The business of Finnish hydraulic block and component manufacturer ST-Koneistus was thriving all the way until the economic crisis hit the world big time in 2008.
It took the company a couple of years to get over the worst, but the rest of Finland did not recover quite as quickly. As a result, domestic sales remained persistently stagnated for the Finnish manufacturing industry.
“This meant that any company seeking growth would have to start looking for new clients from beyond the borders of our country,” says ST-Koneistus CEO Jarkko Selin.
Before the crisis, ST-Koneistus’s exports were so modest that there was not really much to talk about. Today, however, the situation is notably better, with exports accounting for roughly 25% of the company’s total sales. Not bad, considering the circumstances.
“Back in the good old days things were going so well here in Finland that we didn’t even need to export,” Selin recalls. “That is why our exports were almost nonexistent. We’ve been working hard on changing that, and thanks to the efforts our exports have been growing steadily.”
Nearly all of the growth achieved by ST-Koneistus since the crisis has been the result exports. In 2009, the company found its first clients in the neighbouring Sweden, and some of those new contacts eventually led to clients in Denmark as well. Meanwhile, exports to countries such as Poland and Germany started growing, too.
This block was made in Ylöjärvi, Finland. By now it’s probably on its way to Ireland.
Jarkko Selin explains Swedish business philosophy.
High Quality and a Tiny Bit of Luck
The success of ST-Koneistus makes us wonder just how can a Finnish manufacturer remain competitive on the international stage. After all, Finland is not exactly known for its low prices. The new government is desperately trying to find the means of lifting the country’s manufacturing industry back on its legs.
When we ask Selin about the secret of his company, the answer is simple:
“Quality. And a bit of luck!”
“We are finding more and more clients abroad that have understood it can actually pay off to pay the extra buck for a better product,” he continues. “To give an example, I’d say Swedish clients are especially well aware of the value of quality.”
Does that mean there’s more money to be made working with the Swedes?
“Don’t get me wrong,” Selin laughs. “They will certainly not agree to pay an excessive price for your product, but neither will they go for the cheapest option available. They know that at the end of the day cheap doesn’t take you very far.”
Thankfully, finding new business does not always have to require painstaking efforts. Recently, ST-Koneistus managed to find a major new client almost completely by accident.
“Our local partner often brings its clients over to our facility to take a look at some of their solutions we use in production,” Selin explains. “Recently, a foreign client noted that we produce hydraulic blocks. They said they knew somebody who was in desperate need of quality blocks, and asked if they could forward our contact details to them. I thought why not, thinking we will probably never hear from them again.”
Two weeks later, Selin received a phone call from Ireland. Pictures were requested, and once they had been sent and received, a meeting at the ST-Koneistus facility was set up. Soon after the meeting, the first orders were placed.
According to Selin, the production of hydraulic blocks in Ireland is very much centralized, controlled by a handful of strong manufacturers that do not leave the client much room for choice in terms of, for instance, the materials used.
“Our new client wanted to have their blocks made of certain material,” Selin explains, “but no one would do that for them – not a single manufacturer in the British Isles! The material in question is more expensive and a challenging one to machine.”
Said client, a manufacturer of hydraulic cylinders and a relatively big player at that, is now one of ST-Koneistus’s most important clients. According to Selin, the average size of an order from a Finnish client is somewhere around 50 units. The Irish client, on the other hand, has so far not placed a single order of less than 400 units, sometimes ordering as many as a thousand.
“We had a couple of machines running for half a year just to fill up their stock,” Selin reveals. “Then it got a little quieter for a while, but once they start having some more room again in their storehouse, they’re going to turn to us again.”
Sounds like a good deal, but there might just be more coming. Selin says the client is part of a group containing four different companies. It has been agreed that if the cooperation with the first company continues to go smoothly, ST-Koneistus will start delivering to all four companies, meaning the sales for the client could quadruple.
According to Selin, that would mean sales potential worth €2 million per year.
Not bad for a coincidence.
Text and images by Industrial PRIME
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