Transcript General

Arto Rajala, Dr.
Helsinki School of Economics
Department of Marketing
Outline
Definitions
Characteristics of High Technology
Commercializing High-Tech Products
Identifying and Crossing the Chasm
On the Mainstream Market
Managing Marketing Offerings in High-Tech
Conclusions
Appendix: High Technology in Finland
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Definitions
Marketing & High Technology
Defining Marketing
Marketing is a business (management) discipline or
orientation
”...performance of business activities that direct goods and
services from produces to consumer or user (AMA)”
Understanding actual and potential customer needs, by
developing/modifying products, facilitating customer access to
its offerings, attracting and influencing the market, creating
differential advantages (brand)
Establishing and maintaining customer relationships
Managing 4P’s (Product, Price, Place, Promotion)
Segmenting  Targeting  Positioning
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Through Market Segmentation, Companies Divide Large,
Heterogeneous Markets into Smaller Segments that Can be Reached More
Efficiently And Effectively With Products and Services That Match Their
Unique Needs.
Mass Marketing
Same product to all consumers
(no segmentation, i.e Coca-Cola)
Segment Marketing
Different products to one or more segments
(some segmentation, i.e. Marriott)
Niche Marketing
Different products to subgroups within segments
(more segmentation, i.e. Standard or Luxury SUV’s)
Micromarketing
Products to suit the tastes of individuals and locations
(complete segmentation)
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Local Marketing
Individual Marketing
Tailoring brands/ promotions to local
customer groups, i.e Sears
Tailoring products and programs to the needs
of individual customers, i.e. Dell
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Segmentation Process
Market Segmentation
1. Identify bases for
segmenting the market
2. Develop segment profiles
Market Targeting
3. Develop measure of
segment attractiveness
4. Select target segments
See more in e.g.
Kotler & Armstrong (2003),
Principles of Marketing. 10th
edition, Prentice Hall.
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Market positioning
5. Develop positioning for
target segments
6. Develop a marketing
mix for each segment
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Requirements for Effective Segmentation
Measurable
• Size, purchasing power, profiles
Accessible
• Segments can be effectively
of segments can be measured.
reached and served.
Substantial
Differential
Actionable
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• Segments are large or
profitable enough to serve.
• Segments must respond
differently to different marketing
mix elements & programs.
• Effective programs can be
designed to attract and serve
the segments.
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Characteristics of High Technology…
Novelty – advanced compared to the-state-of-the-art
Knowledge intensity – based on radical innovation
Leading-edge technology
The-state-of-the-art in the field and not widespread acceptance by
those working in the field
Technology-base is new
Cross-industry characteristics
Ability to create/modify new applications
Dependence on R&D and highly educated people
R&D investments > 4% of turnover (OECD)
usually between 10% - 20%
Long R&D phase – short market existence
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…Characteristics of High Technology
Developer’s vs. user’s view on technology
Technology adapters = CUSTOMERS
Technology providers = SUPPLIERS
Customer perceived value
Added value to customer
Knowledge intensity
Different technology settings
Technology life cycle
From product to process technologies
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A Definition of High-Tech …
… from Marketing Point of View
“High-tech is that of the leading-edge technology
involving a high level of knowledge intensity, which
enhances the value of the product or process to
the customer in the sense that it provides better
quality, lower costs, or it makes the use of the
object easier compared to the old technology”
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High Technology
What Makes High-Tech so Difficult for
Marketers?
Innovations – CORE of high techonology
Innovation ~ a totally new, or a remarkable enhanced, product,
service or production system/process
Product innovations
New, or enhanced innovative products or services
Process innovations
New information and material flows within and between units and
organizations as well as innovative principles of working,
working methods, roles and the tools used in the business
process
Organizational (managerial) innovations
Refers to innovations about administrative, social and
organizational elements (e.g. new organizational structure,
management & reward systems, business models)
Process and organizational innovations differ from product
innovations in terms of the implementation of ideas.
Process and organizational innovations have an internal focus,
i.e., they are most often implemented within the company
Product innovations are embedded into products and launched
into external markets by different individuals and departments
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Continuum of Innovations
Incremental Innovation
Extension of existing
product or process
Product characteristics
well defined
Competitive advantage
on low-cost production
Often developed in
response to specific
market need
Demand-side market
Customer pull
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Radical Innovation
Now technology creates
new market
R&D invention in the lab
Superior functional
performance over ’old’
technology
Specific market
opportunity or need of
only secondary concern
Supply-side market
Technology push
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Technology Life-Cycle
Era of Ferment
 Design Competition
 Substitution
Era of Incremental
Change
 Elaboration of
Dominant Design
Time
Technological
Discontinuity 1
Dominant
Design 1
Technological
Discontinuity 2
Source: Anderson & Tushman (1990)
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Nature of High Tech Markets
Why are high-tech markets different ?
