As we look to take our business, International Jean Company, into the ever expanding global market, its important that we choose locations that are going to fit our needs. This location selection cannot just be random, nor can it be done hastily. Our time learning how to be International Managers have taught us that only through careful research into many topics like the Environment, the Geography and Climate, the Culture, and Communication, can we really have the information necessary to make an informed decision. Therefore, we began to look at Denmark, and extensively researched the strengths, weaknesses, opportunities, and threats that lay before us here.
Denmark is a small country with a population of just over 5 million inhabitants. It has achieved a remarkable degree of economic success over the last 50 years or so. With GDP per head of around $56,000 the country ranks fifth in the world and ahead of both Japan and Germany in terms of purchasing power. This remarkable economic success has been achieved by the Danes thanks, in no small measure, to their pragmatic business style.(1) According to the Ministry of Foreign Affairs of Denmark, it has the most efficient distribution system, the best labor regulations, and the second highest GDP per person. According to Forbes.com, Denmark is the best country to do business in. The Danish economys mix of low inflation and low unemployment along with emphasis on entrepreneurship and lower taxes make Denmark an attractive company to business investors and entrepreneurs. These qualities combined with high marks for innovation and technological savvy lift Denmark to the top of the business world. Denmark is a country that is filled with many small and medium sized, independently owned businesses.
Compared to the rest of the European Union, Denmark has a significantly less amount of large corporations, with the exception of Spain. They are known for their top quality production standards. Danish companies tend to concentrate on highly specialized products with a high margin production and rely more on product innovation and design instead of improvements in production technology and price competitiveness. Many small and medium sized companies are able to have major control over their market because they base themselves in small towns and rely on relationships with the community. This makes it difficult for large corporations to take their market share. Although Denmark has a significant amount of independent businesses that support its economy, it is highly dependent on foreign trade and international cooperation.
Denmark is made up of a highly developed infrastructure, an advanced telecommunications system and a well-educated and stable workforce. Throughout all relevant levels of the workforce, English is spoken and written at an exceptionally good level. This is a very beneficial factor to the role that Denmark plays in the global market. Geographically, Denmark is in the perfect position for international trade. It is in the center of the Scandinavian countries and has easy access to the Northern and Eastern European countries. International surveys show that Denmark has top ratings in transportation, in all modes, energy, communications, and distribution systems.
It is also highly rated in product quality, organizational quality, customer relations, credibility, and social responsibility. Denmarks legal system is very similar to those of other European countries. Foreign business men may find some difficulty in legalities due to the use of civil law system and statutory law. Unlike the common law system used in countries such as the US, the Danish courts are not limited to the strict lettering of the law, but instead the purpose of the statute. This interpretation is also applied to private agreements. Compared to other countries, lobbying of the government is not as common and not as organized as in other countries.
Usually, trade bodies will bring up issues to the government instead of individual persons or companies. The most common forms of companies used in Denmark are Public Limited Companies and Private Limited Companies. Denmark is known for having a high tax rate although when taking to account other costs of doing business (wages, benefits, cost of living, etc.) it balances out. The Danish tax regime relies heavily on direct taxes, such as taxes from labor, but there is little to no dependence on indirect taxes, such as social security and contributions from employers.
Denmark is a significant player in the global market when it comes to social responsibility and ethics. It has the lowest rate of corruption of any other countries in the European Union. It also has very strict government regulations and very beneficial reasons to be socially responsible. Since the 1970s, Danish environmental law has developed as part of public, private and European Community law. The National Agency for Environmental Protection, the National Forest and Nature Agency and the Department of Planning all make up the Ministry of the Environment. The have local and regional councils which are elected by the public and are responsible for environmental and planning procedures that conform to local wishes. Denmark is one of the few countries that have several kinds of green fees and green taxes. This is to motivate companies to use cleaner technologies, resource management, and/or environmental audit and management schemes.
