Investing In Sweden

Market Entry Strategy

Sweden is a sophisticated market with savvy consumers and buyers that demand value in their product choices. Flexibility in the distribution channels and in consumer habits allows for almost any entry path to the market. As remarked above, Sweden likes to be a trend leader. The most effective entry strategies will vary by product and sector. Swedes are sensitive about wasting valuable business time. They do not like to agree to meetings without a clear objective and a reasonable likelihood of return on the investment of their time. Whereas Stockholm is the most frequent stop for visitors, the business value of the other Swedish cities, depending on the sector, can be as high or higher. Gothenburg, the business center on the west coast, for example, should not be neglected in any business plan.

Agents and distributors are commonly used in the initial stage of market entry. Firsthand visits are important because Swedes often rely on business honesty and “handshake” deals and therefore need to be assured of whom they are dealing with. Swedes are known for their consensus decision-making, not unlike the Japanese, and prefer to stick to carefully considered plans, rather than make “on-the-fly” changes. This generally leads to a longer up-front sales cycle than in the U.S.

Using an Agent or Distributor

Swedish commercial agents and/or sole distributors are organized under the Swedish Association of Agents (Agenturforetagen) (http://www.agenturforetagen.se) The Association has about 600 member companies, most of them being small ownermanaged businesses. Industries represented include clothing industry (accounting for more than 50 percent of membership), footwear, electrical and electronic and food. Normally, an exclusive agent or distributor is appointed to cover the Swedish market. Swedish agents/distributors often represent several foreign firms. A visit to the market is the best way to appraise the relative merits of prospective agents/distributors. Close contact between the American principal and the Swedish agent/distributor is very important and should be developed early.

Establishing an Office

The most popular and simplest company structure is the limited liability company. This works well for many foreign firms – especially SMEs starting up in the market. For greater details or what form would be best for your company you can contact the Invest in Sweden Agency - www.isa.se or any of the many reputable legal firms resident in Sweden.

There are no restrictions on foreign-owned firms establishing companies in Sweden. The legally recognized forms of business enterprise in Sweden are:

• Limited liability companies, two categories exist: public and private (aktiebolag)
• Limited partnerships (kommanditbolag)
• Trading partnerships (handelsbolag)
• Non-trading partnerships (enkla bolag)
• Branch of a foreign company (filial)

Foreign investors in Sweden historically have favored the limited liability corporate form, which is the only corporate form with no personal liability in Sweden. There are two different forms of limited liability companies: public and private. The difference between the two is that only the public limited liability company can turn to the public for capital. A subsidiary of a foreign company established in Sweden in accordance with Swedish law is considered a Swedish company in all respects and generally no legislative distinction is made between companies whose shares are wholly or principally owned by foreigners and those owned by Swedes.

The Swedish Companies Act (Aktiebolagslagen) governs the founding of a company. However, a foreign investor need not bother with these proceedings, as it is much easier to acquire an already registered shelf-company and adapt its articles of association to the needs and intents of the investor. The share capital must be at least SEK 100,000 in a private limited liability company and SEK 500,000 in a public limited liability company. A foreign company interested in establishing a business in Sweden may also conduct its operations through a Swedish branch (filial). A branch may be established without the permission of the Swedish authorities – the branch need only be entered in the Register of Branches, which is kept by the Swedish Companies Registration Office (Bolagsverket) (http://www.bolagsverket.se).

Franchising

The interest in franchising in Sweden continues. According to a recent report published by the Swedish Franchise Association there are some 300 franchise systems, comprising some 15,000 franchise units and employing 100,000 people in Sweden. The turnover of the franchise market is estimated at USD10 billion. Franchising is especially popular in the area of fast food, retail trade and consulting/business services. It is strongly recommended that U.S. companies considering franchising in Sweden conduct a qualified legal study to ensure full validity and enforcement of franchising agreements. The use of an American franchising agreement without adjustments for Swedish laws and practices could be detrimental to the franchiser’s business. Franchise networks, which have been successful in the United States, will not automatically succeed in Sweden, but a name that is well known in the U.S. market does have a great advantage. However, to meet the needs of the Swedish market, U.S. franchisers should be prepared to modify their product mix or implement other changes in their marketing policy in order to boost competitiveness. For detailed information on franchising contact should be made with the Swedish Franchise Association, Sofierogatan 3A, SE-412 54 Goteborg. Tel: 46-31-40 55 10. Fax: 46-31-81 10 72. http://www.franchiseforeningen.se.

