Young Living's Relocation: Business Environment Analysis in Finland

This report provides a comprehensive analysis of Young Living's business environment, specifically focusing on its relocation and expansion into the Finnish market. The study begins with background information on Young Living, an American multi-level marketing company specializing in essential oils and related products, and outlines its business model and global presence. The report then delves into the Finnish business environment, examining political, economic, social, technological, legal, environmental, and financial factors. It utilizes strategic tools like PESTLE analysis and Porter's Five Forces to assess the competitive landscape, supplier power, customer dynamics, and potential threats. The analysis considers the impact of Finland's VAT rates, strict regulations on cosmetic products, inflation rates, and the growing demand for natural and herbal products. The report also examines the competitive intensity, supplier power, customer preferences, and the threat of substitutes within the Finnish beauty and personal care market. Finally, it offers recommendations based on the findings, providing insights into how Young Living can successfully navigate the Finnish market.

BUSINESS ORGANISATION
AND ENVIRONMENT IN
GLOBAL CONTEXT

Table of Contents
INTRODUCTION...........................................................................................................................1
BACKGROUND INFORMATION ON YOUNG LIVING...........................................................1
BACKGROUND INFORMATION ON BUSINESS ENVIRONMENT.......................................3
Political factors.......................................................................................................................3
Economic factors....................................................................................................................3
Social factors..........................................................................................................................3
Technological factors.............................................................................................................3
Legal factors...........................................................................................................................4
Environmental factors............................................................................................................4
Financial System....................................................................................................................4
ANALYSIS OF BUSINESS SCENARIO BY APPLYING ANALYSTICAL APPROACHES. . .5
Porter Five Forces...................................................................................................................5
Demand and Supply Scheme..................................................................................................6
CONCLUSION AND RECOMMENDATION...............................................................................8
Recommendation....................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Business environment refers to external and internal factors which influence operational
situation of company (Gugler, 2017). Relocating MNC to different country is known as
offshoring where organisation relocate business process from one country to another. Expansion
or relocation of business is a critical process where it is important for the management of
companies to analyse macro and micro environment to gain understanding over strength and
opportunities. Also, when offshoring the main focus of MNC’s is to enhance relationship with
key stakeholders (Valentino and et.al., 2019).
This report is about company Young Living which is multi-level marketing company that
sells essential oils and other similar products. The organisation is headquartered in Lehi, Utah,
United States. The present study will outline relocation of Young living Europe HQ (EMEA)
from Groningen, Holland to Finland. The study is focused on relocation of firm with the motive
of exploring foreign direct investment opportunity in Finland and therefore will outline
information on business environment of Finland with the help of strategical tools like Pestle,
Swot and Porter five forces.
BACKGROUND INFORMATION ON YOUNG LIVING
Young living company is an American multi-level marketing company located in
different regions like London and Holland. The company was founded in 1993 by Donald Garry
Young, who is controversial figure convicted for unlicensed practice of medicine. The company
sells essential oils and beauty and health related products (Cuervo-Cazurra, 2016). The products
of Young living encourage healthy lifestyle and provide opportunities to people across the globe
to follow their aspiration and achieve goals by working on passions and values.
Young living is private limited company and its legal structure can be defined as limited
liability company. The company follows multi-level marketing business model according to
which it can be said that the firm has thousands of independent distributors who sells products
directly to shoppers and their earning is based on commission on sales. The distributors of
company are aligned in hierarchical network that in synch in down lines. The individuals can
earn profit from direct sales but the major money is generated from commission.
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Figure 1: Key members of Young living
(Source: Young Living Essential Oils Lc. 2019)
Size of the company can be justified by its leading position as the organization is known
as leader of essential oils movement with more than 3,000 employees and 4 million members.
The company continues to have extraordinary growth, which is represented in its sales of 2017
which was of $ 1.5 billion. Further. Organization surpassed 41 billion in sales of last three years
which increased its revenue over 800 percent in last five years (Young Living Exceeds $1.5
Billion in Annual Sales for 2017, 2018). Apart from this, Young living can be justified by the
sales of products by its hierarchical network of distributors. In year 2017, distributors of Young
living were assigned responsibility to make $100 of purchase per month to quality for a
commission.
Current international operations
Young living has 16 corporate and partner farms across the globe and have 13 operating
offices in 22 markets and produces and ships in 133 countries. The company is known as world
leader and in recent years the company has increased its global presence ad is continuously
focused on expansion (Kaplan and Kinderman, 2017). Like Young Living (European HQ) has
recently moved from London to Holland in the light of a No-Deal Brexit and is now planning
expansion of its European business in Finland.
