ECONOMIC FORCES
Economic forces refer to the nature and direction of the economy in which the business operates. It can contribute to the failure or success of a company. These factors, have a direct impact on the potential attractiveness of various strategies.
Worker productivity levels
According to the report of the Council, associated with the low productivity there is the low level of sophistication and diversification of the productive device, which ends being reflected in the loss of sophistication of the Colombian exports. 4,5 Colombian workers manage to need to produce praise that a North American worker produces, demonstrating the empty field that exists in the aptitudes and performance of one and other one. (Dinero, 2014), Because of it is necessary inside our business to qualify every employee for the major productivity
Dinero.com, (2014). Colombia se raja en productividad. [online] Available at: http://www.dinero.com/pais/articulo/productividad-competitividad-colombia/202863 [Accessed 11 May 2014].
Stock Market Trends
The market of actions in Colombia initiated 2015 in the same way as it ended the previous year, that is to say with downward behavior. The international prices of the oil have done that the investors castiguen strongly the actions (dinero, 2015), The actions in Colombia are in the same behavior of 2014 this indicates that the oil prices remain affected to the economy and therefore to our company.
2015, L. (2015). Las acciones más atractivas en 2015. [online] Dinero.com. Available at: http://www.dinero.com/inversionistas/articulo/acciones-para-comprar-durante-2015-colombia/204578 [Accessed 1 Jun. 2015].
Es.tradingeconomics.com, (2015). Colombia - Mercado de acciones. [online] Available at: http://es.tradingeconomics.com/colombia/stock-market [Accessed 24 Aug. 2015].
Demand shifts
Although there is a lot of congestion in Colombia, specially in Bogotá, it is still not having any negative effect on the demand for vehicles.
38% of vehicles registrated in 2013, where in Bogotá.
Utility cars are the ones with higher demand due to the free trade agreement with the US. Taxis also had positive results during the past years, due to the stock in public service transportation.
The demand information shown before, shows a constant increse in car demand in Colombia, as well as the projections based on historical data.
Proyección de la demanda automotor en Colombia
UPME, PROYECCIÓN DE DEMANDA DE COMBUSTIBLES EN EL SECTOR TRANSPORTE EN COLOMBIA, (Marzo 2015), Found in: http://www.sipg.gov.co/sipg/documentos/Proyecciones/2015/Proy_Demanda_Mar2015.pdf
BBVA Research, "Automotive Outlook" (March 2014) Found in: https://www.bbvaresearch.com/wp-content/uploads/migrados/ESAUT_1404_Colombia_AutomotiveOutlook_Apri14_tcm348-444417.pdf
Inflation Rates
The inflation rate measures how fast prices for goods and services rise over time, or how much less one unit of currency buys now compared to one unit of currency at a given time in the past.
En lo corrido del año 2015 se registró una variación de 3,52 %. Esta tasa es superior en 0,79 puntos porcentuales a la registrada en el mismo periodo del año anterior (2,73 %).
Entre agosto de 2014 y julio de 2015, es decir los últimos doce meses, el IPC presentó una variación de 4,46 %, pero se espera que para el cierre del año la inflación este en 4,1%.
the level at which inflation is established affects our company. the more increases, we must pay more for the same amount of products and tools we need to provide our service.
http://www.banrep.gov.co/economia/pli/bie.pdf
http://www.portafolio.co/economia/inflacion-julio-2015-colombia-dane
http://financial-dictionary.thefreedictionary.com/Inflation+Rate
Value of de Dolar in World Markets
Preciodolar.com, (2015). Precio del dolar hoy - Precio dolar hoy - Dolar hoy - Valor dolar hoy! | PrecioDolar.com. [online] Available at: http://www.preciodolar.com/dolar-hoy [Accessed 24 Aug. 2015].
http://www.portafolio.co/negocios/disponibilidad-credito-empresarios
http://data.worldbank.org/country/colombia
http://www.sura.com/blogs/mujeres/habitos-consumo-colombia.aspx#sthash.aXyREdyt.dpuf
Foreing countries economic conditions
The current values, the historical information, the forecasts, statistics, graphs and economic calendar - Colombia - GDP. (Es.tradingeconomics.com, 2015) from the point of view of our company it is possible to say that the production of goods and services in Colombia for the year 2015 diminished in 4 in which it presents losses for our sector.
Es.tradingeconomics.com, (2015). Colombia - GDP. [Online] Available at: http: // es.tradingeconomics.com/colombia/gdp [Accessed 24 Aug. 2015].
