Trade mission heads to Norway, neighbors
Alesund Town, one of Norway’s picturesque cities.
With the news media’s constant updates on the severe economic woes in such diverse locales as Greece and Puerto Rico, plus declines in China’s stock market, to read about a stable economy like Norway’s is like a breath of fresh, albeit chilly, air for a franchise development officer. Who better to do international business deals with than a people who consider themselves internationalists?
Oil revenues have made Norway one of the richest counties in the world—it’s the third largest exporter of natural gas and seventh largest oil exporter. But just as poorer countries, such as India, shouldn’t be written off, richer countries like Norway aren’t automatically a bestseller for franchise expansion.
“Norway, as with all the Scandinavian countries, has been a challenge to take U.S. franchises into,” says William Edwards of Edwards Global Services, who is the international representative for several countries planning to attend the International Franchise Association, Franchise Times and the U.S. Commercial Services’ trade mission to Norway, Finland and Sweden later this year.
One reason is the demographics are different from the rest of Europe: “higher GDP per capita; very socialized, very high wages as a result; short good-weather season; inward looking culture,” Edwards says ticking off the list.
But even more daunting, he adds, “It’s hard to get them to see the value of foreign brands.”
As in many sophisticated markets, domestic franchises tend to dominate the landscape, says Eric Johnson, a senior international trade specialist in the Atlanta Department of Commerce, who is leading the trade mission, October 18-24. But American brands are welcomed—the U.S. Commercial Service only sets up trade missions when the in-country staff has determined there is a strong interest in franchising, and specifically in the brands that sign on to attend.
A boon for U.S. service brands is that while there’s a tradition of being self-sufficient, the younger generation is starting to hire people to do gardening and home repairs, much to the chagrin of their elders.
U.S. restaurant brands may have a leg up here, because Norwegians are coffee lovers. They drink more coffee per capita than any other country, according to hotel travel site, oyster.com. Starbucks just recently went into the city of Stavanger and as expected, the lines were long. What wasn’t expected, according to one of our staff members who visited there recently, is to pay $12 for a tall regular coffee. Prices are high—as are wages—and branded products have shorter lists of ingredients than their counterparts in the U.S.
According to the U.S. government, the Nordic region (which includes Denmark as well as the three countries on the trade mission) is considered one of the 10 largest economies in the world. It also tends to be a test market for new products and technology and an easy-to-enter export market. Another ease-of-doing business item is that English is widely spoken.
Norway is one of the most sparsely populated countries in Europe, but because incomes are evenly distributed— GDP per capita is about USD$65,900, the CIA World Factbook reports—everyone is a potential consumer. High taxes have helped to produce a middle-class society with no privileges granted to the wealthy. Another novelty to Norway is that it’s a homogeneous population with no gender bias.
The Norwegian business culture is based on Scandinavian work values, which stresses a focus on equality. As a result, you will see little hierarchy, flat structures and an informal communication system, according to the website, investinnorway.com. Unemployment and interest rates are low.
Norwegian workers tend to start their workday right at 8 a.m. and end exactly at 4 p.m. The authors of the business etiquette book, “Kiss, Bow or Shake Hands,” say it’s not unusual for office workers to hang up in the middle of a phone call if the clock strikes 4 p.m.
While the Swiss are known to set the precision for being on time, Norwegians tend to be the least punctual northern Europeans. This leads to them also being less formal than their peers. But they are also more open to discussion than the rest of Scandinavians, Edwards says.
Norway is not a member of the European Union, but is linked to Europe through the European Economic Area agreement, and also as a member of NATO.
The Norwegian corporate tax system is transparent. The corporate tax rate is a flat tax of 27 percent that applies to the sum of profits and capital gains.
Since Norway is ranked No. 1 on the Human Development Index by United Nations Development Programme, franchisors shouldn’t have a hard time convincing its staff to be part of the opening team once a development agreement is signed there. (Sweden is 12th and Finland is 24th in the UNDP ranking.)
Noteworthy is that Norway is a well-developed welfare state with a high degree of social security—plus it’s “green.”
The other stops
All three countries on the trade mission rank in the top six on the World Economic Forum’s ranking of Human Capital. According to its 2015 report, Finland is No. 1; Norway, No. 2; and Sweden, No. 6 (the U.S. is No. 17).
Why this ranking is important, the World Economic Forum says on its website, is because “talent not capital will be the key factor linking innovation, competitiveness and growth in the 21st century and we must each understand the global talent value chain.” Some of the factors measured in the 124 countries profiled are education levels, labor force participation, GDP per capita, working age population, unemployment and child dependency.
Finland also ranks No. 1 on the Global Competitiveness Index for high education levels and training (Norway is No. 8). And Finland is No. 1 for innovation (Sweden is No. 7).
Franchising is one of the fastest-growing business sectors in Finland, although it is still a relatively young business concept there, according to a U.S. Commercial Service report. Currently there are some 300 franchise systems in Finland, predominately domestic. A good city to start in is Helsinki, whose metropolitan area accounts for more than 25 percent of the country’s population, the report says.
The Swedish Franchise Association counts about 750 franchise chains in Sweden, the majority of which are of local origin. About one-third are retail, while other popular sectors include services/consulting and hospitality.
To find out first-hand the business climate in Scandinavia, check out the trade mission in October. An application and more information can be found at http://www.franchise.org/Scandinavia2015.
The paper clip was not invented by Norwegian Johan Vaaler in 1899, as claimed in some versions of history books. Its original purpose was not to bind paper together, but instead to bind people to a common cause—patriotism, during World War II, much to the ire of the Germans. Norwegians aren’t known as big inventors, but they are credited with the cheese slicer and the aerosol spray can.