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Country Commercial Guides
FY 2000: Finland
CHAPTER V: LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT
Best Prospects for Non-Agricultural Goods and Services
1. Franchising (FRA) 2. Electronic Components (ELC) 3. Computers and Peripherals (CPT) 4. Computer Software (CSF) 5. Telecommunications Services and Equipment (TES,TEL) 6. Travel and Tourism Services (TRA) 7. Aircraft and Parts (AIR) 8. Medical Equipment (MED) 9. Pollution Control Equipment (POL)Rank of sector: 1
Name of sector: FRANCHISING (FRA)Narrative: The total market for franchising in Finland was estimated at $1.9 billion in 1998. According to a survey made by the Finnish Franchise Association franchising sales increased by 15 percent in 1998. As a result there are about 150 franchise chains in Finland.
Local trade sources predict that the sales volume will increase at an annual rate of 15 percent. The increase is explained by expansion of franchising as a business concept -- franchising involves lower risks for companies expanding their operations. The highest number of chains are in retailing and in services. However, the largest increase in sales volume is predicted for food and beverage franchising, which has expanded rapidly in Finland over the past few years. The fast food hamburger market is shared by three large operators, McDonald's, Hesburger and Carrols.
McDonald's market share is almost 50 percent (48), Hesburger (27 percent), and Carrols (19 percent) are domestic franchise chains. These restaurants have been in Finland for about 30 years. Besides the traditional hamburger (McDonald's) and pizza (Pizza Hut)chains, there are market opportunities for U.S. fast food restaurants such as salad bars, tex-mex food and coffee bars.
There are about ten U.S. franchise chains now operating in Finland: Avis, Budget, Esso Snack & Shop, Glass-Tech, Hertz, Homecare, Novus (car windows), McDonald's, PC-Super-Store and Pizza Hut. Many typical U.S. franchise operations are still unknown in Finland. In the coming years, the following franchise operations are expected to offer good possibilities in the Finnish market: print shops, all kinds of automotive services; tires, mufflers etc., dry cleaning, one hour photo shops and packaging stores.
The future for franchising in Finland looks promising. It is evident that franchising as a whole will increase during the coming years. This projection is based on statistics as well as recent positive economic developments.
Data Table -- USD Millions 1997 1998 1999 A. Total market size 1,700 1,900 2,200 B. Total sales by local firms 1,250 1,400 1,550 C. Foreign sales by local firms 0 0 0 D. Sales by foreign owned firms 450 500 650 E. Sales by U.S. owned firms 400 450 550 F. Exchange rate:$1=FIM 5.3Note: The above statistics are unofficial estimates.Rank of sector: 2
Name of sector: ELECTRONIC COMPONENTS (ELC)Narrative: Electronic components and contract manufacturing represent 34 percent of Finland's total electronic market. There are three major external suppliers of electronic components into Finland, the United States with about 20 percent import market share, followed by Japan (18 percent) and Germany (13 percent). U.S. suppliers are strong in semi-conductors, which are viewed by Finns as the cutting edge. Japanese suppliers are strong in bulk components, where price plays an important role. Germany supplies mainly electro-mechanical components to the Finnish market.
Demand for electronic components is, to a large degree, linked to the success of the Finnish electrical and electronics industry, which continues to be one of the fastest developing industry sectors. State-of-the-art technology, on-time delivery and responsive customer service are factors, which have accounted for the competitive advantages that the United States enjoys over the Japanese. As the total market for electronic components is expected to increase at a rate of about 20 percent within the next three years, U.S. new-to-market companies have good opportunities in the Finnish market.
The major end-user of electronic components in Finland is Nokia Oy, the flagship of the Finnish electronics industry, which alone buys half of all electronic components. About 30 electrical and electronics companies, such as Fujitsu Computer Systems buy a third. The remaining 15-20 percent of the market is divided between several hundred smaller companies.
As a member of the European Union (EU), Finland is subject to EU import duties for electronic components outside the EU countries. However, the United States has negotiated an ITA agreement, which will in the future abolish import duties on certain electronic components.
*Data Table -- In USD Millions 1997 1998 1999 A. Total market size 2,660 3,000 3,715 B. Total local production 1,400 1,810 2,170 C. Total exports 220 400 530 D. Total imports 1,480 1,590 2,075 E. Imports from the U.S. 300 320 415 F. Exchange used: $1=FIM 5.3Note: the Federation of Finnish Electrical and Electronics Industry provided 1997 and 1998 figures. 1999 statistics are unofficial estimates.*Contract manufacturing is included in the statistics.
