Reference no: EM132374834

Poland is located in Central Europe and is bordered by Germany, the Czech Republic, Slovakia, Ukraine, Belarus, and Lithuania. The Baltic Sea is located to the northwest. Slightly smaller than New Mexico, the country's terrain is largely flat with mountain ranges along its southern border. Its climate is relatively cool, with moderately severe winters and mild summer temperatures. Poland's natural resources include coal, sulfur, copper, natural gas, silver, lead, salt, amber, and arable land.

Poland's population, estimated at 38,562,000, has remained steady for the last several years. Poland, with a median age of 40 years old, has an older-than-average population. The country is essentially entirely made up of native Poles. Immigrants do not comprise a significant proportion of the population. Poland has no citizenship by birth; instead, citizenship is awarded by descent, which requires both parents to be citizens of Poland. The country is almost exclusively Roman Catholic.

Poland's GDP stands at US$545 billion, or US$24,952 per capita. Unlike most of Europe, Poland has seen years of steady economic gains. In 2015, the economy expanded at 3.5 percent.79 Poland was one of the only countries in the European Union to avoid a recession during 2008-2009: The government of Prime Minister Donald Tusk steered the Polish economy through the economic downturn by skillfully managing public finances and adopting controversial pension and tax reforms to further shore up public finances. Once a largely agricultural nation, the country's economy has transitioned to one based primarily on industry (41 percent) and services (56 percent).80 The labor force, with 18.29 million people, ranks 34th in the world in size.81 Poland's main export partners include Germany, the UK, the Czech Republic, France, Italy, the Netherlands, and Russia. Machinery and transportation equipment, intermediate manufactured goods, miscellaneous manufactured goods, foodstuffs, and live animals are all major exports.82

Poland has adopted a republic form of government. It was one of the first ex-communist countries to embrace a capitalistic economy with privatization and economic liberalization. The country's economic success following the fall of the Soviet Union was largely attributed to the government's success at privatizing most of the small and medium state-owned companies and encouraging foreign direct investment. Poland's major difficulties lie in its somewhat deficient infrastructure, its rigid labor codes, a burdensome commercial court system, its extensive government red tape, a lack of energy mix, and its burdensome tax system.

You Be the International Management Consultant Tesco, a multinational grocery and general merchandise retailer, operates over 6,000 stores around the world and 442 stores in Poland. Tesco has a large online presence and handles online orders for customers in its various markets. The company has enjoyed considerable success across the world but has faced some recent difficulty with its Polish investments.

The Polish government has recently announced a plan to increase revenues to pay for various initiatives, including the proposed imposition on large retailers of a 1.9 percent tax on gross revenue. This tax is targeted at "foreign-dominated industries" like supermarkets and banks. Moody's estimates that this new tax could cost Tesco as much as 3.5 percent of earnings.

1.) If you were a consultant for Tesco, how would you advise Tesco to deal with the new tax?

2.) Would this new tax be enough for you to advise the company to end business in Poland?

3.) Does the fact that this regulation is specifically targeted at foreign- dominated industries and businesses create concern for future regulations should you choose to continue operations in Poland?