Denmark company has ambitious plans for Chinese market
Updated: 2012-04-17 10:38
By Hu Haiyan (China Daily)
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Danfoss Group, one of the largest industrial corporations in Denmark, said last week that its sales revenue last year in the Chinese market grew 28 percent from a year earlier to 2.96 billion yuan ($469 million) and will become its largest market by 2015.
"In 2011, Danfoss' global revenue gained a 7.5 percent year-on-year increase to $6.3 billion, with a profit margin of 12 percent. We expect to see single-digit sales growth and the profit margin is expected to maintain 12 percent this year," said Kim Fausing, COO and executive vice-president of Danfoss.
China is the third-largest market for Danfoss after the United States and Germany in terms of revenue.
"It is definitely a strong driver to our global business development," said Fausing, adding that its market continues to expand despite the fluctuation of the global market.
Driven by the big potential of the Chinese market, the multinational company, which, among other things, produces electrical components for several industries, aims to make its Chinese business the largest revenue driver for the group by 2015.
"China has invested a lot of efforts to build up an energy-saving and environmentally friendly society, such as the initiation of the 12th Five-Year Plan (2011-15), which emphasizes changes to a more green economic growth model. This will promote enterprises to focus on energy conservation and emission reduction," said Thomas Koniordos, president of Danfoss China.
"Thus, the market of energy efficiency is endowed with great potential here. And it is also in accordance with our business, since we specialize in providing energy-efficient solutions to our customers. That's why we decided to develop China as our second home market," Koniordos said.
The president of the China division said Danfoss predicts a 20 percent year-on-year increase between 2011 and 2015 based on an average annual growth rate of 30 percent over the past five years.
Danfoss China's employee numbers ranks No 2 within the organization - at 4,600 - and the volume of the raw material purchased from China is the largest in Danfoss' global business.
"We are confident that all of these indexes will become No 1 by 2015. That means we will have the largest employee number, annual sales and raw material purchasing volume here in China," Koniordos said.
To help achieve those goals, Koriordos says it will expand business through direct investments as well as joint ventures with local companies. It invested about 6 billion yuan in China in 2011, including establishing a new research and development laboratory in Wuqing, Tianjin, and expanded its production line in Haiyan, Zhejiang province.
He said Danfoss China attaches great importance to localization.
"Our philosophy is 'doing business in China for China's growth'. It is more than 'do as the Romans do'. As a foreign company conducting business here in China, we are now much more tuned into the needs of our domestic consumers while at the same time, maintaining our own characteristics," he said.
To make it fully localized, Danfoss plans to build more facilities in China to offer products that were created - from start to finish - in China.
He noted that China's market is different and has its own special needs compared to those in Europe.
"For instance, in terms of the solar energy market, which enjoys huge potential here, the Chinese government is promoting large-scaled solar energy producing equipment. While in Europe, the government attaches more importance to household items," Koniordos said.
"We should make equipment according to the different needs. That's also why we set up own research and development center here in China," he said.
In 2011, Danfoss China employed about 1,100 people from China, among whom 260 were for the research and development center to try and capitalize on the untapped markets.
"Unlike many foreign companies, which mainly focus on developing the high-end market, we noticed that there is a huge demand in the mid- and low-end market in China," Koniordos said.
He also said that Danfoss will look at developing its business in China's second- and third-tier cities, especially in the western region.
huhaiyan@chinadaily.com.cn
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