In 1992, the Chinese coatings industry marked a significant turning point. That year, Nippon entered the Chinese market, and ICI, which later became part of Dulux, also established a presence in the country. Over the following two decades, these two global giants gradually captured the majority of the Chinese paint market, setting the stage for intense competition.
Fenlin, on the other hand, entered the Chinese market a decade later. As a latecomer, it faced an already saturated and oligopolistic market, with strong competitors like Nippon and Dulux dominating the landscape. The challenge was not only to compete but also to find a unique position in a market that had already been shaped by foreign giants.
"Fenlin can't beat them directly, so we need to hide," said Yan Ming, general manager of Fenlin China, when proposing a strategy targeting the high-end retail market to the company's headquarters. This approach proved effective in the early stages. Even a well-known Finnish business magazine analyzed Fenlin’s growth in China, advising European companies to "avoid blindly adjusting to China's price-driven environment" and instead focus on premium segments.
At the same time, the process of "localizing" Fenlin's operations was both challenging and necessary. The company had to modify its product formulas and adapt its business practices to better fit the local market. During this transition, gaining influence at the headquarters became crucial. Although Fenlin's sales in China were not yet high, its performance within the group showed consistent growth. Moreover, the traditional marketing model of this long-established European company was deeply rooted, and the Chinese market was seen as a testing ground for new strategies. Thanks to this, Yan Ming managed to secure more decision-making power at the corporate level.
However, the ceiling effect soon became apparent. Relying solely on the high-end retail segment limited Fenlin's growth potential. "I'm afraid we'll have to enter the low-end market," Yan Ming admitted. He recognized that the lower end of the market represented a key opportunity for breaking through the current limitations. Yet, Fenlin's success in China had largely been built on its high-end positioning. If this strategy were abandoned, the company would face greater uncertainty and new challenges ahead. The path forward required careful balance between maintaining brand identity and adapting to market demands.
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