Paste your essay in here..Executive Summary
Croatia is a country located on the Adriatic Sea, to the east of Italy. With a long history of how it came to be, Croatia embraces its history and looks forward to the future. With a modernized political system of parliamentary democracy started in 1990, Croatia has found a stable from of government for itself. Joining the European Union has helped create a more stable economy for Croatia, as well. Croatia has a strong
History Overview
Croatia has a lengthy history starting over 100,000 years ago. With the major historic events starting in the 9th century. Between 810 and 925, the Croats were starting to develop their own identity as both a people and an overall state, with a religious outlook of Western Christianity (Hall). In 925, the first King of Croatia, Duke Tomislav went into power after being recognized by the pope. For a little over 166 years, Tomislav’s family had transformed the Croatian Kingdom into one of the largest powers in the region (Hall). Petar Svačić, the last king of Croatia was killed in 1102 and the Colomon of Hungary united Croatia and Hungary together (Hall). Between 1453 and 1552, Croatia was trying to protect itself from being conquered by the Ottoman Empire (Hall). At the end of World War 1, Croatia cut its ties with Austria, and joined the Kingdom of Yugoslavia, which was dominated by Serbia (Hall). Because it was a dictatorship, the Croats were oppressed severely, because they had strong beliefs in the expressions of irredentism and ethnic identity. In 1941, Croatia is established as “the Independent State of Croatia.” However, once World War II ended in 1945, Croatia rejoined Yugoslavia (Hall). After the Soviet Union collapsed and Eastern Europe went through realignments, Croatia and many other countries sought independence. Croatia elected Franjo Tudman, its first president, in 1990. In 1991, Croatia became recognized as an independent state, which helped trigger a four-year war with Serbia (Hall). After the end of the war, Croatia gradually stabilized the country, and joined the European Union in 2014 (Hall).
Croatia’s current political system first come to power in 1990 after its independence from Yugoslavia. Franjo Tudman was the first president of Croatia. Tudman was also the founder of the Croatian Democratic Union political party in 1989. Tudman led Croatia to its independence in 1991. Tudman was re-elected as president in 1997 and served the country until he died in 1999 (Misachi). Vlatko Pavletic was Croatia’s second president and only served for 3 months, after Tudman’s death (Misachi). Croatia’s third president Zlatko Tomcic held the title of president for only 18 days, in order to cover the space in between Pavletic’s stepping down and the next presidential election (Misachi). Stjepan Mesic was the fourth president of Croatia and served from 2000 to 2010. Mesic is acknowledged for promoting Croatia’s ambitions of joining the European Union and improving the foreign relationship between Libya and Croatia (Misachi). Croatia’s current president is Kolinda Grabar-Kitarovic, she is Croatia’s fifth president and the country’s first female president (Misachi).
Currently, Croatia has a parliamentary democracy. The president is elected for five-year terms, with a maximum of two terms allowed. The president is the Head of State, while the Prime Minister is considered to be the Head of Government. The president has a variety of different tasks: they are the commander in chief of the armed forces, the duty of appointing the Prime Minister and has influence on foreign policy (Political System of Croatia Today). Croatia’s Parliament is classified as a unicameral legislative body and has to have between 100 and 160 representatives that serve their terms for four-years and are elected through the popular vote (Political System of Croatia Today). Croatia’s government is headed by the Prime Minister, with 2 deputy Prime Ministers and 14 Ministers that are in charge of particular activity sectors (Political System of Croatia Today). Croatia’s executive branch takes responsibility of proposing new legislation, guiding foreign and internal policies, and executing laws (Political System of Croatia Today). Croatia’s judicial system is a three-tiered system, which consists of municipal courts, county courts, and a Supreme Court. There is also a Constitutional Court that handles any matters dealing with the Constitution (Political System of Croatia Today).
Since becoming independent and joining the European Union, Croatia has had a stable government and economy. Croatia’s economy is able to compete with countries in Southeast Europe that have some of the most developed economies (Overseas Business Risk). With the currency being pegged to the Euro, the inflation rate is low, and the currency rate is stable (Overseas Business Risk). With many banks in Croatia being owned by Italian and Austrian banks, the banking industry has been stable after Croatia was hit by the Global Financial Crisis and went through a recession of six years (Overseas Business Risk). The Croatian economy has seen a steady growth of about three percent over the past couple of years (Overseas Business Risk).
