FRANCE
Larry McKinney
April 1, 1999
Statistical Overview - FRANCE[1]
A. GeographyLand area / 545,630 square kilometers
Major cities / Paris, Marseille, Grenoble, Lyon, Dijon
Climate / Generally cool winters and mild summers
B. Demography[2]
Population / Approximately 59 million
Population growth rate / .31%
Fertility rate / 1.63 number of children born per woman
Mortality rate / 5.69 deaths per thousand live births
Life Expectancy / Men: 74.6 years
Women: 82.62 years
C. Political
Type of government / Republic
Party or person in power / President Jacques Chirac, Prime Minister Lionel Jospin
D. Economic
Currency / Franc, Euro
Exchange rate (per US$) / 6.08 Francs per dollar
Fixed/Floating exchange rate / Floating
GDP PPP (US$) / 1.32 trillion
GDP per capita (US$) / $22,700
GDP growth rate / 2.3%
Inflation rate / 2%
Unemployment rate / 12.4%
Major imports / Crude oil, machinery and equipment
Major trading partners: imports / Germany 17%, Italy 10%, US 9%, Belgium 8%
Major exports / Machinery and transportation equipment, agriculture
Major trading partners: exports / Germany 17%, Italy 9%, UK 9%, Spain 8%, US 6%
E. Socio-Cultural
Major religions / Roman Catholic 90%, Protestant 2%, Other 8%
Literacy rate / 99%
Languages spoken / French 100% with various dialects
Ethnic groups / Celtic and Latin
Introduction
I've never been to France, and I don't speak any French. If you are French, I apologize for my inadequacy, but I'm sure you understand that I'm only American after all. I chose this country early in the semester simply because I'm fascinated by the dichotomies that exist in our perceptions. As I wrote my thoughts then I recall saying that "France is dirty but clean, snobbish but classy, rich but poor". At this moment I don't know whether my research will bare any truth to these perceptions but in any case we should all have a clearer understanding of the French, their culture, and any opportunities that may exist for business. It is my intent that this paper will provide you with enough information to peak your interest, to show you the complexities of doing business in France, and to point you in the direction of further research possibilities if you are planning imminent business there.
Executive Summary
This paper begins with a brief history lesson of France, a country that is very proud of its heritage, and then focuses on the current state of doing business in the 1990's. This second part encompasses many aspects of the business environment, including economic, trade related, legal, practical and cultural before moving on to the opportunities for the future. Finally, some conclusions are drawn and presented about the realities and perceptions of one of our biggest European allies.
History
The French have a long and colorful history, replete with Kings and Queens, castles and jewels, and revolutions to rival those of many nations, including America. Probably the earliest date to be associated with the French is around 51 BC, when the Celtic Gauls were conquered by Julius Caesar.[2] Around 550 AD, Clovis extended the kingdom to cover most of Europe, and in 814, after Charlemagne's death, France was born as one of several countries.[3] For almost a thousand years France grew stronger as a monarchy, up until the French Revolution (1789-1793), when the monarchy was overthrown. You may recall that King Louis XVI and Marie Antoinette were beheaded at this time. Shortly thereafter, a young General named Napoleon Bonaparte was sought after to head France's First Republic, at about the same time a young America was beginning to grow. Unfortunately, Napoleon became overly aggressive with hopes of ruling a vast empire, eventually losing at the battle of Waterloo. Subsequently, France has had four Republic governments, the latest beginning in 1958. This Fifth Republic now includes President Jacque Chirac and Prime Minister Lionel Jospin, a tenuous but collaborative arrangement, known as a "cohabitation" government.[4]
Because of their long history and colorful rulers, the French have a long-term view of themselves and their "place" in the scheme of things. Their language became so prevalent for the thousand years of their monarchy that it was thought to be the language of the elite, and in fact eventually became the standard language for international diplomacy for hundreds of years.[5] They think so highly of their heritage that it is advisable to apologize if you seek to do business with them and do not speak their language.[6] As another example of their elitism, they grew tired of eating like the rest of the world back in the late 1700's and refused to hold their silverware in the "continental" style like the Americans and the commoners did.[7] The French nobility thus switched to the "European" style, not anticipating that all of Europe would eventually change as well. To this day it is still thought of as the more sophisticated and efficient way to enjoy food.
Business Today
The country proper is about the size of Colorado times two, and over 59 million residents call it home.[8] It is strategically located in Western Europe, bordered by Belgium, Spain, Italy, Monaco, Luxembourg, Germany, Andorra and Switzerland, as well as the Bay of Biscay, English Channel and Mediterranean Sea.
