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Subject Code: 2830003
Global country study report [GCSR]
On Finland Country
Shri Aurobindo Institute of Management Rajkot
College Code: 758
MBA Sem IV
Year: 2011-2013
GCSR
Part I and Part II
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Content
Part I: Economic Overview of the Finland Country
Page No 05 - 31
1.1 Demographic Profile of Finland
1.2 Economic Overview of the Finland
1.3 Overview of Industrial Trade and Commerce
1.4 Overview of Economic Sectors of Finland
1.5 Overview of Business and Trade at International Level
1.6 Present Trade Relations and Business Volume of Different Product with India
1.7 PESTEL Analysis
1.8 Conclusion
3
Part II
Industries & Companies Study of the
Finland Country
Group: A
Distribution Channel Of Businesses In Finland Country
Page No: 128 - 159
1. Distribution Channel
2. Comparative Position Of Selected Company
3. Competitive Position Of Distribution Channel System In India.
4. The Future Of India's Distribution Systems
5. Policy And Norms For Distribution Channel
6. Structure, Function Of The Business
7. Summary
8. Conclusion
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Group: B
Banking Sector In Finland Country
Page No: 91 - 109
1. Origin Of Finland Bank
2. Banking Operations
3. Different Types Of Services
4. Regulatory Authority
5. BANK OF FINLAND
6. Reserve Bank Of India
7. Comparative Position Of Banks
8. Present Position And Trends Of Bank With India
9. New Trends In Payment And Billing
10. Bills Go Electronic
11. Policies And Norms Of Banking Industry
12. Opportunities In Future
13. Findings
14. Conclusion
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Part I
Economic Overview of the Finland
Country
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1.1 Demographic Profile of Finland:
Authoritatively the Republic of Finland is a Nordic country situated in the Fanons Canadian
region of Northern Europe. It is surrounded by Sweden in the west, Norway in the north and
Russia in the east, although Estonia lays to its south crossways the Gulf of Finland.
Approximately 5.4 million people be alive in Finland, with the greater part concentrated in
the southern region. It is the eighth largest country in Europe in terms of area and the most
sparsely inhabited country in the European Union. Finland is a parliamentary democracy
with a central government based in Helsinki and local governments in 336 municipalities. A
whole of about one million inhabitants live in the Greater Helsinki area (which includes
Helsinki, Espoo, Kauniainen and Vantaa), and a third of the country's GDP is produced there.
Other larger cities include Tampere, Turku, Oulu, Jyväskylä, Lahti and Kuopio.
Finland is populated by the Finnish people, and 92% of the population speaks the Finnish
language. Finland was traditionally a part of Sweden, and from 1809–1917 was an
autonomous Grand Duchy within the Russian territory. The Finnish Declaration of
Independence from Russia in 1917 was followed by a civil war in which the leftist side was
crushed with German support. Finland fought World War II as basically three separate
conflicts: the Winter War (1939–1940), the Continuation War (1941–1944), and the Lapland
War (1944–1945). Finland connected the United Nations in 1955, the OECD in 1969, the
European Union in 1995, and the euro zone since its inception in 1999.
Finland was a comparative late arrival to industrialization, remaining a basically agrarian
country until the 1950s. Thereafter, economic development was fast. Finland built an
widespread welfare state and balanced between the East and the West in global economics
and politics. Through the best educational system in Europe, Finland has lately ranked as one
of the world's most peaceful, aggressive and inhabitable countries.
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The population of Finland is currently about 5,350,000. Finland has a normal populace
density of 17 people per square kilometer. Finland's residents have always been concentrated
in the southern parts of the country, a trend that became even more pronounced during 20th-
century urbanization. The largest cities in Finland are those of the bigger Helsinki
metropolitan area – Helsinki, Espoo and Vantaa. Other large cities include Tampere, Turku
and Oulu.
Religion
Around 4.2 million (or 78.2% at the end of 2010) adherents are members of the Evangelical
Lutheran Church of Finland. The Evangelical Lutheran Church of Finland is one of the
biggest Lutheran churches in the world, although its share of the country's population has
declined in recent years. The second leading group, accounting for 19.2% of the inhabitants,
has no religious association. In recent years, A small minority belong to the Finnish
Orthodox Church (1.1%). Other Protestant denominations and the Roman Catholic Church in
Finland are considerably smaller, as are the Muslim, Jewish and other non-Christian
communities (totaling 1.3%).
Health
Life anticipation is 82 years for women and 75 years for men. There are 307 inhabitants for
each doctor. On 18.9% of health care is funded directly by households and 76.6% by
taxation. A latest study by The Lancet medical journal found that Finland has the lowest
stillbirth rate out of 193 countries, including UK, France and New Zealand. UK was 32 spots
behind in the shared 33rd position with Belarus and Estonia. Nigeria and Pakistan had the
highest stillbirth rates.
Society
Finnish family life is centered on the nuclear family. Relations with the complete family are
often somewhat far-away, and Finnish people do not form politically important clans, tribes
or similar structures. According to UNICEF, Finland ranks fourth in the world in child well-
being.
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Finnish women were as well knowledgeable as their male counterparts, and, in some cases,
the number of women studying at the university level. In addition to a growing welfare
system, which since World War II had come to give them with considerable support in the
area of child-bearing and child-rearing, women had made notable legislative gains that
brought them closer to full parity with men.
Cultural
However Finnish written language could be said to be present since Mikael Agricola
translated the New Testament into Finnish in the sixteenth century as a result of the
Protestant improvement; few remarkable works of literature were written until the nineteenth
century, which saw the foundation of a Finnish national Romantic Movement. This
encouraged Elias Lönnrot to collect Finnish and Karelian folk poems and place and publish
them as Kalevala, the Finnish national epic. The era saw a climb of poets and novelists who
wrote in Finnish, remarkably Aleksis Kivi and Eino Leino. Many writers of the national
development wrote in Swedish, such as the national poet Johan Ludvig Runeberg and Zachris
Topelius.
After Finland became autonomous there was a grow of modernist writers, most famously
Finnish speaking Mika Waltari and Swedish speaking Edith Södergran. Frans Eemil
Sillanpää was awarded the Nobel Prize in Literature in 1939. The Second World War
provoked a return to more national interests in comparison to a more international line of
thought, characterized by Väinö Linna. Besides Kalevala and Waltari Swedish speaking
Tove Jansson is the most translated Finnish writer. Writing in modern Finland is in a strong
state. Popular modern writers include Arto Paasilinna, Ilkka Remes, Kari Hotakainen, Sofi
Oksanen and Jari Tervo,
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Particular Information
Population 5,259,250 (July 2011 est.)
Population growth rate 0.075% (2011 est.)
Birth rate 10.37 births/1,000 population (2011 est.)
Death rate 10.24 deaths/1,000 population (July 2011 est.)
Net migration rate 0.62 migrant(s)/1,000 populations (2011 est.)
Urbanization
Urban population: 85% of total population (2010)
rate of urbanization: 0.6% annual rate of change (2010-
15 est.)
Sex ratio
At birth: 1.04 male(s)/female
under 15 years: 1.04 male(s)/female
15-64 years: 1.02 male(s)/female
65 years and over: 0.69 male(s)/female
total population: 0.96 male(s)/female (2011 est.)
Infant mortality rate
Total: 3.43 deaths/1,000 live births
male: 3.73 deaths/1,000 live births
female: 3.11 deaths/1,000 live births (2011 est.)
Life expectancy at birth
Total population: 79.27 years
male: 75.79 years
female: 82.89 years (2011 est.)
Total fertility rate 1.73 children born/woman (2011 est.)
Nationality Finnish
Ethnic groups
Finn 93.4%, Swede 5.6%, Russian 0.5%, Estonian 0.3%,
Roma (Gypsy) 0.1%, Sami 0.1% (2006)
Languages Finnish (official) 91.2%, Swedish (official) 5.5%, other
(small Sami- and Russian-speaking minorities) 3.3%
(2007)
Literacy Definition: age 15 and over can read and write
total population: 100%
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male: 100%
female: 100% (2000 est.)
School life expectancy (primary to
tertiary education)
total: 17 years
male: 16 years
female: 18 years (2008)
Education expenditures 5.9% of GDP (2007
Maternal mortality rate 8 deaths/100,000 live births (2008
Health expenditures 11.7% of GDP (2009)
Physicians density 2.735 physicians/1,000 population (2008
Hospital bed density 6.52 beds/1,000 population (2008)
Obesity - adult prevalence rate 15.7% (2008)
Milestones of the history of statistics in Finland
Sweden - of witch Finland was a component - was the first country in the world to establish a
statistical office to produce official statistics. This happened in 1748, and the office was
named Tabellverket, Tabulation office. Before that, households were already enumerated for
taxation purposes.
