Case Study

Zhejiang Haili Electronic Technology Co., Ltd (Holip) (A2)

7 pages
January 2009
Reference: IMD-3-2052

The case describes how Fang Guangming, a serial Chinese entrepreneur, entered the relatively high-technology frequency converters business from the stuffed toy business where he began. Holip started by reverse engineering Japanese products, outsourcing capital intensive parts of the manufacturing process and limiting Holip’s production role to final assembly and testing. Holip opted for a sales strategy that worked well with local Chinese customers. Its early success was largely due to fast response time, customized services and low prices. The company suffered losses in its first year, and then quickly became profitable by having a very lean cost structure and introducing new and higher quality products. The company had ambitions to grow and to move up in the market by developing new and better products. However, developing the appropriate technology was a significant barrier and the management felt they needed access to additional capital to achieve their objectives. One option that management was considering was to sell out to Danfoss. The (A2) case is written from the perspective of Holip management and has much detailed and complete information on Holip and the hopes and concerns of the Holip management team. The information on Danfoss is quite limited. Much of this additional information was not known to Danfoss at the time of the (A1) case. The (A1) and (A2) cases allow the class to be split into two groups: one seeing the situation through the eyes of Danfoss and the other seeing the situation through the eyes of the Holip management team. This leads to a richer classroom discussion of the two perspectives than is possible if the whole class has read the (A) case.

Learning Objective

To understand how a fairly typical low cost Chinese player thinks and operates, and the challenges that many of them face as competition in their markets intensifies. Depending on the course’s learning objectives, the Danfoss-Holip case series can be taught either by using the A case followed by the B case, or by using the A1 and A2 cases followed by the B-case.

Keywords
Low Cost Competition, Pre-acquisition Analysis, Dual-brand Strategy
Settings
China
May 2005
Type
Field Research
Copyright
© 2009
Available Languages
English
Related material
Teaching note
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