Import and export factors
Import
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Vehicles represent a 9,7% of the total imports, and oil an 11,8% (other top imorts include machines and electronic equipment.
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Forty one percent of Colombia´s automotive industry is a domestic production, while 59,9% is imported
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Between 2013 and 2014, imports in this sector increased a 16,3%
Pro export Colombia, "Automotive industry in Colombia", (April 2012) Found in: http://www.investincolombia.com.co/attachments/Automotive%20Industry%20in%20Colombia%20-%20April%202012.pdf
Export
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Crude petroleum represents the 42% of the total exports and the coal briquettes the 14%
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The high production and sales of vehicles, led to a growth in the auto parts exports
Pro export Colombia, "Automotive industry in Colombia", (April 2012) Found in: http://www.investincolombia.com.co/attachments/Automotive%20Industry%20in%20Colombia%20-%20April%202012.pdf
BBVA Research, "Evolución reciente del sector automotor" (2014) Found in: https://www.bbvaresearch.com/wp-content/uploads/2015/03/3Evolucion1.pdf
This information about imports and exports, shows that the automotive industry in Colombia is very important for the economy of the country since 2007. Auto parts exports have been stable since then. On the other hand, imports represent a high demand on the assembly industry in Colombia.
Price fluctuations in Colombia
Colombia have been experiencing a significant inflation, in relation with the past years. Some prices increased 3.66% during 2014 and as a result, there have been adjustments in lease rates, notary fees, and some tolls.
Another important aspect, is the high dollar price, which increases the prices in a lot of industries like the automotive and turistic.
El tiempo, "Inflación del 2014 fue casi el doble que la del año anterior", por: Economía y Negocios. (15 de Enero 2015). Found in: http://www.eltiempo.com/economia/indicadores/inflacion-colombia-2014/15057302
This information means, that during the past 3 years Colombia have been experiencing an increase in car prices, due to the high dollar price. Auto parts imports increase in relation with the dollar price.
Unemployment trends
From the point of view of our business of car wash it is possible to realize an analysis that the economic situation for which Colombia is happening in questions of Unemployment rate can concern our company since if employment does not exist, People does not possess the sufficient income to take our service, in addition We can offer also as positive aspect flexible work to those who need employment.
Indexmundi.com, (2015). . [online] Available at: http://www.indexmundi.com/colombia/unemployment_rate.html (indexmundi, 2015/03) [Accessed 24 Aug. 2015].
Income differences by region in Colombia
DANE Boletín de prensa. "Cuentas departamentales - Colombia Producto Interno Bruto (PIB) Comportamiento 2000-2012" (Mayo 2/ 2014)
Most of the departments had an income increse during 2011. The three departments with the major participation are Bogota D.C (24.7%), Antioquia (13.1%) and Valle del Cauca (9,3%). In the table shown below, these are the three departments that had the major participation in new vehicle registrations in june of 2015.
New vehicle registrations department in June 2015
Shift to a service economy
The services sector has had a growing progress in the economy not only in Colombia but in all over the world. From 2011, the sector has been rising in the growth of the Colombian economy, aproximately 6% of growth till 2014. It is based on a simple concept that is to understand the point of view of the user, taking it as a key point to innovate and go continually growing as organization. This is a very important variable for our company because we are in this sector, and it demonstrates that people are looking for people that do some work or activities for them as an occupation or business and that is a service definition.
Availability of credit
Credit is an agreement that makes the buyer to get something with the compromise to return over time, clearly obtain a credit generating a debt and it is clear that it should be a limit as to what you want to borrow. We notice that the domestic credit provided by financial sector is been increasing with the past of the years, from 2011 to 2014 it has increased approximately in a 6%. The wide availability of credit is useful for several things and it’s divided in different ways (Housing Credit, Consumer Credit, Trade Credit, Microcredits).
For us, the most important ways of credit are the consumer credit and the trade credit. The consumer credit is important for our industry, so we can know the facilities that a person has to get a credit to buy specially a car. This type of credit has grown in Colombia at a real rate of 9.22%, as much cars people buy as more we might have more work. The trade credit, because we as new entrepreneurs can form an initial basis for what will be our organization.