1648 the first population registers, kept by the parish priests
1748 the Tabulation Office, Tabellverket, was founded
1749 the first vital statistics in the world were compiled by the Tabulation Office
1865 the provisional Statistical Office of Finland, Statistiska Byrån, was founded
1879 the first Statistical Yearbook of Finland was published
1886 the first course of statistics was held at the University of Helsinki
1917 Finland became independent
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1920 the Finnish Statistical Society was founded
1920-22 J. W. Lindeberg published the Central Limit Theorem
1945 the first chair of statistics was created at the University of Helsinki
1948 national accounts were calculated for the first time
1955 Finland joined the UN
1961 Finland became an associate member of the EFTA (full member 1986)
1969 Finland joined the OECD
1975 the interview organization of Statistics Finland was founded
1990 a completely register-based population census was carried out
1995 Finland joined the European Union
1995 the Internet service of Statistics Finland was opened
Recent History
Finland's recent history has been a time of vast change with the transformation from a greatly
poor, primarily agricultural society in the 1920s to one of the world's most advanced nations
in the space of one lifetime. The late 1990s were dominated by the growth of the Finnish
economy and Finland's development as an EU Member State including their successful EU
Presidencies in 1999 and 2006.
The fast growth of the 1980s had been suddenly checked by the collapse of the Soviet Union
(Finland's single largest trading partner - but on a clearing basis): between 1991 and 1993,
Finnish GDP fell by 10%, unemployment quadrupled to 20% and public debt rose to record
levels. This encouraged the Finns to refocus the economy towards high technology products
aimed at Western Europe - a decision that has now paid off substantially.
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The collapse of the Soviet Union permitted Finland to step out of its political shadow.
Finland saw its interest‘s best represented within the European Union and became a full
member in 1995. Membership of the EU did not change extensive position de-facto promise
to its non-aligned status. The Maastricht Treaty did not establish a military alliance and
allowed individual countries to continue with their own defense provision. Finland
considered these provisions to be compatible with non-aligned status.
The government, (led by Paavo Lipponen 1999 - 2003) pursued economic policies, to meet
the Maastricht Criteria for EMU. This included reining in public expenditure and cutting
unemployment benefits despite strong union opponent. Finland was among the first wave of
EU member states to accept the euro. This followed a public debate that centered on
Finland‘s susceptibility to asymmetric shocks (such as the fall down of the Russian Ruble in
1998). As a result of the debate, Finland developed a unique "buffer fund" solution under
which funds are set aside against possible future hard times. Finland became the only Nordic
EU member to accept the Euro as the national currency.
The current Finnish Government has recognized a number of areas that could be addressed
over the coming years in order to improve Finland's international competitiveness:
further alteration of the world leading education system focusing on universities and
adult learning
more resources into Research and Development: target of +4% of GDP
addressing the growing demographic shortage
measures to attract more foreign funds
Prioritizing infrastructure investment on links crucial for international
competitiveness.
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1.2 Economic overview of the Finland
Finland is strongly competitive in manufacturing - largely the wood, metals,
engineering, telecommunications, and electronics industries. Finland excels in
technologically advanced exports such as mobile phones. Apart from for timber and a
number of natural resources, Finland depends on imports of raw materials, energy, and some
machinery for manufactured goods. Forestry provides a secondary occupation for the rural
population. Finland had been one of the best performing economies inside the EU in recent
years and its banks and financial markets avoided the worst of global financial crisis. Longer-
term, Finland must address a quickly aging population and declining efficiency that pressure
competitiveness, economic sustainability, and economic growth.
ECONOMIC INDICATORS
Population (2009) 5,351,427
Unemployment rate (2009) 8,2%
GDP at current prices (euro) (2009) 171,3
GDP per capita (euro) (2009) 32 088
GDP annual growth (forecast for 2010) 1.1%
Inflation rate (2009) 1.6%
Total exports (million euro) (2009) 45,063
Total imports (million euro) (2009) 43,655
Internet access (2009) 78%
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Finland GDP Growth Rate
The Gross Domestic Product (GDP) in Finland expanded 0.9 percent in the third quarter of
2011 over the previous quarter. Historically, from 1975 until 2011, Finland's average
quarterly GDP Growth was 0.59 percent attainment and historical high of 5.00 percent in
September of 1980 and a record low of -5.50 percent in March of 2009. Finland has an
extremely industrialized, mainly free-market financial system. Its key economic sector is
manufacturing - primarily the wood, metals, engineering, telecommunications, and
electronics industries. Trade is essential, with exports equaling almost one-third of the GDP.
This page includes: Finland GDP Growth Rate chart, historical data, forecasts and news.
Data is also available for Finland GDP Annual Growth Rate, which measures growth over a
full economic year.
15
Chart-1
Inflation Finland 2011 (CPI)
The inflation chart and table below feature an outline of the Finnish inflation in
2011. The inflation rate is based upon the consumer price index (CPI). The CPI inflation
rates in the table are presented both on a monthly basis (compared to the month before) as
well as on a yearly basis (compared to the same month the year before).
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The average inflation of Finland in 2011: 3.42 %
1.3 Overview of Industrial Trade and Commerce
Finland‘s economic achievement requires the further removal of barriers to export and
investment and an open import policy that promotes rivalry. The key challenges include
customs duties and non-tariff barriers to trade and trade-distorting measures that are still
common in many markets.
Industries:
Metal & its products, electronics, machinery and scientific instruments, shipbuilding, pulp
and paper, foodstuffs, chemicals, textiles, clothing
Industrial production growth rate:
-16.3% (2009 EST.)
Country comparison to the world: 159
17
Oil - production:
8,718 bbl/day (2009 EST.)
Country comparison to the world: 86
Natural gas - production:
NA (2008 EST.)
Current account balance:
$3.444 billion (2009 EST.)
Country comparison to the world: 31
$8.206 billion (2008 EST.)
Debt - external:
$364.9 billion (30 June 2009)
country comparison to the world: 22
$339.5 billion (31 December 2008)
Stock of direct foreign investment - at home:
$85.71 billion (31 December 2009 EST.)
Country comparison to the world: 36
$83.14 billion (31 December 2008 EST.)
Stock of direct foreign investment - abroad:
$118.7 billion (31 December 2009 EST.)
Country comparison to the world: 23
$116.1 billion (31 December 2008 EST.)
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Exchange rates:
EUR/ USD: 0.7338 (2009), 0.6827 (2008), 0.7345 (2007), 0.7964 (2006), 0.8041 (2005)
Taxation:
Corporation tax (26%) is standardized for all types of corporate income, including sales
profits, interest income, dividends, royalties and rental income; value-added tax (VAT) is
charged at 23% on most goods and services. Reduced tax rate of 13% is practical to the sale
of food and animal feed and to serving of foods and reduced rate of 9% to cinema
performances, physical exercise services, books, pharmaceuticals, passenger transport
services, accommodation services etc.
1.4 Overview of Economic Sectors of Finland
Finland has a highly developed, mixed economy with a per capita production equal to that
of other western economy for example France, Germany, Sweden or the United Kingdom.
The major sector of the economy is services at 65.7 percent, followed by manufacturing and
refining at 31.4 percent. Prime production is 2.9 percent. In 2000, the balance between
Finland's financial sectors was consistent with those of mainly OECD nations, with
agriculture contributing 5 percent to the GDP, industry 32 percent, and services 63 percent.
1. Agricultural
Finland's weather and soils make growing crops a scrupulous challenge. The country
lies between 60° and 70° north latitude - as far north as Alaska - and has severe winters and
relatively short growing seasons that are sometimes broken up by frosts. However, because
the Gulf Stream and the North Atlantic Drift Current moderate the climate, Finland contain
half of the world's arable land north of 60° north latitude. Until the late nineteenth century,
Finland's separation required with the purpose of most farmers concentrate on producing
grains to meet the country's basic food requirements.
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2. Forestry
Forests play a key role in the country's economy, making it one of the world's
important wood producers and providing raw materials at competitive prices for the crucial
wood-processing industries. As in agriculture, the government has long played an important
role in forestry, regulating tree cutting, sponsor technical improvements, and establish long-
term plans to make sure that the country's forests continue to supply the wood-processing
industries.
3. Industries
From the 1990s, Finnish industry, which for centuries had relied on the country's
huge forests, became dominated by to a larger extent by electronics and services, as
globalization lead to a decline of more traditional industries.
Outsourcing resulted in more manufacturing being transferred overseas, with Finnish-based
manufacturing focusing to a better extent on R&D and hi-tech electronics.
As per above graph, the industry sector contribute much more employment.
20
Electronics
The Finnish electronics and electro-technics industry relies on heavy investment
in R&D, and has been accelerate by the liberalization of global markets. Electrical
engineering started in the late 19th century with generators and electric motors built by
Gottfried Stromberg, now part of the ABB Group. Other Finnish companies – such as
Instruct, Vaisala and Neles succeed in areas such as industrial mechanization, health and
meteorological technology. Nokia is a world chief in mobile telecommunications.
Metals, engineering and manufacturing
Finland has a large quantity of natural resources, but many big mines have closed
down, and most resources are now imported. Therefore, companies now tend to focus on
high added-value processing of metals. The exports include the production steel, copper, zinc
and nickel, and finished products such as steel roofing and cladding, welded steel pipes,
copper pipe and coated sheets. Outokumpu is known for developing the flash smelting
procedure for copper production and stainless steel. The world's biggest cruise ships are built
in Finland; also, the Finnish company Wärtsilä produces the world's major diesel engines.
