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Electrolux Readjusts China Market Strategy
Dec 23, 2003
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Electrolux, one of the world's biggest household appliance producers, announced that it is planning to become the leader in China's light home appliances market in the next 3 years.

In a launching ceremony that attracted hundreds of distributors from around China, the Sweden-based company unveiled a wide range of light household appliances for the China market in 2004, including vacuum cleaners, air-conditioners, toasters, coffee percolators, and ovens. The move marked a shift in the China market strategy of the 100-year-old manufacturer.

Light appliances is one of the few remaining profitable sectors in China's fiercely competitive white goods market. Statistics show that in China, the profit margin in light appliances is almost twice that of large household appliances such as refrigerators and color TV sets, which have high penetration among urban households and an average profit margin of less than 5 percent.

An average Chinese household has only a few light appliances, far fewer than the average of 30-40 items per household in Europe. Chinese home appliance producers are strong in their capacity to turn out refrigerators, TV sets, and other large consumer durables, but they still lag behind their Western counterparts in the variety, technical standards, and scale of light appliances.

As intensified competition has helped accelerate the consolidation of the Chinese appliance manufacturing industry, international companies such as Electrolux have adapted their business tactics for this market with huge potential.

In order to take advantage of the relatively low cost of manufacturing in China, Electrolux has moved its global production capacity for air-conditioners and its procurement center to the region. In the next few years, the company will buy U.S. $1.2 billion-worth of materials from China and meet $1 billion-worth of global orders with local production every year.

On the other hand, the increasingly fine division of consumer demand in China has provided new niche markets for international manufacturers.

General Manager Solemn Cheng of Electrolux Floor Care and Light Appliances China said the company had seen great potential in China's light appliance market. Electrolux is preparing to bring its most sophisticated products into the country, including the top-end automatic vacuum cleaner Trilobite, which can reportedly circle around obstacles and recharge automatically.

Results of a survey done by the governmental think-tank Development Research Center (DRC) have shown that 56 percent of Chinese urban residents are paying more attention to brands when they choose household appliances. International companies like Electrolux are trying to meet this demand for personalized, fashionable appliances with their latest production lines.

Meanwhile, Merrill Lynch has reported that there is no universally acceptable experience for international appliance producers to do business in China. It said the international companies need to adapt their strategy to the real conditions in the Chinese market or adopt a strategy with Chinese characteristics so as to succeed in this huge but diversified market. (XIC, Asia Pulse)

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