Table of Contents
Introduction 1
Background of the strategy 1
Human Resource implication of a business 1
Expatriate vs. local 1
Advantages of Expatriates 2
Training or Recruitment is not needed 2
Managerial Knowledge 2
Existing manufacturing knowledge 2
Expatriates vs. Local workforce 2
Cross-cultural adjustments 2
Language 2
Loyalty 3
Staffing policy 3
HRM policy 3
Homogeneous Factors to create better working environment: 3
Legal Implication in Hungary: 3
Rule Regarding Foreign Work Policy: 4
Labor law in Hungary: 4
Laws regarding company: 5
Laws regarding Taxation: 5
Laws of termination of Business: 6
Laws related to Investment: 6
Economic Factors that relates to Production of PTM mobile: 6
A Study about European Mobile Economy: 7
High Competition driving the price down in this market: 8
A Concise Study of the Economy of Some European Countries: 8
Poland: 8
Latvia: 8
Slovenia: 8
The Risk Associated with Hungarian Political Scenario: 9
The Government related risk: 9
Advantages of EU membership: 9
Economy related risk: 10
Benefits of having Production Unit outside United Kingdom: 10
Conclusion: 10
References 10

Introduction
Hungary is well known for its manufacturing purpose for many years. It is situated inside the Europe but the wages of the labor force there is 60% lesser than any other country in Europe. The labor force is skilled and educated also. For this most of the manufacturing organizations want to start their work there. The main industries that are working there are-
• Telecommunication and information technology
• Engineering
• Pharmaceutical
• Economics research and related work
• Mathematical sector.
The investment policy of Hungary is sound also. By considering all these PTM, is trying to move their business there.
Background of the strategy
PTM is one of the growing mobile manufacturing companies. It wants to shift its production procedure in Hungary. There are plenty of reasons for shifting. And as Hungary is investment and labor friendly country the company decided to go there.
Human Resource implication of a business
The human resource implication is necessary in the business. In Hungary it is bit complicated. But it is not a big problem there. The growth rate and GDP is increasing there and the same time the inflation rate is under control. For the telecommunication sector it is really essential. It is also important to maintain a successful domestic and international market in this sector (Kalocsai, 2011)
Expatriate vs. local
In the Hungary there are some people who are not basically Hungarian. They come from abroad for work. This number is not significant. The management and training of these people is also tough. On the other hand the local people are skilled and they can be thought easily.
Advantages of Expatriates
There are significant advantages of expatriates. They have got some specific and special skill. That is all are the main advantages of being them in the company.

Training or Recruitment is not needed
As the PTM is comes from abroad into Hungary all the employees of it will be counted as the Expatriates. They need not to be recruited into the company as they are already works for the organization. And the same reason they need not to be train as they are already expert in doing their work.
Managerial Knowledge
People of Hungary have got lacking in this. They don’t have good managerial knowledge. The Expatriates have got this. And when they use it to the expert Hungarian workers they did their work better.
Existing manufacturing knowledge
Many Expatriates have got existing manufacturing knowledge. They might good skill also. They come to the Hungary only for better job. This knowledge works well in the organization. It also creates speed on it.
Expatriates vs. Local workforce
Expatriates and the local workforce have got significant differences and values. These ares-
Cross-cultural adjustments
The cross-cultural adjustments are very common in Europe. And it also works in Hungary. Different people of different culture are met each other and it is only for working purpose. This also works positively sometimes. The workforce sometimes willing to work more, in this working culture. Language
With the culture the language is also different in the workplace. For this the standard language is used. This will help everyone to understand the order of the management. Generally English is used. But sometimes French, Spanish or other different language is used with English.
Loyalty
This is also works well in Hungary. As the entire employee works well and they are also loyal to the foreign owner company.

Staffing policy
PTM follow the law all the time and it is follow 1989 policy for its staffing. There is special section for the local employee. If this is not maintained then the government of Hungary may take steps against the organization.

HRM policy
The human resource management of the PTM will not face any trouble at first. There aren’t many risks for the company to be afraid of. On the other hand as there is no need of training here. There will be a huge surplus of fund to the management. But in long run there are risks. As the majority of the people of Europe are going to be aged soon it will be really difficult to found perfect workforce there in future. So for the long term strategy it is wise to shift the manufacturing sector to the Hungary. (Highbeam LLC, Hungarian Human Resource., 2008)

Homogeneous Factors to create better working environment:

