Author: Vitalii Parshukov
A3 population trends for your market entry strategy in EU
In international growth projects Excedea’s team often receives a key question in market entry strategy: How to choose the region for the expansion of my business activity?
To give a quick answer, the European Union’s motto “United in Diversity” works well. Not only are the European countries different and constantly changing, but also, they have a lot of internal diversity in the level of attracting new business ventures and investments as well as what is considered as their future potential. The specifics of the region could heavily impact the success of the market entry strategy.
To start the analysis, it is useful to understand the regional differences and to know the trends of population distribution. This will give an idea of the location of the target consumers and the suitable labour market conditions for the preferred market entry.
Trend 1. The population of Western Europe continues to grow, while in Eastern Europe population is typically decreasing.
The national-level data shows the population in Eastern European countries tends to decrease. For example, Latvia and Lithuania have witnessed a 4-5% decrease in the total population during the last five years. However, the location of our own headquarter – Estonia – is an outlier in Eastern Europe with a minor increase in the total population during the same time.
On the other hand, Western European countries have demonstrated stable population growth during the last five years. For instance, the size of the population has grown by 3.57% in the UK, by 1.28% in France, and by 2.79% in Germany. However, there are exceptions: the population has decreased by 1.45% in Portugal and by 0.7% in Italy.
Trend 2. The largest cities get larger, while the population of rural areas is decreasing.
This trend is not only typical of Eastern Europe. Countries such as Italy, Germany, France, Spain, and others reveal the same pattern of population distribution: highly populated cities and suburbs attract more and more inhabitants.
According to the recent study by the Commission for Territorial Cohesion Policy and EU Budget, metropolitan area attract population due to:
1) higher density of economic activity;
2) job opportunities;
3) better access to services and infrastructure.
Another important factor to consider is suburbanization within the metropolitan area when residents are moving out of the core city to suburbs within a commuting distance due to lower real estate prices. That is one of the major reasons why the population is growing in areas surrounding the largest cities in Europe.
In contrast, rural area inhabitants face fewer job and education opportunities and have more complicated access to public services and infrastructure. This situation leads to the marginalization and aging of populations in rural areas.
Trend 3. People with a higher level of education are mostly concentrated in capitals and large metropolitan areas.
The analysis of data about residents’ education levels demonstrates a clear trend that persons aged 25-64 with higher education levels tend to be located in the largest urban areas existing in a country. This trend is the same for Eastern and Western Europe.
How to choose the region for the expansion of your business activity?
The answer to this question depends on your goals. If you would potentially need to open a new office, make significant recruitment decisions, or identify potentially relevant customers or partners, you might want to choose among the largest urban areas existing in your target country. There is no need to think only about capital cities since the prices for property, salary levels and competition are typically higher in those than they are in other cities. Current trends in population distribution show that non-capital urban areas are actively developing and growing, being attractive for new residents and economic activity, making them useful alternatives to capitals.
The population is not the only factor that can influence the choice of a target country and region. Please contact our team to know more and discuss your ideas.
 Commission for Territorial Cohesion Policy and EU Budget, The impacts of metropolitan regions on their surrounding areas, 2019
 Persons aged 25-64 with ISCED level 5, 6, 7 or 8 as the highest level of education, from 2014 onwards