u.s. companies in denmark - moski2.net · 2016-03-31 · u.s. companies in denmark t jbs n nstnts 1...

U.S. COMPANIES IN DENMARK — trade, jobs and investments

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U.S. COMPANIES IN DENMARK — TRADE, JOBS AND INVESTMENTS

Universal Robots – acquired by Teradyne Inc. in 2015– here at work for Scandinavian Tobacco Group


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The Danish business landscape is increasingly influenced by international companies. Gone are the days when the sole competitors were other Danish companies, and the Danish market was all that mattered.

Denmark has embraced the benefits of glo-balization, excelling in international trade and making the most of international investments. By attracting the best minds, companies and products, Denmark has positioned itself at the forefront of technology and innovation while Danish companies and consumers have access to the best products from around the world with-out unnecessary costs, tariffs or red tape.

Denmark and the United States are bound by a deep mutual commitment and lasting friendship that has created a historic economic partnership. As Denmark’s largest trading partner outside of Europe, the United States has played a unique role in the internationalization of the Danish economy, with U.S. companies bringing major investments, technology and new products to the Danish market.

With this report we highlight the strong economic linkage between our two countries – a relation-ship that was built and has flourished through the entrepreneurship of individuals and businesses.

INTRODUCTION

By investing and trading with each other, Danish and U.S. companies continue to share incredible progress and innovation across the Atlantic.

This report takes a closer look at the role and im-pact of U.S. companies in the Danish economy via trade and investment. In addition to highlighting the strength of economic ties, we demonstrate that there is potential for even more collabora-tion, and we believe that the Transatlantic Trade and Investment Partnership (TTIP) currently being negotiated by the European Union and the United States will help to unleash this future po-tential.

A comprehensive TTIP would improve the al-ready good conditions for companies investing on both sides of the Atlantic, bringing increased, sustainable trade and investment, while it would allow Danish companies opportunities to reach the large American market and Danish consum-ers and companies to enjoy more U.S. goods and services at lower cost.

AmCham Denmark, the U.S. Embassy and the Confederation of Danish Industries are commit-ted to strengthening transatlantic economic ties even further. We hope this report will improve the understanding of the many contributions made by U.S. companies to the Danish society, and that it will stimulate further engagement.

Thomas BustrupDeputy Director General

Confederation of Danish Industry

Rufus GiffordAmbassador of the United States

to Denmark

Stephen BruggerExecutive Director AmCham Denmark

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TRADE, JOBS AND INVESTMENTS BETWEEN THE U.S. AND DENMARK

TOP U.S. INDUSTRY SECTORS IN DENMARK By Number of announced U.S. FDI Projects in Denmark 2003 – 2016

DKK 52 Billion

U.S. Exports to Denmark

DKK 71Billion

Danish FDI in the U.S.

Source: Statistics Denmark and U.S. Department of Commerce

657 Danish Companies

Create60,000 Jobs

in the U.S.

Source: Copenhagen Capacity & fDI Markets


1. SOFTWARE & IT SERVICES

2. BUSINESS SERVICES

3. COMMUNICATIONS

4. FINANCIAL SERVICES

5. PHARMACEUTICALS

6. INDUSTRIAL MACHINERY, EQUIPMENT & TOOLS

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TRADE, JOBS AND INVESTMENTS BETWEEN THE U.S. AND DENMARK

DKK 99Billion

Danish Exports to the U.S.

