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Electrolux Said to Back away from China(Comtex Business Via Thomson Dialog NewsEdge) BEIJING, Jun 27, 2006 (SinoCast China IT Watch via COMTEX) --Electrolux China, a wholly owned division of the Sweden-based home appliance producer AB Electrolux, is facing the danger of not receiving investment from the Sweden headquarters, according to an insider close to the company. The company has changed five presidents in the past four years. "In the near future, the company will only have a Swedish brand," said the insider. Because of the continuous decline of performances, Electrolux headquarters has revealed the intention of no longer making investment in Electrolux China. "Electrolux had done well in China's small home appliance markets such as refrigerator, washing machine, air-conditioner, and bathroom and kitchen. But apart from refrigerator and washing machine, the other products have disappeared from the market now," said a manager of Electrolux China, who was not surprised about the news. As a matter of fact, Electrolux only sells refrigerators and washing machines in the Chinese market presently. "The main reason for the shrinkage of production lines is to save expenditures. Once Electrolux headquarters withdraws its investment from the company, it is important for the partners to collect profits," remarked the insider. In fact, Electrolux is not the sole foreign home appliance maker planning to cease its investment in China. Other companies also intend to stop some of their businesses in China, such as Panasonic, LG, Samsung, and Bosch. It was reported not long ago that Panasonic would withdraw its bathroom and kitchen home appliances from the Chinese market next year. Later, LG headquarters announced that it would concentrate on products other than microwave oven. In other words, it abandoned the business to its own fate. Meanwhile, Samsung headquarters and Bosch headquarters confirmed the news that they would stop turning out microwave ovens and water heaters in China respectively. The main reason for Samsung's suspension of microwave oven production is that the price of the product is too low in the Chinese market, and the business generates little profit, according to distributor of Samsung products in Beijing. Salesmen of Gome, Dazhong, and Suning confirmed as well that Samsung has withdrawn the product from their outlets. With regard to foreign home appliance manufacturers' withdrawal from China, Shen Wenjian, an observer in the industry, noted that the true reason is the slim profits in the Chinese market. A good many foreign companies have not found the balance between size and profit in China. Although some of them grasp the high-end market tightly, the market size is too small. In addition, they still have to face expenses in R&D, production, and distribution. And some other companies carried out localized strategies, but they run short of cost advantage. The huge expenditure in all links, along with price wars, has a great impact on foreign companies in their localization process. The ultimate result is that their scale growth is not as fast as their profit decline. "The withdrawal can not be considered a failure of foreign home appliance makers in China, but their strategic adjustment in the market," said Liu Buchen, a home appliance analyst who holds a different viewpoint. After stopping these non-mainstream products, foreign companies may focus on products with high profit and consumer loyalty, which is favorable for them to make more profit in the Chinese market. From Star Daily, Page 1, Monday, June 26, 2006 [email protected] |