4

Case Study

TOPRANK CORPORATION
SDN BHD
Malaysia - China
Strategic Partnership

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59

Malaysia - China
Strategic Partnership
Lok Lee Lee
Zulaifah Omar
Mazlina Shafii

Opening remarks by the Chairman of the Manufacturing Consultative

Panel Meeting 3/2008:
Ladies and gentlemen. Welcome and a very good morning. I would
like to thank all members for your contributions, commitments and
untiring efforts in helping MPC formulate plans and strategies to assist
industries enhance their productivity, quality and competitiveness. Your
presence today and your continuous support all these years are
demonstrative of the passion that you have in contributing to Malaysias
aspiration to be among the top 10 competitive nation.
We are lucky today to have Mr. A.H. Yong who is one of our members
to share his companys success story in forming a strategic alliance with
his partners from China. As you know the current business strategy is
towards co-creation and smart partnership, so his topic today is much in
line with the current measures to mitigate the impact of the global crisis

The consultative panels, led by chairmen who are captains of

respective industries and prominent government officials
supported by members representing the public and private
sectors as well as the academia had been established with the
following terms of reference:
To provide guidance and advisory services on research methodology
in specific fields and related matters,
To advise MPC consultants on current issues relating to
Productivity, Quality and Competitiveness, and
To make recommendations and comments on MPCs research
reports.
The 11 MPC, Consultative Panels have provided strategic focus in
the areas of Agriculture, Construction, Development Financial
Institutions, Energy and Utilities, Healthcare, Human Resources,
Information and Communication Technology, Logistics and
Transportation, Manufacturing, Productivity Measurement and
Tourism.

The Companys History

In 1986, TopRank started off as a trading
company in Petaling Jaya and expanded into
manufacturing operations when it established its
first factory site in Sungai Buloh, Selangor, in 1992. The expansion into
manufacturing was brought about by market requirements and trends.
In early 1990s, in line with the governments policies of encouraging buy
Made in Malaysia products coupled with the assistance from
Malaysian Industrial Development Authority (MIDA), the company
secured more tenders from government linked companies in particular
Malaysias largest power utility group, Tenaga Nasional Berhad (TNB).
TopRank manufactures electrical power equipments covering a wide
range of Medium Voltage (MV) (12 ~ 36kV) Circuit Breaker Switchgears,
Remote Terminal Units (RTU), Control Relay Panels (CRP), Relay Tap
Changer Circuit panels (RTCC), Ring Main Unit (RMU), Compact
Substation, Low Voltage (LV) Feeder Pillars, and other types of metal
housing fabrication. (Exhibit 1). In the mid 1990s, other principal
activities include Engineering, Procurement, Construction and
Commissioning (EPCC) services, covering the capabilities of Planning,

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Design, Engineering, Equipment Supply, Procurement, Installation,

Testing and Commissioning to the after sales service and maintenance
of the complete Transmission and Distribution power systems. Along with
the years of experience in the power engineering industry and with its
qualified and experienced workforce of 150 personnel, TopRank has the
strength and commitment to ensure quality value and expectations are
met.

Exhibit 1
TopRanks Manufactured Products

36kV VCB
Air Insulated Switchgear

12kV VCB
Air Insulated Switchgear

12/24kV
SF6 Insulated Ring Main Unit

1500kVA
Compact Substation

1600/800A
LV Feeder Pillar

Remote Terminal Unit (RTU)

Control Relay Panel (CRP)

Relay Tap Changer Circuit (RTCC)

