Iceland: Economic and Business Lessons – Fire and Ice
This summer, I had the pleasure of visiting Iceland with my family. It is an amazing country in so many ways. In addition to its unmatched natural beauty of mountains, glaciers, seashores, and active volcanoes, visiting offers some great lesson in economics and business.
Iceland Has a Winning Tourist Formula: Importance of Workforce Education
For years, Iceland’s economy was focused on fish, lamb, aluminum ore, and wool. When the country moved into international finance in a big way in the late 1990s, its Viking banking ways got crushed during the international recession. The country was reliant on seafood, lamb, wool, aluminum, and silica – all commodities, but it had borrowed in foreign currencies, and the world was consuming less. Iceland became insolvent. As Iceland learned, commodities can be difficult markets. The price of product is decided by a market and the willingness and ability of buyers to pay.
Reeling from a financial crisis that pushed Icelanders back to the fisheries, it turned to tourism. Today, tourism is the largest industry, and this country of some 330,000 will welcome over 2 million visitors. Countries often look cautiously at the economic benefits of focusing on tourism. It is a boom-bust business that creates many low-paying service jobs. It booms when tourists have money and busts when they don’t. It works the same way in Florida, Arizona, Spain, Mexico, and Hawaii, too. It made me reflect on some work I did with the Secretary of Tourism of Mexico to boost their tourism and the Republic of Turkey to also increase their tourism. Mexico and Turkey have great treasures but have experienced challenges in cultivating tourism growth. How could Iceland be so successful and do it so quickly when other countries have struggled? The answer is really in education. Iceland has a highly educated population. Nearly everyone speaks perfect English with mostly an American accent. In addition to the language skills, the education has allowed farmers to become hoteliers, and weavers to open restaurants. Education provides flexibility in the workforce. Advanced skills, especially in English and access to the Internet open the world of possibilities in deploying labor where and how it is most needed. Economically struggling parts of the US are such, in part, because redeployment of labor has proven difficult.
Business Lessons in Marketing: Iceland is Cool (Really) and Has Really Cool Brands
We flew the nonstop service from Chicago to Reykjavik on Icelandair. You actually land in Keflavik, an airport built by the US during World War II. Immediately upon boarding, everyone gets a bottle of Icelandic water. Our children got a great toy bag, branded with Icelandair. The staff are dressed in sharp uniforms and the in-flight videos feature Icelandic products. The branding and positioning began right away. It was professional, compelling, and created a sense of quality. A few Icelandic brands really struck me as having amazing international positioning.
Icelandic water in the trademark glacier-inspired bottle.
Icelandic water is widely available in the US and sells for a premium. What a great positioning for a commodity product!
Icelandic Lamb – Roaming Free Since 874
If you are seeking great-tasting lamb, try it. If you are trying to claim quality and authenticity, here is a great example of invoking Viking heritage and history in marketing.
Earning its name from Iceland’s location of 66 degrees north in latitude, this outdoor clothing line is best described as the Icelandic version of North Face, but perhaps bolder in colors and equally focused on work apparel for fisherman and outdoor winter work. The 66 North brand and its positioning has an honesty that invokes trust and quality in its business.
The Economy is Booming: Tourism is Up… For Those Who Can Afford It
Economist have longed looked at tourism to measure economic surplus and to gauge individual disposable income. There are many Americans, Chinese, British, and Spanish tourists in Iceland. With the astonishingly high prices in Iceland, it suggests that the traveling population of these countries has well recovered from the international recession of last decade. At least those willing and able to travel at those prices. Iceland still attracts backpackers, but more and more it is out of reach of nickel-rubbing college students.
Iceland Is Expensive…For Many Reasons
Being on a remote island in the North Atlantic that mostly makes seafood, lamb, and wool, means that nearly everything else must be imported. Potato chips might come from the US, candy from the UK, cars from Korea, and furniture from Sweden. Transportation, importation, lack of economy of scale, and being off major shipping lanes, mean everything has a higher cost in Iceland. Still, all packages are labeled in Icelandic (by law), meaning that Doritos, for instance, has to make special products for this small market. This protection of their language, surely results in higher costs to consumers and visitors, too. Labor, owing to its Nordic social system, is expensive, too. With unemployment near 2%, Iceland has turned to increasing the number of immigrants, mostly from Poland to meet its labor demand.
Business and Economic Lessons for Everyone
The tight Icelandic labor market reminds us that as unemployment falls and demand for labor increases, inflationary pressures increase, making goods more expensive. With many countries, including the US, trying to stimulate demand (and or inflation), it is important to realize that immigration works to control the price of labor and therefore the cost of goods. As the US looks to renegotiate NAFTA and other trade agreements, we should realize that our relatively low cost of goods is made possible by immigration and outsourced production. Immigration, trade, and export are all intertwined and related in ways and at levels that we might not have realized in the past decades, owing to changing demographics and new business models, like Amazon that dramatically alter the cost of goods and consumption of labor by deploying automation and efficient digital platforms.
With Amazon announcing that it is lowering food prices at Whole Foods, I am looking forward to visiting for some lower-priced Icelandic water, salmon, and lamb.
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