Many of the biggest success stories come from humble beginnings.

Things looked pretty grim for Sony Ericsson when it formally launched its China operations in August 2002.

The young company was struggling with low brand awareness among Chinese consumers.

"We were facing a very challenging situation," recalls Jan Wareby, corporate vice president of Sony Ericsson China.

The company was not alone, however. Most foreign mobile phone companies, including Motorola and Nokia, were having trouble. Chinese manufacturers controlled a 15 per cent share of the mobile market in 2001. The figure climbed to 30 per cent the following year, and more than 50 per cent in 2003.

Sony Ericsson was also burdened by losses at the time, which weighed on its marketing campaign budget.

The firm was not even among the top 20 phone manufacturers, even though the competition then was much thinner than it is now.

Sony Ericsson managed to make a fantastic turnaround, says Wareby, the company's former chairman.

Sony Ericsson started generating profits in 2002 and has remained profitable since then. It is now ranked as the fifth largest mobile phone company in China.

"Our business on the mainland is progressing very well," says Wareby.

The joint venture between Sony and Sweden-based Ericsson, which was launched in 2001, has also been hugely successful across the globe.

Cracking the Chinese market has not been easy, however. Most foreign players went through difficult adjustment periods, including Motorola, Nokia, Siemens and Alcatel.

Some of Sony Ericsson's initial discomfort was likely due to the huge gamble that the company took from the beginning: It opened a research and development (R&D) centre in Beijing on the same day it formally launched its Chinese operations.

"We also established our factory in Beijing as our sole global manufacturing base," says Wareby.

The expansion of the R&D facility, however, was crucial to Sony Ericsson's eventual success in China.

At the start, few people worked at the centre and their main job was to develop Chinese versions of software for new mobile phones developed outside of the country.

The Beijing R&D centre is now one of the company's four largest facilities globally. Sony Ericsson's previous new models were introduced to China generally three to six months after the global launches, Wareby says. Now the gap has been narrowed to as little as two weeks.

The manufacturer's highly anticipated W800c Walkman phone was even launched in China before it went worldwide.

The firm is now also one of the major suppliers of customized phones to China Mobile, the world's largest cellular operator.

Much to the chagrin of its rivals, Sony Ericsson is playing an increasingly bigger role in the industry. The company has even begun to focus on mobile entertainment.

"New technologies such as music, pictures and real-time video, have provided a niche for Sony Ericsson to closely follow top players such as Nokia, Motorola and Samsung, or even to differentiate itself in the high-end mobile market," says Zhao Yuewang, an analyst at Beijing-based research house Analysys International.

The company has aggressively promoted top-of-the-line camera and music phones. Sony Ericsson is not selling as well in China, however, as larger rivals like Nokia and Motorola.

They have nonetheless established their niche as a producer of upscale mobile phones.

Its roster includes glitzy models such as the P908, billed as "the king of smartphones," the K700c, the first mega-pixel camera phone in China, and the W800c, the first music phone using Sony's Walkman technology.

Its T618 model, with attractive design and strong imaging capabilities, has long been a best-seller in China.

"We have been the imaging leader for the last three years, both globally and in China," says Wareby.

Music gamble

This emphasis on imaging technology has helped Sony Ericsson score big, both globally and in China.

China is now the company's largest single market, contributing more than 10 per cent of its global unit sales of mobile phones, according to Gunilla Nordstrom, president of Sony Ericsson China.

"We have achieved great results here, but are not satisfied yet," says Nordstrom.

The company now sees music as one of the next big things in the mobile phone industry.

Sales of W800c Walkman phones have exceeded its expectations, which could help the firm establish its leadership in the mobile music market, says Wareby.

Sony's Walkman brand and technology are establishing the mobile phone as one of the most popular personal music players, he notes.

"Many mobile phones also play music, but they are not music machines," he says.

A total of 340 million Walkman units have been sold globally. Its strong brand awareness is also boding well for Sony Ericsson.

"Walkman means mobile music, and consumers want fun on the move," says Wareby. "We have more Walkman phones waiting in the wings."

Sony Ericsson has provided China Mobile with its customized K758 model music phone, the first of its kind for the Chinese mobile operator.

"One of our key strategies has always been to work closely with mobile operators," Nordstrom says.

Nordstrom adds that Sony Ericsson is always the first to respond to business demands from operators.

Several of its customized models have been selected by Guangdong Mobile, China Mobile's largest subsidiary.

The Walkman phones could provide a big opportunity for the company, but the competitive mobile music market in China will remain largely unchanged, says Analysys' Zhao.

"The music phone market will boom in the coming years, but the phones won't completely replace MP3 or MP4 players," he says.

Statistics by Analysys show that Sony Ericsson overtook China's TCL as the fifth biggest player in the mobile phone market in China in the second quarter this year, trailing Nokia, Motorola, Samsung and China's Ningbo Bird.

"Within one or two years, it's unlikely Sony Ericsson will overtake Nokia or Motorola."

That's because Nordstrom has positioned Sony Ericsson China to focus on sustainable and profitable growth instead of hasty and inefficient expansion, says Zhao.

"It knows it makes no sense for it to compete head-to-head with Nokia, Motorola and Samsung," he says.

Sony Ericsson has focused mostly on high-end phones and far fewer economical models than Nokia and Motorola, although it is slowing working its way to that end of the market. The company is becoming increasing ambitious about its China operations.

"We want to grow even stronger, better and faster," says Nordstrom.

Earlier this month, Sony Ericsson strengthened its management team by appointing Corporate President Miles Flint as chairman of the Sony Ericsson China board, underlining the increasing importance of the Chinese market.

Nordstrom was formally named president of China operations; she had previously been head of the China region. She will now focus on co-ordinating and enhancing Sony Ericsson's China operations.

The move signals a shift from sales to full functionality.

It reflects the firm's growing desire to compete with its chief rivals in China, the world's largest mobile subscriber market. By June, China had more than 361 million mobile phone subscribers.

"We have entered second-phase development here," says Wareby.

"Now the biggest challenge for us is to continue offering better products to the market and respond to consumer demands and market changes."

The company will now focus on developing phones that help operators generate higher average revenue per user (ARPU), he adds.

Analysys predicts that Nokia, Motorola and Sony Ericsson will be the top three most competitive third generation (3G) mobile phone manufacturers in China.

Sony Ericsson will also redouble its efforts to further improve its brand awareness among Chinese consumers, Wareby says.

The firm has sponsored the Women's Tennis Association (WTA) Tour with US$88 million.

The Sony Ericsson WTA Tour is the world's premier professional sport tournament for women, with more than 1,100 players representing 76 nations competing for more than US$58 million in prize money at the Tour's 64 tournaments in 33 countries.

The China Open WTA Tour is being held on September 10 to 25, and the Guangzhou Open will be held during September 26 to October 2.

The sponsorship will give an even bigger boost to Sony Ericsson's brand awareness in China, says Wareby.

"The implications for the brand are very exciting," he adds.

(China Daily 09/19/2005 page7)