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What do companies like Lego, Skype, IKEA and Carlsberg have in common? Apart from being household names, they all hail from the Nordic countries.
If you’re running a start-up or scale-up in a Nordic country like Sweden, Denmark, Norway or Finland, you might be wondering: what does it take to go global?
In this article, we’ll discuss some of the key factors that make the Nordic region ideal for introduction to the global business stage — plus the key challenges you’re likely to face as your company spreads its wings.
Why the Nordics are a haven for start-ups
For such a small corner of the world, the Nordics produce a lot of successful tech businesses. One of the biggest household names is Spotify, which was founded in Stockholm, Sweden in 2006. This year, it was valued at $61.82 billion (about €57 billion).
In more recent years, we’ve seen an explosion of successful Nordic fintech start-ups including Klarna, Pleo, Softbank and iZettle. And, as of 2023, the region has produced almost 80 unicorns — start-ups that reach $1 billion in value before being listed on a share market.
So, what makes this part of the world such a good environment for tech start-ups? Let’s get into some of the major success factors the Nordics have to offer.
A region of early tech adopters and innovators
People in the Nordic countries are keen tech adopters, with the region ranking highest in Europe for both internet penetration (97%) and smartphone usage (96%). And this love for technology has translated into the business world.
As long ago as the 1980s, innovative businesses like Nokia and Ericsson were making waves in Nordic countries by producing some of the world’s first mobile phones. And, although these two companies have since been overtaken by other global players like Apple and Samsung, their early success has left its mark on the Nordics.
Today, many of the most successful companies to come out of the region are tech companies, including Skype, Spotify, MySQL and Unity.
Government policies and opportunities for funding
Because of their small size, Nordic economies are heavily reliant on international trade. This means that governments are incentivised to nurture home-grown talent by helping start-ups and scale-ups to succeed, ultimately improving their countries’ GDP.
In some Nordic countries, state-owned entities like Business Finland and Innovation Norway help get innovative companies off the ground by providing public funding. Also in Norway, the SkatteFUNN R&D tax scheme provides tax relief for businesses in order to stimulate research and development.
There are also a number of tech accelerators providing guidance, support and funding to new companies, including Sting, Antler, Techstars and Katapult. And governments are keen to encourage investment: in Norway, you can claim a personal income deduction for investments up to NOK 1 million (around €87,000).
Of course, all of this creates a cycle of innovation, because many successful founders of now-global companies have returned to their home countries wanting to give back. For example, Skype founder Niklas Zennström set up venture capital fund Atomico, which went on to fund both Klarna and Rovio (the makers of Angry Birds).
Social welfare as a strong safety net
Nordic countries are known around the world for their strong social protections, which provide a safety net for their citizens. Free access to things like high-quality healthcare and education are the foundations on which these countries are built.
That means that founders and business owners are more likely to take risks in Nordic countries than elsewhere, because they know they have these systems to fall back on.
This can lead to greater innovation and creativity, simply because people are less afraid to try things out than they would be in a country where failure could mean losing everything.
Open and collaborative business culture
The Nordic countries are all different places with their own identities, but they do tend to share some characteristics when it comes to business culture. Specifically, Nordic businesses tend to have flat rather than hierarchical structures, and welcome contributions from people at every level.
These companies typically favour open and direct communication and encourage employees to speak their minds honestly without fear of retribution. This makes them very conducive to entrepreneurship, which typically comes about when people are free to be creative and bring ideas to leadership.
Plus, half of the top ten countries on the latest World Happiness Report were in the Nordics, with Finland, Denmark and Iceland snagging the top three spots. The fact that people are generally happy, and enjoy a healthy work-life balance, flexibility and strong parental leave probably contributes to the energy that Nordic people are able to put into entrepreneurship.
The need for international expansion
The population of all of the Nordic states and territories put together could fit comfortably into a state like ` With such small local markets, Nordic companies that are ready for their next stage of growth effectively have no choice but to expand beyond their country’s borders.
In fact, local markets are often so limited in size that international expansion within the region happens before a company is really off the ground. Spotify, for example, launched initially in Sweden, Norway, Finland and Spain, before expanding to the US three years later.
That means that Nordic countries often have some initial experience of international business early in their journey. This can set them in good stead for further expansion and help them avoid some of the common pitfalls companies face when trying to expand internationally after years of success in one market.
Global expansion challenges and pitfalls
While expanding internationally is often the only logical path for Nordic start-ups that make it past a certain stage, there are always challenges involved with the process. Here are some of the main hurdles you might have to overcome as you take your homegrown Nordic business global.