Rank of sector: 3
Name of sector: COMPUTERS AND PERIPHERALS (CPT)Finland's population of 5.1 million people comprises a highly sophisticated market for computer hardware and software. This is illustrated by the fact that Finland has the highest number of computers per capita connected to the Internet in the world. Presently, about 40 percent of Finnish homes have computers and about 60 percent of the population have access to the Internet either at home, at work, or through a local institution, such as a library.
Finland's total market for computers was estimated at $1,8 billion in 1998. With about a 30 percent import market share, the United States is Finland's leading external source of computers and peripherals. There are about 4,200 local computer companies in Finland. 3,700 companies have less than five employees and the five largest companies cover about 60 percent of the industry sector's sales volume. In 1998, 443,000 PC's were sold in Finland, an increase of about 20 percent over the previous year. The number of business PC's per 100 white-collar workers in Finland is 60, a figure above the European average.
Presently Compaq is the number one supplier of PC's covering 19 percent market share followed by IBM (14 percent), MikroMikko (Fujitsu/ICL) 11 percent and Hewlett-Packard (10 percent). Competition in this sector comes mainly from the already established American suppliers in the local market. Computer hardware used in the Finnish market has changed substantially in the last few years. PC's lead the market with 65 percent market share, followed by workstations (35 percent). Total PC sales reached FIM 3.6 billion (USD 679 million) in Finland in 1998. Local sources forecast an average annual growth rate of about 20 percent in the industry sector over the next three years.
In 1998, about 110,000 microcomputers were manufactured/assembled in Finland. FUJITSU ICL Computers Oy (owned by British ICL) dominates domestic production of microcomputers. The company manufactures MikroMikko computers in Espoo and exports about 80 percent of the production. Other companies which are represented in domestic production and/or assembly include Mikrolog Oy, POMI and Dacco Trading. Mikrolog bought the Osborne brand name from the U.S. parent in 1986. Mikrolog has an assembly plant of PC's, mainly for business use in Karkkila, about 30 miles northwest of Helsinki.
Mobile computing (PC's + cellular phones), a presently used technology, is considered to be the future for Finland's computer industry. Declining prices of computer peripherals has resulted in increased sales of high-end products as well as standard products. For example, sales of top end color laser printers are booming in Finland. Demand for computers and peripherals in Russia and the Baltic countries have begun to grow, providing distributors in Finland with excellent future market potential.
Data Table -- USD Millions 1997 1998 1999 A. Total market size 1,455 1,845 1,920 B. Total local production 1,110 1,180 1,190 C. Total exports 1,025 1,025 1,130 D. Total imports 1,370 1,690 1,860 E. Imports from the U.S. 460 510 560 F. Exchange rate $1=FIM 5.3Note: The above statistics are unofficial estimates.Rank of sector: 4
Name of sector: COMPUTER SOFTWARE (CSF)Narrative: Finland's software market is estimated at about USD 590 million in 1999. The United States, with an import market share of about 90 percent, is the number one supplier of standard, non-customized application software. Competition for new-to-market computer software companies is strong and comes from previously established U.S. companies, such as Microsoft, Novell, Lotus, Borland etc.
Finland has 350 local producers of computer software, mainly custom-made business software. Finns are experts in wireless software technologies and multimedia software. There are also Finnish CAD/CAM/CAE producers who play an important role in the local software market as well as Internet and new media companies. About 120 Finnish companies export applications software mainly to the United Kingdom (25%), the United States (14%), the Baltic countries (13%) and Sweden (11%).
The trend in the Finnish computer market, as elsewhere, is toward downsizing. An increasing number of companies are converting from mainframes to smaller computers with network capabilities. For this reason, sales of software for mainframes have declined, while the use of microcomputer software has increased. The total software market is expected to increase by about 10-12 percent during the next three years. The electronic industry, in particular, is expected to increase investments in smaller, user friendly computers, thus increasing market potential for computer software.
Special applications software and specialized, high-tech software such as CAD/CAM products for PC's, information management data base products, software based on embedded systems and real time systems, vertical and horizontal applications for business, government and local government intranets and ERP (Enterprise Resource Planning) solutions have excellent market potential in Finland. Due to changes in recent years in Russia and the Baltic countries, Finland also serves as an excellent gateway to these emerging markets.