In 2008, Danish parliament passed a bill that forces large corporations to report on their corporate social responsibility (CSR) on their annual report. The Danish companies that have engaged in CSR have reported that it has had a positive effect on the companies. They claim that while it is flexible, it does bring up some legal burdens on them. It is the belief of the Danish government that the legal requirement marks the starting point for increased reporting on CSR, and in the forthcoming years the government intends to encourage progress and improvement of Danish businesses CSR work and reporting. Upon this laws implementation, 1100 companies were required to report CSR on their next annual reports. According to the 2009 reports, 89% of the required companies complied and 3% did not comply (8% complied by default because of being a subsidiary of a company that complied). The most common form of CSR among Danish companies related to environmental and climate issues.
According to International Management, by Helen Deresky, Denmark is tied for the number one spot for the country with the least amount of corruption. This is because the Danish culture has a much more direct approach to business practices. They prefer openness and honesty, which sometimes seems rude to foreigners. It is clear to see that Denmark is ahead of almost all other countries in being Socially Responsible and having sound business ethics. For a new company, good ethics and social responsibility can be a make-it or break-it issue for a company. In one aspect, these issues can cost the company money. When just beginning, you should try to get your costs to be as low as possible. On the other hand, being viewed as an ethical company and by being socially responsible you improve the image and branding of the company.
That will give the public a better perception of the company and can increase the demand for your product. Fortunately, in Denmark, only large companies are legally required to report their activities relating to social responsibility. While it would be a smart choice to make, not having to spend money on social responsibility during the beginning phases of the company will allow ease for penetrating the market and will allow us to be more socially responsible in the future. Overall, Denmarks cost of doing business is about the same, if not lower than other countries, and the benefits of doing business in that country are much more significant. As long as our company helps locals and abides by their cultures and their rules, then the company should be very successful.
Understanding the Role of Culture
Before we can truly consider starting our business in Denmark, we need to understand the culture of the area. The viability of the economy, the labor market, the work environment, are all crucial to our success overseas. Taking the time to build a cultural profile of Denmark can help International Jean understand how to transition our business, and our expatriates to a very new experience.
We begin our cultural profile by looking at the Government and Economic systems of Denmark. The politics of Denmark could best be described as a Social Democracy Though they do have a constitutional monarchy, like England it is a mostly ceremonial position. Elections occur democratically, similar to the United States without the Electoral College, which leads to a more direct representation of democracy. There are very low levels of corruption, not just in Denmark but in the entirety of the surrounding Nordic countries.
As far as picking a market to operate out of, Denmark is a very excellent selection. Denmark has a prosperous, well-developed mixed market economy, ranking 16th in the world in terms of GDP (PPP) per capita. They use the Nordic Model, which is a version of what is traditionally called a welfare state The Nordic Model differs from other welfare states with an emphasis on maximizing labor force participation, promoting wage and gender equality, and a large amount of wealth distribution. A so called welfare state goes hand in hand with wealth distribution, citizens can count on monetary support during periods of unemployment and on welfare. The redistribution of wealth goes towards many societal needs, which will be explained further.
Furthering supporting our transition, Denmark features low barriers to free trade, as well as little product market regulation. In fact, according to OECD rankings, Denmark has one of the highest ratings as far as product market freedom is concerned. We will be able to easily enter into this market, and will have a lot of freedom in regards to product selection, as well as advertising and marketing. This plays into the next few sections of our cultural profile: Kinship and attitudes towards leisure and recreation.
Denmark, similar to most of the Nordic region, is one of the most liberal nations in Europe. They have an open attitude towards sex, nudity, and freedom of expression. As you walk around cities in Denmark, you can find advertising that features risqu situations, and even cursing. The people of Denmark tend to have a darker sense of humor than what were acclimated to here in the United States, and often find ways to poke fun even at traditionally somber topics like death. Though we should be careful of how we utilize humor, both in our advertisements and in our work environment. Though good natured, citizens here tend to intensely dislike any joking at the expense of Denmark and its culture, particularly from outsiders. They are very proud of their country, and their family units reflect this.
Families in Denmark are traditionally tight, well-knit units, who enjoy a good quality of life. They tend to live a relaxed lifestyle with a focus on family and friends. Bicycles are one of the predominant ways to travel around, especially in bigger cities like Copenhagen. We come to a big difference between the United States and Denmark, in terms of the attitude towards work. Whereas most Americans work to live, in Denmark the opposite is true. The Danish are taught from an early age to choose a profession that they would enjoy working, as opposed to a job taken out of financial necessity.
