Strategic MarketingAssignment # 3Top Three Economies of theWorldProgram: MBA (Evening)Submitted To:Sir Abdul Qayyum QureshiSubmitted By:Muhammad TayyabRoll # 111405
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 2Economy of SwitzerlandThe Swiss economySwitzerland’s economy is based on a highly qualified labour force performing highly skilled work.The main areas include microtechnology, hitech, biotechnology and pharmaceuticals, as well asbanking and insurance know-how. The service sector now employs the greatest number of people.Most of the people working in Switzerland are employed by small and medium-sized enterprises,which play an extremely important role in the Swiss economy.The Swiss are concerned that economic activity should have as little impact as possible on theenvironment. Switzerlands energy and transport policies aim to be environmentally friendly.The age of unlimited economic growth in Switzerland is over. Fear of unemployment has been oneof the main concerns of the Swiss for several years.Facts and Figure of SwitzerlandZurich, Switzerlands largest cityRank 27thCurrency 1 Swiss franc (CHF 1)Fiscal year Calendar yearTradeorganisationsEFTA, WTO and OECDStatisticsGDP CHF 550.6 billion (2010)$622.8 billion (2012 est.)$364.5 billion PPPGDP growth 0.8% (2012 est.)1.7% per capita nominal2.7% real1.6% per capita real
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 3GDP per capita CHF 70,334$75,440 current (nominal)$46,815 PPPGDP by sector agriculture (1.2%)industry (27.5%)services (71.3%) (2011 est.)Inflation (CPI) 0.2%Populationbelow povertyline4.8 %Gini coefficient 33.7 (2008)Labour force 4.547 millionLabour forceby occupationagriculture (3.4%)Industry (23.4%)services (73.2%) (2010)Unemployment 3.1% (2011)Mainindustriesmachinery, chemicals, watches, textiles, precision instrumentsEase of DoingBusiness Rank28thExternalExports $308.3 billion (2011 est.)Export goods machinery, chemicals, metals, watches, agricultural productsMain exportpartnersGermany 19.2%, US 10.2%, Italy 7.9%,France 7.7%, UK 5.9% (2010)Imports $299.6 billion (2011 est.)Import goods machinery, chemicals, vehicles, metals; agricultural products, textilesMain importpartnersGermany 32%, Italy 10.2%, France 8.5%,US 5.3%, Netherlands 4.5%, Austria 4.3%(2010)FDI stock $395.6 billion (31 December 2009 est.)Gross externaldebt$1.346 trillion (30 June 2011)Public financesPublic debt 46.7% of GDP (2012 est.)Revenues $222 billion (2011 est.)Expenses $216.8 billion (2011 est.)Economic aid donor: ODA CHF2.31 billion (0.47% of GDP)Credit rating Standard & Poors:AAA (Domestic)AAA (Foreign)AAA (T&C Assessment)Outlook: StableMoodys:AaaOutlook: Stable
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 5In 2010, 15 Swiss firms, including the pharmaceutical giant Novartis (No. 160) featured on the“Fortune Global 500”, an annual ranking of the 500 most powerful corporations which is compiledby the eponymous American business magazine.Many companies are still in the hands of families who founded them. However, a survey conductedin 2002 showed the impact of globalisation on large firms: it found 40% of board members and26% of managers were non-Swiss, mostly from Germany, the UK and France. However, therewere still few foreign managers in medium and small businessesA mainstay of the Swiss economyWhen you mention Switzerland, most people automatically think ofmountains and cheese, with banks coming a close third. This is not surprising given that the Swissfinancial centre is a central pillar of the Swiss economy, generating over 10 % of Swiss GDP. Atthe end of 2011, some 211,000 people (full-time equivalents) – or 6 % of Switzerland’s totalworking population – were directly employed by banks, insurance companies and other financialinstitutions.The term "financial centre" generally refers to major cities like New York and London, which have adense network of banks, financial companies, stock exchanges, insurance companies andinternational trading firms. These centres boast a high concentration of myriad financial services.Switzerland’s financial centre has four main hubs - Zurich, Geneva, Basel and Lugano.Players and servicesThe key players in the Swiss financial centre are the banks. One of their core businesses is wealthmanagement. This is reflected in a ranking of the world’s largest wealth managers, which placesthree Swiss banks in the top ten. At the end of 2011 Swiss banks managed assets totalling CHF5,600 billion. In terms of cross-border private wealth management, Switzerland is the undisputedworld market leader with a share of 27%, or CHF 2,100 billion (cf. table below).The second most important players are insurers. Close to 70% of their global premium income in2011 was generated overseas, indicating a high degree of internationalisation. Swiss insurancecompanies have increasingly specialised in re-insurance, i.e. where an insurer insures otherinsurers, making Switzerland the fourth largest reinsurer in the world.The Swiss financial centre is also a major international force in currency trading, commodity tradingand the management of funds of hedge funds. However, in other financial services, such as thefunds business, institutional asset management, investment banking, as well as commerce andcorporate banking, it continues to play only a minor role.