Additionally, Finland also produces train store. The manufacturing business is a major
employer of about 400,000 people
Chemical industry
The chemical business is one of the Finland's major industrial sectors with its
roots in tar making in the 17th century. It produces a huge variety of products for the use of
other industrial sectors, particularly for forestry and agriculture. Additionally, it produces
plastics, chemicals, paints, oil products, pharmaceuticals, environmental products, Biotech
products and petrochemicals. Biotechnology is regard as one of the most hopeful high-tech
sectors in Finland and it is rising rapidly.
Pulp and paper industry
Forest products have been the key export industry in the earlier period, but
diversification and expansion of the economy has concentrated its share. In the 1970s, the
pulp and paper business accounted for half of Finnish exports. Besides, several of large
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international corporations in this business are based in Finland. Stora Enso and UPM were
positioned 1 and 3 by output in the world, both producing more than ten million tons. M-real
and Myllykoski also come into view on the top 100 list.
Energy industry
Finland's 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 consumed in
Finland goes to industry, one fifth to heating buildings and one fifth to transport. Lacking
original fossil fuel resources, Finland has been a power importer. This might vary in the
future since Finland is presently building its fifth and approved the building permits for its
sixth and seventh reactors.
As far as employment is concerned, the following figures indicate the employment
contribution of the various sectors:
Agriculture and forestry- 4.5%
Industry-18.2%
Construction- 7.3%
Commerce-15.9%
Finance, insurance, and business services- 14.5%
Transport and communications- 6.9%
Public services- 32.7%
1.5 Overview of Business and Trade at International Level
Finland has a greatly modern, free-market economy with a per capita output like to
that of other western economies such as France, Germany, Sweden, or the U.K. The largest
22
sector of the economy is services (64.9%), followed by manufacturing and refining (32.4%).
Primary production is at 2.7%. In 2010 the Finnish economy improved from the 2009
financial crisis better than most forecasts predict, and showed a broad-based growth of 3.1%.
The forecast for 2011 predicts an export-driven annual growth of 3.6%. GDP growth in 2012
is expected to average 2.7%.
Foreign Trade in Figures:
Foreign Trade Indicators 2006 2007 2008 2009 2010
Imports of Goods (million USD) 69,375 81,704 91,781 60,890 68,095
Exports of Goods (million USD) 77,206 90,025 96,456 62,855 69,264
Imports of Services (million USD) 18,571 22,613 30,377 25,636 22,864
Exports of Services (million USD) 17,388 23,167 31,772 27,482 24,750
Trade by regions in 2010, share %
Regions Exports Imports
EU 55.6 56.4
Euro area 31.0 33.2
External trade 44.4 43.6
Developing countries 16.7 16.1
Exports - commodities:
electrical and optical equipment, machinery, transport equipment, paper and pulp, chemicals,
basic metals; timber
Exports - partners:
Germany 10.32%, Sweden 9.79%, Russia 9%, US 7.85%, Netherlands 5.9%, UK 5.24%,
China 4.1%
23
Imports - commodities:
harvest, petroleum and its product, chemicals, transport equipment, iron and steel,
technology, textile yarn and fabrics, grains
Imports - partners:
Russia 16.28%, Germany 15.76%, Sweden 14.65%, Netherlands 6.99%, China 5.29%,
Multilateral Relations
Finnish foreign policy emphasizes its contribution in multiparty organizations.
Finland joined the United Nations in 1955 and the EU in 1995. As noted, the country also is
an associate of the North Atlantic Treaty Organization's (NATO) Partnership for Peace as
well as a member in the Euro-Atlantic Partnership Council. As a NATO partner, Finland had
178 military troop and 39 civil disaster management experts in Afghanistan as of November
2010, helping with a Swedish-led Provincial Reconstruction Team in the province of Mazar-
e-Sharif and functioning to generate a secure environment for rebuilding in northern
Afghanistan.
1.6 Present Trade Relations and Business Volume of Different
Product with India
Finland and India have customarily enjoyed warm and pleasant relations. In the
recent past, there has been a perceptible increase in the level of engagement, both political
and commercial, which saw the exchange of the visit of the Prime Ministers of the two
countries during the same calendar year (2006).This was followed by a visit by the President
of Finland Mrs. Tarja Halonen in January 2007 and February 2009 and Finnish Prime
Minister Mr. Matti Vanhanen visited India in February 2008 and February 2010, to attend the
Delhi Sustainable Development Summit organized by TERI. In 2011 there are frequent
exchanges of visits from both counties. Finland sees in India a large market for its products
and a favorable investment destination for its high technology industries whereas India views
Finland as an important associate of the EU and a repository of modern technology.
24
India-Finland Trade:
Indo-Finnish economic and trade relations have grown steadily in recent years with joint
trade reaching Euro 748 million in 2008, but declining a little bit in 2009 due to global
slowdown.
Following are figures for the past few years:
Value: € million
2007 2008 2009 2010
Exports from India to Finland 191.52 219.49 230.44 349
Imports by India from Finland 453.56 529.24 450.24 599
Total 645.08 748.73 680.68 948
Export items
Export items from India have been garments, made ups and textiles accounting for
about a third of the exports. Other major items include metals, iron and steel, chemicals,
petroleum products and leather.
Import items
Main imports from Finland include telecommunication tools, power generate
equipment, electric and other equipment.
Investment:
On the investments side, large Finnish companies like Nokia, Kone elevators,
Wartsila and Elcoteq have set up manufacturing facilities in India. Over 80 Finnish
companies now have operation in India and 30 Indian companies, mostly in the software and
consultancy segment are running in Finland.
25
Tourism:
Favored Finnish visitor destinations in India are Goa and Kerala, though other
destinations are also becoming increasingly popular. With the commencement of direct
Finnair flights from Helsinki to New Delhi in 2006 the number of Finnish guests has
increased. Finland is among the five countries for which visa on arrival scheme has been
made applicable 1st January, 2010. During the winter months (October-March) Finnier
operates two to three charter flights a week to Goa, depending on require.
1.7 PESTEL Analysis
1) Political factors
constancy of government, social policy,
trade
regulations, tax policies and entry mode
regulations
2) Economic factors Inflation, interest rates, exchange rates,
3) Social factors
healthiness, growth rate, age allotment,
career attitudes and emphasis on
protection
4) Technological factors
R&D activity, automation, technology
incentive and rate of technological
transform
5) Environmental factors
attitude towards the atmosphere ( in
terms of demand and supply for product,
fumes or conserving the nature),
environment, climate
6) Legal factors
Employ rules, competitive policy,
product rule, and fitness and security
system.
PESTEL analysis for Finland
Outlined below is the PESTEL analysis for Finland as a whole.
26
1) Political Factors
i. Constitutional System
Finland tied the European Union in 1995 and adopts the euro as its exchange in 1999.
The country is sparsely occupied, with about one-fourth of its land mass above the Arctic
Circle, but boasts a modern, competitive, and transparent economy with vibrant in sequence
and interactions technology sector.
ii. Stability of Government.
. The nation remains a world leader in industry independence, trade independence, assets
rights, and freedom from fraud. Private enterprise continues to blossom and encourage
improvement in an efficient regulatory and lawful environment.
iii. Business Freedom
The generally liberty to start, operate, and close a business is strongly protected
under Finland‘s regulatory environment. Starting a business takes an average of 14 days,
compared to the world average of 35 days. Obtaining a trade license require much less than
the world average of 18 procedures and 218 days.
2) Economic Factors
Economic Freedom Score - 73.78
Tariff Rate 1.29
Income Tax Rate 30.49
27
Economic Freedom vs. World Average
i. Fiscal Freedom
Finland has reasonable tax rates but a comparatively high level of overall
taxation. The peak income tax rate is 30.49 percent, with municipal rates between 16.5
percent and 20 percent.
Ii Monitory Freedom
Finland uses the euro as its currency. Between 2006 and 2008, Finland‘s
weighted average annual rate of increase was 3.10 %. As a participant in the EU‘s Common
farming Policy, the government subsidizes farming production, distorting the price of
farming products.
Iii Investment Freedom
Finland is open to foreign direct investment. Certain acquisition of huge
companies may need follow-up clearance from the Ministry of Trade and Industry. Non–
European Economic Area investor must apply for a license to invest in safety, electrical
Corporate Tax Rate 26.0
GDP (billion) 188.21
GDP per Capita 35427
Tax Burden % GDP 43.10
Government Expenditure % GDP 47.31
Population (billions) 5.32
28
contracting, alcohol, telecommunications, aviation, and restaurant. Regulation is relatively
transparent and efficient.
3) Social Factors
i) Changes in lifestyles and trends
Doesn‘t have many changes in lifestyle and trend since Finland is count as one of
the modern countries.
ii) Educational levels
The education levels in Finland are extremely fine where the literacy is 100% for
both male and female. The normal school life expectancy is 17 years.
iii) Labor Freedom Ranks
Burdensome labor market regulations hamper employment opportunity and
efficiency growth. The non-salary cost of employ a worker is high, and dismissing a worker
can be expensive. Limits on work hours are rigid.
iv) Freedom of corruption
Fraud is perceived as almost nonexistent. Finland is joined for 5th place out of
179 countries in Transparency International‘s fraud perception Index for 2008. Finland is a
signatory to the OECD Anti-Bribery Conference.
