Backer AB
Background
The Norwegian Christian Backer, the founder of Backer AB, emigrated to Canada and in Ottawa he built up a plant for experiments. In Canada Christian Backer developed a complete concept for production units and started selling licenses of his method. After the Second World War Christian Backer wanted to build up an activity in Sweden. Backer Elektro-Varme AB in Sosdala was founded in 1949. The products of Backer can be derived from the technical principle that Christian Backer took out a patent for, in the year of 1921. The company was started together with Nils Bernerup, the founder of NIBE-verken in Markaryd. The technical principle is based on a resistence wire that is positioned in the centre of a tube. The space between the wire and the tube is filled with magnesium oxyde. The element tube with the magnesium oxyde is then compressed and sealed. The electrical heating element is also known as the "Backer element".
Modern History
Backer set up a subsidiary in Norway in 1969. Twenty years later NIBE Industrier acquired NIBE and Backer from the Bernerup family, after which three product units gradually emerged. Five years later Backer acquired a 32% stake in Polish tubular element manufacturer OBR and a few years later Backer AB acquired operations in Danmark and transferred production to Markaryd. A sales and service branch was set up in Danmark and later, in 1997, Backer OBR became a wholly owned subsidiary within NIBE element. Backer focuses on three different business areas: element, heating and stoves.
Interview at Backer AB
We interviewed Mr. Robert Nilsson, Market and Technical Manager at Backer AB.
Markets
The degree of internationalisation of Backer AB is fairly high, 65 % of turnover abroad, and the internationalisation of the market is also fairly high. In Europe there are five main competitors and about 50 local manufacturers. Backer established production in Sweden 1949, Norway 1969, Poland 1994, The Czech Republic 2000, Italy 2002, Great Britain and China 2004. In 1969 Backer establishes the first production unit abroad in Norway to provide the Scandinavian market. In the 1970s Backer AB established a facility in France, which later was sold off and left is a sales office. Backer has sales offices in Germany and the U.S. The company entered Germany at a late stage, in the early 1990s. One of the reasons was that Backer AB had focused on the France market. Backer AB entered the Polish market at an early stage compared to its competitors. The reason why the company entered this market was that a Polish company contacted Backer for material supplies. At that time Backer AB did not see the Polish market as a potential market and for two years Backer AB turned the Polish offer down. However, as the Polish company tripled the production every year, Backer AB realised the potential of the market. The sporadic export turned into a deeper relation when Backer in 1994 acquired a 32 % stake in the Polish tubulator element manufacturer OBR. In 1997 the Polish company became a wholly owned subsidiary within NIBE heating.
New Market Entries
When Backer AB is about to enter a market they look at potential growth and the number of existing competitors in the new market. An important factor when establishing a new facility is low labour costs and an example of this is Czech Republic. The interesting market for future investments is the Eastern Europe, such as Russia, Estonia, Latvia, Lithuania and Poland. The main reason for entering the Baltic market is that Backer AB's customers move production to these low cost countries. In order to supply the customers Backer AB needs to follow although sales is a bit slow there. When entering new markets Backer AB begins with export. At the moment the company is exporting to the Russian market, but Backer AB has sent a sales man to St. Petersburg and Moscow to establish customer relationships. About 50 potential customers were found and three of them will be in focus. New potential markets are the U.S and Canada since the climate is similar to the Scandinavian countries. The barriers for entering these markets may be energy political decisions where other modes of heating may be favoured. Other factors influencing is tradition.
The main market is Sweden and the main export market is France. Backer AB started with export to Norway and Finland where the company also acquired facilities. Further expansions were Denmark, Germany and France, which was mainly a coincidence. Using agents when entering new markets is not in accordance with Backer's strategy as the products take quite long time to introduce. An exception was made as the German market was entered through acquisition. Further expansion has been made in China where a facility has been established in order to serve existing customers established in China. According to Mr. Nilsson Backer's competitive advantages are a strong brand name and special products adapted to different markets since 98 % of the product range is adapted to customers' needs. Despite this, Backer AB may use technical know-how gained in the home market and transfer it to new markets. Further advantages are good quality and accuracy in delivery. To avoid problems with psychic distance, for instance in China, sometimes Backers choose to export through an English agent.
Networks
The market information is acquired through networks of contacts, such as SandvikCantal, but mainly the company gather market information on their own. To gain knowledge and keep transaction costs for know-how low all technology and know-how are available for all subsidiaries within NIBE and Backer AB. Backer AB acquires new knowledge through acquisitions and mergers. Another way to reduce transaction costs is through intranet and newsletters. Mr. Nilsson states that Backer AB engages in both national and international networks. Backer AB is involved in a network within the region of Sosdala with other technical international actors, for example, Autoliv. At the local level networks are used to gain knowledge and protection of environment. At the global level the advantages for engaging in networks are co-operation against common rivals and to gain further market shares. Global agreements may also give reduced costs of purchasing. According to Mr. Nilsson Backer AB develops most knowledge internally. Some R&D is bought in projects and sometimes Backer AB needs to buy new technical know-how from the customers to be able to serve them with the right products. Social and informal networks are not of great importance according to Mr. Nilsson.
Mr. Nilsson ends our interview by stressing that very often coincidence is a more determining factor than strategy, when it comes to entering new markets.