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The Forefront of Business in Asia:
The Expansion of the Taiwanese Company, Tingyi Holding Corporation (Kang Shi Fu), in China and Partnerships with Japanese Companies

Jusuke Ikegami
Associate Professor, Center International Education, Waseda University

At the Waseda University Asian Service Business Research Institute (Director: Masataka Ota), we conduct research on business in the broad Asia region, including India. Although Japanese, European, and American companies often come to mind when international business is mentioned, it is also essential to learn about conditions at emerging companies in the Asia region and study how to work together with these firms. In addition, while in the past it was assumed that innovations would be initiated by the developed countries, we also need to conduct research on how to incorporate innovations developed by emerging countries. With this awareness, we would like to introduce Tingyi Holding Corporation (Kang Shi Fu*1), which is a core Taiwanese company in the Ting Hsin International Group that has enjoyed great success in China.

Taiwanese-born company becomes top brand in the Chinese market

China has become a huge market, accounting for 27% of global steel demand and 46% of coal consumption. Of the approximately 95 billion instant noodle servings that are consumed worldwide every year, approximately 45% are consumed in China. In terms of scale, this is eight times the amount consumed in Japan, which is the birthplace of instant noodles. According to the global integration-local responsiveness framework (I-R framework) in international management, industries and businesses are classified on the two axes of integration and responsiveness. In general, the food business is viewed to be highly responsive, with strong local characteristics. Accordingly, it is said to be difficult for an overseas company to enter a foreign market and then gain and maintain top share in that country. However, the Ting Hsin International Group entered the Chinese market from overseas and has become the company with the highest market share (55%)*2. (Figure 1)

Figure 1

During fiscal year 2010, the Ting Hsin International Group recorded total sales of RMB 66.2 billion (approximately JPY 926.8 billion)*3. The highest ratio of these sales was accounted for by the Tingyi division, consisting mainly of sales of instant noodles, beverages, and snacks in the Chinese market. Sales in this division were RMB 44.2 billion (approximately JPY 618.8 billion), and profits before taxes were RMB 74.6 million (approximately JPY 10.4 billion). Tingyi's average growth rate of approximately 20% for the past five years is also astonishing.

In international business it is typical for overseas expansion to be conducted after a firm has established an advantageous position in their home country. However, for the Ting Hsin International Group, this was not the case as the company did not have any particular strengths at the time of overseas market entry because the company was not engaged in the foods industry in its home country of Taiwan. The success of the Ting Hsin International Group in China could be seen as a rare example of a company newly constructing an advantageous position in a host country.

Entry in the Chinese market in the late 1980s

The predecessor of the Ting Hsin International Group was Ting Hsin Oil & Fat Industrial Co. Ltd., a marketer of lubricating oils for machinery that was founded by He-de Wei in 1958 in Yongjing Township, Changhua County, Taiwan. After He-de Wei passed away in 1980, his four brothers took over the company (first brother: Ying-chou Wei (current chairman), second brother: Ying-chiao Wei, third brother: Ying-chun Wei, and fourth brother: Ying-heng Wei) and established a business in China in 1988. Initially, the company sold high-quality cooking oil in China, and in August 1992 the company took a chance and began to sell two varieties of packaged noodles in China. The two varieties were Master Kong beef noodles and traditional Taiwanese-flavored noodles. Afterwards, the packaging for Master Kong beef noodles was renewed seven times and product improvements were conducted more than 30 times, and as a result, it has become the best-selling core product.

Due to poor sales, the company immediately abandoned its Taiwanese-flavored noodles. It is common for companies to become fixated on products from their home country and to go to great trouble to sell these products even if sales prospects do not look favorable. However, it is believed that because Tingyi Holding Corporation was not engaged in the sale of instant noodles in its home country, it was able to quickly abandon the Taiwanese-flavored noodles and try out new flavors in the market. I believe the ability to respond flexibly to local conditions due to not having established a strength in the home country could serve as a helpful reference point as Japanese companies shift towards new perspectives. Rather than transferring over strengths built up in its home country, the company focused on responding effectively to local needs. It focused on customer surveys from the initial launch phase, conducting consumer surveys on approximately 100,000 people each time and devoting itself to product development in line with local tastes. One of Tingyi Holding Corporation's strengths is believed to be its high level of regional adaptiveness based on the over 200 regional brands it currently has. (Figure 2)

Figure 2 Major instant noodles products and regional brands

Partnerships with Japanese companies

Figure 3 The beverage business has become a new pillar business

Another characteristic of the company is its partnerships with Japanese companies. In 1999, Sanyo Foods, which is well known for the brand Sapporo Ichiban, acquired a one-third stake of Tingyi Holding Corporation. Although this transaction was positioned as financial support during the Asian financial crisis, as a result Tingyi Holding Corporation increased its know-how related to instant noodles in partnership with Sanyo Foods. After realizing the benefits of partnerships with Japanese companies, Ying-chou Wei furthered partnerships with Japanese companies afterwards, including the establishment of a joint venture with Itochu in 2002.

In 2010, the Ting Hsin International Group formed strategic alliances with ten Japanese companies, including Kameda Seika, Kagome, Asahi Holdings, Nippon Flour Mills, Yoshinoya, and Uny. Apparently Chairman Wei intentionally aims for partnerships with the second and third largest companies in their field in Japan that are highly motivated toward growth. The reason for this is that the largest companies are often bound by their successes and thus lack flexibility. The second largest companies and lower ranking companies are more inclined toward taking on challenges and offer more opportunities for mutual growth. To further strengthen partnerships with Japanese companies, since 2007 several employees have been sent to Waseda University on a regular basis, which is one of the most well-known universities in China. After one year of study at Waseda University, these employees work at Japanese partner companies. The knowledge gained has been directed towards the growth of the two key businesses of instant noodles and beverages at Tingyi Holding Corporation, and as a result the scale of the beverage business now exceeds that of the instant noodles business. (Figure 3)

I believe there is a great deal that can be learned from the Ting Hsin International Group's strategic selection of markets and partners.

*1: In Chinese, the sound Kang is associated with health and wealth.
*2: Monetary-based (Nielsen survey). The products are relatively expensive, as the volume-based percentage is 40%.
*3: Assumed that RMB 1 = JPY 14

Jusuke Ikegami
Associate Professor, Center International Education, Waseda University

[Profile]
Specializes in international management and management strategy. He entered the university after gaining practical business experience at companies including BCG, MARS, Softbank, and Nissay Capital. He serves as the academic coordinator for ETP(EU EXECUTIVE TRAINING PROGRAMME). He has acquired a masters in international relations from the University of Kent, UK, a masters in international political economy from the University of Sheffield, UK, and an MBA from the University of Cambridge, UK. His many publications include Japan's Blue Ocean Strategy [Nihon no Buru Oshan Senryaku] (First Press), the co-authored International Business Series 1: Introduction to International Business [Shirizu Kokusai Bijinesu 1: Kokusai Bijinesu Nyumon] (Chuokeizai-sha), and the co-translated The India Way (Eiji Press).