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China market not wash and dryPublished: 19 Jul 2009 18:02:01 PST
By Tu Lei
Two international home appliance makers are taking steps to boost their market share in China by going after high-end consumers with better products.
The US-based Whirlpool, one of global leaders in the appliance market, said its April 2008 joint venture with Hisense-Kelon Electrical Holdings, a Guangdong-based home appliance company, was activated and it expects the 900 million yuan ($131.6 million) joint venture will collectively produce 1 million refrigerators and 2 million washing machines aimed at high-end shoppers.
At the same time, Electrolux launched three types of high-end air conditioners in May, a development that comes six years after they were virtually absent from the market.
In fact, it is not the first time for the two to launch white home appliances in China. But compared with their performance overseas, they had reasons to worry about their presence in China.
In 1994, Whirlpool arrived in China and bought four companies, including Beijing Xuehua Electric Appliance Group and Shanghai Narcissus Electric Appliance Manufacture Co, but their relationships and their product lines evaporated for a variety of reasons.
Whirlpool’s global vice president Li Yan told the China Electronics News that the failed efforts cost the company about $100 million.
Sweden-based Electrolux entered China in 1996 and bought 60 percent in shares from a Hunan-based company and saw losses pile up.
The refrigerator market share in China was less than 1 percent for Electrolux at one time.
The causes
Zhong Ming, general manager of the commerce department at Whirlpool’s office in China, said yesterday that the failure was mainly attributed to inadequate information about the Chinese market.
“In the past, we did not introduce our best products to China,” said Zhong, adding that as recently as 2008, Whirlpool was still selling products they developed five years earlier.
Moreover, Zhong said good technology must be accompanied by good marketing, something they didn’t have in the past.
The problem for Electrolux was also grave.
During the past 13 years, the company has had seven presidents in China, including one who was at the helm for just two months. This, combined with a poor strategy and inconsistent brand positioning, hurt sales.
Although Electrolux tried to reposition itself as a high-end company following the departure of Liu Xiaoming in 2003, the company’s first president in China, the company failed to offer any impressive products.
Way out
Although the financial crisis has restrained efforts by Chinese companies to explore overseas markets, the domestic home appliance market in the first half of this year developed in part, said a report at the China International Consumer Electronics Show, because city customers were able to buy new appliances at a discount by trading in their old ones.
The report said that between January and May, 3.87 million washing machines were sold.
The research firm AVC Consulting said in the first quarter of 2009, the sales volume of refrigerators stood at 4.54 million, and the amount of sales was 10.3 billion yuan ($1.51 billion).
Figures from State Information Center shows in the first quarter of this year, high-end refrigerators, including French door, three and above three-door, led by Haier, Meiling, Midea and Hisense, saw jump in sales of 19.97 percent, and it predicts sales will reach to 3.65 million sets in 2009.
Gunilla Nordstrom, the company’s newly appointed China president, said that starting this year, Electrolux China will concentrate on the high-end market mainly in four municipalities and eight provinces, including Jiangsu, Zhejiang, Guangdong and Guangxi.
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