The Swiss National Bank dropped the bomb in the morning of January the 15th 2015: they announced that they would stop to artificially support the euro through buying on the market. This had a massive impact on many things – including improving your competitive positioning in Switzerland, if you are selling to Switzerland from the euro area. So – what have you done about it?
Many companies and people have felt the pain, though. Including all of us here in Switzerland, who had euros on their bank accounts or companies that had receivables from their export business activities in euros. The Swiss Market Index was hit by the news too and went down by 14.9%.
There had been talk that the pressure on the Swiss Franc was mounting, but few expected the SNB to make such a major move all of a sudden. The euro went down massively within literally minutes from the announcement, recovering then slowly from costing less than one Swiss Franc to parity.
For quite some time now the exchange rate EUR/CHF has been close to about 1.05.
Did you know that according to the Informatikverband ICT Switzerland the Swiss ICT exports in 2011 were about 9 billion Swiss Francs – a whopping six times more than the combined exports of cheese and chocolate combined?
The impact to any company having their costs in Swiss Francs and their export sales made in euros is of course significant. But that’s not all: all of a sudden the Swiss tourism industry is suffering from the lack of tourists, too. And the Swiss living anywhere close to the borders – and in a small country like Switzerland there are plenty of those – started shopping in the supermarkets in Germany, France and Italy more eagerly than ever before!
In fact, very soon after the announcement the local media reported on queues several kilometres long on the roads heading towards the German town of Konstanz in the north-eastern corner of Switzerland, by the Lake Constance!
The Swiss businesses have started to cope with the situation in different ways. The large retail chains are lowering their prices to keep their customers. As an example, Coop announced on the 22. of January that they would reduce prices on a thousand products from the euro area and again on the 3. of February reductions on 3.200 further products by up to 17% were announced. Migros soon followed with their own similar announcement.
As another development, some manufacturers are asking their employees to work longer weeks – according to Handelszeitung 43 – 45 working hours per week are being requested from the employees in an attempt to improve productivity.
A good question is, why the SNB did not do this gradually by announcing the capping to say, 1.10?
Well, be that as it may, your euro area business now has an advantage on the Swiss market of around 15% in comparison to the time before the January 15th announcement. We are experiencing many Swiss businesses using this opportunity to buy investment goods and consumables from the eurozone in higher volume than before and there is no reason why you should not take advantage of this new situation.
If you are not yet on the Swiss market, you should seriously consider the entry. Either way, we at Fennobiz would be happy to discuss the market situation and how your hi-tech offering would fit on it in more detail. Give us a call and we’ll discuss your particular situation without any obligation.