4) Technological Factors
i. Science and Technology
Technology and innovation rule measures look for to put in to enhancing the competitiveness
of Finnish trade and the well-being of people, with the plan of making Finland capable of
providing companies with a top-flight innovation atmosphere internationally, which also
attract foreign R&D investments.
29
ii. Research and Development
R&D funding will be increased to 4 % of Finland‘s gross national product.
This subsidy will be allocated to center of strategic excellence in sector that is essential to the
growth of the national country, society and citizens‘ safety.
5) Environmental Factors
i. Climate
Cold pleasant and potentially subarctic but moderately mild because of moderating
influence of the North Atlantic Current, Baltic Sea, and more than 60,000 lakes.
ii. Current issues
Air pollution from industrialized and power plants contributing to acid rain, water
pollution from industrialized waste, farming chemical; habitat loss threatens wildlife
populations.
6) Legal Factors
i. Employment Regulations
ii. healthiness and security Regulations
iii. Trade and Regulations Standards
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1.8 Conclusion
Finland is a democracy which became free in 1917. The head of state is the president.
Ultimate political power is vested in the 200-member unicameral parliament. The population
of Finland today is a small over 5 million.
Finland is powerfully competitive in built-up - principally the wood, metals, engineering,
telecommunications, and electronics industry. Finland excels in high-tech exports such as
mobile phones. Apart from timber and several minerals, Finland depends on imports of raw
materials, energy, and some machinery for manufactured goods.
Overall the present position of industry is too superior of Finland country, major they are in
manufacturing of nokia that is telecom division. Metal and metal products, electronics,
equipment and technical instrument, shipbuilding, pulp and document, foodstuffs, chemicals,
textile, garments extra they are in agriculture and oil engineering also.
Finland has a greatly industrialized, mainly free-market economy, with per capita output
roughly that of the UK, France, Germany, and Italy. Its key economic segment is
manufacturing—principally the wood, metals, engineering, telecommunications, and
electronics industries. Deal is important, with the export of goods representing about 30
percent of GDP. Except for timber and several minerals, Finland depends on imports of raw
materials, power, and some machinery for manufactured goods. Because of the climate,
farming growth is inadequate to maintaining self-sufficiency in basic products. Forestry, a
significant export earner, provides a secondary profession for the rural population. The
economy has recovered from the depression of 1990-92, which had been cause by economic
overheating, miserable foreign markets, and the dismantling of the barter system between
Finland and the earlier Soviet Union. A comparatively high unemployment rate (estimated at
7.7% in 2005) has been persistent but recent indicators show that the situation may be
improving.
31
Finland and India have customarily enjoyed warm and pleasant relations. In the recent past,
there has been a perceptible increase in the level of engagement, both political and
commercial, which saw the exchange of the visit of the Prime Ministers of the two countries
during the same calendar year (2006).
For importing tariff is more imposing, but better fact is that major of its nokia products are
used in India. And mostly in Gujarat.
As the taxation duty is levied high, mostly India go for joint venture with Finland companies.
Our major interest is in country‘s growth, and with duly research we found that Finland is
the most excellent for our GCR project.
32
Part II
Industries & Companies Study of
Finland Country
33
Group: A
Distribution channel of
business in Finland Country
34
Distribution channel
The channel decision is very important. In theory at least, there is a form of trade-off: the
cost of using intermediaries to achieve wider distribution is supposedly lower. Indeed, most
consumer goods manufacturers could never justify the cost of selling direct to their
consumers, except by mail order. Many suppliers seem to assume that once their product has
been sold into the channel, into the beginning of the distribution chain, their job is finished.
Yet that distribution chain is merely assuming a part of the supplier's responsibility; and, if
they have any aspirations to be market-oriented, their job should really be extended to
managing all the processes involved in that chain, until the product or service arrives with the
end-user. This may involve a number of decisions on the part of the suppliers difficult
enough to motivate direct employees to provide the necessary sales and service support.
Motivating the owners and employees of the independent organizations in a distribution
chain requires even greater effort.
There are many devices for achieving such motivation. Perhaps the most usual is `incentive':
the supplier offers a better margin, to tempt the owners in the channel to push the product
rather than its competitors; or a compensation is offered to the distributors' sales personnel,
so that they are tempted to push the product. Julian Dent defines this incentive as a Channel
Value Proposition or business case, with which the supplier sells the channel member on the
commercial merits of doing business together. He describes this as selling business models
not products. In much the same way that the organization's own sales and distribution
activities need to be monitored and managed, so will those of the distribution chain. In
practice, many organizations use a mix of different channels; in particular, they may
complement a direct sales-force, calling on the larger accounts, with agents, covering the
smaller customers and prospects.
These channels show marketing strategies of an organization. Effective management of
distribution channel requires making and implementing decision in these areas.
35
Comparative position of selected company
1. Finland‘s retail sector turnover and profitability improved in 2010
2. The total turnover in Finland‘s retail trade was EUR 115.5 billion in 2010
3. Wholesale trade turnover increased by 8.9%, retail trade turnover by 2.1% and car
sales by 7.6% in 2010 compared to the year before.
4. In the wholesale trade the operating margin was 3.3% of the business income and in
the retail trade 3.9%.
5. In 2010, profitability improved both in absolute terms and as a percentage of the
previous year‘s result.
6. In 2010 the gross margin on sales was EUR 26.1 billion, representing 22.6% of the
total turnover.
7. Small and medium sized companies made up 37% of the total turnover and 51% of
the sales margin.
8. Car sales enjoyed the biggest improvement in profitability with a 1.5% increase on
the year before.
9. The gross sales margin in car sales totaled EUR 3.1 billion which was 20.2% of the
turnover.
Competitive position of distribution channel system in India.
Distribution system in newspaper
In a newspaper organization like DNA (Gujarat version known as Divyabhaskar), there are
Various factors that determine the successful operation of the sales and distribution
channels.Accordingly, even minor issues in these operations can adversely affect the
newspaper. A customer may choose a newspaper for various reasons. However, it‘s up to the
newspaper agencies to communicate to the customer that their newspaper can deliver all the
values a customer may look for. The reach and popularity of a newspaper to a large extent
depends on its distribution network. Here we have carried out an analysis on the delivery and
36
sales management of the DNA newspaper in order to better understand their channel and also
ident if and provide possible solutions to any shortcomings. is dispatched to the respective
area.
Relationships and Expectations
The various stakeholders in the value chain need to work closely to deliver the service
quality expected in a newspaper delivery each morning without fail. This infallible
commitment to the customers requires that each actor in the value chain clearly understands
the expectations off him/her and clearly communicates his/her expectations to the others.
Company
The company is at the head of the value chain and is clearly the Channel Leader. The
customers come to the vendors and/or hawkers with an intention of buying a particular
newspaper which clearly indicates that the brand of the product is important and not the
vendor or hawker as such.
Thus, from the point of view of the vendor/hawker, the supplier power is relatively high. The
dealers (vendors/hawkers) expect the following from the company:
1. Timely delivery of the newspaper each morning in all weather conditions.
2. Proper quantity to be delivered each day as per their demands.
3. Newspaper which are not sold the prior day to be returned and reimbursed.
4. Their commissions to be maintained in the long run and not reduced especially as the
newspaper circulation picks up.
5. Make it easier for them to collect newspapers
6. There are several customer segments on the basis of income and age categories and
hence expectations differ. However, the following are a common subset across
different segments:
7. The newspaper should report all ―relevant‖ news reports from the previous day
8. There should be interesting feature articles suiting their taste.
37
9. The presentation should be good including the print quality and colours.
10. The higher the newspaper weight, the better since it can be sold for a higher price at
the kabadiwala.
Dealers
The dealers (vendors/hawkers) are the company‘s sole touch point to the customers. The
company‘s relationship with hawkers is temporary since they have a fluctuating demand and
8 hence the important dealers from the company‘s perspective are the vendors who typically
have a committed demand based on the number of customers they serve. The company
expects the
following from these vendors:
1. To deliver the newspapers on time to the customers.
2. To ensure that they do not overcharge the customers making it expensive for the
customers.
3. To ensure that any supplement/promotional material being sent along with the
newspaper by the company being delivered to the customers without any pilferage
(e.g. at times newspaper stick samples of products on pages in their advertiser‘s
promotion campaigns).
Customers
The company‘s relationship with the customers is typically long term since people do not
usually change their newspaper reading habits. We could not gather any clear expectations
that the company executives had from their customers. On the editorial side, there could be
expectations on content related feedback especially through letters to the editor etc. but these
were not explicitly mentioned by the company executives.
38
Joint and Independent Decisions
Financial and product related decisions are usually taken solely by the company. However,
nonfinancial decisions in the value chain are either taken by the vendors or by the company
or by joint consultation.
The service area for each vendor and the quantity each vendor buys is solely decided by the
vendors. The company does not allocate territories or quotas. In fact, at times there can be
severe rivalry among vendors for control over a particular area which can even lead to
physical assaults, Newspaper Advertisements are of two types.
