Over the years, Florida has experienced massive changes in the business environment. This is due to a medley of factors such as the effects of adverse weather conditions, political environment, government legislation as well as unique market dynamics. Authorities in Florida aim at making the business environment attractive to spur business sustainability for economic growth. Florida has one of the most business-friendly tax regimes in the United States of America. This is coupled with consistent efforts to amend business legislations to support businesses (ADG 1, 2). Regardless of this, businesses are affected differently depending on the nature of business. For the purpose of this paper, two interviews are conducted with two senior executives with two major businesses operating in South Florida. The purpose of these interviews is to highlight the business climate in Florida and how companies utilize opportunities there in. From the interviews, it is evident that depending on the nature of business companies engages in, businesses are affected differently by the prevailing business environment.
Florida East Coast Railway Corp, FECRC, is a large investment company based in Coral Gables, Florida. It plans to establish a class B railway transport worth more than US 1 billion dollars. According to FECRC spokesperson Christine Barney, the company envisions Florida’s friendly tax environment as one of the most viable development opportunities for its current project (Gale par 4). Based on Florida’s zero-rate on income tax, FECRC does not have any future liabilities on income tax. FECRC also stands to benefit from government sponsored property tax rebates which come in form of $22.8 million grant from the U.S. Department of Transportation. This is to be used to improve rail facilities in the greater Florida (FECI 10). Nevertheless, FECRC’s project comes at a time when Florida’s Governor Rick Scott rejected a $2.4 billion federal grant earmarked for the development of a high speed rail system. This, according to Barney, negatively affects FECI’s ambitions to provide high speed rail services (Gale par 4).
According to FECRC’s spokesperson, the project is likely to generate 6000 new jobs. This increases the company’s cost of business. The company offers its employees a number of benefits which include medical, dental allowances, professional development as well as performance appraisals (Plunkett 450). With an added 6000 employees, the company’s economic performance is likely to be curtailed. Additionally, the company spokesperson indentifies the recent financial meltdown as having negative effects on FECRC. FECRC seems to be suffering from the ripple effects of the recession in the construction industry, which has effectively slowed the growth of FECRC’s business. The global financial meltdown has resulted in rise of inflation rates, resulting to an increase in prices of basic commodities such as fuel. As a result, fuel suppliers have increased fuel prices. To remain in operation, FECRC is forced to pass on the increased cost to the consumer inform of a fuel surcharge (FECI 13).
FECI economic performance outlook appears grim, especially as a result of the recession. Despite the federal government efforts to relax its fiscal polices with the intention of making credit available, such a condition may not necessarily help FECRC. Barney argues that this is as a result of declining credit ratings which makes most of the creditors apprehensive. Problem in accessing credit will improve when the economy has fully overcome the effects of the recession (FECI 19).
As indicated earlier, FECRC new project generates about 6000 new jobs. This raises the question of whether South Florida labor market can sufficiently meet FECRC’s labor requirements. Sought Florida’s economic environment is still reeling from the global financial downturn. While recent labor force statistics indicate a fall in unemployment rates, there are more than 1 million unemployed people in Florida at any given time. As such, Barney argues that this is likely to be the reason why FECRC has never faced any significant challenges in filling vacant positions. While the high unemployment rate eases the company hiring, the acquisition of FECRC by Fortress Investment Group LLC has had negative effects on employee turnover rates. According to the company’s spokesperson, any type of business merger affects employee’s confidence in the company. This is not different at FECRC. As a result, the company has had difficulties retaining quality employees especially after the merger. Most of FECRC’s employees are unionized, and as such the company has to deal directly with labor unions. Failure to negotiate successfully with unions implies FECRC operations stand to be affected due to disruptions of its operations (FECI 27 to 29).
FECRC acknowledges the impacts on technological evolution on improved business performance and as such, the company performs a major technological overhaul every 8 years. While FECI continues to invest in new technologies, the company is also exploring new opportunities that exist within emergent technologies. FECRC has embarked on a mission to popularize some of its latest projects such as the US $ 1 billion railway project through online social media tools such Facebook and twitter. However, much of FECI’s technological investments go to energy consumption reduction, efficiency enhancement as well as the reduction of harmful gases. In that case the use of technology FECRC is not a threat to employment opportunities.
FECRC operates in a very competitive environment. Most of its competitors exist within the non rail modes of transport. The biggest competition comes from motor vehicles but water transport, the barge as well as the Florida pipeline offers competitive alternative means of transport. FECRC biggest threat is any changes within Florida’s macroeconomic and legislative environment which are likely to favor other modes of transport, and render its services less preferable. This is likely to affect its future business significantly (FECI 29, 30).
Despite having a very friendly tax environment, FECRC business performance seems to be affected by the politics of the day thus exposing the company to other unprecedented risks. Unlike FECRC, the tax environment in Florida seems to be reducing Florida Power & Light Company’s (FPL) business risks. Located in Juno Beach, Florida, Florida Power & Light Company’s main objective is to generate cost effective and environmental friendly power. As such, other than HEP the company is exploring alternative sources of energy especially solar, wind and nuclear. According to the company’s executive VP Charles Sieving, FPL mostly benefits from production and investment tax credits from both the states and the federal government. Currently, FPL is accruing 30% investment tax credit extending to 2013 for any investment made in wind energy. Regardless of this, Sieving anticipates adjustments in Florida’s income tax laws and regulations. As a result, the company’s tax liabilities are likely to go up, thus hurting the company’s returns (FPL “FORM 8-K”, 5 to 7).
