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Focus On The Big Picture To Excel In Western Europe(HKTDC Hong Kong Trade Services, Vol 02,2002)

Vol 2, 2002








Design, Marketing & Communications

Focus On The Big Picture To Excel In Western Europe

Partnerships Open Doors Into Eastern Europe

Personal Touch Secures Middle Eastern Business

Marketing Success Hinges On Who Says What And How

Licensing Business Enjoys Space To Expand In Asia

Focus On The Big Picture To Excel In Western Europe

France is a lucrative market for Hong Kong SMEs willing to provide specialized professional services in areas such as design, logistics and finance.
ARRIVAL of the euro as a common currency is a definite plus for trade in most of Western Europe and some neighbouring countries.

"It is so easy to compare prices now. A quotation in France is immediately comparable to one from Germany," says the Hong Kong Trade Development Council's Amsterdam-based director for the Benelux region, George Ammerlaan.

Binatone Electronics Int'l Ltd senior sales and marketing manager Sat Murthi sternly warns SMEs against trying to arrange all their business in Western Europe from Asian head offices.

With Hong Kong and Guangdong Province being 6-7 hours ahead of these markets, there is an enormous benefit to be achieved in establishing at least one local office "to deal close to where the market is", Murthi says.

"Having a local office can help substantially to sell your image to European markets," he adds. Binatone itself has operated an office in the UK since the 1970s.

For newcomers to the region, Murthi suggests Austria, which is part of the EU but with relatively low costs, as an attractive site.

Local offices easily can earn their keep in coping with one major requirement from European customers: super-fast delivery. People want immediate deliveries.

In the Benelux region (Belgium, the Netherlands and Luxembourg), the Netherlands has obvious appeal to Asian SMEs. "The Netherlands is Hong Kong's ninth-largest export market, larger than France, Spain or Sweden," says Ammerlaan.

"Do not regard the Netherlands as one market. View it as part of the European Union and use it as a gateway to all of Europe," advises the consul for economic and commercial affairs at the Netherlands consulate in Hong Kong Cornelis J Groeneveld. Various Japanese and South Korean companies operate European distribution networks based in the Netherlands.

Groeneveld recommends SMEs consider reaching beyond commodity trade to offer appropriate professional services in design, logistics and finance.

French Chamber of Commerce and Industry in Hong Kong representative Stephane Guerin echoes these sentiments. "Hong Kong companies can bring trade knowledge, professionalism and a strong sense of service to France, all things their rivals may lack," he says.

Manufacturing in the EU probably is much too expensive to be viable for Hong Kong or mainland SMEs. One alternative is OEM-based production.

"We have many clients looking for hi-tech components, especially for circuit boards. They feel secure in dealing with Hong Kong companies for OEM work because Hong Kong is very experienced in QC," says the head of the Finland Trade Center in Hong Kong Hanna Marttinen-Deakins.

Although most products hold sales potential in Western Europe, "these are interesting markets, yet tough. There is a lot of competition," Ammerlaan says.

Benelux consumers appreciate brand-name jewellery or watches, hi-tech optical frames, ink cartridges, Asian-motif home decorations, comfortable and functional shoes or bags, consumer electronics or toys (especially for very young children).

Germany is a tough market to enter. "Consumers lack confidence and hesitate to spend," says TDC Frankfurt director Daniel Lam.

Yet demand does exist, and SMEs can succeed with home textiles, table settings, Asian-style furniture and reproductions of classical Chinese furniture. The emphasis is on home decoration.

German buyers will pay more for high quality, but do expect value-for-money products.

In Scandinavia (Sweden, Finland, Norway and Denmark), buyers want Chinese medicines and herbs. "Why eat or drink something chemically created when something natural is available? Chinese medicine has huge potential in Scandinavia," says TDC Stockholm director Derek Qvisth. Other appealing products include gifts, houseware, toys and sporting goods.

Norway, although outside the EU, is significant for having agreements in place allowing trade on the same terms as for EU members.


INFORMATION HIGHLIGHTS

Western Europe In A Nutshell

USE of the euro removes most of the headaches when comparing prices offered by buyers from various Western European countries.

SMES do best by viewing Western European countries as pieces of one large pie. They should not restrict themselves to a single market. Consumers will pay for quality, but definitely expect value for money.

Austria, the Netherlands or another appropriate site can serve as a useful regional gateway and distribution headquarters.