The ones printed in the paper which are decided solely by the company The ones through
pamphlet-inserts are decided solely by vendors 9 Time of delivery to vendors is typically
decided in consultation with vendors since they
need to be present to collect the newspapers. Since each vendor may be collecting multiple
newspapers, the time needs to be coordinated.
Physical Distribution
DNA prints 90,000 copies of newspapers daily. DNA knows about the daily demand from
newspaper paper, like demand from newspaper vendors in Panjapore char rasta which is
20,000 copies daily. Mode of transportation used by DNA to deliver newspaper in different
areas is different. Tempos are used for transporting newspapers in small quantities in towns
near to printing press. For area where volume to be delivered is high trucks are used.
39
The Future Of India's Distribution Systems
Organized Retail
Organized retail pharmacies are in a nascent stage in India, but have started making inroads
in the distribution system. The first retail pharmacy chain was started by the Subiksha Retail
Services Pvt Ltd. The Medicine Shoppe, one of the largest retail drug stores in the US,
opened two retail outlets in Mumbai and has franchised three more in Mumbai, Calcutta, and
Baroda. Others have also entered the field including Health & Glow, Pills & Powders, and
Reliance that has set up units under the brand name of Reliance Wellness.
NitinGokarn, senior manager of supply-chain management (SCM) at Merck India, is
optimistic for the growth of organized retail. He says that, "Though organized retail faces
strong resistance from the traders lobby, it has a great potential." He also opines that, "It will
take a great deal of political will and reforms to make this happen." With an organized retail
system, pharmaceutical companies would be able to offer medicine at higher margins, and
some speculate that retailers may even be able to pass on cost benefits to the end-users as
well.
Large Untapped Rural Market
The growth of institutional sales had little impact on the accessibility of medicine in rural
areas, according to an analysis by the Indian Retail Druggists and Chemists Association.
A large proportion of the rural population still does not have access to proper medication and
the situation may take long to improve. Rural areas contribute around 21% to the total
pharmaceutical market. In 2006–2007, the rural pharmaceutical market was estimated at
around $1.4 billion. Nearly 70% of India's population lives in rural areas where the
healthcare infrastructure is poor. With increasing rural household incomes, the rural market is
becoming more attractive. According to estimates by the Planning Commission, rural
households now spend 12% of their income on healthcare.
40
Value Added Tax (VAT) Impact
With the introduction of VAT, medicine prices have been standardized and price
discrimination, in which different states pay different prices for the same products, has
reduced. VAT has also helped reduce the illegal interstate transfer of goods and the unethical
interstate trade for higher margins. Per the new rules, sales tax is levied at each stage of value
addition and credit for the tax paid on the inputs can be obtained.
IT Adoption
IT adoption in healthcare has grown drastically. Pharmaceutical companies have realized the
need for integrated solutions in SCM to keep inventories at optimum levels, to improve
distribution, to provide for liquidation of stock, and to streamline interconnectivity between
manufacturing facilities, warehouses, and CFAs in different states. The use of software like
SAP and SAS, apart from other customized software, is increasing. However, the adoption of
technologies such as radio-frequency identification (RFID) has been slow.
Future Challenges
Pharmaceutical companies in India have realized the importance of SCM and are
aggressively looking for ways to improve the costs associated with SCM. Distribution in
India is proportionally much more costly than it is in the US or EU. The companies, which
have spent as much as one-third of their revenues toward financing their supply-chain
operations, recognize that the cost of logistics is very high in India. In US and EU, the
expenditure on SCM alone is perhaps 2%, whereas in India, it averages 4–6% of total sales.
According to Gokarn, "It's mainly because in India, the cost of drugs is very low compared to
the developed markets. Taking into consideration the poor infrastructure and extreme
geographic conditions, it is difficult to curtail the cost involved in SCM."
Long-Channel Inventory Management
The multilayered distribution channel and lobbying at all layers has been successful at
preventing pharmaceutical companies from bringing in significant reforms toward higher
trade margins, and at bypassing the multiple distribution layers to reach customers directly.
Because pharmaceutical companies do not have direct access to retailers' data on sales
41
(tertiary sales), most pharmaceutical companies depend on stockists' sales data to monitor
sales (secondary sales). The primary sale involves transferring stock from the central
warehouse to its CFA. The medical representatives are given predefined sales targets. To
meet these targets they push inventory on the stockist to levels that exceed the actual
demand. When the next level of sale does not take place, the stockist will either return goods
to the company or the stock expires.
Increasing Competition Between Wholesalers and Retailers
Today, with so many mergers and acquisitions in the Indian pharmaceutical industry, the
number of stockists for each company has increased. Now two stockists from the same
company may be competing against each other. Retailers take advantage of this situation by
prolonging the credit period and asking for more discounts, which has an adverse effect on
stockists, because they have to comply with the retailers to sustain their business.
Brand Substitution
The emergence of generic drugs has also taken a toll on Indian pharmaceutical company
sales, as prices can be almost two to 15 times less for the same drug. Moreover, to capture
market share generics, companies offer higher trade margins at the retail level. Sometimes
generic drugs provide up to 500% trade margins, which is a lucrative offer for a retailer to
pass up, and this leads to brand substitution.
Recalling Drugs
There is no foolproof system for recalling drugs in India. Once a medicine is released into the
market, it becomes a daunting task for a pharmaceutical company to recall because of the
highly fragmented nature of the distribution network. Newer technologies such as RFID
would help in keeping track of products along the entire chain and would prevent counterfeit
drugs to enter into the system.
International Competitiveness and Cold-Chain Management
Indian pharmaceutical companies are increasingly seeking opportunities to supply drugs to
the world market. More developed cold-chain management practices will be required to
42
achieve this goal. This is one of the major challenges faced by the industry if they are to
retain product quality during shipment. Companies like Eli Lilly in India have implemented
initiatives such as having their own vehicles equipped with cold-chain management systems.
Other companies such as World Courier have developed cold-chain management models to
help pharmaceutical companies maintain the cold chain.
Policy and norms for distribution channel
As India is a liberal country we had a mix economy in India, there is no restriction to do a
business with any country in world. Government regulates all sector which is necessary to
control the industry. There are some policy and norms for distribution system in India which
every citizen should follow. A company has autonomous to select any type of distribution
system either within the country or outside the country. Companies should take in the mind
that a customer should get a benefit from it.
Introduction of distribution channel
A channel of distribution or trade channel is defined as the path or route along which
goods move from producers or manufacturers to ultimate consumers or industrial users. In
other words, it is a distribution network through which producer puts his products in the
market and passes it to the actual users. This channel consists of: - producers, consumers or
users and the various middlemen like wholesalers, selling agents and retailers (dealers) who
intervene between the producers and consumers. Therefore, the channel serves to bridge the
gap between the point of production and the point of consumption thereby creating time,
place and possession utilities.
A distribution channel can be as short as being direct from the vendor to the consumer or
may include several interconnected intermediaries such as wholesalers, distributors, agents,
retailers. Each intermediary receives the item at one pricing point and moves it to the next
higher pricing point until it reaches the final buyer. Also called channel of distribution.
The channel decision is very important. In theory at least, there is a form of trade-off: the
cost of using intermediaries to achieve wider distribution is supposedly lower. Indeed, most
43
consumer goods manufacturers could never justify the cost of selling direct to their
consumers, except by mail order. Many suppliers seem to assume that once their product has
been sold into the channel, into the beginning of the distribution chain, their job is finished.
Yet that distribution chain is merely assuming a part of the supplier's responsibility; and, if
they have any aspirations to be market-oriented, their job should really be extended to
managing all the processes involved in that chain, until the product or service arrives with the
end-user. This may involve a number of decisions on the part of supplier.
A channel of distribution or trade channel is defined as the path or route along which goods
move from producers or manufacturers to ultimate consumers or industrial users. In other
words, it is a distribution network through which producer puts his products in the market
and passes it to the actual users. This channel consists of: - producers, consumers or users
and the various middlemen like wholesalers, selling agents and retailers(dealers) who
intervene between the producers and consumers. Therefore, the channel serves to bridge the
gap between the point of production and the point of consumption thereby creating time,
place and possession utilities. A channel of distribution consists of three types of flows:-
Downward flow of goods from producers to consumers \
Upward flow of cash payments for goods from consumers to producers
Flow of marketing information in both downward and upward direction i.e. Flow of
information on new products, new uses of existing products, etc. from producers to
consumers. And flow of information in the form of feedback on the wants, suggestions,
complaints,etc from consumers/users to producers.
An India has a number of alternative channels available to him for distributing his products.
These channels vary in the number and types of middlemen involved. Some channels are
short and directly link producers with customers. Whereas other channels are long and
indirectly link the two through one or more middlemen. Here types of distribution can be
used to make product available to consumers: (1) intensive distribution, (2) selective
distribution and (3) exclusive distribution.
