Essay: Expanding business into Sweden – analysis

Introduction
Expanding business into a foreign country requires the careful consideration of dozens of variables, factors, and circumstances. It involves a great depth of evaluation and circumspect planning and forecasting to ensure a smooth and successful transition. Even so, some elements of international business are challenging to anticipate. Through a detailed analysis of various components of both the physical and figurative landscape of Sweden, we will provide a guide and corresponding recommendations to conducting commerce within this Scandinavian gem. Beginning with an overview of the country and Sweden’s economy and culture, we will then move into an exploration of the political, legal, and technological aspects of the country and conclude with an evaluation and suggestions for engaging in business within Sweden.
Background Information
The country of Sweden is located in Northern Europe on the Scandinavian Peninsula, and it lies between Finland and Norway. At approximately 173,860 square miles, it is the 56th largest country in the world and only slightly bigger than the U.S. state of California (Central Intelligence Agency). Within Western Europe, Sweden is the third largest country and boasts a population of about 9.3 million with its largest city, Stockholm, as the nation’s capital (Kirchberger, 2011).  The people also appear to be living well into their elder years with an average life expectancy for women of 84 years and 80 years for men (BBC Monitoring, 2016). Also noteworthy is that ‘Sweden has the highest proportion of women lawmakers in the world’ (Eupedia, 2004). As for the language, Swedish is the most prominent, but they do have five official minority languages, including Finnish, Me”nkieli, also called Tornedal Finnish, Romani chib, Sami and Yiddish (Universite de Montreal).  At the start of the seventeenth century, Sweden was still using silver currency like many other European countries at that time. Following the use of sliver, Sweden went through a period of using copper currency, banknotes, and then returned back to the silver currency in 1776. The country also switched to using krona as their choice of currency in 1873 and continues to use it to this day (Currency Information and Research, 2011).
During the Iron Age, which took place around 500 BC, agriculture was presented to Sweden when settlers began to appear after the melting of the ice surrounding the country.  Agriculture was used to ‘form the basis of the economy and society’ of the age (Swedish Institute, 2013). The Viking Age allowed for much expansion for the people of Sweden. Instead of the violent pillaging that was associated with the Vikings of Western Europe, Swedish Vikings mainly held to ‘peaceful trade’ (Spotting History, 2016). Great riches have been found in parts of Sweden indicating that trade took place between Sweden and eastern countries down to Asia. The country then turned to feudalism in the thirteenth century, where it allowed the people of Sweden to work and fight for the nobles in return for the safety and use of the nobles’ land (Spotting History, 2016).
From the fourteenth to the sixteenth century, trade in Sweden grew rapidly, and several towns were formed because of the thriving commerce and social activity. This continued until the Black Plague stunted the growth of the economy and the overall population of Sweden in 1350 (Swedish Institute, 2013). In 1544, Sweden came under a hereditary monarchy, in which the crown was passed down from one family member to another. Even though Sweden was a powerful force in many wars in Europe during the seventeenth century, it was not able to maintain its high power status for long, due to its agrarian economy and minimal resources (Swedish Institute, 2013).
After Sweden lost the Great Northern War and its king, Karl XII, in the eighteenth century, the parliament of Sweden allowed the country to be run by parliament, itself. In the nineteenth century, there was an interference with the trade that took place overseas due to the Napoleonic War causing unrest in the economy of Sweden (Swedish Institute, 2013). At this time, ’90 percent of the people still earned their livelihoods from agriculture’ (Swedish Institute, 2013). When Sweden reached the late nineteenth century, businesses began to boom helping Sweden to be ‘one of Europe’s leading industrial nations after World War II,’ switching very quickly from an agrarian economy to a modern and industrialized country (Swedish Institute, 2013). This is what Sweden is today: a country that values innovation.
Economic Environment
On January 1, 1996, Sweden joined the European Union, along with Finland and Austria. Unlike most E.U. countries, however, Sweden is among three who have abstained from converting their currency to the euro (the other two countries being Great Britain and Denmark) (Hill, 2016, pp. 256, 265). The Swedish krona currently has an exchange rate with the U.S. dollar of 8.4968 (Riksbank, 2016).