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This experience of knowledge and expertise covers most power

substation equipments and ancillaries, LV, MV and HV Circuit Breakers,
Control and Protection Systems, Power Control and Automation,
Conditioning Monitoring equipments, the Control and Management of
Transmission and Distribution Networks and Systems. As a Government
Statutory Registered Contractor (PKK) Class 1 Certificate, it qualifies the
company to carry out projects of any size within the government sector.
A Construction Industry Development Board Malaysia (CIDB) Class G7
Certificate enables the company to carry out projects of any size
without any limit or restrictions within the government sector. The
company is also recognised by the Ministry of Finance to be financially
able to undertake large government contracts. TopRanks product
manufacturing process, organisational operations and services are
certified with ISO 9001:2008. With these registrations in hand, TopRank is
well positioned to tender for and undertake substantial contract work
from government/statutory bodies and the private sectors.
Why China?
Fast technological advancement in the
Power Transmission and Distribution
industry has created opportunities for
Multinational Corporations (MNCs) to
enter the Malaysian market and
compete with existing local companies.
MNCs offer advanced and trendy
features into the products that meet
customer requirements. Some of them
even attempted to monopolise the market by offering added value
features but at a higher price. The features contribute nearly 40% of the
product added value and 80% of the overall system costs. Most of the

local companies could not compete with the product differentiation

created by those MNCs from Japan, USA and Europe. This was an early
warning sign which Mr. A.H. Yong realised the need to seek out other
options.
Economically the world is witnessing the emergence of China on the
world stage. Industries need to ride the tide of the rise of this great Asian
power. Against the backdrop of changing global trade patterns, China
was Malaysias 4th largest trading partner while Malaysia was Chinas 8 th
and the largest in ASEAN. The trade between Malaysia and China
increased by three-fold in the last five years to nearly USD19 billion in
2004, and it is expected that this figure will swell to exceed USD50 billion
by 2010. Between 60 to 70 percent of the bilateral trade between China
and Malaysia comprised Electrical and Electronic (E&E) products, palm
oil and chemicals. China for the last 10 years was growing so fast and
had opened up their market globally, offering a pool of resourceful and
innovative human resource as well as the latest technology.

Figure 1: China Direct Investment Flows Inward (US$ billion)

100
90
80
70
60
50
40
30
20
10

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08
20

06

07
20

20

05
20

03

04
20

20

02
20

00

01
20

20

99
19

97

98
19

19

96
19

19

95

0
Years

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MNCs are more in favour to switch their business and investment in

China rather than Malaysia (Figure 1) to take advantage of the lower
cost and exploit the enormous potential market demand. Mr. A.H.
Yongs thoughts immediately swerved towards searching for alternative
partners. Why not take advantage of this new emerging power for his
business expansion? Why not follow the MNCs in engaging China as a
partner? There were many things much in common which he could take
advantage of.
How did you source for a suitable partner?,
asked Mr. Ong (A Member of the Consultative Panel)
Mr. A.H. Yong with a smile replied: I was lucky to have participated in
the Trade Mission and Trade Expo in China organised by the Malaysia
External Trade Development Corporation (MATRADE), an agency under
the Ministry of International Trade and Industry (MITI). I had the
opportunity to meet up and discuss with many China counterparts and
at last there was this one particular company which impressed me most.
I was lucky to meet face-to-face with one of Chinas biggest power
transmission and distribution engineering contractors. TopRank had
come a long way and I was very determined to expand my business
horizon to continuously sustain my companys competitiveness to gain
international recognition.
Taking Off with the First Chinese Partner
China XD Group (XD) or also known as Xian Electric Group was
uppermost in Mr. A.H. Yongs mind. XD
has continuously supplied Power
Transmission
and
Distribution
equipments to Malaysias largest power utility, Tenaga Nasional Berhad
(TNB) since 1992. Since obtaining this reference in Malaysia, XD has
succeeded in supplying other utilities/industries in Singapore, Hong
Kong, Thailand, Philippines, Indonesia, Taiwan, Nepal, Bangladesh,
Pakistan, India, America, Colombia, Brazil, Russia, South Africa, Turkey,
Germany and USA. XD had also clinched more than a hundred turnkey
substation projects, and obtained fantastic results in projects in which
funds are loaned by the World Bank, Asian Development Bank and
other international financial organisations. At the same time, it had also
participated actively in Chinas electric power construction projects. In
recent years, they had also furnished Extra High Voltage (EHV) 500kV
AC/DC substation equipments for the world renowned China Three
Gorges Hydro Power Station project and the China West to East
Electricity Transmission project.