DKK 79Billion U.S. FDI

in Denmark

530 U.S. Companies

Create39,000 Jobs

in Denmark


Source: Bureau of Economic Analysis

FOREIGN AFFILIATE SALES Sales of U.S. owned enterprises in Denmark (billion DKK)

90

100

110

120

130

140

201420132012201120102009

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Sea Transport 19,570

Travel 3,711

Telecommunications and Information Services 2,359

Royalties and License Fees 1,476

Other Transport Services 1,456

Total Services Exports 35,612

THE SHIPPING SECTOR DOMINATES TRADE IN SERVICES

U.S. exports of services to Denmark, top 5 categories, 2015, million DKK

Source: Statistics Denmark

The trade and business relations between the United States and Denmark are not only strong and growing – the close transatlantic ties con-tribute significantly to growth and job creation in both countries. The U.S. constitutes the largest foreign market for Danish companies outside the European Union. Meanwhile, Denmark boasts a hugely attractive investment environment for American companies, earning first place in Forbes’ “Best Countries for Business” in six of the award’s 10 annual editions.

Trade is of course an important indicator of the impact of U.S. businesses on the Danish econo-my. In terms of goods, imports of ’Measurement and Medical Instruments’ are very significant, comprising 10 per cent of American goods ex-ports to Denmark in 2015. Regarding services, the transport sector takes center stage with sea transport accounting for 55 percent of total U.S. services exports to Denmark in 2015.

However, trade figures do not tell the entire sto-ry. Foreign direct investment (FDI) in Denmark by U.S. companies contributes significantly to growth – especially in the long term. Over the past decade, the largest share of investment projects has been within the sectors of software, information and communications, and American companies’ investments have served as catalysts

for the digitalization and modernization of the Danish economy. Furthermore, with U.S. FDI in Denmark increasing by 19 percent between 2010 and 2014, there are signs of growing appetite among U.S. businesses for investing in Denmark.

Increased involvement by American companies in the Danish economy has also resulted in the creation of thousands of jobs in recent years. The number of full-time employees at U.S. business subsidiaries in Denmark has increased from al-most 33,000 in 2010 to nearly 39,000 in 2013, an increase of more than 19 percent.

These trends and figures clearly indicate the posi-tive contribution of U.S. companies to the Danish economy. Nevertheless, the picture remains in-complete. First of all, companies can have a huge impact without being visible in trade or invest-ment statistics. Most companies in the service sector for instance leave little trace in the statis-tics for trade and investments. Secondly, inno-vative U.S. businesses and brands conceive and transform the way business is being done, creat-ing entirely new markets. And thirdly, the impact and contribution of companies also depends on the type of jobs they create and where these jobs are located. Investments in research and devel-opment will typically be among those with the largest impact on other parts of the economy.

THE U.S. IN DENMARK


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HIGH-TECH INSTRUMENTS LEAD THE WAY FOR U.S. GOODS EXPORTS TO DENMARK

Top 10 U.S. goods exports to Denmark by product category, 2015, million DKK

0 500 1,000 1,500 2,000

Machines for Industrial Purposes

Pharmaceuticals

Animal and Vegetable Products

Prepared Foodstuffs and Beverages

Mineral Products

Mechanical Appliances

Electrical Machinery and Communications Equipment

Vehicles, Aircraft and Vessels

Chemical Products, w/o Pharmaceuticals

Measuring and Medical Instruments

Source: Eurostat (Comext)

”Foreign companies inject capital, new knowledge and provide an international net-work. They help to develop Danish strongholds and improve competition among companies in Denmark.”Kristian Jensen Danish Minister of Foreign Affairs

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TITEL

Ford Model T’s ready to be shipped out (app. 1925). Over a 40 year period almost 400.000 vehicles came off the assembly line at the Sydhavn factory.


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WHY DENMARK?

The figures for trade and investments are com-prised of data from individual companies who have chosen to either trade with Denmark or to invest in a physical presence in the country. In this part of the report, we take a closer look at the U.S. companies that have chosen to do business in Denmark; the type of companies, what sectors they are in, how they have come here and where they have had a particular impact. The focus is on company investments, thus excluding invest-ments made by financial institutions such as pen-sion or equity funds.

As a backdrop, we have the fact that internation-al companies have a higher level of productivity than companies that are only focused on the do-mestic market. Furthermore, some studies indi-cate that U.S. owned multinational companies have the highest productivity of all.

