Monday, 14. March 2016

China Module – German Premium Family-owned Companies

As all good things come to an end, the China Module is drawing to its natural end. Today, the Part-Time MBA group went on field trips to German premium family-owned companies, the backbone of the country’s economy, and to have a close look at how this type of companies performs in the Chinese market.

 

In the morning, the WHU group drove to Taicang, a satellite city of Shanghai known for being home to more than 200 German-owned enterprises, to visit TRUMPF, one of the world’s leading companies for machine tools, lasers and electronics for industrial applications. Having its first move to China in 2000 through direct investment in Taicang, TRUMPF witnessed a meteoric growth in China (e.g. the average annual growth of order intake was more than 30% over the last decade) and has been serving as the regional headquarter for central coordination of machine development, production, sales and service since 2012. Key insights from the discussion with Dr. Karsten Tonn, the CFO of TRUMPF China, are for instance 1) TRUMPF’s decision to establish a plant in China was less driven by cost savings than by the necessity to stay on the pulse of Chinese market and to reduce lead times; 2) In addition to heavy investment in R&D, the company attaches high value to the welfare of the employees and organize activities that bear the potential to induce a sense of belongingness among Chinese employees; 3) When it comes to deal with Chinese customers, challenges very often result from different understanding of quality and different importance ascribed to maintenance contracts. The field trip was enriched by a guided tour of TRUMPF‘s exhibition hall and production sites.

Following a ninety minutes’ transfer, the WHU group came back to the former Britain/American Concession in Shanghai to explore our last destination – the Miele House. Designed to mimic a Chinese palace, this historic building has been serving as a showroom for the iconic German manufacturer of high-end domestic appliances, commercial equipment and fitted kitchens since 2010. During the lively discussion, Marco Stuettem, Head of the Product Management of Miele China, shared some very interesting take-aways about how Miele does the things in China, such as 1) From the Miele House serving as an experience center where Chinese customers can become keenly aware of German quality to E-commerce platforms which are believed to have revolutionized the nation’s shopping habits, Miele makes use of various sales channels to reach Chinese customers; 2) As expected, Miele develops specific products to cater to the needs and desires of  Chinese users (e.g. distinction between “dry kitchen” and “wet kitchen”) or to comply with local regulation. However, despite having own production sites in China, the products sold in China are all made in Germany due to the strong country of origin effect; 3) Like TRUMPF, Miele China considers employees as family members and launches different initiatives to foster “teams with XO (extra ordinary) spirit”. A guided tour at show room put the WHU group in the shoes of potential buyers and sparked several insightful discussions. As the night fell over the metropolitan Shanghai, the Part-time MBA group celebrated the end of China Module with some very fine cuisine in the iconic Miele House – of course prepared in a Miele kitchen.