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 7However, it is worth remembering that in many countries a significant proportion of the electricityused is consumed by large industrial plants, which Switzerland does not have. If it were unable toimport goods produced by such plants and had to make them itself, its per capita consumptionwould be higher.Switzerland, like most other countries, obtains its electric power from a number of differentsources.Transit trafficSwitzerland stands on the route linking northern and southern Europe, but the Alps made transitdifficult until tunnels were built through them. The Gotthard railway tunnel, 15 km (9.3 miles) long,was built more than 100 years ago. The Gotthard road tunnel, opened in 1980, was the longest inthe world at 17 km (10.6 miles) until Norways Laerdal tunnel (24.5 km/15 miles) opened inNovember 2000.Switzerlands position as a transit country has exposed it to ever increasing amounts of freighttraffic. As Europe moves closer together, frontiers are no longer a barrier to trade. As a result, theroad network is coming under heavy pressure, and gigantic queues build up, especially onthe Gotthard route.The situation is at its worst during the vacation season in western Europe, when sunseekingholidaymakers join the lines of trucks with their cars and caravans.High wages, long hoursThe Swiss work a lot, an average of 41.6 hours a week for full-time employees in 2005. Full-timeemployees are entitled to leave of only 20 working days per year. This is less than in many otherEuropean countries. Public holidays vary from canton to canton, but there are generally 8 or 9.In 1985, the Swiss rejected a general increase in vacation entitlement from four to five weeks andin 2002 they voted against the introduction of the 36 hour week.Strikes are rare and workplace absenteeism is low.About three quarters of absences from the work place are for health reasons, but over 13% are formilitary service or its civilian equivalent.A survey of 71 cities round the world carried out by the Swiss bank UBS in 2006 showed bothZurich and Geneva offered higher net salaries but demanded a higher number of hours than didcomparable cities across the world.
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 8EarningsAccording to a survey carried out by economic experts in Canton Aargau published in 2006, thebest-paid job in Switzerland is that of a long-haul airline pilot, who can expect a basic monthlysalary of 18,193 francs after 20 years experience.There are large regional differences between salary levels.A survey conducted by the Federal Statistical Office in 2004 showed a difference of over onethousand francs per month in the median wage between the best and worst paid areas. In theZurich region it was 5,984 francs, while in Ticino it was 4,823. (The median wage is situated at thehalf way point on the wage scale: half the wages under consideration are higher, and half arelower.)The disparity is to be explained by the nature of the economic activity conducted in the differentareas. Banking, insurance and research account for the high median wage in the Zurich region.Cost of livingStatistics released by the European Union in 2002 showed that Switzerland was the third mostexpensive country in Europe, after Norway and Iceland. The Swiss pay particularly high prices formeat, cooking oil, fish and vegetables.Nevertheless, Swiss wages take the cost of living into account. A survey of 71 cities round theworld carried out by the Swiss bank UBS in 2006 showed that it takes less time for workers inSwitzerland to earn enough to buy a loaf and a hamburger than it does in many other countries.ExpenditureFood and clothing accounts for an ever smaller proportion of household budgets, dropping from16% in 1992 to 12% in 1998 to just under 11% in 2005.Housing is expensive, and most people live in rented accommodation. Switzerland has by far thelowest rate of owner occupiers in Europe: in 2000 only 34.6% of homes belonged to the peoplewho lived in them.Taxation is relatively low in comparison with the neighboring countries. On the other hand, theSwiss spend a lot on insurance, including compulsory health insurance, which alone accounts forover 5.6% of their expenditure. They spend another 5% on private insurance; the more peoplehave, the more they want to - or must - insure.
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 9Important items in the household budgetItems PercentSource: Federal Statistical Office (2005)food and beverages 7.7%alcohol and tobacco 1.2%clothing and shoes 2.9%housing and energy 16.9%furnishing and maintenance 3.2%health care 4.0%transport and communications 9.9%entertainment, recreation, culture 12.5%
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 10Economy of SingaporeSingapore has a highly developed and successful market economy. It has an open, pro-businessenvironment, relatively corruption-free and transparent, stable prices, low tax rates (14.2% of GDP)compared to other developed economies, and one of the highest per-capita gross domesticproducts (GDP) in the world. Its innovative yet steadfast form of economics that combineseconomic planning of Singapore Economic Development Board with free-market has given it thenickname the Singapore Model. Singapores sovereign wealth fund Temasek Holdings is a largeinvestor in the economy, holding majority stakes in several of the nations largest companies, suchas Singapore Airlines,SingTel, ST Engineering and Media Corp.Exports, particularly in electronics and chemicals, and services including the posture thatSingapore is the regional hub for wealth management (and the opening of the city states firstcasino in 2010 ) provide the main source of revenue for the economy, which allows it topurchase natural resources and raw goods which it does not have. Moreover, water is a scarcity inSingapore therefore water is defined as a precious resource in Singapore along with the scarcity ofland to be treated with land fill of Pulau Semakau. Singapore has limited arable land thatSingapore has to rely on the agrotechnology park for agricultural production andconsumption. Human Resource is another vital issue for the health of Singaporean economy.Singapore could thus be said to rely on an extended concept of intermediary tradeto Entrepôt trade, by purchasing raw goods and refining them for re-export, such as in the waferfabrication industry and oil refining. Singapore also has a strategic port which makes it morecompetitive than many of its neighbors in carrying out such entre pot activities. The Port ofSingapore is the busiest in the world, surpassing Rotterdam and Hong Kong. In addition,Singapores port infrastructure and skilled workforce, which is due to the success of the countryseducation policy in producing skilled workers, is also fundamental in this aspect as they provideeasier access to markets for both importing and exporting, and also provide the skill(s) neededto refine imports into exports.Singapores government promotes high levels of savings and investment through policies such asthe Central Provident Fund, which is used to fund its citizens healthcare and retirement needs.Most companies in Singapore are registered as private limited-liability companies (commonlyknown as "private limited companies"). A private limited company in Singapore is a separate legalentity, and shareholders are not liable for the companys debts beyond the amount of share capitalthey have contributed.
