Chinese market platforms in China and Europe

Chinese market platforms in China and Europe Learnings from the Fanerdun establishment in Kalmar BENCH seminar, Linköping 20110523 Susanne Sandberg PhD Student International Marketing Baltic Business Research Center School of Business and Economics Linnaeus University susanne.sandberg@lnu.se

AGENDA 1 Third wave of internationalization of firms 2 Chinese market platforms in China and Europe 3 4 5 When China came to Kalmar Analysis of the Fanerdun establishment in Kalmar Questions

THIRD WAVE OF INTERNATIONALIZATION OF FIRMS First wave - Firms from market economies establish in other mature markets, i.e. US firms enter European markets and vice versa Second wave - Firms from US and Europe establish in South and East Asia, and firms from the emerging markets there, e.g. Japan and South Korea, establish in mature markets Third wave - The result of the opening up and integration of former closed planned economies into the world economy - Firms from mature markets, US and Europe establish in emerging markets e.g. BRIC, while firms from these markets enter the global market - Increasing trend of smaller firms internationalizing

MARKET PLATFORMS IN YIWU, CHINA 62 000 booths in 4 Million m2 100 000 companies 200 000 employees 1,7 Million products Solely wholesaling Simple trading goods Export 60% to >200 countries Ca 300 000 foreign customers/year

THE FUTIAN MARKET IN YIWU Ca10 000 companies Shop owners: Chinese producers Customers: Wholesalers and retailers from China, Middle East, Africa, Pakistan, India

CHINESE WHOLESALE MARKETS IN EUROPE (1) Kouvola (Finland) (2) Warsaw (Poland) (3) Budapest (Hungary) (4) Prato (Italy) (5) Älvkarleby (Sweden) 5 1 10 (6) Bucharest (Romania) (7) Prague (Czech Republic) (8) Amsterdam (Netherlands) (9) Wigan (U.K) (10) S:t Petersburg (Russia) (11) Kalmar (Sweden) 9 8 11 2 7 3 6 4 Established Planned

WOLKA-KOSOWSKA CENTER, WARSAW, POLAND Ca 20 km (30-40min by car) southeast of Warsaw by the highway to Krakow 3 trade centers: GD (Chinese, 600 companies) ASG (Vietnamese, 600 companies) EACC (Turkish, 400 companies, run through ASG) Simple ware house facilities Trade facilitating organization: ASEAN Poland business center Services: bank, post, parking lot and restaurants Products: shoes, clothes, accessories, kitchen tools etc. Some copies, low quality

RETAIL MARKETS, WARSAW, POLAND

ASIA CENTER, BUDAPEST, HUNGARY Ca 15 km northeast of the center of Budapest close to a highway 3 trade halls selling asian products: AsiaCenter (AC) two halls (170 & 300 companies) Budapest China Mart (BCM) one hall (15 companies) Parking facilities for ca. 250 cars Services: free bus transfer to and from subway, free parking, restaurants, bars and coffee shops Products: clothes, shoes, accessories, bathroom devices

RETAIL MARKET, BUDAPEST, HUNGARY

LEARNINGS FROM WARSAW AND BUDAPEST Established outside large cities with a Chinese Diaspora Varied results: Warsaw: more tenants and customers, continuous expansion Budapest: Less tenants and customers, opening up also for consumers, great competition from informal market Two business ideas: Proprietors (renting out the booths) Tenants (import wholesalers) The customers are micro retailers: buys small volumes each week, retail the products in local indoor/outdoor markets to consumers Depending on geographical proximity and small scale

CHINA TO KALMAR IN AUGUST 2006 Chinese Fanerdun Group chose Kalmar Family conglomerate from Hangzhou Negotiations for three days (vs Amsterdam) Billion investment Wholesale market 90 000 m2,1100 firms 300 appartments Hotel Restaurants Center Chinese medicine Logistic centre Municipality input: seller of facilites, investments infrastructure and marketing Other actors: IS, Region council 12

ORIGINAL BUSINESS IDEA 5 product groups Sport Offer to & Chinese leisure Stationary customers Shoes & bags Ironware Booth Customers at market customer in Accessories Kalmar Appartment Wholesalers Planned start in Kalmar Retailers Appartment From Sweden in and Hangzhou Europe August 2007

FROM SCCWM TO CEBEC August 16th 2006 Sweden China Commodity Wholesale Market Bring China closer to Europe through a wholesale market August 8th 2007 China Europe Business Exhibition Centre Wholesale, exhibitions, trade shows for customers from all over the world. Both export and import, e-commerce.

