Mon, Sep 21, 2009 page12

• FEATURE : Franz’ CEO aims to bring human touch to business

  • By Crystal Hsu / STAFF REPORTER
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  Franz Collection Inc (法藍瓷), a domestic maker and retailer of functional and home decor accessories, has made inroads into gift markets around the world since its creation in late 2001.

  Today the company’s products — porcelain tableware, vases and jewelry — are on shelves at some 6,000 stores in 53 countries, with customers including celebrities like Barbara Streisand, Elton John and Nepalese royalty, as well as political leaders at home.

  Yet, Francis Chen (陳立恆), chairman and CEO of the fledgling company, loathes capitalism and defies virtually every piece of conventional wisdom associated with successful corporate management.

  

  Franz Collection Inc chairman Francis Chen speaks during an interview in a Taipei showroom on Aug. 19.

  PHOTO: TAIPEI TIMES, CHIEN JUNG-FONG

  The 58-year-old has vague ideas about his company’s financial profile, rarely sets goals for its operations and never bothers to craft a strategy for its sustainable development.

  With help from aides, Chen said he founded Franz single-handedly with capital of NT$50 million (US$15 million) and never took out a loan throughout his business career over the past 30 years.

  “I owe every penny I earn to hard work,” Chen said during a recent exclusive interview with the Taipei Times. “All my life, I have tried to avoid dealings with banks. I don’t think it is right to make a fortune through lending money. I once wrote an article to condemn usury.”

  Apart from Franz, Chen owns Seagull Decor Co (海暢實業), which has been manufacturing Christmas trinkets for internationally renowned gift makers including Enesco and Lenox in the US, as well as Goebel and Kaiser in Germany for more than a quarter of century. Today, Seagull and Franz generate roughly equal revenues.

  Profit margins in the contract manufacturing business exceed 30 percent, but Chen was not content remaining invisible.

  “Being an OEM [original equipment manufacturer], it feels as though the company never exists despite robust orders and lucrative revenue,” he said. “It feels like being in limbo and we could never taste the ecstasy of being in paradise.”

  The discontent drove Chen to embark on branding eight years ago and to his own surprise, Franz quickly drew international name recognition.

  A branding specialist at the Taiwan External Trade Development Council (TAITRA, 外貿協會) said on condition of anonymity that while Chen likes to cast himself as an artist, he demonstrates prowess in cultivating interpersonal ties and burnishing a corporate image.

  “These qualities surely help Franz win friendly commentaries at home and broad,” the specialist said. “There is no denying its products are well designed, manufactured and marketed.”

  In 2002, Franz’s butterfly collection won the best gift award at the International Gift Show in New York. In 2005, a Franz creation was picked as the best ceramic gift in England.

  “Winning the prize [in New York] took me by surprise, too,” Chen said. “The company has since won more awards, but I never take them for granted.”

  Unsurprisingly, Franz was also once a winner of the prestigious annual Taiwan Excellence Gold Award, for which the company had to outperform contestants in name recognition, marketing strategy, research and development investment, and total quality management.

  Chen, a porcelain lover, stamps “Franz” — a German name given to him by his German literature professor in college — on every product to demonstrate his commitment to branding and his ambition to carve a niche for the company in the global gift industry.

  The rise of the Chinese market provided another catalyst for branding, as Chen is confident Franz will capture a large segment of the Chinese market before long. Chinese consumers have an affinity for Franz products, especially works that include design elements from Chinese culture, philosophy and landscape.

  Franz started to tap into the vast Chinese market in 2005. It now owns 55 stores and plans to add another extra eight or nine by the end of this year, Chen said. Despite the economic slump, revenues in China surged 55 percent year-on-year to approximately NT$300 million in the first half, Chen said. The showing elsewhere is dismal, dropping 30 percent in the US and Europe, and breaking even in Taiwan during the same period.

  “Franz was not spared from the global slump,” Chen said. “The US and Europe are the main markets after all.”

  Worldwide, Franz posted total revenues of NT$1.5 billion last year with the domestic market accounting for 21 percent at NT$320 million.

  The figures constitute a tiny segment of the global gift market, Chen said, comparing the industry to a “blue ocean” that promises ample opportunity for growth driven by value innovation, instead of conventional price competition.

  “The gift market in the US was valued at US$200 billion in 2003 alone,” Chen said. “Gift-giving plays such an important role in helping people cultivate relationships and communicate messages that they will not abandon the practice.”

  Beryl Lee (李培芬), a branding consultant at the Association of Chain and Franchise Promotion (連鎖加盟促進協會), said there is ample room for Franz to grow if the company would allow foreign agencies to expand its markets overseas.

  “Like other high-priced products, Franz should have entire stores devoted to showcasing its collections to increase their image and value,” Lee said.

  Lee also believed Franz could use more simplicity in its design as some collections are to detailed and ornate.

  Chen, a Christian brought up with Confucian philosophy, likes to blend Franz works and his beliefs in a natural harmony between heaven, earth and man. He resists the idea of developing a sustainable strategy.

  “I don’t buy this concept of target management,” he said. “It is a capitalistic approach under which companies treat employees as machines and constantly set targets for them to accomplish. The practice clashes with humanity.”

  Chen said he does not care if Franz continues to exist as long as its products live up to expected standards. The artist-businessman said nothing delights him more than customers passing down Franz products as heirlooms to the next generation.

  Chen proudly recalled a British customer who asked the company to inscribe a few words on a Franz plate to show his love for his family months before his death.

  “Today that remains my most unforgettable experience,” he said.

  Still, Chen has his share of pragmatism. The company’s products are mostly designed in Taiwan, manufactured in China and marketed around the globe to keep costs down and maximize profitability. While Franz owns and runs all the outlets in Taiwan and China, it limits its role to importer and wholesaler in the US, Germany, Japan and other foreign markets.

  Franz employs 3,000 workers at home and abroad and has 15 designers from different cultural backgrounds to add international touches to its products.

  Looking forward, Chen aims for Franz to be like Louis Vuitton, an international fashion brand that commands awe and firm brand loyalty from its customers, although a lack of talent and firm resolve has prevented him from taking aggressive action, he conceded.

  “It takes long-term penetration to export cultural and creative industries,” Chen said. “You cannot achieve that without first breaking down linguistic and cultural barriers.”
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