Description
Mingzhu Dong & Gree Electric: Changing
Business Lane to Diversification, Celebrification,
Live Streaming, and “Ms. Dong”
ZHOU Sanza
Mingzhu Dong, the chairwoman and president of Gree Electric, is one of
the best-known live streamers, or “Wanghong”, an internet celebrity in 2020.
A few years have passed since the author of this book Wanghong Economy:
A New Business Model in the Internet + Era elaborated how Mingzhu Dong rose
to fame. But even now in 2020, she still holds the “crown” as one of the most
popular online celebrities, and deservedly so. That is why I want to center this
foreword on her.
Obiectively, Mingzhu Dong is a powerful businesswoman who never
swerves away from her principles. She is so strong and surefooted in business
decisions that her competitors once commented “grass will not grow along the
road she walks on”. No wonder she becomes so popular. Even when she set out
as a salesperson, which was more than 20 years ago, she started to exhibit the
potential of a business maverick early in her career.
Back in 1992, agents and dealers all over the country flocked to the
Chunlan Trade Fair to seek for an agency of Chunlan air conditioners, collecting
business information that might be useful to each party. It was at this trade fair
that the then 38-year-old Mingzhu Dong won over the business manager of
Jiangsu Hardware, Electric and Chemical Products Company (JHEC) with her
compelling negotiation skills. After a short conversation, both sides quickly
reached the cooperation intent. It took a time shorter than a meal break for the
manager to invite her to Nanjing, the capital city of Jiangsu province, for a
formal business discussion on cooperation opportunities.
At that time, Gree was still known as Haili, a small air conditioning
manufacturer whose annual output capacity barely exceeded 20 million yuan,
and whose sales revenue in Jiangsu was a mere 3 million yuan.
But the business landscape was about to be changed. The cooperation with
JHEC, a company with a strong capital base and sound wholesale network,
had significantly boosted Gree’s sales in Jiangsu, making Dong stand out in
the whole company with remarkable sales figures. Three years later, she was
promoted by the senior management to Head of Operations, from where she
embarked on a stunning journey to revolutionize distribution channels and
invented the “off-season rebate”, a sales strategy to stimulate sales during off
peak seasons.
Her grit and decisiveness did not fade over time. Instead, they grew even
stronger after over 20 years, which led to the famous quote – “grass will not
grow along the road she walks on” – from her rivals. Even when offered a
1-billion-yuan “bet” by the upstart company Xiaomi, she accepted the challenge
without hesitation.
The “gamble” did pay off. Gree outperformed the challenger in sales
revenue for 5 years straight. Ms. Dong won the “wager”. On 16
th
January 2019,
Gree released its Annual Sales Performance Forecast 2018, revealing a total
revenue of somewhere around 200 to 201 billion yuan for 2018. In the same
year, the gross revenue Xiaomi generated was 174.9 billion yuan, up 52.6%
percent year on year; its adjusted net profit was 8.6 billion yuan, up 59.5% from
a year ago.
Her winning of the 1-billion-yuan bet is of huge significance:
First, Gree Electric is a firm practitioner on long-termism and product-ism
in traditional manufacturing sectors, who believes that creating an excellent
product is the key to success.
Second, while forging ahead with its core businesses, Gree also made bold
strides toward new and diverse markets under Dong’s leadership.
Third, as digital transformation swept through the industry, she immediately
embraced the internet, connecting thousands of Gree’s brick-and-mortar stores to
online marketplaces. This great move laid a solid foundation for Gree’s success
in Online-to-Offline (O2O) commerce.
Fourth, the outbreak of the COVID-19 pandemic has exerted a huge Foreword 3
economic impact on physical stores, especially those that sell home appliances,
including air conditioners, the main contributor to Gree’s total income. In-store
sales slumped. Dong had to look around for another way – live streaming – to
stimulate sales.
- Changing Business Path: Maintain Focus and Grow Beyond
Over a long period of time, Gree Electric had been clenched to the claim: it
would always concentrate on its essential businesses. However, in the face of a
new technological revolution, the company gradually reached the “ceiling” while
others were still climbing their way up. To Gree’s management, diversification
was no longer a choice but a now-or-never decision to be made as swiftly as
possible.
To walk out of the dilemma, meet customer’s needs, and enhance
competitiveness, Gree must become attuned to digital trends while switching to
another business “lane”.
“Here to announce to you that Gree Electric, a company once concentrated
solely on the air conditioning, has entered an era of diversification.” said Ms.
Dong at the 2
nd
China Manufacturing Summit Forum in Beijing on 23
rd
July
2016, which opened a new chapter to the combination of specialization and
diversification.
Back in the early days, Gree used to make wide strides on the path to
specialization, with an annual output below 20 million yuan. Five years later,
which was in 2011, it grew astonishingly by 3,040 times in output, achieved
60.8 billion yuan in annual sales, and built 8 manufacturing bases at home and
abroad. Meanwhile, it became the only Chinese air-con brand rated “World’s
Famous Brand” by the General Administration of Quality Supervision,
Inspection and Quarantine (AQSIQ) of the People’s Republic of China. By then,
it had grown into a megacorporation that sold own-branded products to more
than 100 countries and regions, ranking first nationally in production and sales
for 16 consecutive years, and leading the sales globally for 6 consecutive years.
What a legend!
Later, Gree switched to a different path called “diversification”. But does
the move necessarily mean that Gree abandoned the specialization strategy it
had been sticking with all along? The answer was a sounding “No” according 4 Wanghong Economy A New Business Model in the “Internet +” Era
to Dong, who gave motor and compressor as examples, “Thanks to the mastery
of AC core technologies, which brings new business opportunities to Gree, we
make not just air conditioners but also other appliances, and even produce best
electric motors and air compressors in the world.”
As Dong pointed out, Gree switched to the diversification strategy because
of the mastery of electric motor, air compressor, and other technologies essential
to develop and manufacture refrigerators, new energy vehicles (NEVs), small
appliances, cell phones, robots, environmental-friendly devices, and many other
appliances.
Dong added, “The number of servo motors developed by Gree surpassed
20 in 2017, which were all widely used by intelligent equipment companies
in robotic arms and other robotic applications, with comparable performance
to Japan’s Yaskawa and Mitsubishi, which broke the monopoly of Japan and
Europe on high-end servo motor markets. Gree’s self-developed magnetic
levitation centrifugal compressor, featured low-pressure ratio and low mass flow
rate, performs 40% better than the water-cooled centrifugal chiller.”