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 11Facts and figure of SingaporeCurrency Singapore dollar (SGD); Brunei Dollar(B$)Fiscal year 1 April - 31 MarchTradeorganisationsWTO, APEC, IOR-ARC, ASEANStatisticsGDP $318.9 billion (2011 est. PPP)GDP growth 0.3% (Q3 2012)GDP per capita $62,100 (PPP, 2010 est.),$43,117 (nominal, 2010 est.)GDP by sector agriculture: 0%; industry: 26.6%;services: 73.4% (2011 est.)Inflation (CPI) 5.2% (2011 est.)Populationbelow povertylineN/AGini coefficient 47.3 (2011)Labour force 3.237 million (2011 est.)Labour forceby occupationagriculture 0.1%, industry 19.6% 18%, services 80.3% (2011)Unemployment 1.9% (2012 est.)Mainindustrieselectronics, chemicals, financial services, oil drilling equipment,petroleumrefining, rubber processing and rubber products,processed foodand beverages, ship repair, offshore platform construction, lifesciences,entrepot tradeEase of DoingBusiness Rank1stExternalExports $414.8 billion (2011 est.)Export goods machinery and equipment (including electronics and telecommunications),pharmaceuticals and other chemicals, refined petroleum productsMain exportpartnersMalaysia 12.2%, Hong Kong 11.0%,China 10.4%, Indonesia 10.4%, UnitedStates 5.45%, Japan 4.5%, (2011 est.)Imports $311.7 billion (2011 est.)Import goods machinery and equipment, mineral fuels, chemicals, foodstuffs, consumer goodsMain importpartnersMalaysia 10.7%, United States 10.7%,China 10.4%, Japan 7.2%, SouthKorea5.9%, Taiwan 5.9% (2011 est)
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 12FDI stock $497 billion (31 December 2011 est.)Gross externaldebt$23.58 billion (31 December 2011 est.)Public financesPublic debt 118.2% of GDP (2011 est.)Revenues S$40.53 billion (2011 est]Expenses S$37.18 billion (2011 est.) note: expenditures include both operational anddevelopment expendituresEconomic aid noneCredit rating Standard & Poors:AAA (Domestic)AAA (Foreign)AAA (T&C Assessment)Outlook: StableMoodys:AaaOutlook: StableFitch:AAAOutlook: StableForeignreservesUS$233.368 billion (March 2011)Main data source: CIA World Fact BookAll values, unless otherwise stated, arEconomic historyThis is a chart of trend of gross domestic product of Singapore at market prices estimated by theInternational Monetary Fund.YearGross Domestic Product($ millions)US Dollar ExchangeNominal Per Capita GDP(as % of USA)PPP Per Capita GDP(as % of USA)1980 25,117 2.14 Singapore Dollars 39.65 55.001985 39,036 2.20 Singapore Dollars 36.63 63.411990 66,778 1.81 Singapore Dollars 52.09 74.761995 119,470 1.41 Singapore Dollars 86.14 90.602000 159,840 1.72 Singapore Dollars 66.19 91.482005 194,360 1.64 Singapore Dollars 67.54 103.032007 224,412 1.42 Singapore Dollars 74.61 107.922008 235,632 1.37 Singapore Dollars 73.71 107.272009 268,900 1.50 Singapore Dollars 78.53 108.332010 309,400 1.32 Singapore Dollars 82.13 119.542011 270,020 1.29 Singapore Dollars - -
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 13Singapores strategic location on major sea lanes and industrious population have given thecountry an economic importance in South-east Asia disproportionate to its small size. Uponseparation from Malaysia in 1965, Singapore was faced with a lack of physical resources and asmall domestic market. In response, the Singapore Government adopted a pro-business, pro-foreign investment, export-oriented economic policy combined with state-directed investments instrategic government-owned corporations. Whilst nominally socialist in the 1960s, the ruling partyincreasingly became openly capitalist but self-described as pragmatic, described by some as aeuphemism for capitalism with authoritarian social controls Singapores government movedtowards guiding the economy and investing in medicine and infrastructure. Living standardssteadily rose, with more families moving from a lower-income status to middle-income security withincreased household incomes. During a National Day Rally speech in 1987, Lee Kuan-Yew claimed that (based on the homeownership criterion) 80% of Singaporeans could now beconsidered to be members of the middle-class.Singapores economic strategy produced real growth averaging 8.0% from 1960 to 1999. Theeconomy picked up in 1999 after the regional financial crisis, with a growth rate of 5.4%, followedby 9.9% for 2000. However, the economic slowdown in the United States, Japan and the EuropeanUnion, as well as the worldwide electronics slump, had reduced the estimated economic growth in2001 to a negative 2.0%. The economy expanded by 2.2% the following year, and by 1.1% in 2003when Singapore was affected by the SARSoutbreak. Subsequently, a major turnaround occurred in2004 allowed it to make a significant recovery of 8.3% growth in Singapore, although the actualgrowth fell short of the target growth for the year more than half with only 2.5%. In 2005, economicgrowth was 6.4%; and in 2006, 7.9%.Singapores unemployment rate is around 2.2% as of 20 February 2009. As of 8 August 2010,Singapore is the fastest growing economy in the world, with a growth rate of 17.9% for the first halfof 2010. As of 2012, despite attracting the highest figure in foreign direct investments amongcountries in Southeast Asia, Singapore has 0.3% growth for its third quarter year-on-year, thelowest among its peers in the region opposite Philippines which got 7.1% on the same quarter butgetting the lowest foreign direct investments at only $2.1 billion.SectorsManufacturing and financial business services accounted for 26% and 22%, respectively, ofSingapores gross domestic product in 2000. The electronics industry leads Singaporesmanufacturing sector, accounting for 48% of total industrial output, but the government also isprioritising development of the chemicals and biotechnology industries.To maintain its competitive position despite rising wages, the government seeks to promote highervalue-added activities in the manufacturing and services sectors. It also has opened, or is in theprocess of opening, the financial services, telecommunications, and power generation and retailingsectors up to foreign service providers and greater competition. The government has also
