Sun: An Overview of Norway’s Steady and Wealthy Economy

Norway

Norway, located in northern Europe, is renowned to be one of the steadiest and secure economies in the world. It shares its border with Sweden to the east, Russia towards the Far East and Finland shares its borders with Norway to the north. The country although small, with a total area of 148,746 square miles just above 4.8 million, has tremendous potential. Oslo, the capital, is the largest city and a major financial and commercial hub providing all amenities that other European cities provide to its 568,809 population. Norway gained independence on May 17, 1905 and the government is elected democratically although monarchy is also inherited.

Norway is also the 5th wealthiest country in the world with a GDP per capita standing at an exceptional figure of US$ 55,200 and the average GNP per capita is the highest in the whole world. The economy has grown at an outstanding pace ever since the industrial era kicked off. The country also has vast oil deposits and other natural resources which were discovered in the 1970s and capitalized upon. The country is operated through a mixed economy with a certain level of state influence.

Norway is also famously known as the Land of the Midnight Sun. Moreover its beautiful countryside, humanitarian work, culture and most importantly its shipping industry have played a crucial role in promoting Norway throughout Europe and the world. In terms of human development, it is rated the highest and in 2007 was titled as the most peaceful and serene country in the world by the Global Peace Index. It is also one of the major financial donors to the United Nations, and also participates in international missions in Kosovo, Afghanistan and Sudan.

Country Attractiveness

Norway has tremendous potential for growth in almost all industries especially shipping, fishing, oil, food processing, mining and paper products to name a few. It indulges in promoting a liberal environment for businesses to operate in. The oil sector, mainly the offshore oil industry has attracted major investments in the past and would certainly continue to do so in the future. The revenue generated through oil is used by Norway to develop its social welfare system which is considered one of the best in the world. The country is in the initial stages of developing its manufacturing and industrial base therefore there are vast opportunities for investors mainly in the financial services sector. Norway has enjoyed free trade with the EU despite being a member which highlights the importance EU gives to the nation state. Moreover, Norway has also adopted many EU directives within its own economy.

The petroleum sector is by far the most important for the Norwegian economy. Norway is the world’s third-largest gas exporter and fifth-largest oil exporter. All of the produced gas is exported whilst hydropower caters to all of Norway’s electricity requirements. Offshore exploration and production are also boosting economic activities in the country.

We will now analyze the country’s attractiveness in terms of its environmental factors, socio-cultural environment, economic and regulatory environment supported by various figures.

Environmental Factors

The environment of Norway is one of the most diverse of those found in Europe. It is characterized through a rough shoreline, broken by vast fjords and thousands of islands. The coastline extends over an enormous 2,500 kilometers. It shares its 2,542 kilometer land border Sweden, Finland and Russia. To the west and south, Norway is bordered by the Norwegian Sea providing abundance of fish and sea food.

In terms of area, Norway is larger than Germany with 385,252 square kilometers of land. The terrain in the country is mostly high terrain with mountains including various other natural features like glaciers, fjords, caves, waterfalls and lush forestry making Norway an ideal tourist destination. The south-west region of the country has less rugged terrain and this area is particularly important to agriculture with the percentage of arable land in the country at a mere 3%.

Norway experiences four distinct seasons with less inland precipitation and colder winters. Each year, the western and southern parts of Norway receive more rainfall than the other areas. The lowlands around Oslo have the warmest summers but also cold weather and snowfall in the winters. Part of the country, due to its high altitude, encounters around 20 hours of daylight each day.

Norway is rich in natural resources as well. It has massive oil and gas reserves along with hydropower, fish, forests, nickel, zinc, iron ore, copper, titanium, lead and pyrites. However, environmentally the country does face certain issues. Water and air pollution are major problems which through acid rains adversely affect lakes and the coastline which inevitably threatens fish stocks.

Norway is a geographically diverse and ideally located country. With its position adjacent to active sea and air routes in the North Atlantic its topography provides lots of incentive for investment and guarantees growth and stability.

Socio-Cultural Environment

The population of Norway stood at around 4.8 million. Mostly the population is ethnic Norwegians but the central and northern parts of Norway see the occupation of the Sami people. Other minorities include Jews, Forest Finns, Gypsies and other immigrants. Immigrants account for almost half of Norway’s population growth. The largest immigrant groups are Poles, Pakistanis, Swedes and Iraqi’s.

