Local Competition of the Supor Company - Essay Example

LOCAL COMPETITION (SUPOR ASD) ANALYSIS Company profile – Supor Co. Ltd Company Zhejiang Supor Co., Ltd Established 1994 Registered Capital RMB 634.98 mil Number of Employees 11,000 Listed Location and Year Shenzhen, 2004 Main Products Kitchen Appliances, Cookware This information is from Bloomberg, (2014, para 1). Supor is a company that was established in the year 1994 in a place called Hangzhou, in the province of Zhejiang. In 2004, it was listed on the Shanghai Stock Exchange and from 2006; the French firm Groupe SEB owned 71.31% of Zhejiang Supor’s equity, while Supor Group held 11.76% (ReportLinker, 2013, para, 6-7). The company begun as a manufacturing expert in pressure cookers and later grew to become the leading homeware dealer through provision of stove top cookwares and different kinds of kitchen utensils. To enrich its product portfolio, Supor expanded to produce small electrical appliances and kitchen appliances, as well as plastic products such as beverage ware. At the end of 2011, the cookware products the company of were revealed by the media to contain huge levels Manganese, a harmful element to human health. This issue elicited many reactions from the general public, until at the beginning of 2012 when the company alongside other government officials rubbed of the claims saying that levels of manganese were within the recommended health standards. Nevertheless, the situation increased consumers’ concerns over the safety of the company’s products, which influenced Supor’s brand reputation and, in turn, negatively impacted sales because Chinese consumers are highly cautious about safety issues (Woke, 2012, para, 1-3). Products Supor runs its activities in five main areas, which comprise of Hangzhou, Vietnam, Wuhan, Yuhuan, and Shaoxing. In Wuhan, the company has a production potential of up to eight million pieces of cookware, while in Shaoxing, production processes have been hampered by inadequate finances. The manufacturing capacity in Shaoxing base is projected to hit 9.25 million units in future. Supor focuses on the production of its own brands, without manufacturing for third party brands or private label products. As well as the production of homeware products, it also produces consumer appliance. By end of 2012, electric appliances had become major business for Supor, accounting for 55.5% of total revenue. Kitchen products accounted for 44% of Supor’s overall revenue in 2012, while rubber and plastic products accounted for 0.5% according to the company’s annual report. Supor positions its products as mid-range, providing high-quality products in acceptable price. RETAIL PRICE Pressure Cooker 100 – 1300 RMB Wok 70 – 1600 RMB Frying Pan 60 – 500 RMB Pot 60 – 500 RMB Operation From 2008 to 2011 Supor’s revenue and net income maintained rapid growth. In 2012 H1, the company’s revenue was RMB 3,338 bil, down 4.04% year on year; the net income reached RMB 241.8 mil, down 4.61% y-o-y (CorporateInformation, 2014, para 1). The main reason for the decline lies in the global economic downturn and unsatisfying overseas marketing. Revenue analysis of Supor By Region, 2008-2012 (RMB) By Industry, Supor gained RMB 1.837 billion from electric appliances in H1 2012, up 3.31% y-o-y. The revenue of cookwares and rubber & plastic products however witnessed a decline of 10.23% and 26.29% respectively, owing to decreasing overseas orders. Strategic Direction Supor continues to look forward towards adding impetus to its will continue to focus on strengthening its place in the production of homeware and more specifically kitchenware. The key aim remains to be focused on launching better quality and in the homeware category, most specifically in kitchen and kitchenware, focusing on the launch of high quality and unique products. As far as establishing a distribution network is concerned, the company hopes to stick to its latest sales chains like Suning and Gome, while at the same time, it will start to establish new online channels which will serve the ever growing curiosity for online shopping. Besides the first- and second-tier cities, Zhejiang Supor will also focus on penetrating third- and fourth-tier cities to expand its consumer base (Hansegard, 2012, para 1.). However, rumors about the company’s product quality and safety may have a negative impact on sales growth, which will also be an area of focus for cook wares. Company Profile – ASD Co. Ltd (ASD 2007). Company Zhejiang Aishida Electric Co. Ltd Established 2004 Registered Capital RMB 240 mil Number of Employees 5,600 Listed Location and Year Shenzhen, 2010 Main Products Kitchen Appliances, Cookware Headquarter Wenling(温岭市)，Zhejiang Stock Code 002403 This company is a nationwide cookware and automotive components manufacturing business (EC21, 2014, para, 1). It has six manufacturing bases, three oversea subsidiary companies and over 5,600 employees. For the domestic market the ASD group has more than 40 branches and offices, with a sales service network of more than 10,000 locations throughout China; while the ASD group has established a market operational system for the international market (Made in China, 2013, para 3). The products of this company are sold to countries in different countries in excess of 50 including those in South-East Asia, the greater Middle-East, Australia, Africa, Europe, and the Americas. Products The company provides woks, non-stick woks, smoke-free woks, adjustable pressure cookers, cast iron woks, frying pans, pressure cookers, milk pots and soup pots, as well as kitchen electrical appliances, such as electric pressure cookers, electric rice cookers and electromagnetic cookers, among others. It provides its products under the brand name ASD. This company