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GBE Project Report
Analysis of the Sweden
Newsprint Industry

SUBMITTED TO: SUBMITTED BY:
Prof. Pradip Chakrabarty Rashi Singh (053033)
SWEDEN BUSINESS ENVIRONMENT
Political Environment: * Form of government: Constitutional monarchy; Capital: Stockholm * The constitution, dating from 1809 and revised in 1975, is based on the following four fundamental laws: the Instrument of Government, the Act of Succession, the Freedom of the Press Act, and the Riksdag (Parliament) Act. * The reigning monarch is the head of state but exerts no political power; the responsibilities of the monarch are ceremonial only. * The Riksdag, a unicameral parliament elected by the people for four-year terms, is the foundation for the democratic exercise of power through the cabinet. The prime minister is nominated by the speaker of the Riksdag after consultations with party leaders and must be approved for office through a vote of the Riksdag. * Ordinary general elections to the Swedish Parliament are held every fourth year. A party must receive at least 4% of the votes in the entire country or 12% in a single electoral district to qualify for any seats in Parliament. * Prominent parties include three non-socialist parties, the Alliance—the Moderate Party (formerly the Conservative Party), the Centre Party, and the Liberal Party—and two socialist parties, the Red-Greens—the Swedish Social Democratic Workers’ Party (SAP; commonly called the Social Democratic Labour Party) and the Left Party (former Communist Party). * The last Swedish general election was held on 19 September 2010 in which Alliance lost its absolute majority in the parliament but continued to govern as a minority government.

Economic Environment: * Sweden has one of the most globalized and competitive economies today. With an annual GDP growth rate of 5.5% in 2010, the economy of Sweden is a developed diverse economy, aided by timber, hydropower and iron ore. * The main industries include motor vehicles, telecommunications, pharmaceuticals, industrial machines, precision equipments, chemical goods, home goods and appliances, forestry, iron and steel. * Sweden has the second highest total tax revenue behind Denmark, as a share of the country's income. * Sweden is an export-oriented mixed economy featuring a modern distribution system, excellent internal and external communications, and a skilled labor force. * According to Swedish Statistics, unemployment in May 2011 was 7.9% in the general population and 25.9% amongst 15-25 year olds. * World Economic Forum 2010 competitiveness index ranks Sweden 2nd most competitive, behind Switzerland. * Sweden rejected the Euro in a referendum in 2003, and Sweden maintains its own currency, the Swedish krona (SEK). * The largest trade flows are with Germany, United States, Norway, United Kingdom, Denmark and Finland.

Social and Cultural Environment: * Sweden has one of the highest standards of living in the world. Sweden is a forward thinking country where people have very egalitarian notions of society. Understanding Swedish society and culture is essential to successfully do business in Sweden. * Swedes are known for their open but direct style of communication. Directness is highly valued in business discussions, but direct criticism should be diplomatic and directed towards aspects of the problem and not towards anyone in particular. * Swedish culture places a high importance on notions of egalitarianism. Consensus and compromise permeate almost every aspect of Swedish society. Decision-making in business can therefore be a slow process since everyone has a right to contribute and decisions will tend to be made only once everyone is in agreement * The national character of Swedes is often described as shy, quiet and reserved. As a result, Swedes are often mistaken for being cold and unfriendly but once you get to know them they are extremely warm and hospitable. They simply value modest and reserved behaviour. * The small population of Sweden has a high respect for natural spaces and their love of nature is reflected in Swedish society such as in their environmental awareness and unique architecture. It is also evident at work where Swedes ensure that they take time off to escape from the high-paced business life to a more serene and peaceful.

Technological Environment: * In the 18th century Sweden's scientific revolution took off. Many of the companies founded by early pioneers are still remain major international brands. Alfred Nobel invented dynamite and instituted the Nobel Prizes. Lars Magnus Ericsson started the company bearing his name, Ericsson, still one of the largest telecom companies in the world. Jonas Wenström was an early pioneer in alternating current and is along with Serbian inventor Tesla credited as one of the inventors of the three-phase electrical system. * The traditional engineering industry is still a major source of Swedish inventions, but pharmaceuticals, electronics and other high-tech industries are gaining ground. * A large portion of the Swedish economy is to this day based on the export of technical inventions, and many large multinational corporations from Sweden have their origins in the ingenuity of Swedish inventors * Swedish inventors hold a total of 33,523 patents in the United States as of 2007, according to the United States Patent and Trademark Office. As a nation, only ten other countries hold more patents than Sweden.

