Globalisation feeds jobs in Swedish heartland
Globalisation | Everyone has seen the writing on the wall – low wage countries will suck jobs away from Sweden. But the reality is different.
GARO, a company in Sweden’s industrial heartland producing electrical installation material, has suppliers in China and a facility in Poland. Expansion has resulted in more jobs for the base company, in Gnosjö, a town that is a Swedish byword for hard work and business optimism.
– We have to think globally to develop locally, says CEO and part owner Stefan Jonsson.
Since GARO launched production in Poland, more people have been employed in Gnosjö, and not only in the typical, home-base divisions: product development, logistics and marketing. Even production operators have increased even though the Polish subsidiary has 65 on its payroll.
– Some products can sell more if we can make a component or detail more cheaply, explains Jonsson, a detail that we can make in Poland.
His view is that the recent trend to move production to countries with low wages was often built on a narrow perspective. Many businesses forgot — or chose to ignore — the big picture, focusing solely on production costs.
Now, with some parts manufactured by suppliers in China or elsewhere in this shrinking world, and others by GARO itself in Poland, and with the main factory and assembly in Sweden, the company has arrived at the right mix for maximum competitive advantage. This is globalization at the service of the company and a small Swedish city.
– Our market is in Europe and this structure lets us be quick and flexible. We produce customer-friendly items — for example, distribution boxes — from a lead time of 48 hours, including ordering, designing, price calculation, assembly and delivery. Ten years ago, delivery time was six weeks for the same product, says Jonsson.
Meeting a group of schoolteachers, visiting GARO under the auspices of the Swedish Enterprise Sweden-China Knowledge Travel plan, Jonsson explained the process of finding the right supplier in China.
– We’re not big player when it comes to buying from China,” he said. “On the other hand, we purchase quite a bit globally. The risks are considerable, especially in China. Cultural differences can easily lead to misunderstandings and language problems can lead to disagreements that are hard to solve, since the same words can mean different things. And if there’s a problem, their judicial system is impenetrable.
– Here in Europe we can bargain. We discuss a product’s specifications then the price, trying to bring it down. In China, there’s a strong risk they think you’re talking about a new item if you mention a lower price. The product we agreed on for ten kronor [one euro] is suddenly another, of poorer quality, if you start saying nine kronor. You can get a changed product with different specifications, but cheaper.
Quality problems do exist, even if China’s production apparatus is well-developed and technical skills extremely high.
– But checks are often done afterwards, instead of like here, where monitoring is built into the process.
The time perspective is another interesting factor. Stefan Jonsson believes that Westerners are often seen as impatient.
– Take your time, get to know your business partner and don’t tell them when you’re planning to fly home. If you do, negotiations will be delayed until the last morning. Tell them you’re staying until the deal is done. And be prepared for a lot of paperwork when the contract is finalised.
Jonsson can see China’s competitive advantage being eaten away by high commodity prices and steeply rising energy costs. Electric power is also shaky; power distribution is subject to outage. Wages are rising quickly and delivery costs are also growing in China.
– At the same time, energy and wages are stable here in Sweden. That’s good for us in a longer perspective.
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