44
In intensive distribution, the product is sold to as many appropriate retailers or wholesalers
as possible. Intensive distribution is appropriate for products such as chewing gum, candy
bars, soft drinks, bread, film, and cigarettes where the primary factor influencing the
purchase decision is convenience. Industrial products that may require intensive distribution
include pencils, paperclips, transparent tape, file folders, typing paper, transparency masters,
screws, and nails. In selective distribution, the number of outlets that may carry a product is
limited, but not to the extent of exclusive dealing. By carefully selecting wholesalers or
retailers, the manufacturer can concentrate on potentially profitable accounts and develop
solid working relationships to ensure that the product is properly merchandised. The
producer also may restrict the number of retail outlets if the product requires specialized
servicing or sales support. Selective distribution may be used for product categories such as
clothing, appliances, televisions, stereo equipment, home furnishings, and sports equipment.
When a single outlet is given an exclusive franchise to sell the product in a geographic area,
the arrangement is referred to as exclusive distribution. Products such as specially
automobiles, some major appliances, certain brands of furniture, and lines of clothing that
enjoy a high degree of brand loyally are likely to be distributed on an exclusive basis. This is
particularly true if the consumer is willing to overcome the inconvenience of traveling some
distance to obtain the product. Usually, exclusive distribution is undertaken when the
manufacturer desires more aggressive selling on the part of the wholesaler or retailer, or
when channel control is important, exclusive distribution may enhance the product's image
and enable the firm to charge higher retail prices.
Structure, function of the business
Producer-Customer:-
This is the simplest and shortest channel in which no middlemen is involved and producers
directly sell their mobile instrument products to the consumers. It is fast and economical
channel of distribution. Under it, the producer or entrepreneur performs all the marketing
activities himself and has full control over distribution. A producer may sell directly to
consumers through door-to-door salesmen, direct mail or through his own retail stores. Big
45
firms adopt this channel to cut distribution costs and to sell industrial products of high value.
Small producers and producers of perishable commodities also sell directly to local
consumers.
Retailer-Customer:-
This channel of distribution involves only one middleman called 'retailer'. Under it, the
producer sells his product to big retailers (or retailers who buy goods in large quantities) who
in turn sell to the ultimate consumers. This channel relieves the manufacturer from burden of
selling the goods himself and at the same time gives him control over the process of
distribution. This is often suited for distribution of consumer durables and products of high
value.
Producer-Wholesaler-Retailer-Customer:-
This is the most common and traditional channel of distribution. Under it, two middlemen
i.e. wholesalers and retailers are involved. Here, the producer sells his product to
wholesalers, who in turn sell it to retailers. And retailers finally sell the product to the
ultimate consumers. This channel is suitable for the producers having limited finance, narrow
product line and who needed expert services and promotional support of wholesalers. This is
mostly used for the products with widely scattered market.
Producer-Agent-Wholesaler-Retailer-Customer:-
This is the longest channel of distribution in which three middlemen are involved. This is
used when the producer wants to be fully relieved of the problem of distribution and thus
hands over his entire output to the selling agents. The agents distribute the product among a
few wholesalers. Each wholesaler distribute the product among a number of retailers who
finally sell it to the ultimate consumers. This channel is suitable for wider distribution of
various industrial products.
Most of the India Company has to choose a suitable channel of distribution for his product
such that the channel chosen is flexible, effective and consistent with the declared marketing
policies and programmers of the firm. While selecting a distribution channel, the
entrepreneur should compare the costs, sales volume and profits expected from alternative
46
channels of distribution and take into account the following factors:- Producer-Customer:-
This is the simplest and shortest channel in which no middlemen is involved and producers
directly sell their products to the consumers. It is fast and economical channel of distribution.
Under it, the producer or entrepreneur performs all the marketing activities himself and has
full control over distribution. A producer may sell directly to consumers through door-to-
door salesmen, direct mail or through his own retail stores. Big firms adopt this channel to
cut distribution costs and to sell industrial products of high value. Small producers and
producers of perishable commodities also sell directly to local consumers.
Producer-Retailer-Customer:-
This channel of distribution involves only one middleman called 'retailer'. Under it, the
producer sells his product to big retailers (or retailers who buy goods in large quantities) who
in turn sell to the ultimate consumers. This channel relieves the manufacturer from burden of
selling the goods himself and at the same time gives him control over the process of
distribution. This is often suited for distribution of consumer durables and products of high
value.
Producer-Wholesaler-Retailer-Customer:-
This is the most common and traditional channel of distribution. Under it, two middlemen i.e.
wholesalers and retailers are involved. Here, the producer sells his product to wholesalers,
who in turn sell it to retailers. And retailers finally sell the product to the ultimate consumers.
This channel is suitable for the producers having limited finance, narrow product line and
who needed expert services and promotional support of wholesalers. This is mostly used for
the products with widely scattered market.
Producer-Agent-Wholesaler-Retailer-Customer:-
This is the longest channel of distribution in which three middlemen are involved. This is
used when the producer wants to be fully relieved of the problem of distribution and thus
hands over his entire output to the selling agents. The agents distribute the product among a
few wholesalers. Each wholesaler distributes the product among a number of retailers who
47
finally sell it to the ultimate consumers. This channel is suitable for wider distribution of
various industrial products.Anentrepreneur has to choose a suitable channel of distribution
for his product such that the channel chosen is flexible, effective and consistent with the
declared marketing policies and programmers of the firm. While selecting a distribution
channel, the entrepreneur should compare the costs, sales volume and profits expected from
alternative channels of distribution and take into account the following factors:-
Product Consideration:-
The type and the nature of products manufactured is one of the important elements in
choosing the distribution channel. The major product related factors are:-
Products of low unit value and of common use are generally sold through middlemen.
Whereas, expensive consumer goods and industrial products are sold directly by the producer
himself. Perishable products; products subjected to frequent changes in fashion or style as
well as heavy and bulky products follow relatively shorter routes and are generally
distributed directly to minimize costs.
Industrial products requiring demonstration, installation and after sale service are often sold
directly to the consumers. While the consumer products of technical nature are generally sold
through retailers.
An entrepreneur producing a wide range of products may find it economical to set up his own
retail outlets and sell directly to the consumers. On the other hand, firms producing a narrow
range of products may their products distribute through wholesalers and retailers A new
product needs greater promotional efforts in the initial stages and hence few middlemen may
be require
Market Consideration
Another important factor influencing the choice of distribution channel in mobile sector is
the nature of the target market. Some of the important features in this respect are:-If the
market for the product is meant for industrial users, the channel of distribution will not need
48
any middlemen because they buy the product in large quantities. Short one and may as they
buy in a large quantity. While in the case of the goods meant for domestic consumers,
middlemen may have to be involved. If the number of prospective customers is small or the
market for the product is geographically located in a limited area, direct selling is more
suitable. While in case of a large number of potential customers, use of middlemen becomes
necessary. If the customers place order for the product in big lots, direct selling is preferred.
But, if the product is sold in small quantities, middlemen are used to distribute such products.
Other Considerations: - There are several other factors that an entrepreneur must take into
account while choosing a distribution channel. Some of these are as follows:
A new mobile company may need to involve one or more middlemen in order to promote its
product, while a well-established firm with a good market standing may sell its product
directly to the consumers.
A mobile company which cannot invest in setting up its own distribution network has to
depend on middlemen for selling its product. On the other hand, a large firm can establish its
own retail outlets.
The mobile company costs of each channel are also an important factor because it affects the
price of the final product. Generally, a less expensive channel is preferred. But sometimes, a
channel which is more convenient to the customers is preferred even if it is more expensive If
the demand for the product is high, more number of channels may be used to profitably
distribute the product to maximum number of customers. But, if demand is low only a few
channels would be sufficient. The nature and the type of the middlemen required by the firm
and its availability also affect the choice of the distribution channel. A company prefers
middlemen who can maximize the volume of sales of their product and also offers other
services like storage, promotion as well as aftersales services. When the desired type of
middlemen is not available, the manufacturer will have to establish his own distribution
network. All these factors or considerations affecting the choice of a distribution channel are
inter-related and interdependent. Hence, an entrepreneur must choose the most efficient and
cost effective channel of distribution by taking into account all these factors as a whole in the
light of the prevailing economic conditions. Such a decision is very important for a business
to sustain long term profitability.
49
Summary
As we know that different countries of the world will have their own cultural system,
lifestyle and consuming pattern. Therefore in IV semester report regarding GCSR subject our
main focus would remain on how advertising or media industry works and perfume in the
Finland. Advertising is any paid form of the non personal presentation of the idea about
goods and services , description or presentation of a product, idea, or organization,in order to
induce individuals to buy, support, or approve of it. Media is a meaning of various
communication, such as television,radio, and the newspaper. Computer media can be
harddrives,removable drives, such as zip files. While doing this report we will consider the
following points in our report: 1) The overall overview of the advertising and media industry
in Finland. 2) Various factors affecting the advertising industry in the Finland. 3) Major
advertising agencies of the Finland. 4) Government Rules and regulation with regards to the
advertising industry. 5) Preferences given to various advertising. Apart from the above
mentioned topics we will also work out on the other topics which are directly or indirectly
affecting our project.