Direct Marketing

American exporters of consumer goods may find it advantageous to sell directly to department stores, consumer cooperatives, chains, and other retail outlets. Some of the larger Swedish retailers have purchasing agents in the United States. Direct marketing is expanding in Sweden. Although well-established mail-order firms strong in the areas of clothing, sporting goods and hardware already exist, there are good opportunities for specialties. Use of telemarketing and cable TV sales channels are growing.

Joint Ventures &Licensing

In Sweden a joint venture is an agreement between two or more parties to carry out a project. It is not a legal entity, but only an agreement, and a legal vehicle must be formed to pursue the project. This legal vehicle may be either a limited liability company with the joint-venture participants as shareholders, or a partnership with the joint-venture participants as partners. Agreements for production in Sweden of U.S. products are common. Royal and license fee payments may be freely transferred out of Sweden.

Selling to the Government

In Sweden the EC Council directives on public works contracts has been implemented by means of the Public Procurement Act (Lagen om offentlig upphandling, LOU). Bodies governed by public law must procure goods and services in a businesslike, competitive and non-discriminatory way.  The act applies to bodies that award public works contracts: central government agencies, municipalities, county councils and ecclesiastical units. Also covered by the Act are central and local government-owned companies, associations, special districts and foundations established to perform tasks for the benefit of the public. The act applies to large as well as to small procurement. In the case of procurement above certain threshold values, the EC directive’s rules on advertising, grace periods, and so forth must be applied. The threshold values for supplies and services are SEK 1.7 million (in the utilities sectors there are other higher values and for central government a lower value, around SEK 1.4 million) and for a construction contract just under SEK 44.5 million (threshold values in Swedish currency are determined in an ordinance and apply for a period of two years). To make it possible for all conceivable suppliers to become aware of forthcoming and concluded procurement, notification of such procurement shall be published in the Supplement to the Official Journal. Procurement below the threshold values must follow the same basic principles as procurement above the threshold values, but the tender procedure is not regulated in as much detail.

The National Board for Public Procurement (http://www.nou.se) is responsible for contacts with public agencies, organizations and the public. One of the tasks is to provide information and general advice on how the Public Procurement Act and the WTO agreements shall be interpreted. Under the WTO “Agreement on Government Procurement”, signatories to the agreement, including Sweden, will not discriminate against or among the products, certain services and construction of other signatories in purchases covered by the agreement. The agreement’s covering extends to purchases of goods by specified government entities (e.g. ministries and Government authorities) listed in the agreement on contracts valued at 130,000 Special Drawing Rights (about $190,000). The list includes all the central government entities of the major developed countries. The agreement does not apply to purchases of national security items, purchases by local governments, or purchases by any entity that has not been specified as being covered.

To eliminate discrimination against foreign products at all stages of the procurement process, the agreement includes detailed requirements as to how government procurement is to be conducted. And with more than SEK 400 billion estimated spent on public procurement each year, entry into this market could prove quite lucrative. Many Swedish government procurement announcements, covered by these codes, are published in the U.S. Department of Commerce’s publication Commerce Business Daily. Code-covered tenders are also published in the Journal of Commerce, a private sector newspaper.

The county councils arrange centralized equipment procurement for the medical care sector. The 21 councils are autonomous units, and the degree of centralization varies. The normal procurement procedure is for the county medical care authority, together with end-users of the equipment, to survey the equipment needs for hospitals and forward them to the purchasing departments. In the case of replacements, the procurement request originates in the hospital department involved, with the decision to purchase made by the county authority. There is a high degree of uniformity in the Swedish hospital organization.