The country has a population growth rate of 0.88% according to 2009 statistics with a modest birth and death rate. Infant mortality stands at 3.1 deaths/1000 live birth, life expectancy on average is 79.25 years and literacy rates are 100%.

Most of the Norwegians are affiliated with the Church of Norway. They register with the church at the time of baptism. Christian denominations account for 4.5% of the population where as Islam is the largest non-Christian religion in Norway with 1.5% of the population. Other religions with a less than 1% share include Judaism and Hinduism. Moreover 5% of the population has no connection to any religion. Thus, Atheism has a 6% share in the religions of Norway.

Norway has two official language forms; Bokmal is used by more than 50% of the population. Nynorsk is the other major language and is used by 50% of the population and is taught in schools as a written language. Other languages include the Sami and Gypsies Romani language. Moreover immigrants have brought in their own languages to such as Polish, Arabic, and Urdu etc whilst English remains as a widely spoken language.

Education in Norway is virtually free. The government spends 7.2% of its GDP towards education. The education structure can be separated into three divisions, Elementary school (age 6-13), Lower secondary school (age 13-16) and upper secondary school (16-19). The higher education is granted through seven universities, five specialized colleges and 25 university colleges. The literacy rate of Norway stands at a perfect 100%.

Culture in Norway holds immense importance. Norwegian culture is very closely linked to the country’s history as well as geography. Norwegians have an egalitarian outlook towards society and justice and fairness is practiced throughout. Environmental and animal protection is also given importance. Seafood and farming traditions form the bases of the Norwegian cuisine. Different types of seafood and dairy products for e.g. the Lefse a potato flatbread are very popular. Cinema and music are also very popular and renowned Norwegian artists often perform at dedicated theatres. Many Norwegian authors have won the Nobel Prize in Literature highlighting its importance. Moreover architecture and art are also notable in Norway. Many buildings are made of wood. Some of the notable national traditions and celebrations include May 17th the Constitution of Norway and Jonsok, a valued holiday celebrated on the 24th of June.

Understanding Local customers, Local cultures and Buyer Behavior

The Norwegian consumer is a smart, well informed individual who would select products and services very carefully. The Consumer Council of Norway exists to provide consumer protection. It helps consumers increase their influence in society. Customers carefully evaluate the quality of products and services, what resources were used to produce them and how much production affected the environment. Buyer behavior also majorly depends on the perceptions a consumer has about a certain organization. The corporate image plays a crucial role. The perceived quality, value and experience that a consumer hopes to derive from a product are also very important. The consumer will be willing to pay a little higher for better quality. This is because Norwegian income per capita and its renowned standards of living are one of the highest in the entire world, thus, consumers are selective and quality is given priority. Other factors affecting the consumer buyer behavior include customer loyalty, complaint handling and off course the price and its worth in terms of quality.

Economic Environment

The economy of Norway has shown healthy growth rates since the start of the industrial era with shipping forming the backbone of the country. Shipping along with the abundance of other natural resources has fueled growth in the country. The country prides itself with a very high standard of living and a well integrated welfare structure.

As stated earlier, the Norwegian economy is a mixed economy where the free market mechanism and the government function together in an efficient and effective manner. The state controls the important industries such as oil and gas. These are controlled through major government ventures.

The country has a variety of natural resources which include oil, gas, hydropower, fish, forests and various minerals. The petroleum industry is the most important one as it accounts for 50% of exports and 30% state revenue. It is the seventh largest oil and third largest gas producer in the world.

According to 2008 estimates the Norwegian economy has a GDP of US$ 256.5 billion (purchasing power parity) and a GDP real growth rate of 1.8%.  Norway is also the 5th wealthiest country in the world with a GDP per capita standing at an exceptional figure of US$ 55,200 and the average GNP per capita is the highest in the world. Agriculture contributes 2.4% to GDP whilst industry and services contribute 40.7% and 56.8% respectively. The unemployment rate is at 2.6% which is lower than many other economies around the world. Investments in 2008 equaled 20.3% of GDP. The Norwegian budget had a surplus of US$86.7 billion. Towards the financial side, the inflation rate stood at 3.6% still lower than many other economies, central bank discount rate was 2.5% and the market value of publically traded shares was US$142.5 billion. Norway is a net external creditor and reserves of foreign exchange amounted to US$ 60.84 billion in 2006 a figure which has risen since then. Therefore, even though the world economic crisis has affected the Norwegian economy, it is still holding its position as a relatively stable economy and one of the world’s best economies.