Conclusion
The population of Finland is currently about 5,350,000. Finland has an average
population density of 17 inhabitants per square kilometre. This is the third-lowest population
density of any European country, behind those of Norway and Iceland. Today Finland has a
highly developed industrial economy. Despite the climate and its geographical location that
permit a very short growing period, agriculture is fairly developed and Finland is self-
sufficient as far as basic foods are concerned. Finland is strongly competitive in
manufacturing -principally the wood, metals, engineering, telecommunications, and
electronics industries. Finland excels in high-tech exports such as mobile phones. Agriculture
represents less than 3% of the current Finnish GNP and employees less than 5% of the
population.
50
Ones. Finland specializes in exporting information and communication
technologies, Nokia becoming the world leading manufacturer of mobile handsets. From the
1990s, Finnish industry, which for centuries had relied on the country's vast forests, became
dominated by to a larger extent by electronics and services, as globalization lead to a decline
of more traditional industries. The Finnish electronics and electrotechnics industry relies on
heavy investment in R&D, and has been accelerated by the liberalization of global markets.
The chemical industry is one of the Finland's largest industrial sectors with its roots in
tar making in the 17th century. Finland has a highly industrialized, free-market economy
with a per capita output equal to that of other western economies such as France, Germany,
Sweden, or the U.K. The largest sector of the economy is services (64.9%), followed by
manufacturing and refining (32.4%). Primary production is at 2.7%.
The dissolution of the Soviet Union in 1991 opened up dramatic new possibilities for
Finland and has resulted in the Finns actively seeking greater participation in Western
political and economic structures. Finland joined the European Union in 1995.
NorvantoTrade is one of the corner stones of the Indo-Finnish relations. During the last
decade trade between India and Finland increased significantly making India Finland's fourth
largest trading partner in Asia.
51
Group: B
Banking sector in Finland
Country
52
Origin of Finland Bank
Finland banking that has been developed since the mid-nineteenth century,
Control over investment capital gave a few large banks great power. Distinct laws for each
type of bank contributed to the development of a fragmented banking structure in which
separate types of institutions served different purposes and closely regulated by the central
bank.
The Bank of Finland was founded in 1811.the Bank of Finland first provided
the services of a true central bank in the 1890s. Formally independent, the BOF's
management comprised bodies responsible to both the executive and the legislative branches
of government.
Finland's commercial banks were the actual leaders of the financial industry,
and they controlled most lending to Finnish corporations. About ten banks were considered
to be commercial banks, only two--the Suomen Yhdyspankki (Union Bank of Finland) and
the Kansallis-Osake-Pankki was national banks with extensive branch networks.
The cooperative and savings banks served regional and local customers, but
usually exercise relatively little economic power. The savings banks were nonprofit banks;
they served small-scale industry and households.
Although private banks created the strength of character of Finland's financial
structure, state-owned banks still accounted for about one-quarter of bank assets in the mid-
1980s. The Postipankki had about 40 branches of its own.
Currently, Finland has 14 commercial banks, 213 member cooperative banks,
38 local cooperative banks, 34 savings banks (28 banks + 6 limited companies) 14 deposit-
taking branches of foreign credit institutions.
The three largest banking groups in Finland are OP-Pohjola Group, Nordea
Bank Finland and Sampo Bank.
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Banking operations
It includes saving, investment, financing, lending & payment related services.
A stable financing structure can efficiently handle financing, payments program and risk
management. Banking services had boost and diversified over the years in order to better
meet the needs of increasingly diverse customers.
Different Types of Services
Demand for loans recovered
Demand for loans increased in 2010, and the loan portfolio of monetary
institutions grew by 6.7%. In 2009, this growth was below 2% in 2009. This rise can be
explained by increased housing loans and corporate loans.
New home loans granted to households by banks
Bank‘s lending depends on housing market and housing production. Lending
to the housing association grew faster in 2010, mainly due to govt. support in housing
production.
Households confident in housing loan market
The borrowing of household‘s grew up by 6% in 2010, from previous years.
Growth in fixed-term deposit accounts
It was too faster, after the republication finish people majorly used this service
to secure their income for future growth.
List of Commercial banks in Finland that have been selected:
Evli Bank
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Kaupthing Bank
Nordea Bank Finland
Sampo Bank
Tapiola Bank
(1) Evli Bank:
It was established in 1985 and is been a guide in the rapidly developing capital
markets. Opening out as a four-man office, Evil has since expanded into an independent
investment bank that today covers the whole region. Evil‘s operation is not only seen by
growth, but also by a strong sprit of enterprise and improvement.
The aim for its establishment was to provide smoother and better service to the
general public of Finland.
(2) Kaupthing Bank:
It‘s currently in winging up proceedings during which Kaupthing is headed by
the winging up committee.
The board of directors of Kaupthing bank willingly resigned from BOD. This
was because of bank‘s financial difficulties and a resolution committee was appointed for the
Estate by the FME in accordance with Act.
(3) Nordea Bank :
It was founded in 2000 and its headquarter is in Stockholm, Sweden. Nordea
sell its banking products as corporate and retail banking, asset management. Nordea‘s vision
is to be a Great European bank, acknowledged for its people, creating superior value for
customers and shareholders.
Nordea is trying hard for their customers to reach their goals by providing a
wide range of products, services and solutions within banking, asset management and
55
insurance. Nordea bank has about 11 million customers, approx. 1400 branch offices and it is
10th
largest universal banks in Europe in terms of total market capitalization.
(4) Sampo Bank:
Sampo Bank was established in 1887, Originally the Finnish state-owned Post
and Savings Bank, which accepted deposits from the public at its post offices. In 1999, the
state-owned bank was merged with Sampo PLC's insurance business to form the Sampo
Group.
(5) Tapiola Bank :
Tapiola Bank was established in 1990 and it actated as modern bank serving
mainly private persons online, by phone or at offices throughout Finland. The bank does not
offer the OTC banking services.
In addition the bank offers personal advisory service to customers by
appointment with regard to both loans and investments.
List of Commercial banks in India that have been selected:
Axis Bank (Formerly UTI Bank)
HDFC Bank
ICICI Bank
Kotak Mahindra Bank
Yes bank
(1) Axis Bank:
The Bank was built-in 3rd December and Certificate of business on 14th
December. The Bank transacts banking business of all account. UTI Bank Ltd. was promoted
by Unit Trust of India, Life Insurance Corporation of India, General Insurance Corporation
of India and its four subsidiaries.
56
Axis bank was the first private sector bank to get a license issued by Reserve
Bank of India in 1997. Rs. 100 crores was contributed by UTI, and the rest from LIC Rs. 7.5
crorers.
(2) HDFC Bank:
HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation
Limited. Its India‘s largest housing financing company.
(3) ICICI Bank:
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary.
In the 1990s, ICICI changed its business from a development financial institution
offering only project finance to a diversified financial services group offering a wide range of
products and services.
(4) Kotak Mahindra Bank
Kotak Mahindra Bank is an Indian financial service firm established in 1985. It was
previously known as Kotak Mahindra Finance Limited, a non-banking financial company. In
February 2003, Kotak Mahindra Finance Ltd, the group's flagship company was given the
license to carry on banking business by the Reserve Bank of India.
Kotak Mahindra Finance Ltd. is the first company in the Indian banking history to
convert to a bank. Today it has more than 20,000 employees and Rs. 10,000 core in revenue.
57
(5) Yes bank
Yes bank is private Indian Bank Catering to the ―Future Businesses do India‖, and is
an outcome of the professional and entrepreneurial commitment of Rana Kapoor, founder as
well as MD and CEO.
YES BANK has exemplified ‗creating and sharing value‘ for all its stakeholders, and
has created a differentiated Banking Paradigm. YES BANK has had a strong focus on
Development Banking, as is evident from the cutting-edge work that the Bank has done in
the area of Food & Agribusiness, Infrastructure, Microfinance, and Sustainability which in
most cases has been first-of-its kind in India.
YES BANK has been recognized amongst the Top and the Fastest Growing Bank in
various Indian Banking group Tables by high-status media houses and Global Advisory
Regulatory Authority
Following are the two regulatory authorities in both of the countries i.e. in India and in
Finland.
Bank of Finland.
Reserve Bank of India.
(A) BANK OF FINLAND
The Finland‘s bank act as a Finland‘s central bank that is the Bank of Finland.
National authority and member of the European System of central banks and the euro system.
The Central Bank of Finland is also popularly known as SUOMEN PANKKI it‘s a Finnish
bank. The headquarters of this bank is at Helsinki Erkki Liikanen is acting as a governor of
this bank.
58
It was established in 1st march 1812. The central bank of Finland is the World‘s fourth
largest bank.
History
The Bank of Finland was established on 1 March in 1812 in the city of Turku by
Alexander I of Russia. In 1819 it was relocated to Helsinki. The Bank shaped and regulated
the Finnish Markka until Finland adopted the euro in 1999.
Functions and ownership
The Bank of Finland is a member of the European System of Central Banks. It is
Finland's monetary authority, and is accountable for the country's currency supply and foreign
exchange reserves.
