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Mainland brands think globally
http://www.sina.com.cn 2003/06/24 11:14  Shanghai Daily

  Unlike some other Asian countries, China has yet to develop a global retail brand. It is a situation likely to change soon as a selectsgroupsof Chinese companies are increasingly targeting markets such as the US and Europe in an effort to promote their brand awareness but more importantly, to increase market share.

  The 79-year-old Greenwich Bank building at 36th Street and Broadway in New York City boasts 25 Corinthian columns, a setting often used for fashion shows. Its owner: China's largest refrigerator maker.

  Haiersgroupsbought the building for US.5 million two years ago to step up its attack on the US market. The company - whose president, Zhang Ruimin, is an alternate member of the Chinese Communist Party's elite central committee - aims to quadruple sales in North and South America to US billion by 2005.

  "Our primary purpose and goal is to develop the Haier brand in the US," Haier America President Michael Jemal said in a May 29 interview at the company's New York headquarters, now re-christened the Haier Building.

  After battling multinational rivals at home for more than a decade, Chinese companies including computer maker LegendsgroupsLtd, TV manufacturer Sichuan Changhong Electric Co and Huawei Technologies Co, a telecommunications gear supplier, are setting their sights on the US, Europe and other markets.

  Haier will account for 16 percent of the US refrigerator market this year, Jemal said. General Electric Co had 36 percent of the market for full-sized units and Whirlpool Corp had 25 percent in 2001, according to Appliance Magazine's most recent figures. Haier had less than 1 percent of the US market then.

  Based in Qingdao, a port city in eastern China, Haier is gaining ground abroad by offering lower prices and introducing new products, such as a portable air conditioner, employees at Best Buy Co, the largest US electronics retailer, said.

  "Customers are looking for quality products at a low price, and Haier has that," said Zachary Teske, a buyer on the appliance team at Best Buy's headquarters in Richfield, Minnesota.

  Best Buy started selling Haier's refrigerated wine cellars three years ago. It added the Chinese company's standard-size refrigerators last year, its air conditioners this year and its mini-refrigerators last month, said Teske.

  The Haier units "are very popular with college students," said sales manager David Saunders. Haier appliances are also sold at retailers such as Wal-Mart Stores Inc and Home Depot Inc.

  Haier says industry data show it has 12 percent of the US refrigerator market four years after arriving. Whirlpool spokesman Steve Duthie and Kim Freeman, a spokeswoman for Fairfield, Connecticut-based General Electric's appliance and lighting division, wouldn't comment on Haier's US expansion.

  "Let 'em have at it,"Duthie said from Whirlpool's Benton Harbor, Michigan headquarters, when asked about Haier's prospects. "It's a tough, competitive market."

  While Haier refrigerators and Legend's Lenovo personal computers aren't household brands in Europe and the US yet, Chinese companies have the potential to match or even eclipse the success Japanese and Korean companies such as Sony Corp and Samsung Electronics Co had going abroad, said Paul Gao, a consultant at McKinsey & Co in Shanghai.

  "The leading Chinese players have already established good market share in a domestic market that is open" to foreign competition, Gao said. "They can be successful in overseas markets." Sony and Samsung were protected from competition at home during their global expansion through import tari-ffs and barriers to foreign investment.

  Legend has about 30 percent of the PC market in China, the world's second-largest market after the US.

  The Beijing-based company, which makes cellular phones, computers and hand-held organizers, aims to increase overseas sales to a fifth of annual revenue by 2007. In fiscal 2003, Europe made up 3.6 percent of the company's HK.23 billion (US.6 billion) in sales. North America accounted for 0.5 percent.

  To position itself abroad, the company, known as "Lianxiang" in Chinese, took on a new English-language brand name in April: Lenovo. It had to replace the two-decade-old Legend name because it is patented outside China by many companies."We decided internationalization is the way to go," chairman Liu Chuanzhi, who is also a delegate to China's National People's Congress, told reporters at the April meeting.

  Changhong, China's largest TV manufacturer, accounted for 87 percent of the US million in Chinese color TV sets sold in the US last year, said Luo Guangqiang,head of Changhong's overseas marketing department. Last year China's TV exports to the US surged to more than 12 times 2001's level, the Chinese electronics industry trade association said.

  First-quarter profit at the company, based in Mianyang, Sichuan Province, quadrupled to 78.9 million yuan as exports to the US, Europe and Southeast Asia surged sevenfold. Its shares have risen 5.4 percent this year.

  Huawei, China's largest telecommunications-equipment maker, is going abroad as Chinese phone companies pare spending to respond to slowing subscriber growth. Last year, Huawei's international sales rose 68 percent to US million, while overall revenue fell 13 percent to US.7 billion.

  "We're expanding quickly in Europe, Asia and Russia," said spokesman Fu Jun from Huawei's headquarters in the southern Chinese city of Shenzhen. The closely held company, run by former People's Liberation Army officer Ren Zhengfei, plans for 35 percent of sales to come from outside of China by 2006, Fu said.

  Overseas expansion hasn't been without pitfalls.

  Chinese companies accuse foreign competitors of targeting them through a well laid-out campaign against them.

  Huawei is being sued by Cisco Systems Inc in federal court in Marshall, Texas for allegedly copying Cisco's software and infringing on patents.

  Changhong and other Chinese TV makers face possible antidumping duties as high as 84 percent in the United States in a complaint brought before the US International Trade Commission by a component manufacturer and two unions.

  Profit at Haier's Shanghai-listed unit, Qingdao Haier Co, fell 36 percent last year to 397 million yuan as it cut prices to win customers. The unit represents about 15 percent of the parent company's US billion of annual sales. Its shares have risen 4.7 percent this year, compared with a 14 percent rise in the Shanghai A-share index.

  In addition to refrigerators, Haier also sells 26 different kinds of refrigerated wine cellars in the US and markets a television for children called Ribbit TV that looks like a frog. It also manufactures a beer-making machine.While most of the appliances Haier sells in the US are imported from China, it makes about 200,000 full-sized refrigerators a year at its factory in Camden, South Carolina because it isn't economical to ship them from China, Haier's Jemal said.

  Its strategy for taking on US rivals is to use local employees to understand the market better, said Jemal, a 37-year-old Brooklyn native. None of the 105 employees at its New York headquarters is Chinese. Only the American flag and the blue and white polka-dotted Haier corporate banner fly outside of the company's New York headquarters.

  "It is very different from some of the companies Japanese or Koreans have set up, where they basically took people from their home turf," Jemal said. Haier gives me "the autonomy to develop their business."




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