Nikkei Asia Prizes 1998

Ni Runfeng

Standing Out As A Model For Reform Ni Runfeng helped turn ailing state-run company into television giant

BY RYUJI SATO
Senior staff writer

In a country where most leading-edge companies are situated along the coast, China's Sichuan Changhong Electronics Group, one of the world's leading producers of color televisions, stands out for being located far inland.

The consumer-electronics maker is headquartered in the city of Mianyang, a two-hour drive from Chengdu, the capital of Sichuan Province. The company has overtaken its rivals on the coast with the nation's highest sales volume of color televisions and an annual production rate of 6.6 million units.

The former state-run military-radar factory was transformed into China's largest consumer-electronics company by Ni Runfeng, 54, the company's chief executive. In 1985, when Ni had just been promoted to the plant's top position, the company fell on hard times. At the time, the government ordered many such defense plants to switch to civilian operations. Government support fell drastically and the company was forced to fend for itself in the market for the first time.

The road from radar manufacturer to China's leading consumer-electronics manufacturer was hardly a smooth one. It wasn't until the country was swept up in a consumer-electronics boom in the late 1980s that the company was able to experience growth.

The biggest obstacle was the company's lack of customer awareness. Even after the company acquired a production line for 17-inch TVs from Matsushita Electric Industrial Co. of Japan, most employees were still used to serving the military, and the idea of producing TVs was not greeted with much enthusiasm.

A flustered Ni drew inspiration from a Chinese expression that says a nation can only be taken one castle at a time. He drew up highly specific marketing plans.

His strategy was to focus on the interior and northeastern regions of the country, where technology lagged behind other regions. Color TVs in these areas were generally of poor quality and often broke down. Ni won customers over with low return rates, solid quality control and excellent after-sales service. He helped set the company apart from its competitors by introducing TVs with remote-control functions and other features.

Ni then began operations in the Yangtze River Basin area and in Southern China, where many foreign companies are active. His company quickly introduced a 29-inch TV and took a 35% share of the overall domestic market. Ni is targeting 45% for 1998.

Ni's economical approach to management has earned him fame in Chinese business circles. He drives himself in Mianyang to save on the cost of hiring a driver. Though he invests in plants and equipment, his office is housed in a 1950s-era building.

He has gained the admiration of Prime Minister Zhu Rongji, a harsh critic of state-enterprise management. On an inspection tour in the fall of 1996, Zhu, then a vice premier, praised the venture, saying China would be growing at a much greater pace if all state enterprises were like Sichuan Chang-hong. The company's success serves as an encouraging model for a Chinese government eager to promote greater growth in the interior.

"Changhong is an apple that has yet to ripen," said Ni, who has plans to move the company into personal computers in the future. The company is aiming to become a major player in information-based consumer electronics in the 21st century.

Twenty years of economic reform and liberalization have produced some bold and savvy Chinese managers. The question remains to what extent such success stories will become an exemplar for the large numbers of state enterprises groaning under massive debt. For Ni, who crossed over into politics by being elected as an alternate member of the Communist Party's Central Committee in the fall of 1997, many challenges still lie ahead.