It is time Taiwanese companies discovered that being No. 1 is about far more than producing a good product.
It may not be a household name where you come from, but for the Taiwanese, Hey Song is as famous as Coca-Cola is to Americans. But, then, it has a little history on its side. The name came into existence in 1931, after a local company bought up a Japanese soda production line, and today it is still going strong, its original sarsaparilla drink as popular as ever. In fact, thanks to a sophisticated marketing push, Hey Song has gained popularity.
Youth-oriented advertising for Hey Song has been such a hit and so successful in boosting sales that it has been used as a teaching material in mass communications courses in Taiwan's colleges and universities. And the point here for other businesses is that if new thinking can turn around the image of a reliable but unexciting drink brand like Hey Song, anything is possible for the more newly ascendant stars of the Taiwanese business world.
Increasingly, Taiwanese businesses are facing the fact that being on top of their game is about more than being just the best--it is also about having a name that says they are the best. Taiwan's economic miracle was built on making the hardware that went into other people's products. In the industry this is called the original equipment manufacture (OEM) model. And it is a model many Taiwanese companies continue to hold onto even though cheaper manufacturing bases such as China have clearly made it outdated for Taiwan.
That has to change, and the way forward is probably the Hey Song way, through branding. And, if anyone needed reminding that Taiwan still has a long way to go, when Business Week teamed up with Interbrand Corp., a pioneering brand consultancy in New York, to offer an annual ranking of 100 global brands by dollar value since 2001, not a single Taiwanese company has made it into the list.
Perhaps that is because most of the companies focusing on branding are those with local products that need a new lease on life in a market made more competitive by international imports. Take the Ten Ren Tea Company, which was established in 1953. Ten Ren is concentrating on its product, store design, and innovation.
Ten Ren experienced a severe financial crisis in the early 1990s when it expanded into the securities business and lost NT$3 billion (US$91 million). The crisis forced Ten Ren to rethink its philosophy, the outcome of which was a decision to focus on its strength--tea. To recover its loss, Ten Ren concentrated on selling traditional tea and avoiding risky ventures. When the company regained its stability, it began actively promoting tea culture, especially among the younger generation, who have fueled the explosion of retail coffee shops.
Ten Ren also launched the Cha for Tea restaurant chain in 2002. Like foreign coffee chains, modern Cha for Tea stores attract teens and young professionals. The food also appeals to local tastes. The store serves beef noodles, dumplings, and tea-flavored cheesecake. "Tea-drinking has thousands of years of history in China," says company Chairman Lee Shen-chih. "Tea is healthy and has a lingering fragrance. I don't like to see young people turning their backs on it."
Besides the four stores Ten Ren opened in Taipei and Taichung, Cha for Tea has also opened stores in Los Angeles and Sydney. Ten Ren also authorized Coca-Cola to produce oolong and green tea in 2003, at some of the American giant's many production lines wordwide.
Despite such efforts, however, neither Ten Ren nor Hey Song made it into an Interbrand Taiwan top 10 brand list last year. Two non-high-tech industries did however: Giant (see story on page 16) and Maxxis, both of which were established more than 30 years ago.
Maxxis, which is better known to the Taiwanese as Cheng Shin, was founded in 1972. It has been the leading tire company in Taiwan for decades, but decided to go global with the brand name Maxxis in 1989 when Maxxis International, which is in charge of marketing and R&D for the Maxxis brand, was set up in the US. "Without your own brand name, there's a good chance that you aren't making much of a profit through OEMs because clients are constantly cutting prices," says company President Chen Yun-hwa. "Establishing a brand takes huge capital, so you need to be absolutely certain that you're going to do it, and of course your brand has to be backed up by product quality and innovation."
