Table of Contents

Chapter1. Organizational readiness to internationalize ............................................................................. 1

1.1 Field of activity, short history of the company and its current position on the domestic and
international market ................................................................................................................................. 1
1.2 Important figures ................................................................................................................................ 3
1.3 The company’s mission ....................................................................................................................... 4
1.4 Turnover and main products .............................................................................................................. 4
1.5 SWOT analysis ..................................................................................................................................... 5
1.6 Corporate Strategy of S.C. Farmec S.A. Cluj-Napoca ' ....................................................................... 6
1.7 Organizational culture........................................................................................................................ 7
1.8 Justification of the product range that was chosen for export .......................................................... 8
Chapter 2. Assessment of Foreign Market Opportunities ...................................................................... 10
I. Austria ............................................................................................................................................. 10
II. Denmark .......................................................................................................................................... 13
III. Sweden ............................................................................................................................................ 16
IV. Norway ............................................................................................................................................ 20
V. Poland .............................................................................................................................................. 23
VI. Croatia ............................................................................................................................................. 27
Chapter 3. Market industry potential and firm potential share ............................................................... 30
Chapter 4. Market entry mode .................................................................................................................. 30
Chapter1. Organizational readiness to internationalize

1.1 Field of activity, short history of the company and its current position
on the domestic and international market

Company 'S.C.Farmec S.A. Cluj-Napoca is a symbol of cosmetics in Romania, after

about 60 years of existence, being the leader of the Romanian cosmetics market and a 'high
potential player on the international stage.

If we take into consideration the fact that most brands from Romania have disappeared from the
market in the last 20 years because of the new stronger companies, there is a totally opposite
situation with Farmec Company, which has grown exponentially over the years to become,
nowadays, one of the most known beauty product.

The story began in 1889 in Budapest in the Molnar Moser laboratory . After 54 years , in
1943 in Cluj-Napoca is founded a new laboratory named Mol-Mos . The real “ boom ” was late
in the 60’s when the communists decided that Romania needed not just a cosmetic company but
the strongest company in the world .

In 1965 the well-known cosmetic product, Doina milk, is launched on the market and
even today this product is one of the best sold cleansing milks with a share exceeding 15% . In
1967, Liviu Tudean became the director of the company and he lead the company until 2000
when his son, Mircea Turdean took over the company’s leadership. In the same year (1967),
Farmec marks a new achievement: thanks to the hard work of. Prof.Dr. Ana Aslan, Farmec
became the first producer of Gerovital H3 creams and emulsions in Romania, the first series
production being made the same year.. The products are made for women aged at 40 years with
the first sings of aging . Ana Aslan made the H3 vitamin ( Gerovital) in 1952 and the product has
been patented in over 30 countries and used by many international personalities .

Until 1989 , Farmec manufacturing, in Cluj Napoca, had over 1000 employees and
provides 90% of all products on the market and that means they meet the needs for the 22
million Romanians , offering around 600 products from creams skin , sprays to household
cleaners .

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 The special attention paid to the quality of the products made available for the clients as
well as the care for the environment have been a permanent concern for the company , thus
investing approximately $3 million in the acquisition of new ultra-performing machines for the
new production department .

The investment is the second of its kind in Central and Eastern Europe, with the support
of O.N.U.D.I. Thus, S.C. Farmec S.A. Cluj-Napoca is among the few companies that have
managed to put into operation an ecological objective of national importance, unique in the
country, where products that meet the standards imposed by the European Union are being
industrialized. After 1990, in the development strategy of the company, a special emphasis was
placed on the distribution, and at the end of 2000, Farmec had its own distribution network
through its 14 representative offices and working points in all areas of the country: Bucharest ,
Cluj, Brasov, Constanta, Ploiesti, Pitesti, Sibiu, Craiova, Focsani, Iasi, Piatra Neamt, Timisoara,
Tg.Mures, Galati.

Thanks to its 250-member, well-developed sales team and a well-developed

infrastructure (150 cars out of which 9 large-capacity vans), the company reaches a total of
10,000 customers in both modern retail , as well as the traditional one. Also, a special importance
was given to export, which accounts for over 20% of turnover.

S.C.Farmec S.A. Cluj-Napoca,has been in the last 10 years on the top 3 businesses in
Romania and in 2005, the company gave a new proof of the undeniable prestige it enjoys by
being ranked first in the rankings of companies by domain activity during the 13th edition of the
National Top of Private Companies in 2006 .

Taking into consideration the history we can say that Farmec S.A. has actually entered in
the European economic industry both from the point of view of the quality of products, the
modern technologies used and the values promoted , thus being a company with a tradition
ready for the future .

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1.2 Important figures

Prof.Dr.Ana Aslan is a name, the legend of a life dedicated to people. She is one of the most
important personalities in the world, being considered the "parent" of geriatrics and gerontology.
She devoted her whole life to investigating the causes of aging:

Under the leadership of Ana Aslan, the Gerovital H3 concept was confirmed by many scientists
in the USA, Germany, Great Britain, Japan, Italy, Austria in the 1960s and it became a scientific
certainty, a great value treatment against aging. Gerovital H3 is not just a treatment but also a
philosophy and hope, a spirit that is still alive today at "Farmec".