Context
Introductions in Croatia follow a fairly simple script. You first say, “My name is.” Next, you say how old you are. Then, you state what your job or profession is. Finally, you end by mentioning where you came from and where you live now (Kulturkul). However, if you are not from Croatia, you would say what country you are from, followed by the city (Kulturkul). Typically, if someone wants you to introduce yourself, they will say one of the following questions or statements: “Can you tell me something about yourself?”, “Tell me about yourself.”, “Please, introduce yourself.”, or “What is your name and where are you coming from?” (Kulturkul). It is also important to include a handshake when you are meeting someone for the first time (Culture Crossing).
Interactions in Croatia can vary, depending on the situation. When two men are greeting one another, they will give each other a handshake. If it is two women greeting, they will use air kisses, where they touch cheeks and kiss the air. If it is a man and a woman, a handshake is often used, however air kisses or hugs will be used if they are friends (Culture Crossing). Eye contact is very important when communicating and lack of eye contact would be considered as a dislike for a person (Cultural Information). In most interactions, people will be an arm’s length apart from one another, unless you are familiar with each other, in a bar, or on public transportation (Culture Crossing). In Croatia, humor is considered to be widely used and is appreciated in conversations (Culture Crossing).
Manners in Croatia are somewhat similar to what we see in the United States. As mentioned before handshakes are important, especially when meeting someone for the first time. Maintaining eye contact is also very important, especially in the workplace, and can be taken as a sign of dislike if it is not maintained (Cultural Information). There are also some gestures that are considered to be rude: giving the middle finger, pointing at someone, and waving a pointed index finger (Cultural Information).
Gender roles in Croatia are also somewhat similar to the United States. Women have equal rights and a part of the labor force. In the workplace, women tend to make less than men and are often working in lower level positions that have little to no authority (Culture Crossing). Women are expected to have a job, instead of staying home and doing housework all day (Croatia). Even though women are getting jobs, they are still expected to clean, do laundry, cook, and take care of the children (Croatia). Women are also as likely as men to pursue higher levels of education (Croatia).
Business culture in Croatia is interesting. Work is often finished at the last minute to reach deadlines, but it is frowned upon to be late for business meetings. Both men and women are dressed formally, which is a sign of respect and demonstrates their attitude toward the company. The practice of gift giving is complicated in Croatian companies. Gifts are not expected to be given in the first meeting and expensive gifts are not recommended (Business Etiquette). Bribery is common in Croatia in order to get contracts or cut through red tape while trying to start a business (Business Etiquette). The decision-making length in Croatia varies for each company, however each company tends to follow schedules and deadlines but have some room for flexibility, so the decision-making length is considered to be moderate (Croatia Management Guide). Companies in Croatia follow a hierarchy business culture, so the decisions will be made by the top-level employees and not the managers. Managers tend to act as if they were consulted when relaying the decisions made to the lower level employees, but most often times the decisions were made without any of their input (Croatia Management Guide).
Family life in Croatia is important. Marriages are set up similar to the United States and not arranged by families. Often times the marrying couple are in their early 20’s and of the same nationality, religion, education level, and social status (Croatia). Divorce is considered to be undesirable but is still becoming more common (Croatia). Typically, after marriage the couple will move in with the husband’s parents or grandparents due to housing shortages and for taking care of children or the elderly (Croatia). The house or apartment is the most important thing that is passed on from one generation to another. Typically, one child will inherit the housing, but the wealth will be equally distributed among all of the children (Croatia). The average lifespan in Croatia is 78 years old, which is the highest it’s been in the history of recording Croatia’s average lifespan (World Bank). In 2017, the population of Croatia was 4,125,700 which is less than it was in 1960, when the country’s population was first recorded. The highest population was recorded in 1990 with a total population of 4,780,000 (World Bank).