Although manufacturing in Western Europe is impractical for cost reasons, there is promise in OEM production of hi-tech components, especially for Scandinavia. Intricate knowledge of quality control procedures gives Hong Kong SMEs an edge.

Numerous opportunities extend beyond basic commodity trade into professional service sectors like finance, design and management.


Useful Contacts

Consulate General of Finland
Tel: (852) 2525-5385
Fax: (852) 2810-1232
Web: www.finlandconsulatehk.com

Consulate General of the Netherlands
Tel: (852) 2522-5127
Fax: (852) 2868-5388
E-mail: nlgovhon@netvigator.com

Amsterdam Office
Hong Kong Trade Development Council
Tel: 31-(20)-627-7101 (4 lines)
Fax: 31-(20)-622-8529
E-mail: amsterdam.office@tdc.org.hk
Frankfurt Office

Frankfurt Office
Hong Kong Trade Development Council
Tel: 49-(69)-95772-0
Fax: 49-(69)-95772-200
E-mail: frankfurt.office@tdc.org.hk

WRITTEN BY TAMARA CHEUNG


Partnerships Open Doors Into Eastern Europe

Poland is another target market that is poised to join the EU in the next few years.

OPPORTUNITIES for SMEs abound in Eastern Europe, especially in Russia and Hungary. Binatone Electronics Int'l Ltd senior sales and marketing manager Sat Murthi says understanding local product approval certifications is a likely source of headaches in this region.

"Western Europe has clear standards so there are far fewer barriers and the whole process is much simpler. In Eastern Europe, each country has its own bureaucratic approval process," Murthi says.

He recommends solving this problem from the inside, as Binatone has done for 44 years. "SMEs need to set up connections with local labs capable of acting as on-the-scene approval-processing people. This creates the advantage of being able to market products freely throughout the country."

Although English is useful almost everywhere, incorporating local languages onto packaging is a good idea. Multi-language packaging shows dedication to individual markets and pleases the customers. "We have six or seven languages on all our gift boxes," says Murthi.

Understanding that each country is huge - in complexity, in geography or both - is also essential. Murthi suggests always understanding and learning as much as possible about potential customers.

Russia

SMEs striving to enter the Russian market may find the solution surprising. "The best way for Hong Kong companies looking to do business in Russia is to cooperate with firms on the Chinese mainland," says chairman of the Hong Kong General Chamber of Commerce's Russian Interest Group Peter Gordon.

"Russian consumers have German tastes, but with limited budgets," says Gordon, adding that prices are an issue.

"A number of Chinese mainland firms already do direct business with Russia, but few manufacture there. They are aware of their own drawbacks, primarily in QC, branding, marketing and after-sales service, all areas where Hong Kong SMEs are strong."

Russians like to buy from Hong Kong traders, but find it easier dealing with mainland firms.

Some SMEs may consider manufacturing in Russia or participating in Sino-Russian development. "If opting to manufacture in Russia, then understand that Russians manufacture many products that are naturally more competitive than imported goods. SMEs must know if there are Russian players in the same field."

Regardless of the chosen option, SMEs should look beyond trading. Business climates change fast, but oil prices are a reliable indicator. "Be aware of oil prices. Looking at Russian business conditions for the next few years, it is best if oil prices stay high," Gordon says.

As in many emerging markets, potential problems do exist. In Russia, one difficulty is distribution.

"Traditionally a regional market, Russia has changed little in this aspect. On the upside, it is easy to find buyers. On the downside, it is hard to develop a nationwide network," says Gordon.

Eastern Europe

SMEs from Hong Kong and the Chinese mainland gain by working together in Eastern Europe too.

Consumers still enjoy buying clothes at street markets. "In Poland, and to a lesser extent in Hungary, many of the products are from Chinese mainland suppliers," says Tina Angst, a regional specialist directing the Hong Kong Trade Development Council's Vienna office.

When choosing target markets, remember to consider possible European Union accession. "For all of Eastern Europe, the EU is the main import/export market, but I doubt if all East European countries will join the EU at the same time," Angst says.

Early EU entrants (maybe in 2005) may include Poland, the Czech Republic, Slovenia, Hungary and the Slovak Republic.

High unemployment weakens consumer sentiment in Poland. Last year, Poland experienced 0.8% GDP growth, compared to Hungary's 3.6%, the Czech Republic and Slovenia's 3.2% and the Slovak Republic's 2.5%. Among these countries, Hungary imported the most Hong Kong imports.

