Financial comparison of Finland and China

Introduction

We could never choose the place we born but we could always dream the place we live which a place that we all are aspire to. As the reason, “Newsweek” a second largest news weekly magazine in America has study a special issue for the purpose of the best countries in the world to fulfill the need of the world audience (Wikipedia, 2010). Therefore, where is the place that people are aspiring to? The answer is base on a country that provide many factors to ensure the national well being which people are healthy, educated, have a high quality living condition, nation are enjoy the economic competitive and also a stable political environment. All these 5 categories are the measurable of the best country of the world that set out by the Newsweek magazine and also had been study across 100 nations in the world. So, it means that it was an applicable data that represent all to conclude one country as the place that every people are looking for and every nation should be learning for.

P.E.S.T.E.L Analysis —- Finland

By using PESTEL analysis, we will able to realized and find out the opportunity and threat lie in the Finland. PESTEL is a useful and orientation tool for us to enlarge the “big picture” of the environment in Finland. Therefore, we are able to understand the sustainability, potential and prospect, risk and threats, challenges of Finland.

Political Factor

Finland is a parliamentary republic country and conducts a semi-presidential parliamentary system. Every resident has their right to vote in municipal election and in the European Union election. Finland has a central government based in Helsinki. Besides that, it has local governments locate in 342 municipalities.

Finland’s president Martti Ahtisaari was awarded the Nobel Peace Prize in 2008. It had proved that Finland is a cooperative model state. The award is strengthening Finland’s image and reputation of their stability political system. Moreover, it has builds a strong confidence to all the foreign investors and motivate them to invest in Finland. The award will bring long run profitability to Finland as well.

Political risk comprises the stability of the government and stability, the effectiveness if the government economy policies, the efficiency of the government bureaucracy and appropriateness, the effectiveness international relationship, and the reliability and integrity of legal system.

In a research conduct by A.M. Best Company (2009), it had show that the political risk in Finland is very low. There is because The European Central Bank had cut down the interest rates to Finland. The purpose of this action is to spur the economy activities and raise the demand in Finland. Besides that, the Finnish government is conducting fiscal policy in same time. By this way, Finland will able to afford this level of economy stimulus and avoid of large deficits. This is very important for a country to lower down their political risk. This is because an inefficiencies government, inadequate legal system, societal tensions or international tensions will cause adversely developments for a country.

Economic Factor

Helsinki is the central government in Finland and almost one million of Finns live at there. Moreover, a third of the country’s GDP is produced from there.

Economic risk can be assess by evaluate the weaknesses in a country’s economy. The domestic economic, government finances, international transaction, prospects for growth and stability of the country might affect the development of the country’s economy.

Finland’s economy is primary supported by manufacturing field including woods, metal and electronics. Another main economy activity to support Finland economy is Export. Finland has own high technologies knowledge and produces a lot of high-tech products, especially mobile phones. It is one of the main high-tech products producers in the world as well.

Most of the Europe is experiencing economy contraction. Since the global economy has slow down, the occurrence of negative performance of Finland in the economy fields was affected by this as well. The demand of Finnish exports have decline and loss of profitability has affect many of local business and also foreign investors. Most of the economists have expected that the current recession is considered to be long and sharp. The economy of Finland is expect to be continuing contract and might not return until 2011. However, the economic risk of Finland is still low while comparing with other developed countries.

Social Factor

The social security of Finland is well known in the world. All of their residents are guarantee with decent living condition. Finland had one of the world’s most extensive welfare systems for all of their residents in the late of 1980s. However, the social security had been cut back nowadays. It still consider as the most comprehensive social security in the world.

In the other hand, the health care system provides by Finnish government is one of the most decentralized and highest level in the world. It is quite closest to all other Nordic countries and UK. The health care system covers the whole country’s population. In additional, the health care service are mainly provided by government and the public sector and all the financed through general taxation. The municipalities will take the responsibility for arranging and taking all the financial responsibility for whole range of “municipal health services”. Therefore, all the residents in Finland no need worry about their financial problem for their health services.

The performance of education system in Finland is well and springs directly from education system as well. Finland government will prepare sustainable funding to ensure free education for all the students. For example, the government will took care of all the tuition fees, warm school meals, learning material, textbook, transportation, new equipment and new facilities. Besides that, all the teachers must qualify a master degree. Finnish government believes that “Investment in people is the best investment” and educational is the critical driver of economic growth. Finnish government is substantially investing a lump sum of money in education and research to foster innovation and cutting-edge development. Their purpose is to make their country become more competitiveness.