The impact of higher productivity is higher wages and greater value creation for society as a whole. Therefore, a scenario with fewer American and international company investments would mean slower influx of new technology, fewer jobs being created and generally more sluggish growth. So while the reasons why Denmark needs U.S. com-panies to invest here are clear, it is not as clear why the U.S. companies chose Denmark in the first place.

Each company have their own answer to this question; some have come to Denmark seek-ing out new opportunities as part of a long-term strategic plan, some because they already had clients here and needed a local presence, and others by means of mergers or acquisitions with Danish companies. Broadly speaking, American companies in Denmark can be divided into three groups; large Greenfield investments, Acquisi-tions of mature Danish companies, and small initial investments followed by Organic Growth.

GREENFIELD INVESTMENTS IN DENMARKThe Ford automobile assembly line built in Co-penhagen in the 1920’s is perhaps the U.S. in-vestment in Denmark with the largest impact ever. At that time, the Danish automotive indus-try was clearly ahead of the German, so it was a logical place to set up production. And for several decades, cars and tractors destined for the mar-kets in Northern Europe were assembled in the industrial area “Sydhavn” in Copenhagen.

In those days, shipping finished goods was costly, and therefore entering the market often entailed setting up a manufacturing facility somewhere in the region. Colgate-Palmolive is another ex-ample of this approach; starting sales in 1926 and commencing local production of toothpaste and soap two years later. This continued for more than three quarters of a century, until 2004, when their last production site in Denmark was closed.

Over the course of time, business models have changed, and setting up manufacturing facili-ties aimed at the Danish market is no longer the norm, making greenfield investments in produc-tion facilities far less frequent. However, within certain sectors, Denmark has the combination of skills and costs that makes it a relevant place to invest, as Biogen’s manufacturing complex in Hillerød demonstrates. Here, more than 600 em-ployees manufacture biologic pharmaceuticals and the 4 billion DKK investment in production facilities is the largest foreign greenfield invest-ment in Denmark.

ACQUISITIONS OF DANISH COMPANIESWhen U.S. companies acquire or merge with a Danish company, it is typically an acknowledge-ment of the potential in that company – and most often it is related to the company’s know-how and its ability to create innovative solutions. By

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joining forces with – or becoming part of – a larger entity, the Danish company is better equipped to make use of its accumulated knowledge in more products and to reach a larger market.

Being bought and integrated into a global opera-tion can also lead to jobs and decision-making power moving away from Denmark – to the det-riment of the Danish economy. However, the alternative may have been for the company to disappear altogether, in which case a diminished presence seems like a better outcome.

As can be seen from the examples on the next page, there is a wide variation in the sector, size and type of companies that have been acquired, and it is not possible to paint one scenario that matches all cases. However, most of the acquired companies maintain a high level of activity in Denmark, particularly aimed at utilizing and strengthening the unique capabilities that made the company interesting in the first place.

GROWING THEIR MARKET IN DENMARKRegardless of how a company entered the Danish market, what happens afterwards depends on its ability to produce and sell goods and services to this market. Some, like McDonald’s (see below), started small and have grown over time, making a significant impact on the Danish economy and even society as a whole.

By their presence in Denmark, U.S. companies are able to bring the best and most innovative so-lutions to the Danish market. Additionally, these companies are able to utilize their innovation and design skills in Denmark to develop prod-ucts and solutions that can be used around the world. Companies like Medtronic and 3M have been present in Denmark for decades, primarily serving the local market, but have also invested in units working on the development of new, in-novative solutions.

Biogen (Hillerød): The largest foreign greenfield investment in manufacturing in Denmark in recent times.

”Innovative U.S. businesses and brands conceive and transform the way business is being done, creating entirely new markets.”