OPENING OF CEBEC SEPTEMBER 28th 2007

PUBLIC COMMENTS AFTER THE OPENING Det verkar vara många tvivlare (journalister och dyl.) som inte fattat att detta är det största som har hänt Kalmar sedan Kalmarunionen! Tyvärr har denna satsning kommit 15 år försent. Idag finns snart inga fristående affärer utan man ingår i kedjor eller har gemensam inköpsorganisation som redan har goda kontakter i Kina. Företag köper på Kantonmässan med 19 000 utställare och stor konkurrens om priserna. Grattis Kalmar! Äntligen har denna vita fläck av Sverige fått lite färg. Det är verkligen glädjande att se lysande röda färger inte bara från de fantastiska svenska cupsegrarna Kalmar FF:s tröjor. Nu är det bara att hoppas på stor framgång med projektet!!! Gör inte vi affärer med kineserna gör någon annan det. Rättfärdigar detta mänskligt förtryck? Detta är verkligen bra! Vi ska inte bara se problem här. Detta är en bra chans för regionen att utvecklas. Vi ska vara positiva och se möjligheter och inte bara problem. Hela affären stinker, kommunalråd som stoppar huvudet i sanden, inga öppna kort här inte. Tycker det är helt fantastiskt att det är någon från Kina som vågar satsa dessa summor i vår stad Kalmar. Varför så pessimistiska? Försöka vara lika glada och trevliga som kineserna, de har alltid ett leende på sina läppar.

ESTABLISHMENT MOTIVES - SWEDEN Low company taxes Welfare system Secure (neutral, no wars) Kind and caring people Easy integration into society School and health care free of charge Maternity leave for female, but also time off for the father

ESTABLISHMENT MOTIVES - KALMAR (1) Kalmar center of Baltic Sea Region (2) Beneficial with smaller cities (3) Prices of land and facilities Advantages for Kalmar Economic development Increased number of inhabitants Develop Kalmar and its brand, increased tourism and traffic Disadvantages for Kalmar Chinese Diaspora Different life styles Risk of cultural and organizational problems Mr Lou was right

TURBULENCE Not full salaries to workers Construction work stopped due to security and work environmental reasons Construction delayed Swedish board members quit False marketing in China Residence permit, free school, subsidies No permission to transfer money to Sweden Bankruptcy 2009 Facilities sold during 2010 Soon nothing is left of Fanerdun in Kalmar Barometern 18th of August 2007

THE FAILURE OF FANERDUN IN KALMAR What was Fanerdun? Chinese small firm in the third wave of internationalization High ambition, not enough muscles Not sufficient international knowledge No prior international experience Large distance between China and Sweden Not sufficient market knowledge About Swedish laws and regulations About Chinese customers interested in Sweden About customers customers in Sweden and Europe Not sufficient business network knowledge No own international contacts No Chinese Diaspora to connect into

SOME EFFECTS ON KALMAR MUNICIPALITY FROM THE FANERDUN ESTABLISHMENT Financial Sellers of land and facilities (12,2 MSEK) Investments infrastructure and marketing (ca 13 MSEK) Region council covered half Publicity Marketing (press conferences) in China Coverage in national, regional and local Swedish news Political Prestige of the leading politicians and other involved actors Other Large increase of bankruptcy in statistics 2009 Rising prices on land Increase in interest of China: courses at the university, seminars etc.

谢 谢 Thank you!