REVIEW ON THE CURRENT NORWEGIANFINNISH BUSINESS CLIMATE Report

REVIEW ON THE CURRENT NORWEGIAN-FINNISH BUSINESS CLIMATE Report by NOFI, NORSK-FINSKA HANDELSFÖRENINGEN R. F. NORJALAIS-SUOMALAINEN KAUPPAYHDISTYS NORWEGIAN-FINNISH TRADE ASSOCIATION Presentation delivered March 18, 2016, at a joint miniseminar in Joensuu by Ane Ahnger ane. ahnger@mconpartners. com 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 1

18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 2

About the report • • • A survey was made in May 2015 in cooperation with Haaga-Helia University of Applied Sciences. Research objective was to get an overview of the trade and business relations between Finland Norway. The survey is based on a survey from 2011 Appointed to individuals and organisations with business relations already in Norway or Finland, or companies intending to establish relationships with Norway or Finland. The report is an analysis of the survey and a guideline. 18. 3. 2016 • Basic considerations: 1. How can we increase mutual business (trade, investmets) ? 2. Business culture differences (attitudes, opinions) ? 3. How can we advance the business and do we have trade barriers ? 4. What are the recommendations for companies? . © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 3

Facts & figures Import and Export 2014 [1000 €] COUNTRY Germany Denmark United Kingdom Netherlands Norway Russian Federation Sweden United States Finland Total 18. 3. 2016 Import 7 746 009 share % of total import 13, 4 1 891 393 1 842 736 3 652 621 1 630 582 8 663 485 6 551 072 2 191 162 57 608 117 3, 3 3, 2 6, 3 2, 8 15, 0 11, 4 3, 8 6 699 486 share % of total export 12, 0 998 100 3 040 373 3 394 577 1 546 837 4 631 532 6 209 026 3 813 586 55 828 590 1, 8 5, 4 6, 1 2, 8 8, 3 11, 1 6, 8 Export © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 5

Investments out from Finland [M€] Germany Denmark Estonia United Kingdom Netherlands Norway Russian Federation Sweden United States 2007 5, 512 600 1, 709 1, 102 16, 579 929 2, 348 16, 527 3, 668 2008 4, 587 592 1, 59 1, 133 16, 533 880 2, 467 14, 083 8, 639 2009 4, 119 648 1, 657 1, 054 14, 49 828 2, 328 21, 778 7, 923 2010 4, 769 853 1, 754 1, 062 15, 695 1, 076 2, 783 25, 435 7, 808 2011 4, 435 1, 048 1, 956 1, 431 16, 708 2, 215 2, 978 25, 939 7, 006 2012 6, 234 1, 002 1, 400 2, 259 24, 525 2, 023 3, 197 29, 375 9, 787 Investments into Finland [M€] Germany Denmark Estonia United Kingdom Netherlands Norway Russian Federation Sweden United States 2007 2, 238 4, 490 62 4, 241 8, 762 689 636 31, 128 1, 324 2008 2, 992 4, 669 60 1, 387 7, 633 336 612 34, 038 1, 653 2009 2, 12 4, 852 90 1, 311 9, 455 714 751 30, 768 618 2010 4, 337 4, 132 109 1, 054 11, 342 517 793 32, 848 409 2011 5, 73 3, 910 223 643 12, 783 362 941 33, 663 746 2012 4, 177 4, 337 161 1, 194 15, 736 1, 063 583 34, 226 1, 190 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 6

3 Step IT grows further by acquisitions in Norway 24. 9. 2015 Citycon acquires Sektor Gruppen, a Norwegian shopping centre owner and manager CITYCON OYJ Stock Exchange Release 25 May 2015 Lojer to become Nordic market leader by acquisitions in Norway 8. 9. 2015 Norwegian Targovax to acquire Finnish medical start-up 12. 6. 2015 COMPANY NEWS: NEW R&D OFFICE Nordic Semiconductor ASA opens R&D office in Oulu Finland Oslo, Norway 2014/09/26 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 7