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BACKGROUND INFORMATION ON BUSINESS ENVIRONMENT
Political factors
Political factors determine the extent to which the government of a country influence the
working of a company. It involves tax rates, subsidies and other tariffs charged by the
government on the foreign company. The VAT rate on cosmetic and natural beauty products in
Finland is 24% which is very high therefore it is imperative for the Young Living company to
price its products accordingly. Moreover, the country has strict policies regarding the use of
chemicals in cosmetic and essential oil products therefore it is essential for Young Living to
specify the ingredients used while making the finished products.
Economic factors
Economic factors of a country have a strong impact on the working of both foreign as
well as local companies. It includes exchange rates, foreign direct investment, inflation rate and
growth patterns. The current inflation rate in Finland is 1.1% as compared to 3.3% average rate,
thus it indicates a positive sign for the Young Living company as it would help them to enter into
the new market easily. The exchange rate of an euro also compares to 1.09 USD which is
comparatively high and as a result the organization needs to restructure their prices. Also, the
Beauty and personal care industry in Finland is just valued at $863 million which clearly states
that it has very few players in that sector and there is scope for Young Living company to grow
(Vetvicka and Vetvickova, 2016).
Social factors
Social factors are concerned with people's beliefs, culture, their attitude towards the
product and buying capacity. It is imperative for the company to identify their target customers
in Finland on the basis of age and gender and then sell them accordingly. Young living
(European HQ) must perform ethical activities and should disclose all the information regarding
the manufacturing of products in order to increase their customer share as well as build their
brand image. The companies must not test their products on animals as it is unethical.
Technological factors
In today's dynamic environment, it is important for every company to use modern and
updated technology if they wish to maximize their profits. Finland is considered to be one of the
most technologically advanced countries in the world and thus can be beneficial for the company
as they can use Finland's upgraded technology in order to increase their profits and minimize
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their overall costs. On the other hand, Young living (European HQ) must also adopt competitive
pricing if they wish to increase their market share (Leppänen, 2015).
Legal factors
Legal factors of the country are the most important factors as they affect the overall
working of a company. Every country has different rules and regulation therefore it is essential
for the company to follow them in order to ensure smooth working of the business. Finland's Act
on Cosmetic Products (492/2013) states that the company must not use any hazardous or toxic
chemicals in their essential oils or beauty products a they can be harmful for the human skin.
Furthermore, the Act on the Protection of Animals used for Scientific or Educational Purposes
(497/2013), bans the testing of human care products on animals and birds. Young living
(European HQ) must adhere by these laws otherwise they might have to face legal consequences.
Environmental factors
Finland has always been strict about the use of eco-friendly products and the government
of the country has always promoted green lifestyle towards the citizens and other businesses
therefore Young living (European HQ) must follow proper measures in order to take care of the
environment. The company must also use sustainable and recycled materials in order to preserve
the atmosphere. Also, they must avoid using plastic bottles as it would be beneficial for the
nature and would also help them in image building (Söderholm and et.al., 2015)
Financial System
Finland has high industrialized mixed economy with per capita output similar to other
Western European economies. The largest sector of the economy is services which comprise
72.7 %, followed by manufacturing and refining which is 31.4 %. It is predicted that the personal
care industry is expected to grow at a steady rate over the next few years. Also, the total revenue
in this industry amounted to $1,055 million for the year 2019, in Finland and is expected to grow
at a rate of 1.3% annually up to 2023. The United States is the current market leader in beauty
industry on term of revenue. Although, the Finnish beauty care market is comparatively smaller
but with the increasing demand for natural and herbal products, the industry is said to grow
incessantly over the coming years therefore, it is a good opportunity for Young living (European
HQ) company to become successful in Finland by providing natural and herbal essential oils to
the customers. Also, it would help Young living (European HQ) in establishing their brand
image in the Finland market.
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ANALYSIS OF BUSINESS SCENARIO BY APPLYING ANALYSTICAL
APPROACHES
Porter Five Forces
Porter' five forces were developed by Michael E. Porter and they focus on different ways
in which a company can achieve competitive advantage and sustain different levels of
profitability.
 Competition in the industry: It refers to the number of competitors operating in the
cosmetic and beauty industry. More the number of competitors, the less the share of the
company. The beauty and body care industry in Finland is hugely populated with several
players operating in their industry. Also, recently it has been found that people of Finland
prefer using products made up of natural ingredients thus if Young living (European HQ)
company wishes to succeed in the international market then they must produce
organic/vegan and herbal products. Threat from rivalries to Young living (European HQ)
in Finland is high.
