Factor (Input) Conditions:
Icelandic businesses enjoy good infrastructure, efficient ports and airport, and a modern
telecommunication system. Internet penetration and computer literacy is among the highest in the
world
Political Stability where in GCR 2006 (1st pillar element such as government, Business, Firm, Corporate
and judicial indicator ranked highest one) for an instant, Business cost rank 1 among other 125 countries
In this article also mentioned that Iceland has homogenous population and this statement supported by
Human Development index where Iceland ranked in 2 nd place
Competitively priced green energy-The country had an abundant supply of low-cost energy, and was the world
leader in the use of geothermal ~energy (for example, 90% of all houses were heated this way)
Iceland has a skilled, young, well-educated and entrepreneurial labor force and a good public schooling
system. In 2005, 31% of the employed labor force held a university degree
However many Icelanders study and work abroad (Europe & USA).
Iceland lags peers in the quality of Math and Science education
The Icelandic labor force is among the most entrepreneurial in the world, according to the Global
Entrepreneurship Monitor, however the main drawbacks are the countrys isolation, high cost of labor,
and the small size of the workforce, leading to limited source of specialized labor.
Based on Iceland cluster it shows that fishing & mining industries contribute 50% of GDP, nevertheless
this industries are shrinking from time to time.
Context for Firm Strategy and Rivalry and Demand Conditions: A stable society, short distances, low
corruption, low corporate taxes (currently 18%, soon to become 15%), an independent judiciary, a
progressive legal framework, and a highly efficient bureaucracy make Iceland an attractive place to do
business. Access to credit has been excellent during the past several years, but has been severely
restricted in the past few months due to the global credit crunch, prohibitively high interest rates and
the banks precarious debt position.
However, the tiny size of the local market is a major drawback, allowing for limited intensity of local
rivalry and limited local demand and buyer sophistication. The small market (along with Icelands
isolation and volatile macro-economy) has prevented Iceland from attracting much FDI and few foreign
firms therefore operate in Iceland. Restrictions on foreign ownership of fisheries and in the energy and
aviation sector are also to blame for low FDI. Therefore, most Icelandic companies are locally owned. The
only significant exception is foreign-owned aluminum plants (FDI seeking low cost energy) but these
firms are mostly isolated from the rest of the economy. Limited growth opportunities at home have
pushed Icelandic companies in diverse markets such as pharmaceuticals, financial services, food
production, retail commerce, property development, aviation and shipping to aggressively acquire
subsidiaries abroad to extend their reach.
Related and Supporting Industries:
Both the quality and quantity of local suppliers is weak, again mostly due to the tiny market size.
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10 There are few research institutions and
Invest in Iceland Agency (2008), Doing Business in Iceland. February 2008.
specialized training programs. Iceland holds a leading research position in fishing and geothermal energy.
The most prominent bodies are the Marine Research Institute and the National Energy Institute, both
government institutions.
BCI Performance: Iceland ranks 16th on the Business Competitiveness Index (BCI)15, slightly below the
Scandinavian countries (Denmark, Sweden and Norway rank 4, 5, and 13 respectfully). Despite significant
weaknesses, mainly caused by its isolation and small population, Iceland is highly competitive.