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 14attempted some measures including wage restraint measures and release of unused buildings inan effort to control rising commercial rents with the view to lowering the cost of doing business inSingapore when central business district office rents tripled in 2006.BankingSingapore is a financial centre in Southeast Asia. According to the Human Rights Watch, due to itsrole as a financial hub for the region, Singapore has continually been criticized for reportedlyhosting bank accounts containing ill-gotten gains of corrupt leaders and their associates, includingbillions of dollars of Burma’s state gas revenues hidden from national accounts.BiotechnologySingapore is aggressively promoting and developing its biotechnology industry. Hundred of millionsof dollars were invested into the sector to build up infrastructure, fund research and developmentand to recruit top international scientists to Singapore. Leading drug makers, suchas GlaxoSmithKline (GSK), Pfizer and Merck & Co., have set up plants in Singapore. On 8 June2006, GSK announced that it is investing another S$300 million to build another plant toproduce pediatric vaccines, its first such facility in Asia.Pharmaceuticals now account for morethan 16% of the countrys manufacturing production.Energy and infrastructureSingapore is the pricing centre and leading oil trading hub in Asia. The oil industry makes up 5 percent of Singapores GDP, with Singapore being one of the top three export refining centres in theworld. In 2007 it exported 68.1 million tonnes of oil. The oil industry has led to the promotion of thechemical industry as well as oil and gas equipment manufacturing. Singapore has 70 per cent ofthe world market for both jack-up rigs and for the conversion of Floating Production StorageOffloading units. It has 20 per cent of the world market for ship repair, and in 2008 the marine andoffshore industry employed almost 70,000 workers.Trade, investment and aidSingaporean exports in 2006
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 15Singapores total trade in 2000 amounted to S$373 billion, an increase of 21% from 1999. Despiteits small size, Singapore is currently the fifteenth-largest trading partner of the United States. In2000, Singapores imports totaled $135 billion, and exports totaled $138 billion. Malaysia wasSingapores main import source, as well as its largest export market, absorbing 18% of Singaporesexports, with the United States close behind. Re-exports accounted for 43% of Singapores totalsales to other countries in 2000. Singapores principal exports are petroleum products,food/beverages, chemicals, textile/garments, electronic components, telecommunicationapparatus, and transport equipment. Singapores main imports are aircraft, crude oil and petroleumproducts, electronic components, radio and television receivers/parts, motor vehicles, chemicals,food/beverages, iron/steel, and textile yarns/fabrics.Singapore workforceIn 2000, Singapore had a workforce of about 2.2 million. The National Trades UnionCongress (NTUC), the sole trade union federation which has a symbiotic relationship with theruling party, comprises almost 99% of total organized labour. Government policy and pro-activityrather than labour legislation controls general labour and trade union matters. The Employment Actoffers little protection to white-collar workers due to an income threshold. The Industrial ArbitrationCourt handles labour-management disputes that cannot be resolved informally through the Ministryof Manpower. The Singapore Government has stressed the importance of cooperation betweenunions, management and government (tripartism), as well as the early resolution of disputes. Therehas been only one strike in the past 15 years.Singapore has enjoyed virtually full employment for long periods of time. Amid an economic slump,the unemployment rate rose to 4.0% by the end of 2001, from 2.4% early in the year.Unemployment has since declined and as of 2012 the unemployment rate stands at 1.9%.While the Singapore government has taken a stance against minimum wage and unemploymentbenefit schemes, the government has introduced a Workfare Income Supplement (WIS) scheme tosupplement wages of low-skilled workers.Public financeGovernment spending in Singapore has risen since the start of the global financial crisis, fromaround 15% of GDP in 2008 to 17% in 2012. The governments total expenditure as a percentageof GDP ranks among the lowest internationally and allows for a competitive tax regime. Thegovernment has no foreign debt and consistent budget surpluses. Singapore government debt isissued for investment purposes, and not for fiscal needs.Personal income taxes in Singapore are among the lowest in the world, ranging from 0% to 20%for incomes above S$320,000. There are no capital gains or inheritance taxes in Singapore.Singapore attracts entrepreneurs, and established corporations from around the world, with acorporate tax structure that encourages startups and provides incentives for international business.The corporate tax rate of 17% is low relative to other developed nations. Singapore has a single-tier corporate income tax system, which means there is no double-taxation for shareholders.