Data Table -- USD Millions 1997 1998 1999 A. Total market size 452 520 594 B. Total local production 180 207 238 C. Total exports 90 103 122 D. Total imports 362 416 478 E. Imports from the U.S. 250 290 330 F. Exchange rate:$1=FIM 5.3Note: The above statistics are unofficial estimatesRank of sector: 5
Name of sector: TELECOMMUNICATIONS SERVICES AND EQUIPMENT (TEL, TES)Narrative: Finland's telecommunications market is one of the most developed in Europe and arguably one of the most developed anywhere in the world. In Finland, telecommunications operations have been opened up gradually to competition since 1985. The liberalization process has not been as difficult as in many other countries because a part of the telecommunications operators have always been privately owned.
The fact that Finland was among the first to open its telecommunications market has resulted in one of the lowest tariffs today. Both the volume of telephone lines and the volume of telephones are among the densest in the world. The network is one hundred percent digitalized. Finland is presently the world's largest user of mobile telephones (65 percent penetration).
Data transmission speeds are among the fastest in the world. Finland was the first country in Europe to take the ATM technology into commercial use and the first country in Europe to grant licenses for third generation mobile networks. Finland also has the highest number of computers connected to the Internet per capita in the world. The Finnish government has invested substantially in training and education, especially in the field of information technology in order to meet the needs of the country's fast growing ICT industry.
There are two key players in Finland's telecom services: the state-owned Sonera Corporation (previously Telecom Finland) and the 45 privately owned local telephone companies operating under the Finnet Group. Both Sonera Corporation and the private telecom companies have subsidiaries and sister companies, which are involved in the provision of data, mobile and advanced technology services. There are also a number of secondary companies, strongest of which is Telia Finland Oy, owned by Swedish state-owned Telia. Other network operators in Finland are Global One Communications Ltd, Telia One, and U.S. RSL COM Finland Ltd, which provide network and other services for their contracting customers.
Headquartered in Finland, Nokia is the world leader in wireless and wireline telecommunications, the world's leading mobile phone supplier as well as top supplier of fixed telecom networks and services. Nokia's 1998 sales volume was $14.8 billion. The company has manufacturing on three continents in over 10 countries, research and development centers on four continents and employs more than 47,000 people worldwide.
A major factor behind Finland's highly advanced telecommunications technology has been strong competition in Finland's liberal telecommunications market, especially between the service providers. This has had a beneficial impact on telecommunications' know-how, in terms of the variety of telecommunications services available. Due to high technical standards and the liberal telecommunications market, Finland also serves as an excellent test market for development of new services. U.S. companies wishing to enter the Baltic markets and Russia (especially St. Petersburg) should view Finland as a natural gateway and Finnish companies as experienced partners in any such effort.
Table 1: Telecommunications Services Data Table -- USD Millions 1997 1998 1999 A. Total sales 3,010 3,610 4,330 B. Sales by local firms 2,800 3,360 4,030 C. Exports by local firms 280 340 408 D. Sales by foreign-owned firms 490 590 708 E. Sales by U.S.-owned firms 27 34 42 F. Exchange rate:$1=FIM 5.3Note: The above statistics are unofficial estimates.Table 2: Telecommunications Equipment Data Table -- USD Millions 1997 1998 1999 A. Total market size 2,680 2,880 3,110 B. Total local production 6,200 7,100 8,170 C. Total exports 3,960 4,750 5,700 D. Total imports 440 530 640 E. Total imports from U.S. 44 53 64 F. Exchange rate:$1=FIM 5.3
Rank of sector: 6
Name of sector: TRAVEL AND TOURISM SERVICES (TRA)Narrative: The United States continues to be the main long-haul destination for Finns. In 1998 there were over 85,000 Finns traveling to the United States, a 3.7 percent increase from 1997. The increase in the number of Finns travelling abroad is a result of the stable Finnish economy and a growing interest in foreign travel. This has favored long-haul travel and travel to Mediterranean destinations.
New York, Florida and California continue to be the best prospects for the U.S. travel industry. First time travelers, families with children and senior citizens favor Florida, whereas younger people and experienced travelers favor the West Coast. New York, Chicago, Boston, Los Angeles and Atlanta are the most important destinations for Finnish business people.
Although Finns generally favor "sun and sand" and city destinations, an increasing number of travelers are looking for activity holidays. Golf, fishing, diving, sailing, skiing and many other activities have become popular for Finns traveling abroad.
