British kettle company shifts its strategy to stay on the boil
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
A saleswoman shows electric kettles to a shopper in Qingdao, Shandong province.