Bri­tish ket­tle com­pany shifts its strat­egy to stay on the boil

China Daily (Canada) - - ANALYSIS -

China’s man­u­fac­tur­ing strength cre­ated a ma­jor growth story for the ket­tle con­trol sys­tem maker Strix, based on the Isle of Man, but the com­pany has had to re­fine its strate­gies in China as the coun­try un­der­goes an eco­nomic struc­tural shift. The way Strix has pushed for tech­nol­ogy ad­vance­ment and in­tel­lec­tual property pro­tec­tion shows how for­eign firms are ad­just­ing to China’s di­min­ish­ing ad­van­tage in low-cost man­u­fac­tur­ing while also cop­ing with changes in the do­mes­tic mar­ket there.

“It is a com­pet­i­tive mar­ket. We have to con­stantly in­no­vate and come up with bet­ter meth­ods for do­ings things with lower costs to stay ahead of com­pe­ti­tion in the mar­ket,” said Paul Howard-Snow­den, a di­rec­tor at Strix.

The com­pany, founded on the Isle of Man in 1951, has 70 employees in the self-gov­ern­ing Bri­tish Crown de­pen­dency lo­cated in the Ir­ish Sea be­tween Bri­tain and Ire­land. It has an ad­di­tional 750 employees in its fac­tory in Guangzhou in South China, and other work­ers around the globe.

The story of its China ex­pan­sion started at the end of 1996, when the com­pany es­tab­lished a China pres­ence by work­ing with one man­u­fac­tur­ing com­pany in Hong Kong and an­other in Guangzhou. At the time, the world’s ket­tle man­u­fac­tur­ing in­dus­try, like much of the small do­mes­tic ap­pli­ance in­dus­try, had started on a large scale to shift to orig­i­nal equip­ment man­u­fac­tur­ers in China.

Ini­tially, Strix chose the two Chi­nese com­pa­nies to pro­duce se­lected com­po­nents and con­trols as sup­pli­ers, but within two years it es­tab­lished its own man­u­fac­tur­ing com­pany in Guangzhou to move man­u­fac­tur­ing in-house.

Strix used the Guangzhou fac­tory for man­u­fac­tur­ing plas­tic molded com­po­nents and assem­bling con­trol sys­tems, while the Isle of Man fac­tory con­tin­ued to make high­pre­ci­sion metal com­po­nents shipped to China for as­sem­bly.

That al­lowed Strix to con­tinue to source some com­po­nents needed in the man­u­fac­tur­ing process avail­able only in Europe, and then com­bine that with lower-cost man­u­fac­tur­ing in China. Its Euro­pean team also has to main­tain good re­la­tion­ships with Euro­pean cus­tomers like SEB (Tefal), Bosch, Siemens and Phillips, which pur­chase OEM ket­tles from China, to make sure th­ese cus­tomers trust the Strix brand.

Howard-Snow­den said Strix has main­tained its mar­ket com­pet­i­tive­ness be­cause it con­tin­u­ally in­no­vates in the de­sign and func­tion­al­ity of con­trol sys­tems.

In re­cent years, Strix has faced in­creas­ingly strong com­pe­ti­tion from the Chi­nese do­mes­tic mar­ket. Also, ris­ing la­bor costs in China con­tinue to squeeze profit mar­gins, a big chal­lenge for Strix when com­bined with fall­ing prices.

The salaries of se­nior man­age­ment and skilled en­gi­neers in China have risen so much that they are now equiv­a­lent to those in a ma­ture mar­ket like the United King­dom. Strong de­mand for th­ese skilled work­ers in China also means they are tough to find, HowardSnow­den said.

“In­ter­nally this is the big­gest bat­tle be­cause it means the peo­ple with tech­ni­cal skills needed to help us grow our busi­ness are so dif­fi­cult to find,” he said.

Even work­ers with fewer skills on the fac­tory floor are ex­pe­ri­enc­ing big salary in­creases, Howard-Snow­den said. When Strix es­tab­lished its China fac­tory, th­ese work­ers cost about 10 per­cent of the equiv­a­lent Bri­tish la­bor, but the cost has risen to well over 25 per­cent, he said.

Al­though this num­ber may not seem large, it could be sig­nif­i­cant for com­pa­nies that are con­sid­er­ing mov­ing their man­u­fac­tur­ing to China be­cause the cost of re­lo­ca­tion and startup is also high.

“If a busi­ness is es­tab­lished in China al­ready, then that is a dif­fer­ent story,” he said. For Strix, one big rea­son for con­tin­u­ing to man­u­fac­ture in China is the size of the Chi­nese con­sumer mar­ket for ket­tles, now the world’s big­gest.

It is a com­pet­i­tive mar­ket. We have to con­stantly in­no­vate and come up with bet­ter meth­ods for do­ings things with lower costs to stay ahead of com­pe­ti­tion in the mar­ket.”

di­rec­tor at Strix

HUANG JIEXIAN / FOR CHINA DAILY

A sales­woman shows elec­tric ket­tles to a shop­per in Qing­dao, Shan­dong prov­ince.

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