Assessing the Political and Legal environment

The Spanish people are governed by a Constitutional Monarchy, which makes it a “Kingdom” ruled by King Juan Carlos I since 1975. The incumbent Prime Minister is Jose Luis Rodriguez Zapatero. By virtue of the Constitution, the King nominates the President who stands as the chief of the executive branch of government. The legislative branch is made up of a bicameral structure similar to the American Legislative model, where the Congress of Deputies coexists with the Senate.

Spain has three main parties and several other regional parties, each with varying trade/business interests. The main parties include the labor-leaning Spanish Socialists Worker Party (PSOE), the Popular party (PP) and the United Left (IU) Coalition. The regional parties are the Convergence and Union (CIU) based in Catalonia and the northern Basque Nationalist Party (BNP) hailing from the Basque country or Pais Basco. The Judicial branch is perpetually confronted with constitutional issues, yet there is evidence that it has made trade-friendly decisions in their jurisdiction.

A typical Spanish Judiciary is composed of an interesting range of municipal, regional, provincial and territorial courts, all headed by a supreme tribunal (www. dfat. gov. au). Foreign Relations Since the re-institution of democracy after Franco’s Regime, progressive government officials have strived to introduce reforms in Spanish foreign policy. A significant indicator of these efforts is the key membership of Spain in the European Union. Assuming that the country is a major influence in European affairs, an OfficeMax base in Spain will be an effective staging area for future expansions into other member countries of the EU.

It can prove an advantage for OfficeMax if the continental political system of the European Union would allow Spanish-based American firms a grip on European market share. International Economic Policy Online country profiles suggest that Spain has been performing a major role in the international economy of the European Union ever since the beginning of its membership. The country has much to offer, not to mention its fairly large educated population and land area. This means a strong Spanish capacity to offer skilled labor for foreign investors like OfficeMax and an almost unlimited land base for development.

The country benefits also benefits from the EU, as it conforms to the regulated progressive trade and currency mechanism, the Euro. Beyond Europe and Latin America, the Spanish Government has strong economic ties with the United States (home base of OfficeMax), as evidenced by its membership in the Organization for Economic Cooperation and Development (OECD) where the U. S. is a key player in economic cooperation, making Spanish American cooperation a minute challenge. Formal Trade Barriers

The regulatory laws set in by government sometimes impede the successful execution of business, especially when there is a franchising of business into another country as intended by the OfficeMax to introduce its business into Spain. The cultural difference from the organization’s parent’s home and the environmental factor and regulatory framework in place tend to constitute barrier to effective operation. The stability level of operating business in Spain has lead to firms producing similar products. This has lead to low turnover for many firms, and thus threatening the survival for new entrants into the Spain business environment.

According to Thurik & Verheaul (2002, pg 6), “The stability of the managed economy in Spain resulted from a homogeneous product demand, resulting in low turnover rate…the entrepreneurial economy is characterized by high degree of turbulence. Many new firms are started each year and only a subset of these firms survives for any length of time”. Thus, the demand of product in Spain is similar thereby leading to organization producing similar goods, these leads to low turnover among the competing firms, thereby threatening the existence and survival of new entrants such as OfficeMax. Tax system

If Spanish foreign and economic openness seem fairly greasy, the Spanish Tax System can warrant considerable concern for expansionists like OfficeMax. The tax structure of heavily charging foreign investors poses a huge obstacle for operation in the country. “several institutional factors discourage expansion or incorporation of established Spanish firms, these include finance and taxation” (Ibid, pg 15) The system’s complexity is a remnant of the Franco Government which made a protectionist tax policy to shield local industries from foreign investors, which can deal a financial challenge to OfficeMax.