Technological Factor

Since and Technologic of Finland is very well known and very high level in the world. Finland can be described as the Europe’s technologic leader. It moved from playing catch-up to being the forefront of development in the Technologic field over the past 10 years.

Finland was gave birth of the mobile phone leader, Nokia. It has also emerged as a place where multinationals like to recruit and erect labs. Nowadays, the government and local entrepreneur has preparing for the development of clean technology.

The Prime Minister of Finland, Matti Vanhanen (2008), had explained that they cannot compete with other Asia company with low wages, but they will move faster than them and make the possibility to stay a few steps forwards. He has also said that Finland had spent almost 3.5% of their gross domestic product in the development of R&D. It is to ensure they always be the first developer and forwarder and be more competitive.

Moreover, Finland maintains a good relationship between public and private funding. Two-third of the R&D funds in Finland come from private sector and one-third come from the government. However, there is not existing of state’s role to determine where the money should go. It has to be market oriental. Finland has a well management in their development funds and use it widely in developing their country’s Technology.

Environment Factor

Finland, officially Republic of Finland is a Nordic country situated in the Fennoscandian region of the Northern Europe. Finland is the eighth largest area of country in Europe. However, it is the most sparsely populated country in the European Union and only around 5.4 million people reside at there.

Finland is very well known and provides many good examples in protection of nature environment. High level of technologic skills and wide raging and detail environment data of Finland is the main reason of their success in protecting nature environment. These had help Finland in forming their country’s environmental protection policies and be more effective in functioning.

Finland is the world’s wealthiest industrialized country. Therefore, they have enough funds and able to afford the costs for vital environmental investment. Finnish government had put in a lot of effort in solving pollution problems. Many polluted lakes and rivers had been cleaned up. Moreover, the air quality around the industrial area had been improved greatly. In the other hand, the forests in Finland are treating as their most valuable and treasure resource in their countries. So, they put a lot of effort to sustain the natural resources. As a result, the overall annual growth rate of the forest had exceeds the total timbers harvest.

However, the greenhouse gas emission had quickly warming up the climate in Finland. The occurrence of cold winter in southern Finland was becoming a rare phenomenon in Finland as well. Some of the scenarios have expected that the mean degree in Finland will be increased by 3 to 7 degrees Celsius before 2100s. Moreover, they also anticipated that the temperature in winter will rise more than in summer. Finland will have less snow but more rain. Therefore, Finnish’s environment administration will suggest forming a new regulation on requirements for exhaust gases for heavy vehicles, a reform of requirements from emissions from large combustion plants, and a proposal on national upper limits for certain emissions.

Legal Factor

The Constitution in Finland has state that everyone has the right to have their case heard by the court or an authority appropriately without any undue delay. The Finnish court is divided into two courts, which are general court and administrative court.

The general court is mainly deal with civil suits and criminal case. In the other hand, the administrative court is regulating the actions of the administration and litigations between individuals and administration. These two courts was divide in 1918s and also be the two highest courts in the Finland.

Finnish laws has no imposes general restriction on foreign investment. Foreign entities are able to acquire the shares and assets in Finnish company without any permission and approval from Finnish authorities.

In the other hand, Finnish will apply Finnish Employment law for all the employment in Finland. Employment Contract Act has regulate the all the matters between employers and employees. It wills interpretation of individual employment contracts, claims based on individual contracts, the rules on the job protection and numbers of basic rights and duties of the parties, such as equal treatment, transfer of undertaking, family leaves, payment of wages, compensation for groundless termination and many more.

P.E.S.T.E.L. Analysis —- China

Political factor

China, also called Republic of China. Political framework for China is dual leadership system which exercised through the communist party of China and the central people’s government. In china, people’s Congress members at the county level are elected by voters. For every five year term, China president and vice president will be elected by people’s congress. Meanwhile, for the state council will be appointed by people’s congress as well.

To obtain nationality of china is difficult according the nationality law. As a China citizens who are not allow to hold a multiple citizenship. In the aspect of motivation by government, China maintains a well diplomatic relationship with other foreign country. It participate many international organization participation such as World Trade Organization (WTO), Group of 77 (G-77) and many so on. Inter-country attitude was stable and no war occurs between other. This will leads to encourages many other foreign country invest to China.

