Success Story: Tapflo / SME / Set up a branch in Japan

Interview with Håkan Ekstrand, CEO and Managing Director of Tapflo Group

Originating in Sweden, Tapflo Group is a manufacturer and distributor of pumps for a wide range of industries and applications. The group has offices in more than 28 countries and distributors in over 56 countries, employing a total of 320 people worldwide. The company first started its activities in Japan in the early 2000’s, when one of their managers participated in HRTP 31. Tapflo Japan was incorporated in April 2014 and the office officially opened in early 2015.

Håkan Ekstrand, CEO and Managing Director of Tapflo Group, participated in the 31st Human Resource Training Programme in 2002 and is responsible for his company’s relations with Japan. In an interview with the Centre, he explains why his company decided to do business in Japan, how Tapflo Japan came to be, and what he has learned by doing business with Japan and taking part in HRTP.

Why Japan?

The first steps Tapflo took on the Japanese market were initiated by JETRO, the Japan External Trade Organization. In the late 1990’s, two people from JETRO visited our head office in Sweden, looked at our products and asked us to exhibit at an environmental exhibition in Tokyo. All we had to do was send the equipment to Hamburg, and they took care of things from there. That is how the story started.

A couple of years later we decided to invest more time in Japan, which is why I applied to participate in HRTP 31 in 2002. During the programme I had some time to have individual meetings, which I used to further develop some of the contacts I had made prior to my participation. The programme made me realise how important personal relations with your Japanese partners are. In fact, we started Tapflo Japan with one of the people I met in 2002.

I returned from the training programme having created very strong relations with a number of business contacts in Japan. For the following four or five years, I travelled to Japan three or four times a year. We eventually developed relations with two different distributors, each of which would be representing us in a different market segment: one was focussed on general industry, the other on the printing and food industry.

Tapflo Japan

In 2012, one of my partners in Japan announced that he would be retiring, and I asked him if he would be interested instead to start a joint venture with us in Japan. The decision to work together on trying to set up Tapflo Japan was made at the end of 2013. At that time we approached an organisation called Nopef, a Nordic investment fund based in Helsinki. They provided us with rather generous financial support, which allowed us to conduct a market study in Japan, check legal requirements, and so on to explore our possibilities to start a joint venture. Thanks to this support we were able to start the registration process in early 2014. Tapflo Japan was officially established in April 2014.

Over the course of my career I have been involved in almost twenty company establishments, and this was by far the fastest and easiest one. I am convinced that this was thanks to the fact that we understand how things are done in Japan, and that we were working with a trusted, long-term partner.

Tapflo Japan currently has three shareholders: Tapflo Group and two Japanese partners, one of whom is the managing director. We decided to stick to a Japanese strategy of taking it slow for the first year; stay on a low budget, keep a low profile without investing in marketing, and focus on taking care of the existing customers. We actually managed to book more sales than expected, running on black figures for every month except one, which is rather unusual.

For 2015, we have decided to invest more money in marketing and also to hire another staff member, a long-time partner of our Japanese shareholders, who will also be a shareholder himself. Due to these investments we don’t expect great financial results this year, but over the next five years we hope to grow to three times our current size in Japan.

Asia currently makes up about 9% of our market. While our other Asian markets (South Korea, China, Vietnam, Malaysia…) are growing steadily as well, Japan is responsible for the biggest chunk of this 9%, which means tripling in size there will have a great effect on the Asian part of our business, and we also believe that there is great market potential there. We like to compare Japan to Germany, Tapflo’s biggest market worldwide. I believe that it is possible for Japan to one day be as big for us as Germany.

Working with Japan

After so many years of having relations with Japan, we have learned quite well how to manage our customers. Of course, this contact is facilitated by our distributors – and now Tapflo Japan. They know our products very well, having been to Sweden many times to visit the workshop. Probably the greatest challenge for us has been to meet the very high quality expectations of Japanese customers, who sometimes ask rather unexpected questions. However, this has actually turned out to be an opportunity for the company, since it pushed Tapflo to create top notch products and increased the overall quality.

One thing I learned during HRTP 31 is that once you manage to please your Japanese customer, which we have succeeded in over the years, everything works rather smoothly from there one. I think that is where we are today: we have proven ourselves, shown that we deliver quality, and I believe this is why we have been successful in establishing this business in Japan.

The fact that we have managed to do this also gives us a sort of stamp of approval, telling other potential customers – especially in East and Southeast Asia – that we are a trustworthy company.

The main thing to keep in mind when working with Japan, is the importance of personal relations. You cannot compare this with business relationships in Europe. In Sweden, we may talk about the weather for a few minutes, and then we go to business. In Japan it can take months to do what we would do in the first week. When I travelled to Japan during those early years, we would visit some end users and I would provide some technical training, but we would also spend time socially and even visit hot springs together.

Our operations in Japan would not have happened without the personal relations I had. Tapflo is a small operation, and we do not have resources to send someone to Japan and wait for results for two or three years. Moreover, our Japanese partners would not have been satisfied if we had sent lower-ranked staff to deal with them, especially for this establishment they would have wanted to socialise with somebody from the management of the company.

The importance of HRTP

It has been more than ten years since I participated, but even today it is so easy to move around in Tokyo thanks to the language introduction we received during HRTP 31. This knowledge has proven to not only be useful for practical reasons, but also in business. Obviously we did not learn enough to conduct business negotiations, but it gives you that first door opener. We made business cards and are able to say “hello, my name is… and I am a manufacturer of pumps” and that makes most people sort of lighten up a bit. They appreciate that you made the effort to learn their language, and it is a connection point to start the discussion.

What also stayed with me are the field trips, which gave us a good impression of how Japanese manufacturing plants work.

Without HRTP, I don’t think Tapflo Japan would exist – for two reasons. I learned to understand the country and how to do things in Japan, but it also put Japan on our map. For most people, Japan is like a country on another planet, but this programme made it reachable. While the investment fund provided us with money, HRTP provided us with the competence and understanding necessary to start our business in Japan.