Best-selling items in both Russia and Eastern Europe include gifts and premiums, toys (mostly electronic games and educational toys) and household products (especially innovative, lower-priced items).

Although the electronics sector has promise, international brand-name competition is tough. Hong Kong and southern Chinese SMEs may find excellent opportunities in the likes of telecoms accessories, computers, digital cameras and DVDs, products in which they have ample experience.


INFORMATION HIGHLIGHTS

Guidance For Russia & Eastern Europe

SMEs from Hong Kong and the Chinese mainland should work together, each focusing on areas of strength. On the Hong Kong side, that means a strong focus on management, QC, branding, marketing and after-sales service while mainland partners must handle other aspects.

Here is some additional advice for Russia and Eastern Europe:

  • Manufacturing in Russia or participating in Sino-Russian development projects may deserve consideration. When
    opting to manufacture, be sure to avoid direct competition against Russian-made products.
  • In the long term, trading activities alone are insufficient. Operations must expand.
  • Unfortunately, transportation is a major problem. Creating a regional network can be nearly impossible.
  • Oil prices indicate the level of economic health. In Eastern Europe, unemployment levels and possible EU accession are
    important.
  • Investigate what sells. Gifts and premiums, electronics, household goods and toys are all leading categories. In
    electronics, do not compete against established brands. Consider focusing on telecoms accessories, computers, digital
    cameras and DVDs.

Useful Contacts

Hong Kong General Chamber of Commerce
Tel: (852) 2529-9229
Fax: (852) 2527-9843
E-mail: chamber@chamber.org.hk
Web: www.chamber.org.hk

Vienna Office
Hong Kong Trade Development Council
Tel: 43-(1)-533-98-18 (4 lines)
Fax: 43-(1)-533-31-56
E-mail: vienna.office@tdc.org.hk


Personal Touch Secures Middle Eastern Business

The personal touch is the key to winning business in the Middle East.

NOTHING works better than a personal touch to win business in the Middle East, says Ali Fakha, marketing manager for the Hong Kong Trade Development Council's regional office in Dubai.

Customers may be slow replying to e-mails or letters, so Fakha suggests hitting the road to meet them. Never expect customers to make the first approach. "The more they see your face, the more business you secure from them," Fakha says.

The region's buyers most appreciate pearls, precious and semiprecious stones, hi-tech toys, sporting goods, clothing and accessories, timepieces, telecoms equipment and radios.

The most interesting regional gateways (all lucrative markets in their own right) are the UAE, Jordan, Israel and Egypt, says Kin Yat Industrial Co executive director CY Cheng, a leading member of the Chinese Mfrs Assn of Hong Kong. Even so, shipping directly to other Middle Eastern countries poses no major problems.

A toy manufacturer founded in 1980 and nurturing business in the Middle East for more than a decade, Kin Yat sells about 15% of its products to this region. Middle Eastern buying agents in Hong Kong can serve as useful stepping stones, says another company representative Horena Yip.

The most obvious gateway city is Dubai, the second-largest emirate in the UAE. "There, the economic climate is pro-business, and government policies aim to make things easy for potential investors," says Department of Tourism and Commerce Marketing, promotions manager Jane Salomons.

Dubai has four free trade zones, but the most interesting one for SMEs is the Jebel Ali Free Zone (JAFZA) with its available land and lack of hiring restrictions.

Prospects for logistical problems dimmed last year with amalgamation of Customs, the Dubai Port Authority and JAFZA into the Ports, Customs and Free Zone Authority. "This is ideal for investors. Anything related to distribution is now all in one," says JAFZA marketing manager Adel Al Awadhi.

Dubai's appeal as an entry port involves hundreds of millions of consumers throughout the Middle East. Numerous imports are re-exported to Iran, Kuwait, Saudi Arabia and elsewhere.

Saudi Arabia is another key market, but SMEs must remember that most of the country's population is below the age of 25.

Equally important are certain trade restrictions. Products related to religion, alcohol or intricacies of the human body are all forbidden. Even that idol for most little girls, the Barbie doll, is banned.

What Fakha calls "Islamic banking" also demands attention. "Study L/Cs carefully, checking for mistakes or any hints of problems," he warns.