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 16Economy of FinlandFinland has a highly industrialized, mixed economy with a per capita output equal to that of otherwestern economies such as France, Germany, Sweden or the United Kingdom. The largest sectorof the economy is services at 65.7 percent, followed by manufacturing and refining at 31.4percent. Primary production is 2.9 percent.With respect to foreign trade, the key economic sector is manufacturing. The largestindustries are electronics (21.6 percent), machinery, vehicles and other engineered metal products(21.1 percent), forest industry (13.1 percent), and chemicals (10.9 percent). Finland has timber andseveral mineral and freshwater resources. Forestry, paper factories, and the agricultural sector (onwhich taxpayers spend around 2 billion euro annually) are politically sensitive to rural residents.The Greater Helsinki area generates around a third of GDP.In a 2004 OECD comparison, high-technology manufacturing in Finland ranked second largestafter Ireland. Knowledge-intensive services have also ranked the smallest and slow-growth sectors– especially agriculture and low-technology manufacturing – second largest after IrelandInvestment was below expected. Overall short-term outlook was good and GDP growth has beenabove many EU peers. Finland has the 4th largest knowledge economy in Europe, behindSweden, Denmark and the UK.Finland is highly integrated in the global economy, and international trade is a third of GDP. TheEuropean Union makes 60 percent of the total trade. The largest trade flows are withGermany, Russia, Sweden, the United Kingdom, the United States, Netherlands and China. Tradepolicy is managed by the European Union, where Finland has traditionally been among the freetrade supporters, except for agriculture. Finland is the only Nordic country to have joined theEurozone; Denmark and Sweden have retained their traditional currencies, where asIceland and Norway are not members of the EU at all.Economy of FinlandHelsinkiRank 54Currency Euro (EUR)Fiscal year calendar yearTrade European Union
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 17Organizations World Trade Organization (WTO)Organisation for Economic Co-operation and Development (OECD)othersStatisticsGDP $247.2 billion (2012 est.)GDP growth 0.3% (2012 est.)GDP per capita $36,700 (2011 est.) (PPP)GDP by sector agriculture: 2.6%; industry: 29.1%; services: 68.2% (2010 est.)Inflation (CPI) 3.3% (2011 est.)Populationbelow povertyline17.9% at risk of poverty or social exclusionGini coefficient 28.2 (2010)Labour force 2,818 million (2011)Labour forceby occupationagriculture and forestry 4.5%, industry 18.3%, construction 7.3%, commerce16%, finance, insurance, and business services 14.5%, transport andcommunications 7%, public services 32.4% (2008)Unemployment 7.3% (2012 est.)Average grosssalary3,463 € / 4,675 $, monthly (2006)Average netsalary2,043 € / 2,758 $, monthly (2006)Mainindustriesmetals and metal products, electronics, machinery and scientific instruments,shipbuilding, pulp and paper, foodstuffs, chemicals, textiles, clothingEase of DoingBusiness Rank11thExternalExports $78.83 billion (2011 est.)Export goods Electrical and optical equipment, machinery, transport equipment, paper andpulp, chemicals, basic metals; timberMain exportpartnersSweden 11.8%, Germany 10%, Russia9.2%, Netherlands 6.8%, UnitedKingdom 5.2%, United States 4.9%,China 4.7% (2011)Imports $80.34 billion (2011 est.)Import goods foodstuffs, petroleum and petroleum products, chemicals, transport equipment,iron and steel, machinery, textile yarn and fabrics, grainsMain importpartnersRussia 17.6%, Sweden 13.6%,Germany 13.6%, Netherlands 7.6%,China 4.2%(2011)FDI stock $87.99 billion (31 Dec. 2010 est.)Gross externaldebt$370.8 billion (30 June 2010)Public financesPublic debt 53.5% of GDP (2012 est.), net debt 17.4% of GDPRevenues $129.4 billion (2012 est.)Expenses $134 billion (2012 est.)Economic aid donor: ODA, $1.023 billion (2007)
