Zhejiang is a province with a lot of private enterprises as well as a province with a lot of enterprises “walking out”. In Zhuji City, Zhejiang Province there is a modest private enterprise Zhejiang Hailiang Co., Ltd., which actively expands international market and carries out international operation in Asia, Europe, and North America in recent years, with domestic and international business developing constantly. In 2019, Hailiang achieved the business revenue of RMB41.259 billion, and ranked 241st of China’s top 500 of the Fortune Magazine.
Hailiang is an enterprise specializing in manufacturing copper pipe, copper bar, and other copper products. In 2017, Hailiang has started to explore the road to “walk out”, and built its first overseas factory in Vietnam. In 2020, Hailiang’s 2nd factory in Vietnam was put into production. In 2016, Hailiang purchased 3 factories of Luvata Group in Asia with RMB0.88 billion, and Luvata’s HQ is in Finland. In such a way, Hailiang owns its production base in Thailand, producing products for middle and high end customers and forming favorable supplement for the its factory in Vietnam. North America has always been one of the biggest market shares of Hailing. In 2016, Hailiang purchased American JMF Company and expanded its sales channel further; later, through further analysis and investigation for local market, in 2018, Hailiang confirmed to invest in Houston to build a workshop (the construction is being planned and prepared). In March, 2019, Hailiang purchased 5 factories of KME in Germany, France, Italy, Spain with 119 million euro, and further completed its global layout. By 2020, Hailiang has owned 15 domestic and overseas production bases and become an leading enterprise of the copper pipe and copper bar industry in the world.
Hailiang aims at giving play to the synergetic effect by “walking out”
Why does Hailiang need to “walk out” and purchase overseas enterprises? President Zhu Zhangquan of Hailiang believes that the purpose of the enterprise’s overseas purchasing can be summarized as: I. Learn the advanced technology and technique of the objective market by purchasing; II. Introduce overseas brands and give full play to the market influence of current brands. III. Expand objective market faster and more effective by using the current operating channels of the objective company. Zhu Zhangquan believes that though European brands have their leading techniques through many years of development, in recent years, Chinese enterprises have constantly innovated and developed and formed their own unique advantages; for example, currently, Hailiang has had the latest copper pipe equipment and its technology has been leading in the world. It is favorable for achieving the advantage supplement of the acquirer and the acquired.
Five cost indexes consideration for Hailiang to walk out
While talking about how to look for effective investment destinations in its global layout, Zhu Zhangquan pointed out that Hailiang has formed its 5 “cost indexes” in overseas investment through many years of exploration: I. Land and workshop cost index; II. Labor cost and labor source index; if a market has no sufficient labors, no matter how good it is, we will not consider; III. Energy cost index; copper processing relatively has large demand for electricity and gas; the sufficient and competitive energy supply of the investment destination is an important guarantee for successive normal operation. IV. Logistics cost index; the logistics development degree of the factory location and its logistics radius from its main objective customers is also an important index requiring our serious consideration; V. Tax and public relationship cost; it is necessary to consider local tax cost, policy supporting degree for enterprises’ investment for workshop building, and communication and coordination cost with local government.
Through a series of projects of “walking out”, Hailiang has successfully achieved its global layout of smart non ferrous manufacturing industry and further improved its international competition and brand influences. In the year of purchasing JMF, Hailiang achieved a sales revenue increase of 10.4% year-on-year. In 2018, the three factories purchased from Luvata achieved a sales volume of 78900 tons and a net profit of RMB92.0223 million, up by 62.22% and 88.83% compared with the year before delivery respectively, and a prospective profit was obtained. It can be foreseen that other overseas bases of Hailiang will have a better and faster development with the excellent operation capability of its HQ and the stimulating mechanism of technological innovation.
It is the key to success to attach great importance to R&D and enhance professionalism
An excellent enterprise must attach great importance to R&D. Hailing inputs one hundred million in R&D every year. Currently, it has established partnership with University of Science & Technology Beijing, Central South University, etc., and has established its own postdoctoral workstation. Because of technological innovation and progress, Hailiang’s production efficiency improves constantly, from the annual production of 10000 ton for 1 line (only 6000 tons for the industry at the beginning) to 40000 tons for 1 line now, leading in the industry.
Zhu Zhangquan believes that it is a must to specialize in a field and it is impossible to be outstanding in the manufacturing industry without a long time of accumulation. As per Hailiang’s successful experience in international and domestic market, Hailiang only engages in the business it is professional in and able to master the core technology, without expanding blindly. For example, upon purchasing corresponding business of KMF, who has copper pipe and copper bar business as well as copper plate and copper strip business. However, current production lines of Hailiang don’t have copper plate and copper strip business and fail to master the core technique of the production line, so Hailiang just purchased the copper pipe and copper bar business instead of the whole business.
The epidemic is a crisis as well as an opportunity
Currently, the epidemic has huge impact on the European economy. Zhu Zhangquan believes that Chinese enterprises need to see the “crises” as well as “opportunities”. Under the epidemic, some overseas enterprises are not operated well, which is just an opportunity for excellent enterprises.
While considering whether to walk out or not, an enterprise needs to have its development strategy and global layout consideration as well as the pertinence. It is very important for the enterprise walking out to understand the laws, regulations, customs and habits, and labor guarantee system of the objective market. European and American countries have big differences with China in laws, regulations, and cultural background, and sometimes some unexpected small problems may even affect the business development. For example, upon Hailiang’s workshop expansion in Germany, as per original plan, some trees needs to be cut, but European countries attach great importance to environmental protection and don’t allow cutting tree during a special period, which affected the construction period of the enterprise. Zhu Zhangquan suggests that it be very important for enterprises “walking out” to keep channel and information smooth and open channels from different aspects, including law firms, accounting firms, Chinese ambassador and relevant countries ambassadors, government institutions and business associations, to understand the market conditions comprehensively and correctly.
Zhu Zhangquan pointed out that, currently China’s business environment is being improved constantly. On the contrary, some European countries’ business environment is not so satisfactory and some overseas local governments’ work efficiency is not so high. While building a new workshop in China, it just takes 7 to 10 months from the construction start, but in Germany, it may takes 2 to 3 years to build a new workshop. Therefore, Chinese enterprises need to be fully aware of this and prepare well for it.
At present, at such a special moment of epidemic spreading, the HQ of Hailiang thoroughly interacted with domestic and overseas bases, established and issued overall epidemic fighting systems and pamphlets timely and donated materials for overseas companies and cooperative agencies. The pipe used in medical field produced by Hailiang domestic and overseas bases also supported the construction of relevant hospitals. At such a hard period of epidemic, the production and sales volume of Hailiang in September achieved the 4th best performance since the purchasing. Hailiang sticks to expanding domestic and overseas markets at the same time, solidly promote the “double circulation” in China and in the world, and its global operation road deserves the enterprises walking out learning.