Distribution & Sales Channels

Consumers and businesses, alike, are very import-oriented in Sweden. To compliment this import-oriented market, Sweden offers American exporters a wide range of methods for the distribution and sale of products. A very high level of efficiency characterizes the distribution system. The Swedish Federation of Trade (Svensk Handel) http://www.svenskhandel.se) is the principal organization for private sector importers and traders in Sweden. Within this federation, the Import Council works to encourage Swedish importing by supplying American exporters with knowledge concerning items such as customs regulations and antidumping laws, while also providing Swedish companies with information on potential American contacts/suppliers. The federation’s membership includes 15,000 member firms, importers, wholesalers, distributors, and general agents for all types of goods. The major distribution centers in Sweden are Stockholm, Gothenburg and Malmo. Stockholm is the capital and business center of the country with a metropolitan area population of 1.9 million. The head offices of most Swedish industrial, and commercial associations, and most large corporations are located in Stockholm. Many multinationals also use Stockholm as the headquarters for their Nordic and Baltic operations.

Gothenburg, Sweden's second largest city, is the nation's foremost port for international shipping. Located on the southwestern coast, Gothenburg is also the center of a fast growing industrial complex representing a wide spectrum of manufactured products ranging from motor vehicles to petrochemicals. Malmo and Helsingborg are located at the southern tip of the country, a short distance from neighboring Denmark. Both cities are important ports for Swedish shipping to continental Europe. A bridge between Malmo and Copenhagen is physically linking Northern Europe with the Continent. The northern two-thirds of Sweden are sparsely populated, but contain many large industrial sites for forest products, mining, and hydroelectric power. Major population centers there include Sundsvall, Skelleftea, Lulea and Umea.

Selling Factors & Techniques

Selling techniques are comparable to the practices in the U.S. General competitive factors such as price, quality, promptness of delivery and availability of service are those that determine the success of a supplier. Swedish firms do not change suppliers readily and many commercial relationships have been built up and maintained over decades.

Electronic Commerce

It is estimated that some 85 percent of the Swedish population have access to the Internet and the number of Swedes shopping on the Internet continues to increase. In 2007, E-commerce is estimated to reach sales of $3.6 billion. An American company interested in setting up an E-commerce business in Sweden should contact NIC-SE Network Information Centre Sweden AB for information on the registration process. Information on NIC-SE can be found on http://www.nic-se.se.

Trade Promotion & Advertising

Advertising plays a major role in Sweden's commercial life. All types of media are available. Daily newspapers and other publications are by far the most important media accounting for over half of all advertising expenditures. Direct mail is the second most important advertising medium, followed by radio and television commercials. Other forms, useful for certain types of products, are point-of-sale advertising, motion picture advertising, outdoor posters, and billboards. Commercial broadcasting exists and isgrowing in importance.
In order to place advertisements in newspapers, magazines, and trade journals, an agency must be authorized to do so by the Swedish Newspaper Publishers’ Association (Tidningsutgivarna). Authorization requires that the agency have experience in advertising and that its books be open for audit by the association. The major metropolitan papers in Stockholm, Gothenburg and Malmo have wide geographical circulation. The three large Stockholm dailies - Dagens Nyheter, Svenska Dagbladet, and Dagens Industri - enjoy nationwide circulation. The large dailies in Gothenburg and Malmo (Goteborgs Posten and Sydsvenskan respectively) provide important media for advertising exposure in western and southern Sweden.

Pricing

Companies set prices individually. According to the Swedish Competition Act (which is in line with EU rules), companies are not allowed to practice price fixing. All goods and services are subject to VAT (value-added tax), which ranges from 6 percent to 25 percent. 25 being the normal percentage, 12 percent which is for food or hotel charges, and 6 percent for products such as newspapers, books and magazines, and admission fees for commercial sporting events and also for transportation within Sweden. Products in Sweden are priced using the following formula: CIF price + import duty + excise tax +
profit + VAT.

Sales Service & Customer Support

Sales services and customer support are comparable to the practices in the United States. American firms wishing to enter the Swedish market will have to provide outstanding service and support to successfully replace a Swedish supplier.

