The marketplace no doubt abounds with success stories of fellow companies expanding their operations into China. While the fruits of their achievements can easily be seen and felt, relatively little is known about their recipe for success in China. The individual ingredients often remain elusive, as if they were a closely guarded secret.
Many years ago, the Brazilian major player Intelbras – a leading pioneer in innovative solutions – made the bold step and undertook the challenging endeavour to expand into China. As with all ventures into the unknown, the journey was not without difficulties and obstacles. In particular, the unprecedented rupture caused by the pandemic presented Intelbras with a formidable task.
In an exclusive conversation with CW, a senior representative from Intelbras – our longstanding client – revealed the two key ingredients that have been integral to their success in China, even in the face of strong headwinds: robust relationships with local stakeholders and innovation. In addition, he shared valuable insights into how Intelbras was able to leverage China’s innovation prowess and extensive industrial supply chain to its own advantage.
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Background: Intelbras as the epitome of Brazilian innovation
Founded in 1976, Intelbras offers a wide portfolio of innovative solutions, including electronic security systems, access controls, network equipment, communication devices, and solar energy storage products.
Recognised nationwide and elsewhere in Latin America as a market leader in the security, communications, and energy sectors, Intelbras boasts a vast network of retail sales points and corporate resellers in addition to its five sites in Brazil. It is also the recipient of numerous accolades, including in innovation, customer service, and employee satisfaction.
Innovation is a recurrent theme for Intelbras and lies at the very heart of its mission, vision, and organisational culture. The Brazilian giant strives to create a better future through collaboration as well as with innovative solutions and technologies, revolutionising the ways in which people communicate, interact, and safeguard themselves.
Overcoming supply chain challenges
Intelbras leverages the advantages of participating in global value chains, procuring key components, such as chips and cables from China. These constituent parts are then shipped back to Brazil, where they are integrated into final products at Intelbras’ state-of-the-art manufacturing facilities.
Catching the global value chain wave has allowed Intelbras to reap the benefits of cost-efficiency and optimised production processes. On the flip side, however, its participation has exposed it to the fragility of supply chain linkages. As it was plainly evident during the pandemic, a clog in the network could have far-reaching knock-on effects. Sending shockwaves through the system, the pandemic created an unprecedented predicament for downstream and upstream players alike.
Intelbras, like many in the same boat, was impacted by raw material and labour shortages as well as transportation bottlenecks. But thanks to its swift and agile response in taking remedial action, Intelbras was able to better weather the storm and emerge unscathed. As we will explore below, the company’s strong ties with local suppliers and business partners played a pivotal role in cushioning the impact of disruptions.
Build strong relationships with local stakeholders
- Engage suppliers as partners
Besides adopting different strategies to mitigate the adverse effects of disruptions and enhance supply chain resilience, Intelbras prioritised an essential aspect. It focused its attention on mending and strengthening the underlying structure that held the different nodes in the supply chain together – its relationships with local suppliers.
According to Intelbras, engaging closely and positively with its suppliers and business partners on the ground was a key ingredient that enabled it to hit its growth target even during the pandemic-stricken years. Rather than viewing them as only suppliers from whom they source components, Intelbras engages them as partners on equal footing.
Many of the operational issues faced by companies were exacerbated and made glaringly obvious by the pandemic-induced disruptions. But the pandemic per se was not the root cause of these problems. They in fact stem from a fundamental flaw in the management of supplier relationships. Until companies construct a new framework of cooperation that promotes maximum visibility and transparency, they remain vulnerable to hiccups in the system. Relationship dynamics with suppliers need to shift. Suppliers should feel comfortable to proactively share important information about availability and capacity in advance – without fear of facing animosity and being blamed.
In addition, better relationship management can provide a competitive advantage. Suppliers with whom you are on good terms would be more inclined to work together to develop and implement procurement practices that reduce costs and cut lead times.
- Elevate the importance of relationships
Intelbras recognised the importance of forging and nurturing robust relationships early on, which is highlighted in its 2022 financial report. It states:
Our relationship with our business partners, our distributors and authorized resellers has evolved and allowed us to further strengthen our presence in the market.
By investing in relationship building, Intelbras is able to better capitalise on the opportunities that China’s vast supply chain has to offer, which will be discussed further below. It should be emphasised that this approach is not limited to Intelbras’ dealings with suppliers. This also extends to its partnerships with other parties and stakeholders based in China, including CW.
The importance of proper relationship management should not be overlooked in China. The influence of guanxi, which roughly translates as relationships or connections, is pervasive in Chinese society. Guanxi plays a big role in regulating personal as well as business interactions in China. Therefore, if you are seeking to do business in China, cultivating strong and lasting on-the-ground relationships should form the cornerstone of your corporate strategy.
Staying on top of the game
- Innovation is the key
In the ever-changing business landscape, competitive advantages are constantly shifting. As companies adjust their business models to navigate new market dynamics, the core capabilities that previously set them apart from others may lose their power as differentiating markers.
