world heritage sites. Capital city Paris has some of the most famous museums of the world including Louvre – one of the most visited museums of the world.
France has one of the most extensive railway network in the world with over 29,ooo kms of rail line and the fastest of the worlds train including TGV are in service. Charles – de Gaulle – international airport of France is one of the busiest ariports in the world and National carrier of France is Air France.
The annual defence expenditure of France is 62 Billion and accounts of 2.5% of its GDP. Some of the world’s most advanced and reliable weapon systems have been developed in France including Fighter Jet Rafale, and Triomphant class submarines which also makes it as one of the largest exporters or armaments in the world. Future
#Text from Sushant#

PESTEL Analysis
Below we have, in brief, tried to understand the various political, economic, social, technological, environmental and legal environments for France.
Political
Mr. Francois Hollande, a socialist, defeated President Nicolas Sarkozy after a second round of voting in the May 2012 presidential elections and The Socialist Party won control of the National Assembly in June 2012. The president is the Head of State and Prime Minister Mr. Jean-Marc Ayrault is the Head of Government. Hollande campaigned on a platform of higher taxation, increased government spending, and a pledge to reverse Ex-President Sarkozy’s austerity measures. France is formally reintegrated into NATO’s military command structures and also participated in NATO’s March 2011 military engagement in Libya but France is not part of NATO’s Nuclear Planning Group. France was a founding member of the European Union and has struggled to maintain its traditional influence over EU policy as membership has grown. It has a diversified economy and receives market-distorting agricultural subsidies under the EU’s Common Agricultural Policy. Potential growth of 2.1% between now and 2030 requires appropriate policies for optimizing human resource utilization and boosting productivity.

Economic
High deficit spending and deterioration of public finances decreased French economy’s competitiveness and flexibility as a top economy of the world. Institutional strengths -protection of private property rights and an efficient regulatory framework is eroded by populist policy choices that favor income redistribution and maintenance of costly welfare programs. The top income tax rate is 41 percent as of June 2012, and the top corporate tax rate is 34.4 percent. Other taxes include a value-added tax (VAT). The overall tax burden corresponds to 42.9 percent of GDP. Recent tax hikes have focused on high earners and large corporations. Government spending amounts to a very high 56.1 percent of total domestic output. Deficits are around 5 percent of GDP and public debt is rising. A new 75 percent top income tax rate is expected to be in effect in 2013. The French Government dominates major sectors of the economy and remains a large shareholder in many semi-public enterprises.
In Lisbon agenda, 2000, the countries of the European Union (EU) tried to boost innovation- driven growth, by stepping up investment in knowledge and infrastructure. But due to economic difficulties and structural problems, investment’s implementation failed leading to households’ loss of confidence and companies’ pessimistic expectations. This decreases growth prospects and urgent reforms are needed for high economic growth. The French economy does not provide a favourable climate for the development of the new companies, particularly in the high-tech and service sectors, these requires more R & D. The overall R& D spending in France is less compared to USA. The European single market has enabled French companies to deepen their specialization in sectors that rely heavily on economies of scale, like the automobile industry.

French Working population, 1968-2050:
(index base 1968 )

Source: National Institute for Statistics and Economic Studies-France (INSEE).
The maximum work force was in 2007. Ageing significantly altered population structure. The share of persons over 55 out of the working population will rise, whereas the opposite was true between 1970 and 2000. The share of the young (15-24 years) and the 25-54 age groups will decline. However, these structural changes would not significantly affect average labour productivity.

Trade policy:
France trade policy is same as that of other members of the European Union. The common EU weighted average tariff rate is 1.6 percent. There is barriers to trade in services. Investment laws are transparent, but have bureaucratic impediments. The financial sector is under relatively strong state influence, with a small number of foreign banks operating within France.