The United States competes mainly with Southeastern Asia. Thailand, China, India, Australia, Hong Kong, and the Near East (Bahrain, United Arab Emirates) have gained in popularity, due to competitive package tours organized to these destinations.
There are no restrictions on the Finnish foreign travel. From October 1, 1991, Finland has been included in the visa waiver pilot program for visits up to 90 days in length. This has made it considerably easier for Finns to travel to the United States.
Finnair, the national air carrier, is the only airline based in and operating flights from Finland to the United States. Out of the U.S. air carriers, Delta Air Lines has a sales office in Finland, America West and Continental have a representative, Northwest Airlines is represented by KLM, American and TWA are represented through sales offices in Stockholm, Sweden.
Data Table -- USD Millions 1997 1998 1999 A. Total travel 4,243 4,040 4,105 B. Domestic travel 4,537 4,630 4,725 C. Incoming travel* 1,884 1,300 1,365 D. Foreign travel* 2,178 1,890 1,985 E. Travel to the U.S.* 76 94 113 F. Exchange rate: $1=FIM 5.3* Source: Bank of Finland, Balance of Payments (travel).
Domestic travel and 1999 figures are unofficial estimatesRank of sector: 7
Name of sector AIRCRAFT AND PARTS (AIR)Narrative: The United States is the most important supplier of aircraft and parts in Finland with an import market share of over 80 percent. The U.S. share is based on Boeing's (McDonnell Douglas) market position in Finland both in civil and military aviation.
The civilian market for aircraft and parts is dominated by the Finnair group, the national airline. The Finnair fleet as of 1998 consisted of 57 aircraft of which 41 were McDonnell Douglas planes. The average age of Finnair's aircraft is 10.9 years. Finnair is going to replace its medium-range fleet of 37 aircraft DC-9's and MD-80's with the Airbus 320 series, as the new aircraft type for its European traffic. Twelve Airbus aircraft have been ordered and the contract also includes options of an additional 24. Delivery started in the beginning of 1999. Finnair has also bought five Boeing 757's for holiday traffic between Finland and the Mediterranean destinations.
The total market for aircraft and parts is estimated to increase annually by about 15-20 percent. The increase is explained by the 64 F/A-18 fighters contracted by the Finnish Air Force and Boeing. The value of the Hornet purchase is estimated at $3.35 billion during 1995 - 2002. Seven Hornet trainers have been delivered by Boeing (McDonnell Douglas). Fifty-seven fighters will be partly assembled in Finland by Finavitec as part of the offset program. Thirty-nine fighters have been assembled by Finavitec during 1996 - June, 1999 and the program will be completed in August, 2000.
In 1998, there were a total of 1,346 aircraft in Finland: 650 airplanes, 383 gliders, 84 helicopters and about 229 other light airplanes. Demand for small aircraft, such as air taxis, air ambulances and service planes will continue in the future.
Data Table - USD Millions 1997 1998 1999 A. Total market size 720 787 875 B. Total local production 160 170 205 C. Total exports 60 70 30 D. Total imports 620 687 700 E. Imports from the U.S. 590 632 650 F. Exchange rate:$1=FIM 5.3Note: The above statistics are unofficial estimates.Rank of sector: 8
Name of sector: MEDICAL EQUIPMENT (MED)Narrative: The medical sector is still recovering from severe depression that Finland experienced through the first half of the 1990's. Due to budget cuts, the operating costs of Finnish hospitals have been reduced. The major hospital procurement is mainly replacing older equipment and buying some new equipment, e.g. radiology and tele-medicine equipment.
The United States is the most important external supplier of medical equipment in Finland with an import market share of about 30 percent, followed by Germany, Sweden, United Kingdom and Japan, in respective order. High-quality and technically sophisticated medical equipment have the best market potential in Finland, especially equipment which increases efficiency and reduces occupancy rates in hospitals. Products such as patient monitoring systems, mini invasive surgery (MIS), day surgery equipment, magnetic resonance imaging (MRI) equipment, video endoscopes, digital image processing, and picture archiving have the best sales potential in Finland. Within the EU all medical trade is duty free. Import duties are collected from production coming from non-EU countries. The duty fluctuates significantly according to the specific product, ranging from 5-12 percent for medical equipment.
Local production was about $945 million in 1998, consisting mainly of dental equipment, anesthesia monitors, specialized x-ray equipment, and chemical analyzers. Local production and imports do not overlap, as they do not compete with each other. About 85 percent of local production is exported because of the small domestic market size.