While by no means a silver bullet, innovation is the key to achieving and maintaining a competitive edge – and it is at the core of what Intelbras does. In the business world, the term “innovation” has become synonymous with progress, breakthrough, and success. It holds no less importance than that of customer centricity. Spanning a spectrum, innovation can range from a sequence of incremental improvements to existing products or processes that culminate in transformative changes over time to ground-breaking, disruptive innovations. In a nutshell, innovation is a strategic imperative because it is a key value driver. Further, research has repeatedly shown that top innovators are more skilled at unlocking new growth, especially after a crisis.
- Pushing the frontiers of innovation
Intelbras strives to always stay at the forefront of innovation to maintain its competitive edge. This is, however, no easy task. Operating in a market characterised by a fast adoption rate and constant technological evolution, the Brazilian major player must establish and sustain a consistent trajectory of differentiation.
As well as being unwaveringly committed to this goal, Intelbras fully understands its role as a value deliverer to its customers and, hence, the need to unearth and create new value propositions. Through tapping into the vast potential of China’s industrial supply chain, Intelbras has found that its collaborative endeavours with Chinese partners are instrumental in transforming the results of innovative ideation and experimentation into products – which are then introduced into the Brazilian market and beyond.
Instil innovation at every level
Since innovation is an inherent part of Intelbras’ DNA, it should be of little surprise that, for the company, products form only one chapter of the innovation story. According to Intelbras, innovation should be embedded into every aspect of business operations. It is necessary to devise and implement mechanisms that ignite curiosity, encourage the ready acceptance of new technologies, and remove barriers to creativity and spontaneous “leaps” in thinking.
During our conversation, Intelbras underlined the importance of fostering a culture of innovation throughout the entire organisation. To achieve this, it is vital for the company to regard innovation as a strategic necessity. Every level of the corporation, from top management, middle managers to ground workers, should be inspired to play a proactive role in promoting innovation. To this end, Intelbras holds regular meetings with its staff to discuss departmental strategies, actively encouraging them to contribute innovative ideas, be that about managing people, improving processes, or technology. The company has integrated the application of emerging technologies into its daily operations. The adoption has significantly improved customer experiences, optimised processes, increased productivity, and enhanced connectivity and collaboration.
As a touchstone of Brazilian innovation, Intelbras also harnesses the power of innovation to make a positive impact in the wider community. A champion of inclusive development, the company firmly believes that sharing the fruits of innovation with different communities can create a ripple effect of positive social change. Since the creation of a better future is a collective endeavour, Intelbras teams up with strategic partners to develop and implement sustainable solutions. It has participated in many large-scale infrastructure projects for the betterment of people’s daily lives, including those aimed at improving road safety and widening rural communities’ access to basic amenities.
Tapping into China’s vast supply chain
- Unleash the power of China’s industrial ecosystem
Recognising the abundant opportunities presented by China’s extensive industrial supply chain, Intelbras has sought to fully harness its synergies with local suppliers through close collaboration. This goes well beyond the mere procurement of components and intermediate outputs. A mode of cooperation involves sending its engineers from Brazil to China, where they work hand in hand with Chinese suppliers to develop innovative products. Another mode of cooperation enables cutting-edge Chinese products to be sold in overseas markets via Intelbras’ vast sales and distribution network.
By leveraging the collective resources, capabilities, and know-how of its ecosystem, Intelbras can tap into new efficiencies and business opportunities. Its supply chain ecosystem serves as a powerful innovation engine, propelling the development of new value propositions for its customers and, thereby, sharpening the company’s competitive edge. For partnerships to flourish, it is important to opt for partners based on expertise and value potential. Equally important is to ensure that they are strategically aligned.
- Opportunities for Brazilian companies
Without a doubt, there is still plenty of scope for collaboration between Brazilian and Chinese companies. China has been Brazil’s largest trading partner for 14 years in a row. With the recent state visit by President Luiz Inácio Lula da Silva heralding a new era in the bilateral cooperation between Brazil and China, new avenues will emerge for collaboration in investment and innovative co-creation. During the state visit, the two countries signed a clutch of new deals, focusing on technological innovation.
In addition, China is fast becoming a technology superpower, driven by its innovation-oriented development strategy, which is progressing full steam ahead. Over the past decade, the economic powerhouse has increased its research and development expenditure from around USD 145 billion to USD 445 billion. This places China as the second highest spender globally. These favourable policy developments will create greater opportunities for Brazilian companies to take advantage of China’s sophisticated supply chain infrastructure.
What CW can do for you
Are you inspired by Intelbras’ journey? Do you wish to become the next success story in China? We can help you turn your ambitions of expansion into the Chinese market into a reality.
At CW, we understand that you want to hit the ground running when you enter the Chinese market. Setting the right market entry strategy from the very outset is, therefore, essential. We know that businesses come in all shapes and sizes, each with their own particularities. Based in Hong Kong with a well-established presence in Shenzhen, Guangzhou, and Shanghai, our China Consulting team can provide you with a tailored and total solution from entry, set-up to supporting your business in reaching the next stage of growth in China.
Contact us to start your own story of business success in China today.