XDs Strengths:

19%

19%

29%

33%

20%

80%
Engineers 80%
Others 20%

Company Personnel with Experience in Project Management

- Over 10 years experience in international project management (19%)
- Over 5 years experience in international project management (33%)
- Over 2 years experience in international project management (29%)
- Newcomers in international project management (19%)

Mr. A.H.Yong set about to initiate his dreams with XD. After weeks of
successful communication and a site audit visit to XD, the co-creation
deal was successful, which culminated in the signing of a MoU in 1990.

With the strong support from one of Chinas biggest Power Transmission
and Distribution engineering contractors, TopRank was in a position to
undertake customised turnkey projects for any high voltage AC/DC
sub-stations up to 550kV and was capable of providing the best
solutions in electrical system, telecommunication, electric railway
transport, metallurgical and architectural solutions for customers.

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Strategic Alliance Leading to the Birth of a New Company

The
most
outstanding
achievement to overcome
European dominance in the
domestic Malaysian market
was the establishment of a
joint
venture
company
between Tenaga Nasional
Berhad, TopRank and China
XD Group culminating in the
joint company known as
Tenaga Switchgear Sdn Bhd
(TSG). TSG was established
in 1994 as part of Tenaga
Nasional Berhads drive to
diversify into manufacturing of High Voltage Switchgear namely 132kV
and 275kV Gas Insulated Switchgear, SF6 Gas Circuit Breakers and
Disconnector Switches. TSGs commitment to quality, safety and
reliability as manifested in its ISO 9001 certification was its main strength
in achieving a foothold in the competitive global high voltage power
equipment market.

Market share for high voltage switchgears before the collaboration was
less than 5% and after that it went up to 70% (Figure 2). The average
sales per year increased from RM10 million to RM30 million (Figure 3).
Tenaga Switchgear is continuously increasing its turnover and is
expected to reach RM100 million in the next three years.

Figure 2: TopRank-Xian

Figure 3: TopRank-Xian

Market Share

Sales Performance (RM)

Before

After

5%

30%

30,000,000
25,000,000
20,000,000
15,000,000

95%

70%

TopRank

10,000,000
5,000,000

Others

0
Before

After

One Is Not Enough

As competition intensifies and to keep abreast
with the fast changing technological
advancement and automation trends, Mr.
A.H.Yong strived to look out for another partner
as he planned to upgrade IT-based technology
products for his company.
Dongfang Electronics Information Industry
Group Ltd. (DongFang) a large-scale
state-owned enterprise in China was one of the
Top 100 China Software Enterprises. DongFang
is an integrated R&D, manufacturing, marketing
and services with 11 sub-branches.
The
company has installed RTUs in more than
8,000 power substations in China and overseas
as well as more than 90 Master Stations
including those located in major cities like
Shanghai and Beijing. The market share in
China consisted of 30% of District-level Master Dispatch Center and 30%
in County-level Master Dispatch Center.
DongFang fitted into Mr. A.H.Yongs expectations to collaborate with a
R&D center, a working station for postdoctoral scientific research of
national class and which had proudly hosted the biggest power

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distribution simulation laboratory in China. Their R&D efforts were driven

by the top qualified technical talents consisting of 340 engineers (16.6%
of total), 110 senior professional engineers (5.4% of total) and 68.8% of
the staff with professional degrees, including 23 PhD holders and 183
Masters. It has top quality analysis facilities like the Electronics Analysis
Center, Electro-magnetic Compatible Laboratory, Power Laboratory
and Integrated Circuit Test Room.
The quality of their products on every step from research to production
could be trusted of high quality standards and be guaranteed. Market
share before the collaboration with DongFang was less than 3% and
after that it went up to 35% (Figure 4). The sales value increased from an
average of RM2 million to RM8 million per year (Figure 5).

