Major companies tailor approach for China

27 April 2010

BEIJING: General Electric, L'Oréal and Intel are among the companies that have developed tailored approaches in a bid to grow sales in China.

General Electric, the US conglomerate, currently derives just 4% of its annual revenues from China, but has set ambitious expansion targets for its operations in the country.

“We have to grow by two to three times of GDP every year. We hit that last year with new partnerships and increasing localisation. We want to build China as GE's second home market,” said Mark Norbom, its China CEO.

Norbom boasted over a decade of experience working in areas like Hong Kong, Indonesia, Japan, Taiwan and Thailand prior to taking on his current role, but suggested that China is a one-off.

“China is bigger, more complex, more political and [has] higher growth than any other market that I have had the opportunity to work with in the past,” he said.

“Given the importance of China to GE's globalisation, growth and reverse innovation strategy, the top management of the company tends to pay more attention to China than it does to many other markets.”

General Motors, the automaker, has attached a similar level of importance to the world's most populous nation, where it sold 1.83 million vehicles last year through its local arm, GM China.

This equated to an uptick of 67% year-on-year, and made the company the largest multinational automotive manufacturer by volume shipments.

While GM's Chinese totals still lagged those in the US, where it sold 2.07 million vehicles in 2009, it predicts the former of these countries will soon overtake the latter in terms of the number of cars sold.

“China is obviously viewed as extremely high priority, probably the highest priority next to the turnaround in the US,” Terry Johnsson, GM China's vice president, said.

L'Oréal , the cosmetics giant, first established a presence in China in 1997, and has seen its sales there rise from 182 million yuan ($26.7m; 20.1m; £17.2m) in that year to 6.95 billion yuan in 2008.

Paolo Gasparrini, president and managing director of L'Oréal China, argued that introducing products specifically tailored for the tastes of Chinese shoppers had been key to its success.

“Our CEO says that China has to take its destiny in its own hands. So we have to drive our own R&D, take our own internal decisions and, more and more, drive our own development,” he said.

L'Oréal has acquired two local firms, Mininurse and Yue Sai, in a bid to enhance its position in China, and is now considering the global roll out of an eponymous brand developed by the second of these companies.

Microsoft also effectively made its Chinese division an independent entity in 2003, a strategy that was replicated by Intel in 2007.

“It is like a ‘mini Intel'. We have manufacturing, R&D, sales and marketing. We have very much a complete Intel organisation here. And that has happened after years and years of gradual investment in China,” Ian Yang, president of Intel China, said.

“My challenge is … can I think big enough? Can I come up with a radical new idea that will take the business to a new height?”

Data sourced from Forbes; additional content by Warc staff