Sweden is an ideal location to establish operations from which to launch expansion into the growing European market for any type of good or service.  There are several key reasons: 
 

• The widespread proliferation of computer, telecommunications, and Internet resources provides a solid base of network support and a competent and talented IT labor supply.

• Due to a paradox in its labor markets, Sweden is enjoying strong financial growth, while maintaining one of the highest levels of unemployment in western Europe.  In addition, relatively cheap labor exists in the surrounding regions (i.e. Baltic states). This provides an opportunity for abundant skilled and unskilled labor (both of which are essential to a non-IT firm).

• Finally, with Europe’s largest per capita economy, Sweden provides a stable environment for growth, as well as attractive financial, technical, legal, and commercial infrastructures.

Justification 

As an international manager, the decision to locate a small to medium sized non-IT global business in Sweden relative to other areas of Europe, would be advisable. 

The cost of setting up a small to medium operation is lower in Sweden than in the rest of Europe, due largely in part to the current unemployment situation.  It can also be attributed to the advanced IT infrastructure that Sweden maintains and the relative number of Swedish IT professionals.  Finally, Sweden enjoys one of the world’s most liberal telecommunications markets. This is the result of deregulation in the early 1990s, which lowers costs and increases innovation. 

According to a study prepared by KPMG in 1997, comparing the combined effect of cost factors that impact location decisions for medium sized companies, Sweden offers the lowest costs in Europe, and is second only to Canada among all countries studied.  The study compared eight different industries in seven countries in Europe and North America. The factors included in the study were labor, transportation, electricity costs and relative taxes.  The study however, did not specifically address IT issues.  (Source: ISA) 

According to statistics gathered by KPMG, it is 17 % more cost effective to locate an electronics plant in Malmö, Sweden, than it is to locate it in Düsseldorf, Germany.  In addition, KPMG also concluded that it costs 3% less to establish a medical devices operation in Goteborg, Sweden, than in Manchester, U.K. (Source: ISA) 

Regional Operational and Labor Advantages 

The dicotomy between the high technology competencies of the Scandinavian peninsula region and a relatively poor employment situation and economy in the Eastern Baltic states enhances the economic potential of Sweden and creates business opportunities.  A number of attractive assets are abundant in different parts of the region, ranging from clusters of different industrial competence, research and development investment, a skilled, highly educated and computer savvy population and lower labor and production costs in the surrounding Eastern Baltic states for blue collar work. 

Compared with Sweden, production costs in these surrounding Baltic states  are considerably lower.  The average hourly compensation cost in manufacturing is only 10-20 percent of that in Scandinavia.  Many companies are discovering how to utilize and combine this variety of comparative advantages. Industrial operations in Sweden that require capital and high tech know-how (e.g. Manufacturing medical equipment) can be complemented with more labor-intensive operations (e.g. combining components) in an eastern Baltic country offering low costs. 

Alternatives 

Sweden has been characterized in recent years as providing an opportunity for foreign companies to grow in the European market by purchasing Swedish subsidiaries.  This would be a viable alternate for a global non-IT company interested in entering the Swedish market . 

Another possibility would be to establish a call center in Sweden to serve the European market.  Sweden is an ideal location for this type of operation. Sweden offers vast call center experience, an abundant and multilingual labor pool, and a highly educated work force. Over 80,000 people are employed in the country's call centers, by compaines such as; American Express, Avis, DHL, Ford, Hertz, and Microsoft. (Source: Invest in Sweden Agency)