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Acquisitions

Investor Acquisition Year Industry

Teradyne Inc. Universal Robots A/S 2015 Robot Technology

FMC Cheminova ApS 2014 Agrochemical

Valmont Industries Inc. DS SM A/S 2014 Industrial Machinery

Campbell Soup Co. Kelsen A/S 2013 Food

Agilent DAKO 2012 Medical Technology

SPX Inc. Anhydro A/S 2011 Industrial Machinery

DuPont Danisco A/S 2011 Food & Biotechnology

eBay Den Blå Avis 2008 Publishing

Danaher Corp. Radiometer Medical 2004 Medical Technology

JM Huber C.P. Kelco 2004 Biotechnology

IBM Inc. Mærsk Data 2004 ICT/Software

Microsoft Corp. Navision 2002 ICT/Software

Masco Corp. Tvilum-Scanbirk 2000 Furniture

CSC Datacentralen A/S 1996 ICT/Software

West Pharmaceuticals Inc. Schubert Seals A/S 1994 Medical Technology

NOTABLE U.S. COMPANY INVESTMENTS IN DENMARK

Source: Invest in Denmark & Bureau van Dijk

Greenfield

Company Year of establishment Industry

Apple Inc. 2017 ICT

Iron Mountain Inc. 2006 Data Storage Solutions

Biogen 2001 Pharma

IBM 1950 ICT/Software

Colgate-Palmolive 1926 Consumer Goods

Ford Motor Company 1924 Automotive

”Companies can have a huge impact without being visible in trade or investment statistics.”

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THE IMPACT OF THE U.S. COMPANIESCULTURAL IMPACT – HABITS AND BRANDSIn the eyes of the Danish public, U.S. companies are intrinsically linked with well-known global brands such as Coca-Cola, McDonald’s, Col-gate, Heinz and Kellogg’s and in recent years also Apple, Google and Facebook.

In fact, the company size and economic impact may be much smaller than the cultural impact and the brand itself, which is clearly the case for a company like Coca-Cola. The Coca-Cola Compa-ny never invested in production, bottling or dis-tribution in Denmark. Instead, all aspects of their physical products were delegated to Carlsberg via a licensing agreement, allowing Coca-Cola to focus solely on brand management and mar-keting. Therefore, the company has never had a significant number of employees or investments in Denmark, thus demonstrating that trade and investment figures completely fail to capture Coca-Cola’s true impact on Denmark and Danish society.

These U.S. brands have helped forge a strong bond between Danish consumers and American culture. This bond has been further strengthened by media such as TV, movies and music, where American produced content has dominated in terms of both quality and quantity. Notably, this has happened in spite of very limited presence of U.S. media companies in Denmark – with Dis-covery Network as a notable exception.

The American dominance in cinemas has been a source of much debate in many European coun-tries with some regarding it as a kind of cultural imperialism. Denmark has responded by consis-tently supporting the production of Danish mov-ies rather than restricting imports. The result has been a fairly stable market share of between 50 and 60 percent for American movies over the past decade.

In recent years, the markets for both TV and film have been severely disrupted by new trends originating primarily in the U.S., with services like Netflix and HBO having a growing impact on the cultural habits in Denmark as well as in the rest of the world.

With business models, consumer patterns and cultural habits changing at an increasing pace,

MCDONALD’S CONTRIBUTION TO DENMARK In spite of the attempts by a series of U.S. fast food brands to enter the Danish market, the only one to achieve a significant market share remains Mc-Donald’s.

The first McDonald’s restaurant in Denmark was established in 1981 – next door to the first Burger King restaurant, which had opened four years ear-lier. With a core of own restaurants and a growing number of franchise agreements, the company has expanded, and in 2015 McDonald’s had 89 restaurants and 4.200 employees in Denmark.

McDonald’s serves 160.000 meals per day – and while this is impressive, it is still less than 10 per-cent of the fast food meals served in Denmark on any given day.