Market uncertainty
Ambiguity about the type and extent of customer
needs that can be satisfied by the technology
Technological uncertainty
Not knowing whether the technology - or the
company providing it - can deliver on its promise
to meet needs, once they have been articulated
Competitive volatility
Changes in the competitive landscape
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Sources of Uncertainties
Sources of Market
Uncertainty
Market
Uncertainty
1. What needs might
be met by the new
technology?
2. How will needs
change in the
future?
3. Will the market
adopt industry
standards?
4. How fast will the
innovation spread?
5. How large is the
potential market?
Technological
Uncertainty
Marketing of
High Technology
Products and
Innovations
Competitive
Volatility
Sources of Competitive
Uncertainty
1. Who will be the new
competitors in future?
2. What competitive tactics
will be used?
3. What products will we
compete with
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Sources of
Technological
Uncertainty
1. Will the new
product function as
promised?
2. Will the delivery
timetable be met?
3. Will the vendor
give high-quality
service?
4. Will there be side
effects of the
product or service?
5. Will the new
technology make
ours obsolete?
Source: Mohr (2001)
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Challenges for Marketing
New designs must win market share
Role of distribution channel
Customer perceptions
Competition
From higher performance to lower costs
and differentiation through minor design
variations and strategic positioning tactics
incremental changes take place
Segmenting  Targeting  Positioning
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Commercialising
High-Tech Products (1/2)
Identifying and Crossing the Chasm
Key Issues
Why so many excellent products fail?
90-95 % of new product ideas newer reach market
30-50 % of introduced products seem to fail on the
market
Are there differences between high-tech and
low-tech product concerning the
commercialisation process?
Critical issue: Time-to-Market
Using the ‘Market Development Model’
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Technology Adoption Life-Cycle
Pragmatists:
Stick with the herd!
Conservatives:
Hold on!
Visionaries:
Get ahead of the herd!
Techies:
Try it!
2,5%
Innovators
Skeptics:
No way!
33%
33%
16,5%
14%
Early
Early Majority
Adopters
Late Majority
Laggards
Pragmatists create the dynamics of high-tech market development.
Source: Moore (1998)
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Innovators ~ Technology Enthusiasts
Primary Motivation:
Learn about new technologies for their own sake
Key Characteristics:
Strong aptitude for technical information
Like to alpha test new products
Can ignore the missing elements
Do whatever they can to help
Challenges:
Want unrestricted access to top technical people
Want no-profit pricing (preferably free)
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Early Adopters ~ Visionaries
Primary Motivation:
Gain dramatic competitive advantage via
revolutionary breakthrough
Key Characteristics:
Great imaginations for strategic applications
Attracted by high-risk, high-reward propositions
Will commit to supply the missing elements
Perceive order-of-magnitude gains — so not pricesensitive
Challenges:
Want rapid time-to-market
Demand high degree of customization and support
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Early Majority ~ Pragmatists
Primary Motivation:
Gain productivity improvements via evolutionary
change
Key Characteristics:
Astute managers of mission-critical applications
Understand real-world issues and tradeoffs
Focus on proven applications
Like to go with the market leader
Challenges:
Insist on good references from trusted colleagues
Want to see the solution in production at the
reference site
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Late Majority ~ Conservatives
Primary Motivation:
Just stay even with the competition.
Key Characteristics:
Better with people than technology
Risk averse
Price-sensitive
Highly reliant on a single, trusted advisor
Challenges:
Need completely pre-assembled solutions
Would benefit from value-added services but do not
want to pay for them
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Laggards ~ Skeptics
Primary Motivation:
Maintain status quo.
Key Characteristics:
Good at debunking marketing hype
Disbelieve productivity-improvement arguments
Believe in the law of unintended consequences
Seek to block purchases of new technology
Challenges:
Not a customer
Can be formidable opposition to early adoption
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The Logic of Commercialising HighTech Products
Seeding new products to Techis
Techis help and educate Visionaries
Visionaries serve good references for
the Pragmatists
Becoming the market leader by serving
Pragmatists and setting standards
Leverage success - generate sufficient
volume & experience -- reliable
products which are also cheap enough
to Conservatives
Leaving Sceptics to their on devices
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Discovering the Chasm
Chasm
Early Market
Mainstream Market
High-tech products are warmly welcome in an
early market but then they usually fall into a
chasm (sales will falter and often plummet)
Visionaries don’t see enough of a head start
Pragmatists see no reason to start yet
Source: Moore (1998)
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Crossing the Chasm
High-tech paradox…
80% of many solutions but none of 100%
Pragmatists won't buy 80% solutions !!!