Country Risk Tier (CRT):
The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three categories of risk: Economic, Political and Financial System Risk.
Sweden is a CRT-1 country with very low levels of risk across all three categories. Sweden’s economy, in part due to its heavy reliance on trade, was hit very hard by the global slowdown. The net effect of this has been a slight economic contraction in 2008 and a contraction of nearly 5% for 2009. However, the Swedish economy is currently recovering faster (real GDP expected to grow by more than 3% in 2010) than previously expected.

Economic Risk: Very low
Extensive forests, rich iron ore deposits and hydroelectric power are the natural resources which, through the application of technology and efficient organization, have enabled Sweden to become a leading producing and exporting nation. Total trade in Sweden accounts for more than half of gross domestic product (GDP).
Reliance on external trade has made Sweden’s economy vulnerable to the current global conditions and thus the pace of the Sweden’s economic recovery will be dictated by the pace of the global recovery.
Political Risk: Very Low
Sweden is a member of the European Union (EU) however, by not joining European Exchange Rate Mechanism (ERM II) Sweden has been able to avoid adopting the euro and all Swedish political parties have agreed not to adopt the Euro without a public referendum.
After easing monetary policy through 2009 The Riksbank (the Swedish Central Bank) has been slowly raising interest rates in 2010. This raising of rates is expected to continue through 2011.
Financial System Risk: Very Low
The Swedish insurance industry is regulated by the Financial Supervisory Authority (FSA).

Sweden Foreign Investment
Sweden has some of the most liberal foreign investment laws in the world. Sweden's corporate income tax rate of 28%, one of the lowest in Europe, makes Sweden an attractive target of foreign investors. It is open to nearly all foreign investment and allows 100% foreign ownership, except in certain transportation sectors (air and maritime) and in arms manufacture. For the period 1988–1990, Sweden was ranked third of 140 countries on UNCTAD's Inward FDI Potential Index, after the United States and Canada. For the period 1988–2000, Sweden was number two, behind only the United States.
Inward FDI flow was only $3.7 billion in 1993, but had reached $19.5 billion by 1998. FDI inflows peaked in 1999 at $60.8 billion, then moderated to $23.4 billion in 2000. The world economic slowdown and the collapse of the dot-com bubble reduced FDI inflows to $12.7 billion in 2001, and an estimated $11.5 billion in 2002. By 2001, cumulative FDI in Sweden totaled $155 billion, the 10th-highest total in the world. From 1998 to 2002, the 10 largest sources of inward FDI were, in order, the United Kingdom, Finland, Germany, the United States, Norway, Belgium, the Netherlands, Denmark, Canada, and Switzerland.
Sweden's outward FDI also rose steadily during the 1990s, from $1.4 billion in 1993 to a peak of $41.7 billion in 2000, ahead of inward FDI for the year by $18.3 billion. Outward FDI dropped to $6.2 billion in 2001 but rose to $11.3 billion in 2002. The countries with the largest net Swedish investment are Finland, the United States, Ireland, Norway, and the United Kingdom

The Newsprint Industry
Sweden is the fourth-largest producer of newsprint in the world, accounting for 7 percent of world newsprint production in 1998. Around 68% of available land is forested in Sweden. The country is Europe’s largest exporter of pulp, and accounts for around 8% of global production. Sweden has many internationally important pulp and paper companies, such as STORA, SCA, Modo, Metsa Serla, Sodra Cell, Holmen Paper etc. Some of these companies are major producers of newsprint. Building upon Sweden’s natural resources of forests and hydro power, the pulp and paper industry has been, and still is, very important to the economy. The industry is located in areas scattered over the whole country, but to a lesser extent in the larger cities. Another significant feature is that the industry exports about 80% of its total production, mostly to other members of the European Union.