Data Table -- USD Millions 1997 1998 1999 A. Total market size 674 755 831 B. Total local production* 835 945 1,040 C. Total exports 347 396 436 D. Total imports 186 206 227 E. Imports from the U.S. 54 56 59 F. Exchange rate:$1=FIM 5.3Source: The Association for Finnish Healthcare Industries and Finnish Customs.
*includes In Vitro Diagnostics. 1999 figures are unofficial estimatesRank of sector: 9
Name of sector: POLLUTION CONTROL EQUIPMENT (POL)Narrative: The total market for Finland's environmental technologies sector, including air pollution control equipment, water and waste water management, waste treatment and recycling was estimated at $520 million in 1998. With an import market share of about 30 percent, Germany is Finland's number one supplier, followed by Sweden (12 percent) and the United States (10 percent).
Environmental technology has become a new area of high tech production in Finland. Finland has also helped its eastern neighbors solve their environmental problems by using technology transfer. In Finland, both individuals and the corporate management are highly conscious of environmental protection and preservation of the present high standard. Finnish capabilities in environmental technology are high, albeit expensive, due to high labor and manufacturing overhead costs. Finnish companies have expertise in waste water treatment and are considered one of the world leaders in this field. Another area of local expertise is oil spill control. Finns are looking for high technology and quality from U.S. suppliers interested in entering the Finnish market.
Demand for Finnish air pollution control equipment is strong due to the increasing environmental concerns among the surrounding countries (i.e. the Kola Peninsula, St. Petersburg and the Baltic countries). The pulp and paper industry represents about 30 percent of Finland's exports, and is the main end-user of air pollution control equipment. Given the U.S. reputation for providing top quality air pollution control equipment, their products are in strong demand.
Finland's ascension to the European Union in January, 1995, the 1994 Waste Act, plus amendments in 1997 and especially the Finnish National Waste Plan 2005 are expected to increase investments in Finland, which in turn will offer foreign companies increased business opportunities in this market. The new waste law is stricter in the waste management sector, which is expected to help U.S. companies since they already have a considerable share of the Finnish waste management market. The best sales prospects for U.S. companies are within recycling of household and community waste. Other best prospects include potential to supply equipment such as composting, anaerobic decomposting, sorting machines etc. as well as cooperation with Finnish companies in large projects. Another area for U.S. companies to consider is the emerging markets of the Baltic countries and Russia's working through Finland.
Data Table -- USD Millions 1997 1998 1999 A. Total market size 495 520 550 B. Total local production 280 295 310 C. Total exports 180 190 200 D. Total imports 395 415 440 E. Imports from the U.S. 40 42 44 F. Exchange rate:$1=FIM 5.3Note: The above statistics are unofficial estimates.Best Prospects for Agricultural Products
Finland's geographical proximity to the Baltic States and Russia allows Finland to serve as a major gateway to these regions. The economic upswing, more stable banking sector, and improving standards of living in the Baltic States, along with the development of the Russian market place, has generated increased demand for consumer goods (and tourism). Thus, Finland's access to these rapidly emerging adjacent markets is vital for firms interested in this region for trade development.
High Priority - Beverages: wine, micro-brewery beer; Snack foods: health snacks, dried fruits and nuts, corn chips; Convenience foods: frozen juices, TexMex items; Pet food for dogs and cats; Preserved: Canned fruits and vegetables; Frozen ready-made foods.
Medium Priority - Fresh fruits/vegetables: apples, grapes, pears, avocados, cherries, food grains: rice; Convenience foods: microwavable items like popcorn; Seafood: salmon, frozen crayfish (Swedish style), white fish roe.
Due to fluctuation in the exchange rate the following values may be somewhat below actual.
Exchange rate used in 1997: USD1 = FIM 5.1944
Exchange rate used in 1998: USD1 = FIM 5.3415For current data on agricultural trade prospects with Finland, the reader is referred to the following Internet web site: http://www.usemb.se/Agriculture/Index.html. This site is maintained by the USDA office in Stockholm, which has regional responsibility for Sweden, Finland, Norway, Latvia and Estonia. Its content includes an analytical overview of agricultural marketing opportunities in the region, marketing activities of possible interest to U.S. firms, an array of exporter/importer services and links to sites containing a detailed current breakdown of individual country imports/exports of agricultural products subdivided into several product categories (bulk, intermediate, consumer-oriented, forestry and fishery).
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Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.