Aslan's research work has been honored with numerous international awards including:

 Cross of Merit - I Class of the Order of Merit, Germany 1971;

 Cavalier from Nouvelle Europe, Italy 1973;
 Les Palmes Academiques, France 1974;
 Honarary Foreign Citizen & Honorary Professor of Sciences, Philippines 1978;
 Diploma "Member Honoris Causa" of the Bohemo-Slovaquian Society of Gerontology,
1981;
 Leon Bernard Award, the prestigious award given by the World Health Organization for
its contribution to the development of gerontology and geriatrics, 1982.

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1.3 The company’s mission

According to Liviu Turdean , the CEO , their mission is “ To be one of the biggest
producers of cosmetics from the South-East Europe , continuously adapting our products , their
design and packaging in order to satisfy the needs of our consumers and last but not least, we
want to create optimal conditions for our employees.”

1.4 Turnover and main products

Both the economic and financial results obtained ( turnover for 2016 was $25.609.756)
demonstrate the undeniable value of the company on the product market cosmetics .

Farmec S.A commercializes products from the following categories:

 Wellness products
 Face and body products
 Hair care products
 Make-up products
 Deodorants
 Dermato-cosmetics
 Beach products
 Hygiene-dental products
 Household chemicals
 Professional cleaning products
 Work safety products

The cosmetics products from Farmec represent the materialization of a constant

collaboration of the research team with relevant institutions such as: Dr.Ana Aslan Foundation ,
Faculty of Pharmacy of the University of Medicine and Pharmacy of Cluj Napoca, Clinic of
Dermatology Cluj Napoca etc.

A particular emphasis is on amplifying the distribution network through direct vendors

who have concessions like: free entry into the system, support and specialized training, free

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promotional materials and the possibility of resuming after a period of inactivity without losing
the achieved level .

1.5 SWOT analysis

STRENGHTS
Leader of the Romania cosmetics market
Considerable turnover
Wide range of products WEAKNESSES
Well-developed distribution network Product presentation
Substantial investments for upgrading and Lack of promotion on potential external markets
modernization Low attractiveness to foreign investors
Continuous product diversification
Intensive research activity
Attention for environmental conservation

OPPORTUNITIES
Foreign appreciation THREATS
Development of the cosmetics market in the last 2 Local companies offensive
years Offensive from international companies
Increasing of the purchasing power Increased market selectivity and high quality
Enhanced export opportunities emphasis
Developement of a new market segment – “ Supply of Bulgarian and Polish producers
cosmaceuticals” Variable duty rates
“ direct sales “ growing trends

Strenghts

 Leader on the cosmetics market in Romania and one of the leading cosmetic
manufacturers in South Eastern Europe.
 Considerable turnover
 Wide range of products and a very well-developed distribution network
 Symbol of Romanian cosmetics , long tradition
 Substantial annually investments for upgrading and modernization
 Continuous product diversification

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  Intensive research activity
 Increased attention to environmental conservation

Weaknesses
 Deficiencies in the way products are presented ( packaging and advertising campaigns )
 Lack of promotion on potential external markets
 Low attractiveness to foreign investors

Opportunities
• Appreciation of “ Farmec ” products outside of the country
 International recognition of the Gerovital H3 range , as well as success in the field of
geriatrics and gerontology of.Prof.Dr.Ana Aslan
 Development of the cosmetics market in the last 2 years
 Increasingly higher purchasing power of consumers as they join the European Union and
their preferences for innovative and high-quality production
 Enhanced export opportunities in the community market
 Developing in a new market segment – “ cosmaceuticals”
 Extend the “ direct sales “ trends

Threats

 Offensive of other local companies with the same field like : ElmiProdFarm , Gerocosen
, Apicol Combinator etc
 Offensive from other companies like : Beiersdorf ( Nivea Visage ) and L’Oreal Paris – a
company who invest heavily in research and development , building on a very clear
strategy – they communicate clearly their competitive tehnological advantages
 Increased market selectivity and high quality emphasis ( new standards imposed by
European legislation )
 Increasing the supply of Bulgarian and Polish producers that are already on the market
 Existance of variable duty rates from state to stare for care products and cosmetics

1.6 Corporate Strategy of S.C. Farmec S.A. Cluj-Napoca '

In view of the SWOT analysis, it can be noted that S.C. Farmec S.A. Cluj-Napoca 'has
important production capacities, experience and dedication in the specific field of activity, while
holding a significant and confronted market share with a potential future growth of the demand

6
for cosmetics with the integration into the European Union . Thus, the company aims to expand
its activity and enter new markets.