Currently, China faced some territorial disputes before. Taiwan is one of the examples which successful obtain by China. Taiwan people desire to build up the linkage such as direct transportation system with mainland China for extends their Taiwanese business.

As overall for political factor, China government leadership and structures are well being currently. The political trends of China became better as before revolution.

3.2 Economic factor

Economic factor is the most crucial factor part determines the overall environment. For china’s economic growth, it economic keep growing rapidly due to their open for outside world which are welcome other foreign country to investment (large scale capital investment such as opening its banking sectors) and productivity growth. Besides that, China’s governments are investing into developing the education and technology aspect. This enhances the sector of technology changes. Last but not least, China tend toward urbanization which became an important driver among the globalization market demand and produced a low cost market for other foreign country tend toward invest in China.

China is the bigger population in the world which around 1.3 billion people. This population factor influence the spending levels. Compare with other country, China government are invest a huge capital in technology factor and at the same times, people purchasing power are strong as well. China average annual growth about 6 percents and next of the 20 years will allow China revolution became high income nation (Lou, 2010).

In the taxation part, China implements those basic taxes such as business tax and income tax. For the international taxation, China is corporate with 46 countries which sign up the double taxation agreement. China’s trade pattern continues to grow dramatically, the size of the export and imports keep increasing. China is one of the ASEAN members so that for the tarries and barriers within the country will reduce. The top trading partners for China are European, United State, Japan, and Hong Kong.

Nowadays, China GDP slows to 9.6% in the third quarter of the year 2010. The unemployment rate in China was last reported at 4.20 percent in March of 2010 and the inflation rate increase to 3.60 percent in September of 2010.

3.3 Social factor

China demographics Overpopulation problem causes many economic crises like lack of food, water and other basic amenities. As a result of its aging population, China’s government introduces the one child campaign due to the ever growing population of China. Government is trying to control the population by allowing just one child per family. It controls family size and the overpopulation problem. As estimated, population will shift in future which decline from 9 in 2006 to 2.5 by year 2050 according to the Washington.

The lifestyle changes and the living standard increase in China. This is because that China toward the urbanization. Furthermore, China’s economic growth rapidly recently years. Besides that, governments invest to the education industry boost up the individual became knowledgeable. This will increase the opportunity of working for an individual. On the other hand, many foreign direct investments in China provide more opportunity of occupation for China’s citizen. From this, the high income nation will achieve in future, so that individual purchasing power will increase to enjoy a more quality lifestyle.

3.4 Technology factor

Technology changes rapid throughout the world. Innovation with technology compliance will increase the China own productivity and reduce the exports of growth. By implement advance technology, more information can be gain by the country and will discoveries more new advantages like manufacturing advances, new research, and transportation infrastructure can be more convenience by using high technology implement. Science aspect like energy fuels usages, bio-tech, genetics, agri-tech all can be benefit through this factor.

Many country advocate save the world by recycling. By using advance technology, goods can be done by using those used product and process a new product to the society. At the same time, recycling can be done. Most of the company will choose China as the production plant, so that, advance technology will be imports in China and at the same time, new technology able help to save much cost.

3.5 Environment factor

There many external factor been catogories in enviromental factor such as change of weather, and climate changes, which might impact many industries such as tourism, farming, and insurance. Furthermore, increasing awareness of these potential impacts of climate changes are changing how a company operates.

The enviromental factor are can not be amendment by China itself. It depend other external enviroment like the enviromental regulation swhich is the rules or regulation that set by other country like tariff and quota. However, there are some country will do protection onward their own product.

The Environmental Performance Index (EPI) is a way in quantifying benchmarking the environmental performance of a country’s policies. According to 2010 environmental performance index, China score 49.8% of EPI and 58.7% of environmental health. Among the Asia country, China get the 18th places of its. One of the major reasons due to many industry factories builds at their effect the environment health. The air pollution of environmental health in China is at the 40.07%.

3.6 Legal factor

Legal factor include regulatory of the country. Company which analysis by this PESTEL analysis is to determine the strategy should be implementing on that. As china, employment rate fluctuant small. Employer will choose to have a factory at China that might due to low cost labor if compare with other country. Major law in employment law is the labor law which is to protect labor benefits. According that, included all penalty, the standard working hours and the overtime minimum payment for ensure employee able get the benefits that should obtain.

