Country Entry Risk Assessment Paper
Country Entry Risk Assessment
Finland
Jeffrey Amley
Baker College
Bus 401: International Business
Dr. Frank Bucaria
May 03, 2013
Thesis
The information provided in this paper will help us prepare an analysis of the risk issues that might be found in introducing the product into the specific country, utilizing the theories and concepts in the course material. We will be successful in achieving this by discussing the method of product entry. For this Paper I have chosen Finland as the country and the bicycle as the product to enter. I will also be discussing direct export, licensing as well as franchise opportunities. I will also be looking into the culture of the people as well as the demand for the product and companies selling competitive products. I will also break down labor and staffing issues as well. The goal will be to see if this business has the opportunity to be successful in the country of Finland.
The rational for introducing this particular product to the citizens of Finland is the country’s long standing love affair with …show more content…
the bicycle. The population of Finland is 5.4 Million people and 60.4% of those people ride bicycles. This ranks Finland at number 7 among the top 10 countries with the highest amount of bicycles per capita. “In Finland 9% of all trips are made by bike. The average distance cycled per inhabitant per day is 0.7 km. Fins ride bicycles without reference to the age or social status, both children and grown-ups: tourists and housewives, pensioners and students. Although the cycling season in this country traditionally starts in spring or summer, some fans of bikes are not afraid of neither the rain, nor slush, nor event winter snowstorms. The love of Fins cyclists to the bicycles can be compared with their love to dogs, or to fishing, or to sauna” ("Top 10 countries," 2011). The culture dictates a laid back life style and according to many publications is referred to as one of the freest nations in the world in terms of civil liberties. Finland also enjoys freedom of the presses as well as high levels of political rights. “Finland is rated the sixth most peaceful country in the world by the Economist Intelligence Unit, and since 1945, Finland has been at peace, adopting neutrality in wartime” ("Finnish culture," ). In 2007 Readers Digest declared Finland as the best country to live in because of the freedoms as well as education, income, quality of drinking water and greenhouse gas emissions. This culture would benefit us in terms of selling products as well as research and development because of the amount of highly educated people. Because of the highly educated workforce there would be a higher cost to manufacture products if manufacturing needed to be moved. For instance if sales were to take off and production and manufacturing were to be needed in country the cost to do so would be higher. Whereas hourly compensation in a manufacturing capacity is only $6 in the Philippines the cost to produce the bicycles in Finland would be $124 hourly. This information all falls in line with a business model that would have us manufacturing the bicycles elsewhere and having the imported to Finland to sell. Unions also make up a large percentage of the workforce in Finland. Roughly 1 out of every 5 workers belongs to the Central Organization of Finnish Trade Unions of 1 million people. This particular is another reason why it cost more to manufacture products in the country. If a business can afford to manufacture this way then they would benefit from highly skilled workers and very high quality products. There have been a few success stories in terms of manufacturing and the innovation of products. One company that has done very well is Nokia. Nokia completed all the production and innovation in Finland before 1984. This company is very familiar to me because of the fact that they produce among other things cellular phones. We sell these devices in our stores along side devices from South Korea, Japan and China. Nokia is responsible for the world’s first international cellular network and the first to allow international roaming, the first car phone and the first handheld mobile phone. They are still very successful on terms of cellular technology as well as accessories for their devices primarily because they do all of their manufacturing in other countries as well. They currently have manufacturing facilities in Brazil, China, Hungary, Mexico, India, South Korea and Vietnam. To stay competitive in the global marketplace they have had to move manufacturing and production out of country. All of these facilities have been opened since 1984.
The benefits of doing business in Finland would be their good record on fiscal management, High levels of research and development spending as well as the implementation of cutting edge industries. The weaknesses would include the Economy being heavily dependent on the state of the international economy, the concentration of exports as well as the aging population. So what does this mean for a bicycle business like ours doing business in Finland? It means that although the economy has been a bit stagnant over the past year and is expecting little grow this year individuals are still buying these products. Although the euro crisis and its consequences loom above the market in Finland forecast ordering by the retailers is on the same level as usual and they are preparing themselves for a normal sales season. The interesting information about bike sales in 2012 is listed below:
The Bicycle Market in Finland in 2012 in Units
2011
2012*
Production
25,000
27,000
Import
309,281
265,000
Export
7,939
6,000
Domestic
deliveries
325,000
285,000 ("Finland 2012: Bicycle," 2013) Before researching this information I would have assumed because of their long history and love affair with the bicycle that domestic sales would have been higher.
The above referenced numbers indicate that they import a much higher number of bicycles than I believed. This information would indicate that there is room in the marketplace for bicycles built elsewhere and imported into Finland.