The corporate strategy is growth, mainly through concentration and concentric diversification.
The strategy of concentration through market development, justified by the current position
and high competitiveness of products, is aimed at expanding exports to other areas than the ones
existing (USA, Europe) such as Latin America and Asia. This expansion will obviously be
accompanied by large, well-funded advertising campaigns adapting to the socio-cultural
specificity of the regions they are targeting.

Concentration strategy through product development has long been promoted in 'Farmec
S.A.' as the company mentioned earlier, allocating important research funding for the annual
launch of 50 new products.

The concentric diversification of the organization's development plan refers to the expansion of
'cosmaceuticals' (cosmetic and therapeutic) products and the diversification of their range.

1.7 Organizational culture

The values that guide the company are: integrity, promptitude, continuous concern for
innovation. Moreover, given that the company's mission is to target the proximity of consumers,
to satisfy their needs of beauty by offering natural products of exceptional quality with a modern
and original packaging, the observance of the ethical standards within the organization is a prime
objective rank. Thus, each employee is trained in the spirit of total devotion vis-à-vis to ensure
first the high quality of the products and the maximum efficiency that meets the needs of
physical and mental comfort of end users.

Concern towards clients and employees

 the company provides employees with a safe and healthy working environment;
 encourages employees to develop continuously on a professional level;
 promotes a climate based on fairness, respect, trust and security in dealing with
employees or collaborators;

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  ensure the confidentiality of employees' personal data;
 Provides proper competence-based assurance;
 offers excellent quality, value and services to all the clients of the company: "I
considered the company in which I work as the second family and I tried to feel that the
employees feel it," says Liviu Turdan, general manager.

Protection of the environment

"Farmec S.A." controls the impact of its activities on the environment.

The company strives for the work equipment to meet the required safety standards, as well as
setting up a modern recreation space. Farmec has started the investment of the "Farmec Park
Complex" which has become one of the most popular recreational places of Cluj-Napoca. The
recreational complex includes an artificial football field, a playground with all the facilities and a
terrace-restaurant.

1.8 Justification of the product range that was chosen for export

The Gerovital H3 Evolution range is specifically designed to slow down all three skin aging
mechanisms and to counteract their long-term effects using 3 active principles with direct action:
 SOD, called "anti-aging super-enzyme," , the most active antioxidant enzyme of
natural origin.
 Trylagen acts against wrinkles and provides a smoother, more elastic skin, stimulating
the production of new collagen and elastin fibers, as a support for synthesis.
 GP4G regenerates the skin from inside, being a pure energy source that adds to the
diminished capacity of cells to generate and store energy.

The products in the Gerovital H3 Evolution range are structured into two age groups to meet the
specific differentiated requirements.
Products for women over 30 years of age combat the first signs of aging: fine lines around
the eyes and mouth, eyes and bags under the eyes, loss of shine. The structures of these products
are light and immediately provide a feeling of comfort as well as lasting hydration.

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Products designed for women aged over 45 are designed to solve more complex problems
caused by photo aging and decreased estrogen production around menopause: accelerated
loss of skin elasticity, deep wrinkles, decreased vitality and cellular regeneration (turn-over
cellular), the appearance of pigment spots. The products in this range are rich in nutrients and
provide a feeling of emollience, lasting hydration and a noticeable increase in skin tonicity.

The gamma was enriched with 3 new anti-hyaluronic acid solutions, Hyaluronic Acid
Micellum, 6% Hyaluronic Acid Serum and 3% Hyaluronic Acid Cream. The products are
based on pure hyaluronic acid and liposomal, an ingredient that intensively moisturizes the skin
and contributes to significant wrinkle fading.

Responding to the demands, nowadays in the world of cosmetics, skin care, protection against
environmental damaging factors and skin aging prevention, S.C.Farmec S.A. Cluj-Napoca has
created the Gerovital cosmetics line, based on an original concept, which exploits the exceptional
potential of the clay in the Forest of Craiova Mountains. As the other product lines of S.C.
Farmec S.A, have so far benefited from an intense promotion on international markets, the
company has decided to expand with this range of cosmetics because of their innovative
character and the lack of similar products globally.

Another important factor influencing the decision to promote just this range was Prof. Anna
Aslan's contribution to the research process, which noted in one of his studies: 'clay is a
miraculous land that carries complex actions beneficial to the entire human body, proving a
remarkable tropism for the disease in general and for certain diseases in particular (with
extraordinary antitoxic power), potentiating the body's defense forces. "

9
Chapter 2. Assessment of Foreign Market Opportunities

I. Austria

Demographics

Austria, officially the Republic of Austria, is a country of nearly 9 million people in Central
Europe. It is bordered by the Czech Republic and Germany to the north, Hungary and Slovakia to
the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the west. The territory
of Austria covers 83,879 km2. The majority of the population speaks local Bavarian dialects as their
native language, and German in its standard form is the country's official language. Other local
official languages are Hungarian, Burgenland Croatian, and Slovene.

Austria is a federal republic with a parliamentary representative democracy comprising

nine federated states. The capital and largest city, with a population exceeding 1.8 million,
is Vienna. Other major urban areas of Austria include Graz, Linz, Salzburg and Innsbruck.

