Abstract
Manufacturing industries contribute to the Gross Domestic Product of an economy, so it has to keep up with the latest trends and key emerging societal factors that are aligned with the cultural factors. The construction and manufacturing industry is helpful for a much-skilled labour force because it integrates high-value parts, design, research and development, and marketing. In Hungary, there are several global chains of multiple industries that are further comprised of millions of medium, small, and large manufacturers that are facing intense demand from consumers, and manufacturing innovating products. Today, global economies are ignited by macro-environmental trends. The report discusses a comprehensive scenario of the economy of Hungary as an emerging market. Key conditions in the local business environment, socio-economic and political factors and key entry strategies to enter in a new market are a part of this report. The research report elaborates the involvement of business in the economic growth of a country and key role played by industries to involve people under economies of scale.
Introduction
Hungary is a part of central Europe that has transitioned from a planned economy to a market-based economy (Lane, 1995). Emerging technology is changing the direction of business and overall industry and further involving new strengths, capabilities, merchandisers, and professionals (Bae, S. Y., 2018). Aerospace, agriculture, and healthcare sectors are now specializing in better development aspects and have gained a strong position worldwide. This research report is going to discuss Hungary as an emerging market, in future it will be changing the economic patterns. The report will examine Hungary economy as an emerging market, and it will analyze the local, cultural, legal, and political factors that are shaping this overall economy. In addition the following will also be discussed key market entering strategies, the overall performance of the economy, trends, risks and challenges, entry and long term strategies to minimize risk as well as recommendations to businesses looking to enter this market.
The Local Business Environment
Under global strategy, Hungary’s economy has gained significant importance due to the marketing mix and segmenting the local market. It has been seen that this economy is an attractive destination for international business now, and it is going to be in the future. Business and service industries are considered a powerful segment of the economy that cannot only change the future of the labor market but also create more opportunities for business (Eszes, L., & Muhlemann, A. 1993).With the rapid expansion in transport, trade patterns, and communications, the international market has provided easy access to all businesses(Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018).
To fulfill consumer requirements, world is getting harmony in all its processes, such as technology, lifestyle, transportation, capital, and travel. Resurgence in global standardization at international level provides many motives to global firm’s decisions about trade. International marketers focus on right standard balance in global businesses so that performance can be optimized (Chan, E., 2019). Integration level is viewed at a global level due to global marketing strategy and role of marketing tactics. Technological advances have a significant role in the economy.
Global expansion caused the industry to push its product launch regarding automation, knowledge-based products, and biotechnology (Eszes, L., & Muhlemann, A. 1993). Economy can better explain the consumption perspectives of an industry when it comes to its specific features and products (Chaudhry, H. and Hodge, G., 2016). Value, when produced in commodities, undertake cultural and political-economic approaches to fulfill the historical trends. Marxist economists focused on linear commodity trends to discuss the concept of production and consumption. Individual production network tends to acquire vertical structure systems for the provision of consumer goods.
Approach of economy regarding the interaction of horizontal factors undertakes all political, socio-economical, and cultural factors, about consumables that move from one country to another. In Hungary, the automotive industry is advanced, and leading edge technology is implemented in biotechnology sector (Lane, S. 1995). A regulatory environment for the development of pharmaceutical products and biotech products is implemented. Through low cost and quick method of manufacturing, consumers engage in the ever-changing collection of affordable commodities; for instance, capital sources are involved in corporate development and spin-off activity. The rapid changes in trends and evolving lifestyle perspectives have shaped the industrial products (Cox, H. and Mowatt, S., 2012). On a broader culture, tremendous stress is placed on the system of production that can be labor-intensive. Hungary has a broader scope regarding fashion and footwear due to potentiality of factors; for instance, high-end fashion, products for the younger generation, and luxury brands are an important part of Hungary’s economy (Eszes, L., & Muhlemann, A. 1993).
