The 1+1=3 Effect of Dual Brand Strategy

“If we add the Volvo brand and SDLG brand together, our sales rank first in China…absolutely the first in the market.” Eberhard Wedekind, global executive vice president of Volvo Construction Equipment, said in an interview with “CEConline" said proudly in an interview. It has been exactly ten years since Volvo Construction Equipment entered China. Although it was the latest to enter, it came out on top, and it accounted for about 84% of Volvo Group’s total revenue in China by 2010, making it the most successful Volvo Group in China. business.

“Ten years ago, China was just an import market for Volvo Construction Equipment. Ten years later, it has become our second home market.” Eberhard Wedekind believes that supporting this rapid growth, in addition to Volvo Construction In addition to rapidly occupying China's high-end market with its own brand of equipment, it also acquired Shandong Lindong, a local Chinese brand, in 2007, and used a dual-brand strategy to further cover the mid-to-low-end market.

Volvo Construction Equipment entered the Chinese market as a sole proprietor in 2002. In 2003, it set up its first production base in Shanghai Jinqiao Development Zone, and gradually shifted from complete imported assembly to high-proportion localization. Multinational giants, including Volvo Construction Equipment, have basically monopolized the high-end market of Chinese construction machinery, and have begun to explore the low-end market, which is dominated by Chinese local companies. The acquisition of local companies is a conventional method. In 2006, Volvo Construction Equipment announced the acquisition of a 70% stake in Shandong Lingong, which is the fourth largest wheel loader manufacturer in China with a 40-year history; in 2007, Volvo Construction Equipment increased its capital in Shandong Lingong and registered the latter Capital increased to $96 million.

At the time, this acquisition was compared to one going "into the mountains" and the other "going out to sea." ”, the two sides agree. It is worth mentioning that during the same period, Carlyle's acquisition of XCMG caused a lot of noise and ultimately failed, but Volvo Construction Equipment's acquisition of Shandong Lingong was surprisingly successful. Shandong Lindong chairman Wang Zhizhong once pointed out that retaining the Lingong brand, importing Volvo's advanced technology and not restricting the overseas sales of Lingong products prompted the relevant Chinese government departments to approve the acquisition.

After the formal cooperation, in the first three quarters of 2007, Shandong Lindong's product output increased by about 25% year-on-year, product sales increased by nearly 30%, and profit increased by more than 50%. However, foreign capital brings not only capital to Chinese local enterprises, but also the output of brand, management and culture. In 2008, Shandong Lingong officially launched a new brand strategy of "creating an internationalized Lingong and building a reliable brand", trying to change the product-driven internationalization strategy of Chinese enterprises by brand-driven. As a result, in 2011, Shandong Lingong's loader export volume was the first in China, with an export value of 126 million US dollars, and its business also covered more than 60 countries and regions around the world; from January to April 2012, exports increased by 104.07% over the same period last year. . In addition, in 2010, the first batch of excavator series products of its own brand were launched, realizing the breakthrough of Shandong Lingong from a traditional loader manufacturer to a full-line construction machinery product supplier. Industry insiders commented: "Whether in terms of strategic planning, business operations, technological innovation, or soft power such as brand building, the details of the integration between the two parties are a typical example."

Eberhard Wedekind revealed, In terms of Volvo's dual-brand strategy, Shandong Lingong is its first experiment in the world, the purpose is to meet the different needs of different customer groups for products. The experiment paid off in the first year, and 2007 was the most successful year in Volvo CE's history, with new records for sales, product sales and the number of major acquisitions; Sales doubled, and Asia became its largest market in the world. Tony Haiershan, the company's CEO at the time, said: "Through the acquisition of Lingong, we have established a firm foothold in the Asian market."

"We want to build Shandong Lingong into a second international brand." Eberhard Wedekind pointed out that Shandong Lingong For Volvo Construction Equipment, Lingong is not limited to simply satisfying the Chinese market, and currently sells Shandong Lingong brand products around the world.

The secret of Volvo's acquisition and integration

Eberhard Wedekind, before serving as the global executive vice president of Volvo Construction Equipment, was its president of Asia, and also personally participated in the acquisition of Shandong Lingong and the formulation of the dual-brand strategy. In a conversation with CEConline, he explained the story behind the success of this strategy.

If it shouldn't be integrated, don't move

CEConline: How does Volvo CE coordinate internally when implementing a dual-brand strategy?

Eberhard Wedekind: A lot of coordination work is needed during the cooperation. We mainly set up two mechanisms. The first is the joint venture board of directors for strategic decision-making at the highest level. It meets two to four times a year. I am one of them. The day-to-day business is handled by the dual-brand committee, with representatives from both Volvo and Lingong joining, and I am the chairman. The Dual Brand Committee discusses all issues related to dual brands, such as brand positioning, product positioning, product planning and design, procurement, production and distribution channels. From the practical point of view, the two-level committees have solved the problem very well.