As a member of the E.U., Sweden boasts a desirable and competitive business environment for foreign companies, ”with a well-educated labor force, outstanding infrastructure, and a stable political environment’ (U.S., 2015). According to the U.S. Department of State:
Sweden is highly dependent on exports, is strongly pro-free trade, and has one of the most internationally integrated economies in the world. The government has been expanding its export base away from the traditionally European market, seeking to grow in Asia, South America, and the United States, but the bulk of Sweden’s exports still remain within the EU. The U.S. is Sweden’s 4th largest export market, capturing 7.1% of Swedish exports valued at an estimated $10.2 billion. (2015)
One of the most attractive attributes that Sweden has for foreign business partners is their ethics. According to Transparency International’s Corruption Perceptions Index, Sweden ranks 2nd only to Denmark for the highest ‘clean’ rating, which means they have the highest standards for business practices, as it relates to corruption and bribery. This caliber of business virtue is an excellent indicator for companies seeking foreign direct investment opportunities and trade with Swedish business partners (Hill, 2016, p. 50).
Ranked 42nd globally, Sweden’s total GDP (PPP) is $467.4 billion. However, if you look at their per capita GDP of $48,000, you can see that their ranking increases to 26th, which indicates a relatively wealthy society. According to Hill and Hult, Sweden’s GNI per capita is among the highest in the world, which indicates a high level of wealth and income for Swedish residents (2016, p. 63). Unemployment remains relatively steady ‘ currently at 7.4%. Sweden’s economy is highly service and consumer-oriented, with the service industry accounting for 64.7% of GDP and 86% of the labor force. Total household consumption in Sweden accounts for 45.4% of GDP (CIA, 2016).
As a social democracy, Sweden’s political policies heavily influence their economy (Hill, 2016, p. 41). Sweden’s environmental policy is also closely tied to its’ economic policy. A world leader in environmental stewardship, their extensive green initiatives and high environmental standards include the imposition of carbon and sulphur taxes on businesses to encourage compliance with their environmental objectives (OECD, 2015, p. 18). Major export industries within Sweden include iron and steel, precision equipment, timber, and chemicals. Major imports overlap, including machinery, petroleum, chemicals, motor vehicles, iron and steel, food, and clothing (CIA, 2016). The average tariff rates on manufactured products are comparable to other major E.U. countries at an estimated 3.9% (Hill, 2016, p. 12).
Individuality is highly valued in Sweden. This, together with their extremely low masculinity and low power distance thresholds indicates that they have a higher level of social and gender equality among their workforce. Add their low level of uncertainty avoidance, and this paints a picture of the perfect environment for entrepreneurial business endeavors (Hill, 2016, pp. 112-114).
Despite the positive aspects of Sweden’s economic environment, there is still reason for caution. According to Riksbank, Sweden’s central bank, their overnight lending rate is currently at an alarming -0.50% (2016). This is an indication that their economic growth is stagnating; thus, they are attempting to spur spending via negative rates. There is also growing concern about higher taxes, the swelling size of household debt, and the unsustainable increase in housing market valuations (UK.Gov, 2015). In fact, their tax rates rank Sweden the 12th highest in the world, at 51.8% of GDP (CIA, 2016). Because of their heavy reliance on foreign trade due to high exports, it should be considered that they are easily impacted by global economic events.
Culture
While the mention of Sweden may inspire thoughts of Swedish meatballs and IKEA, this country actually has much more to offer. Kindness seems to play a large part in Sweden; in fact,  ‘one of the key characteristics of Swedish culture is that Swedes are egalitarian in nature, humble and find boasting absolutely unacceptable’ (Kwintessential, 2016).
Swedes have very calm personalities, and they rarely get angered in public settings. They don’t often take kindness for granted and will always say thank you.  According to Kwintessential, ‘failing to say thank you for something is perceived negatively in Sweden’ (2016). Swedes do not go by the concept of ‘work hard, play hard.’ They value more of a moderated approach and avoid either extreme. Swedes are very humble, and it shows in the way they raise their children. In reference to their cultural norms of parenting, research has shown that, ‘Due to the strong leaning towards egalitarianism in Sweden, competition is not encouraged and children are not raised to believe that they are any more special than any other child’ (Kwintessential, 2016). Sweden has some of the best childcare rights in the world. Either parent is allowed to be absent from work until the child reaches 18 months. Parents can take up to 60 days off per year for sick children, and they can reduce their workload by 25 percent until the child is 8 years old. The country’s devotion to supporting families is admirable and in contrast to many other countries around the world. As Kwintessential’s cultural evaluation of Sweden notes, ‘Anyone travelling to Sweden will notice the family friendly environment of most restaurants and other such establishments. Even trains have a toy and play area!’ (2016).