Lebanon, where foreign investors can receive national treatment, is another useful gateway, especially for Syria, Jordan and Iraq. Consumers are price-sensitive and brand-conscious. "If you want to compete, the prices must be medium to low," says Fakha.

In fact, Yip says price levels are a prime concern throughout the region. Yet satisfactory quality is also necessary.

Israel is another leading market. "The first step there is to contact the Asia-Israel Chamber of Commerce," says commercial attache at the Israeli consulate in Hong Kong Ornit Avidar.

Advantages in dealing with Israel include its free trade pacts with Europe and the US. Any Hong Kong or Chinese mainland SME creating an Israeli manufacturing subsidiary to use Asian knowledge, Israeli skill and components from the parent company can enjoy tariff/quota-free access to US and European markets, reduced Israeli taxes for the subsidiary company and possible investment incentives.

Ultimately, many Middle Eastern countries offer compelling and individual attractions.


INFORMATION HIGHLIGHTS

Face-To-Face Works Best

EVEN small enterprises wanting business in the Middle East must strive to meet clients in person, rather than relying on e-mail or faxes.

After building trust, SMEs may consider receiving payment directly by telegraphic transfer (T/T), rather than using letters of credit (L/C). They should examine any L/Cs carefully, watching for mistakes or hidden implications.

Dubai is a useful gateway. Lebanon serves a similar role into Syria, Jordan and Iraq.

Saudi Arabia has important import/export restrictions, banning all products pertaining to religion, alcohol or the intricacies of human shape.

Lebanon, like much of the region, is extremely price-sensitive so prices must be medium to low.

Meanwhile, Israel has important free trade agreements with the US and Europe while offering incentives to investors to create a manufacturing base there.

WRITTEN BY TAMARA CHEUNG

Useful Contacts

Consulate General of Israel
Tel: (852) 2529-6091
Fax: (852) 2805-2750
E-mail: trade@israel.org.hk

Jebel Ali Free Zone
Tel: 971-(4)-8812222/8815000
Fax: 971-(4)-8810128
E-mail: mktg@jafza.co.ae
Web: www.jafza.co.ae

Dubai Office
Hong Kong Trade Development Council
Tel: 971-(4)-2233-499
Fax: 971-(4)-2232-331
E-mail: dubai.office@tdc.org.hk


Marketing Success Hinges On Who Says What And How

KNOWING the appropriate target consumers is much like the first step on a production line. If the initial step is wrong, so is everything that follows.

The only way to know the target market is through research. Dig out the pertinent facts about education level, gender, occupation, income, family type, lifestyle and buying habits. This is the only way to avoid wasting money on misdirected messages. You never reach your destination by setting out on the wrong highway.

Understand Target Consumers

Identifying target consumers is only a beginning. Understanding them is even more important. No one comes to know the customers by sitting in the comfort of an air-conditioned office.

One simple method for marketing and advertising people to know their target consumers is to become consumers. Go to the markets and think from a consumer's angle - see, choose, feel and buy. Try similar products. Ask if there is a compelling reason to buy the product? All this is crucial information for product positioning.

For example, most Nestl?Ice Cream campaigns are simple, fun and cheerful. This product is positioned for appeal to general consumers.

Häagen-Dazs, on the other hand, is marketed as a super-premium ice cream for quality-seeking consumers with comparatively high incomes and sophisticated lifestyles.

Properly understanding customers prompts very different decisions on what to say and how. Hgen-Dazs buyers are perceived as sophisticated, self-assured and always seeking enjoyment by doing things their way. Very simple and subtle messages can work well. The last Christmas campaign featured the wording: "To celebrate your Christmas in your own way..."

Stand Apart From Rivals

Competition creates a need to differentiate your products. For example, Hong Kong's mooncake market is very competitive. Starting each June, numerous print ads promote mooncakes. Hgen-Dazs, a leader for ice-cream mooncakes, attracts high-end gift givers by focusing on the product's pizzazz and luxurious touch.

Projecting a luxurious image requires very sophisticated photography. Is a superbly luxurious picture with a golden background sufficient? Where is the uniqueness of the ice-cream mooncakes? Can a beautiful shot show all the inner value? What if other brands take equally sophisticated photos?

The solution is simple. The product is cut to a special shape. With a helpful camera angle, the egg yolk cleverly becomes a heart shape. Now the photo shows a luxurious product with prestige and heart.