The education system in Croatia starts when a child is six months old. Between the ages of six months to six years old, children start their education in nurseries and institutions that are similar to what the United States calls “preschools” (Education System,). Once a child is older than six, they have to attend elementary education for eight years. In 2016, 95.396% of the total population between the ages of six to fifteen were enrolled in elementary school (World Bank). After elementary education, the children have the option to continue onto secondary education. Secondary education is divided into three types based on the learning curriculum. The first type is called gymnasiums, which is where students go to school for four years and cover a wide variety of learning topics. The second type is vocational schools, where students learn about topics that are either industrial, technical, or craft based for anywhere from one to five years, depending on what they choose to study. The final type of secondary education is art schools, where students study music, dance, or art for one to five years depending on their program. Both elementary and secondary education is free in Croatia, as long as the students attend “state schools” (Education System).
Croatia’s higher education is very similar to the United States’ higher education system. The only major difference is that in the United States college students earn degrees, while in Croatia the students earn titles. If a Croatian student completes a three- or four-year program, they earn the title of Bachelor. If they decide to continue past their bachelor title, they will earn the title of Master after completing another one- or two-year program. Finally, they can earn the title of Doctor of Science or Doctor of Arts after completing another three-year program (Education System). In Croatia, the university has been a tradition, with the first university being established in 1396 in Zadar. In 1669, the Zagreb University was developed after King Leopold promoted Zagreb Jesuit Academy into a university. The modernized University of Zagreb was founded in 1874, with the major areas of studies being: Law, Theology, and Philosophy (Education System). Today the University of Zagreb is Croatia’s largest university and has twenty-nine faculties, three university centers and academies. Currently, there are ninety public and thirty-two private higher education universities and institutions found throughout Croatia. Over 67.5% of Croatia’s students are enrolled in higher education systems, which is the highest number of students recorded (Education System).
Croatia’s currency is not worth trading on the open market. With one kuna equaling about $0.12-$0.15 between three of the most common currencies (pound, euro, and US dollar) there is no worth in trading Kuna into the stronger currencies. It wouldn't even be suggested that one kuna be traded for the yen and the won, because of how weak of a currency they both are, meaning that you would need over 1,000 wons or 100 yen to equal a strong currency such as the US dollar or euro, so essentially it is worthless to trade other currencies for the kuna.
According to the World Bank, in 2017 Croatia’s GDP was $58.85 billion in United States dollars (2018). The service industry is Croatia's largest GDP producer, making up 59% of the total GDP (The Economy). One of the specific forms of services that brings money into the economy is tourism. In 2012, about 11.8 million tourists had an overnight stay in Croatia and 92% of them were from foreign countries (The Economy). With the Kuna being a weaker currency, tourists could exchange less of their home currency for a larger amount of kuna, therefore Croatia could be considered an attractive travel destination for countries with stronger currencies.
Croatia has seen its inflation rate more than double this year. In January, the inflation rate was 1.1% and after a steady increase from March to June, the inflation rate was 2.4% at the end of June (Croatia Inflation Rate). Starting in July, the inflation rate started to decrease until September, however in October it increased again. The inflation rate affected the food and non-alcoholic beverage industry the most, with the highest increase in prices seen in the bread and cereals category with the rate spiking from 1.2% to 2.6% (Croatia Inflation Rate). From 1999 to 2018, Croatia’s average inflation rate was 2.29% (Croatia Inflation Rate). In July of 2008, Croatia’s inflation rate hit a record high of 8.43% (Croatia Inflation Rate). While in May 2016, the inflation rate was an all-time low of -1.8% (Croatia Inflation Rate).
The most important category of the consumer price index in Croatia is the food and non-alcoholic beverages and it makes up 27.9%. Housing and utilities are next, and they make up 16.2%. The transportation category makes up 12.6%. Miscellaneous goods and services accounts for 7.5%. Clothing and shoes are 6.5%, while recreation and culture make up 6%. The last 23.3% is a combination of household goods and furniture, communication, health, education, hotels, alcoholic beverages, tobacco products, and restaurants (Croatia Inflation Rate).