Although German is the official language, most Austrians are multi-lingual. Depending on the
region in which they live, Austrians may speak Italian, Turkish, or Serbian, as well as regional
Austrian dialects and English.

Culture

Austrian culture has been greatly influenced not only by the Habsburg imperial family, but also
by its neighbors. Vienna has long been considered the music capital of Europe, and is home to
world-class music schools. Famous composers such as Johann Strauss, Joseph Hayden, and
Wolfgang Amadeus Mozart all learned, composed, taught, and played in Vienna. This means that
Vienna is also home to some of the best venues on the planet, such as the Golden Hall, the Vienna
State Opera, and the Musikverein, to name a few. There is always something going on in the music
scene in Vienna, including numerous festivals.

Politics

10
 In the federal parliamentary republic of Austria, with a President as head of state, and a
Chancellor as the head of government. The President is Alexander Van der Bellen and the Head of
the Government is the Chancellor Sebastian Kurz. Governments, both local and federal,
exercise executive power. Federal legislative power is vested both in the Federal Government and in
the two chambers of Parliament; the National Council and the Federal Council. The Judiciary of
Austria is independent of the executive and the legislature.

Economics

As one of the most prosperous and stable EU Member States, Austria offers its investors ideal
conditions. The Austrian economic system can be characterized as a free market economy with
a strong social focus by also taking into account the weaker members of society. Austria also
features a tried and tested system of economic and social partnership, which has traditionally
played a strong and reconciliatory role in wage and price policies.

Austria is a highly developed industrialized country with an important service sector. The most
important industries are food and luxury commodities, mechanical engineering and steel
construction, chemicals, and vehicle manufacturing.

In the field of agriculture, Austria is witnessing a strong trend towards organic farming. With
an overall share of 22%, organic farms in Austria occupy a leading position among the EU
Member States.

Austria's industrial and commercial sectors are characterized by a high proportion of medium-
sized companies. Austrian industry covers every branch of manufacturing, from basic goods to
the labor-intensive production of highly processed products.

In the global-political arena, Austria is increasingly becoming an international meeting point,

which is illustrated by the large number of summits and conferences held in Austria. At the same
time, the country's relevance as a vital transit country between the economic areas of Europe is
increasing, especially for European energy supplies, including petroleum, natural gas, and
electricity.

11
Risk Assessment (Provided by Coface)

Country rating: A1 - The political and economic situation is very good. A quality business
environment has a positive influence on corporate payment behavior. Corporate default probability
is very low on average.

Business Climate rating: A1 - The business environment is very good. Corporate financial
information is available and reliable. Debt collection is efficient. Institutional quality is very good.
Intercompany transactions run smoothly in environments rated A1.

Strengths of the country

• Central location in Europe and attractive quality of life Industrial and tertiary diversification,
high added value;

• Solid current account surplus and low public deficit Low level of household and company debt,
below the European average ;

• High level of employment and low youth unemployment;

• 30% of energy sourced from renewable supplies;

• Major tourist destination (11th in the world);

• High level of public R&D investment (3% of GDP);

Weaknesses of the country

• Reliance on the state of German and Central and East European economies

• Banking sector with high exposure to Central and Eastern and South-east European countries

• Multiple layers of power and administration (federal, Länder, communes)

• Lack of competitiveness of public services and numbers of regulated professions

12
II. Denmark

Demographics

Denmark is one of the Scandinavian countries in Europe, and the smallest among the Nordic
countries. The country is bordered by Sweden, Germany, and Norway. Denmark covers an area of
42,923 square kilometers and consists of 443 named islands of which only 74 are inhabited. The
country is mostly flat with an average elevation of 31 meters above mean sea level. Most parts f the
country consist of rolling plains while the coastline is sandy with a bit of forested area. Denmark
consists of arable land. The population of the country was estimated at 5,707,251 in 2016 with a
median age of 41.4 years. The population growth rate is estimated at 0.22%. 86.9% of the
population are Danish while 13.1% are immigrants or children of immigrants.

Culture

The culture of Denmark has a rich intellectual and artistic heritage. Culture and the arts thrive as a
result of the proportionately high amount of government funding they receive, much of which is
administered by local authorities so as to involve citizens directly. Thanks to a system of grants,

13
Danish artists are able to devote themselves to their work while museums, theatres, and the film
institute receive national support.

Copenhagen, the capital, is home to many famous sites and attractions, including Tivoli
Gardens, Amalienborg Palace (home of the Danish monarchy), Christiansborg Palace, Copenhagen
Cathedral, Rosenborg Castle, Opera House, Frederik's Church (Marble Church), Thorvaldsens
Museum, Rundetårn, Nyhavnand the Little Mermaid sculpture.

Politics

The politics of Denmark take place within the framework of a parliamentary representative
democracy, a constitutional monarchy and a decentralized unitary state in which the monarch of
Denmark, Queen Margrethe II, is head of state. Denmark is described as a nation state. Danish
politics and governance are characterized by a common striving for broad consensus on important
issues, within both the political community and society as a whole.

