Case Finland and Nokia
Case Finland and Nokia
1. How was Finland as a nation able to move from a sleepy economy to one of
the most competitive nations in the world by the end of the 1990s?
The Finnish economy was historically driven by the wealth of the country’s
natural resource endowment, e.g. the pulp and paper cluster had emerged
based on the large forests. The cluster had achieved a leading role in the
world. Finland became an important supplier of manufactured products to the
Soviet Union, Sweden, Germany, United States.
Finland constantly developed its following the models of its Nordic neighbors
to invest highly in social welfare and public infrastructure. GDP growth rates
were stable, investment rates were high, and total factor productivity growth
outperformed many other European countries.
One of the main reasons for the country to succeed was the government
regulations. Taxes and public spending were high. Macroeconomic policy
featured a fixed nominal exchange rate, centralized wage bargaining.
Government expenditure was rising. Finland focused on quality public
education and university system.
The country joined the European Free Trade Association (EFTA) in 60s,
European Economic Area (EEA) and European Union in 90s. Finland was
known for fiscal stability and was the only Nordic country introducing the Euro
in the first wave.
With the opening towards the west, the Finnish economy attracted significant
amounts of inward FDI. New kinds of investment syndicates were established
where the public sector invested alongside venture capitalists.
Emerging demand for Finnish technology from global market would be the
greatest reason why mobile communication industry emerged in Finland and
made Finland a world-leading nation in mobile communication. In 80s
technology research organizations were founded, which became the main
implementers of technology policy.
The Finnish telephone network was never monopolized by the state. The
threat of nationalization, had stimulated private operators to constantly
upgrade their technology. Finnish operators, who were quite advanced
technologically, engaged actively in R&D cooperation with equipment
manufacturers. Private telephone operators were up for administrative
cooperation and joint actions with each other, combining their R&D and
marketing efforts. The introduction of the Nordic Mobile Telephone (NMT)
network by Finland, Norway and Sweden in 60s made the Nordic region the
world’s largest single mobile market at the time.
Investments also played an important role as a big part of all venture capital
in Finland was directed towards telecommunications.
Lastly, Finns had been early adopters of mobile phones with a big percentage
of population owning mobile phones. The world’s first graphic-based Internet
browser was developed in Finland in 2001. Finland was recognized as a
location for highly skilled IT professionals.
3. How did the Finnish firm Nokia become the world leader in mobile handsets?
How did its home base in Finland influence Nokia’s success?
Overall growth rates were declining, and major export markets appeared
weak, the demand for the products fell. The telecommunications cluster
especially was experiencing a severe downturn. All mobile phone
manufacturers were facing intense competition in 2001, and one of the main
challenges facing Nokia in 2001 was the evolution of standards. Nokia had
seen its revenue and profits fall. Given the large role of Nokia and the cluster
in Finland’s economy, concerns about the level of exposure to one company
and one cluster were becoming bigger.
VOLVO CASE
1. Why has Volvo spread its value chain for heavy trucks around the
world?
Their value chain and internal logistics should add more value to Volvo
truck because of its relatively low cost
It allows to integration with their suppliers and used internal resources
to assembly the truck
Volvo value chain adds more value to their whole operation system and
brand name
the operation and manufacture factories are always located inside one
zone, which is comfortable
How can you explain why certain activities are performed in certain
locations? (You may want to begin with Exhibit 5).
Certain activities are performed in certain locations because of labor force, needed
resources of location, infrastructure development level, estimated production
volume, etc. For this reason plants for producing drive-train components, engine
factories, assembly plants are located in certain places.
having operational system that integrated into all the major drive-train
components and having own distributors throughout Europe
4. What steps has Volvo taken towards establishing itself in the United
States?
6. What are the implications of the Volvo Truck case for how countries
should attract foreign investment?
COSTA RICA
Former economy of Costa Rica was based on agriculture, textiles and tourism.
However, the country emphasized public and private investment in manufacturing
and infrastructure in order to overcome Costa Rica’s dependence on imports and
price fluctuations in its traditional commodity export products. As president Figures
mentioned that country needed a national strategy that moved beyond cheap labor
and exploitation of the natural resources. He wanted to compete based on
productivity, efficiency, and technology to become a leading Latin American
economy. The aim was to attract industries with higher value, allowing Costa Ricans
to increase their standard of living and promote the development of techological
cluster.
