China / Business

Gaming firms have eye on overseas markets

By Lin Jing (China Daily) Updated: 2013-01-04 09:44

Zhongshan charts ambitious plan to become a global design and manufacturing hub

Entertainment equipment manufacturing companies from Zhongshan are looking to make inroads in overseas markets, even as the city strives to be the global design and manufacturing hub for the entertainment industry.

"We have been making aggressive strides in the global markets recently. As part of this, we plan to participate in at least five to six international exhibitions every year, mainly to promote our products and explore new business opportunities," says Deng Zhiyi, president of the Zhongshan Game & Amusement Association.

Deng says that he expects more gaming companies from Zhongshan to participate in international exhibitions and trade fairs.

Ye Weitang, president of Golden Dragon Amusement Equipment Co Ltd, a Zhongshan-based games and amusement equipment maker, says that though the global market is estimated at around $100 billion yuan, Chinese companies account for just $6.4 billion of the total pie, thereby giving ample opportunities for further growth, he says.

Part of the reason why Chinese companies are still lagging others in the global market lies in the quality and R&D advantage enjoyed by countries like the US and Japan. But with Chinese companies gathering output pace and putting more focus on quality, it is only a matter of time before they catch up with competition, Ye says.

Golden Dragon has already made rapid strides in markets like the Middle East, East Europe and the US and overseas business accounts for more than 40 percent of the total business. "Overseas business has been clocking annual growth rates of 20 percent to 30 percent and going forward I expect it to be around 60 percent."

Ye says that he expects companies from Zhongshan to be the key players in the global market over the next five to 10 years.

Similar sentiments are echoed by Deng, who believes that Chinese companies can now make products that are as good or even superior to the ones made by their Western counterparts. He feels that manufacturing costs for Chinese companies are less costly than others due to the lower labor and raw material costs. "The price of products made in Europe can be three to five times more expensive than those made in China."

Liang Guoqiang, general manager of Zhongshan G-Look Amusement Machine Co Ltd says that his company's long-term plan is to integrate more Chinese cultural elements into its products and export these to the overseas markets.

Liang, however, says that though Chinese companies are fast catching up in production techniques, they still have a lot to learn from their Western counterparts, especially on aspects like business operations.

"After several years of development, many of the developed countries are now capable of producing gaming equipment with better quality and in large scale. The biggest advantage they enjoy over Chinese companies is their understanding of the business, gained largely from their advanced manufacturing techniques for equipment manufacture.

"Though several China-made products have achieved similar production levels, they still lag in safety aspects. We should learn from their techniques and make the necessary changes," Liang says.

Though he agrees that Chinese companies need to add more cultural elements to their products, the process also calls for improving the levels of innovation and R&D.

Part of the answer to that puzzle may come when companies in Zhongshan decide to pool their resources and form a cohesive group to tap global markets, experts say.

Ye from Golden Dragon says that while many small companies are keen to tap the overseas markets, the higher exhibition costs are often a deterrent. "Overseas exhibition costs can often run into hundreds of thousands of yuan. These amounts are often beyond the reach of small companies."

Small or middle-sized companies can expect sizable returns only after they make considerable investments in overseas markets, he says.

The best way out of such a situation is for the local government and industry associations to help domestic companies in organizing/participating in international exhibitions and offering subsidies for R&D efforts.

Karl McCarrison, business development manager for Delta Strike, a manufacturer of laser tag equipment in the US, says that Chinese companies should invest more time to learn about the intended market and develop or modify products suited to that market.

"Consumers or purchasers will identify more easily with products that reflect their culture and interests. Cost is always crucial of course. If a consumer is offered three different products at the same price they will obviously choose the product they identify with the most."

Lisa Hanson, managing partner and founder of Niko Partners, a consultancy focused on the Asian game market, says that for Chinese companies that endeavor to enter a foreign market, market research and due diligence about the competitive, regulatory, and available market situations are necessary.

"I think that Chinese products will be competitive globally as long as the price is right and the quality is good, and most importantly are backed by excellent customer service," Hanson says.

At the same time, it may not be easy for Western companies to promote their products in China, despite their success in other markets.

Hu Xiaochun, sales manager of Zone China System (Nantong) Co Ltd, says that there are significant cultural differences in the Chinese market.

"Unlike the West, Chinese teenagers are often burdened with studies and examinations. They do not have enough time to play. Even if they have, there is still the process of market education, before they grow to like the game."

The company offers equipment packages for all types of laser tag equipment. It also provides assistance and advice on facility design, installation of laser equipment and training.

The best selling product of the company is a set that contains a vest and a laser tag gun, priced at about 10,000 yuan. The other hot product is a uniform and a laser tag gun for outdoor activities, priced at 6,000 yuan.

Though its products are made in China, Zone China products are more popular in overseas markets like the US, the UK and France. Hu says that overseas sales have been growing at a steady tick.

"In the last few months, we have been able to sell at least 50 packages every day," she says. "Laser tag players are relatively young, often aged between 10 to 30. Normally they play the game during a birthday party or kids camps or in shopping centers."

McCarrison from Delta Strike says that though such products are relatively new in China, it is only a matter of time before they gain market acceptance.

"Although our main focus has been international distribution, we know laser tag will soon be played in malls across China. We plan to have a quality assurance office in China to have better leverage in Asia."

The company believes that until the industry develops to reflect, or ideally to anticipate, consumer behavior, there is very little potential for growth. However, in the long run, the gaming and amusement industry will remain a key element of leisure spending.

Hanson from Niko Partners says that for foreign companies to succeed in China, they should have the right pricing strategy and also develop content that passes muster with local authorities.

Hot Topics