An early March interview with LiuGong Chairman Zeng Guang’an gave insights valuable to any manufacturer hoping to expand their business outside their own countries. The tips are based on LiuGong’s long and successful experience in global expansion.
The key to doing business in Europe and the U.S., Guang’an, said was that companies must first learn about and genuinely respect the specific culture they will be doing business in, as well as understand the advantages and disadvantages presented by cultural differences.
Guang’an explained that there are “visible and invisible costs” associated with creating value through technology innovation, management and the company’s operations. While China’s lower manufacturing costs have traditionally been one of the greatest advantages for Chinese companies in the global market, it is no longer a sustainable model. “The lowest-price” tactic historically used in domestic and emerging markets,” Guang’an said, “is less persuasive in some markets, especially developed markets in which price is not the only evaluation of value.”
Guang’an said companies must also determine whether to enter developing and developed markets simultaneously or to focus on one in particular. “Chinese brands are still in a weak position in Europe and America. To break these prejudices, Chinese enterprises must be aware of, and ready for, a long process, involving continuous investment in research and development, talent cultivation and the creation of an internationalized operating system.”
One of the most important lessons LiuGong learned as it grew into a global business, Guang’an said, was the value of a consistent, step-by-step strategy to keep pace as the expansion evolves. “Otherwise, international efforts will be blind and risky.”
The overall expansion strategy was combined with established, internal policies. In 2002 LiuGong had initiated a plan to build, Guang’an said, “an open and internationalized LiuGong,” that treated overseas markets “with awe and respect.”
“We first thoroughly studied a foreign market’s regulations and how its market differed from China’s before we entered it. And we built a respectful international brand upon our values that govern the way we do our business, the way we think and how we act.”
Timing was also important, Guang’an said, with 2017 representing an especially good year for the company. “The market was recovering, and LiuGong seized the opportunity. Our long-term dedication to innovative designs paid off with several breakthroughs. Now our company is more effective than ever, with renewed vitality.” LiuGong wheel loaders exceeded 350,000 units in 2017, with excavator sales showing a 150-percent year-on-year increase. Total 2017 revenue for LiuGong Group reached $2.3 billion.
Expansion overseas was supported by improvements at home, Guang’an said, which focused on nationwide structural reforms of its supply side. One in particular is a program LiuGong calls “second-time undertaking,” upgrading its traditional manufacturing processes with intelligent manufacturing to support innovative technology. The result was strategic new growth points in emerging industries and the launch of 26 new products.
“Our large-scale wheel loaders and excavators gained good market position, and our revolutionary vertical lift wheel loader, the VL80A, is listed in the National Innovation List as a major achievement. All these have showed our determination and strength to build a sustainable developing company.”
LiuGong also optimized its global sales and support network and reinforced its channel construction. This integration of strategies and internal initiatives have earned LiuGong a higher growth rate than the world average. For instance, LiuGong India maintained its growth in both production and sales in 2017 while LiuGong Poland extended its manufacturing capabilities and strengthened its presence in Europe. Today LiuGong’s localized business network consists of more than 300 dealers in over 100 countries globally.
Guang’an said LiuGong’s next goal is maintaining its “developing” perspective. “The economic developing mode and structure should adhere to the macro environment and strive to improve the efficiency and the execution of the national supplying side structural transformation.”
The goal of the company’s 13th five-year strategy and second-time undertaking is to increase global competitiveness of products and service by “improving operating efficiency and profitability, optimizing the industry and investment structure, and actively developing new businesses like robotics, agricultural equipment and others.”
The result, Guang’an said, should allow LiuGong to meet a challenge set for 2018, the company’s 60th anniversary – increasing annual sales revenue to $3.19 billion.
