Why Switzerland? The market potential in Switzerland for Finnish companies
Michel Patteet from Switzerland by FinnCham tells transition to post-pandemic phase – positive signals in Switzerland – what to expect and how did the companies manage to continue their operations through the challenging past years and what are the opportunities and benefits for Finnish companies in the Swiss market.
Like everywhere around the world, the pandemic hit severely in the daily lives of all of us and affected the economies and local companies. After the global economy was shut down in 2020, it ramped up again to less or more full capacity. In such a context the companies had to maintain the business operational, protect the health of their employees, secure liquidity and supply chains and deliver products wherever it was still possible. It was amazing how quickly the Swiss companies tried to cope with the new situation. They clearly showed a high degree of flexibility, creativity, commitment, while maintaining their composure. The support package, like 0% loans and the system of short-time working that the Swiss Government had developed in no time certainly contributed to this. I think that the Swiss economy has once again shown great resilience.
We do now see positive signals of recovery. For example, the unemployment rate is expected to reach the historically pre-pandemic level of 2,3%. The GDP is growing again, just like the exports. The private consumption is also on the rise again, with Swiss consumers spending significantly more than the European average. At the public level, a transition towards a post-pandemic phase is in full swing. Decision makers are now thinking of lifting Government restrictions and replacing them with voluntary measures, based on self-restraint and individual responsibility.
What are the opportunities and benefits for Finnish companies in the Swiss market?
As we have been assisting several Finnish clients on the Swiss market, we have noticed that in several sectors, they have a real potential in Switzerland. But before zooming in on some sectors, let me just highlight some general elements that make it attractive for a Finnish company to look at the Swiss market. Currently there is a strong Swiss franc compared to the euro, which makes Finnish products more competitive. Because Switzerland is a multicultural country, influenced by its neighbours Germany, Italy, and France, where the competition is quite tough due to high quality and innovation expectations, I would see it as an ideal test market. If you can make it here, you can make in the rest of Europe.
From a sector point of view, I see a real potential for sustainable products, like packaging materials for example. Here, Switzerland has still a way to go. The same counts for energy-related technologies. As Finland is quite advanced in the digital field, it could certainly meet needs in the administration, to companies, the finance sector, power management and logistics. Because the Swiss consumers are among the biggest spenders for organic food in the world, more than 10% of all food in Switzerland is of organic origin, the needs of bio foodstuff are further expected to grow. And last but not least: med-tech and e-health! In these fields Finland has a top-notch position and this is well known in Switzerland. I think that the Swiss can learn a lot from the experience Finland has built up over the last decades.
How Finnish companies should prepare themselves if they want to enter the Swiss markets? Which mistakes are most common?
Let me start by answering your last question. Then I can explain how to avoid mistakes.
We often notice that our European clients think that exports to Switzerland are the same as to an EU country. They tend to forget that Switzerland does not belong to the European Union and overlook the trade barriers to the market entry. Apart from the non-tariff regulations, there are also quite often tariffs that apply. They should be aware of these taxes before starting the prospection, because they will influence the price setting of the products or services they wish to offer.
When clients see that the Swiss potential customer has an interest in their products, they become enthusiastic and want to go fast and start pushing the sales process. Since the decision-making process in Switzerland is slower compared to other countries, this is definitely an attitude that should be avoided!
Because Switzerland has a mature market, competition for many types of products is quite tough. Unless you arrive with a completely new product with a high “must have” factor, you will have to set up a careful marketing strategy. Or to put it bluntly: in most cases, the Swiss haven’t been waiting for your product or service. A way to generate a first mark of interest though, is to lower the threshold. I mean by that, translate your website and brochures in the mother tongue of your prospect, in German and in French. This will facilitate the communication, even if you don’t speak the language.
In Switzerland you have cantons – how would you describe them and how do they differ from each other – how this should be taken into account when choosing a region where the Finnish company would like to invest or find partners?
Switzerland has 26 cantons, like your regions. They are spread over four language areas. Some of them are more urban, other rural. This makes a very interesting mosaic. Almost Europe in miniature, I would say! The German speaking region is the largest and has 17 of the 26 cantons are monolingual German. The French speaking part has seven cantons. Three cantons are bi-lingual, German and French. In the south you have the Italian speaking canton of Ticino. Interestingly, these three regions are quite influenced by their ‘big neighbouring brothers’ Germany, France and Italy. You feel the difference in the mentality. For example, if you meet with a Swiss person from a French speaking canton or from Ticino, they are more Latin, compared to a person from a German speaking canton. As these cantons have a far- reaching degree of autonomy with many competences, like healthcare, education, tax system to name a few, you can almost consider them as mini states. There is also a sound competition amongst the cantons in the field of attracting foreign investors, so that makes it interesting to shortlisting a few and make a comparison on a number of parameters, when you plan to set up a legal entity in Switzerland.
From our European clients who want to sell their products or services in Switzerland, we often receive the question: “Where in Switzerland shall we start our market prospection?” If you look at where most of the Swiss population is living, it is quite clear: out of the 26 cantons, 63% is concentrated in just 7 cantons, that include cities like Zurich, Basel, Berne, Lausanne and Geneva. Another element that often plays a role as well, is the language. Certain companies from abroad are more versed in German, whereas other prefer French. We can easily solve this problem, since we have an office in both linguistic regions, from where we can reach out on behalf of our customers in the local language.
How would you describe a Swiss partner and a Swiss colleague?
In general, Swiss business partners are considered as reliable. They will treat you with respect, provided you do the same, of course. Compared to other Europeans, especially from more southern countries, they are more reserved. For example, in order to make a good business deal, they do not need to know where you have spent your last holidays. You should not take this reservation as a pretention. The Swiss consider this attitude rather as a virtue. They are pretty down to earth and during negotiations they prefer to base on facts rather than feelings. They prefer to clearly separate their professional life from their private sphere.
Once you have concluded a deal, Swiss business partners scrupulously what has been convened. Usually you will hardly encounter any payment problems.
Your favourite place to spend free time in Switzerland – and why?
I like to spend holidays in the Alps in the canton of Graubünden. Long mountain walks in this beautiful region always open up new views in every season. At the same time, they inspire me and allow me to put things into a context and perspective.
Can we conclude that there is a potential for Finnish companies in Switzerland? And if so, what is the formula for success?
It is true that the Swiss market is a very mature one, where competition is quite strong, where a number of sectors are protected and where the expectations in terms of quality and degree of innovation are high. But as I said before, in a number of sectors, Finnish companies have an attractive potential to offer. It is crucial that sufficient time and energy are invested in the preparation. My experience has shown that the companies that have prepared also achieved the greatest success. Then you have set for a durable and long-term relationship. Who wouldn’t pursue that?