This strategic position has enabled the country to become highly marketable, and it now enjoys the fourth largest economy in the world. Ironically, it is a socialist republic, not at all what one would expect to be so successful. Curiously, Prime Minister Lionel Jospin is quoted as saying, "yes to the free market economy, no to the free market society."[9] What this means is anyone's guess but I believe it refers to control. As you already know or may expect, the French government extensively controls many aspects of business and society.
The current government is frankly in a state of flux, waffling on the issues of privatization, social welfare, and even the mandates of the European Union. As politics go, however, it may be a pivotal moment for the Fifth Republic or just a hiccup in the road. It all started in 1995 when President Jacque Chirac was elected by a slim margin over Lionel Jospin. In an effort to build a stronger coalition, President Chirac dissolved the National Assembly early and called for new elections. Unfortunately, Mr. Jospin's party won and he then became Prime Minister. At the time he ran on a platform to end privatization, and to revisit their commitments to the European Union, which President Jacque Chirac was promoting. Although Prime Minister Jospin has relented somewhat, France seems capable of sliding off the balance beam in either direction, dependent solely on the charisma of the leaders and the short-term gains to which they both lay claim.
Economy
As stated earlier, France has the fourth largest economy in the world, estimated at $1.32 trillion annually.[10] But more importantly, now that the European Monetary Union (EMU) is in full swing, France can be viewed as an entryway into a much larger economy that includes over 300 million consumers, and accounts for one-fifth of the world's total economic output. In order to evaluate that opportunity you must understand the complexities of using France as your portal. To that end, I will discuss four key areas of interest:
Legal, Trade Related, Practical, and Cultural
Legal
France uses a civil code, unlike America, which uses common law. No matter which method you choose to do business, i.e. distributorship, joint venture, or incorporation, it would be advisable to get a lawyer experienced in the French system, especially since many business people also know law quite well and are inclined to draw up their own contracts.[11] Since joining the EMU, France has become stringent on those it will allow to represent clients within their system, so unless your lawyer has passed the equivalent French Bar exam you'll need to find a new "avocat". Keep in mind that only written agreements are binding to the French, and even then, don't take financial statements or assurances at face value as the French like to be secretive concerning such matters.[12] They feel Americans are so preoccupied with money that they lack creativity.
The difference between a civil law country and a common law country can be quite stark, but the primary difference is that civil law countries rely on a black/white code with very little gray, whereas a common law country relies heavily on historic precedent in related cases, with significant discretion. In both cases, the law is constantly evolving. One other significant difference is that in a civil country the judge acts much like a lawyer, deciding what evidence should be developed and/or produced. In a common law country the judge is much more neutral.
Trade Related
Like many other countries, France has established tariffs, trade barriers and customs to maintain their competitiveness. For raw materials, tariffs are low or non-existent, otherwise expect to add 5-17% in fees to your manufactured product.[13] If it is agriculturally related you can expect to add even more. More so with agricultural products than any other, the French government has placed extensive trade barriers along the way in an effort to boost your prices to such a level they will be non-competitive. Additionally, there are some products which are expressly forbidden, such as poultry meat, enriched flour, genetic material, "exotic meats" such as alligator and buffalo, crayfish, and certain fruits and vegetables which are subject to seasonal price restrictions.[14] Although the French can be highly arbitrary on the non-tariff trade barriers to imports they generally only restrict two classes of exports, those with strategic implications like weaponry and those with heritage implications like antiques. As you might have already determined, the French are particularly proud, and would be deeply offended if their heritage were to leave the country without their knowledge. A 50% off sale on such items would not likely endear you to them.
Another trade barrier is the use of labels in advertising. Since labeling is tightly controlled in France be prepared for added inconveniences. Labeling must provide consumers with precise information which answers six basic questions about the product, and it must be provided in French:[15]
- What is it?
- What is it used for?
- What is it made of?
- What does it cost?
- How is it used?
- When should it be used?