Levele of disposable income
Rango salarial Poblacion (%)
$644.350 (salario mínimo legal) 54,82%
Entre $644.350 y $1.000.000 18,92%
Entre $1.000.001 y $1.500.000 8,12%
Entre $1.500.001 y $2.000.000 6,37%
Entre $2.000.001 y $2.500.000 3,38%
Entre $2.500.001 y $3.000.000 2,85%
Entre $3.000.001 y $4.000.000 2,71%
Entre $4.000.001 y $5.000.000 1,20%
Entre $6.000.001 y $8.000.000 0,79%
Entre $5.000.001 y $6.000.000 0,51%
Entre $8.000.001 y $10.000.000 0,33%
100%
Every year the minimum wage has an adjustment, as the table shows from 2005 to 2015 it has a difference of $262.85 Colombian pesos. This cipher is really important for us because as employers we must know the minimum wage to pay all employees fairly and according to law, furthermore, 54% of the population earns this amount its approximately the half of the country, it show as that the level of disposable income is really low and as the income gets higher the amount of population decreases.
Interest rates
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The monetary policy intervention used by the Central Bank is th main mechanism to affect the amount of money circulating in the economy, is to change the minimum interest rate it charges banks for loans that makes them , or maximum interest rate you pay for extra money receive them . Are youIntervention rate monetary policy of the Bank of the Republic from Monday September 1, 2014 is 4.50%,
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The Prime rate is an indicator of lower interest rate for loans offered by banks to their best commercial customers the Prime rate 3.25 % (July 2015).
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The table above show us the interest rates of the most important Colombian Banks for credit cards the general average from February 2015 is of 27,14% (Effective annual rate), we can notice that it has been a little decrease and this rate is the lower one. This variable is important for us because we can know the rates for the credits we might ask for, and compare the different rates of the banks so we can choose the most convenient one.
Federal government budget deficits
Is a government document presenting the government's proposed revenues and spending for a financial year, the budget deficit is the excess of spending over income over a particular period of time.
Como producto de la desaceleración de la economía colombiana en lo corrido del año y también de la reducción de los ingresos derivados de la actividad minero – energética, el Ministerio de Hacienda y Crédito Público anunció la revisión de la meta del déficit fiscal para el 2015, y reveló que el déficit este año sería del orden del 3% del PIB (aumento en un 0.2% de la meta anterio, la cual era de 2,8%.
This expenditure increases the total of the demand for goods and services in the economy and this tends to raise prices , it generates inflationary pressures. That inflation affects people and companies who will have to pay more for the same amount of goods and services.
http://www.businessdictionary.com/definition/federal-budget-deficit.html#ixzz3jKAklEln
http://www.portafolio.co/economia/deficit-fiscal-colombia-2015-cardenas-ministerio-hacienda
Gross domestic product trend
The monetary value of all the finished goods and services produced within a country's borders in a specific time period.
La Junta Directiva del Banco de la República, en enero anunció sus proyecciones de crecimiento de la economía colombiana para 2015 y, luego de una revisión a la baja, pronosticó una expansión del Producto Interno Bruto (PIB) de entre el 2% y 4%, con 3,6% como cifra más probable.
Por su parte, el ministro de Hacienda, Mauricio Cárdenas, aseguró que esta tasa de crecimiento, si bien es menor a la proyectada por el Gobierno, de 4,2% para este año, sigue siendo mucho mayor a la Latinoamericana. El Banco espera que el crecimiento se haya situado entre 4,5% y 5%, con 4,8% como cifra más probable.
All companies that produce goods or services being located in Colombia is consumed by residents; this represents more revenue and higher profits for companies, which results in ability to hire people. Therefore it is important that the Gross Domestic Product grow, because it means that there are more jobs in the country.
Consumption patterns
It refers to all products that an individual or family ordinarily consume, according to a usual average estimated frequency of at least once a month; Also the consumption patterns in the way people acquire products either by the influence of the market, technology, production costs or prices , which is related with the income of people and that in turn the acquisition of these products is homogenized in rural and urban areas.
La sociedad reconoce que la globalización –económica y cultural- hace parte de su cotidianidad y genera un estilo de vida y hábitos de consumo relacionados con su entorno más cercano. 2015 se dará una nueva forma de pensar en la que se acepta una existencia con menos objetos, espacios reducidos y altos niveles de conectividad y movilidad. será un año en el cual se presentarán lanzamientos tecnológicos que buscarán cambiar la vida de las personas. La necesidad de vivir una vida menos acelerada y con más tiempo de ocio.
