A Family Business Case: German Pool

How German Pool continues to develop cutting-edge products to lead the market

By China Business Knowledge @ CUHK

Founded by Edward Chan in Hong Kong in 1982, German Pool is a family business that has been importing advanced water heating systems from Germany and selling them to building contractors, both locally and in Mainland China. In 2000, the company started its kitchen cabinetry business; and in 2014, the business diversified into wardrobe and custom cabinetry. From initially being a B2B business, German Pool successfully branched into B2C, selling directly to the mass market through chain stores.

In 2006, when Chan’s daughter, Karen, came back from her overseas studies and work, she spearheaded a series of revamps at the company, setting up a marketing and branding operation, as well as launching a full-scale diversification of its product lines to cover a wide range of high-end home appliances aimed at making people’s lives easier and more enjoyable. At the same time, Karen has been taking charge of the company’s market expansion both in the mainland and overseas, further opening its sales channels to a broad base of customers.

By applying modern marketing strategies, which Karen has learned during her studies toward the MSc in Marketing degree at CUHK Business School, she has successfully transformed the company’s original identity as a water heater importer into a consumer-facing company that sells high-quality and technologically advanced (represented by the name “German”) “Pool” of products.

Updating the Business Model

The original business model was to sell water heating systems to building projects through architectural firms and contractors. The new business model is to sell directly to consumers through its own showrooms and a wide network of retail outlets.

The company aims to continuously push the envelope to develop cutting-edge products in order to stay as a market leader. As diverse as the product lines have become, every product stays true to the five core values: multi-functional, chic, easy-to-use, safe and environmentally friendly. All of these are inspired by the company motto “life made simpler.” In addition, instead of run-of-the-mill kitchen appliances, the company’s products always include distinct “value-added” features and some product lines offer customizable designs to suit individual taste.

R&D is done both in-house and with overseas partners. In some cases, patents of new technologies are purchased for further product development. The Hong Kong headquarters is focused on product design, quality control and tuning in to the ever-changing market demand, whereas the plant in Shunde is the main production center.

In the kitchen and home cabinetry business, the company goes for two distinct product lines — the high-end line sells fitted kitchen cabinets imported in whole from Germany. The economic line sells kitchen fittings that can be customized with either imported or local materials, and assembled in the German Pool’s own mainland production facility.

Facing the Challenges 

As a “parachute” executive, Karen has to convince the old-timers of her management ability through continuous achievements in business performance. So she studied marketing to provide a solid theoretical basis and to execute best practices in day-to-day operation.

The Chinese government had plans to move Hong Kong-owned plants in the Pearl River Delta to the Northeast, threatening the operation of the company. German Pool’s Shunde Manufacturing Headquarters started production in 2014. The facility–measuring 400,000 sqm–features state-of-the-art equipment. The company has no immediate plan to move from the Pearl River Delta to the Northeast region, as the company shares the same concern as many Hong Kong enterprises: the lack of infrastructure and talents in that region. If the PRC government insists on implementing the move, the company will use its 33 years of experience in the business to direct its resources and talents to tackle this challenge.

The biggest challenge is to create value-added solutions for the company’s wide range of product lines. In response, the company created customizable products, such as food processors with customers’ insignia, and launch supporting marketing campaigns, such as cooking classes and VIP clubs to appeal to customers in niche markets. The company also provides consulting service to customers looking to create highly personalized interior designs.

Advertising is very costly in China due to the sheer size of the domestic market and the big differences among consumer segments. Karen chose to participate in trade fairs and expos across the mainland, making contacts with retailers and establishing more than 200 distribution outlets across the country.

While high-end products help the company carve out a niche in the Hong Kong market, they may not be enough to drive further growth in the mainland market. Therefore, going forward, the company will look into the e-Commerce platforms in the mainland and develop more affordable products to match the market demand.