oid corp

■ Polaroid Corporation

Companies venturing into nonindustrialized nations often face a natural contradiction between their own goals and those of the host country. The foreign company wants an adequate return on investment and to create returns for the shareholder. The host country usually wants long-term capital investments that bring in foreign technology, create jobs based on significant value-added production and exports, and train management and workers. Polaroid's fundamental strategy in China is the same as it has been for the Soviet Union, Eastern Europe, and India: to tie the company's goals into the needs of these countries. Polaroid has reconciled the natural differences by focusing on points of mutual advantage, namely manufacturing for export, provided there is a demand for export goods. Like other firms, Polaroid has developed its commitment to China in stages as benchmark goals were met. It began by selling, moved to subcontracting component assembly, and when comfortable with its partner, started discussions on a joint venture.

This case study focuses on the evolution of the venture and describes an important component of dealing with the domestic market-sales and marketing. This description originally appeared in Business China (July 29 and August 12, 199 1) and is adapted here with permission of the publisher, Business International Asia/Pacific Ltd.

Polaroid has been selling directly into the China market since the early 1980s, primarily via its Hong Kong regional office marketing, subsidiary. By the mid- 1980s, Polaroid was ready to explore the next steps, and talks with the central government led Polaroid to initiative discussion with the Shanghai Motion Picture Industry Corporation (SMPIC). Polaroid eventually set up a subcontracting arrangement with the Chinese enterprise. In return for Polaroid's upgrading one of SMPIC's factories, Shanghai 20anfeng, the Chinese would assemble printed circuit boards for use in Polaroid's Supercolor 635CL instant cameras. To bring Xianfeng up to speed, Polaroid provided capital equipment, trained the work force, and upgraded the factory' As a result, the Chinese have been supplying printed circuit boards to Polaroid manufacturing plants around the world since 1989. Polaroid in the meantime had a chance to evaluate operating conditions in China, cement ties with its partner, build up the Chinese side's production skills, assess the feasibility of a larger commitment, and set the basis for a solution to the foreign exchange problem. In mid- 1990, Polaroid took the equity plunge, signing an agreement to set up Polaroid of Shanghai with SMPIC. The Xianfeng factory has since become part of this larger operation. In addition to the assembly of printed circuit boards, the joint venture will assemble instant cameras. package film and gradually assume marketing responsibility for the entire Polaroid product line in China. So far, the camera maker, which holds 73% of the joint venture's equity, has invested close to $2 million in the project. The transition from subcontracting and assembly to a full-fledged joint venture manufacturing operation has gone practically without a hitch. Polaroid attributes this to the evolutionary nature of its relationship with SMPIC and Xianfeng. All the camera maker had to do to get the joint venture up and running was add some new assembly equipment, introduce a detailed program for camera manufacture, and assign two expatriates to manage the project on the ground. Polaroid has also intensified training. At first the venture assembled cameras from kits for local consumption. In 1992, It began moving toward full vertical integration of the assembly operation. Polaroid wants to source a substantial portion of its inputs locally within three years. For the moment, sales of china-made printed circuit board generate enough foreign exchange to meet the joint venture’s needs. As the venture grows, that need will become greater, and Polaroid plans to meet it by introducing another component for local manufacture at the joint venture. Management programs have not been severs. To help keep the 180-person work force productive, Polaroid has instituted amenities such as transportation between home and factory, new windows and lighting in the factory, and washing machines, dryers, irons, and ironing boards for personal use.

The Marketing Side Polaroid sees sales opportunities for its instant-imaging products in china in the medical, business, and consumer sectors, and is targeting all of them. In particular, Polaroid is targeting street photographers ad well as entrepreneurs or other intermediaries who sell finished photos for passports and visas, drivers’ licenses, and ID cards, and to commemorate important events. Polaroid has put on seminars for the photo studio market, showing the camera’s ability to generate more business and plans to use all these outlets to spearhead efforts directed at tapping the consumer market. Developing consumer awareness of Polaroid began several years ago when the company advertised on Chinese television in campaign designed to broaden public knowledge of the advantages of instant cameras and photography. The company rates this and other promotional efforts as “fairly effective.” Promotional efforts are now centered around the joint venture’s ability to deliver products directly to the customer (important because the JV obviates the need for an import license, something many Chinese retailers find hard to acquire). The program includes direct mail, seminars, and trade shows. Print advertisements, signs, poster boards, product literature, and point-of-sale displays will supplement the effort. Marketing to the medical and scientific communitites in concentrated on direct mail, seminars, and trade shows. Polaroid follows up any leads that come out of these events, often visiting hospitals to demonstrate the special features and advantages of instant-imaging products. The company became one of the sponsors of the Asian Games held in September 1990, which enhanced its visibility in the consumer market. Among other things, Polaroid provided security badges for the athletes and their families, and set up kiosks around the area for local street photographers to display and store their wares. The next step is the consumer market, and Polaroid is rethinking its TV advertising tactics to target specific cities and markets. While sales to private customers are still rare (the local currency cost of the camera is equivalent to about $100), the company is planting the seeds for the consumer market of the future.

Hong Kong Support
Polaroid’s regional office in Hong Kong will continue to handle sales of locally produced and imported cameras until the JV is read to shoulder responsibility for all P.R.C. marketing activities. The Hong Kong office will also supervise the venture’s marketing program and train Chinese customers (like hospital attendants and doctors) to use Polaroid products effectively. Roughly seven members of the regional sales group in Hong Kong devote their time solely to supporting the company’s china business and the joint venture. This includes training of the JV’s sales force as they accompany Hong Kong staff on sales calls and other promotional activities. Polaroid is now refining its distribution system and expanding its service centers to support sales in other regions of the country. The company hopes to establish a network of regional sales offices.