prides in an R&D team of more than 500 secondary and advanced tech staff, and has established long-term cooperation relationships with many famous universities and institutions. Each year, more than 1,000 new items are expected to be developed. Currently the ASD group owns more than 70 live patents, and it is one of the drafters of Chinese national quality standards for non-stick cookware and pressure cookers (EC21 2014, para, 2). PRICE LEVEL Pressure cooker 100 – 800 RMB Wok 60 – 1300 RMB Frying Pan 90 – 500 RMB Pot 50 – 500 RMB Operation In 2012 H1, revenue and net income of ASD was RMB 871.9 mil and RMB 18.7 mil, down 15.01% and 44.68% y-o-y respectively. The big decrease of the company’s performance in 2012 H1 was mainly because of oversea order decreases, Chinese domestic demand decline (Chu, Girdhar, & Sood, 2013 para, 9-10 ), and slow construction of plants of the company in Wenling because of restrictions on industry upgrading and automation updating. Graphical analysis of income as posted by ASD, between 2008-2012 (RMB) ASD’s business is dominated by cookers and supported by small appliances, with the former holding 91% and the later 9%. Revenue of cookers and small appliances of the company in 2012 was RMB 783.5 mil and RMB 76.4 mil, down 17.33% and up 8.53% over 2011. Order decreases from oversea markets strongly influenced revenue of its cooker business. Graphical analysis of revenue of ASD by product, 2008 – 2012 (RMB) The gross margin of cookers of ASD has shown a tendency of growth, being 35.4% in 2012 H1, a growth of 6.4%, due to rising proportion of domestic sales and dropping raw material prices. However, despite the increasing revenue of small appliances, the gross margin kept declining, being 18.7% in 2012 H1 (ResearchInChina 2011). Channel ASD has counters in large-scale chain supermarkets and household appliance stores in first- and second-tier cities, which account for 65% of the revenue, while sales agents account for the remaining 35%. As the channel building costs and maintenance costs in supermarkets or large stores are high, ASD is planning to save only RMB 0.1 bil sales scale in those places, and give the rest to agents step by step. For six consecutive years, products from ASD having have been toping the sales lists in many foreign hypermarkets branches based in china, which include Metro, the Wal-mart branch and Carrefour. In third- and fourth-tier markets, ASD is short of sales outlets, and faced with problem of small market share and low brand influence. Since it cooperated with Goodaymart Electrical Appliance Service Co in 2010 H2, ASD has introduced over 300 effective outlets at Goodaymart. Conclusion Supor and ASD have shown all the reasons why they have established themselves as the giants the manufacturing industry in china. There are a number of factors that have enhanced the expansion of the two companies; first, ASD has been able to save a lot on maintenance and building costs in places where expenses accrued are high. This has been transferred to agents in a consistent manner. The money which is saved in this manner has been channeled towards product development. This is the reason why the company is able to produce high standard goods which easily find acceptance in local and foreign markets. The decision to deal in cookers and other small appliances seems to be advantageous to the company. These are household products that do not miss in any home. This means that the large population in china makes is a cash cow for the company. On the other hand, Supor has also been successful in making mid range products which are highly affordable by many people. Just like ASD, they have cut their niche in kitchen ware, an essential area in any house. The company has held to the point of establishing high quality products which people can rely on amidst the presence of rival companies. In the recent past, the company has created and stuck to its vibrant sales chains in Gome and Suning. In future, the prospects of establishing on an online sales chain stands to be another milestone in the history of the company. This is because; the advent of internet has been increasing the number of consumers who troop in to make online shopping. Being worldwide, the company will manage to reach distant markets and hence increase its returns. Bibliography “Made in China,” (2014). Zhejiang Aishida Electrical Equipment Co., Ltd. Available at, http://www.made-in-china.com/showroom/lilytrade88/companyinfo/Zhejiang-Aishida-Electrical-Equipment-Co-Ltd-.html (Accessed Feb 26, 2014). ASD (2007). ASD Group. Available at, (Accessed Feb 26, 2014). Bloomberg, (2014). Company Profile for Zhejiang Supor Cookware Co Ltd (002032). Available at, (Accessed Feb 26, 2014). Chu V, Girdhar A & Sood R, (2013). Business Today; Couching tiger tames the dragon. Available at, (Accessed Feb 26, 2014). CorporateInformation, (2014). Zhejiang Supor Cookware Co Ltd. Available at, (Accessed Feb 26, 2014). EC 21, (2014). Zhejiang Taizhou AISHIDA Electrical Equipment Co.,LTD. Available at, < http://lilytrade88.en.ec21.com/company_info.jsp> Hansegard J, (2012). The Wall Street Journal; Ikea Taking China by Storm. Available at, (Accessed Feb 26, 2014). ReportLinker (2013). Global and China Stainless Steel Tableware and Kitchenware Industry Report, 2013-2015. Available at, < http://www.reportlinker.com/p01022385-summary/Global-and-China-Stainless-Steel-Tableware-and-Kitchenware-Industry-Report.html> (Accessed Feb 26, 2014). ResearchInChina, (2011). Global and Stainless Tableware and Kitchenware Industry Report 2012-2014. Available at (accessed Feb 26, 2014) Woke L, (2012). Supor suspends stock trading. Available at, < http://www.chinadaily.com.cn/m/hangzhou/e/2012-02/18/content_14727255.htm> (Accessed Feb 26, 2014). Read More