 Power of suppliers: Suppliers play a crucial role in determining the success and growth of
a company. There exist various suppliers in the industry and it is the duty of the company
to identify the perfect supplier for them that provide good quality materials at a
competitive price. Also, Young living (European HQ) must negotiate with the supplier or
give bulk orders in order to receive discounts. Choosing the right supplier can prove
beneficial for the company in the long run as it would help them in delivering quality
products at competitive prices. Some of the major beauty products suppliers in Finland
are Flinkenberg, Detria and Muoviteollisuus ry (Kröger and Raitio, 2017).
 Power of customers: Customer is the king of the market and if any company wishes to
succeed and achieve their organizational goals and objectives effectively then it is
compulsory for them to identify the needs and wants of the consumers. The customer
base in Finland have shifted their preference to the use of essential oils made up of vegan
or natural products. Therefore, Young living (European HQ) must also focus on
producing materials extracted from natural sources like coriander, sunflower oil and
geranium. This will help them in providing maximum customer satisfaction and also
increase their overall revenue (Huang, 2016).
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 Threat of substitutes: Substitutes are the players that provide similar quality goods and
services as the company in the same market. With the increasing competition, the threat
of substitutes has also increased in Finland therefore it is important for Young living
(European HQ) to provide unique products at competitive prices in order create their
separate entity. The organization can also build economies of scale in order to decrease
their overall cost. There are various substitutes available in the Finland market offering
the same quality goods and services like L'oreal, Lumene, Olivia Klein and Henua
Organics and several others.
 Potential of new entrants into the industry: Since, the personal care industry is one of
the fastest growing industries not only in Finland but in the entire world therefore it
induces a lot of players to enter into this sector with the motive of profit maximization.
Also, with the minimum inflation rate in Finland, it has become easier for the new
players to enter therefore the only way to counter the threat of new entrants is by
spending more money on research and development in order to manufacture an
innovative product (Jha, 2015).
Demand and Supply Scheme
Demand and supply scheme denote the relationship between quantity of a commodity which
the company wants to sell at different prices and the quantity which buyers wish to buy.
Figure 2: Growth Trends in the Domestic Industry
(Source: Personal Care & Cosmetics Products the Nordic Region, 2018)
Nordic region consists of Norway, Sweden, Denmark, Iceland and Finland. As per the study
the region consists of total population of 26 million among which 5.5 million population is of
Finland. The region has combined market of personal and beauty products of over $5 billion in
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which Finland has market size of $863 million (Personal Care & Cosmetics Products the Nordic
Region, 2018). Finland has challenging economic condition but still the sales of pharma products
continues to grow because Finland is Nordic neighbor where people have sensitive skin and
therefore demand of quality products like bath, sun care, make has growth opportunity. In
accordance with this, it can be said that demand for personal care products in Finland is based on
quality of supply of products and therefore Young living (European HQ) has foreign direct
investment opportunity in market to Finland. Also, in Finland premium pharma brands are
experiencing rapid growth regardless of economic impact on cosmetic products. As per this, it is
outlined that demand for personal care products is never ending and therefore business
environment of Finland offers stable relocation of MNC.
Figure 3: Cosmetic Market in Finland
(Source: Organic and natural cosmetics in Finland, 2018)
On the other hand, it is identified that society of Finland believes in living in harmony and
therefore people are environment focused. The consumer of Finland for environmentally friendly
products and packages. The buyers aim at reducing the use of additives, synthetic ingredient and
chemical. Demand of personal care product in market of Finland can be managed by developing
story behind every product and essential oil (Organic and natural cosmetics in Finland, 2018).
The Finnish shoppers are more focused on story behind the product of company as it helps them
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in understand its proper use and quality. Hence, the demand and supply of product depend on
consumer preferences and thus Young living European HQ will control demand and supply of
Finnish buyers by creating competitive market with regard to quality of personal and health care
products.
From the analysis of business environment and scenario, it can be said that, Young living
European HQ have opportunity to diversify their activities in the Finnish market by identifying
customer needs and wants, performing market research and then developing a unique product
through research and development. PESTLE analysis is extremely important for the growth of
the company because it would help them in identifying the market trends, use of technology,
social and other legal factors. Also, Porter's five force analysis has further helped the business in
identifying ways to achieve competitive advantage and profit maximization by analysing the
competitors, substitutes and target customers in the market (André and Hwang, 2018).