These new trends that have been received during 2015 are a contribution to our company , because we provide a service that generate comfort , relaxation to the customer , while the customer has more time to make use of it according to their preference.
http://www.dinero.com/internacional/articulo/tendencias-consumo-para-2015/203784
Monetary Policy
The monetary policy in Colombia is governed by an inflation targeting system (Inflación Obejtivo), whose purpose is to maintain a low and stable rate of inflation, and achieve a growth of the product in accordance with the potential capacity of the economy.
This means that monetary policy objectives combine the goal of prices stability with maximum sustainable growth in output and employment. In this way, monetary policy complies fulfill with the mandate of the Constitution and contributes to improving the welfare of the population.
This monetary policy affects our business in a positive way because helps to increase individuals income, so they will buy more vehicles and will have the capacity for paying a cleaning service.
Banco de la republica, "Política Monetaria: La estrategia de inflación objetivo en Colombia" (2013) Found in:http://www.banrep.gov.co/es/politica-monetaria
Tax Rates
The tax rate is the tax imposed by the federal government and some states based on an individual's taxable income or a corporation's earnings.
Investopedia, "Tax Rate" Found in: http://www.investopedia.com/terms/t/taxrate.asp#ixzz3jOGWTD5J
Table 1 Indicators of Business Environment: 2015
Note: Taken from Euromonitor International, Colombia: Country Profile, 14 August 2015 at: http://www.portal.euromonitor.com.ezproxy.unisabana.edu.co/portal/analysis/tab
According to Doing Business 2015, Colombia’s total tax rate as a percentage of total profits reached 75.4%, considerably higher than the averages for both the OECD (41.3%) and the Latin American region (48.3%). This is mainly due to Colombia’s high labour taxes and contributions (which amount to 26.9% of total profits), and to numerous other taxes including a financial transactions tax, a tax on industrial and commercial activity, and a real estate tax (which together account for 28.6% of total profits), according to the same source.
As of 2015, Colombia’s corporate income tax rate stands at 25.0%, although foreign companies with no permanent establishment in Colombia are subject to a 39.0% rate (to be increased progressively to 43.0% by 2018). In addition, a surtax on net profits (CREE) applies at a rate of 9.0% as of 2015 (to be lowered to 8.0% from 2016 onwards). Companies operating in any of the numerous Colombian free trade zones are subject to a preferential 15.0% income tax rate.
In the case of VAT, the country applies a three-tier scheme, with the standard 16.0% VAT rate; a 5.0% rate (applying mainly to foodstuffs); and a 0.0% rate (for exports and certain domestic supplies).
Euromonitor International, "Colombia: Country Profile" (August 2015) Found at: http://www.portal.euromonitor.com.ezproxy.unisabana.edu.co/portal/analysis/tab
This tax rates affect our business in a negative way taking into account that is one of the highest in Latin America, so we have to pay too much of our income to the National Government.
European Economic Community Policies
The European Economic Community has policies for 15 different economic activitoes: agriculture, fishing and feeding, science and technology, culture, education and youthfulness, economy, finance and tax, social rights and employment, business, weather, energy and natural resources, civil society, inside justice and rights of citizens, environment, consumers and health, foreign policy of the European union, transversal policies, regions and local development, transportation and travel.
European Comission, "The policies" (March 2015) Found at:http://ec.europa.eu/policies/index_en.htm
For our business it is important to take into account the automotive industry in the EEC because and incrementation or disminution of the prices of the vehicles produced in Europe will affect how many customers we will have. Thats why it is importnat to take into account the first policy of the EEC for this industry:
1) To strengthen the competitiveness of the automotive industry: The aim is to identify and assess policy issues of significant importance to the competitiveness of the EU automotive industry and to suggest solutions that take into consideration economic, social and environmental objectives.
European Comission, "Automotive Industry" (June 2014) Found at: http://ec.europa.eu/enterprise/sectors/automotive/index_en.htm
Fiscal Policy
Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.
International Monetary Found, "Fiscal Policy: Takinf and giving" (March 2012) Found at: http://www.imf.org/external/pubs/ft/fandd/basics/fiscpol.htm
The government of Colombia has a discretionary fiscal policy that has been historically pro- cyclical : Each percentage point increase in the output gap , the cyclically adjusted balance deteriorates approximately In A sexta- part . Evidence also of pointing Fiscal policy has been less volatility in the last 3 years and the government has been consistent with the condition of long-term sustainability . Moreover , the Government has not made the United Nations Programme countercyclical paragraph offset the effects of the crisis in its finances and suffer significant deterioration by UN ladesaceleración Economy will suffer in the short and medium term.