Hungary’s economy focuses on broader business initiatives; for instance, construction industry is facing local regulation and strong price competition. The economic position of Hungary is based on GDP, and it’s per capita income is two-third of the average of EU-28, while in 2018, its GDP was $155.7 billion (Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018).Current markets are performing good and high competition is see in main global brands, their high quality of products, and performance is causing difficulty for new firms to enter(Lane, 1995).Opening of a fashion company in a new place is based on certain factors, some of which are difficult. In Hungary, supply of raw material and transportation is advanced level and moving towards sustainability and therefore making the competition intense (Eike, R. J., 2018). Hungary economy is performing a competitive role in the education and ICT segment of the industry. Socioeconomic and demographic factors and trends are likely to shape its future potential as an emerging market (Lengyel, B. and Cadil, V., 2009). For global trade supplier finance, capital is made available to the suppliers, who are engaged at the global level, to practice better policies. To open a business in Hungary, its cultural and social factors are important to consider; for example, if fashion textile industry decides to open its brand in Hungary, it will have to focus on its market, economy, and social aspects (Jarmuzek, M., Orlowski, L.T. and Radziwill, A., 2004). Consumer values, socio-cultural patterns, ethnicity, and perceptions of consumers are some key factors that will change the future market and its potential (Gardetti and Muthu, S., 2020).
PESTLE analysis
Industrial development is competitive in terms of the provision of quality and sustainability of products in Hungary. Segmentation, targeting, and promotion policies of different companies are conducive to increase sales and consumer spending (Lengyel, B. and Cadil, V., 2009). PESTLE analysis deals with all political, economic, technical, social, legal, and economic factors at a place. For instance, if Apple is planning to open in Hungary, it has to consider all the factors in the IT industry in Hungary regarding segmentation.New entrants in Hungary will face intense competition because stable socio-economicsystem.Political system is stable, yet some after-effects are due to the international worsening of global issues that will cause new incumbents to focus on their cost structure. Before 2019, Hungary’s fashion market has faced good performance, and its recorded revenue reached $75 billion, according to the National Fashion Chamber Hungary (Jacobs, and E., 2016).
Healthcare in Hungary is facing some global uncertainties, yet it is providing opportunities to British companies such as investment projects, management consultancies, supply of medical equipment, and hospital management services (szikinger, 1999). Economic situation in Hungary is much better due to the presence of many luxuries, lifestyles, and consumer goods in the Lombardy region (Kim, E.-D., 2000). A multi-party democracy of Hungary is divided into conservative right and opposition.
Legal system in Hungary is strict and composed of many regulations and rules. Fundamental law in Hungry is considered a parliamentary republic. For sustainability in the environment, the rule of law is established. Many implementations are faced with business networking (Mcgrath, P., 2013). The commercial communication system is established to know about products’ sustainability. Legal factors are persistent in following the rules and product’s life cycle as well as to reduce any impact on the environment. Specific manufacturing elements have to undertake to license regarding product’s packaging or supply chain and transportation (Lee, J. K., 2018). Legal system also provides confidence about state laws, product features, and fashion-based networking. Property laws and intellectual property elements prevail in the economy that is helpful for whole industry brands.
Economic factors such as inflation, employment level, and per capita income in Hungary are stable for businesses to make companies more productive, and industry can gain its sustainability. Social atmosphere and socio-cultural aspects undertake values and norms, societal characteristics, customs, ethics, and other peculiarities that work significantly for fashion as an emerging market. These factors are important to consider when a business company tries to launch a new product or bring innovation in existing products. For instance, in 2018, US merchandise exports to Hungary were $1.75 billion, and the main exporting items were automotive components, IT equipment, vehicles, electric machinery, electronics, and other manufacturing supplies. It is also working on the economies of scale rule to target consumer’s standards and fulfill their expectations (Mitterfellner, O., 2019).
The socio-cultural factors in Hungary are traditions, values, and norms that people love to see in their favorite brands. In Hungary, despite sustainable implementation, an adequate legal framework about environmental rules is implemented. Activities of involvement with rules & regulations customers will be fruitful to enter into the market. Difference in attitude and culture is a key factor that multiple brands have to focus on while entering in an emerging segment of society. Sustainability of products in Hungary is maintained under specific guidelines of commercial communication to make sure that traders are focusing on green claims (Mcgrath, P., 2013). In Hungary, rapid industrialization has raised environmental concerns; therefore, product sustainability needs environmental protection policies.