Executive power is exercised by the cabinet of Denmark, presided over by the Prime Minister who
is first among equals. Legislative power is vested in both the executive and the national parliament.
Members of the judiciary are nominated by the executive (conventionally by recommendation of the
judiciary itself), formally appointed by the monarch and employed until retirement.

Economics

The economy of Denmark is a modern market economy with comfortable living standards, a high
level of government services and transfers, and a high dependence on foreign trade. The economy is
dominated by the service sector with 80% of all jobs, whereas about 11% of all employees work in
manufacturing and 2% in agriculture. Nominal gross national income per capita was the tenth-
highest in the world at $55,220 in 2017.

Correcting for purchasing power, per capita income was $52,390 or the 16th-highest
globally. Income distribution is relatively equal, but inequality has increased somewhat during the
last decades, however, due to both a larger spread in gross incomes and various economic policy

14
measures. With 5,789,957 inhabitants (1 July 2018), Denmark has the 39th largest national
economy in the world measured by nominal gross domestic product (GDP) and 60th largest in the
world measured by purchasing power parity (PPP).

As a small open economy, Denmark generally advocates a liberal trade policy, and its exports as
well as imports make up circa 50% of GDP. Since 1990 Denmark has consistently had a current
account surplus, with the sole exception of 1998. As a consequence, the country has become a
considerable creditor nation, having acquired a net international investment position amounting to
65% of GDP in 2018. A decisive reason for this are the widespread compulsory funded labor
market pensions schemes which have caused a considerable increase in private savings rates and
today play an important role for the economy.

Risk Assessment (Provided by Coface)

Country rating: A2 - The political and economic situation is good. A basically stable and efficient
business environment nonetheless leaves room for improvement. Corporate default probability is
low on average.

Business Climate rating: A1 - The business environment is very good. Corporate financial
information is available and reliable. Debt collection is efficient. Institutional quality is very good.
Intercompany transactions run smoothly in environments rated A1.

Strengths of the country

• World’s fifth largest shipping operator;

• Energy self-sufficiency (oil in the North Sea and Greenland) and net energy exporter;

• Niche industries (renewable energy/biotechnology);

• Well managed public finances;

• Large current account surplus;

15
Weaknesses of the country

• Small open economy sensitive to external demand Government instability linked to the
fragmentation of Parliament

• Very high household debt levels (240% of disposable income)

• Public sector strongly represented in the job market (30% of employees)

• Tensions over housing in certain cities

III. Sweden

Demographics

Sweden, officially the Kingdom of Sweden, is a Scandinavian Nordic country in Northern Europe.
It borders Norway to the west and north and Finland to the east, and is connected to Denmark in the
southwest by a bridge-tunnel across the Öresund, a strait at the Swedish-Danish border. At 450,295
square kilometres (173,860 sq mi), Sweden is the largest country in Northern Europe, the third-
largest country in the European Union and the fifth largest country in Europe by area. Sweden has a
total population of 10.2 million of which 2.4 million has a foreign background. It has a low

16
population density of 22 inhabitants per square kilometre (57/sq mi). The highest concentration is in
the southern half of the country.

Culture

One of the key characteristics of Swedish culture is that Swedes are egalitarian in nature, humble
and find boasting absolutely unacceptable. In many ways, Swedes prefer to listen to others as
opposed to ensuring that their own voice is heard.

When it comes to speaking, Swedes speak softly and calmly. It is rare that you witness a Swede
demonstrating anger or strong emotion in public. In terms, Swedes rarely take hospitality or
kindness for granted and as such, they will give often give thanks. Failing to say thank you for
something is perceived negatively in Sweden.

Behaviors in Sweden are strongly balanced towards ‘everything in moderation’. Excess, flashiness
and boasting are abhorred in Sweden and individuals strive towards the middle way. As an example,
work hard and play hard are not common concepts in Sweden. People work hard but not too hard,
they go out and enjoy themselves, but without participating in anything extreme.

Politics

Politics of Sweden takes place in a framework of a parliamentary representative

democratic constitutional monarchy. Executive power is exercised by the government, led by
the Prime Minister of Sweden. The Chief of the State is King Carl XVI Gustaf and the Head of the
Government is the Prime Minister Stefan Lofven. Legislative power is vested in both
the government and parliament, elected within a multi-party system. The Judiciary is independent,
appointed by the government and employed until retirement. Sweden is a monarchy.

17
Economics

The economy of Sweden is a developed economy aided by timber, hydropower, and iron ore. These
constitute the resource base of an economy oriented toward foreign trade. The main industries
include motor vehicles, telecommunications, pharmaceuticals, industrial machines, precision
equipment, chemical goods, home goods and appliances, forestry, iron, and steel. Traditionally a
modern agricultural economy that employed over half the domestic workforce, today Sweden
further develops engineering, mine, steel, and pulp industries that are competitive internationally.