Häagen-Dazs creates another prestigious new look by packaging its ice-cream mooncakes in wood. A burgundy colour mix and the simple wooden design make a perfect match.

Less Is More

"If you have only one bullet, do you aim to shoot down a single bird or shoot at many birds to scare them all away?" This is a pertinent question from a Chinese adman, Yip Mau Chung.

Clients tend to ask advertising people to squeeze as much information as possible into any ad space. They want consumers to know all the benefits, but fail to recognize the buyers' inability to remember so much about a single product.

Listing all the facts cannot compel consumers to buy. Single-minded approaches are much better. Choose one benefit and shout it loudly and clearly.

A simple visual, like the accompanying one showing noodles and a ladle, can dramatically direct attention to the product: a dumpling. A short headline says, "To keep your stomach warm, serve dumplings with a hot pot or noodles!" This successful ad is clear, easy to remember and timed to coincide with the arrival of cool weather.


Useful Contacts

Hong Kong Designers Assn
Tel: (852) 2527-3968
Fax: (852) 2527-5468
E-mail: info@hongkongda.com
Web: www.hongkongda.com

Hong Kong Packaging Institute
Tel: (852) 2624-9083
Fax: (852) 2624-9639
E-mail: hkpi@hkpi.org.hk
Web: www.hkpi.org.hk

Assn of Accredited Advertising Agents of Hong Kong
Tel: (852) 2882-8161
Fax: (852) 2890-5083
E-mail: info@aaaa.com.hk
Web: www.aaaa.com.hk

Hong Kong Institute of Marketing
Tel: (852) 2881-6682
Fax: (852) 2881-6057
E-mail: hkim@hkim.org.hk
Web: www.hkim.org.hk

Hong Kong Public Relations Professionals' Assn Ltd
Tel: (852) 2818-5628
Fax: (852) 2816-0877
E-mail: enquiry@prpa.com.hk
Web: www.prpa.com.hk

By Yoken Sin
Executive creative director, Hong Kong marketing specialists Coda Communications Ltd


Licensing Business Enjoys Space To Expand In Asia

Licensors and licensees dicuss business in a sea of friendly faces and shapes.

A STRONG legal and business infrastructure underscores Hong Kong's considerable strength and massive potential as a regional licensing hub.

Industry statistics show Asian licensing turnover of US$25bn in 2000, up 100% on 1999 and accounting for 18% of the global market.

In much of Asia, the licensing industry is ripe for development. "Hong Kong has a small domestic market, but can participate in market expansion throughout Asia, including on the Chinese mainland," says Hong Kong Trade Development Council (TDC) services promotion director Alan Wong. "Companies based in Hong Kong can become licensees to make and distribute licensed products throughout the region," Wong adds.

Acting as licensing agents, or go-betweens for overseas licensors, is another appropriate niche. "Some big entities, like Warner Bros., Mattel and the National Basketball Association (NBA), already have offices in Hong Kong. Their presence indicates we can offer the right environment and be of service to them, especially in finding licensees on the Chinese mainland," Wong says.

"Hong Kong has long served as a centre for the design, manufacture and marketing of Barbie dolls, fashion and accessories. Its proximity to North Asian markets offers a significant growth opportunity," says Barbie Consumer Products Products (Asia) director Robyn Gurd.

Hong Kong traders understand mainland culture while speaking Cantonese and often Putonghua, the necessary languages.

Yet another angle has Hong Kong companies developing their own properties for licensing. This is a budding industry, notably in the entertainment sector. For example, licensing opportunities in toys and apparel surround movie star Jackie Chan.

Licensing players say Hong Kong is already a de facto regional centre. "There are no really serious competitors, because so much licensing activity happens in Hong Kong. However, it is important for us to capitalize on our advantages," says Dave Sharat, marketing director at Animation Int'l Ltd, a licensing agent representing Japanese studios.

One significant step was the Hong Kong Licensing Show and Conference held on April 24-25 concurrently with the Hong Kong Gifts & Premium Fair. The show, Hong Kong's first such event, offered a one-stop venue for licensing cooperation.

Twenty exhibitors representing properties and trademarks from the US, Japan, South Korea and Hong Kong attracted more than 7,000 visitors. Garments, stationery, gifts and premiums were displayed, along with more than 100 licensed characters and trademarks. There were properties from Cambridge and Oxford universities and the University of California in Los Angeles (UCLA), plus ubiquitous brands like Pepsi and Hallmark.