Entry Strategy and General Business Strategy
Main driver of growth in Hungary is domestic demand; it was estimated in 2019 when rise in wages and high consumer confidence was observed. In same year, the foreign investment acted as a strong performing vehicle, and the electronic sector captured interest of global investors (Lengyel, B. and Cadil, V., 2009). Long term strategiesthat new business could adapt to mitigate risksarising from challengesare to be more competitive and revolutionized due to digital market ideas.In Hungary, there is a high wage rate, high profit margins and increased tax collection that can be an attractive entry point for new firms, so they can enhance a general balance of the economy. Due to business and industry growth, Hungary’s economy faced public debt going down, and International Monetary Fund anticipates that in 2020 this debt will be 65.1% and further will reduce to 62.9% in 2021 (Szent-Iványi, B., Végh, Z., & Lightfoot, S. 2018). There is a need for fiscal consolidation for the economy because its supply-side reforms need to maintain growth momentum so that global resilience can be built.
The economy of Hungary undertakes entry and long-term strategies that could mitigate risks arising from the challenges. The entry mode in international business segments adopts various policies such as product export, involvement in joint ventures, participation in the franchise sector, and making operational alliances or subsidiaries (Szent-Iványi, Végh & Lightfoot, 2018). IT, automotive, and construction sectors in Hungary can become more competitive by adopting growth features to get short and long terms success. Due to high competition at a global level, Hungary’s economy will focus on a continuum by nagging in low control to high control practice with resource commitment. Low control model needs more limited commitment of resources, so investment risk is reduced. However, in economy, some firms have little power in global operations that can result in declined financial outcomes (Sadachar and Manchiraju, 2016).
In this case, competitive business brands can enter in Hungary market by focusing on key cultural practices, norms, and involvement of values in the society. Foreign market expansion by any brand also has to focus on the skills and managerial expertise while entering into a new market (Mcgrath, P., 2013). Retail environment in the industry has to establish a competitive brand under specific format, assortment, and product offering. Retailer needs a specific kind of entry mode that matches with the global expertise and its international experience (Lane, 1995). This aspect is closely related to tackling foreign market challenges. The industry undertakes key cultural and market-related factors as competition because these factors are integral to understand economic and political stability. The company has to focus on supply chain management and distribution practices (Szent-Iványi, Végh & Lightfoot, 2018).
In Hungary, the government does not restrict foreign investment. Foreign direct investment is not limited and convenient to organize a large scale for specialized firms (Lengyel, B. and Cadil, V., 2009). Hungary’s industry is specialized in terms of multinational investment to cater to consumer demand. foreign firms win market share from incumbents by adopting different strategies like price wars, raising specific barriers, and making intense competition (Sweney, M., 2019). Competitive advantage in Hungary is considered complex due to the degree of internationalization. According to specialization of segments, the market diversifies and modify different areas of products to shift the market trends. Economy of Hungary is lucrative for global business firms because they can reap the benefits by acquiring a larger market share (Lengyel, B. and Cadil, V., 2009). New businesses can enter by analyzing their competitors’ profiles as well as researching the potential of the Hungary market (Eszes & Muhlemann, 1993). The pricing, product value, and advantages are important to consider. Consumer market has been focused on existing brands, division categorization, and product diversification is necessary to enter in the market because these aspects are inherently related to the economy.
Conclusions and recommendations
Economy of Hungary is set up on a competitive framework that incorporates the latest trends, expertise, and skilled labor force into the product portfolio. Countries engage cultural and social factors in their products because it is helpful for targeting better customers. Country-specific socio-economic & business factors must be considered by new businesses to gain a competitive advantage in Hungary’s market. Working in a foreign country requires a firm to consider its specific economic, political, legal, and environmental policies. New businesses have to focus on specific norms and values operating in Hungary regarding competition in industry because already present firms are operating in tough competition.
Some fashion and business brands have to undertake country risk uncertainty to survive in atmosphere and to ensure the profitability of the firm. In a foreign market, uncertainties like economic health, inflation, disposable income, and political stability and unemployment rates have a considerable impact on the company’s performance.
Key recommendations for new business, who want to enter in this market are research and development, flexibility, and a focus on high control models. They should be avoided to limit resource commitment. To be successful in the global market of Hungary, companies should select low control, entry models, because there will be a high country risk. New businesses have to consider government restrictions. It is recommended to maintain control in emerging market by complying with local rules.
Many competitive business attempt to start operations in Hungary, so they have to focus on political, economic, legal, and environmental factors in the Hungary market. IT, automotive, and fashion being sophisticated industries have to work on a diverse set of occupations. This research has highlighted the significance of certain institutional and cultural factors that play a significant role in the development of an economy and help elevate a firm’s business performance.
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