BRICS Business Magazine
This article originally appeared inBRICS Magazine.
French appliance manufacturer Groupe SEB and Danish brewer Carlsberg sell in vastly different industries, but they both had similar experiences trying to get ahead in the treasure chest that is China. In 2002, Groupe SEB was inching forward—growing by, at most, 0.2% a year—and it was the 32nd-ranked company in its segment in China. Carlsberg was also at the bottom of the pack, a small player with less than 1% market share, with no clear path to a sustainable position. Then both companies got serious. In 2006, Groupe SEB started buying shares in China’s leading appliance manufacturer, Supor, a move that steadily and dramatically increased its market share. The company leapfrogged to 5th place by 2010. For its part, Carlsberg started acquiring or partnering with Chinese local breweries. The brewer has watched inorganic volume grow at a compound rate of 43%, and achieved organic growth of 31% from 2002 to 2011 when, according to Euromonitor, it became China’s 10th-ranked brewer, with a focus on Western China, where it is the market leader.
China is as challenging to global companies as it is important. Even when the economy cools down, it is creating opportunities for scale that are unmatched anywhere else. Already it is the number one market in a host of industries, including automobiles, home appliances, and mobile phones. It is also emerging as a leading profitable growth engine for multinational companies (MNCs). In a recent American Chamber of Commerce in China survey, 68% of MNCs are reaping margins in China that are comparable with or higher than worldwide margins.
But as Groupe SEB, Carlsberg, and countless other companies have learned, winning by going it alone is not easy. The competition has never been tougher, as a new generation of domestic companies—local champions—is quickly setting the standard for low-cost ‘good-enough’ products. MNCs need to measure up or they will fall behind. And with so much competitive pressure, they need to do it fast.