Entertainment or character-related work accounts for almost half of the global licensing business, says the US-based Int'l Licensing Industry Merchandisers' Assn. Trade brands and fashion are the next largest categories, followed by sports, universities, art, music, publishing and non-profit groupings.

A recent survey of 134 relevant companies shows global expansion on the agenda. Warner Bros., for example, hopes that Bugs Bunny and its other cartoon characters will captivate Asian consumers, much as they have Westerners.

"In Asia, the licensing industry began 10-20 years ago, whereas it is a half-century old in the US and Europe," says Warner Bros. vice president for Greater China and Southeast Asia Mickie Leong.

"Yet with economic advances in much of Asia, many products, brands and habits are quite desirable. We see great potential to develop our business here."

Vast Markets Await

WARNER Bros. Consumer Products sees Asia as packed with vast potential, albeit with distinct characteristics and requirements in each market.

An entertainment giant in the AOL Time Warner media conglomerate, Warner Bros. has cartoon characters like Bugs Bunny, Tweety, Sylvester and Daffy Duck. The company and all its cartoons use Hong Kong as a regional headquarters.

"In Asia, licensing is a fairly new business and not very developed, but the upside is huge," says the company's Greater China and Southeast Asia vice president Mickie Leong.

Warner Bros. aggressively markets and sells the licensing concept and its brands and properties. "That means building our brand by creating awareness," Leong says.

Exposure to Western culture through TV and movies fuels demand for related consumer products. The Hong Kong office of Warner Bros. Consumer Products serves nine countries, each treated as a separate entity.

Bugs Bunny and Tweety, with licensing deals on plush toys, apparel, houseware, stationery and books, are the company's most popular characters. Harry Potter is also hot.

"Potential licensees must be experts in their own industry. We look for reputable companies with strong backgrounds," Leong says. Warner Bros. deals directly with licensees in some markets, but employs licensing agents elsewhere.

Licensees may gain rights to sell in single or multiple markets, depending on their scope and production capabilities. There are global dealers too, but most licensee companies are reasonably small.

The licensees must follow style guides and submit samples for approval. Some leeway accommodates varied tastes.

Middle Position Well Played

IN Asia, licensing agents are key middlemen managing the relations between licensors and licensees, says marketing director for Hong Kong-based licensing agent Animation Int'l Ltd Dave Sharat.

The Japanese-owned company represents Japanese animation studios producing TV shows for Asian distribution. As an exclusive licensing agent for 75% of all Japanese studios making animated shows, Animation Int'l has related merchandise, publication, music and promotion rights.

Doraemon, Dragonball and Sailor Moon are among the popular properties available. Normally, TV shows are offered first to establish characters in a particular market.

"About 6-12 months later, we roll out the other synergies going with the business," Sharat says. In specific markets, contracts are awarded for 1-2 years with renewal options.

Animation Int'l's main responsibility is to ensure characters and shows are protected legally. Although not controlling show production, the company manages and maintains quality control on licensees' output.

Triangular relationships involving licensors, licensees and agents are delicate, with success or failure often riding on agents' skills.

There is no formula to determine the right licensing partner. "We go with experience and apply certain rules of thumb. We have an internal rating system based on four major areas to rank prospective licensees: product capability, distribution capability, financial capability and marketing capability," Sharat says.

Licensed Products Boost Business

AS home to countless companies with factories on the Chinese mainland, Hong Kong is an ideal centre for global sourcing - including licensed products.

For David Halsall Int'l Ltd, a leading British-based toy distributor with its primary sales office in Hong Kong, selling licensed products is a terrific boost to business.

The 50-year-old enterprise has 10 licenses for toys ranging from Barbie Doll items for girls to Action Man toys for boys. Licensed-product sales generate one-third of the company's substantial revenue. The remainder is from OEM work.

Nearly all the company's toy production is subcontracted to factories in Guangdong Province on the mainland.

"Licensed products offer customers a point of reference. If selling generic products, you compete with 10 million people out there. The only variation is how low you can go on price," says David Halsall (HK) Ltd managing director Anthony Lam.

Licensed products usually carry higher prices and generate more per-sale profit. In seeking licenses, David Halsall follows an "evergreen" strategy. It wants items likely to remain popular for years - like Barbie. Other companies go for hot items and try making a lot of money in the short term.