There would be many ways to introduce the product which in this case is a line of bicycles into the country of Finland. In the direct export model we would send individuals into the country to set up direct sales opportunities to companies that already sell bicycles. We could also license the products to be used or sold in any way possible or we could set up franchises where individuals could set up turnkey storefronts and sell our products directly to the
consumers. Base on my own background in business and products that are sold in the retail market the best way of introducing these would be to use the direct export model. This works very well for companies like Samsung because of how imbedded it is in the marketplace. We have a representative from Samsung that comes by the store to make sure we know how to use the new products as well as educates us on upcoming promotions new releases. This would be a great way to educate sales teams in Finland about what separates this product from those that are manufactured there. I think that a representative from the company visiting would be the best way to ensure that the sales people know how to sell this bicycle. I don’t think that licensing or franchising would work as well here because of their loyalty to products that they have come to love for many years. Having a storefront dedicated to these products may repel consumers instead of drawing them in. On the other hand having these bicycles side by side with the products that are locally made may help consumers compare products and make the best decision. This business model should be strong because “In Finland the retail sales of bikes are divided between two distribution channels. The traditional IBD channel, bicycle and sports shops which mainly sell branded bikes and offer high levels of service this channel sells just over 50% of the bicycles annually” ("Finland 2012: Bicycle," 2013). A few things to consider before exporting to Finland would be naming your product, packaging, language requirements as well as any laws that could prohibit sales. Chevrolet made a huge mistake in Venezuela when it released the “Nova” for sale there where the Spanish translation means “doesn’t-go”. Making sure that you pick an appropriate Finnish translated name makes great business sense. Other things to consider would be language requirements because retail products in Finland require a Finnish-Swedish label. The sale of an import bicycle in Finland would be tougher because of the loyalty and heritage that Finnish people have to their locally made products. Companies like Helkama which is Finland’s top rated brand and Nopsa which have both been around for over 100 years. This type of tradition and loyalty could make breaking into the Finnish bicycle business a bit tricky. There are also other things that could make selling bicycles in Finland difficult like the implementation of bicycle sharing systems which allow customers to rent the use of a bicycle for daily or weekly rates. There are also specific bicycle sharing systems for specific communities as well as government agencies. Although this can be a drawback on retail bicycle sales this could also be a great opportunity through local marketing companies to get your product in the hands of a consumer. Based on the information contained within this report my opinion would be that from a cost point of view it really does not make fiscal sense to take a product that we have already produced and have it manufactured and assembled in Finland. Because of the fact that there is a highly skilled workforce as well as unions the cost per hour is much too high. The theory behind choosing Finland as a country and a Bicycle was that this would be a product that is currently being used there and that there would also be a need in the near future. Because the sale of bicycles is stable and moderate and has been for the past few years as well as the foreseeable future there would not be a large enough margin to be profitable. On the other hand like I discussed above it would make sense to make products available to sell there because there is a need. Exporting our products to Finland to sell is the only option that would be profitable. This class has taught me to look differently at the ways business is done internationally. If I started my own company and was looking to make it profitable these are the things that I would consider. Is there a need for this product (locally or internationally), What is the cost to manufacture this product (locally or internationally), How much are the workers willing to work for to produce this product (locally or internationally), How would I have to run my business differently if I were to do business internationally (cultural, legal issues, religious) and what competition would I have in these same markets vying for my market share and employees. I enjoyed the class very much and thanks for your professional insights.
References
Bicycles in finland. (2010). Retrieved from http://www.finland-holidays.com/168/transport-in-finland/bicycles-in-finland.html
Delaney, L. (n.d.). How to prepare your product for import/export. Retrieved from http://importexport.about.com/od/MarketResearch/a/How-To-Prepare-Your-Product-For-Import-Export.htm
Finland 2012: Bicycle sales equal 2011 levels. (2013, March 20). Retrieved from http://www.bike-eu.com/Sales-Trends/Market-Report/2013/3/Finland-2012-Bicycle-Sales-Equal-2011-Levels-1180134W/
Finland risk assessment. (2012, September). Retrieved from http://globaledge.msu.edu/countries/finland/risk
Finnish culture. (n.d.). Retrieved from http://www.afrha.com/Finnish-Culture.aspx
International labor comparisons font size: print: ilc share on. (2012, December 12). Retrieved from http://www.bls.gov/fls/country/finland.htm
The nokia story. (n.d.). Retrieved from http://www.nokia.com/global/about-nokia/about-us/the-nokia-story/
Top 10 countries with most bicycles per capita. (2011, March 14). Retrieved from http://top10hell.com/top-10-countries-with-most-bicycles-per-capita/
Finland
Jeffrey Amley
Baker College
Bus 401: International Business
Dr. Frank Bucaria
May 03, 2013
Thesis
The information provided in this paper will help us prepare an analysis of the risk issues that might be found in introducing the product into the specific country, utilizing the theories and concepts in the course material. We will be successful in achieving this by discussing the method of product entry. For this Paper I have chosen Finland as the country and the bicycle as the product to enter. I will also be discussing direct export, licensing as well as franchise opportunities. I will also be looking into the culture of the people as well as the demand for the product and companies selling competitive products. I will also break down labor and staffing issues as well. The goal will be to see if this business has the opportunity to be successful in the country of Finland.