Norway’s major agricultural products include beef, veal, fish and pork the different types of meat and wheat, milk, and barley. Industrially, the economy is thriving with major industries like petroleum and gas, food processing, shipbuilding, pulp and paper products, metals, chemicals, timber, mining, textiles and fishing doing very well. Industrial production growth rates also remained positive at 0.2%.

In the international trade arena, Norway has a relatively good position. Its exports worth US$ 177.6 billion exceeded imports US$ 93.21 billion by US$ 84.4 showing a surplus in the current account in 2008. Major export commodities include petroleum and petroleum products, machinery and equipment, metals, chemicals, ships and fish to the UK, Germany, Netherlands, France, Sweden and the USA. Imports on the other end are mainly of machinery and equipment, chemicals, metals and certain food items imported mainly from Sweden, Germany, UK, Denmark, China, USA and Canada.

In the transport and infrastructure sector the Norwegian economy is doing equally well. The country has state-of-the-art airport infrastructure at Oslo and other major cities, a well organized road network of almost 93000 kilometers and decent railway infrastructure. The Norwegian merchant fleet is the 15th largest in the world. The fleet has a total of 668 vessels which frequent its port facilities at Bergen, Borg Haven, Haugesund, Maaloy, Mongstad, Narvik, Oslo and Sture.

However, since the last decade, Norway has been pursuing local and foreign investors to invest in mainland industries to further promote growth. In addition to this, small business growth and development is also being provided with varied incentives from both local and national governments.

In 2007, the Norwegian economy grew by 6% mainly due to increased consumer demand, however, this is expected to fall in 2008 and 2009 given the world economic recession but will inevitably pick up after 2010 according to speculators. Private households in Norway spend almost 50 Euros per year on household expenditure therefore the market is pretty vibrant and has tremendous potential. Since the country has a very diverse climate and topography, the markets that exist in various parts are very diverse. However, most Norwegians consumers are willing to pay more for ethical and healthy products.

In the international arena, Norway has adopted a very protective policy towards its local producers. It protects them through high import tariffs, quotas and other barriers to trade especially the agricultural sector. Tariffs on industrial goods are low, between 3-6%. Imports are subjected to Value Added Tax which is 25%. Norwegian companies are also establishing their image in foreign markets whilst multinationals are growing in the Norwegian market. Thus, competition does exist in many industries and barriers to entry are also prevalent in major industries such as oil, gas and fishing. Moreover, Norway is also part of the World Trade Organization (WTO), Organization for Economic Co-operation and Development (OECD), European Economic Area (EEA) and party to the Kyoto Protocol and Washington Convention. This further provides market access.

Regulatory Environment

The Norwegian regulatory environment is well-established. Through its history, Norway inherited the Monarchy system which is still in place but a parliamentary system of government is also in place. The Constitution of Norway dissects power into three categories of government, the executive, legislative and judiciary. The Royal Family has seen the responsibilities of the Monarch become more official. He formally dissolves and elects governments, functions as the High Protector of the Church of Norway, Commander-in-Chief of the Defense Force of Norway, represents Norway during state visits and holds meetings with prominent political, industrial and religious figures.

The Prime Minister is part of the Council of State which he heads. The Council of State is also made up of other ministers for different categories. The King has government meetings every Friday and approves government decisions which are decided by the Prime Minister.

The Norwegian parliament is the Storting which consists of 169 members elected from 19 counties. It administers all the legislative decisions, laws, regulations and procedures.

The Supreme Court which is also known as the Courts of Justice of Norway is the last category of the government. It is made up of 18 permanent judges who are headed by a chief justice. Moreover appellate, district and city courts and conciliation councils also exist.

