Franchising in Norway: A Strategic Reference, 2006

How to Strategically Evaluate Norway Perhaps the most efficient way of evaluating Norway is to consider key dimensions which themselves are composites of multiple factors. Composite portfolio approaches have long been used by strategic planners. The biggest challenge in this approach is to choose the appropriate factors that are the most relevant to international planning. The two measures of greatest relevance to franchising are “latent demand” and “market accessibility”. The figure below summarizes the key dimensions and recommendations of such an approach. Using these two composites, one can prioritize all countries of the world. Countries of high latent demand and high relative accessibility (e.g. easier entry for one firm compared to other firms) are given highest priority. The figure below shows two different scenarios. Accessibility is defined as a firm’s ease of entering or supplying from or to a market (the “supply side”), and latent demand is an indicator of the potential in serving from or to the market (the “demand side”). Framework for Prioritizing Countries Demand/Market Potential Driven Firm Relative Accessibility Accessibility/Supply Averse Firm In the top figure, the firm is driven by market potential, whereas the bottom figure represents a firm that is driven by costs or by an aversion to difficult markets. This report treats the reader as coming from a “generic firm” approaching the global market - neither a market-driven nor a cost-driven company. Planners must therefore augment this report with their own company-specific factors that might change the priorities (e.g. a Canadian firm may have higher accessibility in Canada than a German firm). Latent Demand and Accessibility in Norway This report provides a detailed overview of factors driving latent demand and accessibility for franchising in Norway. Latent demand is largely driven by economic fundamentals specific to franchising. This topic is discussed in Chapter 2 using work carried out in Norway on behalf of American firms and authored by the United States government (typically commercial attachés or similar persons in local offices of the U.S. Department of State). I have included a number of edits to clarify the information provided. Latent demand only represents half of the picture. Chapter 2 also deals with micro-accessibility for franchising in Norway. I use the term “micro” since the discussion is focused specifically on franchising. Chapter 3 deals with macro-accessibility and covers factors that go beyond franchising. A country may at first sight appear to be attractive due to a high latent demand, but it is often less attractive when one considers at the macro level how easy it might be to serve that entire potential and/or general business risks. While accessibility will always vary from one company to another for a given country, the following domains are typically considered when evaluating macro-accessibility in Norway: Openness to Trade in Norway Openness to Direct Investment in Norway Local Marketing and Entry Strategy Alternatives Local Human Resources Local Risks Across these domains, a number of not-so-obvious factors can affect accessibility and risk. These are covered in Chapter 3, which is a general overview of investment and business conditions in Norway. Chapter 3 is also presented from the perspective of an American firm, though is equally applicable to most firms entering Norway. This chapter is also authored by local offices of the U.S. government, as is Chapter 2. Likewise, I have included a number of edits to clarify the provided information as it relates to the general strategic framework mentioned earlier.

1 INTRODUCTION & METHODOLOGY 1 1.1 What Does This Report Cover? 1 1.2 How to Strategically Evaluate Norway 1 1.3 Latent Demand and Accessibility in Norway 3 2 FRANCHISING IN NORWAY 4 2.1 Latent Demand and Accessibility: Background 4 2.2 Latent Demand: Market Composition 4 2.3 Latent Demand: Market Data 4 2.4 Latent Demand: Leading Segments 6 2.5 Key Suppliers 6 2.6 Accessibility: Market Entry 6 2.7 Market Issues and Obstacles 7 2.8 Accessibility: Trade Events 7 2.9 Key Contacts 7 3 MACRO-ACCESSIBILITY IN NORWAY 9 3.1 Executive Summary 9 3.2 Economic Fundamentals and Dynamics 9 3.2.1 Government Intervention Risks 9 3.2.2 Trade Barrier Risks 10 3.2.3 Infrastructure Development 10 3.2.4 Major and Third Country Competitors 10 3.3 Political Risks 10 3.4 Marketing Strategies 11 3.4.1 Market Organization 12 3.4.2 Language 12 3.4.3 Creating a Sales Office 12 3.4.4 Major International Accounting Firms in Norway 13 3.4.5 Taxes 13 3.4.6 Advertising Options 14 3.4.7 Agency Agreements 15 3.5 Import and Export Regulation Risks 17 3.5.1 Technical Standards 17 3.5.2 Labeling Issues 19 3.5.3 Samples and Carnets 19 3.5.4 Advance Rulings on Classification 20 3.6 Investment Climate 20 3.6.1 Openness to Foreign Investment 20 3.6.2 Foreign Investment Legislation 21 3.6.3 Investment Incentives 22 3.6.4 Discriminatory or Preferential Export/Import Policies 22 3.6.5 Conversion and Transfer Policies 23 3.6.6 Expropriation and Compensation 23 3.6.7 Dispute Settlement 23 3.6.8 Performance Requirements 23 3.6.9 Right to Private Ownership and Establishment 23 3.6.10 Intellectual Property Risks 23 3.6.11 Transparency of the Regulatory System 25 3.6.12 Capital Market Risks 25 3.6.13 Political Violence 25 3.6.14 Corruption 26 3.6.15 Bilateral Investment Agreements 26 3.6.16 OPIC and Other Investment Insurance 26 3.6.17 Labor 26 3.6.18 Free Trade Zone Options 27 3.7 Trade and Project Financing 27 3.7.1 Exchange Control Risks 27 3.7.2 General Financing Availability 27 3.7.3 Financing Export Strategies 28 3.7.4 Major Norwegian Banks and U.S. Banks Operating in Norway 28 3.8 Travel Risks 29 3.8.1 Infrastructure for Conducting Business 29 3.8.2 Country Data 30 3.9 Key Contacts 31 3.9.1 Major Norwegian Trade Associations 32 3.9.2 Selected Norwegian Ministries and Organizations 33 3.9.3 Market Research Firms 35 3.9.4 Commercial Banks 36 4 DISCLAIMERS, WARRANTEES, AND USER AGREEMENT PROVISIONS 37 4.1 Disclaimers & Safe Harbor 37 4.2 Icon Group International, Inc. User Agreement Provisions 38

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