After coming under scrutiny for “not contribut-ing” to the Danish society, and being accused of not paying corporate tax, McDonald’s initiated a study of their actual contribution to the Danish society including the number of jobs, turnover and total taxes for both McDonald’s and their value chain. The study from 2013 demonstrates that the DKK 47 million they paid in corporate tax was only around 10 percent of their total tax payment of DKK 436 million. However, in terms of the to-tal contribution to Danish GDP, the figure was a whopping DKK 1,5 billion.


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U.S. companies, products and brands will con-tinue to leave an impact on the Danish economy and society. Interestingly, Danish businesses – and society as a whole – seem to be able to ab-sorb this impact and sometimes add a local twist before sending it back across the Atlantic.

ICT SECTOR – THE BACKBONE OF IT INFRASTRUCTURE – AND THE CORE OF SOCIAL MEDIACertain sectors have a higher prevalence of U.S. companies than others, and perhaps none more than the ICT sector. This reflects the dynamics of the sector, where U.S. companies have been both technology and market leaders on a global scale.

Over the last half century U.S. ICT companies like IBM, Motorola, Hewlett-Packard and Texas In-struments have brought new technology and in-novation to Denmark. Some have grown with the market, but in this sector where companies grow and falter faster than anywhere else, others have disappeared altogether.

Many have seen an opportunity to invest in ideas and innovation potential and have acquired Dan-ish companies. The best known – and most sig-nificant – example remains Microsoft’s acquisi-tion of business software company Navision in 2002.

This trend continues today, where the business model for many ICT start-ups is to sell the com-pany and its intellectual property before it has even reached the market – and very often U.S. ICT giants are the buyers. However, in recent years there has been a trend where Danish com-panies enter the U.S. market at an early phase of their development. Often, they even move both their headquarters and development activities to the U.S., thus becoming truly transatlantic com-panies.

U.S. companies have also been active when state-owned ICT companies in Denmark have been privatized; the national telephone compa-ny, TDC, was for a period of time U.S. owned, and CSC has acquired assets both from the govern-ment (Datacentralen), from national airline car-rier, SAS, as well as from the private sector. As a consequence, the backbone of the Danish public sector’s IT-infrastructure has been developed and managed by U.S. companies.

The ICT sector also represents the dilemma that services are delivered digitally, when a company is able to have an enormous market share with little or no physical presence in the country. Global giants like Google, Amazon and Face-book are part of everyday life for many Danes, and while they are present in Denmark, they are nowhere near the top 1000 companies in Den-mark in terms of number of employees.

Photo: TDC/Jørgen True

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HEALTHCARE – PROMOTING HEALTH AND INVESTING IN RESEARCHHealthcare related products – and particularly pharmaceuticals – remain at the top of the list for both Danish exports to the U.S. and American exports to Denmark. In Denmark, the sector is characterized by a small group of very large glob-al companies, all of them present in Denmark and many of them American. Additionally there is a wealth of small biotech companies, many of whom have grown out of research conducted at universities and hospitals.

All the major U.S. healthcare companies (includ-ing Pfizer, Medtronic, MSD, Eli Lilly, Janssen-Cilag, BMS, Agilent, Abbott, Amgen and more) sell products on the Danish market, but the de-gree to which they also engage in other activities such as research and development is even more interesting.

Two key elements in attracting corporate invest-ment in R&D are; (1) the presence of an under-growth of new, innovative companies, and (2) an openness in the public sector, allowing a close co-operation between companies and public institu-tions such as hospitals and universities.

With these elements in place, U.S. companies will continue to spend millions of kroner on re-search and development in Denmark – providing a welcome boost to the economy and ultimately benefitting patients in Denmark and the rest of the world.

