One of the more interesting aspects of manufacturing is how a company can virtually dominate a given market, yet remain relatively unknown in the eyes of consumers. Enterprises that produce components or smaller elements of larger products often see their brands languish in obscurity, even as they reap the rewards of their overwhelming market share.
It is this sense of anonymity that Akzo Nobel is facing as it navigates the occasionally treacherous waters of the Chinese market.
"China has a key role to play in the company's growth strategy," says Hans Wijers, chief executive officer (CEO) of the Dutch Fortune Top 300 company.
Despite its undeveloped brand presence, the company's three main businesses pharmaceuticals, industrial and decorative coatings, and chemicals have performed well in China.
The public is buying its Marvelon contraceptive pills, but few people actually know much about the company that controls half of the domestic market. The industrial coating manufacturer remains largely anonymous, despite the fact that it is an industry-leading supplier of protective coatings for wooden furniture and ships, as well as powder coatings for household electrical appliances.
Wijers and the company are poised to establish a stronger Akzo Nobel brand presence in China, however.
The CEO caused a stir when he showed up at the June ribbon cutting ceremony of a new factory in Suzhou, East China's Jiangsu Province. It was the first time that a top Akzo Nobel official attended the launch of a new production site in China.
Akzo Nobel sponsored the largest Chinese cultural celebration ever staged in the Netherlands between October 2 and 17. The Arnhem-based company asked 35 Chinese artists to submit paintings that were later reproduced on banners using the company's Sikkens paint. These featured the Akzo Nobel logo, and were displayed in Amsterdam's Museumplein, in front of the city's three most important museums.
Wijers will come to China again in November. He is to open Akzo Nobel's new powder coatings plant in Langfang, North China's Hebei Province. The CEO will undoubtedly also be busy meeting with Chinese news reporters to unveil some of Akzo Nobel's plans for the mainland.
Akzo Nobel achieved a sales volume of US$655 million in China last year, accounting for 3.7 per cent of its global total.
With five production sites across the country, chemicals now contribute 27 per cent to Akzo Nobel's total China sales. The factories are operated under Akzo Nobel's three major chemical business units polymer, functional and pulp and paper.
Wijers says Akzo Nobel will increase investment in China for both the domestic and export markets, but he declines to release further details.
Pharmaceuticals are the smallest arm of Akzo Nobel's China operations. They contribute 6 per cent of the company's sales in the country.
Wijers says that the Chinese healthcare market is still difficult to access, despite its very positive growth prospects. The major reason, he says, involves lengthy registration processes, centrally co-ordinated pricing, the hospital tenders system and the fact that distribution of modern medication is still limited to major cities.
The Dutch company plans to strengthen research and development (R&D) co-operation in China to come up with new drugs.
"We are in the final stages of signing contracts with two companies in Shanghai to discover active ingredients in natural products," says C David Nicholson, executive vice-president of Organon International's global research. He declines to reveal further details.
Organon, Akzo Nobel's pharmaceutical business unit, established a joint venture in Nanjing, East China's Jiangsu Province, in 1992. Organon China's main products are Marvelon, the anaesthetics Norcuron and Esmeron, the psychiatric drug Remeron, and hormone therapy treatments Livial and Andriol.
The company has established 20 production sites across the country since it came to China in the 1980s, with two representative offices in Beijing and Shanghai.
Darner says Akzo Nobel has no plans to set up a regional headquarters in China.
"We are a business unit managed company," Darner says. Each unit runs its own business, its own factories and builds its own infrastructure. The representative offices in Beijing and Shanghai provide shared services in human resources, finance, and communication, and facilitate business units that export to China.
"We have found this (decentralized system) is the most efficient way of managing a global corporation," Darner says.
"We are very flexible and we are closer to our products, to our development and to our customers."
(China Daily)