He Xiangjian: The Legacy of Midea

In this chapter, the Chinese leading appliance maker- He Xiangjian is chosen to be discussed, emphasizing on his entrepreneurial traits. He Xiangjian is the Founder of GD Midea Holding Co., Ltd. and served as its Chairman since May 2007 (Bloomberg Business, 2015). According to Forbes, he has an estimated net worth of $8.9 billion as of September 2015. In the China Richest List, he is ranked 18th and the 437th in the list of World Billionaires.

He Xiangjian born on January 1, 1942, in Shun De, Guangzhou, China. When he was in the age of 26, he funded RMB5000 yuan together with 23 residents of Shun De. He founded the 'Beijie Plastics Production Team' or also known as the North District Office Plastic Production Group (北街办塑料生产组), as the fundamental organization of later Midea group. This group was initially a workshop for the production of bottle lids in 1968 (The Richest, n.d.).

Here is the starting point which He Xiangjian portray a visionary entrepreneurial trait. He was more ambitious than merely producing the normal bottle lids. The team’s next move was to manufacture electric fans. In 1973, the workshop began to produce medical used glass tubes, mainly sold in neighboring areas. On May 4, 1976, it changed the name to 'Shunde Beijiao Commune Automobile Component Plant' (Midea, n.d.). From this split of plants, He Xiangjian gradually expand his business in the production sector.

In 1981, the main base of Midea was established, covering an area of 20,000m2 in Shun De. In 1984, this plant started to produce plastic vane fans. On June 1, 1984, Midea set up 'Shunde Midea Electric Fan Plant', the main production line in electric fan (Midea, n.d.). This further expand Midea and diverse the production of the group, setting up a ground for Midea as the main electrical appliance supplier. During this time of exploring market, He Xiangjian has developed an excellent sense on market, which contributed on his observant personality in pursuing his business as an entrepreneurship.

Due to his proactive personality, he grasped the great opportunity for rapid growth after Miyazawa Kiichi, former prime minister of Japan visited Midea on July 8, 1984, becoming the township enterprise representative. Later on, Midea entered the air conditioning industry. In 1988, Midea became a qualified base for the export of mechanical and electrical products, enjoying the self-operated right of import and export (Midea, n.d.).

In June 1990, He Xiangjian’s team established Midea Industrial City, covering an area of 280,000m2. During this time, Midea group started producing a wide variety of electrical appliances including air conditioners, dishwashers, microwave ovens, water dispensers, rice cookers, domestic gas appliances, vacuum cleaners, heaters and other. In short, Midea started from small beginnings of lid production and became a wealthy appliance manufacturing tycoon (Midea, n.d.).

Until 1993, Midea was founded for 25 years. He Xiangjian, with his open risk taker entrepreneurial traits did not only successfully sustained the growth of Midea but he was also taking risk to expand it, by listing Midea in the stock market to attract more capital. On November 12, 1993, Midea listed on Shenzhen Stock Exchanges, becoming the first listed township enterprise approved by China Securities Regulatory Commission. Income of major business of Midea group was increasing from RMB487 million in 1992 to RMB2.5 billion in 1996. Midea became one of the biggest home appliance production bases in China. In 1998, Midea purchased 40% share of Toshiba-Wanjiale Refrigeration Equipment Co. Ltd. and Toshiba-Wanjiale Electrical Machinery Co. Ltd., which both company were facing operation difficulties. During the restructure of Midea group, the two company made profit in the same year. Later, Midea purchased 20% more of share owned by Japan Toshiba of the above two enterprises. Midea use them as the base of supply chain of air conditioner industry, expanding the business into air conditioner compressor sector (Midea, n.d.).

As an entrepreneur with open culture, He Xiangjian’s founded the Midea Newsletter on Feburary 10, 1991 as a carrier of Midea enterprise culture, adhering to the principle of "Serve Midea", recording its growth process and creating a better cultural environment. Since 1999, following the international practice, Midea began to employ in large quantity overseas experts. At the same time, Midea sent a large number of senior executives, suppliers, and dealers to receive training abroad, implementing the “Century Talents Project”,  (Midea, n.d.).

Midea has its “month of science-tech” every October, rewarding the science and technology contributors, appreciating their creativity and innovative. In 2012, Midea spent RMB20 million to reward those innovative talents working in the frontier positions. For the same purpose, Midea also invited foreign experts from Japan, South Korea, Spain and other to join Midea (Midea, n.d.).

He Xiangjin’s visionary did not stop in China. Since 2000, Midea, under his leadership, put a lot of effort in expanding overseas market, following the smooth operation of its Hong Kong company, Midea established Midea (US) Company, Midea (Europe) Company, Midea (Japan) Co. Ltd., Midea (Korea) Representative Office, Midea (Canada) Representative Office, and Midea (Russia) Representative Office, promoting the expansion of overseas business and offering support for Midea to become a well-known multinational company. In this year, Midea sales revenue hit RMB10.5 billion. Midea hence became the largest enterprise in Shunde in terms of business scale (Midea, n.d.).

Nonetheless, He Xiangjian is famous with his style of management, which was mainly outcome oriented. Under the communism regime, he managed to implement management buy-out (MBO) in 2001, which means the Beijiao Town Government as the biggest shareholder, withdrawing completely from the company, the executives headed by He Xiangjian becoming the biggest shareholders. The fate of executives was linked with the fate of the enterprises. It showed that He Xiangjian was typically looking on the larger source of capital- public listed (Forbes, 2012). In addition, to increase the public confidence, he actually took the MBO strategy, even it might affect Midea’s relationship with the local government.

Since 2003, Midea was the biggest enterprise in Foshan and in 2012, as the second largest electrical appliances supplier in China. The brand value of Midea increased from RMB2.654 billion in 1997 to RMB11.702 billion in 2002. Since 1990, Midea has contributed RMB50 million in social public welfare, education and health. This contribution made He Xiangjian an actual entrepreneur, he also further the contribution to the society after his retirement as the chairman of Midea group (Midea, n.d.).

The outcome oriented entrepreneurial trait is also seen when he resigned as the group's chairman on August 25, 2012 from the company he started in 1968. He passed the torch not to his son but to Fang Hongbo, president of the group's flagship subsidiary, Shenzhen-listed Guangdong Midea Electric Appliances Co. He Xiangjian will continue as the chairman of Midea Investment Holding Co to focus on development strategy, while his 45-year-old son He Jianfeng will be on Midea Group's new board, meaning the He family will distance themselves from the group's daily operation and entrust it to non-family members (Cong, 2012). This was unusual due to the long tradition and culture in China, which most enterprises were dominated by family business. He Xiangjian’s move was seen to be proactive and outcome-oriented at the same time.