To recover costs for licensing fees and royalty payments, David Halsall negotiates contracts beyond the standard two years.

Despite expenses in time, money and effort, Lam is sure the company benefits from licensed products. "When a little girl goes to a store and sees Barbie-brand swimming armbands, she asks for them."

Nurturing Gains

COMPANIES with their own brands and characters can find a ready licensing market.

Bubble Mon Licensing (Int'l) Co Ltd has more than 20 licensees in Hong Kong, on the Chinese mainland and elsewhere for six cartoon characters developed recently. Mono-Mini and Street Dancer lead the cast.

The company invented characters and created an audience by producing related comic books. The next phase was related toys.

"Our characters are less famous than, say, Mickey Mouse. Yet this was an advantage because our licensees pay less and have exclusive rights," says Bubble Mon licensing manager Lee.

"When a firm buys our license, we help to channel its products into the Chinese mainland," says Lee.

Bubble Mon's 10-member marketing team maintains extensive contacts with mainland retailers and wholesalers. Another strategy is to work with manufacturers who may become licensees. Bubble Mon produces toys and stationery based on its cartoon characters for sale on the mainland.

At Daynice Int'l Ltd, which has seven cuddly characters known as Pork Chop & Friends under the Close-to-the-Heart collection, the main goal is creating a global market for its licenses and products. Among its character-based items are polyresin figures, stuffed toys, ceramic, apparel and back-to-school items.

"Pork Chop & Friends was established in the early 1990s when we started our own design and set up an international marketing team, " says Daynice marketing manager Samuel Chan.

Daynice has penetrated major markets such as the US and Western Europe with a full range of products numbering more than 1,500 items and is also successful in Asia, including the Chinese mainland.


INFORMATION HIGHLIGHTS

Firm Laws Prevent Disputes

SOLID legal infrastructure and intellectual property laws are foundations for any licensing centre, says Rebecca Lo, chairman of the Licensing Executives Society of China (LESC-HK), Hong Kong Chapter.

"One major consideration for licensors is how effectively IP rights are protected in a territory and whether disputes can be fairly, efficiently handled," says Lo, who also leads the Asian IP, technology and communications practice of global law firm Linklaters.

Hong Kong has a reliable court system, respected arbitration options and a high concentration of international law firms. In recent years,

Hong Kong strengthened its IP law and improved enforcement. Many brand-protection agencies adept at detecting and investigating counterfeit operations are based in Hong Kong.

"Licence negotiation can be a complicated matter and, to minimize subsequent disputes, is best done with professional help," Lo recommends. "This is so particularly for multi-jurisdictional licences, which may give rise to competition and parallel importation issues."

The Chinese mainland market for licensed products should grow rapidly with the country's admission to the World Trade Organization.

Regular LESC-HK meetings of licensing professionals and Hong Kong and mainland lawyers help to exchange legal ideas and information while reassuring overseas companies that communication channels are open.

Useful Contact

Licensing Executives Society of China Hong Kong Chapter
E-mail: info@les-cn-hk.org
Web: www.les-cn-hk.org


INFORMATION HIGHLIGHTS

Valued Guidance En Route

HONG Kong-based China Patent Agent (HK) Ltd, established in 1984 after the Chinese mainland developed its first patent law, seeks to guide Chinese and overseas companies through legal steps to protect brands and inventions.

As one of Hong Kong's largest such firms, the company has 290 staff members, including more than 100 attorneys, patent and trademark agents. It is a joint venture associated with the China Council for the Promotion of Int'l Trade and specializing in mainland law.

"Many clients are overseas companies in hi-tech areas like electronics, mechanisms and chemicals wishing to apply for patents and trademarks. We see more opportunities in the licensing of everything from fashion to entertainment," says attorney, trademark and patent agent Jiang Qinfeng.

China Patent Agent (HK) Ltd also advises mainland enterprises on protecting intellectual property rights overseas. For this purpose, it works with a global network of law firms to provide assistance and legal services.

Enterprises applying for mainland patents or trademarks must engage the services of agents. "We register patents and trademarks for them. If a domestic firm wishes to apply for a patent overseas, we will find them an agent there," Jiang says.

Mainland patent, trademark and copyright laws are now enhanced to meet international standards. More domestic and overseas companies are establishing joint ventures to explore business opportunities.

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