Hisense makes ac­qui­si­tion work

China Daily (Canada) - - ANALYSIS -

Chi­nese firms are mov­ing up the value chain by shift­ing from be­ing low cost man­u­fac­tur­ers to branded, high qual­ity pro­duc­ers as their re­search and de­vel­op­ment strengths grow.

In the process they are start­ing to ac­quire in­ter­na­tional brands to which they had pre­vi­ously sold prod­ucts as orig­i­nal equip­ment man­u­fac­tur­ers.

One ex­am­ple is the Chi­nese white goods maker Hisense, which ac­quired the re­frig­er­a­tor brand Fridge­mas­ter in the United King­dom in 2012, and used its ex­ist­ing sales force to build the Hisense UK sub­sidiary.

Be­fore the ac­qui­si­tion, Hisense had been mak­ing re­frig­er­a­tors for Fridge­mas­ter for about 10 years. As a re­sult, it built a deep un­der­stand­ing of the Fridge­mas­ter brand and good re­la­tion­ships with its em­ploy­ees.

Fol­low­ing the ac­qui­si­tion, Hisense con­tin­ued to sell prod­ucts un­der the Fridge­mas­ter brand to ex­ist­ing out­lets, but added its own prod­uct lines, which are pre­mium prod­ucts with more func­tions, sell­ing at higher prices and branded as Hisense.

“We knew the brand very well and we al­ready knew the UK mar­ket very well through work­ing with Fridge­mas­ter, so we de­cided on the ac­qui­si­tion,” said Louis Hou, man­ag­ing di­rec­tor of Hisense UK Ltd.

With Fridge­mas­ter’s ex­ist­ing team be­com­ing its core em­ployee base, Hisense grew very fast in the UK. Its UK rev­enue grew from 8.5 mil­lion pounds ($12.4 mil­lion) in 2013 to about 30 mil­lion pounds last year.

Mean­while, Hisense has ex­panded be­yond the re­frig­er­a­tor busi­ness by sell­ing tele­vi­sions in the UK.

Hisense added its lat­est 4K TV to its prod­uct range in the UK last year. 4K is a pic­ture tech­nol­ogy that quadru­ples the num­ber of pix­els found in a full HD pic­ture.

Glob­ally, Hisense is the third-largest pro­ducer of 4K TVs — which pro­vide a crisper pic­ture with 4,000 pix­els of hor­i­zon­tal res­o­lu­tion. That is just af­ter Sam­sung and LG.

Hou said Hisense’s in­ter­na­tional growth is a good ex­am­ple of a three-stage model of ex­pan­sion that many Chi­nese white goods pro­duc­ers share. The first stage of ex­pan­sion is pro­duc­ing as an orig­i­nal equip­ment man­u­fac­turer for Western brands, the se­cond is sell­ing its own branded prod­ucts over­seas through part­ner­ships with lo­cal dis­tri­bu­tion part­ners, and the third is to man­age brand­ing and sales over­seas it­self.

Hisense reached the third stage in 2009 when it re­struc­tured its Euro­pean busi­ness, fo­cus­ing on set­ting up sub­sidiaries to mar­ket Hisense-branded prod­ucts. This re­struc­tur­ing has led to the cre­ation of sub­sidiaries in Italy, Ger­many and Spain, fol­lowed by the UK in 2012, which was aided by the ac­qui­si­tion of Fridge­mas­ter.

Hisense grew out of Qing­dao No 2 Ra­dio Fac­tory, founded by the lo­cal govern­ment in 1969. It es­tab­lished a glob­al­iza­tion strat­egy in 2006, and it has built 16 over­seas com­pa­nies in North Amer­ica, Europe, Aus­tralia, Africa, the Middle East and South­east Asia. It re­mains a State-owned en­ter­prise.

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