CEConline: What were the main hurdles you faced in the beginning of the acquisition? At that time, Shandong Lingong had nearly 2,000 employees. How did you coordinate and maintain efficient communication between the two parties? Eberhard Wedekind: In the beginning, everyone really had mixed feelings about "what does this change mean to me". But in the past few years, we have made great progress, and the two sides have a new understanding of the mutual cooperation between brands.

We did a very necessary thing at the time, that is, we did not replace the management after the acquisition, but kept the management completely, and did not send a European, not even the chairman. We fully trust the local management of Lingong, and their past operations have been very successful. Based on their understanding and planning of the local market, it is in the best interest of both parties to sit together to plan, formulate strategies, and execute together. At the same time, in order to better promote the technical exchanges between the two companies, we have established a Lingong Integration Office, which is responsible for more daily communication and coordination.

For now, this is a very successful model and we will keep it.

CEConline: Now Shandong Lingong operates as an independent company. In the future, as its global strategy continues to advance, will it be fully integrated with Volvo?

Eberhard Wedekind: Volvo and Lingong have actually been integrated. For example, our production is carried out on one site, and logistics and other aspects cooperate with each other. However, the overall integration of all aspects, I don't think it is necessarily a wise thing. We have two different brands, in terms of value and product differentiation, once fully integrated, it may not be able to effectively meet customer needs.

In other words, we integrate where we should and leave it where we shouldn't. Ultimately, it is up to the dual-brand strategy to determine the strength and degree of integration. For example, in terms of marketing channels, we believe that separate channels are the best model, but rigid integration is not the best method.

"CEConline": A company has different product lines. If it wants to achieve cost optimization, it will generally integrate the supply chain, such as production and procurement, so as to maximize resources. Have you taken a similar approach?

Eberhard Wedekind: In terms of procurement channels, especially accessories, we are also very careful to choose places that can be integrated, and we want to avoid cannibalizing each other in the market.

Meanwhile, in assembly, we are separate. Although we do assembly and production on one site, the production lines are completely separate and managed by different people.

Healthy competition like brothers

"CEConline": Will there also be a fierce confrontation during the whole cooperation process? So in the confrontation, how to maximize the interests of both sides?

Eberhard Wedekind: It should be said that in this process, there are no particularly irreconcilable contradictions. There are definitely concerns. For example, when we injected Volvo's technology and products into Lingong, there were actually many different voices within Volvo. We were worried that injecting the most high-end technology into a local company like Lingong would create competition for us in the market?

However, as it turns out, such fears did not materialize. The market is big enough, and the space between the Volvo and Shandong Lingong brands is enough for everyone to occupy their own market independently. Competition did not take place, on the contrary, the share of both parties in the Chinese market has been rapidly increased. It's a very positive thing that we're doing things right. Our starting point is not 1+1 ≤ 2, but 1+1=3.

"CEConline": A company should avoid competition among various product lines. It should do a good job in product line planning at the beginning, and when competitors appear in the market, all product lines can be well coordinated. Avoid head-on conflict. How does Volvo CE do it?

Eberhard Wedekind: Our strategy is actually very clear from beginning to end. It is a strategy of matching high and low, and I have always recognized this very much. Regardless of any strategy, there will always be people who disagree and feel risky. But through sufficient consideration, once the decision is made to implement it, everyone will implement it without controversy, and put all disputes aside, and the results at this time can be proved to everyone. However, the dual-brand strategy is also an ongoing process. We must not dwell on existing achievements and continue to coordinate effectively.

"CEConline": When an enterprise has done a good job in low-end and mid-end products, according to the general development law, it must extend to the high-end to maximize the value of the entire enterprise. Wang Zhizhong, chairman of Shandong Lingong, also publicly expressed his hope for greater development. In terms of global development strategy, how does Volvo CE coordinate?

Eberhard Wedekind: Actually, the best answer is to listen to the voice of the customer. It's not that Volvo decides what customers should get, or SDLG decides what customers get, but we have to meet customer needs. Some customers just need a relatively economical high-quality product, while others need products with the most high-end technology, higher quality, and higher service, and they will choose different brands by themselves. So, in the end, it is up to the customer to decide what kind of product we should produce.

CEConline: In addition to the mechanism you mentioned above, are there other reasons for the success of the dual brand?

Eberhard Wedekind: I want to emphasize two points. The first is that everyone must have a mentality of being willing to help and learn from each other. The second point is to have a certain healthy competitive environment, but the competition between two brands should not be It's vicious, but healthy, it's like a rivalry between two siblings, and in the end they help each other and make progress together.