ENERGY AND OFF-SHORE – INVESTING IN INNOVATIVE INFRASTRUCTURE The energy sector is typically very investment heavy and therefore large companies form the brunt of the sector – both in Denmark and abroad. Historically, the gasoline market in Den-mark was dominated by a handful of companies, and brands such as Mobil, Texaco, Chevron, Esso and Gulf were household names. Today, none of these remain on the retail market, but U.S. companies are still an integral part of the en-ergy infrastructure in Denmark; with Chevron as part of DUC and Hess as one of the newcomers in

the exploration sector, while Babcock & Wilcox Vølund specializes in waste-to-energy facilities.

Many U.S. companies were an integral part of the development of the off-shore extraction sec-tor in the 1970’s and the off-shore cluster in and around Esbjerg. Today, traffic also goes in the op-posite direction, and Danish companies increas-ingly take their expertise to the global market, including the American off-shore hub in Houston.

MICROSOFT – ONE BRAND, TWO STORIES

Microsoft represents two very different stories of how a global IT company interacts with the local economy of Denmark. The company ‘Microsoft Danmark’ was established in 1989, as a country office for Microsoft, dealing with sales of IT prod-ucts and services in the local market. The com-pany has all along been a very important player on the Danish market, continually on the forefront, with a clear market focus and with significant con-tributions to the local software economy. In terms of statistics, the impact of the company is prob-ably most evident when looking at “foreign affili-ate sales”.

In 2002, Microsoft Corporation made a massive investment in terms of FDI when they acquired Danish business software company Navision. What is more important is that they chose to in-tegrate the company by establishing the Microsoft Development Center Copenhagen (MDCC); the first unit of its kind in Europe and still the largest outside the U.S.

The Center is responsible for the development of business applications for the global market. The value of the output from the MDCC will therefore be reflected in the turnover of Microsoft sales subsidiaries around the world. However, figures for trade or foreign affiliate sales in Denmark will not be directly impacted by the company. Never-theless, in terms of impact, by creating a hub for highly qualified IT engineers and programmers from all over the world, the impact of MDCC goes way beyond the initial investment.


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In 2015, Microsoft reinforced their presence in Denmark by investing in a new domicile, designed by Henning Larsen Architects, that houses both Microsoft Danmark and Microsoft Development Center Copenhagen.

AmCham Denmark

Established in 1999, the American Chamber of Commerce in Denmark (AmCham Denmark) is a non-profit, non-governmental business asso-ciation representing more than 240 companies actively investing in Denmark and the United States.

As the voice for international business in Den-mark, AmCham is committed to building a com-petitive business climate in Denmark, and to do-ing its part to minimize barriers to international trade.

To help identify key issues and trends facing our members, AmCham annually surveys interna-tional companies in Denmark and reports the findings in our Business Barometer.

The latest Barometer (September 2015) reflects the positive performance of international and U.S. companies in Denmark: From 2014 to 2015, 46 percent of the companies increased their in-vestments in Denmark with 50 percent anticipat-ing an increase in 2016.

Confederation of Danish Industry

The Confederation of Danish Industry (DI) is a private trade organisation and an employers' as-sociation organisation funded, owned and man-aged entirely by 10,000 companies within manu-facturing, trade and service industry.

In its capacity of trade organisation DI ensures that the Danish business community has the optimum basis for competing, developing and manufacturing in Denmark and internationally.

In its capacity of employers' association DI is responsible for collective bargaining, at the na-tional level and within the individual sector or enterprise.

DI also has more than 100 member associations, as well as multi-trade communities. These cover the food industry; IT, telecommunication, elec-tronics and communication; the building mate-rial industry; the energy industry; the service industry; the automotive industry; the Danish Management Board; the wood and furniture in-dustry and the machinery and metal industry.

www.amcham.dk www.di.dk

Published by Confederation of Danish Industry and AmCham Denmark. Editor: Peter Bay Kirkegaard and Ole Schmidt. Print: Kailow Graphic A/S. 978-87-7144-076-8. 1000.04.16

u.s. companies in denmark - moski2.net · 2016-03-31 · u.s. companies in denmark t jbs n nstnts 1...

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