Sweden is a competitive mixed economy featuring a generous universal welfare state financed
through relatively high income taxes that ensures that income is distributed across the entire society,
a model sometimes called the Nordic model.

Due to Sweden being a neutral country that did not actively participate in World War II, it did not
have to rebuild its economic base, banking system, and country as a whole, as did many other
European countries. Sweden has achieved a high standard of living under a mixed system of high-
tech capitalism and extensive welfare benefits. Sweden has the second highest total tax
revenue behind Denmark, as a share of the country's income.

The Gross Domestic Product (GDP) in Sweden was worth 538.04 billion US dollars in 2017. The
GDP value of Sweden represents 0.87 percent of the world economy. GDP in Sweden averaged
224.66 USD Billion from 1960 until 2017, reaching an all time high of 578.74 USD Billion in 2013
and a record low of 14.84 USD Billion in 1960.

Risk Assessment (Provided by Coface)

Country rating: A2 - The political and economic situation is good. A basically stable and efficient
business environment nonetheless leaves room for improvement. Corporate default probability is
low on average.

Business Climate rating: A1 - The business environment is very good. Corporate financial
information is available and reliable. Debt collection is efficient. Institutional quality is very good.
Intercompany transactions run smoothly in environments rated A1.

18
Strengths of the country

• Open, diversified and competitive economy

• Specialization in high-tech products and green economy

• Sound public finances

• Increasingly dynamic demographics

Weaknesses of the country

• Tensions on the real estate market

• Substantial household debt

• Highly concentrated banking sector

19
IV. Norway
Demographics

Norway, officially the Kingdom of Norway, is a Nordic country in Northwestern Europe whose
territory comprises the western and northernmost portion of the Scandinavian Peninsula; the remote
island of Jan Mayen and the archipelago of Svalbard are also part of the Kingdom of Norway.
Norway has a total area of 385,252 square kilometers (148,747 sq m).
Capital City: Oslo ; Currency: Norwegian krone (NOK)

Major Languages: Bokmal & Nynorsk Norwegian (official), small Sami- and Finnish-speaking.
Around 95% of the population speaks Norwegian as their first or native language.
Students who are children of immigrant parents are encouraged to learn the Norwegian language.
The Norwegian government offers language instructional courses for immigrants wishing to obtain
Norwegian citizenship.

Primary Religions: Church of Norway (Evangelical Lutheran - official) 71.5%, Roman Catholic
2.8%, other Christian 3.9%, Muslim 2.8%, other 9.5%

Norway has a population of 5,312,300 (as of August 2018). Norwegians are an ethnic
North Germanic people. Since the late 20th century, Norway has attracted immigrants from
southern and central Europe, the Mideast, Africa, Asia and beyond.
In 2012, an official study showed that 86 of the total population have at least one parent who was
born in Norway. More than 710,000 individuals (13%) are immigrants and their descendants; there
are 117,000 children of immigrants, born in Norway.

Culture

The Norwegian farm culture continues to play a role in contemporary Norwegian culture. In the
19th century, it inspired a strong romantic nationalistic movement, which is still visible in
the Norwegian language and media.

20
Norwegian culture blossomed with nationalist efforts to achieve an independent identity in the areas
of literature, art and music. This continues today in the performing arts and as a result of
government support for exhibitions, cultural projects and artwork.

Politics

Norway is considered to be one of the most developed democracies and states of justice in the
world. From 1814, c. 45% of men (25 years and older) had the right to vote, whereas the United
Kingdom had c. 20% (1832), Sweden c. 5% (1866), and Belgium c. 1.15% (1840). Since 2010,
Norway has been classified as the world's most democratic country by the Democracy Index.

According to the Constitution of Norway, which was adopted on 17 May 1814 and inspired by
the United States Declaration of Independence and French Revolution of 1776 and 1789,
respectively, Norway is a unitary constitutional monarchy with a parliamentary system of
government, wherein the King of Norway (King Harald V) is the head of state and the prime
minister (Prime Minister Erna Solberg) is the head of government. Power is separated among the
legislative, executive and judicial branches of government, as defined by the Constitution, which
serves as the country's supreme legal document.

Economics

Since World War II, Norway has experienced rapid economic growth, and is now amongst the
wealthiest countries in the world. Norway is the world's third largest oil exporter
after Russia and Saudi Arabia and the petroleum industry accounts for around a quarter of GDP. It
has also rich resources of gas fields, hydropower, fish, forests, and minerals. Norway was the
second largest exporter of seafood (in value, after China) in 2006. Other main industries include
food processing, shipbuilding, metals, chemicals, mining and pulp and paper products. Norway has
a Scandinavian welfare system and the largest capital reserve per capita of any nation.

Norwegians enjoy the second-highest GDP per-capita among European countries

(after Luxembourg), and the sixth-highest GDP (PPP) per-capitain the world. Today, Norway ranks
as the second-wealthiest country in the world in monetary value, with the largest capital reserve per
capita of any nation.