Quality and innovation, however, do not necessarily translate into market share without a good marketing strategy. Maxxis works on name recognition by sponsoring sports events such as car or motorcycle races, and professional sports teams such as the Houston Rockets. Targeting sports fans, Maxxis successfully established the brand as a supplier for sports /utility vehicles and bikes. According to a survey by Media Guide, an auto-industry publication, Maxxis has been ranked No. 1 in several categories, such as mountain bike tires.
While Giant and Maxxis have gone global, other older Taiwanese brands are doing very well despite increased foreign competition in the domestic market. These companies can not be considered "international brands," which are generally defined as brands that sell at least 20 percent of their products outside of the local market.
Founded in 1918 when Taiwan was still under Japanese occupation, the Tatung Company (see story on page 12) started out in the construction business. The company began to make home appliances like electric fans and rice cookers in the late 1940s, and over the past decade has become a leader in the design and manufacturing of a vast array of digital consumer products including PCs, LCD TVs, videophones, and home appliances. Tatung also delivers advanced products for business computing, such as Tablet PCs, blade servers and wireless thin clients.
Tatung has managed to keep its edge, in part, by setting up Tatung Senior High School and Tatung Institute of Technology (now Tatung University), both of which prepare Tatung employees for the factory floor and research and development. Graduates of the schools are the company's most reliable manpower source.
Another of Taiwan's older and larger brands that have survived the test of time is the Teco Electric and Machinery Company. Teco started out as an industrial motor manufacturer in 1956, and began manufacturing televisions and air conditioners in the 1970s. Teco is credited with being the first company to introduce a number of products to Taiwanese consumers such as the 300HP motor, LCD TV sets, and a washing machine that does not need laundry powder, just to name a few.
Teco also embarked on an aggressive marketing campaign. To promote the company's TV sets, air conditioners, refrigerators, and washing machines, Teco contracted young pianist Eric Chen as the spokesman in a series of commercials. The purpose was to create an image that Teco's home appliances were more than modern conveniences, but rather a line of products that could contribute to a clean, healthy, and environmental-friendly lifestyle. The strategy was so successful that Teco's production line had to run at maximum capacity to meet demand.
Teco has diversified its developments and investments, and, by doing so, has evolved into a conglomerate with worldwide operations. The company is renowned both for its reputation as the nation's leading heavy electrical industrial brand and as a manufacturer of home appliances, telecommunications equipment, medical information systems, semiconductors, software, and infrastructure. It has also tackled the service industry by providing financial investment counseling, food services, distribution industries, and e-commerce. Teco's flexibility stems from its commitment to R&D. The company's R&D division focuses on motor development, home appliances, network applications, precision engineering, as well as others.
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In addition to the larger enterprises, many of the older small- and medium-sized enterprises (SMEs) that have supported Taiwan's economic development have also been adapting to increasing production costs and strong competition. Take Sunonwealth, an OEM manufacturer of mini-fan motors that was established in 1980. Taiwan was once the world's top manufacturer of mini-fan motors but lost its competitive edge because of rising production costs and the sharp appreciation of the New Taiwan Dollar. Others closed their operations or moved offshore, but Sunonwealth managed to stay and survive. "R&D is the life of the company," says company President Hong Yin-shu. "Only with continued R&D can the company have a future."
It is an attitude that is getting the company recognition where it counts. Sunonwealth may not be a household name like Hey Song--or for that matter Coca-Cola--but it has strong brand recognition amongst those that count: computer manufacturers.
Hong likes to point out that his company's investment in R&D has paid off, telling an anecdote about attending an electronic show in Japan in 2001, and how a Japanese manufacturer proudly demonstrated a mini-motor, touting it as the world's smallest, without knowing that on a booth not too far away, Sunonwealth was demonstrating a product that was only a tenth in size. "The truth is, I was at least 10 years ahead of them," says Hong.
In a sense, it is an old Taiwanese story. All too often the products being produced in what is the world's 15th largest trading economy are ahead of the competition. And all too often the absence of branding means that too few people know about it. When that truly changes it will be the genesis of Taiwan's next economic miracle.