Furthermore, many companies decided invest their business in China and built up their industry and factory.Therefore the industry specific regulation to protect China’s industry. Competitive regulation such as implement the taxes on foreign good to protect own good comparison.

Comparison Between Finland vs. China

4.1 Political Factors

The ranking of the Finland under the categories of political environment is number five over the world and it shows that Finland is really a stable country (Newsweek, 2010). However, the ranking of the China is number ninety three which a very huge different between Finland and it shows that China is really unstable due to the position of China in the world is really influential and every little single action that china going to do will definitely affect many countries (Newsweek, 2010). Therefore, no matter the political environment outside or inside the China there are all unstable and full of risk. Although, china political environment is unstable but there are still lots of investor fight to go in the market to do business and this shows that the investor are interested in high risk high return business. Besides that, Finland is a parliamentary republic country and China is a communist country (Wikipedia, 2010). The government system between Finland and China are difference which Finland is adopts semi-presidential parliamentary system and China is adopt dual leadership system. Other than that, the election system is also difference which Finland’s resident has the right to vote in municipal election and China’s resident has the right to vote for people congress’s member after that the people congress’s member will represent all to vote for the election.

4.2 Economic Factors

The ranking of Finland under the categories of economic dynamic is number eight and China is number thirteen all over the word (Newsweek, 2010). In this categories, the difference between two counties are closer it is because China is a world’s second largest economy, even though the political stability of China is week but in this economic categories it seem to not much affection. For Finland, the economy is primary supported by manufacturing field and then the finished goods will be export to other countries. So, it means that export is playing a very important role in Finland’s economy. Furthermore, Finland is expert in produce high-technology product because they own the knowledge and the skill which is difference from other countries and other countries cannot be comparing. On the other hand, China is a strong economic country which growing rapidly if compares to Finland which economy continuing contract it shows that the threat of china is how huge. The China government is emphasize in expand the technology aspect it answer the question why China improve so much and the economic growing so fast.

4.3 Social Factors

Social factors include education system, health care system and etc. The ranking of Finland under the categories of education is number one which means that Finland having a well and complete educational system in the world (Newsweek, 2010). The government is concern the education of their residents and provide free education for all students because they believe the human resources is the competitive advantage of their country. However, for China which under the education categories is number sixty one it means that the China education system is not that well because China has too many people and every residents are hard to get the limited seat of highest education opportunity if compare to Finland (Newsweek, 2010). So, the difference between Finland and China is Finland’s residents are having equal high education opportunity but China’s residents are not because the population of China is too large.

4.4 Technological Factors

Finland was the Europe’s technology leader which had world class technologic knowledge and skill that others countries cannot be compare. Besides that, the R&D of Finland is very important, they spend a lots of money in this area because want to keep faster than other countries. So, Finland was wanted to maintain good relationship between all public and private funding to ensure that the high technology development going smoothly as their competitive advantage. On the other hand, China is also concern in term of improves the technology but more likely involve in science aspect which are bio-tech and etc. Besides that, China is encourage other countries bring in the advance technology, so that, China can be acquire the new technology at the same time.

4.5 Environmental Factors

Finland is a developed country which concern in protection of nature environment by develops high level technology and skills to prevent the pollution. And also Finland government has set out several protection policies to run through the program and make it more effectiveness. Besides, Finland is also concern about the lakes and rivers by introduce many policies to prevent such as clean up the lakes, improve the air quality around industrial area and etc. However, in China the pollution matter is serious and it definitely cannot compare to Finland’s environment condition. Because China is a developing country which many factories are build up but the owner of the factories are lack of the knowledge/awareness to protect the environment, so that, it lead to pollution in China become more seriously after all.

4.6 Legal Factors

The legal environment of Finland toward foreign investment is no imposing any restriction. On the other hand, the legal environment of China toward the foreign investment is difference from Finland which China government has imposed specific regulation to protect China’s industry. Besides that, Finland will apply Finnish employment law to regulate both the employer and employee. And also China has their labor law which take care the benefit of the labor. All the labor law among difference countries is all same in nature which wants to ensure that the employer and employee’s benefits.