Country Analysis: Switzerland

The business world evolves constantly. Today’s companies are not looking to overtake the market in their home towns; they are working towards global domination. When a company decides to push their business into the International market they have an immense task on hand. One can’t visit a foreign country and say to themselves “this looks like a nice place to sell my product, let’s set up shop.” There are many aspects of a country that a business needs to look into before diving to their demise in an unknown land. Switzerland is a country with a legacy of beauty, immaculate knives and watches, and a banking industry that no one trusts more. One may think that a country is a country and there is nothing more to it. If something sells in just one store it is bound to be the next best thing country wide. This is a huge misconception, and a naïve way to do business. There are 26 separate cantons within Switzerland, with numerous separate economies, and what one may like, their neighbor may despise. As of July 2006, the Swiss population was estimated to be 7,523,934, with 68.1% being between the ages of 15 and 64 (Internationalist). All of which have different tastes, cultures, norms, and to say the least, speak a dialect of the five languages that inhabit the country. For the most part the population makes a similar salary as those in the United States. For example a person in an apprenticeship position has a salary between CHF40’000 and 80’000, and a person in lower management has a salary of CHF120’000 and 250’000 (Economy). Now one may be wondering, “What is a CHF?” Just as the ‘$’ represents the American dollar, the CHF signifies the Swiss Franc. The exchange rate for a Swiss Franc is CHF1.25 equals one American dollar (The Internationalist). The above figures would be calculated as: CHF40’000 / 1.25 = 32,000 dollars
So, CHF40’000- 80’000 = $32,000- $64,000 and CHF120’000- 200’000 = $96,000- $160,000 As a country with very low unemployment rates, these figures would tend to look pretty promising to a company interested in ‘setting up shop’ there. Though, as was stated earlier, there are an immense number of aspects that need to be considered before making the plunge.

Switzerland’s government is a Federal Republic with direct democracy. What this means is that all citizens, no matter language or region, are important to the political process. Everyone has a say in the decision making process. The country is divided into 26 cantons, and within these cantons are communes. There are currently 2,900 communes in Switzerland. The cantons are similar to our states but have their own constitutions, governments, and lawmakers. There is a basic design for the educational system, but because each canton has their own way of doing things, there are slight variations. The basic design for education in Switzerland is as follows: Preschool, Primary, Secondary I, Secondary II, Tertiary and Adult education. Preschool, also known as kindergarten, is attended by most children between the ages of five and six years of age. “Children may attend one or two years depending on the cantons” (Presence Switzerland, 1). This stage of a young child’s education is designed to get them in the habit of going to school, teaching them how to interact socially, and for them to learn to pay attention to the teacher. Primary and Secondary I is attended by all children starting at the age of seven. This stage consists of first thru sixth grade for Primary and seventh thru ninth grade for Secondary I. Children obtain their basic elementary education at these stages. From Secondary I, children have a choice for their Secondary II schooling. The choice is between apprenticeships or to continue their schooling. If they choose to do an apprenticeship, they will work for a company that will train them while still attending school one or two days a week. After completing their apprenticeship, young adults may choose to then join the work force or continue their education, such as attending a technical school. If their choice is to continue their education the schooling provided to them is preparation for a Tertiary education at a university. Switzerland is comprised of many different religions. The country is about 42% Roman Catholic, 35% Protestant, 23% a mixture of Islam, Orthodox Christian, Hindu, Buddhist, Judaism, and 11% claim no religion. The Protestants helped create Switzerland. It was the predominant religion that drew up the constitution which united the cantons. Midway through the 1900’s the Roman Catholics became the majority due to immigration. Despite the importance religion has “played in shaping Switzerland and in the ways the Swiss view themselves,” (Presence Switzerland, 1) church attendance is on the decline for many individuals.

In Switzerland, being on time is much of a concern, arriving late is considered rude shows that an individual may not be serious. Depending on what part of Switzerland one is located arriving late to a dinner party may be expected, but in other parts it may not. Described in the following are tips of do’s and don’ts while learning to do business with the Swiss. The Swiss take business matters very seriously and expect one to be well prepared, organized and direct. Getting acquainted before cracking a joke is advised, and they will not hold back if one has crossed their line of comfort. They are not ones to discuss their personal life; the Swiss are very private people. Avoid personal questions all together and they will do the same. Make sure to have plenty of business cards because the Swiss like to exchange them. Some key things to have on a business card are; ranking within the corporation, professional title in a different font, and the founding date of the corporation for which one works. Flashiness and major displays of wealth are not qualities that the Swiss look for in a business partner. They like clean cut and conservative. Also make sure that one’s shoes are in good condition because the Swiss are looking. As for body language, do not “fidget, move hands, or make sweeping gestures it is considered rude. Do not point your index finger to your head it is an insult. Do not slouch, stretch or yawn in public it is frowned upon” (Krentzel, 4). Gift giving is done if invited to a social event, such as flowers or chocolates. Gifts are also exchanged in business “after the successful conclusion of negotiations and not before” (Krentzel, 5). Never give a gift that is expensive because it may be perceived as a bribe. Also, do not give a gift such as knives because it indicated the severing of ties. Do not just give a gift if one has not received a gift.

