Enough with tradition, now is the time for innovation

Alex Lee, chief financial officer of Suga International, explains how a cocktail of innovation and incentive is a recipe for success.
Alex Lee, Suga International
Alex Lee, Suga International

A whiteboard and marker pens are necessary equipment for office meeting rooms and school classrooms alike. But Hong Kong-listed Suga International aims to change this with its next-generation interactive educational products, including the electronic whiteboard.

“The traditional blackboard, whiteboard and marker pen have been in use in the school classroom for many years; it is now time for a change,” said Alex Lee, CFO of Suga International. “We have definitely seen an increase in demand for the electronic whiteboard from Europe and the US, and we will continue to focus on this particular product in the foreseeable future.”

Lee emphasises the fact that Suga concentrates on manufacturing “specialised electronic products” such as equipment associated with interactive learning. Other major areas include auto fare paying systems found at toll gates, pet training products and professional audio equipment. Asked why the company focuses on this seemingly eclectic product range, Lee simply states that “margins in these specialised and innovative products are usually higher than for ordinary consumer electronics”.

Fair enough, and the company’s recent 2010 interim results would seem to back him up. Suga reported a 23.4% increase in turnover compared to the previous year. Sales revenue derived from pet training products increased by about 50% in the period, while revenue from its interactive education products also grew by 10%.

If it had not been for a shortage of materials limiting the production of auto fare systems, the percentage increase in turnover could have been even more impressive, he added. At the beginning of last year, the company had performed better than expected, but then it was faced with a shortage in supply of specific components sourced from Europe to produce specialised collection systems. Although the uptick and the ensuing supply shortage were unexpected, Lee resolved the situation by rescheduling outstanding orders with customers for the second half of the year.

“We overcame this problem by discussing with our customers and agreed to place advanced orders to our suppliers for the specific components we required, even before our customers place orders with us, on the condition that they agree to repurchase any excess materials from us that are not used in the manufacturing process,” said Lee.

Lee explained that he was able to negotiate this situation because of the understanding his company has with its customers. A period of between 16 to 20 weeks is usually required for components to arrive at the company’s three factories located in China (two in Shenzhen and one in Weizhou). Suga’s customers are confident enough that they will make sales that they are willing to place advanced orders, he said. This allows for instant manufacturing and quick delivery of the finished goods.

Lee also credits the company’s success to an in-house incentive-driven system he implemented when he joined the firm in 2004. “At the beginning of each financial year we set sales and profit targets to the general managers of our factories based on past years’ performances and current market conditions,” Lee explained. “If this target is reached or exceeded, the general managers and core team members will receive a bonus depending on performance. This has proven to be a great results driver.”

Currently the company exports 90% of its products overseas, mainly to Europe and the US. However, Lee plans to tap the mainland Chinese market by introducing interactive education and pet training products. “Although we do not generate many sales in China at the moment, we will assist our customers to explore and sell their products in China with our presence and knowledge of the market. I believe the auto fare collection system, interactive educational products as well as the pet training products will have great potential and demand in China in the years to come, judging from China's strong economic growth and expanding consumer market.”

¬ Haymarket Media Limited. All rights reserved.