Business Organisations and Environments Report: AEG in Hungary

This report examines the business environment and global factors affecting AEG, a global designer and provider of power solutions, with a specific focus on its potential expansion into Hungary. The report begins with background information on AEG and the business environment in Hungary, highlighting Hungary's economic and political stability and its attractiveness for foreign direct investment. The analysis then delves into the business scenario using PESTLE analysis to assess political, economic, social, technological, legal, and environmental factors in Hungary. Furthermore, it employs Porter's Five Forces to evaluate the competitive landscape within the electrical equipment industry, considering the threat of new entrants and the bargaining power of suppliers. The report concludes by summarizing the key findings and implications for AEG's strategic decisions in the Hungarian market.

Business Organisations and
Environments Reports

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
BACKGROUND INFORMATION ON AEG................................................................................1
BACKGROUND INFORMATION ON BUSINESS ENVIRONMENT IN HUNGARY.............2
ANALYSIS OF THE BUSINESS SCENARIO .............................................................................3
PESTLE Analysis (Hungary).................................................................................................3
Porter's Five Forces Analysis.................................................................................................5
CONCLUSION ...............................................................................................................................7
REFERENCES ...............................................................................................................................8

INTRODUCTION
Foreign direct investment is the biggest cornerstone for both; company and government.
Investment map is produced by the international center. Investment is the growth oriented
practice for company which is benefited for good profit margins. Investment map combines
statistics on foreign direct investment and international trade. Present study will be based on
business environment and global environment changes that affect the business activities. For
presenting the study, it will be taking AEG into consideration. It is the power solution or a global
designer and provider company. Further, this report will be discussing about background
information of company and analyze the competition level in market to measure actual market
position and challenges. For analyzing the business environment, study will explain model of
PESTLE and for analyzing the competitive environment, Porter’s five forces analysis will be
done.
BACKGROUND INFORMATION ON AEG
AEG is the power solution which is a global designer of power electronic systems and
solutions for all critical power supply needs. Main aim of company is to produce the best leading
solutions to their users or to make new changes and innovation for leading purposes. AEG
secures the supply chain at all times and to deliver the sources of improvement to power
solutions across world. Now, they are planning to expand its business in Hungary which is a
European country. AEG is having a large number of customer range at global level such as oil,
gas, power generation companies and petrochemical organizations with many other
transformation data & IT players to cutting edge renewable energy plants. AEG is the leading
company in electrical industry with providing great products and services to their potential
customers (Andriof and et.al., 2017).
AEG deals with number of products such as Electrical power generation and transmission
telecommunication, home appliances, machine tools, projectors, printing equipment, etc.
Company was found in Berlin in 1883 when Emil Rathenau with another major challenges. This
help to control the process more challenging and growth oriented performances.
AEG is known for its rapid expansion of innovative products and goals that helps to
attract number of customers towards services of company. They provide the best deal and
leading sources of full ideological fact (Bendell, 2017). Power solution established a new
leadership position that affect the best promotional leading sources into more effective manner.
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In order to expand the business market more, company is planning for foreign direct investment
into another country system. Foreign direct investment is beneficial for company for encouraging
the enterprise functions and business objective goals. Moreover, it carries a fresh market
possibility that brings the new opportunity goals (Brettel and et.al., 2014).
BACKGROUND INFORMATION ON BUSINESS ENVIRONMENT IN
HUNGARY
Hungary is situated in Central Europe after the more transformation in an economy. It is
by far the largest export market for Hong Kong in Eastern Europe. More than a half, this requires
the best possible action goals in order to analyze external environment for expansion of new
ideas and goals (Burke, 2017). Business environment of Hungary is more liberal and flexible as
compared to other country. It is better in terms of infrastructure including its financial and legal
environment that has enabled the country’s solid fundamentals. It enabled a nation to play the
leading role in business. As per the sources or data, GDP increased by an average of more than
4% per year through the production of these kinds of services that increase profit margin or
economy of country. In Hungary, foreign direct investment flow is higher in the last decade. On
the contrary, AEG got benefited through getting good market response from customers (Castells,
2014). Moreover, Business environment is the most essential and crucial process that needs to be
understand by the company before entering into the market, it defines the process into proper
effective manner.
External environment affect the overall state of affairs of business which might be
affected to the economy growth of the country. This affects the business goals and better
advanced performance with leading charging performing objective. Also, it impacts on the
business goals to make goal making process challenging and effective (Doing Business in
Hungary, 2018). This also helps to control the long term goals to make better performing facts. It
is the long term content and better objectivity goal in order to affect business and better
environmental objective task performance score (Cherubini, Iasevoli and Michelini, 2015).
