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Cyprus Globalism

Chapter 1Introduction

The global economic crisis is one that is shaped by multiple factors, though at the root of the economic challenges emerging is the factor that globalization is beginning to level the playing field, causing economic powerhouse such as the European Union and U.S. to slump and scramble for solutions, as developing economies are transforming how organizations are structured around the globe. Small island economies, however, have a unique positioning in the new economic dynamics, as these are economies which esteem small businesses, communal connections, and self-sustaining practices.

Cyprus is a small island economy with a geostrategic positioning which can be utilized to allow the Cypriot economy to flourish as a shipping center and exporter. Yet instead, in a major backlash to the meltdown of the Greek economy and the slipping of the Euro, Cyprus’ banking system is on the brink of collapse. While the banking system and its financial practices are due to the industries own shortfalls; these crises adversely affect many businesses on the island, especially small business. A key objective of this dissertation is to identify ways in which small businesses in Cyprus, and similar island economies, can implement strategies designed specifically for small island economies, and adjust organizational and marketing strategies in order to remain upright when the economy is in a downturn. The primary research questions in this study include the following: How does the global economic crisis, and EU economic crisis, effect Cyprus’ economy? What industries have been hit the hardest in Cyprus, why? What are methods used by small businesses in small island economies that allow them to prosper in the process of globalization? A hypothesis is that technology will play a key role in renovating small businesses in Cyprus as to more effectively partake in globalizing business structures and opportunities.

In order to elucidate the ways in which small businesses in small island economies can transition in the age of globalism, and in the face of economic crisis, it is first necessary to identify how globalization and the European Union affect the Cypriot economy and business structures. Next, looking at other island economies such as Fiji and Bora Bora will be utilized as a manner to assess exemplary business methods and strategies, as well as lessons learned. Then, an assessment of Cyprus’ current business strategies, as well as current attempts to adjust to the global and euro economic crises will be analyzed for strengths, weaknesses, opportunities and threats. Finally, after conducting qualitative and quantitative research of small businesses in Cyprus, results, a discussion, and recommendations will be made to improve business and economic conditions and strategies in Cyprus, as well as other small island economies, in lieu of the changing global economy.

This study aims to explore the various facets affecting the success of small businesses in Cyprus while considering the strengths, weaknesses, opportunities, and threats of globalism. This study implemented a complimentary mixed method approach to gather qualitative and quantitative data regarding small business conditions in Cyprus in lieu of the global and European economic crises. Qualitative data was retrieved in the distribution and collection of 83 surveys filled out by small business managers, across five industries: Maritime, Agrarian, Consumer Goods (includes retail), and Tourism. Further qualitative data was retrieved through semi-structured interviews with management of five small businesses, one in each of the five industries. The data was analyzed individually and collectively. add details about results/conclusions/discussion

Chapter 2Literature Review

Overview of the Cypriot Economy

Cyprus is a most favored shipping centre in a strategic geographical location surrounded by three continents of industries. Various operations in the eastern Mediterranean and the low tax jurisdiction, aligned with the fiscal and regulatory regimes of the EU. The close proximity of Cyprus to Egypt, Israel, Lebanon and Syria makes the island an ideal port of call on short sea shipping routes between these countries and beyond to destinations such as Greece and Italy. Given this geopolitical opportunity, Cyprus should be able to overcome global economic challenges by taking advantages of their location with the boosting of exports, and creating new markets utilizing these aspects.

Currently, the top economic features in Cyprus are tourism, financial services, and real estate: none of these really main economic mediums adhere to small businesses such as local markets, farmers and car dealerships. Overall, Cyprus is a service economy. In terms of GDP, 80.9% of the economy is service-oriented, 16.7% is in industry, and 2.4% is in agriculture. In terms of occupation, 71% of the labor force is employed in services, 20.5% in industry, oriented, and 8.5% in agriculture (CIA World Factbook, 2012).

Cyprus has major appeal for Foreign Direct Investments, especially in the financial industry. Cyprus receives substantial FDI from Europe: in 2010 they received €578 million in FDI’s, in 2009; in 2009 a total of €2.5 billion of FDI; in 2008 there were €965 million of FDI, in 2007 there were €1.7 billion Euros of FDI. Thus the trend is not consistent and it seems to fluctuate with global economic conditions. According to the Central Bank of Cyprus, in 2011, the total FDI assess in the year were €8.3 billion (this includes FDI’s from other locations, such as the U.S.). This reveals that FDI’s have a very strong presence in the Cypriot economy, intricately tying the small island economy to that of many larger European economies. This is especially because most FDIs pertain to “financial and insurance” services of Europe. The majority of FDIs received and destinations are the Netherland and U.K. (Central Bank of Cyprus, 2011).

(add more about ties to Greek economy, Greek bonds in Cyprus).(Add specific case analyses in how global or multinational companies operate in Cyprus – ie. Specific financial firms).