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 18Credit rating AAA (Domestic)AAA (Foreign)AAA (T&C Assessment)(Standard & Poors)ForeignreservesUS$11.492 billion (March 2011)Main data source: CIA World Fact BookAll values, unless otherwise stated, are in US dollarsHistoryFinland started out as a relatively poor country that was vulnerable to shocks to the economy suchas the great famine of the 1860s. Until the 1930s, the Finnish economy was predominantlyagrarian, and, as late as in the 1950s, more than half the population and 40 percent of output werestill in the primary sectorLiberalizationLike other Nordic countries, Finland has modified its system of economic regulation since late1980s. Financial and product market regulations were modified. Some state enterprises wereprivatized and some tax rates were altered.European UnionFinland joined the European Union in 1995. The central bank was given an inflation-targetingmandate until Finland joined the euro zone. The growth rate has since been one of the highestof OECD countries and Finland has topped many indicators of national performance.Finland was one of the 11 countries joining the third phase of the Economic and Monetary Union ofthe European Union, adopting the euro as the countrys currency, on January 1, 1999. The nationalcurrency markka (FIM) was withdrawn from circulation and replaced by the euro (EUR) at thebeginning of 2002.AgricultureFinlands climate and soils make growing crops a particularchallenge. The country lies between 60° and 70° north latitude - asfar north as Alaska - and has severe winters and relatively shortgrowing seasons that are sometimes interrupted by frosts. However,because the Gulf Stream and the North Atlantic Drift Currentmoderate the climate, and because of the relatively low elevation ofthe land area, Finland contains half of the worlds arable land northof 60° north latitude. Annual precipitation is usually sufficient, but it occurs almost exclusivelyduring the winter months, making summer droughts a constant threat. In response to the climate,farmers have relied on quick-ripening and frost-resistant varieties of crops, and they havecultivated south-facing slopes as well as richer bottomlands to ensure production even in yearswith summer frosts. Most farmland had originally been either forest or swamp, and the soil had
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 19usually required treatment with lime and years of cultivation to neutralise excess acid and todevelop fertility. Irrigation was generally not necessary, but drainage systems were often needed toremove excess water.IndustrySince the 1990s, Finnish industry, which for centuries had relied on the countrys vast forests, hasbecome increasingly dominated by electronics and services, as globalization lead to a decline ofmore traditional industries.Outsourcing resulted in more manufacturing being transferredabroad, with Finnish-based industry focusing to a greater extent on R&D and hi-tech electronics.ElectronicsThe Finnish electronics and electrotechnics industry relies on heavy investment in R&D, and hasbeen accelerated by the liberalisation of global markets. Electrical engineering started in the late19th century with generators and electric motors built by Gottfried Strömberg, now part of the ABBGroup. Other Finnish companies – such as Instru, Vaisala and Neles (now part of Metso) - havesucceeded in areas such as industrial automation, medical and meteorologicaltechnology. Nokia was once a world leader in mobile telecommunications.Metals, engineering and manufacturingFinland has an abundance of minerals, but many large mines have closed down, and most rawmaterials are now imported. For this reason, companies now tend to focus on high added-valueprocessing of metals. The exports include the production steel, copper, chromium, zinc and nickel,and finished products such as steel roofing and cladding, welded steel pipes, copper pipe andcoated sheets. Outokumpu is known for developing the flash smelting process for copperproduction and stainless steel.With regard to vehicles, the Finnish motor industry consists mostly of manufacturers of tractors(Valtra, formerly Valmet tractor), forest machines (f.ex. Ponsse), military vehicles (Sisu, Patria),trucks (Sisu Auto), buses and Valmet Automotive, a contract manufacturer, whose factoryin Uusikaupunki produces Fisker electric cars. Shipbuilding is an important industry: the worldslargest cruise ships are built in Finland; also, the Finnish company Wärtsilä produces the worldslargest diesel engines. In addition, Finland also produces trainrolling stock.The manufacturing industry is a significant employer of about 400,000 people.Chemical industryThe chemical industry is one of the Finlands largest industrial sectors with its roots in tar making inthe 17th century. It produces an enormous range of products for the use of other industrial sectors,especially for forestry and agriculture. In addition, its produces plastics, chemicals, paints, oilproducts, pharmaceuticals, environmental products, biotech products and petrochemicals.Biotechnology is regarded as one of the most promising high-tech sectors in Finland and it isgrowing rapidly.