High-tech myopia…
Committing to the most common enhancement requests
Never finishing any one customer's wish-list
Source: Moore (1998)
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Successful Crossing
Understanding the difference between
visionaries and pragmatists
The former is willing to bet ‘on the come’
The latter want to see the solutions in production
(i.e. see the whole product before they by it)’
Clear focus on a single beachhead
Use a niche strategy  a full solution for one niche
Putting all eggs in one basket (e.g. Nokia in 1990s)
Global focus with local applicapility
‘Think global act local’ Gaining the acceptance within
a mainstream market
Gaining the acceptance within a mainstream market
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Commercialising
High-Tech Products (2/2)
On the Mainstream Market
Market Development Model
Main Street
Tornado
Total
Assimilation
Early
Market
Chasm
Bowling
Alley
Mainstream Market
Source: Moore (1998)
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Beyond the Chasm
~ Assessing Mass Market
The Bowling Alley
a period of niche-based adoption in advance of the
general marketplace, driven by compelling customer
needs and the willingness of vendors to craft nichespecific whole products
The Tornado
a period of mass-market adoption, when the general
marketplace switches over to the new infrastructure
paradigm
Main Street
a period of aftermarket development, when the base
infrastructure has been deployed and the goal now is
to flesh out its potential
End of Life
wholly new paradigms (technology) come to market
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Technology vs. Category Life Cycles
Market share
is captured here
Market share is converted into
served installed base here
Product Category
Life Cycle
(Ongoing sales)
Technology Adoption Life Cycle
(First time adopters)
Source: Moore (1998)
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Four Marketing Frameworks
1 on 1
Marketing
Mass
Marketing
Deal
Driven
Niche
Marketing
Source: Moore (1998)
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Product Mix Offerings
Core
Products
Application
Systems
Aftermarket
Products
• Cameras
• Photography
• Film, lenses
• Inkjet printers
• Color printing
• Cartridges, paper trays
• Cell phones
• Wireless telephony
• Batteries, modems
• Word processors
• Word processing
• Suite upgrades
• Routers, switches
• Internetworking
• Performance tools
• Browsers/servers
• Worldwide Web
• Plug-ins
Source: Moore (1998)
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Service Mix Offerings
Distribution
Services
Professional
Services
• Order processing
• Competitive selling
• Consultative selling
• Maintenance
• System configuration
• Facilities management
• Implementation
support
• Business process
reengineering
Transaction
Services
• Outsourcing
• Upgrade management
• Broadcast data feeds
• Proprietary database
access privileges
• Systems integration
• Train-the-trainers
• Project management
• Customer service
• Custom training
• Technical support
• System conversion
• Warranty
• Contract management
Source: Moore (1998)
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Managing Marketing Offerings
in High-Tech Firms
Are the 4 P’s still relevant?
What is a product?
Core product
Installation
Actual product
Packaging
Brand
Features
Core
name benefit or
After
Delivery
service
sales
and credit
Styling services
Quality
Augmented product
Potential product
Warranty
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Evolution of the Whole Product
Mostly
custom
work
Plug & play
Fully
Mass
some
integrated customized
customization
Source: Moore (1998)
Different whole product priorities at different stages of the life cycle.
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What is a Marketing Offering?
Problems of (business) customers are often complex
and can rarely be solved by a physical product alone
Call for marketer’s problem solving abilities and advice
Ability to make promises  value proposition
e.g. each € spent on the purchase of ERP (Enterprise
Resource Planning) software  further 5 € are spent on
service and consulting in the choice and implementation of the
system
Offerings often related to quality  misused term
Five elements of a Marketing Offering ...
Product, Services, Logistics, Advice, and Adaptation
Offerings also depend on the customer’s demand
ability !!!
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Elements of an Offering
Product
Advice
Service
Adaptation
Logistics
Source: Ford et al. (2002)
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Products
A physical part of the offering – what customers
see and feel after the purchase
Products are often wrongly considered by many
customers and suppliers to be the most
important element, but...
... usually the product element is relatively
unimportant
Does not itself have intrinsic value ...
”There is no market for quarter inch drills, but there is
an enormous market for quarter inch holes.”