France's principal export destinations: | France's principal import sources: | 1 | Germany | 16.5% | 1 | Germany | 16.9% | 2 | Italy | 8.2% | 2 | China | 8.0% | 3 | Spain | 7.3% | 3 | Belgium | 7.8% |

French exports lost relative to the expanding world trade. The rise on the world trade scene of export-oriented emerging countries has mechanically contributed to this situation for all advanced economies, but exports from France grow at a slower pace. As a consequence, France has lost market shares in world exports- among the largest in the EU. The French export market share in goods and services has dropped by 27% since 2000, significantly more than the other main exporters in the euro area. During the same period, Germany’s market share rose by 8%. In 2009, when world trade contracted sharply, French exports showed some resilience and France regained some market shares. But that improvement proved only temporary and was compensated by the losses seen in 2010 and 2011. In the spring forecast of the Commission, export market shares are expected to stabilize in 2013, allowing French exporters to benefit from the rebound in international demand. French exports are more focused on countries within the euro area, with a relatively low share going to fast-growing export markets – such as Central and Eastern Europe, China and Middle-East. As can be seen from, the euro area accounted for about half (49%) of French exports while the BRICS represented 6% and China only 3%. While being on an increasing trend, this export share to BRICS is still lower than what can be seen for some of the other top exporters in the euro area.
A breakdown of the trade by type of manufacture goods shows that the deterioration of the French trade balance is reflected in adverse developments for every category of manufactured products. Market share loses in 17 sectors out of 23; the balance on manufactured goods recorded a significant deterioration of its position going from a structural surplus in early 2000s to a deficit a decade later. The energy imports have decreased over time, the recent rise in energy prices in France is due to deterioration of the goods trade balance.
French exports is "generalist", they consist of world leading high-tech sectors (i.e. in aeronautics, computers and pharmaceuticals) and large range of medium- and low-tech sectors which are more exposed to the fierce competition of both industrialized and emergent countries. France compares favourably to the euro area but remains below Germany. The French export structure has experienced only limited changes in the past few years, with transport equipment, electrical and optical equipment and chemicals products remaining the main export categories. Price competition is intense for low and medium technology products. On those markets, French exporters may have more difficulties to maintain their market shares against countries with lower labour costs. French exports of services are mainly constitutes business services and travel services- tourism industry.62% of exports from France is of high and medium-high technology product and rest 38% low and medium-low technology products. Foreign Direct Investment (FDI) France: €115 billion. FDI from France: €164 billion
Besides French trade, tourism is also a big contributor to the national GDP. France rules the tourism industry with over 82 million tourists visiting the country for its rich heritage and culture. Agriculture is also another strong point for France's economy, with almost 25 percent of the EU’s total agricultural products being produced in France. The government provides subsidies to the agricultural sector and the development of this sector is likely to give export activities a boost.
France Imports:
Imports in France is 43137 EUR Million, as reported by the Ministry of the Economy, France . Historically, from 1970 until 2012, France Imports averaged 17517.12 EUR Million reaching an all time high of 44086 EUR Million in August of 2012 and a record low of 1151.90 EUR Million in May of 1970. France main imports are: fuel (17 percent of total imports), electronics (11.3 percent), chemicals (8.5 percent), metal products (7.8 percent), industrial and agricultural machinery (7.5 percent), cars (7 percent), food and clothing. Trade inflows from Europe account for 68 percent of total imports. Main import partners are: Germany (17 percent), China (8 percent), Belgium (7.8 percent), Italy (7.3 percent), Spain (6 percent), United States (5.6 percent) and United Kingdom (4.4 percent).

