Rigas Arvanitis y Zhao Wei
JL is a collective entreprise –like WG above— created in 1979 producing washing machines. It produced come mere 200 machines per year and now reaches a production above one million. Today they produce among the best washing machines in China, but that was not the case at the beginning. It announces sales of two billions Yuans per year (around 250 million USD). They produce all kind of vertical drum machines: manual, semi-automatic and fully automatic. It has exported last year for 8 million USD. Today it is the fifth producer in China, the third exporter of washing machines. Recently it entered in a JV with Mitsubishi for the production of air-conditioners.
The production of washing machines is a sector that is very interesting because it explifies the evolution of the Chinese market. As many others companies it began with the first years of the reform process. The sector has been dominated rapidly by companies that today either disappeared or have lost their rank. This is the case of companies in Guangdong Province in cities of Guangzhou, Foshan, Zhaoqing and Zhongshan. For many years, Weili, a company based in Zhongshan has been the biggest and most famous brand in China. Today Weili produces less than 20.000 units per year and these are very cheap and obsolete models. In the Province of Guangdong, JL represents nearly 90% of the provincial exports in washing machines.
The managers of the company explain their success, apart from the hard work, by the fact that they were a relatively small company, that did not attract the envy and greed of provincial authorities. Apart from this political aspect, which is certainly important for a collective entreprise, a constant strategy based on technological learning is maybe a better explanation. JL has developed good production processes, high quality production and training for its personnel. It should also be mentioned that workers here are mainly local people, not immigrants and they are quite well paid as compared to mean salaries in the industry of this region. It looks actively to create a production unit outside China and Brazil will probably be its next destination.
The company has tried to enter in the production of more and more sophisticated products . It has developed competencies in product design, training of human resources, process capabilities. It has benefited from help form the city office of science and technology for developing partnerships with the local engineering school by developing an R&D center inside the company. It has centered then its attention to Computer assisted design (CAD) –buying a CAD program and installing also a GIS for management of sales. It has conceived of a specific technological program for the design of highly automatized electronic commands of the washing machines. It has design specific moulds for its equipment. A cooperation with Tsinghua University department of engineering in Beijing has been established, as well as with the Normal School of Beijing, the Industrial University of Harbin, and the Polytechnic School of South of China in Guangzhou. Some of these collaborations were supported by the National programmes for Science and Technology. Its investment in R&D has always been quite high: 4,1 % in 1998 and 5,9% of its sales in 2001.
The company has developed many quality control programs and various systems for the encouragement of workers better practices. The failure of Weili, once the best known company in China, has been a lesson: they now bring a lot of attention to the qualified personnel. Specific training programs have been devised with Wu Yi, the local engineering school. Today their strategy is to constantly produce a new machines: new products represent now 30% of their sales. “We want to export and be famous because of the quality of our products and our technological innovation” says the general manager. JL has now a patent policy and an intellectual property office, a rather unusual feature. In 2001, the company has acquired 20 patents and copyrights, of which 7 were technical patents. Some patents have been extended abroad.
Management has been a constant care of the company, especially so management centered on quality, cost-effectiveness and the needs of the clients. Recently the company created an affiliate JV with Mitsubishi for the production of air-conditioners. “For Mitsubishi, the air-conditioning is a small division; for us it means a lot. They have among the best technology and we will learn a lot from their management. Our own development will benefit from their unit”. The JV is entirely Japanese managed. The objective is to see how the Japanese manage their company.
Also the company has learned how to manage efficiently a network of providers. Its network has been extended progressively. The motors are produced outside the company and motors have now attained a 90% rate of acceptance. Some years ago competition was not really a worry. Today competition is hard and foreign companies have entered in the Chinese market. Exports is also a steady objective. JL is also OEM producer for many large firms in China like Konka and TCL. These brands are well known but produce other types of equipment like televisions and computers or telephones. Their washing machines are produced by JL.
Recently, JL entered in a partnership with General Electric. Although the company does not show this as being of paramount importance, it is in fact a decisive step. GE was a client of JL, producing for the Latin American market. And the middle range quality machines. But the technical level of the machines produced by JL has attracted the attention of General Electric. Since then, entirely automatized machines are produced as OEM for General Electric. By this way, the company acquires knowledge of the North American market and it is definitely trying to diversify its production by entering in technical collaborations with GE. The aim for JL is to have a strategic alliance with GE, something that today cannot be done yet but is very proximately possible.