Mon, Dec 18, 2006 page12

• Feature: SMEs at the front of brand building

  SHINING EXAMPLE To ensure its edge, Hiwin Technologies has pumped more than 5 percent of total revenues into R&D over the past five years

  • By Jason Tan / STAFF REPORTER
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  Soon after Hiwin Technologies Corp (上銀科技) was established in 1989, the company enjoyed considerable success in developing and marketing ballscrew products. But into the middle of the 1990s, chairman Eric Chuo's (卓永財) plans for growth received a serious commercial blow.

  Hiwin's Japanese rivals joined hands to block sales of precision machinery from Japan to Hiwin, afraid of the growing threat posed by the small Taiwanese firm.

  It left the components manufacturer -- with a speciality in ballscrews, aircraft parts and linear bearings for use in precision machinery -- little choice but to turn to German vendors to purchase the necessary production equipment. The move would cost an additional NT$30 million (US$0.9 million) over its old suppliers.

  

  Hiwin Technologies Corp Chairman Eric Chuo, center, holds up one of the company's linear guideway products on Oct. 5 during an intra-company sports match.

  PHOTO: TSENG HUI-WEN, TAIPEI TIMES

  Faced with this increase cost, Chuo decided to master the capability to manufacture the precision equipment himself.

  After more than six years of countless attempts and failures, the company managed to lift the machinery quality to international standards -- a process that cost some NT$4 million.

  "Without the capability to manufacture production equipment, a company's competitiveness will lag," Chuo said.

  Chuo, who is a highly motivated individual, is representative of the entrepreneurial spirit of Taiwan's small and medium-sized businesses (SMEs).

  Instead of pursuing contract manufacturing, where margins are forever shrinking, Chuo decided to make a bold attempt at branding.

  But "branding is a long and windy road," he said.

  Hostility from Chou's original Japanese suppliers was one of the early challenges he faced.

  To ensure an edge in a highly competitive business, Hiwin has pumped more than 5 percent of total revenues into research and development (R&D) over the past five years.

  This year's estimated R&D amount will hit NT$170 million, up from last year's NT$128.6 million, the company's statistics showed.

  The R&D percentage will rise to 10 percent when total sales reach NT$10 billion in 2008, Chuo said.

  Facing strong demand, Hiwin has set its sights on becoming the world's largest ballscrew maker and the No. 3 linear guideway maker in 2010.

  While R&D is a key ingredient to ensure brand success, mergers and acquisitions (M&As) are another shortcut to fame.

  BenQ Corp (明基), Taiwan's top cellular phone maker, joined the world's top-tier handset brands after taking over the loss-making handset unit from German Siemens AG in October last year.

  Heavy losses, however, forced BenQ to stop financing BenQ Mobile in Germany in October, causing the latter to file for bankruptcy protection and leaving 3,000 staff out of work.

  While large companies such as BenQ have not fared well with M&As, homegrown SMEs have their own experiences -- some good, some bad.

  "Merging with someone too much larger in size may not help. Companies should not merge just for the sake of it," said Peter Lo (羅崑泉), chairman of Taichung-based Johnson Health Tech Co (JHT, 喬山健康科技).

  Buying out a foreign firm is a viable strategy as companies might not be well versed in overseas markets, but the option does not guarantee instant success, he said.

  Lo, who hails from Chiayi County, never knew that his purchase of a US fitness enterprise in 1996 would later pave the way for the world's fifth-largest fitness equipment corporation.

  Lo decided to take over the fitness division of US-based Trek Bicycle Corp in order to make inroads into US market, and in the end the move paid off.

  He surmised at the time that nobody would sell fitness machines in the US better than domestic professionals, and he paid only a small sum -- US$100,000 -- for the takeover. The professional managers he recruited not only understood product development, but also how to manage a brand by roping in successful channel partners.

  The US$100,000 investment opened the doors to JHT in the US market and later gave birth to the "Vision Fitness" -- the company's first brandname.

  "We shouldn't just marry anyone and hold a big scale, flashy wedding. We need to think of the possible impact before tying the knot," Lo said.

  In his case, making use of domestic professionals and channels to manage a brand is a more efficient strategy, he said.

  Dick Hsieh (謝明振), president of Tainan-based Eminent Luggage Corp (萬國通路), one of Asian leading luggage and travel bag maker, echoed the viewpoint.

  When he decided to venture into business in 1979, he wanted to incorporate his artistic interests into luggage production.

  He had big ambitions -- he wanted people all over the world to equate the "Eminent" logo with international travel.

  When he decided to set a foothold in Europe, he opted to join hands with Galeria Kaufhof, the largest department store in Germany with 142 outlets in Germany and Belgium.

  That strategy worked. Eminent luggage is showcased prominently at highlighted sections of the stores and has since become the leading brand in Germany, even beating larger rival US-based Samsonite Corp.

  "Without brand and channels, a firm will not go far." Hsieh said.
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