Finnfund

Polar Electro is expanding manufacturing operations in the Far East for its heart rate monitors. In addition to its units in Hongkong and Malaysia, the Finnish-based company will this year start production in Guangdong, southern China.

Among the financial backers of the new production unit is Finnfund, which has been Polar’s partner in its projects in Hongkong and Malaysia since the start of the 1990s.

In Hongkong Polar began small-scale production of heart rate monitors in 1989. In the following decade the operations expanded through a shareholding in a company that soon became a wholly-owned subsidiary. Now there are some 200 employees in Hongkong.

“Manufacturing costs in Hongkong have risen continuously,” says Polar Electro’s president and CEO Jorma Kallio. “Production has been shifted to subcontractors in China and now we intend to begin production there ourselves. But we aren’t going to close the Hongkong production unit.”

Far eastern productivity and quality

For Polar, beginning production in Asia was a wise strategic decision.

“The Far East offers a combination of productivity, price competitiveness and quality production. In the electronics industry, the level of labour quality has grown all the while”, sums up Kallio.

By 1998 Polar was ready for setting up a new production unit on Penang Island, Malaysia.

“Our company’s size increased rapidly in the 1990s. At the same time the advantages and cost benefits of production in Asia became increasingly obvious. We have learnt to manage logistics and administration and to control output quality. We also wanted to ensure the continuity of operations by not putting all our eggs into the one basket of the Hongkong unit,” Kallio says.

There are currently 550 employees in the Malaysian unit. It is owned by Polar together with a local partner and Finnfund.

Continuing co-operation with Finnfund

Kallio points out that Finnfund has played a major role in the start-up phase of Polar’s Asian operations.

“Finnfund has been an excellent partner in helping us finance projects in developing countries. Its participation has given the investment a degree of security and created institutional trust among local entrepreneurs,” he explains.

“This is why we are continuing to work together. In our business we aim to keep the doors open to our established partners. What’s more, Finnfund’s products are competitive.”

Better-than-expected progress in Asia

Kallio notes that the surprises that Polar has encountered in Asia have been far more positive than negative.

“Things have gone better for us in both Hongkong and Malaysia than we could ever have expected. Good basic planning has been behind this success. There’s also been synergy with making products and developing technology in Finland.”

The problems that Finnish companies face in Asia are generally interpersonal or culture-related, Kallio believes. The Chinese way of thinking is a little different from the Finnish way, he feels.

“For example in some circumstances the Chinese appreciate short-term results more than we do. They may think that it’s worth doing a little more by hand, taking a smaller risk but making the business profitable immediately. Finns usually go for a more capital-intensive business plan, buying more machines and making operations profitable over a longer term.”

Kallio describes the Malaysian business culture as similar to China’s because the Chinese minority in Malaysia plays an important role in its business life.

“In terms of the structure of industry, infrastructure and its administration, Malaysia is more developed than China. Business is a bit easier there. But the most liberal business environment of all is in Hongkong.”

He believes that China’s accession to the World Trade Organization will benefit the foreign companies operating there and make importing and exporting easier.

“On the other hand, China has already managed to negotiate customs matters to create a favourable environment for foreign business operations even before WTO membership.”

Main markets in North America and Europe

The most important market areas for Polar heart rate monitors are North America and Western Europe. The products are currently sold in about 70 countries.

“A megatrend of recent years has been increased public concern about welfare amid all of life’s stress. People are paying more attention to their health. It’s been estimated that the world’s fitness-related business is growing at an annual rate of 10-20 percent.”

There are numerous rival products on the market, manufactured by the world’s largest producers of watches and sports equipment, including Adidas, Nike and Timex.

“We succeed amid ever tougher competition thanks to product development that is as fast or even faster than our rivals and with a superior grasp of the business. This includes researching human physiology and translating the results into equipment.”

Kallio believes that demand for heart rate monitors will gradually start to grow in Asian markets, too, although fitness in the western sense of the word is still at the start of its development curve.

“Working out and the wellbeing that it seeks are a western phenomenon. The exercise gym culture is gradually spreading into Asia but our main markets will be in North America and Europe for a long time to come.”


For more information please contact Ms Ilmi Aho tel. +358 9 3484 3335 or email firstname.lastname@finnfund.fi