MGMT6018 Business Law & International Contexts

Introduction

For the purpose of this report, a business has been selected to be opened in the hospitality industry in Colombia. To open a business in the hospitality industry in Colombia, the legal concept and structure of business transactions needs to be analyse. The legal system in the country, including the law of contracts, torts, agency, employment and IP should be elaborated in order to have a proper understanding of the individual business system. The effective analysis of this part is the main purpose of this paper.

Justification of choosing Colombia

Colombia was selected to be the country to open the business because of its excellent connectivity with other countries because of its geographic position. The market place and scope is high as it is a developing country. The labour costs is fair and the legal system is not too rigid. For a travel, tourism or food and drinks business, Colombia is a country that offers high opportunity for the new businesses.

Business context in Colombia

The scenario county selected for the purpose of this research is Colombia to analyse the business structure. To start a business in Colombia, the business is to be registered at the Chamber of Commerce, The Municipal Tax Authority and National Tax Office. It must deposit a capital within two years of incorporation to the Colombian Bank account. The employers and employees should be registered with Administrator of Professional Risks, Health Insurance Entity, Welfare Entity and others. To critically discuss the legal aspects of business in Colombia, the following perspectives should be explained:

Regional economic strengths in Colombia

The economic strength in Colombia has faced an increased growth over the past few years. The production growth rates in various industries has increased to up to 2 percent as estimated in the year 2013 (Heritage.org, 2018). The rapid development in the economic strength has helped Colombia to combat their economic problems.

International monetary system

The worldwide financial condition is influenced by the American countries. Colombia has no less role to play a role in it (Obstfeld, 2013). Monetary authorities of the country have a systematic response in the Federal Funds rate, which indicates that international monetary system has affected the national monetary policies in the country. Though it is a set of rules which is internationally agreed; it has a consequence on the monetary system of the countries (Borio, 2014).

International business trends

Developing countries like Colombia face the largest economic growth. These countries are the closest to the developed countries in terms of the standard of living. The recent trends in international business is to trade with emerging markets to grow rapidly. The factors like economic stability, financial system and local culture influences the market for international business (Cavusgil, 2014). For the development of business, the pace of innovation can be played as an important component. The business in international markets experience an increased competition, as the developing countries have lower employment costs. For a hospitality industry in Colombia, the recent development in international business trends has resulted into a scope of expansion of the industries.

Telecommunication System

The telecommunication system in Columbia is well structured and developed in the business centres where the availability of services is comparatively high. The Government has taken steps to improve the condition of telecommunication in urban and rural areas by formulating some public programs and policies. The regulatory instruments are governed by the ICT law in the telecom sector. The convergence license and their rules is provided under the Convergence Decree.

Cultural sensitivity in Colombia 

Colombia has an ethnic diversity which is reflected in their varied culture. Despite the turbulent history of long armed conflict, their democratic security and economic policy has resulted into a growth in the confidence in the business sector (International.gc.ca, 2018). For running a successful business in Columbia, one must have the political and economic awareness as well as the business etiquette and culture in Colombia.

Business

Types of business and parties involved

In Colombia there are scope for many variety of business as it is a developing country. Business can be recognised into various categories in Colombia, like: Corporations, Limited Liability Company, Limited Partnership, Branch of a foreign company, shares corporations. A corporation, to be incorporated, must have five shareholders (World Bank Group, 2013). While, in order to incorporate a limited liability company, there should be at least two partners who would be jointly and severally liable. The limited partnership requires one or more partners for managing the operations of the entity, and one or more silent or comanditarios partner whose liabilities shall be limited to their capital contributions. For a foreign company, which is willing to pursue permanent operations in the Colombia, must establish a branch office in Colombia (Simonse, 2014). The simplified shares corporations can be set up in Colombia with only one shareholder. For a Simplified shares corporation, it is not mandatory to have a board of directors.

Social and ethical foundations of business

Business ethics is the successful combination of ethical concerns and profits for business. In addition to profit maximization, the business must be legitimized before the society. The sustainable business practices, in correspondence with the legal or financial factors should be the ethical foundations for a business (Pandza & Ellwood, 2013). Social foundation of business comprises of an ethical standard to regulate the business activities. The social and ethical obligations are in exceed of legal duties.

Investment

Colombia is an excellent market place for making successful investment for business. Hospitality industry has a wide scope of investment in a developing countries like Colombia. The recent change business practices has opened up new interests in the business strategies to make investments. Investors has seen Colombia to be a stable place for doing business and the foreign direct investment has improved the business climate. According to the investment trends, one of the largest recipient of the Foreign Direct Investment of the Latin America is Colombia.

Marketing opportunities and competition in Colombia

Political Constitution of Colombia empowers foreigners and nationals with the same rights and guarantees. Being situated at the nexus between the north countries and continents, and having an access to both the Atlantic and Pacific Oceans, the market opportunities in Columbia has a diversified and exportable offers. It has one of the productive labour forces and offers export logistics. It is also considered as the third friendliest countries in the world for conducting business. Hospitality industries like travel, tourism, restaurants experience a high competition in Colombia. It is a centre of attraction for tourist, which makes the travel industries to face competition, resulting into a competition in the foods and beverage industries as well.

Risks

Opening a new business is always amount to threat. Competition is one of the main risk factor in Colombia to operate a business in hospitality industry (Moncada, 2013). The investment may be exposed to threat in such a high competitive market. For a foods and beverages or travelling industry, safety may be one of the main components of pitfalls.

Matrix format for legal aspects

Findings

After analysing the various business structure for operating business in hospitality industry in Colombia, the findings of the research is that such a business has a high scope in a developing country and would face a growth if it is opened maintaining the legal parameters.

Recommended international commercial and legal arrangements

For the purpose of this new business the Colombia and International Conventions on the Protection of Foreign Investments, the Agreement on Cooperation and Facilitation of Investments between Colombia and Brazil, Colombia-Mexico Free Trade Agreement, Columbia-Chile Free Trade Agreement are required to be follow, which regulates the conduct of this business.

Conclusion

Lastly, it can be said that there is mix chances of success of this business as there are various factors that has an impact over the operation. The challenges can be overcome by following the legal regulations and restrictions.

References

Borio, C. (2014). The international monetary and financial system: its Achilles heel and what to do about it.

Cavusgil, S. T., Knight, G., Riesenberger, J. R., Rammal, H. G., & Rose, E. L. (2014). International business. Pearson Australia.

Heritage.org. (2018). Retrieved from https://www.heritage.org/index/country/colombia

International.gc.ca (2018). [online] International.gc.ca. Available at: https://www.international.gc.ca/cil-cai/country_insights-apercus_pays/ci-ic_co.aspx?lang=eng [Accessed 25 Oct. 2018].

Moncada, E. (2013). Business and the politics of urban violence in Colombia. Studies in Comparative International Development, 48(3), 308-330.

Obstfeld, M. (2013). The international monetary system: living with asymmetry. In Globalization in an age of crisis: Multilateral economic cooperation in the twenty-first century(pp. 301-336). University of Chicago Press.

Pandza, K., & Ellwood, P. (2013). Strategic and ethical foundations for responsible innovation. Research Policy, 42(5), 1112-1125.

Schneider, F., & Hametner, B. (2014). The shadow economy in Colombia: size and effects on economic growth. Peace Economics, Peace Science and Public Policy, 20(2), 293-325.

Simonse, L. (2014). Modeling business models. Design Issues, 30(4), 67-82.

World Bank Group. (2013). Doing business 2014: Understanding regulations for small and medium-size enterprises (Vol. 11). World Bank Publications.