In the second quarter of 2018, Croatia’s employment rate was at 61.1%, which is an increase of the 2018’s first quarter’s rate of 59% (Croatia Employment Rate). Croatia’s average employment rate from 2002 to 2018 was 56.09% (Croatia Employment Rate). In the third quarter of 2008, Croatia saw a record high employment rate of 62.2% (Croatia Employment Rate). The all-time low employment rate of 50.7% was seen in 2013 during the first quarter (Croatia Employment Rate). Croatia’s unemployment rate was 9.1% in October 2018, which was down from October 2017’s rate of 11.6% (Croatia Unemployment Rate). With the average unemployment rate being 17.44% from 1996 to 2018, an improvement in the economy and available jobs has occurred (Croatia Unemployment Rate). The record high unemployment rate was seen in January 2002 with 23.6% (Croatia Unemployment Rate). The lowest rate was 8.4% in September 2018 (Croatia Unemployment Rate). The average retirement age in Croatia is 62 for women and 65 for men, which is similar to the retirement age in the United States (Croatia Employment Rate).
Strengths
One of Croatia’s strengths is its stable banking system. Croatia’s banking system is back up by foreign capital, with 90% of the banks are either owned by a foreign country or have shareholders from another country (Wittine & Vuk). With the stable banking system, Croatia is able to maintain price stability for the goods and services sold in the country and ensure stability for the overall financial system of Croatia (Corporate Financial Institute). Another strength is Croatia’s stable levels of tourism. Tourism is Croatia’s number one GDP (Tourism). Tourism not only draws people to Croatia but encourages them to spend their money there as well. With the increasing number of tourists, Croatia has seen a change in the structures that tourists stay in, introduction of international airlines, and an addition of cruises around the Croatian coastline (Tourism).
Croatia has three strengths when it comes to exporting and transporting their goods and services. Croatia exports the majority of its commercially owned agriculture products to nearby countries, specifically Bosnia, Herzegovina, Italy, Slovenia, and Serbia (Croatia). Croatia also exports a lot of aquaculture, farm raised fish, to Spain and Japan (Croatia). Aquaculture has been a growing industry in Croatia over the past couple of years and is gaining more importance for Croatia’s economy (Croatia). Another strength is that Croatia is considered to be very open to international trade. Croatia conducts two-thirds of its overall export trade with other European Union members, with the other one-third coming from trade with Italy, Bosnia, Herzegovina, Germany, Slovenia, and Austria (Croatia). Croatia mainly has import trade with Italy, Germany, China, Russia, and Slovenia (Croatia). Croatia’s final strength is the availability of transportation routes for imports and exports. Because of its location Croatia is able to utilize its long coastline on the Adriatic Sea. There is also newer highways and railways, as well as international airports to help transport goods and services in and out of the country (Croatia).
Weaknesses
One of Croatia’s weaknesses is its large foreign debt. In October 2018, Croatia’s gross foreign debt was 40.1 billion euro, which is about 80% of Croatia’s GDP (Hina). Experts are predicting that the foreign debt to GDP ratio will decrease below 80% by the end of this year, however that is still a large amount of foreign debt. Another weakness is Croatia’s natural damage related damage. Out of the European Union, Croatia has the lowest amount of property insurance with only 35% of citizens and businesses having insurance, making the country have a large economic loss from natural disasters (Hina). The average annual loss is 0.2% of Croatia’s GDP, this is twice as much as any other country in the European Union (Hina).
Another weakness is Croatia’s multilayered public administration. Due to the set-up of Croatia’s public administration, both domestic and international businesses suffer from a confusing business environment (IMF). Because of the multiple layers of administration, business owners have to deal with multiple licensing costs and constant run ins with red tape (IMF). Another weakness of Croatia’s is the high investment barriers. These barriers are related to the multilayered public administration, because of how many things a business has to do before entering Croatia as a business (World Bank). These barriers can take either a short or long amount of time, before the business is able to clear them (World Bank). Croatia’s final weakness is the low participation rates in employment. Croatia is seeing a shortage of both unskilled and skilled workers in the workforce (IMF). The biggest shortage of workers are either the youth or women, due to the low incentives of accepting jobs and low amount of child care facilities (IMF).