Different methods of newsprint production
There are two major techniques used in newsprint production. One is based on virgin pulp and the other on recycled newsprint. Until now, newsprint production from virgin pulp was much more common in Sweden than production from recycled paper, even though the companies all use locally generated paper for recycling and also import large quantities.
Virgin pulp
Sweden has an international comparative advantage in producing virgin pulp. Such production is very electricity-intensive and demands a lot of raw wood as input. Since about 50 percent of the Sweden is covered by forests, there is a large stock of raw material.
Pulp for recycled newsprint
During recent years it has become more and more common to produce newsprint by using recycled pulp as input. Today, Sweden uses 1.5 million tonnes of paper material for recycling, of which 40 percent is imported, mainly from Germany. Availability of newsprint for recycling is limited in Sweden so in this area, Sweden does not have a comparative advantage over most other countries. To be able to use large quantities of recycled paper, inputs must be transported from the continent and then finally the end product has to be transported back.
Under these circumstances, one would expect Swedish companies to use their knowledge and tradition to invest in production on the European continent and thereby use recycled paper in situ without the unnecessary transportation. On the other hand, there is already a large paper production capacity in Sweden in terms of existing paper machines and infrastructure facilities, with no or low alternative value.

Newspapers
Sweden has 78 ‘daily’ newspapers (since many newspapers in Sweden are published every other day, this includes newspapers that are published 4–7 times a week) published in 63 different places of issue. There are 15 areas with two competing local newspapers. If we include weeklies and papers published 2–3 times a week, the number of newspapers in Sweden almost doubles (154). Sweden has over 12 newspapers (4–7 issues per week) per million people; the EU average figure is just under 3 per million people.
In international terms, the high number of national as well as local and regional weeklies is unusual. The large number of these papers is almost entirely attributable to the fact that they are eligible for press subsidies. In the Finnish market, for example (which has no such subsidy), there are as many weeklies as in Sweden, but they are all local, none of them national.
Another particular feature of the Swedish newspaper market is the small number of national papers. Only three papers are ‘truly’ national: the two evening tabloids, Aftonbladet And Expressen , and the business tabloid Dagens Industri. Two additional newspapers are generally referred to as national: the morning papers Dagens Nyheter And Svenska Dagbladet, but they would more accurately be described as Stockholm papers in terms of their audience (both papers have around 65 per cent of their circulation in the Stockholm area). Both papers brand themselves as national, however, and their editorial focus is national rather than local to Stockholm.
Revenue streams for newspapers
Newspaper readership is very high in Sweden. Morning papers reach around 75 per cent of the population daily (compared to 45 per cent in the UK) and their readership has stayed pretty constant since 1979. Morning newspapers are largely sold by subscription; the paper is delivered to the subscriber’s home early in the morning, through a national delivery system. This is the norm, although the (evening) tabloid newspapers are sold by single-copy sales, as in the UK.
For subscribed newspapers, two thirds of their revenues come from advertising (advertisers) and one third from circulation (audiences). For the evening papers, which are sold by single copy, the revenue structure is almost exactly the reverse, with 25 per cent from advertising and 75 per cent from circulation. Advertisers favor those newspapers with the greatest household coverage in their target market; the larger the household coverage, the more attractive the newspapers. Total circulation is of secondary importance. High circulation can even be a drawback if it is sparsely distributed. For single-copy sold newspapers however, total circulation counts.

CONCLUSION
From the study of the Sweden business environment, I would like to conclude the following: * Sweden is one of the world's biggest beneficiaries of foreign investment, with robust international relationships, a skilled workforce, low corporate tax rates and a near absence of bureaucracy. * Sweden is ranked 14th out of 183 economies in the ‘ease of doing business’ and 39th in ‘starting a business’. Economy | Procedures | Time(days) | Cost(% of income per capita) | Paid-in Min.capital(% of income per capita) | Sweden | 3 | 15 | 0.6 | 14.7 | * Low economic risk, low political risk, low financial risk. It is ranked 6th in the country risk rankings. * Newspaper readership is very high in Sweden. Morning papers reach around 75 per cent of the population daily (compared to 45 per cent in the UK) and their readership has stayed pretty constant since 1979. * Most Swedish dailies have enjoyed at least 115 years of uninterrupted publication.