Protecting Your Intellectual Property

The Swedish legal system provides adequate protection to all property rights, including intellectual property. As a 1993 signatory to the EEA agreement, Sweden has undertaken to obtain adherence with a series of multilateral conventions on industrial, intellectual, and commercial property. Sweden is a member of the "Paris Union" International Convention for the Protection of Intellectual Property (patents, trademarks, commercial names, and industrial design) to which the United States and about 80 other countries adhere. American business executives and inventors are thus entitled to receive national treatment in Sweden(treatment equal to that accorded Swedish citizens), under laws regarding the protection of patents and trademarks.

American nationals are also entitled to certain other benefits, such as the protection of patents against arbitrary forfeiture for non-working and a one-year "right of priority" for filing a patent application. The "right of priority" period for trademarks is 6 months. Applications or inquiries pertaining to intellectual property should be addressed to:

Director General
Patents and Registration Office
(Patent & Registreringsverket)
Box 5055, S-102 42 Stockholm
Tel: 46-8-782 2500; Fax: 46-8-666 0286
http://www.prv.se

Patents are adequately protected under the terms of the EU agreement, which states that the signatory countries comply in their law with the substantive provisions of the European Patent Convention of 1973, which Sweden ratified in 1980. Protection in all areas of technology may be obtained for 20 years. Patent applications are examined for inventiveness and, if accepted, published for opposition for 3 months. If no opposition is filed or it is successfully overcome, the application is allowed and a patent is granted.

Law No. 729 of 1960 as amended governs protection of copyrights in Sweden. The term of copyright protection of a work is for the author's life plus 50 years after the author's death. It includes all literary, dramatic, musical, and artistic works. Copyright includes the sole right to produce and reproduce the work or a translation of it; to publish such a work or translation; to perform it in public; and to authorize others to do so. Sweden is a signatory to various multilateral conventions for the protection of copyrights. It is a member of the Universal Copyright Convention to which the United States and about 60 other countries adhere. Works of American authors copyrighted in the United States are entitled to automatic protection in Sweden. Authors need only show on such works their name; year of publication and the symbol "C" in a circle to obtain copyright protection. Sweden is also a member of the "Berne Union" Copyright Convention and the WTO’s Trade Related Intellectual Property (TRIPS) Convention. Swedish copyright law also protects computer programs and databases. However, there have been complaints from American software companies that the law is ineffective since compliance investigations cannot be instituted without prior notification.

Sweden protects trademarks under the Trademark Act, effective January 1, 1961 and has undertaken to adhere to the 1989 Madrid protocol. Sweden has adopted the Nice International Classification System for registration purposes. Trademark registrations are valid for 10 years from the date of registration and are renewable for like periods. The first applicant for a trademark is entitled to receive a registration and exclusive ownership. However, if another party can prove he was the first user, he may have the trademark canceled and re-registered to himself. After 5 years, a registration becomes incontestable on grounds of prior use. Applications are examined and, if acceptable, published for opposition for 2 months. Swedish or foreign official emblems or words, or markings contrary to public order or good morals cannot be registered as trademarks. A trademark registration may be canceled if not used within 5 years, unless the registrant shows an acceptable reason for non-use. The EEA agreement's Article 4 of Protocol 28 covers the subject of semiconductor chip layout design and protection.

Due Diligence

Credit reports on Swedish companies can be obtained by contacting any of the sources below:

Dun & Bradstreet Sverige AB
Box 1529
SE-172 29 Sundbyberg, Sweden
Tel: 46-8-519 010 00
http://www.dbsverige.se

AB Svensk Upplysningstjanst
Box 244
SE-201 22 Malmo, Sweden
Tel: 46-40-25 85 00
http://www.upplysningstjanst.se

UC AB
SE-117 88 Stockholm, Sweden
Tel: 46-8-670 90 00
http://www.uc.se

UC AB, the Swedish Business and Credit Information Agency, is jointly owned by all Swedish commercial banks. The Commercial Service in Stockholm offers the International Company Profile program which provides you with background reports on potential agents, distributors as well as other Swedish firms.