The Chinese Market: Exploring Recent Finnish-Chinese Collaborations

According to the Embassy of Finland in Beijing, trade between China and Finland exceeded €7 billion in 2012. Today there are over 300 Finnish companies in China. The Tekes-Fudan collaboration is the natural result of this. “Finnish companies get to work with the students and staff of the MBA program at Fudan University, one of the top universities in China and the world, to build insight into the market of their products in China,” one Finish company, BioGTS notes on its website, about its yearlong involvement with iLab.

One of the advantages of collaborating with Tekes for the Fudan University School of Management is working with a country ranked three in the World Economic Forum’s annual Global Competitiveness Index (GCI). The reason for Finland’s inclusion in the top 10 (behind only Singapore and top-ranked Switzerland) is based partly on its number one ranking for “highly transparent public institutions.” It also earns high marks for its commitment to education funding, giving its “workforce the skills needed to adapt rapidly to a changing environment [laying] the groundwork for high levels of innovation.”

One area where Finland outperforms many nations who are also highly ranked on the Global Competitiveness Index is on the World Economic Forum’s newer Sustainability-Adjusted GCI. As it explains on its website, the Sustainability-Adjusted Global Competitiveness Index attempts to assess “the set of institutions, policies and factors that make a nation remain productive over the longer term while ensuring social and environmental sustainability.”

The central idea is to measure the productivity level of an economy with respect to environmental stewardship and social sustainability. On this list the US, which ranked fifth on the GCI, drops to 17th. On the GCI, China leads among the BRICS countries, in 29th place. On sustainability it ranks 31st. On its website, Tekes also champions Finland’s “minimal bureaucracy and stable and competitive environment,” another factor that ranked it so high on World Economic Forum’s indexes.

The iLab is a conduit, funneling gifted International MBA students into companies that benefit from their experience. Lumene is a good example of this. Established in 1948, the Finnish skin care company utilizes natural ingredients like cloudberries, lingonberries, blueberries, birch, linen, heather and peat. As noted on the Finnish Embassy website, Finland’s “challenging northern climate places particularly high demands on Lumene skin care products; they need to protect the skin against the cold, wind, heat and light, and also condition it.”

Both Lumene’s philosophy and its raw materials spring from nature. “At the core are knowledge of the northern nature and the concept of Nordic beauty... It is not mere superficiality but, above all, positiveness, charisma, harmony with nature, and well-being radiating outwards,” Tapio Pajuharju, President and CEO of Lumene Group is quoted on the Finnish Embassy site.

Lumene has translated its success in Finland to international success in the US and Russia. Although the company had already enjoyed a successful launch of its products as mass market consumer goods in China, they wanted iLab students to assist their placement as prestige products.

Guo Chi grew up in southwestern China and spent five years after college working in marketing and sales. As part of the iLab team assigned to Lumene, Chi noted that, “The China-unknowns are the biggest challenges.” Chi’s team used the 4P method to provide a full picture of the Chinese market (product, price, place, promotion). 

“More competitors are entering or enhancing their positions in the Chinese market,” Chi explains. Even more challenging, when Lumene imported its high end cosmetics into China, the company faced very high taxes including a customs duty between 6.5 to 15%, along with a consumption tax rate of 30% and a Value Added Tax of 17%.

Charles had worked in a variety of positions for an airline but had no experience or familiarity with the cosmetics and skincare industry in general or Lumene specifically. “Doing something new is always exciting,” he explained. “Also, the theories I learned in the first and second semester were very abstract to me so I needed to apply them to real business cases.”

Since consumers were familiar with the mass market products of a few years ago, Charles remembers that the iLab team encouraged “Lumene to change its brand name in China; we offered several options from which they could choose. In addition, we also offered a couple of distribution channels for better branding.”

Vallila Interiors is another homegrown Finnish success. Begun in 1935 by Otto Berner, the company produces everything from bed linen and curtains to decorative pillows and other high-end home furnishings. For Vallila, the challenge was discovering not only the best way to market their product but also who could sell them.              

Ivy brought with her over eight years of experience in the retail industry. As she explains, “Vallila is a well-established brand in Finland, however, it has no brand impact in China. Resellers like Vallila’s product design, but are skeptical about their market potential. They also are concerned about high cost and long lead time of importing the products from Finland.”

She says her iLab team found a solution, proposing “a strategy of combining reselling with brand licensing, in which some products will be imported from Finland and resell in China, and some others can be manufactures here in China. This strategy was welcomed by both Vallila and the potential resellers.”

The iLab students working with Tekes companies not only had the chance to apply their International MBA educations to real-world business problems, but also got the chance to travel to Finland at the beginning of the project. Visiting the country in January means enduring some harsh weather, but for Ivy it also meant staying in the Santa Claus Village and looking for the aurora borealis.

As Chi recalls, “What stood out most was the beauty of Nordic country. We saw a white world filled with snow in Finland which I barely saw before in China. Everything there was so pure and organic just like Lumene’s brand image which reflects the arctic beauty, refined by science and execution. I experienced a wonderful and memorable time in Finland and really have been impressed.”

According to Fudan, the Finnish companies they worked with were impressed as well.

This article is sponsored by the Fudan University School of Management.