Like FECRC, FPL provides healthcare and retirement benefits to all its employees. The cost of these benefits has increased in the recent past, and as such exposing FPL to substantial increment in the cost of doing business. This, in Sieving’s view, definitely poses risks to the company’s future returns. Additionally, like FECRC, FPL’s employees are unionized. While the current relationship between FPL and labor unions is perceived as stable, the company’s Executive VP anticipates that there are operational risks in future should the company fail to negotiate favorable terms with the unions. Additionally, this could lead to go slows and strikes thus affecting the company’s productivity. The resultant effect is loss of revenues and customer loyalty. Sieving notes that labor unions are likely to react to inflationary pressures and demand to renegotiate employment terms especially with regards to remuneration. This is likely to further increase the cost of employee benefits and significantly reduce the company’s financial returns in the near future (FPL “FORM 8-K”, 6, 12).
Despite its bright business outlook, FPL has faced a perilous past especially during the recent global financial meltdown. Sieving acknowledges this and asserts that the company was hurt due to the fact that Florida experienced a significant drop in the demand for electricity, which effectively resulted to a reduction in the company’s returns. Since the recession has slowed business growth, the company has embarked on risk management activities aimed at not only enabling the company recover from the effects of the recession but also to survive in similar conditions. These activities include power purchase agreements as well as investments in wind energy (Gelsi par 5, 11). Unlike FECRC, the recession nevertheless never had any significant effects on FPL employee retention rates, despite the fact that during the recessions, Florida experienced the highest unemployment rates in the US (Morrell 3, 4). According to the company Executive VP, the fact that the recession never affected its employee retention rates is due to the fact that the company relies on highly skilled employees to perform complex technical tasks. Finding replacements for such employees is likely to be cumbersome due to the rarity of the skills involved (FPL “FORM 8-K”, 13).
As explained earlier, the recession significantly affected FECRC creditworthiness. However, the recession did not have any significant effects on FPL’s creditworthiness due to the fact that FPL intends to invest in alternative sources of energy; the federal as well as the state governments gives incentives for investments in alternative energy sources. Thus, according to Sieving, creditor’s interest is buoyed by protective government policies (FPL par 34 to 40). Sieving adds that the recent global financial meltdown has not significantly affected the relationship with suppliers. Nevertheless in the near future, the company’s VP notes that the FPL is likely to renegotiate with suppliers. This is necessitated by external factors such as extreme weather conditions that are likely to affects the supply of fuel, one of FPL’s major raw materials. Additionally, the prices of the company prices may also be indirectly affected by competitors, who are likely to be offer FPL suppliers attractive offers. This is besides the effects of the unpredictable fluctuation in the global energy prices, which, to withstand such fluctuations, pushes FPL energy prices up (FPL “FORM 8-K”, 14).
The effects of competitive environment on the company’s relationship with suppliers indicate that FPL operates in a very competitive environment. FPL relies on clean, environmental friendly and renewable sources of energy to produces its power. These include wind, solar, natural gas and nuclear energy. Over the years, Sieving notes that the renewable energy segment has become significantly competitive due to the increase in the number of producers. As a result, Like FECRC, FPL aims to invest in sophisticated IT systems that enhance efficiency, productivity and reduce wastages (FPL “FORM 8-K”, 4). FPL is also exploring opportunities that exist within online social media. Using social media mashup, FPL aims to improve interactivity with its clients. Social media tools such as Facebook, twitter and blogs FPL aims not only to gain customer feedback, but also as the main avenue through which the company passes crucial information to its clients on how to use its energy sources, how to save power as well as promote new products (FPL “Social Media”, par 1). Thus, the use of technology at FPL does not necessarily to replace employees but to enhance efficiency.
Florida is one of the most dynamic business climates in the USA. As a result authorities have instituted numerous measures aimed at supporting business growth for the economic development. This makes Florida to have one of the friendliest legal, economic and political provisions for businesses. Surviving in such climate requires that businessmen not only understand business risks but also understand the opportunities that exist within those risks. Additionally, business leaders also ought to understand the nature of their business and how to utilize corresponding legal provisions.
Works Cited
ADG. Florida Business and Political Climate. 2010. Web.
Gale, Kevin. Florida East Coast Industries plans Miami-to-Orlando passenger service. South Florida Business Journal. 2012. Web.
Gelsi, Steve. NexTera Energy Eyes ‘Competitive Power’ Growth Florida Power & Light Changes Name To Reflect Changing Emphasis. 2010. Web.
FECI. Florida East Coast Railway Corp. – FORM 10-Q. 2012. Web.
FPL. FPL Social Media. 2012. Web.
FPL. Florida Power & Light Co – Form 8-K. 2011. Web.
Morrell, Stephen. The Current Recession in Florida: Comparative Information and Data on the Worst Economic Downturn since the 1930s. n.d. Web.
Plunkett, Jack. Plunkett’s Transportation, Supply Chain & Logistics Industry Almanac 2008. Mason, OH: Plunkett Research. 2009. Print