4. Given Intel’s decision, what steps should the Costa Rican government
take to further develop the cluster?
Intel mentioned minuses of Costa Rica which are bureaucracy and small size of the
country. However, Costa Rica remain corruption free country and its size allow
country to move faster and make changes more easily.
1. Intel was concerned about the availability of the midlevel technicians (labor)
that an ATP facility require. Intel would need technicians trained specifically
for the semiconductor industry. This would involve the introduction of new
technical training programs in vocational schools and universities and the
adaptation of existing programs to better fit the company’s needs.
2. Costa Rican industry had not been energy intensive, and every industrial
consumer was charged the same electricity rate, regardless of its size. The
industrial price of electricity in Costa Rica varied between $0.07 and $0.09
per kilowatt-hour, while Mexico had reportedly offered Intel a rate of $0.025.
Intel need a constant supply of high-quality electricity for its plant.
RWANDA
2. Identify the steps that the Government of National Unity took between 1994
and 2000 to restore the economy? How would you evaluate the initial
economic development strategy?
3. Identify and evaluate President Kagame’s economic strategy for the country
from 2000 through 2011.
1. Assets
mineral resources
developed agriculture
tea, coffee, and bananas
Unique climate and growing conditions for a range of products
More or less developed infrastructure
Liabilities
Poor neighbors
Inflation
Price instability
2. Between 1995 and 2000, the Rwandan economy recovered quickly
In 1994, the economy shrunk by 50%, inflation was 64%, and per capita income fell
to $143;
The personal income tax and corporate income tax rates were reduced from 50% in
1997 to 40% by 1999;
In the long term, the government aims to transform Rwanda from a low-income
agriculture-based economy to a knowledge-based, service-oriented economy
with a middle-income status by 2020.
How they attracted FDI Government provided all conditions for foreign
investments, especially developing privatization policy
5 Recommendations
SINGAPORE
Asset: Production resources, Location port development, Good English, Foreign
investment
Liabilities: Poor infrastructure, Labour force not enough skilled workers, High
unemployment
History:
In 17 century, Singapore was an important trading center and port with policy of duty
free trade
By the fourteenth century Chinese immigrants had established a small community on the
island, and the named it Singapura, meaning “Lion City”.
It Was earning Revenue as a center for trade.
Singapore developed a classic entrepôt economy ( in includes shipping, communications,
banking, insurance, and infrastructure) which funneled exports and imports to a
surrounding region.
During World War II, Singapore was Britain’s principal naval and air base in Asia
(военно-морская и авиационная база)
1963, Singapore and Malaya formed Federation of Malaysia
Singapore GDP declined by 4% in the next year after the Indonesia agent bombed a
Singaporean hotel
1965 Malaysia ejected Singapore
1.
Singapore became an independent republic in 1965.
Lee Kuan Yew became Singapore’s first prime minister and his People’s Action Party was
winning all seats in parliament.
New policy about creating Singaporean identity :
Chinese 62% of population, Indians 16%, Malays 14%, others 8%
5 major languages and 20 dialects
They set high taxes for private owners of cars in order to avert air pollution
Alarm for taxi if it is overspeeding
Fines for littering, smoking in public places
Long hair men was prohibited among government workers and tourists
To create jobs and provide housing, government was created two boards:
1. Housing Development Board, to build 10000 low and mid- income housing units per year
2. Economic Development Board, to support job creation by attracting investment
With a limited base of local companies, Singapore welcomed foreign direct investment:
They decreased the taxes in order to Decrease cost position of the companies and attract
new investments
GDP began to growth
2.-3 The “Next Lap” plan plotted long-term social and economic goals:
improving infrastructure,
expanding educational opportunities,
creating an advisory body of Singaporeans living abroad,
building research institutes to support companies expanding to world markets
Goal: achieving a U.S.-level per-capita standard of living by 2030
The “Thinking Schools, Learning Nation” program was launched to transform the
education system to foster creativity, independent thinking, and problem solving.