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 20Pulp and paper industryForest products has been the major export industry in the past, butdiversification and growth of the economy has reduced its share.In the 1970s, the pulp and paper industry accounted for half ofFinnish exports. Although this share has shrank, pulp and paper isstill a major industry with 52 sites across the country. Furthermore,several of large international corporations in this business arebased in Finland. Stora Enso and UPM were placed #1 and #3 byoutput in the world, both producing more than ten million tons. M-real and Myllykoskialso appear on the top 100 list.Energy industryFinlands energy supply is divided as follows: nuclear power -26%, net imports - 20%, hydroelectric power - 16%, combined production district heat - 18%,combined production industry - 13%, condensing power - 6%.One half of all the energy consumedin Finland goes to industry, one fifth to heating buildings and one fifth to transport. Lackingindigenous fossil fuel resources, Finland has been an energy importer. This might change in thefuture since Finland is currently building its fifth and approved the building permits for its sixth andseventh reactors. There are some uranium resources in Finland, but to date no commercially viabledeposits have been identified for exclusive mining of uranium. However, permits have beengranted to Talvivaara to produce uranium from the tailings of their nickel-cobalt mine.CompaniesAleksanterinkatu, a commercial street in Helsinki.Notable companies in Finland include Nokia, the former marketleader in mobile telephony;Stora Enso, the largest papermanufacturer in the world; Neste Oil, an oil refining andmarketing company; UPM-Kymmene, the third largest papermanufacturer in the world; Aker Finnyards, the manufacturer ofthe worlds largest cruise ships (such as RoyalCaribbeansFreedom of the Seas); Rovio Mobile, video gamedeveloper most notable for creating Angry Birds; KONE, amanufacturer of elevators and escalators; Wärtsilä, a producerof power plants and ship engines; and Finnair, thelargest Helsinki-Vantaa based internationalairline. Additionally, many Nordic design firms areheadquartered in Finland. These include the Fiskars owned Iittala Group, Artek a furniture designfirm co-created by Alvar Aalto, and Marimekko made famous by Jacqueline Kennedy. Finland hassophisticated financial markets comparable to UK in efficiency. Though foreign investment is as nothigh as some other European countries, the largest foreign-headquartered companies includednames such as ABB, Tellabs, Carlsberg, and Siemens.
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 21Household income and consumptionFinlands income is generated by the approximately 1.8 million private sector workers, who makean average 25.1 euro per hour (before the median 60% tax wedge) in 2007. According to a 2003report, residents worked on average around 10 years for the same employee ]and around 5different jobs over a lifetime. 62 percent worked for small and medium-sized enterprises. Femaleemployment rate was high and gender segregation on career choices was higher than in the US. In1999 part-time work rate was one of the smallest in OECD.Future liabilities are dominated by the pension deficit. Unlike in Sweden, where pension savers canmanage their investments, in Finland employer chooses a pension fund for the employee. Thepension funding rate is higher than in most Western European countries, but still only a portion of itis funded and pensions exclude health insurances and other unaccounted promises. Directlyheld public debt has been reduced to around 32 percent in 2007. In 2007, the average householdsavings rate was -3.8 and household debt 101 percent of annual disposable income, a typical levelin Europe.In 2008, the OECD reported that "the gap between rich and poor has widened more in Finland thanin any other wealthy industrialized country over the past decade" and that "Finland is also one ofthe few countries where inequality of incomes has grown between the rich and the middle-class,and not only between rich and poor."In 2006, there were 2,381,500 households of average size 2.1 people. Forty percent of householdsconsisted of single person, 32 percent two and 28 percent three or more. There were 1.2 millionresidential buildings in Finland and the average residential space was 38 square metres perperson. The average residential property (without land) cost 1,187 euro per square metre (withoutland) and residential land on 8.6 euro per square metre. Consumer energy prices were 8-12 eurocent per kilowatt hour. 74 percent of households had a car. There were 2.5 million cars and 0.4other vehicles. Around 92 percent has mobile phone and 58 percent Internet connection at home.The average total household consumption was 20,000 euro, out of which housing at around 5500euro, transport at around 3000 euro, food and beverages excluding alcoholic at around 2500 euro,recreation and culture at around 2000 euro. Upper-level white-collar households (409,653)consumed an average 27,456 euro, lower-level white-collar households (394,313) 20,935 euro,and blue-collar households (471,370) 19,415 euroUnemploymentThe unemployment rate was 8.7% in January 2013. The employment rate is (persons aged 15–64)68,6%,Unemployment security benefits for those seeking employment are at an average OECDlevel. The labor administration funds labour market training for unemployed job seekers, thetraining for unemployed job seeker can last up to 6 months, which is often vocational. The aim ofthe training is to improve the channels of finding employment.