When it comes to business, Swedes handle all aspects with serious formality. Unless an important personnel states that an event can be relaxed, Swedes will always be in a serious mood. They like to be greeted with professional titles or their surnames, and ‘personal space is important in Sweden’it is recommended that you maintain an awareness of someone’s personal space and that you do not invade it. Avoid any unnecessary touching’ (Kwintessential, 2016). As stated above, neglecting to say thank you or shaking hands in business is seen as disrespectful. Attire in Sweden for business is conservative with Men wearing suits and women wearing business style dresses and suits. Upper management does not dress more elegant then the typical employee and all employees stray away from anything flashy (Kwintessential, 2016).
Sweden is known for a variety of foods such as meatballs, pizza, kebabs and falafel. ‘Swedish food is usually simple and satisfying, and nowadays also healthy’ (Kamerareportage). The Swedish are known to have some of the safest food due to the strict regulations the country has enacted. Smorgasbords, which consist of several small dishes, are very popular in Sweden. It used to be used as an appetizer; however, over the years it has become larger and more commonly served as a whole meal. Swedish people also take a strong liking to coffee and often drink it in the morning and with lunch. They also have coffee parties where they serve small pastries with coffee (Kamerareportage).
Other cultural hallmarks in Sweden include art and literature. The minimalistic style that is often attributed to the Scandinavian countries is also reflected in the functionally simplistic architecture and aesthetic seen in Sweden. In addition to the arts, the Swedish people have an affinity for literature, and according to Sverigturism, ‘Swedish people read a lot. Each year, about 65 million books are borrowed at public libraries’ (Kamerareportage). There are over 2,000 public libraries in Sweden and they do not charge to rent books, audio books, or cds. The country has also produced many prominent authors who have gone on to win the Nobel Prize (Kamerareportage).
Political and Legal Environment
Sweden’s political system is one that follows a similar format to that of the United Kingdom. According to the Hill’s content in the textbook:
Social democracy also seems to have passed a high-water mark, although the ideology may prove to be more enduring than communism. Social democracy has had perhaps its greatest influence in a number of democratic Western nations, including Australia, France, Germany, Great Britain, Norway, Spain and Sweden where social democratic parties have often held political power. (2016, p. 44)
As a society, Sweden relies on a parliamentary system by which a unicameral cabinet of 349 members make decisions that the country’s government and Prime Minster implement. The Swedish citizens vote for the cabinet or Riksdag as it is called and the nominations come from eight parties (Swedish Institute, 2013). According to the Swedish Institute:
‘the eight parties currently represented in the Riksdag are: the Social Democratic Party (Socialdemokraterna), the Moderate Party (Moderaterna), the Sweden Democrats (Sverigedemokraterna), the Green Party (Milj”partiet de Gr”na), the Centre Party (Centerpartiet), the Left Party (V”nsterpartiet), the Liberal Party (Folkpartiet Liberalerna), and the Christian Democrats (Kristdemokraterna).’ (Swedish Institute, 2013)
Their elections occur every four years and the representation of the people is protected through the Swedish Constitution. Their constitution upholds four fundamental laws, which protect the democratic freedoms of the people and uphold the country’s system of electoral representation and leadership. Regarding the structural set up, ‘The Government governs the country but is accountable to the Riksdag. The Riksdag appoints a Prime Minister, who is tasked with forming a Government’ (The Swedish Institute). The cabinet as an entire entity is responsible for all government decision and control. At this time, the government presents bills to the Riksdag, implements Riksdag decisions, allocates the funds appropriated by the Riksdag for budget represents Sweden in the EU, enters into agreements with other states, and directs activities and operations of the executive brand’ (Swedish Institute, 2013). Government is then separated into national, regional, and local levels in order to better serve in all areas of political and legal consideration. Twenty counties are represented in the country’s regional level and county councils handle those counties. There are 290 municipalities that are divided and controlled at the local level. These municipalities possess similar responsibilities’ to those in the United States and must maintain roads, water supplies, waste removal, etc. Sweden’s participation in the European Union is also handled at what is called the European level. After their entry to the EU in 1995, Sweden took on a role in what is known as the accumulated legislation or ‘legal acts and court decisions that constitute the cumulative body of European Union law’ (Swedish Institute, 2013). The general overtone of Sweden’s foreign policy is ‘based on the premise that natural security is best served by staying out of military alliances in peacetime in order to remain neutral in the event of war’ (Country Watch, Inc., 2010).