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The Norwegian economy is an example of a mixed economy, a prosperous capitalist welfare
state and social democracy country featuring a combination of free market activity and large state
ownership in certain key sectors. Norway has an unemployment rate of 4.8%, with 68% of the
population aged 15–74 employed. People in the labour force are either employed or looking for
work. 9.5% of the population aged 18–66 receive a disability pension and 30% of the labour force
are employed by the government, the highest in the OECD.

Risk Assessment (Provided by Coface)

Country rating: A1 - The political and economic situation is very good. A quality business
environment has a positive influence on corporate payment behavior. Corporate default probability
is very low on average.

Business Climate rating: A1 - The business environment is very good. Corporate financial
information is available and reliable. Debt collection is efficient. Institutional quality is very good.
Intercompany transactions run smoothly in environments rated A1.

Strengths of the country

 Current accounts and public finances sustained by oil and gas despite fall in world prices
 Discovery of new oil fields
 Broad political consensus
 Well-capitalized banking system
 Large sovereign fund

Weaknesses of the country

 Budget deficit excluding oil and gas revenues

 High household debt and high housing prices
 Significant wage costs
 Shortage of skilled labor in certain sectors

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V. Poland

Demographics

Poland, with its 38,544,513 inhabitants, has the eighth-largest population in Europe and the sixth-
largest in the European Union. It has a population density of 122 inhabitants per square kilometer
(328 per square mile).

In recent years, Poland's population has decreased due to an increase in emigration and a decline in
the birth rate. Since Poland's accession to the European Union on 1 May 2004, a significant number
of Poles have emigrated, primarily to the United Kingdom, Germany and Ireland in search of better
work opportunities abroad. With better economic conditions and Polish salaries at 70% of the EU
average in 2016, this trend started to decrease in the 2010s and workforce became needed in the
country

The total fertility rate (TFR) in Poland was estimated in 2013 at 1.33 children born to a woman.

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Cultural

Fashion was always an important aspect of Poland and its national identity. Poland belongs to one
of the most fashionable and best-dressed countries in the world. Although the Polish fashion
industry is not as famed in comparison to the industries of France and Italy, it still contributed to
global trends and clothing habits. Moreover, several Polish designers and stylists left a lifelong
legacy of beauty inventions and cosmetics, which are still in use nowadays.

In the early 20th century, the underdeveloped fashion and cosmetics industry in Congress Poland
was heavily dominated by western styles, mostly from the United Kingdom and the United States.
This inspired Polish beautician Maksymilian Faktorowicz to seek employment abroad and create a
line of cosmetics company called Max Factor in California. In 1920, Faktorowicz invented the
conjoined word "make-up" based on the verb phrase "to make up" one's face, which is now used as
an alternative for "cosmetics". Faktorowicz also raised to fame by inventing modern eyelash
extensions and providing services to Hollywood artists. Another Pole that contributed to the
development of cosmetics was Helena Rubinstein, the founder of Helena Rubinstein Incorporated
Cosmetics Company, which made her one of the richest women in the world, and was bought by
L'Oréal. One of Rubinstein's most controversial quotes was "There are no ugly women, only lazy
ones".

INGLOT Cosmetics founded in 1983, is Poland's largest beauty products manufacturer and retailer,
sold in 700 locations worldwide, including retail salons in New York City, London, Milan, Dubai
and Las Vegas.

Politics

Poland is a representative democracy, with a president as a head of state, whose current constitution
dates from 1997. Poland ranks in the top 20 percent of the most peaceful countries in the world,
according to the Global Peace Index. The government structure centers on the Council of Ministers,
led by a prime minister. The president appoints the cabinet according to the proposals of the prime
minister, typically from the majority coalition in the Sejm. The president is elected by popular vote
every five years. The current president is Andrzej Duda and the prime minister is Mateusz
Morawiecki.

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The judicial branch plays an important role in decision-making. Its major institutions include the
Supreme Court, the Supreme Administrative Court, the Constitutional Tribunal, and the State
Tribunal On the approval of the Senat, the Sejm also appoints the ombudsman or the Commissioner
for Civil Rights Protection a five-year term. The ombudsman has the duty of guarding the
observance and implementation of the rights and liberties of Polish citizens and residents, of the law
and of principles of community life and social justice.

The Constitution of Poland is the supreme law in contemporary Poland, and the Polish legal system
is based on the principle of civil rights, governed by the code of Civil Law.

In recent years, Poland has extended its responsibilities and position in European and international
affairs, supporting and establishing friendly relations with other European nations and a large
number of 'developing' countries.

Poland is the sixth most populous member state of the European Union and has a grand total of 51
representatives in the European Parliament. Ever since joining the union in 2004, successive Polish
governments have pursued policies to increase the country's role in European and regional affairs.

Economics

Poland's economy is considered to be one of the more resilient of the post-Communist countries and
is one of the fastest growing within the EU. Having a strong domestic market, low private debt, low
unemployment rate, flexible currency, and not being dependent on a single export sector, Poland is
the only European economy to have avoided the late-2000s recession. Since the fall of the
communist government, Poland has pursued a policy of liberalizing the economy. It is an example
of the transition from a centrally planned to a primarily market-based economy. The country's most
successful exports include machinery, furniture, food products, clothing, shoes and cosmetics.
Poland's largest trading partner is Germany.