Translating and localising marketing and communications
What works to market a product in one country might not necessarily translate to another. For example, in some countries, ‘hard-sell’ advertising techniques like short-term sales or direct and pushy branding may be off-putting to buyers in some cultures, even if they work well in others.
One way to avoid embarrassing mishaps is to work with local people on the ground in your chosen markets, rather than trying to handle everything from your HQ. That way, they’ll be able to translate your product’s benefits to their local audience, with the nuances and cultural norms of that country in mind.
Dealing with the cost and time investment of incorporating
Expanding your business overseas typically involves setting up multiple local entities in the countries you’re expanding into. This allows you to compliantly hire employees and pay taxes in those countries. However, it can also be a time-consuming and expensive process: opening up a business entity usually takes several weeks at best (and often much longer).
Plus, there are ongoing costs associated with running an additional legal entity. Depending on the country and your situation, you might need to rent or buy registered premises, appoint and pay a local director, and seek legal advice from local legal and tax advisors. All of these costs can quickly add up.
Navigating taxation across borders
One of the most significant challenges of international expansion is understanding your tax obligations — which might be complex if you’re operating in multiple countries. At the very least, companies usually have to withhold and pay income tax on behalf of their local employees — but there may be other taxes to pay as well.
Every government in the world has its own definition of ‘permanent establishment’, which is when a business has a stable enough presence in a country to generate an obligation for corporate taxes (and sometimes VAT). Understanding whether this will apply to your business is crucial if you don’t want to be hit with a nasty surprise once your expansion project is underway.
Our advice? Always consult with experts for help with your international taxes. Sure, you might be able to save a few euros by having your internal finance team figure it out, but the potential consequences of non-compliance are just not worth it.
The need for agility and creativity
No international expansion project goes 100% to plan. When you’re expanding your business beyond your home country and your initial test markets, you need to be ready to pivot if things aren’t working as expected. This means having a keen understanding of the business environment you’re operating in, as well as the ability to think on your feet and find creative solutions to problems.
In general, Nordic companies are better at managing this than others, because they’re used to a business culture that encourages creativity and innovation. But you might want to think carefully about whether the specific people on your international expansion team are the best people for the job.
Ensuring compliance when hiring overseas
Expanding a business overseas almost always means hiring employees or workers in different countries. These people will be crucial in presenting your products and services to new markets in a language they understand — both literally and figuratively.
But hiring an overseas employee isn’t as simple as sending them an offer letter and adding them to your payroll. First, you may need to set up a local legal entity before you can hire anyone at all — which can be complex, costly and time-consuming.
Alternatively, you could take on workers as independent contractors, but there are risks to this approach too. Many countries in Europe and beyond have seriously tightened the rules around who counts as an independent contractor in order to prevent misclassification.
The solution? If you don’t want the stress, hassle and expense of setting up a legal entity straight away, why not hire your employees through an employer of record, or EoR? These companies engage and pay workers on behalf of other organisations, and handle admin and HR tasks like payroll, taxes, and employment contracts for them too.
By using an EoR to facilitate your international expansion, you can compliantly hire employees in your new market while giving your team the time they need to focus on what really matters: growing your business.
The answer: CXC’s workforce solutions
At CXC, we’ve been helping businesses to compliantly hire and pay workers for more than 30 years. And we love nothing more than helping innovative companies to take their operations to the next level through international expansion.
We offer a comprehensive range of workforce solutions, which can help you to source, engage, pay and manage the people you need to drive your business forwards.
Here are some more of the advantages of trusting CXC with your international expansion project:
- Total compliance, guaranteed: We’ve been handling compliance for our clients for a long time — and we operate in more than 100 countries worldwide. That means that, wherever you expand to, we’ll ensure every worker you hire is engaged compliantly and legally.
- Tailored advice and expertise: We can offer advice on everything from sourcing workers to the best engagement structures for your international business. We understand that every business is different — which is why we’ll always tailor our advice to your situation.
- The right people, wherever they are: Not only can we help you to compliantly engage the workers you need, but we can find them for you too. Our sourcing solutions can help you identify the talent you need, anywhere in the world.
- Flexible, adaptable solutions: Our solutions are specifically designed to flex and scale with your business. That means if your needs change, we’ll adapt our solution to make sure it’s still working for you. Whatever your international plan looks like, we can build the tailored, flexible solution you need to make sure it’s smooth and successful.
Want to find out more about how we could help your Nordic business achieve its global expansion goals? Speak to our team today to get started.
