Nordic Industrial Park: bridging distance across international markets

When a resource-constrained firm enters a high-distance market, it helps greatly if it can utilise a low- distance entry point.

The lure of the Chinese market has led several Western companies to venture into a context that is unfamiliar and bewildering, especially for small and medium-sized enterprises (SMEs) lacking the deep pockets of large multinationals. It is useful for SMEs to have a bridge into a high-distance market. One way to accomplish this is to use a foreign-owned industrial park (i.e. a space designated for industrial use).

Consider the case of the Nordic Industrial Park (NIP) that provides a physical space for offices and light-manufacturing facilities, and a range of value-added services to set up a business in China. These include legal services (e.g. registering the company and drafting contracts), human resource management (e.g. recruitment, payroll and expat relocation), accounting (e.g. financial reporting), and information and communication technology (e.g. internet access). NIP was co-founded by Ove Nodland, a Norwegian who first came to China in 1994 to manage different ventures. Nodland learnt that even though rules were set in Beijing (the national capital and political centre of China), they were implemented by local officials and so they mattered greatly. Over the years he invested considerable energies in building close relationships with various officials, and took care to ensure that the ventures he worked for complied with local regulations and aligned themselves with local governmental priorities. Nodlands local guanxi (network connections) grew rapidly.

After a decades experience in China, Nodland realised he was well placed to help European SMEs enter China more broadly. He chose to focus on what he knew best: firms from the Nordic region (Denmark, Finland, Iceland, Norway and Sweden) setting up a base in Ningbo, a port city in Zhejiang province just south of Shanghai (the commercial centre of China) and renowned for its entrepreneurialism. Thus was born the concept of NIP in 2002, which was sold to Silver Rise Hong Kong Pte Ltd, part of Chinas Yinmao Group, in 2013, with Nodland staying on as consultant. In 2015, NIP was selected by the Zhejiang provincial government as one of the first designated international industrial cooperative parks which further strengthened its local standing. Going forward, NIP has signalled its intent to attract projects from Nordic universities and achieve an output value in excess of RMB 2bn (280m, 224m, $364m) by 2017.

From the perspective of a European SME entering NIP, there are multiple benefits:

• Process: L ower start-up costs. NIP leverages its knowledge of the Chinese business environment by hand-holding clients through the complexities associated with starting and running a business in China, thereby allowing firms to focus their time and energies on core business activities.

• Physical environment: A familiar ambience. NIPs architecture and design mimics Scandinavian features that set it apart from standard Chinese buildings. Not only does this give expat managers a sense of the familiar, it is also a symbolic reminder to Chinese employees that they are part of a Western organisation.

• People: A like-minded community. By virtue of being part of the largest concentration of Nordic companies in China, expat managers have the opportunity to share experiences with and pick up tricks of the trade from other managers with a similar cultural background through hallway conversations and lunchtime meetings. Of course, entering a facility like NIP comes at a cost, but offers benefits in terms of reducing distance.

Can you please help me to answer these questions based on the above case study?

1 Consider NIPs services in light of the CAGE framework and analyse how they may help reduce distance.

2 What might be the drawbacks in being located in an industrial park?