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 22Product marketEconomists attribute much growth to reforms in the product markets. According to OECD, onlyfour EU-15 countries have less regulated product markets (UK, Ireland, Denmark and Sweden)and only one has less regulated financial markets (Denmark). Nordic countries were pioneers inliberalizing energy, postal, and other markets in Europe. The legal system is clear and businessbureaucracy less than most countries. For instance, starting a business takes an average of 14days, compared to the world average of 43 days and Denmarks average of 6 days. Property rightsare well protected and contractual agreements are strictly honored. Finland is rated one of the leastcorrupted countries in Corruption Perceptions Index. Finland is rated 13th in the Ease of DoingBusiness Index. It indicates exceptional ease to trade across borders (5th), enforce contracts (7th),and close a business (5th), and exceptional hardship to employ workers (127th) and pay taxes(83rd).Job marketAccording to the OECD, Finlands job market is the least flexible of the Nordic countries.Finlandincreased job market regulation in the 1970s to provide stability to manufacturers. In contrast,during the 1990s, Denmark liberalised its job market, Sweden moved to more decentralisedcontracts, whereas Finnish trade unions blocked many reforms. Many professions have legallyrecognized industry-wide contracts that lay down common terms of employment including senioritylevels, holiday entitlements, and salary levels, usually as part of a Comprehensive Income PolicyAgreement. Those who favor less centralized labor market policies consider these agreementsbureaucratic, inflexible, and along with tax rates, a key contributor to unemployment and distortedprices. Centralized agreements may hinder structural change as there are fewer incentives toacquire better skills, although Finland already enjoys one of the highest skill-levels in the world.TaxationMain article: Taxation in FinlandTax is collected mainly from municipal income tax, state income tax, state value added tax,customs fees, corporate taxes and special taxes. There are also property taxes, but municipalincome tax pays most of municipal expenses. Taxation is conducted by a state agency,Verohallitus, which collects income taxes from each paycheck, and then pays the differencebetween tax liability and taxes paid as tax rebate or collects as tax arrears afterward. Municipalincome tax is a flat tax of nominally 15-20%,with deductions applied, and directly fundsthe municipality (a city or rural locality). The state income tax is a progressive tax; low-incomeindividuals do not necessarily pay any. The state transfers some of its income as state support tomunicipalities, particularly the poorer ones. Additionally, the state churches - Finnish EvangelicalLutheran Church and Finnish Orthodox Church - are integrated to the taxation system in order totax their members.The middle income workers tax wedge is 46% (Nation Master) and effective marginal tax rates arevery high. Value-added tax is 24% for most items. Capital gains tax is 28% and corporate tax is26%, about the EU median. Property taxes are low, but there is atransfer tax (1.6% for apartmentsor 4% for individual houses) for home buyers. Alcoholic beverages are separately taxed and highlyrestricted. For instance, McKinsey estimates that a worker has to pay around 1600 euro for
[STRATEGIC MARKETING ASSIGNMENT # 3] April 17, 2013P a k - A I M S Page 23anothers 400 euro service- restricting service supply and demand - though some taxation isavoided in the black market and self-service culture. Another study by Karlson, Johansson &Johnsson estimates that the percentage of the buyer’s income entering the service vendor’s wallet(inverted tax wedge) is slightly over 15%, compared to 10% in Belgium, 25% in France, 40% inSwitzerland and 50% in the United States. Tax cuts have been in every post-depressiongovernments agenda and the overall tax burden is now around 43% of GDP compared to 51.1% inSweden, 34.7% in Germany, 33.5% in Canada, and 30.5% in Ireland.State and municipal politicians have struggled to cut their consumption, which is very high at 51.7%of GDP compared to 56.6% in Sweden, 46.9 in Germany, 39.3 in Canada, and 33.5%in Ireland. Much of the taxes are spent on public sector employees, many of which are jobs-for-lifeand amount to 124,000 state employees and 430,000 municipal employees. That is 113 per 1000residents (over a quarter of workforce) compared to 74 in the US, 70 in Germany, and 42 in Japan(8% of workforce). The Economist Intelligence Units ranking for Finlands e-readiness is high at13th, compared to 1st for United States, 3rd for Sweden, 5th for Denmark, and 14th for Germany.Also, early and generous retirement schemes have contributed to high pension costs. Socialspending such as health or education is around OECD median. Social transfers are also aroundOECD median. In 2001 Finlands outsourced proportion of spending was below Swedens andabove most other Western European countries. Finlands health care is more bureaucrat-managedthan in most Western European countries, though many use private insurance or cash to enjoyprivate clinics. Some reforms toward more equal marketplace have been made in 2007-2008. Ineducation, child nurseries, and elderly nurseries private competition is bottom-ranking compared toSweden and most other Western countries. Some public monopolies such Alkoremain, and aresometimes challenged by the European Union. The state has a programme where the number ofjobs decreases byattrition: for two retirees, only one new employee is hired.Occupational and income structureFinlands export-dependent economy continuously adapted to the world market; in doing so, itchanged Finnish society as well. The prolonged worldwide boom, beginning in the late 1940s andlasting until the first oil crisis in 1973, was a challenge that Finland met and from which it emergedwith a highly sophisticated and diversified economy, including a new occupational structure. Somesectors kept a fairly constant share of the work force. Transportation and construction, for example,each accounted for between 7 and 8 percent in both 1950 and 1985, and manufacturings sharerose only from 22 to 24 percent. However, both the commercial and the service sectors more thandoubled their share of the work force, accounting, respectively, for 21 and 28 percent in 1985. Thegreatest change was the decline of the economically active population employed in agriculture andforestry, from approximately 50 percent in 1950 to 10 percent in 1985. The exodus from farms andforests provided the manpower needed for the growth of other sectors.