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Services
Are often the major part of the offerings,
because ...
products have little value without the associated
services (e.g. paper machine & automation software)
customers purchase a service instead of a product
(e.g. leasing vs. buying cars)
companies are depended on ’external’ technologies
(e.g. outsourcing design activities in automotive and
fashion industries; contract manufacturing in
electronic and telecommunication sectors;
maintenance in aircraft industry)
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Logistics
Are not just the ways in which the other
elements of the offering are delivered, but...
often the most vital element of an offering for
competitive success  DIFFERENTIATION (JIT,
zero-inventory, MRO – maintenance, repair &
operations in-plant
Important also to advertising agencies,
accountants, trainers, and consultants
Relationships with competitors to advice and service
clients in other countries
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Advice
Concerns all the activities which are aimed at
increasing the customer’s understanding
 reducing the perceived uncertainty of the
customers
Suppliers skills in communication its offering and
influencing its customers
Two-way process in business relationships
Reducing supplier’s uncertainties – how the customer
will use the offering
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Adaptation
Occurs when a supplier makes a change to any
element of its offering that it would not normally
do for other customers
Important to demonstrate commitment to a
relationship
Results in considerable costs & disruption to a
company’s operations
Translating customer problems into offerings that can
provide solutions for different customers with the
maximum commonality  Need for close internal
coordination
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Matching Offerings to Problems
Offering < Problem
Only a part of the problem is solved by the offering
Technological, resource or cost problems (supplier)
Poor diagnostics of the problem (customer or supplier)
Offering = Problem
Solution exactly solves the problem
Optimal quality – contractual
Offering > Problem
Offering does more than solve the original problem  Customer
delight
Demonstrating commitment & building a relationship
Offering <> Problem
Solution exceeds the problem in some aspects but fails to meet
requirements in others (e.g. over-standardization, poor
communication)
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Product Platform
Product platform is a collection of common elements,
particularly the underlying technology elements,
implemented across a range of products.
It is primarily a definition for planning, decision making, and
strategic thinking.
Especially important in high-tech firms in which multiple
products are related by common technology.
Platform defines the cost structure, capabilities, and
differentiation of the resulting products.
Separating product platform strategy from product line
and individual product strategy, a company can
concentrate on its most important strategic issues.
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Product Platform
Segment III
Product 3
Segment II
Product 1
Segment I
Product 1b
Product 1a
Product 4
Unique
product
elements
Product 2
Element C
Element B
Common
platform
elements
Element A
Source: McGrath (2000, 55)
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Main Characteristics
Product platform is NOT a product!
... but the lowest common determinator of relevant
technology in a set of products or product line
Product failures in high-tech firms often caused by
incomplete product platform strategy
Nature of product platforms varies across industries
e.g. in PC it consists of the microprocessor
combined with its operating system, packaging,
power supply, memory, disk drives, monitors, and
interfaces
e.g. it can be a chemical compound combined with
with the manufacturing process
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Conclusions
What have we learned?
‘Current Wisdom’ on High-Tech Marketing
Interaction between marketing and R&D
Coping with the high levels of technological and market uncertainty
Marketing capabilities & business competencies
Product development processes
Rapid changes in technology and market settings
Shortening the ‘breakthrough-time’
Market offering and product platform approaches
Increasing importance of services
Emphasise technical support and after sales service
Differentiating from competitors
Building strong relationships with suppliers, channels and customers
Analysing value systems  Networks, strategic alliances, partnerships
Rely on qualitative rather than quantitative approaches for market
research
What the customers really value?
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What does this mean?
The ‘High-Tech’ label is not ‘once and for all’, so today’s
hot new technologies becomes tomorrow’s basic
technology
Surprisingly, high-tech marketing is not so different from
that of low-tech as often claimed …
… but there is a special need for more marketing focus
in high-tech context because ...
Customer’s view is easily overlooked
To avoid developing a product which are ‘engineer's dilemma but
marketer’s nightmare’
Knowing competitors well enough
Global view of high-tech business
Cross-industry effects and convergence of different
technologies
Focusing more and more on services
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References
High Technology in Finland 2001 (also 1999, 1997, 1995, 1993, 1991),
Finnish Academies of Technology.
McGrath, Michel E. (2001), Product Strategy for High-Technology
Companies: Accelerateing Your Business to Web Speed. N.Y: McGrew Hill.
Mohr, J. J. (2001), Marketing of High-Technology Products and Innovations.
Upper Saddle River, N.J: Prentice Hall.
Moore, G. (1995), Crossing the Chasm: Marketing and Selling High-Tech
Products to Mainstream Customers. New York: HarperCollins Publishers.
Moore, G. (1998), Inside the Tornado: Marketing Strategies from Silicon
Valley’s Cutting Edge.