Economic indicators: | | GDP (US$bn) | 2,778.1 | GDP PPP (Int'l $bn) : | 2,213.8 | GDP per capita (US$): | 44,007 | GDP per capita PPP (Int'l $): | 35,068 | Real GDP growth (% yoy): | 1.7 | Current account balance (US$m): | -54,169 | Inflation(% yoy): | 2.1 | Goods & services exports (% GDP): | 29.0 | | |
Social:
France is the 21st most populous country in the world with a population of around 65.8 million people. There are about 85% white people or European origin people in France, with North-African people (~10%), black people (~3.5%) and Asian origin people (~1.5%) making up the rest of the population. French is the official language of France and required to be the language of government and administration of France as per their constitution. France is a secular nation and ‘freedom of religion’ is one of the constitutional rights. France’s predominant religion has been Roman Catholicism.
The French state has been playing a key role in the development and promotion of culture through its educational, linguistic, cultural and social policies. Cultural changes in France are often linked, or produce some or other political crisis. The cultural policies of recent times have been varied but consensus exists over the preservation of French food and language. Ministry of Culture has been created in 1959 which is in charge of the National Museums and monuments, responsible for promoting and protecting the arts in France and preserves the cultural heritage of the country. Ministry of Culture has been very active since its inception and today, France receives the highest number of tourists per year. In the year 2010, France was ranked no. 1 by International Living group as ‘best country to live in’ for the fifth year running. France always has strong relations with Human Rights and often nicknamed as ‘Country of Human Rights’. Despite of the high living standards in France, Racism has been an enduring social problem in France. The most contemporary racism is anti-immigrant and anti-Semitism. National programs have been initiated to address the issue of racism but the underlying problem of racism still remains in the country.
The French educational system is highly centralized and organized system. It has been divided into three different stages: primary education, secondary education and higher education. Primary and secondary education is public dominated but higher education has both pubic and private elements. Literacy rate of the country is close to 99%. Secular educational policy has been a burning issue of French multiculturalism.
Healthcare system of France is topnotch having secured first rank worldwide by World Health Organization (WHO) in the year 1997 and 2000. Healthcare is generally free for people suffering from chronic diseases like cancer, AIDS, etc. Average life expectancy at birth is ~ 78 years for men and 85 years for women. For every 1000 French people, there are ~3.22 physicians. France faces a problem of obesity in recent years due to junk food eating habits; however their obesity rate is lowest of Europe. But still Obesity is regarded by the authorities as one of the major health issues in recent years.
France has been the country of mass immigrations since 1970. Immigration has been a relevant political agenda in France over the last few years. During the times of Nicolas Sarkozy as President, immigration laws were made very strict and in 2010 budget report, 600 Euros fund was allotted to Ministry of immigration to achieve its immigration policy objectives. But recently, France has been moving on from Sarkozy’s immigration policies amending its naturalization criteria.
The recent problem which France has been facing is Unemployment. Unemployment figures have reached its all time high in 15 years at 3.19 million in February 2013. French Government has made employment as its sole objective for the year 2013 and has been planning to create 150,000 state-sponsorship jobs for young skilled people from rural areas. Also, they plan to introduce a competitive pact by modifying labor laws which could create 400,000 jobs in the industry. However, Government faces a tough challenge to get employers and unions to agree to these changes in labor law.
French system of numbers
France uses Pre-metric units -the livre (a unit of weight equal to half a kilogram) and the quintal (a unit of weight equal to 100 kilograms). For large numbers the long scale is used eg: French uses the word billion for the number 1,000,000,000,000, which in countries using short scale is called a trillion. French word, milliard is for the number 1,000,000,000, which in countries using the short scale is called a billion. Thus, despite the use of the long scale, one billion is called milliard in French, and not mille millions. Names of numbers above the milliard are rarely used. One trillion is called mille milliards (“one thousand milliard”) in French, and a billion.
French numeral notation uses the comma as the decimal separator, whereas space is used between each group of three digits (fifteen million five hundred thousand and thirty-two should be written as 15 500 032). The currency symbol is used as a decimal separator or put after the number eg: €25,048.05 is written either 25 048€05 or 25 048,05 € (always with an extra space between the figure and the currency symbol).In binary computing, a bit is called a bit yet a byte is called an octet (from the Latin root octo, meaning "8"). SI prefixes are used.
24-hour clock time is used, with h being the separator between hours and minutes (for example 2:30 pm is 14h30).The numeric form for dates is in the order day-month-year, using a slash as the separator
Technological
France has always been remarkable in its focus on science and technology. In the 17th century, Blaise Pascal earned his name in the field of probability and fluid mechanics. Role of oxygen in combustion was discovered by French scientists Buffon and Lavoisier. Encyclopedia has also been published by French men only. Louis Pasteur (in microbiology), Sadi Carnot (in thermodynamics) and Augustin Fresnel (founder of modern optics) have carried forward the name of France in the field of science.
French inventors also played their role in the development of internal combustion engine and photography. They also developed the electric generator, neon lamp and refrigerator.
Nuclear energy is quite popular in the France. The quadrupling of the price of oil by OPEC nations in 1973 came as a shock for France as most of its electricity, at that point of time, came from oil burning plants and there, France has decided to launch its nuclear program. Plans were drawn to achieve this energy independence and over the next 15 years, France had installed 56 nuclear reactors which not only satisfy the power needs of the country but also enable them to export electricity to other European nations. France has also developed the first commercial vitrification plant which disposes off the radioactive wastes. Wastes are integrated into a special glass and then the glass is enclosed in a stainless steel container for burial.
France was the third country to achieve success in space technology, developing the Ariane launcher family. France had launched its own space satellite in 1965, after the former USSR and USA. CNES is their national space study centre. CNES is no longer active in launching its own satellites but has been actively working alongside the European Space Agency for the welfare of the people. Global Monitoring for Environment and Security initiative (GMES) which is working towards sustainability development is one such example. CNES also released its UFO files to public in 2007.
France has also developed its high speed transportation system, TGV high speed train and supersonic Concorde. French subway companies have provided mass transit systems in its major cities. 3% of GDP has been invested in research and development program in France. It represents around 17.5% of total spending on R&D in European ranking where it is at second place behind Germany. The R&D spending plan was on declining stages in the last decade, but it is again getting momentum and they are having ambitious R&D target for 2020.