Research centers and advanced training programs were launched in a number of areas
Government also aimed to improve the conditions for local companies
Developed clusters: Petrochemical. By 2008, Singapore was one of the top three oil refining
centers in the world. The petrochemical industry accounted for 11.2% of Singaporean industrial
output and was the third largest manufacturing sector in Singapore,
financial services industry contributed about 13% to Singapore’s GDP in 2008
In logistics, the ports of Singapore remained in a leading global position. By 2008, Singapore
remained the largest container port in the world
Information technology accounted for 3.6% of GDP while electronics manufacturing accounted
for 4.7% of GDP and employed more than 90,000 workers in 2008
Biopharmaceuticals, Tourism, education
4 Competetive advantages:
• Connected to the global economy – open to trade & investments
• Dynamic and business-friendly business environment
• World-class infrastructure
• Good and improving education system
• Efficient public services
• Trustworthy and reliable political system
• Focused cluster development efforts
Recommendations:
Continue with policy to support the market-driven process towards tighter integration into the
Asian economy
Revive ASEAN around a competitiveness agenda where collaboration creates direct
benefits for participants
Focus on productivity growth in existing and emerging sectors
Strengthening cluster linkages to enable companies to develop highly specialized skills
that have significant value-added
ESTONIA
Case questions
Assets:
Similarities:
Chile case
Chile PROFILE
bordered 3 countries: Peru to the north, Bolivia to the northeast, and Argentina to the east.
The capital was Santiago, located near the middle of the country Chile had long been considered the
economic star of Latin America. Medium income country
Trade:
long-delayed membership in the NAFTA(wanted to join but USA was always postponing it)
had signed an association agreement with Mercosur in 1996 but was not a full member.
Assets:
world’s largest reserves of copper (about one-fifth of the world total) and the 2nd largest
reserves of lithium. mineral rich-iron ore, coal, gold,
and silver.
Liabilities:
autonomy, no democracy
History :
Chile had conflicts with Peru and Bolivia throughout the 19th century over nitrate deposits in
the north. These led to the War of the Pacific in 1879 during which Chile seized several mineral-
rich provinces in the north, increasing the size of the country cutting off Bolivia’s access to the
sea.
have been no official immigration limits or targeting for more than a century.
Health standards in Chile were among the highest in Latin America
Before Pinochet Chile had a long history of military intervention in political life.
UNIONS:
Latin America Free Trade Area (LAFTA) which included Argentina, Brazil, Chile, Mexico,
Paraguay, Peru, and Uruguay.
Costa Rica, El Salvador, Honduras, Guatemala, and Nicaragua formed the Central American
Common Market (CACM)
The Andean Group was created in 1969, made up of Bolivia, Chile (which left in 1976),
Colombia, Ecuador, and Peru; Venezuela joined in 1973.
Chile signed the Enterprise for the Americas Initiative (EAI) in October 1990. The EAI
established a goal of tariff-free trade from “Alaska to the Andes” to be called the “Free Trade
Area of the Americas” (FTAA), but no concrete steps had been taken to fulfill this
commitment.
NAFTA Free Trade Agreement between the United States, Canada, and Mexico became effective on
January 1, 1994. It was a free-trade area, meaning that goods would eventually pass tariff-free across
members’ borders, but member countries did not have a common external tariff. Instead, rules of origin
regulations specified which goods qualified for preferential treatment and denied benefits to goods
where significant value had been added in non-member countries. elimination of non-tariff barriers,
coordination of antitrust policies, and dispute resolution procedures.
Mercosur The Southern Common Market, commonly known as Mercosur, was established with the
Treaty of AsunciÛn in 1991. The agreement created a customs union, with the goal of eventually
creating a common market that would allow for the free movement of goods, capital, labor, and
services among its four member countries—Argentina, Brazil, Paraguay, and Uruguay. Mercosur was an
unbalanced group—the economies of Brazil and Argentina dwarfed those of Paraguay and Uruguay.
common external tariff (CET) to imports from countries outside the agreement
Chile’s trade policy was an important part of its development strategy. Membership in NAFTA and
association with Mercosur would allow the country to serve as a bridge that connected the two trade
blocks. Unfortunately, after five years of fruitless negotiations, NAFTA membership was still well in the
future.
