China’s Transformation Not to Be Ignored

One of my favorite companies is continuing with its expansion in China. If you are a large-cap company without a China strategy, you are already behind the eight ball in global competitiveness.

Yes, Luxottica Group, one of the world’s best managed eye care companies announced that it opened its first “LensCrafters” branded retail store in Beijing. The store is now open in on the capital city’s most high-end malls, the Oriental Plaza.

Luxottica already has some 270 optical stores in China and Hong Kong, and expects to open up to 90 LensCrafters branded stores in this market by the end of 2007.

Obviously, part of the Luxottica’s strategy is to saturate the retail marketplace with different branded stores to give the appearance of competition. Not only does the company control a good portion of the retail market for its products in China, it also controls the wholesale market.

This means higher profits and better control over distribution and quality control. It’s a great business strategy in a country with an ageing population.

Even small-cap companies should have a China strategy, at least in the planning stages. For a large-cap company, a presence in the Chinese market goes without saying. The fact is, from a business perspective, you can’t ignore the world’s largest market. Not only is the Chinese marketplace getting wealthier, it is getting more sophisticated and cosmopolitan.

So really, you can think of a company like Luxottica being ahead of the game with such a large presence in that country already. Clearly, with such a large population, if you are in the eye care business you have to have a distribution network in China.

With the rest of the world growing at a measured pace, China’s economic transformation cannot be ignored.