The biggest money-makers abroad include smoked and fresh fish, fine chocolate, and dairy
products, meats and specialty breads, with the exchange rate conducive to export growth. Food
exports amounted to 62 billion zloty in 2011, increasing by 17% from 2010.Structural reforms in

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health care, education, the pension system, and state administration have resulted in larger-than-
expected fiscal pressures. Warsaw leads Central Europe in foreign investment.

Risk Assessment (Provided by Coface)

Country rating: A3 - Changes in generally good but somewhat volatile political and economic
environment can affect corporate payment behavior. A basically secure business environment can
nonetheless give rise to occasional difficulties for companies. Corporate default probability is quite
acceptable on average.

Business Climate rating: A2 - The business environment is good. When available, corporate
financial information is reliable. Debt collection is reasonably efficient. Institutions generally
perform efficiently. Intercompany transactions usually run smoothly in the relatively stable
environment rated A2. S

Strengths of the country

 Market of 38 million people

 Proximity to West European markets
 Price competitiveness / qualified and cheap labor force
 Integrated into the German production chain
 Leading beneficiary of European structural funds
 Diversified economy (agriculture, variety of industries, services)
 Resilient financial sector
 Coal reserves

Weaknesses of the country

 Inadequate level of investment / Domestic savings rate too low

 Weakness in R&D
 Developmental lag of Eastern regions
 Rigidity of the labor market encouraging informal economy
 Structural unemployment and low level of female Employment

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VI. Croatia

Demographics

With its estimated population of 4.19 million in 2016, Croatia ranks 125th by population in the
world. Its population density stands at 75.9 inhabitants per square kilometers. The overall life
expectancy in Croatia at birth was 78.20 years in 2016.

The natural growth rate of the population is currently negative with the demographic transition
completed in the 1970s. In recent years, the Croatian government has been pressured each year to
add 40% to work permit quotas for foreign workers. In accordance with its immigration policy,
Croatia is trying to entice emigrants to return.

Cultural

Because of its geographical position, Croatia represents a blend of four different cultural spheres. It
has been a crossroads of influences from western culture and the east, ever since the schism
between the Western Roman Empire and the Byzantine Empire, and also from Mitteleuropa and
Mediterranean culture. The Illyrian movement was the most significant period of national cultural
history, as the 19th century proved crucial to the emancipation of the Croatian language and saw

27
unprecedented developments in all fields of art and culture, giving rise to a number of historical
figures.

The Ministry of Culture is tasked with preserving the nation's cultural and natural heritage and
overseeing its development. Further activities supporting the development of culture are undertaken
at the local government level. The UNESCO's World Heritage List includes ten sites in Croatia.
The country is also rich with intangible culture and holds fifteen of UNESCO's World's intangible
culture masterpieces, ranking fourth in the world. A global cultural contribution from Croatia is the
necktie, derived from the cravat originally worn by the 17th-century Croatian mercenaries in
France.

Politics

The Republic of Croatia is a unitary state using a parliamentary system of governance. With the
collapse of the ruling communist party in SFR Yugoslavia, Croatia organized its first multi-party
elections and adopted its present constitution in 1990.

Under its 1990 Constitution, Croatia operated a semi-presidential system until 2000 when it
switched to a parliamentary system. Government powers in Croatia are divided into legislative,
executive and judiciary powers.

Economics

Croatia is classified as a high-income economy by the United Nations. International Monetary Fund
data projects that Croatian nominal GDP stands at $53.5 billion, or $12,863 per capita for year
2017, while purchasing power parity GDP stands at $100 billion, or $24,095 per capita.

Risk Assessment (Provided by Coface)

Country rating: A4 - A somewhat shaky political and economic outlook and a relatively volatile
business environment can affect corporate payment behavior. Corporate default probability is still
acceptable on average.

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Business Climate rating: A3 - The business environment is relatively good. Although not always
available, corporate financial information is usually reliable. Debt collection and the institutional
framework may have some shortcomings. Intercompany transactions may run into occasional
difficulties in the otherwise secure environments rated A3.

Strengths of the country

 Hydroelectric power covers 75% of electricity needs

 Tourist attractiveness and long coastline
 Oil and gas potential
 Kuna pegged to the euro
 High-quality infrastructure

Weaknesses of the country

 High private and public debt

 Lack of efficiency in administration and justice
 Uncertainty over resolution of Agrokor case, the country’s largest company and employer
 Weak industrial development/lack of competitiveness
 Manufacturing exports (22% of GDP) of medium or low added value
 Poor absorption of European funds/administrative complexity/corruption
 Low female employment rate and high youth unemployment
 Emigration taking away skilled workforce

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Chapter 3. Market industry potential and firm potential share

Chapter 4. Market entry mode

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