The bank of Finland is owned by the Republic of Finland and governed by the
Finnish Parliament, through the PSCBOD (Parliamentary Supervisory Council & the board of
the Bank. It is responsible for the administration of the bank and its activities. The bank is
governed under the provisions of the act on the bank of Finland, passed in 1998. The bank‘s
branch offices are in Kuopio, Tampere, & Oulu.
Organization
The highest authority is in hands of Governor and the governor chairs the board.
Monetary Policy
The euro system is in charge for the accomplishment of the single monetary
in the euro area, where as Finland is part of the euro area. The main objective of monetary
policy is to maintain price stability in the euro area. The currency is euro in Finland country.
To measure the monetary main instrument is interest rates, all the fluctuations
in interest rates affects market prices & macroeconomic developments. Economic forecasts
are published twice a year in official statement. Price stability is clear as a year to year
increase in consumer price below 2%.
59
Financial Stability:
The bank of Finland‘s set goals in the financial system and it can be
crystallizes into two that is stability & efficiency. Financial markets execute the function of
channeling surplus funds from private individuals and corporations to those individuals and
corporations who are in need of financing.
A well organized and trustworthy functioning of the financial system is
essential for the economy as a whole, an efficient allocation of funds altogether with
financial stability, contributes to economic growth & prosperity.
Objective
The main objective of the Bank of Finland is price stability, which instance
maintaining a reasonable rise in consumer prices. Price stability creates the essentials for a
sound economy. In order to accomplish this objective his bank of Finland participates in the
preparation and administrative process of the monetary policy as well as implementing it.
Statistics
The bank of Finland is accountable for compiling Finnish data for information on
monetary financial institutions and balance of payments (BOP) statistics, as determined by
the Governing Council of the central bank.
The statistics is been shown with regulations and guidelines relating to the contents
and quality of its.
(B) Reserve Bank Of India
History
The RBI is the central bank of the India. Entrusted with monetary policy, stability,
currency management and the supervision of financial and of the payment system.
60
It was established in 1935, after its establishment the economic environment has been
changed. It gives insights into the through processes that have helped shape the country‘s
economic policies.
Reserve Bank of India is the regulatory authority of all the banks operating in India.
RBI issues the banknotes, maintain reserves with a view to securing monetary stability and to
function the credit and currency system of the country to its benefit.
Functions
The bank was established for the following needs, to regulate the issue of banknotes,
to maintain reserve for monetary stability, for supervisory functions, to act as promotional
functions, to control the credits of banks through quantitative controls. To control the system
of bank‘s through licensing and inspection for information.
61
Structure
Central Board of Director
Governor
Executive Director
Principal Chief Manager
Chief General Manager
General Manager
Deputy General Manager
Manager
Support Staff
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Rates of RBI
Bank Rate
Repo Rate
Reverse Repo Rate
Cash Reserve Ratio (CRR)
Statutory Liquidity Ratio (SLR)
Deposit Rate
8.50%
7.50%
6.50%
4.00%
23.00%
7.50% - 9.00%
Comparative Position of Banks
In our project the criteria for comparing Finland with Indian commercial
banks are as follows.
Loans
Performance of bank
Capital adequacy
GDP
There are various criteria for comparison due to time and constraints; we have taken
only four elements to make the area limited.
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1) Loan
In any bank loan is the major factor for growth. Banks provide loans to the general
public for their use and to meet their demand the amount or the level at which they credit it
differ from bank to bank and country to country.
In Finland the loan is given as per individual‘s income, how much they need to
borrow, their residence status, credit rating and history. The primary criteria for obtaining a
loan are their capacity to repay the debt.
While in India the loan is given to creditability & payment capacity of persons. For
taking a loan certain proofs are required that is background of a person his total property
value any dues pending or not, his ability to repay and one witness or the guarantor of that
individual etc.
The average interest rate of consumer is 4.83% in March 2011, in Finland the rate
was quite stable over the preceding 12 months in India the rate is 7% for 180 days.
The average interest rate on housing loan is 2.40% in March 2011 in Finland country,
where as in India it was 10 to 12%.
0
0.02
0.04
0.06
0.08
0.1
Finland India
consumer credit
housing loan
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2) Performance Of Bank
The commercial banks have made good progress over the last 5 years in India. This
can be seen through several parameters such as annual credit growth, profitability, and trend
in NPAs.
Any of the sectors main aim is to gain profit other than Non-Profit Organizations, on
the other hand they are the betterment for the society and provide satisfactory service to the
country people.
In India the progress is 30% while in Finland its 35 to 40% approx.
3) Capital Adequacy
Here the word capital adequacy means how much sufficient capital the bank is
having with it. In Finland its 14.4% Indian commercial banks have good internal capital
generation, reasonably active capital markets, and governmental shore up ensured good
capitalization for most banks during the period under study.
Where as its 14% in India at the same time high levels of public deposits ensured
most banks had a relaxed liquidity profile?
0.26
0.28
0.3
0.32
0.34
0.36
India Finland
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4) GDP
GDP, the total market value of all final goods and services produced in a country in
a given year, equal to total consumer, investment and govt. spending, plus the value of
exports, minus the value of imports.
The average GDP contribution in Finland is 3.1 while in India its 5.2.
0.138
0.14
0.142
0.144
India Finland
India
Finland
0
1
2
3
4
5
6
India Finland
2011 2011
GDP
GDP
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Present Position and Trends of Bank with India
New trends in payment and billing
The banks have adopted new trends for payment mode that‘s now automatic
payment model. At the same time bills will become e-invoices in Finland. At the end of 2012
Finland will join single euro payment area. After this, banks in Finland will no longer handle
payments with Finnish account number and payment instruments.
Not only in Finland but in India also billing and payment have become
electronically. This was the good progress for the commercial banks, like credit and debit
cards, mobile payments etc.
Consumers using online banking services can either accept or reject the proposal
on their online bank. If the consumer does nothing, the changes will take effect.
Bills go electronic
The transactions of the banks have became electronically, that‘s consumer can use
ATM services. According to a model introduced b banks, online banking consumers will
receive a billing notification only as an e -invoice on the online bank and the bank would
automatically pay the bill on the due date.
The Finnish consumer agency considers the model problematic, because online
bank codes are not in actual available to all consumers.
Banks would refuse to pay the bills of people flagged s having default on
payments. The same type of service offered to online banking customers will be offered to
those consumers who do not use online banking services
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Policies And Norms Of Banking Industry
The policies and norms of central bank of Finland and RBI are mentioned
below. Both are having its own unique characteristics.
Policies of central bank of Finland:-
1. Monetary Policy.
2. Exchange Rate Policy.
3. Foreign Reserves.
Monetary Policy
The main monetary instruments are the key interest rates. The level of key interest rates
affects market prices and macroeconomic developments. The key interest rates of the Euro
system are set by the Governing Council of the ECB which includes the Governor of the
Bank of Finland as a member. Monetary decisions are based on the Council‘s judgment at
any one time of the risks to price stability in the euro area.
Exchange Rate Policy
The primary objective of the monetary policy of the Euro system is to maintain price
stability. The Euro system has no explicit exchange rate objective. The euro floats freely in
world foreign exchange markets.
Foreign Reserves
The ECB holds foreign reserves for any possible foreign exchange operations required. At
the beginning of 1999 the national central banks (NCBs) of the euro area transferred part of
their own foreign reserve assets to the ECB. The total transfer amounted to just under EUR
40 billion, of which gold accounted for 15%.
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Opportunities In Future
It has been believed that the forthcoming debt maturities of the Finnish corporate
sector will represent a significant challenge for the Finnish banks. The absence of many
foreign players which have problems in their respective home countries will undoubtedly
exert pressure on Finnish and other Nordic banks in terms of refinancing these debt
maturities.
Although this could also represent an opportunity for some banks to pick up
good new clients, from the perspective of credit risk, banks‘ risk profiles could increase,
especially given that in some cases their credit risk concentration levels are already very
high. There is too large scope for Finnish and Indian commercial banks.
Findings
1. Banking sector has become an emerging sector over the world wide. In India loans are
easily available, even in Finland also.
2. Loan in India is given on the basis of creditability and payment capacity of persons.
3. In Finland, commercial Banks provide 4.83% as consumer credit, while compared to its
low. India is providing at 7% for 180 days.
4. Housing loan in India is 10 to 12% in March 2011 and in Finland 2.40% in March 2011.
5. Over the last 5 years, the Indian banks have made good progress. Performance of banks is
measured in different terms for in both the countries.
6. In India the criteria for performance is NPA for commercial banks, profitability was
maintained at around 15% during 2010 to 2011. While in Finland the criteria for
performance are deposits, operating profits etc.
7. Capital adequacy operating in Finland commercial bank was 14.4%. In India capital
adequacy touching to 14% as on march 31, 2011.
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Conclusion
From the above project we would like to conclude that the commercial banks have
been increased tremendously, since few years it‘s observed.
It is no doubtless saying that banks in India also boomed up. This gave new and
drastic changes in Indian economy. The contributions of commercial banks are high in GDP
there is no much difference in Finland and Indian commercial banks.
Bank is been one of the service sector which generates a huge income and its main
aim is to provide easily service available to the general public.
Loans are easily an available in both the countries; even the interest rates are not too
high for common or for middle class people to repay it.
