No longer poles apart as ties increase

Guangxi Liugong Machinery Co Ltd's assembly line in Liuzhou, Guangxi Zhuang autonomous region. The company's acquisitions in Stalowa Wola, Poland, are expanding its capabilities into the European market. Wang Zhongbin/Xinhua

A Chinese machinery giant's efforts in Poland are paying off despite challenges

In Stalowa Wola, a town with a population of about 65,000 in southeastern Poland, a Chinese company made its presence known with a takeover of a traditional local machinery company that connected two different cultures and markets.

Many Chinese companies have gone global in recent years but success can never be achieved easily.

Chinese engineers and management officials from Guangxi Liugong Machinery Co Ltd, one of the leading construction equipment manufacturing companies in China, spent three to four hours by car to reach this small town, which is located about 240 kilometers south of the country's capital Warsaw, following a more than nine-hour flight from China.

"Many entrepreneurs still hold a superficial understanding of 'internationalization' on the trading stage. However, trading is like floating duckweed on water without roots while marketing is different," said Zeng Guang'an, Liugong's vice-chairman and president.

"Marketing is like planting trees. After you plant a young tree in a local market, you need to take care of it until it grows bigger."

"One tree is not enough. We raise a forest," he said.

Leading the whole process of Liugong's takeover of Huta Stalowa Wola Construction Equipment Division and its distribution subsidiary Dressta Co in Stalowa Wola, Zeng completed his planting of the first tree in Europe.

It took more than two years of negotiations. Liugong acquired the Construction Equipment Division of HSW and Dressta in February 2012, a time when many European companies were suffering from a weak economy.

The acquisition became Liugong's first outright purchase of manufacturing facilities and distribution outside its domestic market.

Promising acquisition?

The takeover has brought mutual benefits to Liugong and HSW.

First, Liugong will acquire the first-class crawler dozers (a specialist bulldozer) production line owned by HSW, said Zeng.

Established in 1937, HSW is well-known for its manufacturing of high-quality crawler dozers at its plant in the Podkarpackie province in Poland.

"The research and development investment for crawler dozer production lines is huge and difficult," said Zeng. "No more than five companies in the world can really make high-quality crawler dozers. The technology Liugong can gain from the takeover is attractive."

Second, the takeover of Dressta can help Liugong expand its European market, which currently is not a major overseas market for certain Chinese companies.

In addition, Poland has almost the lowest manufacturing and labor costs in Europe. The payment of employees at Liugong Machinery (Poland) Co Ltd equals around one-sixth of that of Germans in the same line of work and only 1.5 times Liugong's Chinese employees.

In return, Liugong also helps the Polish company in many sectors, including reducing costs, improving production efficiency and expanding its sales markets.

"In addition to technology communication, Liugong has a well-established global distribution network that Dressta can make use of to increase its overseas sales," said Lestaw Holysz, chief executive officer of Dressta.

"We need more dealers and Liugong has them," he said.

Since Liugong started its "go overseas" strategy in 2002, it has built up a distribution network with more than 400 dealers in 130 countries and regions globally and two overseas manufacturing plants outside China.

Unlike many other Chinese companies, Liugong tried hard to infuse its concepts, culture and management into its overseas plants in addition to making money.

"We want to send a message to the Polish government and local residents that we are not only buying their technology through the takeover. We are also bringing our best technology and products here," said Zeng. "Plus, we will definitely continue our investment and Poland will become Liugong's manufacturing center in Europe."