Leading the top 10 global fragrance company in China
Dr Jeremy Cheng
Doctorate by Research, Business and Management
From humble beginnings, entrepreneur and generous philanthropist Dr Jeremy Cheng is now the founder and CEO (Asia Pacific) of the fastest growing company in the fragrance industry in Asia, which is also one of the top 10 fragrance houses in the world.
Dr Cheng has over 30 years' experience working in the consumer products and chemical industries. In 2003 he started his own business, Fragrance Resources, by forming a joint venture in China with a German company, Fragrance Resources GmbH. The flourishing business creates fragrances for prestigious perfume and cosmetics companies.
After managing multinational companies all over the world, Dr Cheng discusses why he chose to establish the company in China – a notoriously challenging place for any small business to thrive.
How did you find establishing a now successful, global business in China?
By taking the advantage of China’s phenomenal growth, Shanghai was chosen as the Regional Centre for the Asia Pacific region. Yet founding a small company there in 2003 was not an easy task. The complexity of running company in China is far more than in western countries. To name a few: the tedious and endless approval process to establish a company, the poor payment by local customers, and the complex Labour Laws are adding fuel to the fire. Running a company in China is no doubt a breathtaking assignment. I would like to quote a famous saying about doing business in China, “anything can happen but nothing is easy!”
What are the specific challenges you faced?
It was a rather bold move when I decided to leave the Bayer Group to form Fragrance Resources (FR) as the CEO of Asia Pacific. Simply because Fragrance Resources Group is a rather small company when compared with other major multinational competitors. On top of that, the company is a late mover into the region. Most of the competitors have been operating here for over 100 years. The name FR is unknown to local manufacturers in the region.
Starting up a company in Asia in 2003, I faced lots of challenges which included disadvantage in overall cost due to lack of critical mass, difficulties in recruiting high calibre staff, limited capital, etc. Among all the challenges, I feel the most pressing one is being a late mover in a highly concentrated if not mature fragrance industry. While China and South East Asia are emerging markets, the fragrance market in countries like Japan, Australia, New Zealand, Taiwan, Hong Kong and Singapore has reached a mature decline stage. One unique characteristic in our industry is that there is no hard and fast rule in creating an ideal fragrance, it relies on human imagination and the accurate prediction of future trends. Managing such tacit knowledge with limited resources calls for a different set of skills.
How did you deal with the challenges?
The work experience, coupled with the knowledge I gained in my PhD research program at UniSA, rendered me the capacity to start up this venture. To meet the challenges, we analysed the market systematically to find ways to create value for the target customers, that is, a blue ocean strategy approach. We decided on the strategic position and used it as the guiding principle. To thrive on the ever-changing consumer preferences, we made best use of global creative marketing team as well as external market research companies to gauge the consumer behaviour.
I am happy to see that our company has achieved an average annual compounded growth of 15% in the past 12 years. Industrial analysts have ranked us as the fastest growing company (purely from organic growth) in the fragrance industry in Asia. Of course over the years, the market conditions changed rapidly, and at times new prospective customers/businesses surfaced. We had to carefully assess whether taking such ‘opportunities’ were in conflict of guiding principle or stretching our company’s resources over our limits.
How has globalisation effected your business?
One cannot adopt the same strategy in different countries even though globalisation has taken some effect in unifying/moulding consumers’ behaviour and preferences. The Asia Pacific region can hardly be regarded as a single market. In the meantime, the explosion of internet technology has sped up the change in consumer preferences. A difficulty thus arises on how a small company with limited resources can cope with the requirements of different markets.
What is your advice to recent graduates considering starting their own business?
- Passion - The most critical drive that helps one to steer through the stormy waters over the years. Your passion will soon transcend into the corporate culture.
- Integrity – It builds your reputation in the industry. It helps to attract talented staff to join your company and to build trust with customers.
- Focus - Stay focussed on your core business and guiding principles. Stay out of mirage opportunities
- IT- Rapid adoption of IT in the business process and the use robots in manufacturing.
- Speed – In Organisation Learning and Actions