Midea Group

Midea Group

    Overview: It all started with USD 800 Starting Capital


    Midea Group is a privately held Chinese electrical appliance manufacturer, headquartered in Shunde, Guangdong. The company employs approximately 150,000 people in China and overseas and its most important subsidiary is GD Midea Holding.

    Midea is one of China's most successful private companies
    Midea Group was founded in 1968 by He Xiangjian, who had a starting capital of only USD 800. At the beginning, the company only produced bottle lids, but later on expanded its product range and introduced household and commercial appliances. Today, Midea Group is one of the most successful private companies in China with a revenue of USD 22.2 bn in 2011.

    In 2012, Midea's publicly listed division, GD Midea Holding, ranked 2nd in the world in sales amongst all household appliance manufacturers.

    Domestically, Midea sells its products under its own brand, whereas the majority of its export business is original equipment manufacturing (OEM) for many established global brands.


    Internationalization Strategy: Focus on Developing and Threshold Countries

    Midea has been pursuing a globalization strategy for its operations by opening plants in Vietnam, Belarus and Egypt. Investments in other countries are planed for the future, too.

    By the end of the 1990s, Midea entered the air conditioning compressor market through the purchase of Macro-Toshiba's compressor factory. In 2004, it formed joint ventures with the Japanese company Toshiba and the Chinese company Chongqing General for the production of air conditioning products.

    Furthermore, it acquired the Hefei Royalstar joint venture and Hualing Group to establish its brand in the refrigerator and washing machine business.

    Midea has productions plants in Vietnam, Belarus and Egypt
    In 2005, Midea purchased Jiangsu Chunhua Electric Group, a major vacuum cleaner manufacturer in China. Additionally in 2008, Midea acquired controlling share in a publicly-listed appliances manufacturer, Little Swan, further enhancing its product and brand portfolios in washing machines and refrigerators.

    The goal of all these cooperations and acquisitions was to establish Midea on the Asian market. In 2008, Midea engaged in its first joint venture overseas with Horizont, a manufacturer for electrical appliances from Belarus. Furthermore, it formed joint ventures especially in Latin America.


    R&D and Intellectual Property: Badly hurt by the financial Crisis

    Midea reinvests around three percent of its revenue in R&D, which amounted to a total of USD 650 mn in 2011.

    The following graphics represent Midea's patent and utility model applications. While the first two graphs illustrate the distribution over time and across countries, the last two graphs depict the distribution across technology sectors.

    The main difference between a patent and an utility model is the durability and the strength of protection. Patents are protected for twenty years, while utility models are only protected for ten years. Thus, an utility model can be described as a weaker form of patent.

    The first chart shows the development of the number of patent and utility model applications over from 2000 to 2010. Midea increased its number of patent and utility model applications from 2000 to 2004 from two to more than 40 applications. In the following three years the number of applications decreased from more than 40 per year to only twenty in 2007. After a strong increase in 2008, the number of patents and utility models dropped massively in 2009, what could be explained by financial cuts Midea had to do, caused by the world's financial crisis.

    The main focus of Midea is still on its domestic market, China. This is reflected in the fact that China accounts for 97 percent of all filed applications from 2008 to 2010, with only a few applications in other countries. That will probably change after 2010, because Midea had its first overseas cooperation and acquisitions between 2008 and 2011.

    The following two charts show the patent and utility model applications across technological sector. The three most important sectors for Midea are thermal processes and apparatus, consumer goods and equipment, and electrical devices, engineering and energy, accounting for 70 percent of all applications. The high number of applications in the sector "others" reflects that Midea operates in multiple sectors. The remaining three sectors are of less strategic importance for the company.


    References:

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