This is reflected on Denmarks scores in G.L.O.B.E/ Hofstede cultural dimension rankings in masculinity, which are very low, as well as Uncertainty Avoidance also being low. This is partly due to the fact that most of the labor market is a part of Trade Unions, as of 2008 Denmark had 67.6% labor union density. There is a partnership between employers, trade unions and the government, whereby these social partners negotiate the terms to regulating the workplace among themselves, rather than the terms being imposed by law. As we transition, we will need to make contact with these unions, and work closely with them to come up with rules and regulations for International Jeans that work for the native population.
Another workplace difference is in the amount of work per week and the vacation time allotted. The Danish work an average of 37 hours a week, generally calling it a day around 4pm local time. Expatriates should be made aware that the Danish are not impressed with managers that work 50-60 hours a week. As mentioned previously, they believe in a balance between work and life, and would view those who worked considerably more hours to be less efficient at their jobs. In the United States, there are no laws concerning paid vacations or time off. To contrast, in Denmark paid time off is actually mandated by law. The Danish usually receive a minimum of 5 weeks of vacation, plus national holidays. These are factors we need to consider when hiring local workers.
Other characteristics of the Danish work environment include high job mobility, as employees and managers are encouraged to take risks and make decisions that a more conservative American manager might not make. In general, Danish company activities are less structured and less formal, which is reflected again by the low score in the Uncertainty Avoidance category. There is a low level of Assertiveness on the Hofstede scale, as the strength of unions and the desire of the Danish to care about their work come together to make a highly productive and group oriented workplace. We would do well to hire a lot of local talent immediately.
We mentioned the large amount of wealth distribution earlier. Denmark ranks highly on the Collectivism scale. Being a social welfare economy, much of that money is poured into both the Educational system as well as Healthcare. The Danish education system provides access to primary school, secondary school and higher education. All university education in Denmark is free; there are no tuition fees to enroll in courses. Danish universities and other higher education institutions offer international students a range of opportunities for obtaining an internationally recognized qualification in Denmark, and many classes are taught in English. Our company should take advantage of this when looking to hire.
In addition to free education, there is also Universal Healthcare for all Danish citizens, paid primarily by taxes. Denmark spends 9.8% of GDP on healthcare. The life expectancy in Denmark is 78.6 years, and there is one doctor for every 294 persons in Denmark. It should be noted, that these social services also leads to a high tax rate for Danish citizens, hovering near 48-49%
Communicating Across Cultures
As we work towards bringing International Jean Co. to Denmark, we need to be aware of the similarities and differences in the way our two countries communicate. The characteristics of that communication, and the interplay between American expatriates and Danish locals will determine how well our new company will function as an overseas entity. We will begin by looking at native language, as well as the amount of English saturation in Denmark.
The native language of Denmark is Danish, with other regional languages such as Faroese, Greenlandic, and German officially recognized. In selecting expatriates, we should look to be choosing managers that are able to speak Danish, or willing to quickly learn. However, we shouldnt feel like the ability to speak the language is mandatory for expatriates. One of the great aspects of setting up our business in Denmark is that there is a very high proportion of Danish citizens who speak English. In the educational system, it is taught as the primary foreign language. English will be spoken and written well by all relevant levels of the workforce. This is further demonstrated by the fact that many commercials and advertisements, as well as trademarks, are used directly in Denmark without translation.
The people of Denmark are, generally speaking, friendly but blunt in their speech with one another. Concerning Hofstede dimensions, they rank very highly in the Humane category. They tend to shy away from confrontation, so our expatriates are going to need to tread softly when it comes to moment of direct communication regarding mistakes or problems. Direct debate is encouraged, but keeping confrontational phrasing out of it is important.
The Danish tend to be very plain speaking when communicating, which can be mistaken for rudeness in other cultures. Our managers need to be aware of this, so they know that they arent necessarily being insulted when talking about work issues. Like the United States, Denmark is a low-context culture. They tend to be direct and explicit when communicating among one another, and tend not to rely on non-verbal communication. They prefer to have direct conversations, either by phone or face-to-face, though increasingly more electronic communication has taken over.
