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Fast Train To China Manufacturing

Posted in China Business

My law school writing instructor would always tell us: ”show me, don’t tell me.”  By this she meant we should not be telling the court what to do, but instead, describing the facts and law so well that the court will rule for our clients.  There are plenty of good articles and posts out there on how to do this or that in China, but I can never get enough of those that simply tell what some company did in China, be it good or bad.

My friend, Jeremy Gordon, over at China Business Services blog, recently did such a post, entitled, “Fast Train to China Manufacturing,” on British model train manufacturer Hornby, based on an article from the China-Britain Business Council’s China-Britain Business Review (September 2006), by Humphrey Keenlyside.  The article details Hornby’s shifting its manufacturing to China in a fight to stay in business.  Hornby once employed around 2,000 people in the UK, but even though it had reduced its workforce to 750 employees by 1997, it was still failing to keep up with competitors that had outsourced manufacturing to China.

Hornby then made its own move to shift its manufacturing to China and the cost cutting it achieved by doing so allowed it to “refocus spending on design and quality improvements, and to speed the introduction of new lines.”  This in turn increased its sales, allowed it to stay in business, and retain its specialist design and engineering in the UK.

Hornby moved all of its specialist tooling equipment from the UK to Dongguan, in Guangdong Province.  Frank Martin, Hornby’s CEO, reported that the good relationship with their local partner was critical:

Our Chinese partners recognize that if our business grows, then their business will grow. They are not looking to go it alone, because they know that together we can both benefit.

Hornby’s China foray also allowed it to make acquisitions to build “up the broadest brand portfolio in the world in its sector.”  Hornby now has 4 factories in China making its products and its sales since 2001 have nearly doubled, to GBP 45 million (with profits of GBP 8 million), since 2001.  Though it now employs only around 130 people in the UK, it is still in business, unlike at least one of the companies it acquired through liquidation.

China Business Services liked “this story because it shows how forward-looking manufacturing companies (yes, even European ones!) can overcome the challenges of globalization, integrate China into their strategy, and use the advantages of cheap labour to help leverage their real strengths — in added-value areas such as R&D, branding and distribution.”

I like this story simply because it is a real life example of success at doing business in China. However, in appreciation of my old law school writing teacher, I have to admit that I did find myself wishing the article had shown us a bit more of how Hornby got from there to here.

  • http://hornbytrain.net/ Hornby train

    Hornby is a household name and is famous as the UK brand leader in the model railway hobby. The company’s founder was Frank Hornby (1863 – 1936) who applied for a patent in 1901 to protect an invention he called ‘Improvements in Toy or Educational Devices for Children and Young People’. Nobody then could have imagined how this product would influence the model railway hobby that we know today.