Driving force

Like Bright Food, many Chinese companies are seeing their European target companies' sales channels as a key asset to aid their globalization process.

One such example is Shenzhen-based medical equipment maker Mindray, which acquired the French subsidiary of the US-based patient monitoring business Datascope in 2008.

Combining Datascope's existing sales channels and sales workforce with continued investment into new product development, Mindray doubled sales revenue to 10 million euros ($13 million) a year four years after the acquisition.

"We have a strong innovation team in Europe, which introduces about eight new products every year," says Qian Yun, marketing manager of Mindray's French subsidiary.

"One of our advantages is that our products cost 30 to 40 percent less than mainstream alternatives in the European markets. At the same time we can also ensure the quality of the products and customer services," he says.

As newcomers to mature markets, many Chinese companies have chosen to work in partnership with Western companies, thereby allowing themselves time to understand a new market.

China Telecom Europe, which specializes in developing low latency terrestrial cables through Russia to connect Europe with China, is a typical example of the partnership route.

With its competitive edge CTE was able to tie up with many leading European telecom companies like British Telecom, Telecom Italia and Telefonica to provide customers with fast and reliable information flow between Europe and China.

"We look for niche opportunities in the market and try to differentiate our services," Ou Yan, managing director of CTE, says.

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CTE also launched a UK mobile phone SIM card in partnership with British communication firm Everything Everywhere this year, after identifying a gap in the market for mobile services targeting local Chinese customers in Europe.

CTE's SIM card provides round-the-clock Chinese and English language customer services, as well as information on transport routes and tourism services.

"We aren't going to start a price war as international phone calls are already very cheap. We hope to provide a targeted service that makes life convenient for customers," Ou says.

His rationale for working in partnership with European companies is shared by many other Chinese companies which acquire minority interests in European businesses.

Fosun International, one of the largest privately owned conglomerates in China, acquired a 9.5 percent equity stake in the Greek luxury brand Folli Follie Group last year and a 7.1 percent equity stake in the French luxury resort operator Club Med in June 2010.

Fosun subsequently used its own resources and expertise to help both brands strengthen their presence in the Chinese market.

According to Parr, many European businesses want Chinese partners to acquire minority stakes, as it will help them access the Chinese market easily.

"The relationship is mutually beneficial. For European companies, they want to find the right partner and the same applies the other way around. Most of the Chinese companies are already major suppliers in Europe. Investing in a European business gets them closer to their end customers," he says.

Localization challenge

While a certain extent of Chinese culture is observable in all Chinese companies abroad, the most successful companies often deliberately pursue localization policies.

One such example is the fully owned UK subsidiary of the Chinese lighting giant NVC, which supplies industrial lighting to wholesalers.

Out of about 85 employees at its Birmingham factory, only three are Chinese, whose main job is to liaise with NVC's China factory on the dispatch of product orders.

Gerry Pass, director of NVC UK, says the parent company has invested heavily to help its UK subsidiary grow, but at the same time also allowed its British executives to make their own decisions.

"China supplies the financial muscle, but we operate as a UK company," says Pass, who has worked in the British lighting industry for 25 years before joining NVC UK in 2009.

He adds that the salary and employment benefits that NVC UK offers its employees is higher than the packages offered by many British companies. For example, NVC UK contributes to its employees' pensions and finances their further studies wherever appropriate.

The company's localization strategy has reaped rich rewards. As a young business established in 2007, NVC UK already supplies to about 1,500 out of the 3,500 electrical wholesalers in the UK, Pass says.

"Wholesalers generally ask us to step in, when things go wrong with other suppliers, but hopefully they'll make us their first choice next time," Pass says, explaining that NVC UK's key competitors are the 84-year-old Thorn Lighting and the 34-year-old Dextra Lighting.

In April, the company added an industrial unit, which brought its total investment in Britain to 15 million pounds ($24 million, 18 million euros).

It is now looking to expand its production facilities further, shifting from its current model of manufacturing in China and assembling in the UK to manufacturing in the UK.

"Manufacturing in the UK will allow us to respond to customer needs more quickly," Pass says, adding that manufacturing in the UK can potentially halve the time it takes to deliver a product, especially when the product is a new one and requires several rounds of product testing.

NVC UK's local presence has been a key factor in its success, says Paul Mans, managing director of CP Electronics, a British company that supplies censors to NVC UK.

"The biggest issue with importing products from China is not knowing if potential problems can be sorted out. Since NVC has a large office in the UK with employees who have the technical expertise to help customers, it reassures people that potential problems can be sorted out," Mans says.