A global business with Chinese thinking

While installing a building control system on one of the world's largest churches in Moscow for Honeywell International Inc, Shane Tedjarati discovered the building used Chinese-made LED lights.

Because of its enormous size and the height of its ceilings, changing its lights is expensive. A regular incandescent light bulb has to be changed every 18 months, but a LED light bulb only needs changing every seven years.

"They had welcomed the Chinese design because the product was good, as was the price," said Tedjarati, who is now Honeywell's president and chief executive officer of high-growth regions, responsible for driving its business expansion in high growth countries around the world.

Despite being a global company, the technology and manufacturing giant has embraced a strategy that it calls, "Becoming the Chinese competitor".

By learning from China and figuring out ways to better compete with Chinese rivals, the strategy has become fundamental to Honeywell's activities.

In the past 10 years, its sales outside of the United States have grown from about 40 percent of its total sales to about 55 percent in 2011. Last year, the company achieved more than 20 percent year-on-year growth in China and India.

Honeywell's Chairman and CEO David Cote added: "Our focus on 'becoming the Chinese competitor' remains essential to our success. And being able to win in China will be 75 percent of our global battle."

Honeywell is taking the model it has used in China and India to other regions.

This year, the company will continue using its "localization" strategy across its value chain and strengthening its marketing and sales activities in an effort to increase its market share, Tedjarati added, as it forecasts healthy double-digit growth this year.

In 2011, Honeywell earned $2 billion in revenues in China, a 20 percent increase from the previous year.

Tedjarati said he has high hopes for its energy-efficiency activities, which he said will bring significant opportunities during the next five years.

In China, he said he has "never seen a government so serious" about investing in the sector, "and we are seeing a lot of good orders coming through".

Tedjarati thinks that the days of China being the low cost manufacturing center of the world are almost over, but insists Honeywell never came to the country for its low labor costs.

Moving manufacturing operations to countries with cheaper labor costs would double or triple overall costs due to supply chain issues and limited technical capabilities, he said.

"China has been, and will continue to be, competitive in producing mid-range and high-value products for us."

In fact, Chinese productivity increases by 10 to 15 percent every year, Tedjarati added.

"For me, China is a good place to manufacture for the next 20 years."

wangzhuoqiong@chinadaily.com.cn