Background Goals for the Survey • To recognize the current and overall view on business between Finland Norway. • To look more deeply into the trade barriers that were found in the previous survey. • To find out more about the individual attitudes that the respondents have towards the country that they do not represent and to benchmark these findings. • To identify interpersonal barriers. • To discover similarities and differences in communication style. • To find out if the respondents experience a sense of commonality between Finland Norway. 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 8

Profile of respondents Finnish Swedish Norwegian NOFI Finland 20% Neither 69% Other 2% 160 140 NOFI Norway 9% 2 120 100 58 Norway 46% 80 Both NOFI Finland 60 and NOFI 40 Norway 2% Membership Finland 52% 115 75 20 3 0 Finnish Country of residence Norwegian Citizenship/Language 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 9

Regions of Respondents in Finland Norway 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 10

Respondents’ Roles in Organisation 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 11

Respondents’ Business Sectors 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 12

Intercultural Business Styles 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 13

Communication Styles 14% 18% Time focused 46% 50% Task focused Role equality 17% 8% Respect and “face“ in focus 31% Relation-focused 36% 58% 22% Indirect 3% 8% Honesty in focus 35% 5% Hierarchical Egalitarian 45% 30% 13% 7% 63% Direct 29% Deal-focused 19% Conservative Consensus-based 12% 0% 10% 69% 45% 36% 22% 20% 30% 40% 50% 60% Finnish perspective of Norwegian business communication style 70% 80% Norwegian perspective of Finnish business communication style 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 14

Leadership Styles 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 15

”Nordic business cultures are after all alike – but so different” THE CULTURE MAP BY ERIN MEYER Available at https: //simulations. insead. edu/culture-map 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 16

Commonalities in Business, Culture and Society 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 17

Similarities in Society, Culture and Business Strongly disagree Disagree Finnish perspective: Society Norwegian perspective: Society 17. 27% 11. 76% Finnish perspective: Culture 26. 05% 16. 81% Finnish perspective: Business 23. 53% 20% 11. 51% 10. 08% 60. 43% 13. 67% 52. 94% 65. 47% 19. 33% 0% Strongly agree 52. 10% 15. 11% Norwegian perspective: Business Agree 66. 91% 20. 14% Norwegian perspective: Culture 18. 3. 2016 Neither agree nor disagree 13. 67% 67. 23% 40% 60% © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 80% 100% 18

Perspectives on Nations Closest to Own Business Culture Finnish view: 1) Sweden, 2) Norway, 3) Germany/Estonia, 4) Denmark Norwegian view: 1) Sweden, 2) Denmark, 3) Finland, 4) UK 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 19

Trade Barriers 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 20

Trade Barriers Norwegian companies facing barriers in Finland 1. 98 Logistical barriers 2. 16 2. 41 Business culture barriers 2. 00 1. 98 National protectionism 2. 28 2. 19 Market size limitations 1. 97 2. 71 Language barriers 1. 93 2. 22 Networking barriers 2. 20 1. 86 Legislation barriers 2. 06 1 2 Not at all 18. 3. 2016 Finnish companies facing barriers in Norway Very Little 3 Somewhat © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 4 To a great extent 21

Languages Used in Business English Finnish In business contracts 57. 29% At business dinners /social events after work 41. 67% 27. 08% In e-mail correspondence 53. 13% 39. 58% 0% English 10% Finnish 20% 60. 42% 30% 40% 50% 60% 70% 86. 21% At business dinners /social events after work 58. 62% In e-mail correspondence 100% 10. 34% 13. 79% 74. 14% In business meetings 20% 30% 40% 27. 59% 17. 24% 65. 52% 10% 90% Scandinavian In business contracts 0% Languages used with Norwegians 71. 88% 46. 88% In business meetings 18. 3. 2016 Scandinavian 22. 41% 50% 60% 70% 80% © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 8. 62% Languages used with Finns 12. 07% 90% 100% 23