Also like the United States, Denmark is also considered a low-contact culture. They prefer a minimum of an arms length of personal space, and do not enjoy overly aggressive physical contact. Body language is very restricted, which can make interpreting responses and feedback difficult.
Time is another major factor that we as Americans have in common with Denmark. The Danish follow a monochronic time system, which is more linear in structure as compared to polychronic time. Those practicing monochromic time, such as the Danish, tend to complete tasks one at a time as well as adhere to a stricter schedule. We also share similar views on proxemics, or proximity. The Danish see larger offices and more space as reflective of having more power and esteem. The United States and Denmark have a surprising amount of similarities in how we communicate, both in regards to interpersonal communication as well as in a work environment. This should greatly aid International Jean Co. in a smooth transition from the United States to Denmark.
Cross-Cultural Negotiation and Decision Making
The Negotiation Process:
Danish people of business are usually very experienced in interacting and doing business with visitors from other cultures. They pride themselves on their Danish culture and tend to sometimes not be very open to information or assistance from the outside. Similar to many other countries, people of Denmark shake hands upon meeting. This is also the case when departing. It is good to familiarize yourself with the Danish culture before going in full steam. The Danish official language resembles Swedish and Norwegian, and shares a few commonalities with German, but DO NOT remark or even assume that they are similar.
Most businessmen and women in Denmark speak English well, but it is recommended to stay away from using jargon and slang. Danes like to leave space between themselves when interacting, so be aware of others personal space and try not to be too touchy-feely. They usually speak in quiet, gentle tones and interrupting is considered rude. Danes usually do not openly show their emotions. Come well prepared! The Danes are meticulous when it comes to analyzing information and proposals. Know your information and bring in copies for your Danish counterpart to examine. Everything should be well organized and do not steer off topic; straight and to the point.
Business relationships are often only fairly important in the country, and are typically not a needed requirement for initial business interactions. Just like your goal is to get to know ones contacts in a host country and build mutual trust before embarking on business discussion and transaction, your counterpart is also trying to learn about you. Danes are cautious and appear to be reserved and proceed slow. Once the trust is well known, there will be a sense of allegiance to you as a respected business partner. Denmark is a democratic and understanding country. It can be cohesive to criticize other people or systems. Bosses are expected to be team leaders rather than private decision-makers. In the countrys business culture, the respect a person takes pleasure in depends mainly on his or her achievements. Well-liked personal traits include individual initiative, knowledge, and expertise.
To the Danes, negotiation is a joint problem solving process and the buyer and seller in a deal are equal partners. The primary negotiation style is cooperative and they believe in the concept win-win. It is strongly advisable to avoid any open disagreement and to remain calm, friendly, patient, and determined. The Danish believe in information sharing as a way to build trust with their counterparts but this doesnt mean that they are going to say everything. A good part of the communication may be in writing, which Danes often prefer.
They move through things rather quick and are less observant over detail. They strive to conclude negotiations quickly but this does not mean they will readily accept unfavorable terms. Danes do not like bargaining or haggling such that they do not appreciate aggressive sales techniques. They do prefer negotiating in a straightforward and honest style and may use pressure techniques. When persuading your counterpart avoid aggressive tactics and negotiating with the Danish. If confronted, they will not shy away, but this is almost guaranteed to deteriorate your bargaining position rather than strengthen it. It can also eliminate your relationship.
Although a verbal agreement can be considered binding and will most likely be kept, do not consider them final. Only a contract that is signed by the two parties makes up a binding agreement. Written contracts are a serious matter in Denmark. It is best to keep them concise without including too many legalistic details. Signing the contract not only shows your commitment but a strong confirmation of your Danish partners commitment also.
Brunson, Winnon Cultural Perspective: A Year in Denmark 2008
Danish Communication Styles 2012
ET …R I KBENHAVN: FOLKESUNDHED OG KULTUR 2011
The Monarchy today The Danish Monarchy 16, June 2012
ETLA: The Nordic Model
The Nordic Model Nordic Labour Journal: In Focus. 2001
Business Negotiations in Denmark
Business Etiquette in Denmark
Negotiating International Business The Negotiators Reference Guide to 50 Countries Around the World Katz, Lothar. 2007
Doing Business in Denmark Kroman, Reumart. 11 February, 2005.