Figure 4: TopRank-Dongfang

Figure 5: TopRank-Dongfang

Market Share

Sales Performance (RM)

Before

After

3%
35%

8,000,000
7,000,000
6,000,000
5,000,000
4,000,000

97%

65%

3,000,000
2,000,000

TopRank
Others

1,000,000
0
Before

After

Enhanced Capabilities for Complete Solutions

TopRank in cooperation with DongFang had successfully completed
Supervisory Control and Data Acquisition Distributed Automation
(SCADA-DA) projects for both Transmission and Distribution power
substations in Malaysia and were subsequently looking to continue its
growth together in the ASEAN region and beyond. With the strong
support from one of Chinas most experienced in the automation
industry with a 20 year record along with over 3,000 power automation
customers in China and worldwide, TopRank with its own technical
engineering team were well positioned to provide a complete SCADA
solution, including design, manufacturing, assembly, enclosure
fabrication, wiring, site installation, testing and commissioning, linking
communications between a power substations up to 550kV and a
Master Station. After-sales services continued to be TopRanks top
priority as well as to ensure 100 percent customer satisfaction. TopRank
was awarded the supply of 1350 numbers of RTU by Tenaga Nasional
Berhad, Malaysia and is currently implementing the project for the
entire Northern Region of Peninsular Malaysia.

Hence, TopRank now can boast of its own Engineering Division formed
by a group of knowledgeable and experienced engineers. This can be
credited to the years of technological transfer and knowledge sharing
between TopRank and its partners. This advantage has contributed to
the service of TopRanks wide range of high quality and reliable
products to solve most of the power network solutions.
Under its internal R&D initiatives, all developed products of TopRank are
tested in internationally accredited test laboratories like CESI, ASTA, and
KEMA as part of their design verification prior to entering the utility
market. As proof of their success, it had successfully completed R&D of the
First Malaysian-made SF6 GIS Incorporating Vacuum Interruption Technology

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with Continuous Monitoring Facilities and Advanced Operating

Mechanism in collaboration with University of Malaya and with
assistance from The Ministry of Science, Technology and Innovation
Malaysia (MOSTI). Further to that, the Malaysian Technology
Development Corporation (MTDC) also funded the acquisition of state
of the art switchgear know-how from Italy for the manufacturing of Ring
Main Units and Load Break Switches under The Technology Acquisition
Fund. Further on-going R&D for new product development as well as
improvement processes continues as part of TopRanks part to add
value by working with its partners from all over the world.
Congratulations! Mr. Yong, this is really an interesting episode of your
successful journey! As the common saying goes, theres no gain without
pain, so can you share more with us
- remarked Mr. Chin, another member of the Consultative Panel, who is keen to look for partners
in China -

Challenging the Daunting Tasks

You need to be in China, to think like a Chinese to do business in

China! Make room for differences; take into account the cultural
sensitivities , added Mr. A.H. Yong. He cited one of Sun Tzus Art of War
philosophies which could be applied to portfolio management and
relationship management. Retaining value of relationship or Guanxi
will ensure lasting cooperation. As compared to the Western culture

which emphasised on transaction relationship, what the Chinese valued

most are relations with strategic partners, developing trust and integrity,
tolerance and patience. The first hurdle was to overcome the problem
of a culture where quality standards and processes were much different
and being able to communicate to employees a set of different quality
values as the key success factors.
How then did you overcome the misconception of Made in China
quality in the 1990s when you started?
- Another question was posed by Mr. Choy -