As a country that is located within the highest elevation points of the Alps, and is completely landlocked, it is a necessity for Switzerland to have ways of communicating to the outlying areas. This is why they have numerous TV and radio stations, along with newspapers and magazines that are made to suit all different types of people. No matter what one is interested in, there is some type of media that will fulfill one’s needs. According to Switzerland Is Yours, a website designed to guide one through the life of a Swiss national; there are at least six TV stations available everywhere, along with many local stations in each canton. Regional radio stations are a must for each separate language area, but radio stations are also easy to pick up from neighboring countries. Besides the music stations there are more than forty local stations that cater to the many communities. If a tourist is interested in listening in on the radio, Swiss Radio International broadcasts news in English at meal times on one of the short waves, and can also be found on one of the Swiss cable stations. (SwissWorld) The tourism sector is one of Switzerland’s specialties. The Grandhotel Victoria Jungfrau has an award winning newly refurbished spa. Some of the cheapest rooms are (£338) a night. However, if you own shares in the company you can receive 20% off when booking a room. This has led many Swiss investors to buy shares in the group resulting in over inflation of the stock price (Moneyweek).

Switzerland is a country that is very involved in all types of Research and Development. Besides their highly respected banking sector, the Swiss also pride themselves on the brain power of citizens (Swiss World). They feel that with few natural resources, their population’s ability to innovate will keep them in competition with other countries in the race for innovation and globalization. As workers and members of society Swiss nationals pride themselves on their intelligence. This may be one of the reasons why Switzerland is a sought out international research location. Heinrich Rohrer, a Swiss Novel laureate, once said “you can develop yourself here, because you are surrounded by first-rate people at every level.” Einstein studied and lectured at the Federal Institutes of Technology, and IBM has had a European Laboratory in Rüschlikon, near Zurich since 1956. (SwissWorld) Having agriculture as one of the country’s main exports, it is to no surprise that Switzerland has the Swiss Forum for International Agricultural Research (SFIAR). The SFIAR has members that are non-governmental, farmers’ organizations as well as public agencies, and private individuals. Their goals are to help the exchange of information among different organizations and other interested parties. It tries to compile and make Swiss resources more accessible as well as regularly informing the public about current projects and getting people involved. Though the government is not a member or partner of the forum, SFIAR works with it closely to help shape political decisions about the agricultural sector and its research. (Research) Another important area of R & D for the Swiss is the Pharmaceutical sector. It was written, by Elizabeth Mbitha-Schmid, that 40% of all Swiss private sector expenditures were spent on R & D. This sector is a major employer, with about 28,000 employees, and creating close to 50% of the wealth in the Basel region, which is in the northwest. Switzerland’s statutory patent protection lasts 20 years from the application date of the patent, which are a few years longer than the patent protections in the United States. (Mbitha) Although Switzerland is not currently a member of the European Union, they are still one of its major partners when it comes to trading, and has the most bilateral agreements of any other country (Europa). The wants of the Swiss to be a dominate player in the global trade game it is necessary for them to have organizations to help them. Two such organizations are Osec-Business Network Switzerland and economiesuisse. Osec is the official promoter of Swiss foreign trade, and help companies develop international business relations (Osec). economiesuisse has numerous members that aim to create an optimal economic environment for Swiss business while preserving entrepreneurial freedom for all businesses. One of their main goals is to help Switzerland remain one of the most competitive economies in the world, with the help of over 30,000 businesses employing 1.5 million people (Economy). While Switzerland does not have many natural resources to draw from they have to import raw materials into the country for manufacturing and production. This may seem to hinder production in Switzerland, but it does not because once the product is made it is readily available to be shipped anywhere in the world. To help with trade “Switzerland is a signatory to 26 different free trade agreements and is a member of the World Trade Organization,” (Location).

Switzerland’s infrastructure has positioned them as one of the best countries to move product in, out of, and through. Switzerland is in the heart of Europe; therefore, they can transit goods by air “to all major European cities in less than 2 hours” (Swiss-American Chamber of Commerce). While Switzerland is located in the middle of Europe they have also designed their highways and railways for optimum efficiency. In particular, the Swiss have optimized their railways to be of use even with time, temperature sensitive and perishable goods. Since truck traffic at night is legal and costly, a company should make the most out of Switzerland’s low cost rail transit. Utilizing their dense infrastructure would not only open up Europe, but it would help open up the rest of the world. Switzerland is not just a starting point for the European market it is the starting point for the world market.