With regard to the political landscape, Sweden offers its citizens many parties, like those listed above, to choose from. The longest standing primary control has been under the Social Democratic Party. At this time Stefan L”fven is the country’s prime minister, but his entry into control brought a disagreement between the primary parties. ‘Sweden has a system of negative parliamentarism, meaning that a government can stay in power as long as it doesn’t have a majority against it, the Social Democrats and the Greens could still form a government by themselves’ (Swedish Institute, 2013).
Prior to the implementation of a parliamentary system, the successions of monarchs led Sweden’s political and legal control. Today, although the monarchy remains in place, their control and leadership remains solely in a figurehead position and symbol. King Carl XVI Gustaf leads the royal family as head of state along with wife, Queen Silvia Sommerlath, and their three children Crown Princess Victoria, Prince Carl, and Princess Madeleine. As for the King’s responsibilities, ‘As head of state, the King is Sweden’s foremost unifying symbol. According to the 1974 constitution, the monarch has no political affinity and no formal powers. The King’s duties are mainly of a ceremonial and representative nature’ (Swedish Institute, 2013)
Technological Environment
After Sweden’s change from an agrarian economy to a highly industrialized economy, its technological environment became extremely advanced. This is partly due to the fact that Sweden has a large supply of raw materials at hand. Also, according to the Country Profile Series of Sweden, ‘Sweden presents a near-perfect environment for innovation, with its intellectual property rights policy and co-operation between industry, research institutes, and government bodies’ (Pestle, 2014, p. 67).
Sweden is now known as one of the leading countries of innovation, and the technological successes that have come from this country are numerous. These advances in technology from Sweden include the three-point seat belt, a car with an engine that runs on ethanol, micro IP, the zipper, Skype, the ball bearing, black liquor, and they are working on being the first country to put a house on the moon (Lagerberg & Randecker, 2010). All of these products or ideas have had great impacts on all of their fields. For instance, without the three-point seat belt our automobile safety would be nowhere near where it is today, and if the ball bearing had not been invented, our machine technology would be much less sophisticated and effective than the equipment that we have now (Lagerberg & Randecker, 2010). Sweden is also the home country of the inventor IKEA, Ingvar Kamprad, who created the idea of the retail furniture store in the ‘woods of southern Sweden’ (Lagerberg & Randecker, 2010).
According to the Country Profile Series of Sweden, some current strengths of Sweden’s technological environment include ‘strong innovation indicators’ and ‘robust telecommunications network’ (Pestle, 2014). As previously stated, Sweden is a country that facilitates knowledge and advancement. In the European Innovation Scoreboard, which is a test that is designed to compare research and innovation in Europe, Sweden scored much higher than that of the average score, which is a strong indication of innovation. Sweden’s Profile notes ‘Innovation in the country is backed by a skilled and educated scientific workforce and strong government support and public investment’ (Pestle, 2014). Another factor in the strength of the country’s technological environment is it’s robust telecommunications network. The average amount of people in Sweden who own a mobile phone is known to be one of the largest in Europe and that also goes for the average number of people using the internet (Pestle, 2014). These elements are some of the things that explain why the technological environment is so competitive in Sweden.
Sweden’s strengths within the technical environment are not without their weaker counterparts. First of all, ‘the 30 most research-intensive Swedish companies reduced their R&D [research and development] expenses by around 9.0% in 2009,’ and this has caused a decline in innovation within the country since less money has been given to the study and development of technology (Pestle, 2014). Another challenge that Sweden faces is that it is not commercializing new technological ideas as much as it should be. If the country were to do this, more technologically advanced ideas would be put into production and more innovation would occur.