Mr. A.H. Yong nodded in agreement. Yes that was one main concern
during those earlier years. In fact, Products Made in China has been
an issue in the world economy. Misplaced assumptions and perception
of China quality versus that of US, UK and European quality had long
been ingrained in the minds of many Malaysians. That was one
important practical problem to be dealt with. However I can again
share some of our strategic and tactical considerations.
Japan too had similar problems but after they adopted Edward
Demings philosophy, there was the widespread and incessant
application of statistical analysis to quality-control and thereafter its
history of success. However in China, the scenario was different. Prior to
Chinas open door and reform policy, establishing partnerships was not
easy. On top of that was the challenge in overcoming the perception.
Bridging the Link
It was an arduous task, but with grit and determination, Mr. A.H. Yong
was confident that he could bridge the gap. He was determined to
uplift the image and overcome the skepticism on Chinese product
quality. If he wanted to change this, it needed patience, determination
to cultivate the mutual trust, to rethink on how to establish successful
alliances and smart partnership, and how to work hand in hand for
mutual benefits.
From experience and his readings, Mr. A.H. Yong was able to understand
why buyers often tend to make strategic mistakes that ended up
compromising quality. For instance, many assigned procurement
managers to lead contract negotiations with suppliers, "They have a
procurement mentality and focus purely on price negotiation, and it's
an arm's-length transaction," he says. Because their expectations were

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based on their experiences with home-country suppliers, they don't

always follow-up with their Chinese vendors to monitor processes and
quality testing. They did not escalate the specific needs and
expectations of their end users and buyers. There was lack of mutual
understanding and sharing of knowledge on the product quality
requirements, which needed to be in the mindset from its very
beginning - from its inception and product design prior to
manufacturing. A close supplier chain relationship was vital for a
win-win solution.
Many companies did not understand how much support a Chinese
supplier often needs, and many expected to achieve quality
benchmarks without investing in their suppliers. Few stepped back to
ask what initiatives their suppliers had to adopt for the desired
production systems and practices or incorporate the end users
requirements and specifications.
All parties must keep the concept of compatibility and coherent goals
in mind. Purchasing and supply must b consistent with corporate culture
which is very important for cooperation. Putting up the right
environment for info sharing and capacity building, involved sharing
information, working together to reduce costs and lead time and
building total quality in all the stages of supply chain. If there were
disparate beliefs and ways of doing things, the different parts of the
whole supply chain management would pull in different directions.
Mr. A.H. Yong was confident that he and his team could make it. For
himself, he has the engineering qualifications and years of work
experience with MNCs. Above all, he had an additional advantage that
all of his engineering team and technical support services could
communicate in Mandarin and thus could communicate the quality
standards to their China counterparts.
He started off with the promotion and training for the quality managers
and professionals in China to enable them to take a leading role in
promoting contemporary, strategic quality management concepts and
practices. His experienced team in TopRank also assisted to develop a
comprehensive training plan to focus on how improvements through
people, processes and performance evaluation could trigger improved
quality of products and services, improved reputation and customer
satisfaction. In addition they helped explain the major challenges to

overcome in applying quality management strategies in the company,

including people management, processes and product developments,
cost and performance reviews.
Mr. A.H. Yong and team conscientiously worked to promote quality and
helped translate the product specifications and customers
requirements into the Chinese language for their China counterparts.
This had helped speed up quality consciousness organisation-wide for
the China counterparts in their product design and quality to meet
TopRanks local customers back in Malaysia who need to adhere to
stringent international standard conformance. TopRank would then take
up the task to convince the local customers on the quality of products
required. In addition, TopRank had also undertaken to conduct training
and after-sales services to cater for the local customers, thus reducing
operation costs for the customers.
For the China counterparts, quality had now become their top priority,
ultimately it was a win-win situation for all parties (Figure 6).