Switzerland is becoming a center for Human Resource Management. Many companies in Switzerland and the EU go through Swiss staffing agencies due to their employer-friendly attitude. The education level of workers is high with many having advanced degrees. The Swiss workweek is about 42 hours and business loyalty is high. Switzerland has great diversity of the population. “Approximately 65% of the people speak Swiss-German dialects, about 18% French, 10% Italian, and 1% Romansch” (Cyberhaven). However, written communication is in German and many speak English along with a subsequent language. This diversity can add to an employer’s existing culture to enhance ideas and productivity. Working with the Swiss union is very different than working with them here. Unlike the United States where strikes can make a company fail and become hostile, in Switzerland they are almost non-existent. In 1973 “workers of the metal industry renounced the strike as a bargaining tool” (Cyberhaven) and others followed. This agreement with the companies allows free communication with the company and their employees over financial well-being and job continuance.

Obtaining financial resources in Switzerland can be easy to do. While Switzerland maybe a small country, their financial institutions control over 400 billion dollars in assets making it the 3rd largest financial center in the world. Swiss banks also still back their money with gold; therefore its buying power is not drastically affected by inflation. Due to the fact that the Swiss have such control over a large amount of money and their financial institutions are known through out the world as the best, they attract many investors from around the world. The Swiss government will give companies tax advantages if they house corporate facilities within the country. Since their tax rates are favorable with other countries this makes Switzerland an optimal place to locate. Most people know about Swiss Army watches and knives and the secretive banking system, but their economy is made up of more than that. Switzerland remains a nation that prides itself on neutrality, thriving and constant for a market economy based on international trade and banking. There is a very low unemployment rate at 3.3% (2006 est.) and has a low inflation rate at 1.2% (2006 est.) (Switzerland). “The economy is heavily dependent on foreign guest workers, which represents approximately 20% of the labor force” (Infoplease). The labor force is highly qualified and skilled. “The main areas include micro-technology, hi-tech, biotechnology and pharmaceuticals, as well as banking and insurance know-how” (SwissWorld). The country has a GDP of $252.9 billion (2006 est.), which is larger than most Western European economies (Switzerland). At the moment there is a big push in biotech industries in Switzerland and all over Europe. As the 21st edition of Ernst & Young's "Beyond Borders: The Global Biotechnology Report of 2007 shows, the global biotechnology sector registered unprecedented growth on practically all fronts in 2006 (Biotech). With big growth in the biotech industries come some negative aspects. This sector’s stage is considered to be in the maturity process. With that come issues of increased demands of investors and a growing number of regulatory requirements (Biotech). Also, pricing pressures will become more important concerns in the respective markets for those biotech companies that are growing and becoming increasingly global in their orientation (Biotech). There was also the mention earlier of investors over inflating a stock price so they could get a discount at an exclusive hotel. There are many different ways that the Swiss determine tariffs on agricultural goods. Here are some of them given by the World Trade Organization: Single rate: Tariffs are cut to a single rate for all products. Theoretically, this is the simplest outcome. In practice it is mainly used in regional free trade agreements where the final tariff rate is zero, or a low tariff, for trade within the group. Flat-rate percentage reductions: The same percentage reduction for all products, no matter whether the starting tariff is high or low. For example, all tariffs cut by 25% in equal steps over five years. Uruguay Round approach: The 1986-94 Uruguay Round negotiations in agriculture produced an agreement for developed countries to cut tariffs on agricultural products by an average of 36% over six years (6% per year) with a minimum of 15% on each product for the period. Harmonizing reductions: These are designed principally to make steeper cuts on higher tariffs, bringing the final tariffs closer together (to “harmonize” the rates). The Swiss Formula: A special case of a Harmonizing formula tariff cut (WTO). When it comes to the U.S. exporting to Switzerland, there is a simple average tariff of 34.3% on agricultural goods and a 2.3% on manufactured goods (Ustr). “Due to high tariffs on certain agricultural products and preferential tariff-rates for other countries, Switzerland is a relatively difficult market for many U.S. agricultural products to enter” (Ustr). When it comes to subsidies, Switzerland has some of the highest in the world in the agricultural sector; “the OECD estimates that Switzerland subsidizes more than 70% of its agriculture, compared with 35% in the European Union” (Ustr). They are currently looking at reducing this because of budget constraints. Bonded warehouses are available at over 150 facilities. These facilities allow material to come into the country that are still in transit, staged and then moved to their final destination without customs and tariffs. Also at these bonded facilities small manipulations may be done to the product before transferring on. The Swiss also have tough labeling when it comes to goods that are bio-engineered. The products have to be certified by the Federal Food Safety Office and the manufacturer “must submit detailed information concerning the modifications” (Ustr). A large obstacle for bio-engineered agricultural products is the result of policies created by farmers and major food retailers to not buy these products. The most notable are food, feed, and seed derived from biotechnology (Ustr). As one can see from the discussed aspects of Switzerland, countries are very different, yet somewhat similar. These similarities can be, and are often, taken advantage which can lead to large financial losses if a company does not do proper research. Practicing business in a country such as Switzerland comes off a little intimidating, with available information boasting the Swiss’ brain power, and lust for being an international competitor. Though, it is still possible with patience and the want to be in compliance or cahoots with such a thriving and globally domineering country such as Switzerland.

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