As for the future, Sweden has been attempting to make changes in the country to further its technological environment. In 2012, the Innovation Bill was passed to increase the amount of money that would be allocated to R&D and innovation. It is also noted that, ‘In addition, investments in research areas that would lead to new products and services, research infrastructure, and improved higher education are the other key areas the bill is likely to focus on’ (Pestle, 2014). Also, because the people of Sweden are so focused on creating an environment that is much cleaner and healthier, they are constantly creating new ideas to achieve this goal. For instance, ‘The Swedish government plans to be a completely oil-free economy by 2020 by replacing all fossil fuels with renewables’ (Pestle, 2014). With this goal in mind, the amount of investment allocated to R&D should increase to allow the country to find new and better ways of keeping our environment free of pollution. As Sweden goes forward, it needs to allow the R&D investment to increase more to remain competitive.
Business in Sweden & Recommendations
Sweden boasts a very established and developed economy with a high standard of living for its inhabitants. A large part of how they got to their current position lies within the roots of their business culture. As one of the leading countries of the world in corporate social responsibility, the Swedish people consider all the issues of climate change, gender, human rights, and anti-corruption when engaging in commerce (Passport to Trade 2.0, 2014). Additionally, they pay close attention to negotiation etiquette and expect those involved to follow the behavioral norms.
With great detail placed on the process of negotiation, it is very important to come well prepared and informed to a meeting with a Swedish business or person. It is paramount that information provided during the negotiation process be emphasized with clear understanding and forethought. The utilization of factual information and a conscious effort to keep emotion out of the equation is expected (Passport to Trade 2.0, 2014). Although Swedish business is relatively informal, negotiation requires serious consideration and direct indication of the desired outcome. According to Business Culture:
A partner from a different culture may find it difficult to negotiate with the Swedes, the main obstacle being trying to change their position towards making major concessions. They are methodical and detailed people, slow to change their positions and they will push hard for concessions themselves. To do business with Swedes it is important to be honest and all agreements must be written and signed since Swedes consider a written contract as a memorandum of understanding as well as being proof of a deal. (Passport to Trade 2.0, 2014).
Business practices in Sweden have a particular set of expectations that should be carefully regarded when attempting to meet for the purpose of doing business. Handshakes are the expected form of greeting when entering and exiting a meeting of any kind other than between familiar parties. As a society Swedes are very reserved and business meetings and interactions must be done with high attention to appropriateness and politeness. People are keenly aware of the passage of time in the United States and northern European cultures such as Germany, Netherlands and the Scandinavian countries. Businesspeople are very conscious about scheduling their time and are quickly irritated when their time is wasted because a business associate is late for a meeting or if they are kept waiting’ (Hill, 2016, p. 93). Attention to things like time, equality, and respect are very important to Swedish business practices. Punctuality is an extremely important aspect of respectful business practice in Swedish society. Because of the high value placed on personal time, Swedes consider being late as an interruption to one’s precious personal and family time, but by the same token, don’t be too early (Kwintessential, 2016)! ‘One word that every person needs to know when doing business with a Swedish company is ‘fika.’ ‘Fika’ is a break taken from work, the purpose being to drink coffee and chat. ‘Fika’ breaks in Sweden are sacred, and there are usually two or three every day’ (Swedish Institute, 2013). While Swedes take business practice very seriously, the culture of Sweden promotes concepts like this one as they help with work performance and work-life balance. In fact, the Swedish Institute documents that labor union participation is very high among the Swedish labor force. Because of the unions’ powerful presence, employees have work conditions that are superior to most countries especially in the areas of equality, and job security (Swedish Institute, 2013). The concept of unions goes hand in hand with Sweden’s protection of its labor force and people when it comes to fair business practices and equality.