Moore, J. F. (1997), The Death of Competition: Leadership & Strategy in the
Age of Business Ecosystems. N.Y.: HarperCollins Publisher.
Paija, L. (2001), Finnish ICT Cluster in the Digital Economy, Helsinki:
Taloustieto Oy.
Simon, H. (1996), Hidden Champions: Lessons for 500 of the World’s Best
Unknown Companies. Boston, Mass: Harvard Business School Press.
Tapscott, D. (1999), Creating Value in the Network Economy. A Harvard
Business Review Book.
Tidd, Joe, John Bessant and Keith Pavitt (1997), Managing Innovation:
Integrating Technological, Market and Organizational Change. Chichester,
UK: John Wiley & Sons
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Thank You !
[email protected]
APPENDIX
High Technology in Finland
Some statistics…
http://tilastokeskus.fi/tk/yr/ttt_huippu.html & http://www.research.fi/
Turnover of high-tech companies ~16 billion € (1999)
Share of high-tech in manufacturing output 27 % [USA 32 %]
Average growth of production/year ~31 % between 1995-1999
Employed 42,000 people (1999) [30,500 (-95, + 8 % /year]
Number of R&D stuff 73,000 (2003) [47,000 (-91)]
1,257 doctoral dissertations (2003) [524 (-91)]
20.6 % of total export (2002) 9.7 billion euro [6.0 % in 1991]
16.0 % of total import (2002) 5.7 billion euro [12.1 % in 1991]
R&D investments (2003) 3.43 % of GNP (4.9 billion euro of which private
sector accounted for 70 %)
2,575 patent applications (2002) [6,762 (1995)]
Government budget (2004) for R&D 1,538 M€ (Universities 27 %,
Tekes 26 %) i.e. 1.0 % of GNP and 4.5 % of the budget
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R&D expenditure by sector
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R&D personell by sector
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R&D funding in the state budget in 2004
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Finnish patent applications
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GDP share of R&D expenditure (%)
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Major High-Tech Sectors in Finland
Electronics
Telecommunication
Data and Office Equipment
Software
Biotechnology
Environmental technology
ICT- Information &
Telecommunication
Cluster
“Big expectations”
High technology is a problem from industry
classification point of view - no explicit statistic
available!
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Source: www.research.fi
High technology exports and imports: Finland's main trade partners in 2002
€ Million
%
€ Million
%
1,397.6
14.4
1,203.7
21.1
Germany
707.9
7.3
Germany
661.1
11.6
France
623.7
6.4
Japan
545.1
9.6
United States
607.7
6.3
United Kingdom
466.3
8.2
Russia
590.7
6.1
China
449.5
7.9
United Arab Emirates
487.8
5.0
Sweden
265.2
4.7
Italy
427.1
4.4
Estonia
208.3
3.7
Sweden
337.9
3.5
Ireland
195.6
3.4
China
316.5
3.3
Netherlands
163.9
2.9
Switzerland
269.3
2.8
Malaysia
150.2
2.6
Netherlands
269.0
2.8
Taiwan
137.3
2.4
Saudi Arabia
237.1
2.4
South Korea
125.1
2.2
Japan
231.0
2.4
France
124.2
2.2
Ireland
198.5
2.0
Denmark
115.0
2.0
Thailand
183.6
1.9
Switzerland
85.2
1.5
Hong Kong
181.3
1.9
Singapore
81.4
1.4
Greece
179.1
1.8
Italy
74.6
1.3
Poland
174.1
1.8
Hungary
74.5
1.3
Spain
171.9
1.8
Czech Republic
62.3
1.1
Denmark
143.9
1.5
Belgium
58.0
1.0
Total
7,735.9
79.6
Total
5,246.5
92.1
Other countries
1,977.3
20.4
Other countries
449.5
7.9
Total exports
9,713.2
100.0
Exports
United Kingdom
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High-tech Marketing - Arto Rajala (HSE)
Imports
United States
Total imports
5,696.0
100.0
26.3.2004
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High-tech Marketing - Arto Rajala (HSE)
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Source: Statistics Finland
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High-tech Marketing - Arto Rajala (HSE)
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Factors behind the Finnish success
Strong technology-base (Forest & Metal/Engineering
Industries)
High level of R&D investments (public vs. private)
Focusing on core capabilities - outsourcing others
(Nokia)
Technological co-operation between companies,
research co-operation between companies and
universities - Networking (Technology Villages)
Educated labour force (75% of 25-35 years old have a
university or vocational training)
Rapid globalisation - ‘born global’ companies
Access to venture capital funding
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High-tech Marketing - Arto Rajala (HSE)
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