The rational for introducing this particular product to the citizens of Finland is the country’s long standing love affair with …show more content…
the bicycle. The population of Finland is 5.4 Million people and 60.4% of those people ride bicycles. This ranks Finland at number 7 among the top 10 countries with the highest amount of bicycles per capita. “In Finland 9% of all trips are made by bike. The average distance cycled per inhabitant per day is 0.7 km. Fins ride bicycles without reference to the age or social status, both children and grown-ups: tourists and housewives, pensioners and students. Although the cycling season in this country traditionally starts in spring or summer, some fans of bikes are not afraid of neither the rain, nor slush, nor event winter snowstorms. The love of Fins cyclists to the bicycles can be compared with their love to dogs, or to fishing, or to sauna” ("Top 10 countries," 2011). The culture dictates a laid back life style and according to many publications is referred to as one of the freest nations in the world in terms of civil liberties. Finland also enjoys freedom of the presses as well as high levels of political rights. “Finland is rated the sixth most peaceful country in the world by the Economist Intelligence Unit, and since 1945, Finland has been at peace, adopting neutrality in wartime” ("Finnish culture," ). In 2007 Readers Digest declared Finland as the best country to live in because of the freedoms as well as education, income, quality of drinking water and greenhouse gas emissions. This culture would benefit us in terms of selling products as well as research and development because of the amount of highly educated people. Because of the highly educated workforce there would be a higher cost to manufacture products if manufacturing needed to be moved. For instance if sales were to take off and production and manufacturing were to be needed in country the cost to do so would be higher. Whereas hourly compensation in a manufacturing capacity is only $6 in the Philippines the cost to produce the bicycles in Finland would be $124 hourly. This information all falls in line with a business model that would have us manufacturing the bicycles elsewhere and having the imported to Finland to sell. Unions also make up a large percentage of the workforce in Finland. Roughly 1 out of every 5 workers belongs to the Central Organization of Finnish Trade Unions of 1 million people. This particular is another reason why it cost more to manufacture products in the country. If a business can afford to manufacture this way then they would benefit from highly skilled workers and very high quality products. There have been a few success stories in terms of manufacturing and the innovation of products. One company that has done very well is Nokia. Nokia completed all the production and innovation in Finland before 1984. This company is very familiar to me because of the fact that they produce among other things cellular phones. We sell these devices in our stores along side devices from South Korea, Japan and China. Nokia is responsible for the world’s first international cellular network and the first to allow international roaming, the first car phone and the first handheld mobile phone. They are still very successful on terms of cellular technology as well as accessories for their devices primarily because they do all of their manufacturing in other countries as well. They currently have manufacturing facilities in Brazil, China, Hungary, Mexico, India, South Korea and Vietnam. To stay competitive in the global marketplace they have had to move manufacturing and production out of country. All of these facilities have been opened since 1984.
The benefits of doing business in Finland would be their good record on fiscal management, High levels of research and development spending as well as the implementation of cutting edge industries. The weaknesses would include the Economy being heavily dependent on the state of the international economy, the concentration of exports as well as the aging population. So what does this mean for a bicycle business like ours doing business in Finland? It means that although the economy has been a bit stagnant over the past year and is expecting little grow this year individuals are still buying these products. Although the euro crisis and its consequences loom above the market in Finland forecast ordering by the retailers is on the same level as usual and they are preparing themselves for a normal sales season. The interesting information about bike sales in 2012 is listed below:
The Bicycle Market in Finland in 2012 in Units
2011
2012*
Production
25,000
27,000
Import
309,281
265,000
Export
7,939
6,000
Domestic
deliveries
325,000
285,000 ("Finland 2012: Bicycle," 2013) Before researching this information I would have assumed because of their long history and love affair with the bicycle that domestic sales would have been higher.
The above referenced numbers indicate that they import a much higher number of bicycles than I believed. This information would indicate that there is room in the marketplace for bicycles built elsewhere and imported into Finland.