Environmental
France has always been the environmentally conscious country. They were one of the first countries in the world to create the Ministry for looking into the environment issues in 1971. From the year 1974 to 1977, the ministry was renamed as Ministry of Quality of Life. In the year 1978, it became Ministry of the Environment and Way of Life. Currently, it is known as Ministry of Ecology, Sustainable Development and Energy. It has a ‘sustainability’ part in the name due to the pro-environmental movement and the influence of Green party in the French politics over the past decade. Current Minister heading the ministry is Delphine Batho.
Despite being developed and one of the most industrialized countries in the world, France is ranked 17th by carbon dioxide emissions. This achievement dates back to French government’s decision to invest in nuclear power in the year 1974 (after oil crisis in 1973). Currently, nuclear power accounts for around 78% of total electricity production in France and clearly explains why France contributes so less to pollution when comparable with other countries. In the year 2007, along with other European Union members, France has agreed to cut carbon emissions by at least 20% (of 1990 levels) by the year 2020. France was set to impose a ‘carbon tax’ in the year 2009. It was an indirect tax which would have been charged at the rate of 17 Euros per tone of carbon dioxide emitted. It was estimated to have been brought extra revenue of around 4.3 billion Euros every year. However, the plan of this carbon tax was abandoned for various reasons. French companies would have had a difficult time competing with companies of neighboring countries who would not have to pay such taxes on carbon dioxide emissions. Also, introducing a carbon tax was also seemed as unpopular political move for President Sarkozy.
France has been facing a water pollution issue despite having a basic law for the protection of water resources which dates back to 1964. The major water pollution is due to the accumulation of industrial agricultural nitrates, contaminants and waste from the nation's cities. It also faces air pollution issue from industrial and vehicle emissions which in turn results into Acid rain thus damaging forest region of France. In year 2001, 13.5% of France's total land area was protected as forests which have now increased to 28%. French forests are some of the most diversified forests in Europe, having more than 140 different varieties of trees. There are 9 national parks and 46 regional natural parks in France. France also aims to convert 20% of its exclusive economic zone into a marine protected area by the year 2020.