(Add details about current Bailout)

Overview of other Small Island Economies

Theoretical Basis for Research

Globalization

Globalization is an occurrence, a process, which inadvertently can affect anyone on the planet. Globalization is not as simple as advanced countries conducting business in developing countries; globalism is a process which emphasizes integration, the breaking of barriers between lands and cultures, and the fusion of economic, social, political, and environmental policies and practices. In its essence, globalism involves collaboration, not domination. Globalism is still in the process of developing and it is largely driven by technologies, such as the internet, which make for very fast communications and the building of networks across the globe.

To consider the different types of features that Cyprus can offer to the global playing field, it is imperative to have a comprehensive understanding of the country’s positioning in terms of “doing business”. “Doing Business” is a measurement of business relations in different counties, as determined by the International Finance Corporation and the World Bank. Accordingly, Cyprus ranks “36” in overall ease of doing business, just two spots lower than France. Italy ranks 73rd, Greece ranks 78th, Croatia ranks 84th, Lebanon ranks 115th. To consider these countries as the ones that Cyprus can work with or compete with, it shows that Cyprus individually has an much higher ease of doing business while these other countries do not. This posits the possibility of small businesses in Cyprus seeking to appeal to businesses in countries with a much higher ease of business, such as France (35th), Saudi Arabia (22nd). There is already much appeal to businesses in the U.K. (ranked 7th), however this is mainly restricted to the financial sector, and such is what has contributed to the current and ongoing financial problems in Cyprus.

Such financial problems as a result of the Global and European economic crises shows the weaknesses of globalization; that in financial structures of multinational integration, negative financial policies and macroeconomic conditions in one economy can cast a ripple effect onto all other economies. Given this factor, and the relatively small size of Cyprus in comparison to the countries it is integrated with economically, small businesses need to take serious caution when developing business relations outside the country.

According to the Doing Business report, the top weakness is “enforcing contracts” in which Cyprus ranks 108th. Enforcing contracts is essential for ensuing that business deals are effective and secure. Though, Cyprus does rank well in “resolving insolvency” (ranked 25th) and “trading across boarders” (ranked 18th). So it is important to maximize the strengths while fixing the weaknesses. This was already done between 2012 and 2013 when under “registering property” there was a drastic incline from ranking 124th to 99th. So momentum has gained in this weakness, though there is still much more room for improvement. Additional Areas that need improvement include “getting electricity” (ranked 98th). Improving the ease of business allows Cyprus to improve its appeal to various countries even as far as the America’s or East Asia. The objective is not to allow multinational, international, or global companies to enter Cyprus market completely on their own and to thrive off the Cypriot purchasing power, but to utilize the Cypriot labor and goods (small businesses) for outsourcing and offshoring needs.

“Flattening” Nature of the Global Economy

An underlying philosophy in the study is the belief in the theory that globalism is leading to the “flattening” of the global economy. Technology has enabled for new, mass forms of employment, communication, and product/service supply and demand. Friedman describes that there was Globalism 1.0, 2.0, and now we are on 3.0. The three stages initiated with colonialism, in which power and wealth throughout the world was attained Nations at a time. The second stage, which evolved early in the rise of Industrialization and throughout the 20th century, allowed for power and wealth to be attained by large conglomerates. The 21st century, still in its youth, has already showed the promise of wealth being vastly obtained by individuals and small organizations—thus flattening to playing field instead of remaining in the steep hierarchy.

Friedman describes the following as the 10 flatteners as contributing towards today’s economy.  These flatteners will be included in the discussion as to generate new means for small businesses in Cyprus to survive and prosper in global economic conditions. The main concept of such “flattening” is that people and organizations have created and used new ways of attaining income that branches out to the world instead of the immediate location of the collectors. A company does not only serve the community within their reach, rather, each person, company, country has access to a global market. The following are the “flatteners” as established by Freidman.

1) The collapse of the Berlin Wall.  This represents the end of the cold war, the end of an era, and the beginning of a new one where the globe is no longer dictated separately by communism or capitalism.  Rather, many cultures started to find moderation between the two, and global affairs between the east and the west became more abundant. This effects Cyprus because the geopolitical positioning of Cyprus makes it ideal to conduct relations with states on both sides of the former wall, east and west. If Cyprus can also improve internal relations (as in between those influence by Greek culture, and those by Middle Eastern culture), that Cyprus can further improve it’s bond with Israel, Lebanon, Turkey, Egypt, and other nations in Northern Africa such as Tunisia and Morocco, and other nations beyond the Middle Eastern coast, such as to Saudi Arabia and United Arab Emirates. Cyprus can also take advantage of its geographical location and reputation as a shipping port to boost exports to Northern Africa, the Middle East, eastern Europe, and Western Europe.