There would be many ways to introduce the product which in this case is a line of bicycles into the country of Finland. In the direct export model we would send individuals into the country to set up direct sales opportunities to companies that already sell bicycles. We could also license the products to be used or sold in any way possible or we could set up franchises where individuals could set up turnkey storefronts and sell our products directly to the
consumers. Base on my own background in business and products that are sold in the retail market the best way of introducing these would be to use the direct export model. This works very well for companies like Samsung because of how imbedded it is in the marketplace. We have a representative from Samsung that comes by the store to make sure we know how to use the new products as well as educates us on upcoming promotions new releases. This would be a great way to educate sales teams in Finland about what separates this product from those that are manufactured there. I think that a representative from the company visiting would be the best way to ensure that the sales people know how to sell this bicycle. I don’t think that licensing or franchising would work as well here because of their loyalty to products that they have come to love for many years. Having a storefront dedicated to these products may repel consumers instead of drawing them in. On the other hand having these bicycles side by side with the products that are locally made may help consumers compare products and make the best decision. This business model should be strong because “In Finland the retail sales of bikes are divided between two distribution channels. The traditional IBD channel, bicycle and sports shops which mainly sell branded bikes and offer high levels of service this channel sells just over 50% of the bicycles annually” ("Finland 2012: Bicycle," 2013). A few things to consider before exporting to Finland would be naming your product, packaging, language requirements as well as any laws that could prohibit sales. Chevrolet made a huge mistake in Venezuela when it released the “Nova” for sale there where the Spanish translation means “doesn’t-go”. Making sure that you pick an appropriate Finnish translated name makes great business sense. Other things to consider would be language requirements because retail products in Finland require a Finnish-Swedish label. The sale of an import bicycle in Finland would be tougher because of the loyalty and heritage that Finnish people have to their locally made products. Companies like Helkama which is Finland’s top rated brand and Nopsa which have both been around for over 100 years. This type of tradition and loyalty could make breaking into the Finnish bicycle business a bit tricky. There are also other things that could make selling bicycles in Finland difficult like the implementation of bicycle sharing systems which allow customers to rent the use of a bicycle for daily or weekly rates. There are also specific bicycle sharing systems for specific communities as well as government agencies. Although this can be a drawback on retail bicycle sales this could also be a great opportunity through local marketing companies to get your product in the hands of a consumer. Based on the information contained within this report my opinion would be that from a cost point of view it really does not make fiscal sense to take a product that we have already produced and have it manufactured and assembled in Finland. Because of the fact that there is a highly skilled workforce as well as unions the cost per hour is much too high. The theory behind choosing Finland as a country and a Bicycle was that this would be a product that is currently being used there and that there would also be a need in the near future. Because the sale of bicycles is stable and moderate and has been for the past few years as well as the foreseeable future there would not be a large enough margin to be profitable. On the other hand like I discussed above it would make sense to make products available to sell there because there is a need. Exporting our products to Finland to sell is the only option that would be profitable. This class has taught me to look differently at the ways business is done internationally. If I started my own company and was looking to make it profitable these are the things that I would consider. Is there a need for this product (locally or internationally), What is the cost to manufacture this product (locally or internationally), How much are the workers willing to work for to produce this product (locally or internationally), How would I have to run my business differently if I were to do business internationally (cultural, legal issues, religious) and what competition would I have in these same markets vying for my market share and employees. I enjoyed the class very much and thanks for your professional insights.
References
Bicycles in finland. (2010). Retrieved from http://www.finland-holidays.com/168/transport-in-finland/bicycles-in-finland.html
Delaney, L. (n.d.). How to prepare your product for import/export. Retrieved from http://importexport.about.com/od/MarketResearch/a/How-To-Prepare-Your-Product-For-Import-Export.htm
Finland 2012: Bicycle sales equal 2011 levels. (2013, March 20). Retrieved from http://www.bike-eu.com/Sales-Trends/Market-Report/2013/3/Finland-2012-Bicycle-Sales-Equal-2011-Levels-1180134W/
Finland risk assessment. (2012, September). Retrieved from http://globaledge.msu.edu/countries/finland/risk
Finnish culture. (n.d.). Retrieved from http://www.afrha.com/Finnish-Culture.aspx
International labor comparisons font size: print: ilc share on. (2012, December 12). Retrieved from http://www.bls.gov/fls/country/finland.htm
The nokia story. (n.d.). Retrieved from http://www.nokia.com/global/about-nokia/about-us/the-nokia-story/
Top 10 countries with most bicycles per capita. (2011, March 14). Retrieved from http://top10hell.com/top-10-countries-with-most-bicycles-per-capita/