Magazine article New Zealand Management

Stig Ehnbom on a Different Way of Doing Business

Magazine article New Zealand Management

Stig Ehnbom on a Different Way of Doing Business

Article excerpt


When the first oil crisis struck in the early 1970s, New Zealand introduced car-less days and, with most other Western economies, returned to "normal" relatively quickly. By contrast Sweden, with 80 percent of its oil imports used for heating and transport, decided that within 50 years it would not be dependent on oil for either.

Currently, Swedish oil imports account for just 25 percent of fuel used, and it's expected that by 2020 it will be independent of oil for those activities. The Swedish Department of Industry can show a 20-year plan for every sector and with global warming becoming an issue, some sectors are already planning much further ahead. This well-developed process of long-term planning is at the heart of the experiences that Scandinavia is willing to share with New Zealand companies and, indeed, the rest of the world.

Denmark, Finland, Iceland, Norway and Sweden are the main Scandinavian (Nordic) countries, and together with Greenland, the Faroe and Aland Islands have a combined population of just over 25 million. Denmark, Finland and Norway have similar populations to New Zealand (between 4.5 and 5.5 million people each) and Sweden has nine million, according to 2007 Nordic Statistic Agencies' reports. Such similar population levels in islands interested in developing knowledge-based economies ensure that successive New Zealand governments have kept a close watch on Scandinavian business philosophies and activities.

Scandinavia has a long history of smart industrial development and many large, multinational companies have developed from a range of early innovations--witness ABB, DeLaval, Electrolux, Ericsson, Grundfos, Nokia, Sandvik, Scania, SKF, Tetra Pak and Volvo among others that are active in New Zealand.

Underpinning the success of such companies is the recognition that it's often necessary to "think outside the square". For example, in a typical Scandinavian company considering investment in a new product, the order of questions would likely be, "Are we able to do it?" followed by, "What is the world market for this product?" then, "What is its unique selling proposition?" "Can we work with alliance partners?" and eventually, "What is the margin and cash flow?"

Outside Scandinavia, the question related to profit and margin usually comes first, and expectations tend to be for very early profitability and dividends.

Scandinavian companies generally resist the temptation to outsource manufacturing to low labour cost countries such as China, on the basis that unless the product is intended for local consumption the social problems at home as a result of this activity could be catastrophic. Instead, they have encouraged countries like China to outsource their own production to Scandinavia, to take advantage of high productivity levels and the ability to sell items at a premium using the label "Made in Sweden/Denmark/etc".

There are big cultural differences between Scandinavian countries, but after many armed conflicts over the past 1000 years the benefits of cooperation have been learned well. Although quite different, Scandinavians usually work together well and reach consensus on the most complex issues. Everyone seems to know that arguments and conflicts will only produce delays, hostility and low morale. …

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