The requirement that all advertising/labeling be done in French holds true even if the French businesspeople routinely use the English word, e.g. "cash flow". In France they must still use the seldom used "marge brute d'auto-financement". If America were to demand the same consideration, we would demand that "pate'" be called by its more appealing equivalent of "ground goose liver".[16]
Practical
Without necessarily taking sides in the matter, I almost find it an oxymoron to use "practical" and "French" in the same breath. It seems to me the French are highly structured and inefficient business partners, preferring endless debate for the pure sake of it, rather than facts and executive summaries to cut to the chase. It is the chase they enjoy the most. However, if you expect to do business with them you had best learn a few things about their style and attitudes:
Scheduling - Skip the month of August as most French receive 4-5 weeks of vacation and take it at this time. Also, regular business hours are from 8:30 AM - 7:00 PM with a two-hour lunch from 1PM - 3PM. It's best to schedule meetings around 11AM or 3:30 PM.[17]
Punctuality - Never make cold calls and always make appointments, for both business and social occasions. If you accept a social invitation send flowers in advance, but never red Roses, and be there within 20 minutes of the indicated start time. The following day send a hand-written note and an odd number of flowers, never even.[18]
Greetings - Always shake hands, but wait on the woman to offer hers first. Expect the handshake to be less firm than that of the U.S. In social settings with friends you will touch cheeks and kiss the air. Titles like Madame should always be used, and don't use first names unless specifically asked.[19]
Business Cards - Always present them. Have the back printed in French. It is most important that your credentials, namely your schooling, be indicated as well. The French are very class conscious and good schooling indicates your level of sophistication.[20]
Dining - As you know, the French are known for good food and fine wine. Whoever initiates the lunch or dinner invitation is expected to pay. Don't drink hard liquor or smoke before meals as this will deaden your taste buds and show disrespect. Under no circumstances should you salt your food or ask for sauces (ketchup included) before tasting the food. Keep both hands on the table at all times, eat slowly and don't fill up, as the food will come slowly. The French will like you if you are a good conversationalist during this lengthy meal. Finally, before discussing business make sure you have shown great enthusiasm for the food.[21]
Gestures - Don't signify your delight with the food with the U.S. OK sign. It means "zero" there. If you want the check, signal by writing in the air. Eye contact is intense, and may be intimidating even to Americans. A formal and reserved nature, including classic clothing, is imperative. A casual attitude about anything business will turn them off.[22]
Gift Giving - Don't at your first encounter. When you do, don't be skimpy or lavish, and avoid company logo products. Good taste is everything to the French. And don't include your business card either. Books, especially American biographies, are good if they are thick and complex. Simplicity is not a virtue in France.[23]
Cultural
There is no doubting the French preoccupation with status, rank and formality. Your contacts and education are extremely valuable and set you apart from others. Even though the class system is highly stratified, most people occupy the middle class. Even so, power is a basic fact of life there and superiors demand obedience from all walks of life.[24]
As stated earlier, the French love a good debate. If you can do so with flair and imagination, you can disguise the facts with no repercussions. However, don't plan on making sweeping changes as they are not risk takers and anything outside the cultural norm will not be accepted.
Using Hofstede's cultural indices we find that in comparison to the United States they have a low tolerance for risks and have a high power/distance relationship with authority.[25] In terms of individualism they appear to be equally divided between family/group decision making and individualistic desires. And in terms of Masculinity vs. Femininity they appear to be slightly more feminine. Your status is more important than your sex.
Summary of Current Topics in the News
French carmaker Renault buys a major 35% stake in Nissan[26]- Troubled carmaker Nissan, with mountains of debt ($40 Billion), has been looking for a suitor for several months. Several deals had fallen through when Renault stepped to the table and acquired a controlling interest. The dust has not yet settled on the deal so it remains to be seen if Renault, buoyed by European sales, will be able to successfully pull Nissan up. In the short term, however, the deal will turn the partnership into one of the largest and give an entryway for Renault into the lucrative North American and Asian markets.
Georgia Tech opens an international satellite office in France[27]- France, long known for its scientific prowess, is utilizing the services of Georgia Tech to bolster its capabilities. The satellite is offering degrees, mostly at the graduate and Ph.D. level, in several engineering fields and is located in a high-tech industrial park where it has the added benefit of helping existing manufacturers with their processes.
France Telecom becoming privatized[28]- The government is slowly but surely privatizing many sectors it once monopolized, including the telecommunications industry. In mid March they reduced their stake from 75% to 62%. Although the government still has the controlling interest, it is moving towards its ultimate goal of complete privatization. At the same time, France Telecom lost in its bid to acquire Paris Cable to rival Lyonnaise. Interestingly, it only desired to purchase Paris Cable so that it could sell at a higher price when expected legislation forces it to divest itself of cable companies.
Opportunities for the Future
France can either be an opportunity in and of itself, or a springboard to the Economic Monetary Union. Which route you choose will depend entirely on your product and your strategic plan. Assuming your wish is to penetrate the French market first, you must do several things:
1.Pick an entry strategy, i.e. incorporation, distributorship, etc.
2.Pick a good lawyer, or "avocat".