Opportunities
One of Croatia’s opportunities is to change from the Kuna to the Euro as the national currency. By changing from the Kuna to the Euro, Croatia will not only be embracing its acceptance in the EU, but help people compare prices of goods and services to other Euro Zone countries. Changing from the Kuna to the Euro, will also eliminate the risk of currency rate fluctuations (IMF). Another opportunity is lower interest rates. Croatia is trying to pass new administrative reforms that would help lower the interest rates in Croatia. In order to try and encourage more businesses to come to Croatia (IMF). Speeding up structural reforms is another opportunity for Croatia. The current implementation of structural reforms has been slow, which has impaired Croatia’s competitiveness (IMF). If the structural reforms were to be sped up, they would also help improve both domestic and foreign investment, the efficiency of the public sector, and encourage more potential growth (IMF).
Croatia also has the opportunity to better utilize its own state assets. Croatia relies on imports in some industries, instead of using its own assets to get the products (IMF). If Croatia were to utilize their own assets, it will help improve the economy and provide new jobs (IMF). Another opportunity is to increase exports. If Croatia was able to improve the labor force participation and utilize more of their own assets, there would be more goods and services available to be exported (IMF). This would improve the economy and potentially encourage businesses to invest in opening up in Croatia in whatever “new” industry has the most potential.
Threats
One of Croatia’s threats is the fluctuating currency exchange rates with the Kuna. If the Kuna loses its value, it will be hard for Croatia to compare it to the Euro, which is very important since Croatia is a member of the EU and does the majority of its trading with the EU (IMF). Another threat is the potential impacts on Croatia if an EU member nation suffers a financial crisis, especially if the country does a lot of trading with Croatia (IMF). Another threat is the potential relapse of the 6-year rescission Croatia went through. Even though Croatia has made progress towards getting the economy back on track, there is still the slight potential for a relapse if too much is done to try to help the economy too fast (IMF).
Another threat is the heavy reliance on other countries for the majority of agriculture and aquaculture products. If Bosnia, Herzegovina, Italy, Slovenia, and Serbia were able to start raising their own products or find another country to get the products from, Croatia would suffer a loss, because of the heavy reliance on those countries to buy those exports. Another threat is Croatia’s reliance on other countries for oil and gas. Deposits of both oil and natural gas are found throughout Croatia, however the country consumes more than it can produce (Croatia). If countries stopped importing oil and gas to Croatia, the country would have to develop other methods of energy, because of their low resources.
Even though Croatia has good strengths, the country has to remember it has weaknesses, and should make strides at finding ways to improve their weaknesses and potentially turn them into strengths. For example, Croatia could invest more in property insurance in order to lower the impact of natural disaster related damage, with the possibility of one day having the most property insurance compared to EU members. Croatia also has to look at its opportunities in order to grow its economy. Threats cannot be forgot about and should be monitored to prevent or lower the likelihood of them hurting Croatia’s economy.
Depending on what industry the international company is in will determine if they should move their company to Croatia. If the company were in the travel and tourism or banking industry, then relocating in Croatia may be a good move. With the high amounts of tourists and the size of the tourism industry, as well as the stability in the internationally owned banks should show internationally owned businesses that Croatia is a safe and stable country. The high amounts of exports are a positive in the agriculture and aquaculture industries, so if a company is in that industry, Croatia should be considered if the company is looking to relocate or expand. The biggest potential issue for any company looking into relocating to Croatia is the confusing, multilayered public administration that requires companies to go through several layers of red tape before starting their company in Croatia.
Conclusion
Croatia’s long history has shaped it into the country that it is today. Going through several styles of government from a monarchy, to a dictatorship, and ending with a parliamentary president has shown how the country has modernized itself. With many aspects of the country’s business and social etiquette similar to that of the United States, American companies looking into doing business there will not have to worry about spending a lot of time learning about what mannerisms are considered rude and which are acceptable. Education plays a big role in students’ lives in Croatia with a school system style similar to the United States. Even though Croatia’s currency is considered to be weak compared to the United States dollar and the euro, its exchange rate has been holding a steady value. The service industry in Croatia makes up 59% of Croatia’s total GDP, with the tourism sector making up the majority of the industry. Croatia has seen a somewhat steady inflation rate over the past 11 months with no dramatic increases. Croatia has a confusing outlook on employment, there is a high employment rate, a somewhat high unemployment rate, and many women and young adults do not want to work. There are many strengths and opportunities for doing business in Croatia, however there is several weaknesses and threats as well.