This also helps to control the long term goals to make better performing facts. This is the
long term content and better objectivity goal in order to affect business and better environmental
objective task performance score (Cherubini, Iasevoli and Michelini, 2015). Global business
environment is helpful tool to analysis environmental threats and opportunities for company to
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meet the needs of the overall company objectives. Business environment is another essential
term to understand the different changing factors such as political, social, legal and technological
in order to manage the threats in an efficient manner.
Foreign direct investment in Hungary has helped modernize industries helps to create
jobs, boost exports and spur economic growth. Hungary blessed with good surroundings of
business activities where new organization can easily make its own strong position in the market
(Dodgson, 2018). This business environment is perfect for AEG to explore its business functions
or activities for the better growth for business profit. As per the statistics of US department of
commerce, Hungary faced heavy financial crises in 2008/2009 by austerity measures and
sectoral taxes which is introduced by the government in 2010. Foreign direct investment also
helpful to grow the business function activities at across the world with different other locations.
FDI enable to provide large number of advantageous in order to get the new employment
and growing economy benefits in effective manner (Erol and et.al., 2016). To expand the new
business in Hungary is the good decision of the company. On the contrary, it has small and open
economy therefore it is very sensitive to external developments.
ANALYSIS OF THE BUSINESS SCENARIO
PESTLE Analysis (Hungary)
Political Factors
 Hungary's political system is multiparty democracy and it is emerged out of former
soviet bloc communist nations. Currently, it is a stable democratic state and its
administrative power aims at maintaining strong relations with neighboring nation so that
it can strengthen up country's integration into European Union and manage fiscal budget
(Garlapati, 2016).
 It has access to EU markets and has highly skilled and educated workforce which is a
positive factor for AEG as it would not have to strive more for employees in Hungary.
 Through going from many challenges of political changes company needs to acquire
long term goals (Aljuwaiber, 2016).
Economic Factors
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 Hungary is dependent on EU and has a strong export-oriented economy. Budapest Stock
Exchange provides chances to raise capital and its Gross domestic product is worth 130
million dollars which is counted 0.21% of the world's economy.
 Foreign Direct Investment in Hungary has modernized companies to boost the exports
and generate new job opportunities (Gomez-Exposito, Conejo and Canizares, 2018).
Thus, it can maintain high-quality infrastructure which provides AEG an attractive
destination for investment.
 It has supply chain opportunities that favors AEG to expand in electronic and government
focuses on knowledge based technologies.
Social Factors
 Country's aging population is a cause of worry that has occurred mainly due to reduction
in birth rates (Gray, Adams and Owen, 2014). This has resulted in drop down in income
taxes due to reduced government revenues.
 On the other hand, literacy rate of Hungary is highest in the world which is a positive
sign for organizations like AEG because it will get a literate and talented workforce that
can comply with its business operations.
Technological Factors
 There have been a lot of improvements in the field of technology. Hungary has
experienced few advancements including mobile phone’s penetration and high usage of
mobile phones due to which it has become an attractive destination for electrical and
technology industries (Gray, Adams and Owen, 2014).
 Government has initiated various mid-term strategies to have a look on IT developments
and restricted its spending by tight fiscal situation.
 Hungary is benefiting from EU initiatives and trying to assimilate it into EU's new
'Information Age'. Thus, AEG can find technological change and more companies are
going to build their IT environment to create new IT markets.
Legal Factors
 Companies in Hungary have to follow legal rules and regulations related to Corporate
Tax which is set by 19% and tax payable is reduced through different tax incentives.
 It also follows labor law according to which mandatory contents of the employment have
to be fixed (Gupta and et.al., 2015). Thus, AEG has to state job description of
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employees. It also follows a flat-tax model including penalty, VAT, applied to products
and services.
Environmental Factors
 Hungary follows Environment Protection Act that was laid down in Act LIII according to
which environmental impact assessment has to be carried out before commencing any
activity (Hickman and Silva, 2018). Thus, AEG has to follow this act to expand in
Hungary.
 Other than this, companies in Hungary focus on less usage of energy and use of
renewable resources.
Porter's Five Forces Analysis
Porters five forces helps to identifying or analyzing the competition level in the present
market. It helps to draw an expected result of business profit margins or the situation of the other
competitor’s strategies. AEG is one of the leading firms in electrical equipment. Tools or forces
helps to analyze the competitive advantage helps to make profitability and develop a strategy for
enhancing Emerson Electric Co. competitive advantage and long term profitability in industrial
equipment industry (Kew and Stredwick, 2017).