Full membership in Mercosur offered an interesting alternative. Chile’s medium-income neighbors were
more likely to buy sophisticated products and services from Chilean firms than were the NAFTA
countries. But the danger was that the block would lead to trade diversion, not trade creation. If Chile
joined Mercosur as a full member, the NAFTA and Mercosur might well grow farther apart and the
opportunity for hemisphere-wide trade could disappear for decades. It would be difficult, or perhaps
impossible, to become a full member of both groups because of Mercosur’s goal of eliminating all
internal documentation requirements by subjecting goods imported from outside the block to a
common external tariff. The final option was to remain outside both blocks. Chile’s strategy of
negotiating bilateral freetrade deals with any receptive country had served it well. Joining any regional
trade block involved ceding a great deal of sovereignty over economic policy. Few countries could match
Chile’s record of unilateral liberalization, and subsequent export growth. This might continue, especially
if future global negotiations, such as the Uruguay Round, led to further worldwide tariff reductions.
QUESTION
Compare Estonia’s success with that of Chile. What are the similarities? What are the differences?
Which country faced greater challenges
Similarity:
Differences:
Overview
CALIFORNIA ECONOMY
1. What explain the emergence of California as the dominant wine cluster location in US and one of
the world’s leaders.
There are several factors that allowed California Wine Cluster to emerge from ambiguity to significant
player leaving ahead France, Italy and other European countries.
1. The main factor is the Viticulture and Ecology Department at University of California at
Davis, which we established during the epidemic of phylloxera. After the establishment of this
department California reached high quality level, were invited to World’s wine Fair at France and
outperformed Ohio state, the leading wine producer at that times. This department helped to
introduce several new technologies such as mechanical harvesting, drip irrigation, and field
grafting.
2. Science and technology played an important role in eliminating the quality gap between European
and California winemakers. European vintners had relied heavily on traditional methods, whereas
California winemakers began using quantitative analysis and new techniques to produce higher
quality, more consistent wines. Larger wineries had established in-house research staffs of their
own with state-of-the-art laboratories.
3. California had The Wine Institute lobbied state and federal agencies to cancel the ban on
alcoholic beverages.
4. The development of other industries in California that helped promote wine consumption.
Tourism
High end restaurants
Wine tours
Spectator – leading wine publication, promotion medium
Television programs to promote health benefits of wine
5. Development of other clusters lead to high demand and increased rivalry
6. Endowments such as best combination of climate, sunlight, topography, and water for wine
grapes, cool ocean air to pass creating ideal growing temperatures.
7. For a wine to be signed as “California,” 100% of the grapes must have been sourced from within
the California. The threshold for other states was 85%.
8. Low level of taxes - California’s table wine excise tax was the lowest at the amount of only $0.04
per bottle. Bank of America, had developed specialized financing offerings for grape growers and
wine producers, including long-term loans.
2. Why have exports of France’s wine cluster stagnated relative to the U.S., Chile, and Australia?
1. Most European countries and France, suffered from over production. The EU had taken several
steps to reduce wine output in through an array of subsidies. New vineyard planting was
prohibited and re-planting of existing vineyards was allowed only every eight years. Therefore,
the overall acreage in France was declining. In addition, wine were removed from the open
market due to high alcohol consumption. EU’s tight control over yields and wine production
prevented and reduced the incentives to experiment with new varietals and wine types.
2. Labor cost in France exceeded Clifornia’s
AUSTRALIA WINE
Early History
After World War I - trade treatment by Britain for Australia.
Increasing exports of Australian wine against Portugal and Spain.
1929 - A Wine Overseas Marketing Board was created, consisting of representatives from
the government, wineries, distilleries, and winegrowers, to regulate exports between
Australia and Britain.
1930 – opening of promotional office in London. Export growth continued until the
outbreak of World War II.
1930s, wine and winemaking began to attract attention in the educational community. In
1936, an oenology (наука о виноделии) course was established at the Roseworthy
Agricultural College.
1930s - the first production of white table wines
Post-World War II
Change in habits: Australia moved from beer-drinking country and started to consume
more wines.
Table wines became popular in homes and restaurants.
Wine consumption shifted from fortified wines to white table wines in the 1950s and to
red table wines in the 1960s.
Production of stainless steel tank technology from Germany.
In 1955, the Australian Wine Research Institute was established by the government.