After the separation of non-Hungarian territory after World War 1, and the slaughter of many Jews after World War 2 made Hungary a place of Homogeneous people. 90% people of Hungary are Magyars. They are mostly resides in from the east of Danube to the Great Hungarian Plain. They are mostly Magyars. These homogenous factors create a better working environment in the factories.
As a post-socialist country in Europe still Hungary often admires some socialist rules. So profit making mentality is often demeaned by the social welfare mentality. (Foster, 2005)
Legal Implication in Hungary:
Though Hungary has the agitation of the 1980 now it has emerged from a very economic community. From a business point of view Hungary has now a significant business and investment opportunity. More than 20 years have passed since Hungary has published its first edition of Hungarian Business Law. After that a significant changes has been noticed in the Hungarian Legal Prospects.
In 1997 Hungarian Parliament passed a new act on Business Corporation which voids the previous law of Business Association in 1988.(Paton & McCalman, 2013)
After the Second World War Hungarian law was totally influenced by the communist propagandas and it contained up to 1987. In between 1945 to 1988 there were very few corporations which do business here. So at that time most of businesses were government owned or joint venture of them. So Business wasn’t easy at that time. So if PTM tries to shift their business to Hungary it won’t be that tough to manage the whole legislation process. But they need to follow these certain things.
Rule Regarding Foreign Work Policy:
Though PTM is trying to shift its manifesting sector to Hungary but it will need some UK based workforce as supervisor to maintain its production. The Work permits regulations in Hungary is not that much difficult. One has to report the legal authority 60 days before one want to work anywhere. In that case it has to be established that the employer need someone from UK and the needed expertise from the worker in Hungary is not available. This rule only applies for the non-European workers only. EU members can work in Hungary without work permit.(A, 2008)
Labor law in Hungary:
The labor act 1992 clearly states some rule regarding labor behavior in Hungary. The employer and employee must make a contract regarding the probationary period in working in an organization. The Probationary period can be maximum of three months.(Prékopa, 1980)
While terminating any contract the employer must give valid reason behind it. If the reason remains extraordinary then the employer must give 30 day forfeit period for the legal solution of the employee.
The regular working hour in Hungary is 40 hours a week from Monday to Friday. There should be a paid 20 days holiday in a year.
If the PTM wants to recruit women workforce then it has to make sure 24 week of maternity leave and a childcare facility for the children up to 3 years old.

Laws regarding company:
The Hungarian company law was made in 2006. The termination of the company is regulated by the law of 1991. However there is important segment in the company law of the company law of Hungary is the part of taxation.
According to the Hungarian Law tax may be applicable for these following people.
1. Business Organizations like private limited companies, public limited companies, limited partnership or foreign companies.
2. People who are related with law
3. Organizations like foundation and public foundation
4. And Single Member Companies.
As PTM is a mobile phone company it needs to pay cash according to the rules. For the foreign companies the company has to follow the Act of 1996on Corporate Tax. It is seen that provisions for the liabilities which are expected are often raise up the tax base. If the company pays less than 10% than the actual tax base then proper penalty measures can be taken. The corporate tax base is 10% for upto 500 million in profit and 19% for the rest of the profit it makes. There are certain conditions regarding Tax credit in Hungary. If they are met then the PMT can get a three years Tax credit for a certain period of time.(Adam, 2000)
Laws regarding Taxation:
One has to submit its tax return within 31st May of that particular year. IF the Tax liability crosses 5 million, in one year then one has to make its payment in every month. For the companies who reached 100 million in preceding year has to top up a file for that. The deadline of Tax-top up is 20th December of each year.
Laws of termination of Business:
There are some common provisions which has been stated by the Hungarian state law. In the time of dissolution, the order of dissolution has to come from the highest body of the organization. IF the current liability of the company exceeds the current assets of the company then the company has to be terminated immediately. The termination of any company mainly done under the Law of 1991.
Laws related to Investment:
As PTM is a medium sized mobile phone company then it has to import raw material from outside the country. This will apply special rules as the Hungarian government doesn’t encourage importing then it has to import with special obligations. This includes previous permission from the state government. The rules can be minimized if the PTM is a European Union based company which is already is. There is not much difference in doing the production in UK than doing the production in Hungary. So, legal infustructure doesn’t have to be change a lot to sustain the production in here.
Economic Factors that relates to Production of PTM mobile:
Hungary is agricultural based country. From the very beginning of it formulation the people of Hungary are more interested in during agricultural works. After the World War 2, ithas become very industrialized. In the first stage as being the post-socialist country most of the factories of Hungary was nationally owned. The best thing about Hungarian economy is that it is continuously developing a market based economy and trying to find new trade partner continuously. Hungary also encourages others to join in their economy and the rules regarding doing business in Hungary is relatively easy.
Most of the lands in Hungary is arable. So the production of agriculture based industry is highly developed n here. It has a highly diversified livestock and crop industry which gives it unique criteria than that of other nabourring countries. IT is seen that the industries like Cheese, Milk, prepared potato meals, dairy products and bread industry have developed greatly in this region.
A Study about European Mobile Economy:
European mobile communication industry is one of the fastest growing industry in the world. There is a study about European Mobile Observatory which was first published in 2008 and it was again published in 2009. The report ultimately covers up the factors is that who are the ultimate stakeholders, What are the current innovation in the market, Is the market mature enough to adopt the new product, and the financial condition estimated to fulfill within the next five years.
Here I have tried to mention some of the study that EMO made in the last couple of years. The analysis is based upon the data which have been collected from the mobile phone manufacturing companies in here. Here are some confidential information too to describe the picture more clearly. This report is also commissioned by GSMA and developed independently.
The mobile communication is the key industry in the current European Union. It already excceds the aerospace and pharmaceutical companies in Europe and the total revenue from this sector is 174 billion euro in the last 2010. While the market penetration rate is 128% percent in the current economy. In Japan which is still 104%. So we can clearly state that this economy is now in the expansion formation.
Now 456 million European have their own mobile. If the PTM can target even 10 million customer in current European market then it have to make a huge production level and also the cost level should be minimized as there is a continuous pressure from the current Chinese market who can sale their product in much less price.
On the other hand innovation in the mobile based industry is very high and PTM has to invest a lot of investment in its Research & Development sector. It is seen that the uses of the Smartphone is the fastest growing product in the economy and the market expansion rate is almost 33% in every year. So if we can analyses this scenario we can clearly state that it won’t take much time to acquire the Smartphone market by some other more smart products. PTM also have to consider this if it wants to sustain in this economy for longer time (Chakrabortty, 2012).
High Competition driving the price down in this market:
All over the Europe the price of mobile has fallen to 11-13% on an average in the past 3 years. On the other hand the fixed prices fell 5% over this certain time. After all these price downfall the good thing is that this industry is also enjoying a very good revenue growth in this time. Though the revenue declined by 3% the average profit in this sector is still 9% around the year.
The reasons that the economist sees behind this growth falls is that –
• The fast declining economic climate in the past few years
• Market is getting matured day by day
• New product is continuously posing threat to the market.
A Concise Study of the Economy of Some European Countries:
Poland:
Poland Economy scores 67 percent in overall European market. It joined European Union on 2004 and ever since the trade has been easier in this section. The economic freedom has increased about 16 points in the last 20 years. The resurrection of Poland is main from 2002 where it gained name of ‘moderately free. The success factors about Poland economy is low corporate tax rate, linearization, privatization and modernization of regulatory body.
Latvia:
The Economy of Latvia is not that much strong. Latvia is a member of world trade organization (WTO) since 1999 and Eurozone in 2004. This economy is very popular of manufacturing machinery and electronic device. So as PTM is a mobile phone manufacturing company this economy can be very friendly while manufacturing the products. Though the economy of Latvia was very much disrupted but after 2010 the economy has come up to a vantage point.(Inmam, 2014)
Slovenia:
The Economy of Slovenia is relatively stable. The traditional industries in this region is mostly agricultural Forestry and fishing based. The public finances is much less in this economy and the GDP amounted less than 23 percent in 2007. The anti-inflation policy in Slovenia is much dependent on the capital inflow restriction. But they are very interested in inviting foreign business in their country.
The Risk Associated with Hungarian Political Scenario:
From the early 90s Hungary is a politically stable country. Though there were some conflicts in the decades, conditions are now stable at the request of EU and IMF. Hungary’s constitution has changed in the year 2012 and this new constitution has come up with some favorable factors for establishing business in Hungary. From a study of Global Political Risk Index by The Economist showed the stability of Hungary as almost stable. Hungary is now the most politically stable country in the world with a liberalizing market.