2) Netscape.  This is representative of the large window that internet access granted to individuals who could enter this new playing field.  A lot of business in Cyprus is still conducted with paper and pen. By adapting new technologies, Cyprus businesses can be rejuvenated, and beyond being a financial house for many foreign investments, it can become a business meetings port as well. With technology Cyprus companies can implement Customer Relationship Management (CRM) a strategy for managing and nurturing a company’s interactions with clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes, principally sales activities, but also those for marketing, customer service, and technical support. CRM individualizes consumer relationship with the firm. It is a way of marketing the process of serving consumers. However, it is impossible to achieve these objectives if CRM fails to

3) Workflow software.  Since the internet, many software and hardware technologies have been invented which improved workflow for people, from emailing to the ability to create a website.  The first three flatteners considerably established the foundations for Globalism 3.0.  There are various types of programs designed to improve marketing tactics, customer relationships, demographic research, and so on, which can be highly beneficial to Cypriot companies. Again, the need to renovate many traditional business formats is required in order to do this step.

4) Uploading.  With uploading, people are free to share information, collaborate from remote locations, and spread knowledge, ideas, products, services, to a worldwide audience.  Small businesses in Cyprus have been taking major setbacks as a result of the global and European economic crises, though this is a time where small businesses are supposed to be liberated and have much more access to the global playing field. By taking advantage of features such as uploading, Cypriot entrepreneurs can build far-reaching demographics. (For example, Vehicle Rental Company need not market just to local residents, they can market to foreign businessmen and tourists planning visits to the island, and conduct research as a means to adequately communicate with them).

5) Outsourcing.  Outsourcing has been the hallmark of large corporation’s stability.  On one hand, outsourcing employs a very large number of people in undeveloped or developing nations, granting them the ability to build economies and achieve improved quality of life.  On the other hand, outsourcing creates less jobs in the developed nations, thereby hurting their economies and creating ripple effects.  Furthermore, outsourcing largely takes advantage of human rights laws (or lack of) that exist in undeveloped and developing nations.  In many cases such employees will receive extremely low wages, and unsafe/unsanitary/demeaning working conditions.

It is important that if any Cypriot company’s outsource to other nations they do it within the parameters of fairness and safety. Also, if company’s wish to outsource to Cyprus they must adhere to Cypriot law. One area where Cyprus can be an asset is to provide outsourced customer service (as India does) for various wealthier countries in Europe.

6) Offshoring.  This involves the utilization of manufactured goods in other locations (and not just the utilization of people).  Again, this weakens the developed economies, while boosting the undeveloped and developing.  Cyprus can benefit more in the area of being an offshoring source, rather than outsourcing source, as the Cypriot population is limited but the agrarian potential is not at its most fulfilled. There is much room for the agricultural industry in Cyprus to grow, especially by offering competitive products such as organic goods.

7) Supply-chaining.  Supply chaining is historically a management technique to create a hierarchy among people to keep the supply in order; however, modernly this chain involves machines, thereby eliminating jobs.  This is especially impactful on the economy when it is the large corporations utilizing technology over people.  Cyprus is a land where technology has not swept business and personal lives. Though, many companies in the country can partake in global supply chain structures. Goods manufactured or grown in Cyprus can be sold to global distributers.

8) Insourcing. This is when companies perform services for other companies.  For example, instead of Toshiba having service employees in the U.S. work to repair products, UPS employees are hired to fulfill the tasks.  There are many different ways in which small businesses in Cyprus can adapt this method. Instead of Japanese vehicles being repaired on site, they can hire car dealerships to repair vehicles through them, so when one of their clients calls, they are sent to a Cypriot company.

9) In-forming.  With search engines, anyone with computer access is capable of searching anything they can imagine.  Search engines allow people to become as knowledgeable on any topic as they want. 

Marketing departments and company’s in Cyprus can utilize this extensively such as through Customer Relationship Management, Search Engine optimization, Banner ads, Social Media Campaigns and more. There are many opportunities which range from free costs to high costs, depending on the organizations needs.

10) The Steroids.  This refers to all the gadgets that people have become fairly “addicted” to, e.g., smartphones, and personal digital assistants.  These products have become extensions of people.  In developed economies people are increasingly purchasing items and looking for different companies through mobile platforms. This is a critical area to start promoting the sales of items in order for Cypriot companies to remain competitive and a valuable asset to other countries.