Figure 6: Partnership Framework

TopRank
Corporation
Meet Specification
Lower cost

IEC Specification
After-sales Service
Training
Quality Product

Local
Customer

Improve Quality
Increase Sales
R&D

China
Partners

English Language

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Chinese Language

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Spreading Wings in ASEAN

One of the very important factors was that the two Chinese partners
had assisted TopRank in establishing a platform for their overseas
activities. Mr. A.H. Yong was ever optimistic. It was a challenging task.
Im still passionate and enthusiastic to proceed further to expand my
strategic alliances with more partners in ASEAN such as Indonesia,
Thailand and Vietnam, and obviously more and more partners in China.
So this will be another beginning of the never ending journey
- Ir. A.H. Yong

Dos and Donts of Doing Business In China

Keep in mind that there is a social and political as well as
economic content to business in China and that you will
have to be knowledgeable and flexible enough to adapt to
the Chinese environment.
Preserving harmony is very important. For example, to avoid
coming across as rude, the Chinese may say Lets consider
and discuss again, rather than rejecting outright.
Chinese companies are extremely hierarchical - knowing the
seniority/ rank of all of the players in every meeting will help
buyers interpret the responses. You have to build relationships
and work to understand the dynamics of interactions in order
to understand the hierarchy.
Guanxi is knowing the right people to achieve a given task.
So it is extremely important for foreigners to be aware of
Guanxi and establish their own Guanxi. If you do not have
powerful connections in China, get some help from friends
and or other connections and make them.
Know everything possible about the Chinese company or
agency you are going to be dealing with, including personal
details about the managers and executives you will be
meeting.
Be as informed as possible about current social, economic,
and political aspects of China. One of the best ways to
accomplish this is to interview other foreign business people
who are stationed in China and have been there for several
years.

 Take an open, friendly, sincere stance in your presentation.

Say some nice things about China (but do not overdo it) and
about your own country, adding that you believe a
successful relationship will contribute to both countries.

Importance of Free Trade Agreements (FTAs)

FTAs help to strengthen Malaysias presence in key markets and
to gain access into new or emerging markets through the
establishment of preferential arrangements. These preferential
arrangements provide Malaysian business an advantage over
their competitors who do not enjoy similar arrangement.
The most immediate benefit from having FTA is the preferential
tariff arrangement it accords. Malaysian producers will be able to
export their products to the FTA market at preferential tariff rates,
making exports more competitive vis--vis their competitors from
countries which are not enjoying similar privileges. Similarly,
products from countries of the FTA partner will also enjoy preferential
treatment, thus enabling Malaysian consumers to enjoy a wider
selection of imported consumer products at lower prices.
FTAs help to create bigger markets which allow Malaysian
manufacturers to operate at economies of scale, thus lowering
unit cost and making exports more competitive. The creation of
bigger markets through FTAs will contribute greatly to positioning
Malaysia as a competitive production hub and attracting foreign
direct investment (FDIs).
Implemented Agreements
To date, Malaysia has concluded 2 bilateral FTAs namely with
Japan and Pakistan and, together with other ASEAN members,
Malaysia has signed regional FTAs with the Peoples Republic of
China, the Republic of Korea, Japan, India and Australia and
New Zealand jointly.
Malaysia Japan Economic Partnership Agreement (MJEPA)
The formal negotiations commenced in 2004 and were concluded
in 2005. This first bilateral FTA by Malaysia was signed on 13
December 2005 and entered into effect on 13 July 2006.

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Areas of Coverage
Market access for trade in goods and services
Investment
Technical regulations, standards and conformity assessment
procedures
Sanitary and phytosanitary (SPS) measure
Economic cooperation
Malaysia Pakistan Closer Economic Partnership Agreement
(MPCEPA)
The negotiations commenced in February 2005 and were
concluded in May 2007. Malaysia and Pakistan implemented the
Early Harvest Programme (EHP) for trade in goods in January 2006
to accelerate the trade liberalisation process of the MPCEPA.
Areas of Coverage
Market access for trade in goods and services
Investment
Economic cooperation
Source: Malaysia International Trade and Industry Report 2008

Key Learning Points

a Visionary leadership
b. Smart partnership as business strategy
c. Overcoming global challenges

Questions for Discussion

1

What are the critical success factors that had contributed to

the success of the company?

What challenges would the company face in the context of

the current global environment?