Hong Kong: Platform for Festo

Since its foundation a German Company Festo AG & Co. KG has earned a good name in the world market as a reliable and competent producer which offers products with high quality and good service. Festo has 52 independent companies with over 250 branch offices all over the world (see Appendix 1). Festo Hong Kong was founded in 1976. It includes the following departments: sales & marketing, Operations dept. , engineering, SMS cylinder assembly, information service, logistics and Didactic.

“Festo Hong Kong is the first supplier of pneumatic equipment and Engineering Consultant in Hong Kong to receive the ISO 9001:2000 certificate. The high quality control standards include the sales service, after-sales service, as well as the engineering design process. All of these attributes are reflected in this quality award” [3]. Festo Hong Kong offers various free of charge services which include technical consultation, on-site training and customized product seminars and also technical support in Festo PLC programming and training.

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It also has a customer-specific production that allows to satisfy any needs of the customers. Festo Hong Kong offers automation with pneumatic components and systems. Basic and vocational training in industrial automation, about 20,000 in several hundred thousand variants, drives and drive accessories, handling and vacuum technology, positioning, valves and valve accessories, proportional technology, compressed-air preparation, tubing, fittings, mounting accessories, sensors and pressure switches, pneumatic control technology, electronic control technology.

Festo Hong Kong offers not only standard but also industry- and application-specific products. Besides that Festo Hong Kong offers products and services for basic and vocational training. “Festo offers a groundbreaking range of cylinders, valves and accessories developed specially for these purposes to offer maximum performance in minimum space” [2]. 2. Environmental analysis (Macroenvironment). Hong Kong is a popular venue for hosting regional headquarters or representative offices.

Thousands of overseas firms have chosen Hong Kong as their Asia-Pacific base for a single reason. Hong Kong is the best place for maximizing profit from Asia-Pacific operations. Competing and winning at business is what Hong Kong is all about. Many executives say that Hong Kong is in fact the best place in the world to do business. And so Festo is presented in the Asian market and uses all the advantages and privileges of doing business namely in Hong Kong. One should consider the following facts: – Festo itself is a foreign company and all the investments are done from Germany;

Festo has an image of an honest company with transparent economic activity (in respect of legality); – Festo supports its foreign branches with investments, know-how, failed components in case of urgency, machines etc. and these might come from all over the world; – colleagues from Festo AG, as well as from other foreign Festo subsidiaries make plenty of business trips in order to help improve things at the scene; – Festo is oriented on advertising its products in fairs, pneumatic seminars; organizes its own practice courses for future customers and employees;

Festo demands much from its employees and uses local possibility for the raising the level of their skills in local institutions in order to use these “local knowledge” for conquering the local market; – Festo is a family company and the family members want their business to go on. As any family this one also wants to be sure in their tomorrow. Thus new projects are planned with long-term goals and in favorable regions where one can guarantee the stability.

And with relation to the said above Hong Kong offers the following: – higher returns with low tax system (“simple, predictable tax regime, corporate profits tax rate is 17. 5%, maximum salaries tax 15. 5%, no tax is paid on foreign-sourced income of any kind, no capital gains tax, no VAT or sales tax, no tax of personal dividends or bank interest” [9]); – openness (transparency of regulation, no restriction on the international movement of funds, or restriction on currency trading, freedom of information, free flow of goods, no customs tariff on virtually all goods imported into Hong Kong); – services (“the world’s most service-oriented economy, accounting for 86.5% of Hong Kong’s GDP, regional finance teams of many financial leaders, extraordinarily rich in cross-border business skills, skilled managers from diverse cultural backgrounds” [9]).

Connectivity (time-saving Transport and Logistics, air cargo, sea cargo, freight forwarders, logistics-related services, Hong Kong is within five hours’ flight time of half the world’s population, the world’s busiest and most efficient maritime container port); – ideal marketplace (thought-leaders from around the world are brought together; each year over 200 international conferences and meetings);

Vibrancy (vitality, entrepreneurial spirit, and transnational expertise of the private sector, constant interaction between thousands of overseas firms and local businesses); – stability (political, social, legal, one of the most corruption-free governments in the world, transparent, predictable and enforceable legal environment and regulatory regime, safe and protected investments); – closeness of competitors (centre for regional headquarters);. – level playing field (no distinction between local and foreign players, investors); – professionalism (paralleled corporate excellence, high management quality, “can-do” attitude).

All these factors should make the business of Festo winning in Hong Kong. But unfortunately the positions of Festo in the Asian market have weakened during last 5 years. Festo has been presented in Hong Kong since 1976 and the beginning of its business was quite successful. Festo was one of the leaders in the Asian pnematic market. Its products were known for their quality, originality, its service was known for its completness. But since other pneumatic producers started their activities in the Asian market Festo began to lose its positions.

Because the production itself is Western Europe where the components and labour cost much more expensive than in Asia, the price of Festo products looses comparing to the prices of its main competitors. At the moment Festo is not among three market leaders but takes the forth position. Currently its market share makes only 10%. The price still remains the biggest disadvantage. Due to this high price Festo is mainly presented in the higher-end market where customers are more interested in trademark itself and they can afford such biggest name as Festo. http://www.history.org/Almanack/life/family/bibliog.cfm.


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