The Nordic Region as a Single Regional Market

Sharing a common historical background as well as many cultural, language and demand similarities, the Nordic Region, consisting mainly of four countries, namely Denmark, Finland, Norway and Sweden, is widely considered one homogeneous market with some 25 million consumers. While Denmark, Finland and Sweden are members of the European Union (EU), Norway remains outside. But Norway's non-membership affords it the freedom to set its own trade policies, including customs tariffs and trade defence measures such as anti-dumping or anti-subsidy measures, regardless of what is being decided on in the EU. Having said that, Norway has established extensive cooperation agreements with the EU, notably the European Economic Area (EEA) Agreement through which Norway is a part of the single market of the EU, and can enjoy free trade with the 27 EU member states. In regard to international trade and business, except for agriculture and fisheries, Norway usually adopts a more liberal regime than that of the EU.

Market Characteristics

Consumer-wise, Hong Kong exporters should note the fact that not all products that they export to other European markets can suit the taste of Nordic consumers. Despite a high per-capita GDP averaging US$57,000, Nordic people are very practical consumers, who bear less sense of showing off, and are not therefore used to "bling bling" (i.e. ostentation) and crazy fashion. They are deemed more demanding than average European customers, however, when it comes to product quality, design and functionality. Even though Nordic consumers are not very brand-conscious, they generally prefer to identify a product with a brand name. Branding becomes more and more prominent in view of the fierce competition between domestic and imported products, following the influx of new European shops and the inflow of goods under the internal common European market. As a matter of fact, more and more Nordic retailers are developing (mainly on the part of design) their own branded products, highlighting the importance of branding in the Nordic market.

Another important aspect worth noting is that Nordic consumers attach great importance to the environmental friendliness of the products they are buying. They are very aware of environmental issues, how goods are produced, and how they affect the environment when used and disposed of. For instance, Nordic consumers will consider environmental labelling of goods and services with low emissions of greenhouse gases a good attribute, and be willing to pay on average a price premium of up to 10-20% for such products.

Hong Kong's Export Potential

Given the high labour cost in the Nordic region and the subsequent heavy reliance on imports of general consumer goods, Nordic countries offer steadfast export opportunities for Hong Kong companies which are in the business of supplying quality consumer products. After growing by 42% or a compound annual growth rate (CAGR) of 9% over the period 2003-2007, Hong Kong's total exports to the Nordic countries saw a growth of another 7% in the first eight months of 2008, despite a grim global economic outlook. Amid the continuing trend of outsourcing and a predominance of small and medium-sized enterprises in the Nordic region, Hong Kong companies which have strong footholds in both manufacturing and trading on the Chinese mainland are good partners for Nordic companies. Serving both as a sourcing and trading platform, Hong Kong companies look set to have good potential in consumer electronics, household electrical appliances, garments, toys, games and sporting goods, and footwear. Other popular items include watches and clocks, jewellery, and furniture and home furnishings.

In addition, many Nordic multinationals have already established (labour-intensive) production facilities on the Chinese mainland to take advantage of the cost benefits. For instance, Ericsson has established a supply hub in Shanghai to take care of the Asian market. In this regard, Hong Kong electronics companies might seek businesses from these relevant regional headquarters or sourcing offices, instead of going directly to the Nordic region. In addition, it is very common to see industrial clusters (first-tier and second-tier suppliers) being developed alongside these multinationals. Hong Kong companies which are in the business of trading parts and components, for example, could approach these suppliers for cooperation.

Hong Kong as a Technology Marketplace

As regards the role as a technology marketplace, by maintaining certain edges in the business of technology such as stringent intellectual property rights (IPR) protection and enforcement, Hong Kong is well poised to bring its overseas technology partners to the mainland market and mainland partners to the international arena. Seeing the mainland's pressing needs for developing and adopting renewable energy and energy-saving technologies, plus the Nordic region's cutting edge in related areas, there is plentiful room for further promotion and strengthening of a tripartite cooperation between Hong Kong, the Chinese mainland and the Nordic region. Also worth noting is the fact that nowadays not only the Nordic countries are marketing their energy-related know-how to Hong Kong and the Chinese mainland, more and more Chinese companies have established cooperation with Nordic technology companies to carry out research and development activities on energy-related fields in the Nordic region, demonstrating their eagerness to explore the international market.

Hints of Doing Business in the Nordic Region

Putting the auspicious outlook aside, Hong Kong companies should be wary of the challenges arsing from the growing trends of direct trade with China and low awareness of Hong Kong as a trading platform, as well as the cost implications of small orders but high quality requirements among Nordic buyers. To cope with these challenges, as a general rule of thumb, knowing the customers and their unique characteristics is crucial. In addition to flexible handling of small orders and high quality requirements, Hong Kong companies should endeavour to win Nordic businesses by showcasing the value they can add as a trading platform and technology marketplace. By being also attentive to the suppliers of Nordic manufacturers amid the trend of relocation of manufacturing activities, building reliability with brand names, and capitalising on its IPR system and knowledge of the mainland market, Hong Kong companies look set to enjoy rosy trade prospects within the Nordic region.