Abstract

The case illustrates the globalization of Iceland from an egalitarian societyto an open society. It outlines the economicstrategies that the country adopted in order to develop a global stance in the international markets.Inthe initialperiod, Iceland enabled its fishing industry and exported into other market.To support the industry, the governmentreduced taxesto minimizethe exchange rate effect an also reducedthe entry barriers so as to welcome external Europeanmarketplayers.

Later in 1990, the country embraced the Free Trade Agreement with the EuropeanUnion, giving the country a strong boostand market exposure. In the later years, Iceland also initiatedthe airline business and tourism, followed by aluminum production, which has been its comparativeedgedue to geographical location.

However, such shift in industry and adoption of industrialization strategy poseda threat of deteriorating the natural environment along with the issue of loose interest rate policies to support thehousehold activities.In late 2007, the countryfaced strong waves of economicdownturn, making Iceland default in the global markets.

To deal withsuch an issue, in 2010, the country adopted a revised strategy of deviating from the industrialization sector that may harm the environmentand has started focusing towardsrenewableenergies, offering the country sustainability and retention along with political harmony.Moreover, it has also regularizedthe taxes and interest rate policies for the bankingsector to secure markets from further financial crash.

Iceland Small Fish in a Global Pond Harvard Case Solution & Analysis

Introduction

Iceland is a small Island surround by AtlanticOcean.The country has joint borders with other European nations and is regarded partiallyas a part of Europe.Since independence, the countryremainedegalitarian.Such approach resulted in limited global presence and hence,economicstability.

In theinitial period, the country pursued fishing and marineenergy business as a part of global business.In doing so, the government reduced the currency rate in order topromote theexports in the global markets.However, such remaineda practice of Iceland till the early 90s.

In late 1990’s, the countrystarted expanding its business span by introducing service production, financialservices which then resulted in accounting an increase of GDP from 17% to 26% in 2006.In order to support sucha business, the government allowed the local banks to set the interest rates themselves so as to become profitable and sustainable in the long-term.

Such improvement in the business sector and active participation of the government allowed Iceland to reduce the unemployment rate, resulting in high economic spending. Such,in turn,allowed to improve the global image of the country, resulting in more aggressiveforeign direct investments andgovernment budget surplus, reducing the overall debt from the economy.

Though such improvement and reformed policies allowed Iceland to develop strongstance in the global markets, however, the financial effects derived from the financialcrisis along withextendedfreedom to banking andhousing loans is an issue for the sustainability of thecountry as in the future, such may result in another financialcrisis, deterioratingthe overallattractiveness of the newly developed market.

Situational Analysis

SWOT Analysis

Strengths:

• The country has strong government support to regulate the businesses, allowing it to increase export and hence,develop a strong global marketoffering.
• Iceland is nearly connected with the Europeanregion, allowing it to reach the large marketseasily through free tradeagreement.
• The country has substantial natural resources, such as aluminumand other deposits derived from the sea, making it strong in termsof attaining raw materials and leveraging the strength to reach the globalmarkets.
• The country has controlled trade balance, backed through strong government support...................

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