embraco’s progress in china - cebc leader in hermetic compressor + 300 million 22%global products...
TRANSCRIPT
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Embraco’s Embraco’s Embraco’s progress in progress in progress in
CHINACHINACHINACHINACHINACHINA
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World leader in World leader in hermetic compressor hermetic compressor
+ 300 million+ 300 millionproducts products 22%22% global global
Embraco Today
Plants in Plants in 3 3 continents continents
Bra z il
4 ,8 10
China
1,085
Italy
1 ,657
Slovakia
1,334
Singapore
2
Bra z il
4 ,8 10
China
1,085
Italy
1 ,657
Slovakia
1,334
Singapore
2
Bra z il
4 ,8 10
China
1,085
Italy
1 ,657
Slovakia
1,334
Singapore
2
Bra z il
4 ,8 10
China
1,085
Italy
1 ,657
Slovakia
1,334
Singapore
2
Technology Technology Leadership Leadership
hermetic compressor hermetic compressor market market
products products manufactured manufactured
+ 27 million+ 27 millioncompressors/yearcompressors/year
Global distribution Global distribution and sales networkand sales network
22%22% global global market sharemarket share in operation in operation
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Plants and People
USA6868
Italy521521
Slovakia2.5402.540 China
1.2041.204Mexico 6868 1.2041.204
Brazil5.4055.405
Mexico11
TotalTotalEmployeesEmployees
9,7399,739
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• Exporting to China since 1986
• Embraco brand already known in Asia
• Perception of economic growth, domestic potential of the cooling market
• Future export base for the continent
Why go to China?
Determining Factors for the Investment
• Good infrastructure, low production costs
First Brazilian company to form a joint venture with First Brazilian company to form a joint venture with
the Chinese government in 1995 the Chinese government in 1995
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Investment to know peculiarities of the market
• How business is done in China• Financial market – capital inflow and
outflow• Legal and taxation systems
CHINESE MARKET
Embraco’s First Steps
• Legal and taxation systems• Regional differences
Market demand, then estimated at 7 to 8 million compressors/year
Cultural differences between the two countries
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1993 – Initial negotiations for a possible partnership
1995 – Joint venture established with Snowflake group, controlled by the municipality of Beijing
Embraco’s First Steps
Documents that structured the association:• Joint venture contract
• Articles of Association – Limited partnership
• Installation’s rental contract (factory already existed)
• Licensing contract to use brand on product
• Technology transfer contract – EC compressor
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Cultural understandingCultural understandingBusiness strategiesBusiness strategies
Characteristics and Challenges
Understanding social protocolsUnderstanding social protocols
Intellectual propertyIntellectual property
Consolidation of judicial systemConsolidation of judicial system
Complex negotiationsComplex negotiations
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Start of Operations - 1995
• Beijing Embraco Snowflake Compressor Company - BESCO
• Old factory located in urban area: Fungtai District, south of Beijing
• Production volume: 1 million compressors/year
• Number of employees: approximately 1150 people
• Focus on domestic market
Main Challenges:
• Uncertainties regarding Chinese legislation
• Marked cultural differences
• Trust between the parties – relationship building
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EMBRACO
SNOWFLAKE69.18%
Current Capital Stock Structure
SNOWFLAKE
30.82%
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BOARD OF DIRECTORS
PresidentPresident
ViceVice--PresidentPresident
MembersMembers
Management Structure
ManagementManagement
General ManagerGeneral Manager
ViceVice-- General ManagerGeneral Manager
ManagersManagers
MembersMembers
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• New factory located in planned area – near
the Beijing International Airport
• Joint investment of US$ 65 million
• Strategic platform to supply the Asian market
with cooling systems
Embraco Today in China
with cooling systems
• Focus on the domestic market
• Full production capacity of 4.5 million
products
• ISO 9001 Certification
• More than 1,100 employees
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• Research and development center
• New product EM - global
• State-of-the-art technology
• Full production capacity of 4.5 million
products
New Factory Differentials New Factory Differentials New Factory Differentials New Factory Differentials
products
• Environmental concerns:
- Reduction in water consumption
- Reduction in electric energy
consumption
- Reduction in CO2 emission
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1879
2278 2200
2700
3500
Sales Volume Evolution in China
92208
580
1136
14381335 1329
1503
1879
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*
* Forecasted
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3.2
5.15.3
6.67
7.1 7.4 7.76.8
6.76.0
6.36.4
1.82.3
2.2
2.63.3
7.10.1 0.2
0.61.1
1.4 1.3 1.3 1.5
13.3
16.3 15.7
18.220.0
21.7 22.3 22.7 22.9 23.625.0
22.9
27.326.7
Global Sales Volume
BRAZIL EUROPE CHINA
*Profit Plan – millions of units
9.4 10.1 11.1 10.2 11 11.9 13.2 13.6 13.7 14.3 15.0 16.0 14.7
18.4 17.0
3.2
06 07*05040302010099989796959493
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• Chinese partnership management is
more focused on results
• Management, quality and productivity
concepts are internalized
• People already understand that the
Current Situation
• People already understand that the
company should generate jobs and
profit
• China has been a member of World
Trade Organization since 2004
• Steady growth supports investments
for future development
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New Plant Inauguration – May 2006
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New Plant Inauguration – May 2006
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New Plant Inauguration – May 2006
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New Plant Inauguration – May 2006
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New Plant Inauguration – May 2006
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Conclusion
“A Chinese bargain” does not exist.
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Ernesto HeinzelmannErnesto HeinzelmannErnesto HeinzelmannErnesto Heinzelmann
[email protected]@[email protected]@embraco.com