Banco de la Republica, "Borradores de Economia" Found at: http://www.banrep.gov.co/sites/default/files/publicaciones/pdfs/borra566.pdf
OPEC Policy
Opec's main policy is to co-ordinate and unify petroleum policies among Member Countries, in order to secure fair and stable prices for petroleum producers; an efficient, economic and regular supply of petroleum to consuming nations; and a fair return on capital to those investing in the industry.
OPEC, "About Us"(2015) Found at: http://www.opec.org/opec_web/en/about_us/716.htm
This policy affects our business in a postive way because promotes stable prices an regular supplies of oil, so there will be moreindividuals having vehicles so it will be more customers for us. But if the prices of oil increase less people will own less vehicles and we will have less customers.
LDC Policies
LDC have 3 basic policies: [1] Macroeconomic stability – low and stable inflation, low gov't debt [2] Health – better health raises productivity, promotes long-term thinking [3] Education – important for developing modern economy.
Princeton, "Trade in Policies in Less-Developed countris (LDCs)" (Spring 2010) Found at: https://www.princeton.edu/~dixitak/Teaching/InternationalTrade/Slides/ECO352_20.pdf
At the same time it is said that LDC policies should include development of agriculture and industry policies; and development of growth coalitions creating coordination and cooperation between countries for investing, increasing productivity, technological advance, etc.
United Nations, "The Least Developed Countries Report 2009" Found at: https://books.google.com.co/books?id=JN3ovcW-GSQC&pg=PT28&lpg=PT28&dq=coalitions+of+lesser+developed+countries+(LDC)+policies&source=bl&ots=mwGz3IT6sk&sig=Za9NQVP5LS1ISQED6sLat3HvQtA&hl=es-419&sa=X&ved=0CDAQ6AEwBDgKahUKEwj72q34r7PHAhXBXR4KHbpvBc4#v=onepage&q=coalitions%20of%20lesser%20developed%20countries%20(LDC)%20policies&f=false
Also the UN have a variety of policies for helping this countries that take into account 3 principal aspects: trade, development assistance, general support.
UN, "What are least developed countries (LDCs)?" Found at: http://www.un.org/en/development/desa/policy/cdp/ldc_info.shtml
We have to take into account this policies because our market is in a leess developed country, so any change in this policies can affects us positively or negatively.
FENALCO, ANDI, Comité automotor colombiano. INFORME DEL SECTOR AUTOMOTOR A JUNIO DE 2015. Found in: http://www.fasecolda.com/files/6714/3932/1118/6._INFORME_DEL_SECTOR_AUTOMOTOR_A_JUNIO_2015.pdf
Money market rates
It is a basic tool for the economic development of a society , and that through him , the transition from saving to investment is made, this mobilizes resources mainly medium and long term, since those sectors that have a lot of money (savers and investors) to the production activities (enterprises , financial sector , government) through the sale of securities.
La fuerte caída en los precios de las acciones locales, la significativa depreciación del peso colombiano y la desvalorización de los títulos de renta fija durante los últimos meses parecen dilucidar el escenario al que seguramente se enfrentará el mercado de capitales en 2015.
Los agentes están reaccionando ante la posibilidad de un menor crecimiento de la economía colombiana en los próximos años, particularmente ante la fuerte reducción de los precios del petróleo, que representaría una afectación de las cuentas externas del país, una disminución de los ingresos fiscales del Gobierno y, en últimas, una reducción del ingreso nacional.
Pero ante esta situacion, las mejoras en infraestructura, internacionalización y nuevos productos hacen parte de la estrategia para continuar con el desarrollo de mercado de capitales este año. El presidente de la BVC, Juan Pablo Córdoba, explicó que la idea es contar con sistemas de talla mundial y que hablen el mismo idioma que los mercados internacionales (Mila).
The well developed capital markets facilitate investment, raise capital, with capital can be invested into more productive activities and generate innovation . Also, in countries where the market develops , it reduces the level of poverty. But Colombia is forecast to have a slower growth in the economy , which would still impeding progress in the country.
Carwash industry is automatically connected with the Cars industry, taking into account as much people buy cars, as much cars to wash. We notice that the sales of cars has been increasing dramatically, as we can see in the first graph from 2002 to 2011 growth a 146%, the second graph shows us that this number is been increasing more, that is an excellent tool for us to know that our industry is growing too. Taking into account we are going to work firstly at Bogotá, we also have the third graph in which it also shows the number of cars in Bogotá and how it’s been creasing every year.
Carwash industry