These 10 features, or “flatteners” list the general basis of the globalized playing field. In order for Cyprus to be able to compete in the global economy and succeed, it is necessary to understand the role these flatteners play in organizational success, as well as the risks that come with each flattener. So the flatteners will be factored in when interpreting the results. Principle of Absolute Advantage

Another theoretical basis which establishes underlying assumptions for the study is the Principle of Absolute Advantage. Adam Smith described the principals of the absolute advantage more or less in the international trade: with labor as the only constant. This can be explained with a simple comparison: If company Z can produce 20 boxes with 5 employees; whereas, company X can produce 40 boxes with 2 employees. If company Z resides in Greece and Company X is located in Cyprus, it might make sense for Greece to import the boxes; thus, creating a market in Cyprus. Although, both sides are profiting there is a possibility of the deprecation to the integrity of Greece’s economy. There seems to be a give and take: workers in Greece are displaced; however, the consumer will be able to save money, and small companies in Cyprus can profit from the global economy. The example is contingent on the fact that everyone is paid the same rate. The sample is a sophomoric interpretation of the possible benefits of free market trade; however, there are limitations that must be addressed. The aforementioned example can be easily argued on the grounds of mercantilism. According to Ricardo (1817), it is impossible for all nations to become rich simultaneously: due to the fact of the export of one nation is the import for another country. Though, the objective is to establish relationships which benefit both sides.

Mixed Methods Approach to Research

Mixed method approach to research allow researchers to explore social inquiries in a rounded manner that collects both qualitative and quantitative data in the effort to more accurately interpret study findings as a means for implication. A broad list of research purposes in mixed method approach include: assumptions/predictions; making an organizational, social, establishment, or personal change; measuring change; addressing and understanding a complicated phenomenon; testing new ideas; generating theories and/or new ideas; and informing constituencies. Mixed methods for purposes of complimentary “seek broader, deeper, and more comprehensive social understandings (…and interpretations) by using methods that tap into different facets or dimension of the same complex phenomenon” (Green, 2007, p. 101). Thus, they reveal more about the same social inquiry and from varying angles which improves the validity of the study, and also allows the findings to be understood from varying perspectives. Instead of solely gathering empirical results, or solely gathering explanatory or explorative findings, a complimentary study utilizes both to gather both types of data on the same topic.

Chapter 3

Method

This study employed a complimentary mixed-method approach with the aim of identifying the effects of globalization and the global (and European) economic crisis on small businesses on Cyprus, and to identify means for improving economic and business opportunities in Cyprus. Quantitative Data was gathered by distributing a survey to small businesses in Cyprus in four different industries: Financial (and other business-related), Maritime, Agrarian, Consumer Goods (includes retail), and Tourism. To qualify as a small business for this study, the company could have no more than 70 employees. The survey was sent out to 100 small businesses in Cyprus (10 in each area), and 83 surveys were returned fully completed. The survey entailed 3 open-ended questions and 3 questions in Likert Scale format. Participants were first contacted and inquired of their company size, and asked if they would accept being recruited in the study. Upon accepting, the survey was mailed to them with a stamped return envelope. For the qualitative component, leaders of five small businesses (one in each industry) were recruited for an in-depth semi-structured interview. The questions were very similar to those of the survey, only instead of responding in one word answers, they were responded in a descriptive manner. The researcher who collected and analyzed the data is studying marketing and globalism.

Ricardo, D. (1817). On the Principles of Political Economy and Taxation. London. : John Murray .

http://www.reuters.com/article/2013/03/24/us-cyprus-parliament-idUSBRE92G03I20130324https://www.cia.gov/library/publications/the-world-factbook/geos/cy.htmlhttp://www.cnbc.com/id/100585591http://www.personalbusinesstaxguide.com/cyprus/cyprus_small_business_support_schemes.asphttp://www.doingbusiness.org/data/exploreeconomies/cyprus/#starting-a-businesshttp://www.centralbank.gov.cy/nqcontent.cfm?a_id=12490http://www.centralbank.gov.cy/media/pdf/MP_P_FDI_REPORT2011.pdfGreene, J. C. (2007). Mixed methods in social inquiry. San Francisco, CA: Jossey-Bass.

Appendix A

Research Survey: Assessment of Conditions for Small Businesses in Cyprus in Lieu of the Global Economic Crisis.

This survey includes six questions, four open-ended questions and two questions in Likert Scale Format. The responses to the survey will be confidential and anonymously reported. The use of the survey is to conduct research for the contribution to a dissertation of the following topic, particularly researching how the global economy has affected small businesses in Cyprus.

Please answer every question in order to be included in the research results:Number of employees _______________________Industry company competes in ________________Number of years business has been operant______Have any organizational changes (ie: layoffs, diversification) been made in reaction to the economic crisis? If yes, what changes? _______________________________________________________________________________________________________________________________________________________________________________________

(Please check the box which corresponds with the closest response)

To what extent did the global economic crisis in 2008 negatively affect your company?

None A little Moderate A Lot Entirely

To what extent has the Eurozone crisis (2012-current) negatively affected your business?

None A little Moderate A Lot Entirely

To what extent is technology an important component of your business structure?

None A little Moderate A Lot Entirely

Rebecca J.
Rebecca J.
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