Country Evaluation

Norway has one of the world’s most stable and safe economies with a generally receptive market. With so much to offer and with the abundance of resources, Norway, is set to further grow and develop and establish its mark in several world markets. We will further evaluate the country based on the following SWOT analysis.

Strengths

The biggest strength of Norway is no doubt the fact that it has one of the highest purchasing power parities in the world. The country is very technologically savvy with people purchasing cell phones, computers and using the internet extensively. It ranks 5th in terms of the penetration of personal computers in households and 64% of all Norwegians have cell phones. The small population enables the government to control and manage the economy effectively. The government is fair and protection is guaranteed to minorities. Intellectual property rights are protected. The country has a state-of-the-art telecommunications infrastructure. Its strengths also include the abundance of oil and gas reserves along with other natural resources. These include petroleum, natural gas, copper, lead, iron ore, zinc, titanium, pyrites, nickel, timber and fish which are available in abundance and the Norwegian government has been swift in exploiting this strength it possesses. The country is also investing heavily in research and development to find solutions to its economic problems. Dedicated teams are working to reduce emissions, pollution, save energy etc. Norway’s strength also lies in its location, situated amongst key air and sea routes give it a comparative advantage that other European countries do not possess. Lastly, the high standard of living which was achieved through state-of-the-art products, services and infrastructure can also be classified as a major strength for Norway.

Weaknesses

The small size of the population provides little incentive for investors since they believe it limits market size. The country has a very high cost of living. It has a very diverse landscape which causes many communication and growth problems especially since the population is dispersed. The country has also not been able to expand its manufacturing and industrial base so that it can export more products and services to developing markets such as India and China. Another weakness is that the country relies heavily on petroleum and natural gas as a major source of revenue. Since these are non-renewable resources, the country needs to look for alternatives and reduce dependence on these as sources of revenue for the country.

Opportunities

Norway provides immense opportunities for both local and foreign investors. Norway has seen a healthy growth and stability in its economy over the last decade and its citizens enjoy a good quality of life and a high standard of living. Returns for investments are guaranteed and intellectual property rights are also safeguarded. The population is growing at a healthy pace and the influx of immigrants plays a major role in this growth. Therefore opportunities for investment do exist wherever quality is high. The country can invite foreign conglomerates and create strategic alliances with key partners. It can also engage in mergers and joint ventures to capture increased market shares. The EU could prove to be an ideal partner if such endeavors are undertaken. The Middle Eastern countries such as Qatar, Bahrain and Kuwait who are rich can also be approached as their financial backbones are very strong. The lack of trade barriers due to the government’s policies are also beneficial and could boost trade.

Threats

The only threats that might exist for Norway include the depletion of natural resources but the country is investing extensively in research and development activities to overcome these problems. Environmental degradation and the chances of terrorist activities are also seen as a major threat to the economy. Competition in the form of powerful multinationals is also dealt by the stringent policies of the government. Competitors in the retailing and oil and gas industries are far well equipped and have a strong financial backing to storm their way into the Norwegian economy and be a threat to local companies. Moreover, the world recession is going to adversely affect the country if steps aren’t taken to curtail its affects into the economy. The economy is predicted to slow down in 2009 but critics argue that its affects would be minimal.

Conclusion

Thus, to conclude, Norway is one of the world’s most favorite economies to function in and provides opportunities for companies from almost all industries. Its ravishing beauty, from the splendid fjords to the lush green forests is commendable. The rich culture and tradition that Norway possesses in almost all fields from theatre to architecture are extremely precious assets for the nation and it holds its pride within them. Its regulatory infrastructure is one of the simplest and best in the world with favorable regulations for civilians, businesses and investors. It provides excellent telecommunication and transport facilities complimented by an abundant supply of energy, a superior waste and water management system. With the economy performing at above satisfactory rates, there is no reason for any investor to have doubts about the country. It provides a decent growth rate, up-to-date infrastructure and top-notch resources to support activities. Although start-up costs might be high the returns are positive and growth is also guaranteed. With its bright economic indicators there are no doubts that Norway will soon recover from the world recession and be back on track by 2011.

References

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Sun: An Overview of Norway’s Steady and Wealthy Economy. (2018, Aug 20). Retrieved from https://phdessay.com/international-management-essay/

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