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Midea Group Vice President Andy Gu,
Business

Midea's 'low-key' push to be the world's biggest white-goods empire

TOKYO -- When professor-turned-executive Andy Gu joined Midea Group back in 2000, almost no one outside of China had heard of the electronics maker.

Yet over the past 16 years, Gu witnessed Midea's gradual rise to become the world's largest white-goods supplier, grabbing global attention by acquiring German robotics maker Kuka and the Japanese conglomerate Toshiba's home appliance unit.

A number of Chinese companies have acquired or invested in foreign targets to enhance their technologies and seek new market opportunities amid slowing economic growth at home. Kuka's secret to making global expansion successful is to keep a very "low-key" approach to acquisitions or joint ventures with foreign companies, said Gu, Midea's vice president.

"We cannot use our experience from the domestic market [and apply it] to countries outside China," Gu said. "The China-centric method does not work."

Gu said Midea has no intention to introduce its own Chinese brand or change the Toshiba brand name in Japan after the takeover earlier this year. "We understand the Japanese market is very difficult for us to penetrate. Either we don't come to Japan, or we should acquire a Japanese company," Gu said. "We do not want to operate with a Chinese brand in Japan."

He added that Midea also desires to use the Toshiba brand to gain more business in Southeast Asia, where people value Japanese products more than those made in China.

With a similar hands-off strategy and the promise to retain jobs and management independence until 2023, Midea got a green light from the European Union for its controversial buyout of Kuka, whose customers include Airbus and Mercedes-Benz. The Midea-Kuka deal is still pending approval by U.S. regulators.

"We are expecting more deals to come in the following year," Gu said. "If the Kuka transaction eventually works out, we will consider more bids and investment across the industrial robotic field to enhance factory automation."

Since 2007, Midea has found a way to secure significant growth through numerous alliances with brands such as Carrier of the U.S., Bosch of Germany, Lihom Cuchen of South Korea and Japanese robot maker Yaskawa. It also just completed the purchase of a majority stake in Clivet, an Italian air conditioning manufacturer.

To manage these global networks smoothly, Midea set up a special business platform and hired staff from more than 15 countries to coordinate with overseas subsidiaries and joint ventures. Gu said it is more rewarding to let these overseas units keep the existing management team and retain "operational autonomy."

Take Midea's partnership with Carrier in India, for example. The division was named Carrier Midea India, even though it is 60% owned by the Chinese company.

In less than two decades, Midea's revenue grew more than 20-fold to 138.4 billion yuan ($20 billion) in 2015, with nearly 40% coming from overseas businesses. The contribution from abroad may increase to 45% to 50% of revenue by 2017, according to Gu.

Midea's net profit for the July-September period rose 23.2% to 3.3 billion yuan. The company's sales went up nearly 35% to 38.85 billion yuan for the same period.

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