The Government related risk:
The constitution of this country, The Fundamental Law of Hungary, was embraced in April 18, 2011 and practiced from January 1, 2012. Recently in 2013 Hungary Government has made some changes in their constitution which resulted in a huge criticism towards the changes. Special European Union criticized the changes strongly as The Human Rights are ignored in the modified constitution.
To reach the goal of decreasing public debt below 50% of gross domestic product from above 80%, power of constitutional courts are diminished by the constitution on budget and tax matters until the ration decreases in below 50%.
Advantages of EU membership:
As UK and Hungary are both EU member, PTM will get all the facilities and benefits of being EU member while shifting the business partially. Free movement of labor force, goods, services and capital and customs free entree to all the 450 million customers will be a great opportunity for PMT to establish their manufacturing in Hungary.
Along with all the macro economic benefits of being EU member like 0.8% point increase in GDP and 1% point in output growth, regional benefits etc. PMT will experience some extra benefit as a business entity. A fund for research and development and environment protection, tax transparency, free from customs fees makes Hungary a better option for PMT.(Alabaster, 2009)
Economy related risk:
In the recent years Industrial Gross Output in Hungary have increased. Comparing to April 2013, gross output has increased by 10.1% in April 2014. The industrial production volume in April was above 2.4% from the previous month production after adjusting working and non-working days.
Benefits of having Production Unit outside United Kingdom:
There are much benefits of having production or manufacturing units outside Europe. The cost of work force is much higher in that area. The other factors which are related to producing mobile are also much instable in that place. The GDP growth rate is also relatively lower is 0.62 percent in the last decade whereas the GDP growth rate in Hungary is much higher. The production facility of Hungary is also much good. There is a huge power option out there. There are many substitute power option in Hungary.
Conclusion:
In the overall scenario we found that though in some case working and investment in Hungary is risky but in the most case the profit is higher. The development opportunity of the company is much higher here in Hungary than UK.
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