Networking Finnish perspective: I believe that networking events lead to actual business. 18. 71% Norwegian perspective: I believe that networking events lead to actual business. 19. 33% Finnish perspective: I feel that my professional network in Norway is still somewhat weak and I have to strengthen it. 53. 96% 63. 03% 12. 95% Norwegian perspective: I feel that my professional network in Finland is still somewhat weak and I have to strengthen it. 15. 97% Finnish perspective: My professional network is based on my personal and social contacts in Norway. 18. 3. 2016 10% 20% 10. 08% 49. 64% 26. 89% 30% 17. 27% 46. 22% 15. 83% Norwegian perspective: My professional network is based on 12. 61% 13. 45% my personal and social contacts in Finland. 15. 13% 50. 36% 26. 89% 12. 95% 0% 24. 46% 40% 14. 39% 36. 13% 50% 60% © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 70% 10. 92% 80% 90% 100% 24

Key findings Both Finns and Norwegians see each other as direct, task oriented and reliable. This is a business advantage in a global context. However, there are differences between Norwegians and Finns that it is useful to be aware of: Norwegians feel that Finns are more hierarchical, conservative and autocratic, while Finns feel that Norwegians are more relation-focused, democratic and people-oriented. Finns and Norwegians agree that they have a lot in common when it comes to business, society and culture. A sense of commonality between the two countries has been recognized, to a larger extent by Finns. This is an excellent starting point when you want to start business. It is much easier to enter a market that is similar to your own. Finns and Norwegians do not face trade barriers to a large extent. 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 27

…Key findings Non-Swedish-speaking respondents consider the lack of a common language a major obstacle in business communication. Swedish speaking Finns faced fewer language barriers. They communicate with Norwegians mostly in a Scandinavian language in various business situations such as meetings, email correspondence and contracts, mostly without problems. Non-Swedish-speakers typically use English. A network barrier and lack of knowledge about the other country are other barriers that scored a little higher. It is important to develop the network by working on all levels like business, education, the media and politics. To enter the Finnish or Norwegian markets takes time. Patience is a virtue for doing long-term business! 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 28

Recommendation and Guideline We can divide the trade relationship between Norway and Finland into three levels: (1) the interpersonal level, (2) the corporate level and (3) the governmental level. Described below are the most important generic considerations that are drivers for increasing the trade and business activity between Norway and Finland. The statements by NOFI below may directly or indirectly relate to the abovementioned relationship levels. NOFI - NORSK-FINSKA HANDELSFÖRENINGEN RF. NORJALAIS-SUOMALAINEN KAUPPAYHDISTYS NORWEGIAN-FINNISH TRADE ASSOCIATION 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 29

Recommendations and Guideline by NOFI 1. Take a Nordic approach and use the unique Nordic strengths that the countries already have 2. Take a straightforward business style, learn from each other, do matchmaking and create business initiatives. 3. Be prepared to invest for long term growth in business. 4. Encourage increased student and workforce exchange. 5. Support SME business establishment in Norway and Finland for export. 6. Make efforts in removing business barriers especially on the interpersonal and enterprise levels. NOFI - NORSK-FINSKA HANDELSFÖRENINGEN RF. NORJALAIS-SUOMALAINEN KAUPPAYHDISTYS NORWEGIAN-FINNISH TRADE ASSOCIATION 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 36

Our strengths and opportunities, Finland to Norway • We have competitive cost advantage • Legislation and business manners are much alike in both countries • Same understanding of quality and delivery assurance • Norway is located close to Finland also geographically • There is a huge investment program ongoing in Norway • There is a need of skilled labor and expertice in Norway to implement projects and operations • => We have realistic opportunities to establish business relations and succeed in Norway if things are managed well - this requires supervision, effort and work 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 37

Large investments in Norway – many opportunities Construction BNOK 500+ national transport plan investment. Power line BNOK 7 -8 annually. Double the size construction market compared to Finland. Yards and marine technology Subsea Supply bases Frame agreements BUSD 100 market Rig maintenance BNOK 200 investment Aker, FMC, Subsea. One in Norway 80% out of global market New harbour area investments Profitable yards, however slow motion due to low oil price BNOK 350 supply industry included Several MPV ship yards (offshore) Major opportunities in technology and manufacturing. World leader in maritime In 2014 market value technology export BNOK 377 excl. private sector: § Business/public BNOK 102 § New houses BNOK 136 § Re-build market BNOK 139 18. 3. 2016 MMO Fastest growing segment. Tough regulations Source: NHO Næringslivets Hovedorganisasjon, Finpro © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 38

