Optical illusion on the North American market

Asia dominates news, but USA is still important for Finnish companies

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By Pekka Mykkänen
     
      Hands up everyone who remembers hearing on the news recently about how one Finnish company or other is expanding its operations in China or India.
      Now, raise your hands if you have heard about a Finnish company setting up a new factory in the United States.
      Now you can put your hands down. Now hands up if the next claim makes you feel uncertain: The United States has only about ten Finnish companies operating there, and their business operations are dwindling.
      The claim is, in fact, sheer nonsense, but one could imagine that it might be the case, considering how little talk there is about the United States, when the topic of discussion revolves around the operations of Finnish companies abroad. On the other hand, China and India, as well as Russia, Estonia, and the rest of Eastern Europe dominate the headlines on the subject.
     
Now, raise your hands if you know that Finnish companies operate in nearly all states of the USA. More than 100 companies have over 400 locations in the country, employing tens of thousands of Americans. For instance, for Fiskars, the country is a vital market.
      "The United States is not visible enough, considering its importance. There is an optical illusion that it would be something to be taken for granted", said Minister of Foreign Trade Paula Lehtomäki in New York in late September.
      According to Lehtomäki, Finland’s fifth-largest export market, the United States, is in the same series as Sweden and Germany - important as trading partners, but such natural ones that not much noise is made about them.
      The same can be said in the world of enterprise. "One might speak of a lemming phenomenon, and it is not limited to journalists. When China is in vogue, everyone talks about China. When India is in, everyone talks about India", notes Maija Elenius, head of finances at Fiskars.
      The visibility of China and India is also enhanced by the frequent visits by representatives of the Finnish government in the country. In developing economies, there is still a call for visits by trade delegations, whereas in the United States, the companies deal with their own matters.
     
There is rarely smoke without fire, and this applies to the Asia boom as well. People talk about it because it is a real historical phenomenon, which shakes the world economy. This has been felt by Fiskars as well, which sells garden tools, arts and crafts supplies, as well as GerberGear goods, which are popular among hunters, fishermen, and soldiers.
      In 2001, 67 percent of the turnover of Fiskars came from the United States, but the most recent quarterly survey indicates that the share of the USA has fallen to 44 percent of sales. Exports by all Finnish companies into the United States have fallen by one third since 2001. The United States now accounts for six percent of Finland’s overall exports, and about four percent of imports.
      Elenius says that the greatest factor behind the change in Fiskars’s situation is China, which exports more high-quality goods into the United States than before, and which has put production in the United States in a difficult position. Two factories were recently shut down, and two others will close by the end of the year, after which there will be four left.
      "Chinese products are cheaper, and their quality has improved considerably in the past five to ten years. Now we are in a completely new situation", Elenius says, adding that Fiskars also has some of its products manufactured in China.
     
A dramatic indication of the changes in the world economy from the Finnish point of view are the rearrangements in the routes of the airline Finnair. A few years ago Finnair flew to Beijing a couple of times a week, but now it has a total of 23 flights to four Chinese cities.
      Over the years, Los Angeles, San Francisco, Miami, Seattle, and Montreal have been dropped Finnair's North American services. The only routes that are left are Helsinki - New York, which was launched in 1969, as well as summer flights to Boston and Toronto.
      "The Far East is an area where Finnair is seeking expansion and growth", notes Mikko Turtiainen, head of Finnair’s North American services.
      During its busiest years Finnair had about 200 employees in the United States, while it now has no more than just over 20. According to Turtiainen, services to North America are not in jeopardy, because the planes are booked to about 90 percent capacity during the summer, and no other airline flies nonstop between Helsinki and New York.
      The United States is seen as a market in which competition is intense.
      Nokia has also made note of this. Its market share in mobile phone sales in the United States has declined from 32 percent five years ago to about 13 percent.
      The world leader in mobile phone sales is now in third place in the USA, behind the domestic Motorola, and the South Korean Samsung. Nigel Rundström, Nokia’s head of multimedia operations in the United States, says that as consumers, the Americans are quite different from those in the Third World, for instance.
      Whereas an African may have recently make his very first telephone call, an American might be pondering what kind of a phone might match his or her evening wear, how much music can be stored in it, and what kinds of video pictures the device will record.
      Still, as consumers, Americans are not patriotic: they buy goods on the basis of what feels best, Rundström believes.
      In addition to the China Phenomenon, and intense competition, the actions of the Finns in the United States have been challenged by numerous powerful winds blowing in the world economy. For instance, the bursting of the IT bubble led to the demise of many small companies. Maija Elenius says that in Fiskars’s sector, the price of oil is a major factor, which has affected the profitability of the manufacture of plastic products.
      In addition, the strengthening of the euro has turned the export capacity of European companies to the United States upside-down, and the cheap imports of large retail chains is "making price competition pretty radical".
     
However, as it is America, everyone has a dream, and quitters are not looked upon kindly. Nokia, Finnair, and Fiskars all insist that they have faith in the future.
      Foreign Trade Minister Lehtomäki notes that for the small Finnish nation, it is an advantage that "we do not have to seek such a fat slice from the world". In her view, "we are good at figuring things out, and the Finns' strength is a quickness of some kind."
      Finally, some news about one Finnish company. Metso Minerals says that in November it will open a new factory in Columbia, South Carolina. "It responds to the growing demand for the product in the United States, and improves flexibility and customer service." Hands up those who feel that it is game over for the United States!
     
Helsingin Sanomat / First published in print 8.10.2006

More on this subject:
 FACTFILE: Finland has trade surplus with USA

PEKKA MYKKÄNEN / Helsingin Sanomat
pekka.mykkanen@hs.fi