Brand owners modify Chinese strategies

26 October 2012

BEIJING: Brand owners such as Ford and Nestlé are increasingly focusing on capabilities beyond manufacturing in China, reflecting the surging importance of the domestic market.

Ford, the car maker, has invested nearly $5bn in developing its operations across China and plans to roll out 15 new models locally by 2015, at a time when competition is intensifying.

"Automakers need to win in China to win globally," said Russell Scoular, Asia Pacific regional director, government affairs, at Ford, AmCham Shanghai reported. "You build in the markets. You build where you sell."

Kimberly-Clark, the personal care group, which entered China in 1999, is pursuing a similar strategy, according to Ken Whitaker, its vice president, sales, marketing and research and engineering.

"Exports played a significant role in our early years but the Chinese consumer is driving our change in manufacturing focus," he said. "Consumers are increasingly richer, more demanding and willing to pay for quality and are more confident and connected on the net."

Nestlé, the packaged food giant, also announced earlier this month that it would construct two new innovation units, in Xiamen and Dongguan, to accompany its existing sites in Beijing and Shanghai.

"We continue to invest in our R&D capability in Asia, because we know this brings us closer to local consumers, and gives us a greater understanding of the raw materials used to make the products they enjoy," said Johannes Baensch, Nestlé's Global Head of Research and Development.

Eaton Corporation, the power management company, has four R&D centres and 1,200 engineers in China, and believes value-generating activities have become crucial as rising wages reduce the nation's cost advantages.

"We think it's critical that our product development and design engineering are close to the customer," said Curtis Hutchins, its president for Asia Pacific operations. "You've got to be in China to serve the China market."

"Just starting low-cost manufacturing is not a good long-term strategy. When we think about 'low-cost' manufacturing, it's about the management of total cost. It's about infrastructure. It's about logistics in another country. It's about the variability in team capability."

Dover Corporation, the communications expert, has adopted a diversified approach. Its subsidiary divisions have opened seven operation bases in China since the financial crisis began, and it is also seeking possible takeover targets.

"Asia Pacific has become an important strategic market of Dover Corporation rather than simply a low-cost labor intensive manufacturing base," Michael Zhang, its Asia President, said. "Dover will attach more importance to the emerging market of China by continuing investment to drive growth."

Data sourced from AmCham Shanghai; additional content by Warc staff