Threat of New Entrants (Moderate)
It is the first force model that influences overall industry at different dimensions. Threat
of new newcomers increases the competition level in the market due to which existing
companies get affected in different manner. Overlook the matter of fact that, this affect the better
design and well effective implementing resourceful ideology by the new entrants. Moreover, in
terms of Electrical industry, entrants of new companies brings innovation and doing things in
more systematic manner that creates the competition level between the existing companies
(Luthra, Garg and Haleem, 2016). This challenges affect the company by lowering the price,
reducing costs, providing new value propositions to the customers. AEG has to manage their all
challenges and buildup the effective strategies to get over from the barriers.
Company can also make some new creative strategies for customers and buyers to make
their interest stable within firm. AEG might be innovating new products and services to attract
new customers and profitability ration. On the other side, AEG can also attract members of
Hungary by spending money on research and development by introducing large number of goals
and better productivity level (Pakdil and Leonard, 2015).
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Bargaining Power of Suppliers (High)
It is another force model in which electrical industry purchases raw material from
different suppliers. Suppliers dominate the market in-case of high demand and low supply of the
product and services. Sometimes, due to less power in market, company can also face the issues
of negotiation and trust among suppliers. AEG is required to keep relations good with the
suppliers to make things effective and challenging for gaining company’s profits (Paquin, Busch
and Tilleman, 2015). In Electrical industry, power of supplier is high so that organization needs
to manage all required challenges and goals.
It also presents better target goals and improvement channels to enhance the company’s
profit margins. For maintaining good relations with the suppliers for maintaining good
relationship between all stakeholders (Paquin, Busch and Tilleman, 2015). Company also needs
to fulfill the basic demands or needs of the suppliers. This also makes the changes accordingly
and challenging. Apart from that, in order to reduce the negative impact of suppliers, company
needs to adopt some strategies and goals in order to make sure the best productive outcomes
(Gomez-Exposito, Conejo and Canizares, 2018).
Bargaining Power of Buyers (Low)
Buyers are the king of the market that creates various range of demands of different
products. Buyers are always looking for the products and services that are available at minimum
prices level. This would be given with high pressure on company in order to make the profit
from buyers. Buyers are having high power in Electrical industry. Besides, buyers also have
higher ability or power to seek high discounts and offers to the best possible action plan
(Garlapati, 2016).
AEG can make the better environment or strategies to get over from these challenges.
Through given large number of product variety to customers helps to reduce the bargaining
power of customers. Customers can pay any price of the products which is new in the market.
By invention of innovative product & service helps to reduce the bargaining level of
buyers. That helps company to keep the profit margin level within the market. Comparatively, on
the other hand it has been seen that, with old products new products attract customers frequently
or reduce the bargaining level (Garlapati, 2016).
Threat of Substitute Products or Services (High)
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When number of rivals are increasing in the market, it increases the chances of
innovation. This threat has always been involved. For AEG, this threat also affects the industry’s
profit margin and undercover profitability ratio of company’s system. Moreover, this brings new
level of system and makes a positive impact of the system’s performance. To get overcome from
this threat, company needs to discover new services and products that affect the overall system
goals. This also affects the new company level and majorly affected goal employment
(Cherubini, Iasevoli and Michelini, 2015). Some substitute products in Electrical industry are
gas, solar penal, etc. This would affect the performance or growth of company. AEG should also
adopt different quality of products in order to make them different from other substitutes.
Threat of Rivalry (Low)
This is another or last force model that affects the business goals and new ideas. Rivalry
existing players are more intense and competent (Gray, Adams and Owen, 2014). It helps to
redefine the goals and more challenging performance target plan in order to enhance the
company profitability ration and goals. Apart from that, business environment involves different
types of elements that affect business differently. With the help of some competitive models,
company can easily target the approachable decision making growth (Schaltegger and Wagner,
2017).
CONCLUSION
On the basis of above section, it can be concluded that global business environment is
wide concept to understand different changes happened in particular market. Present study
discussed about the overview of electrical market of Hungary. It helps AEG to identify the
possible threats and opportunities in the market. This helps to identify the new growth and
chances for company to expand the business in a new place. Study also discussed the business
environment by explaining Pestle analysis model. On the other hand, report explained about
porter’s five forces model to identify competitive advantage for company. Study explained
external environment of Hungary to identify the potential threats and challenges measuring with
the help of PESTLE analysis.
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REFERENCES
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Today. Routledge.
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Kew, J. and Stredwick, J., 2017. Business environment: managing in a strategic context. Kogan
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Online
Doing Business in Hungary. 2018. [Online]. Available through:
<http://doingbusinessinhungary.com/general-information#political-and-legal-
environment>.
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