The future dilemma? . . is it the End? 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 39

Norway has 3 world-leading industries (global knowledge hubs) : • Oil and gas • Maritime • Seafood sectors EMERGING INDUSTRIES • Renewable energy, the cleantech industry in general and the medical/biotechnology area, all represent interesting, emerging industries. 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 40

About doing the home lesson and strategy work - Company specific and sector dependent Dedicated export sales person • Wholesales and reseller business Local agent • Subcontracting, components Joint-Venture partner in Norway • B 2 B • Service- and engineering Establishing own company, organic growth • Projektitoimitukset Acquire an existing company, competitor or synergy business • Engineering, planning- and consultation Seek for a Norwegian ownership • International large scale business Customers, market Type of business (examples): Prerequisites 18. 3. 2016 • Planning • Customer • Competitive • Maturity? and target? segment? edge? • Market credibility? • Our network? • Market acceptance? © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 41

CASE: Steeldone Oy A Finnish success story in the Norwegian market • Oy Steel. Done. Group Ltd (SDG) est. 2004 • Marketing, sales and projects for supply of steel constructions and engineering services • Business growth from international markets • Oil & gas industries in Russia and Norway. • Demanding velded and machined constructions and equipment • Assembly, installations, commissioning, maintenance and engineering services • Net sales 1 -10 M€, personnel 5 • Several large deliveries in Barentsin region • Standards (Norsok) ja registers (Achilles 2008) • Sites in Oulu and Norway, Russian and Norwegian partners networks • Breakthrough in 2012 • Customer: AXTech A/S, Technip Norge A/S, Statoil Petroleum ASA • Project: Åsgard Subsea Compression Project-Marine Operations • INNOVATION AWARD ONS 2012 Steeldone is a qualified supplier in Achilles JQS - A Joint Qualification System for suppliers to the oil industry in Norway and Denmark. Contact: Martti Saarela, CEO, martti. saarela@steeldone. com 18. 3. 2016 BILD © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 42

Facts about Norway – why is Norway unique ? 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 43

GNP per capita, USD Reference Google 20141005, Ane Ahnger 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 44

Finland is the only Nordic countries with the Euro In some circumstances we may have a competitive advantage 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 45

Significant differences in hourly labor costs and employers’ compulsory costs Graph 1: Wages, salaries and employer costs in selected European countries, EU 28* average, Euro 18** average and Norway. These comparisons do not take into account productivity differences. Source: Eurostat online data code [lc_lci_lev] reported and last update March 26 th, 2015. Costs presented refer to value of the currency in in the comparison period (© AAA). 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 46

Currency devaluation brings an international competitive advantage Graph 2: Selected Euro indexed exchange rates as monthly average since Jan 2010. January 2010 = 100 %. Note: Norwergian Krona (NOK) has devaluated 22 % since July 2012. Source: Eurostat (© AAA). 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 47

SUOMEN SUURLÄHETYSTÖ, Oslo http: //www. finland. no/ http: //www. norja. fi/embassy/ NOFI - NORSK-FINSKA HANDELSFÖRENINGEN RF. NORJALAIS-SUOMALAINEN KAUPPAYHDISTYS NORWEGIAN-FINNISH TRADE ASSOCIATION www. nofi. fi www. mconpartners. com http: //gatewaynorway. no/ http: //www. barentsinfo. org/BC/Barentskeskus 18. 3. 2016 http: //www. pappila-penkkala. fi/ http: //www. storvik. com/ © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 48

And finally some additional links. . . Nordic 100 business directory http: //www. largestcompanies. fi/toplistat Trade www. tradingeconomics. com Economics www. ieconomics. com/gnp Statistics http: //www. google. com/publicdata/directory Nordregio – Nordic Center for Spatial Development www. nordregio. se See also: Companies Norway http: //www. grensetjansten. no/foretag-bedrift/foretag-i-norge/ http: //www. proff. no/ 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 49

Discussion… …Thank you! 18. 3. 2016 © Ane Ahnger, NOFI Norsk-finska handelsföreningen r. f. , ane. ahnger@mconpartners. com 50