Moreover, the essential oils sector just comprises of 8% in the total beauty industry thus
the company holds the potential to grow if they adopt unique production methods and sell them
at competitive prices in the market. They must also keep an incessant check on their competitors
and set the prices accordingly (Tredinnick-Rowe, Taylor and Tuohino, 2018).
CONCLUSION AND RECOMMENDATION
The report summarised business environment of Finland with the help of Political, legal,
social, economic and environmental factors from where it is outlined that Young living
(European HQ) has growth opportunity but the company have focus on quality of products and
appropriate marketing. Thus, it concluded with demand and supply scheme and industry
competition which can be faced by Young living (European HQ) when relocating in Finland.
Recommendation
 Marketing of Young living (European HQ) in Finland will be of major concern and
therefore it is important for the Young living (European HQ) to focus of ethical labelling
and packaging of products when expanding in Finland. Consumer products of Finland are
labelled in Finnish and Swedish (Personal Care & Cosmetics Products the Nordic
Region, 2018). Thus, at the time of expansion the marketing company should label and
market its products in Finnish.
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REFERENCES
Books and Journals
André, C. and Hwang, H., 2018. Tax reform to support growth and employment in Finland.
Cuervo-Cazurra, A., 2016. Multilatinas as sources of new research insights: The learning and
escape drivers of international expansion. Journal of Business Research. 69(6). pp.1963-
1972.
Gugler, P., 2017. Emerging countries’ country-specific advantages (CSAs) and competitiveness
of emerging market multinational enterprises (EMNEs). Competitiveness Review: An
International Business Journal. 27(3). pp.194-207.
Huang, H.Y., 2016. Essential oil diffuser. U.S. Patent Application 29/540,170.
Jha, M., 2015. The global beauty industry: Colorism, racism, and the national body. Routledge.
Jung, N., Moula, M.E., Fang, T., Hamdy, M. and Lahdelma, R., 2016. Social acceptance of
renewable energy technologies for buildings in the Helsinki Metropolitan Area of
Finland. Renewable energy, 99, pp.813-824.
Kaplan, R. and Kinderman, D., 2017. The business-led globalization of CSR: Channels of
diffusion from the United States into Venezuela and Britain, 1962-1981. Business &
Society. p.0007650317717958.
Kaufman, G.N. and Min, D., 2019. AN ANALYSIS OF THE SCRIPTURAL
COMPATIBILITY OF THE USE OF ESSENTIAL OILS BY THOSE WHO PROCLAIM
FAITH IN THE CHURCH AGE. aletheias, p.228.
Kröger, M. and Raitio, K., 2017. Finnish forest policy in the era of bioeconomy: a pathway to
sustainability?. Forest policy and Economics, 77, pp.6-15.
Leppänen, A., 2015. Crowdfunding in Finland.
Söderholm, K. and et.al., 2015. Environmental regulation and competitiveness: Permitting
processes with special focus on Finland, Sweden and Russia. Resources Policy, 43,
pp.130-142.
Tredinnick-Rowe, J., Taylor, T. and Tuohino, A., 2018. Public Health and Well-being
Innovation in the Natural environment Sector: Lessons from the UK and Finland.
Valentino, A. and et.al., 2019. Leaving home: An institutional perspective on intermediary HQ
relocations. Journal of World Business. 54(4). pp.273-284.
Vetvicka, V. and Vetvickova, J., 2016. Essential oils from thyme (Thymus vulgaris): chemical
composition and biological effects in mouse model. Journal of medicinal food.19(12).
pp.1180-1187.
Online
Organic and natural cosmetics in Finland. 2018. [PDF]. Available through: <
https://finnpartnership.fi/wp-content/uploads/2018/11/Organic-and-natural-cosmetics-in-
Finland_FINAL.pdf >.
Personal Care & Cosmetics Products The Nordic Region. 2018. [PDF]. Available through: <
file:///C:/Users/user/Downloads/Nordic%20Region%20Personal%20Care%20and
%20Cosmetics%20Country%20Guide_FINAL.pdf>.
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Young Living Essential Oils Lc. 2019. [Online]. Available through: <
https://www.bloomberg.com/profile/company/5041437Z:US>.
Young Living Exceeds $1.5 Billion in Annual Sales for 2017. 2018. [Online]. Available through:
< https://markets.businessinsider.com/news/stocks/young-living-exceeds-1-5-billion-in-
annual-sales-for-2017-1019104603>.
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