Legal
Property rights and contract enforcement are secure, and the rule of law is strongly maintained. The judiciary functions well, is independent, and sustains the country’s basic foundation of economic freedom. Intellectual property rights are respected in accordance with international standards. Anti-corruption measures are in place to ensure transparency and government integrity. There is no minimum capital requirement for launching a firm and business start-up process is relatively straightforward. The labour market is stagnant. Law highly protects workers, the labour regulations decreases competitiveness, decreases employee potential hence increased unemployment. Price controls affect a number of products and services.

Summery
France is the world‟s fifth largest economic power in terms of GDP. Today 56 nations are current members of the International organization of French-speaking nations (Organisation International de la francophonie). It has an additional 19 observer nations. This represents a total population of 890 million people- Nearly half of all of Africa. This is the only primary language spoken on every inhabited continent in the world. Nearly half of the African continent is French-speaking. The French language is the one factor that can indeed unite the Arabic countries in the north with the predominantly black countries in the south of Africa. The French president has a voice on the world stage that is disproportionate to the size of the nation of France and he speaks for all French-speaking peoples of the world. In the humanities and the social sciences, many of the most important writings have come from France. The English language is a relative new-comer to the world stage. Until recently French was considered the international language of diplomacy. Even today, signs in the United Nations building in New York are written in English and French. France is the home of the International System of Units (the metric system). It is the birth place of cinema, and contributed much to it. France had large colonies before World War II and still maintains following territories around the globe:
1. The Caribbean: Martinique, Guadeloupe and St Martin
2. The Indian Ocean: Reunion Island and Mauritius
3. The South Pacific: Tahiti and French Polynesia
4. The north Atlantic: St Pierre France has important influence on world economy. Hence this assignment is aimed at exploring the French business environment The national capital of France is Paris, official language is French. The surface area is 552,000 sq km, population is 63.1 mn. There is growth slowdown in France and is not a recent development, it dates back to the early 1990s. This is also due to the macroeconomic difficulties following German reunification and the US economic recovery and the internal characteristics.
Strategic location: The French capital-Paris is within 2000 km of all EU countries putting it just a few hours from a truly global market —and within easy reach of 500 million consumers in Europe. Ideally located in the heart of Europe, Paris is exceptionally easy to reach. Paris is the world capital for trade fairs, seminars and professional conferences Paris brings together senior executives and plays a vital role in the world economy. Major multinational firms have opened head offices, drawn in particular by the outstanding quality of service needed to finance the economy and the existence of professional networks that make for a steady flow of information. Paris is where decisions are made. This wealth of economic resources and a central location make Paris Europe’s city of choice for corporate headquarters: today 25 of the world’s top 500 businesses have their head offices in the French capital.

Conclusion
The living standard of France is rising slowly but high unemployment and the emergence of income inequalities exists. Strong growth is obstructed due to structural problems of the French economy, the decline in its working population and insufficient productivity gains. Evolution in economic institutions, immigration policy and scientific advancements are needed for the same. The new balance should make the productive system to move towards high technologies and service activities, the innovation-driven growth can help create jobs. The lack of confidence by economic agents, consumers and investors is causes of France’s poor economic performance -the vicious circle of low growth prevents a return of confidence, but the prospects is good. To restore the confidence that everyone is seeking, investors, wage-earners and consumers demands transparency and encouragement.

Hence, with a strong hold on the international scenario on the various political, strategic, trade, economic, and other platform; France is the one of the country where one can bet their money on. This all is of course keeping in mind the current Euro crises. And being optimistic about the ‘Euro crises’ and the European Union’s current problems.

Bibliography

1. Bank of France- Banque de France's Annual Report
2. Monetary policy, actions to safeguard financial stability and economic recovery by Banque de France
3. Report titled ” Tasks and activities of the Banque de France in 2011”
4. The accounts of the Banque de France
5. INSEE Website
6. European commission’s Alert Mechanism Report (AMR) February 14, 2012
7. The Economist website