As a society, Sweden has it’s own set of cultural norms with regard to both business and everyday life. The textbook references mores or ‘norms that are more widely observed, have greater moral significance than other norms, and are central to the functioning of a society and its social life’ (Hill, 2016, p. 94). In Swedish culture the term ‘lagom’ is used to explain how Swedes regard business culture. ‘Essentially, ‘lagom’ means ‘just right’ or ‘adequate.’ The ‘lagom’ concept or mentality exists in Swedish business as well. Employees, and many employers, often focus on doing exactly what’s needed and doing it well, rather than doing unnecessary things’ (Swedish Institute, 2013). According to the text, Geert Hofstede’s dimensions for cultural evaluation provide a well-rounded study of a country’s culture through looking at power distance, individualism, uncertainty avoidance, masculinity, and long-term orientation (Hill, 2016, p. 112-113). To expand our understanding of Sweden’s environment, we can took at how the country measured up. For power distance, Sweden came in with a low score of 31 reflecting the country’s values of independence, equal rights, and decentralized power, which is further emphasized in Sweden’s high individualism score of 71. The nation’s low masculinity score reveals a feminine society, which values quality of life and satisfaction over recognition and status. Sweden’s low uncertainty avoidance score shows a more relaxed and flexible mindset that is not threatened by innovation. In terms of long-term orientation, the midrange score reveals that the Swedes don’t have a clear preference in this area. An additional category that is often included in more recent versions of the Hofstede model is indulgence; in Sweden’s case, a high score in this component shows that people make leisure a high priority and are willing to delight their impulses and desires for the sake of a good time (The Hofstede Center, 2015). Sweden’s rankings in these dimensions are consistent with the other data we have presented about the country and its societal and structural makeup.
In regards to entering the market of Sweden, the process appears to be rather simple. The World Bank’s ‘ease of doing business index’ gave glowing reviews of Sweden’s level of business friendly regulations with a ranking of 8 out of 189 countries (The World Bank, 2016). That being said, it is recommended that businesses consider expanding into Sweden. In fact, according to The World Bank Group’s business report, the procedure for stating a business in Sweden is just seven days in length and only requires the standard filing fees with the SEK (World Bank Group, 2016). Sweden is part of the Nordic region, which includes Denmark, Finland, Norway and Sweden. This homogeneous cluster has an economy of more than 1.7 trillion and is home to the highest Purchasing Power Parity in all of Europe. Additionally, ‘it is considered worldwide to be an excellent test market for new products and an easy-to-enter market for new-to-market and new-to-export companies’ (Export.gov, 2015). The Nordic countries have close ties to the United States culturally, politically, and historically (Export.gov, 2015).
There are a few challenges that we recommend becoming aware of when looking to enter Sweden for business purposes. First, the Swedish and third-country suppliers are prepared to offer stiff competition. Secondly, the high cost of living coupled with high-priced labor and some of the world’s stiffest personal tax rates can pose a few complications. Therefore, it is recommended that companies make an effort to combat these threats by offering advanced technologies, competitive pricing and contractual terms, and carefully plan for tax expenses and labor charges (Export.gov, 2015).  This shouldn’t drive anyone away, however, because the country is rich in engineering, science, building, and mining knowledge, which also feeds their hearty demand for technological advances and early adopter population. The nation is also highly supportive of the green movement and sustainability. For most of the world, English is the language of business, and for those who comply with this norm, Sweden will be a breeze (Export.gov, 2015). As for the encouraged market strategies, it is essential that companies have a well defined competitive advantage, are cognizant of cultural differences, choose partners wisely, bare in mind the size of the market, consider the prospect of partnering with others within the Nordic region, and exhibit loyalty and commitment with Swedish partners (Export.gov, 2015).
Conclusion
Overall, the country of Sweden has a lot of offer for businesses that are considering expansion into the Scandinavian territory. With a rich culture, thirst for innovation, business-friendly regulations, kind-hearted people, and its well-developed economy, Sweden is a prime candidate for a test market, a first time exporter, or anyone who is looking to expand. Due to Sweden’s deep connection with the rest of the Nordic countries, doing business there opens the potential for even further expansion with the neighboring nations. No international expansion comes without hard work, but Sweden’s prime cultural, economical, political, technological, and legal set up certainly will aid the process. As long as firms are careful to consider the costs, cultural differences, and markets beforehand, Sweden will serve as a very auspicious choice for expansion.