Regarding the case study, Hawang sets its e-reader sights high: What is the key issues in this case study?

Case study:

Liu Yingjian has grand plans. "Before I retire, I'm going to make my company a member of the Fortune 500," says the 57-year-old founder and chairman of Hanwang Technology. Although China's leading e-reader maker has a long way to go to make Fortune magazine's elite list of the biggest companies, with only Rmb574m ($85m) in revenues last year, Mr Liu's optimism is understandable after Hanwang's initial public offering made him a millionaire. Mr Liu and his wife own 36.5 per cent of Hanwang, which last month raised Rmb1.1bn through its listing on the Shenzhen small business board. Its shares have since soared to Rmb155.50 from the IPO price of Rmb41.90. Hanwang is one of the few technology companies in China with a strong intellectual property profile. It has long provided the technology for Chinese and other Asian language handwriting recognition on touchscreen handsets to Nokia, Samsung and others. Mr Liu, a former researcher at China's leading pattern recognition laboratory at the Chinese Academy of Sciences, continues to drive an agenda of innovation at Hanwang. Each year, 10 per cent of the company's revenues are poured into research and development as well as into new solutions such as stand-alone facial recognition devices. But Hanwang faces some severe challenges as it seeks to grow. After surviving in technological niches for a decade, the company saw its revenues more than double and net profit more than triple to Rmb85m last year, but the explosive growth is driven only by e-readers, a product in which some analysts believe Chinese companies have no competitive advantage. "The e-reader market in China is taking off, yes. But they have no unique strength in that field - they rely on Taiwanese manufacturers for the flat panels, on telecoms operators for the channel and on publishers for the content," says Wei Yuhuai, an analyst at CCID, an industry researcher in Beijing. The other concern is what will become the mainstream among mobile internet devices after the iPad, and will e-readers be marginalised?" he adds. Mr Liu is unfazed. Hanwang's e-readers last year grabbed 43 per cent of the 620,000 units shipped in the fledgling Chinese market. However, he admits that while Chinese banks or carmakers can achieve international recognition just on the back of their huge home markets, that does not work for technology groups. "All IT companies must be global," he says. Hanwang has found it challenging to meet foreign consumers' taste. The company is doing reasonably well in Russia and Spain but in Italy its distribution partner asked the company to redesign its casing and packaging. For the time being, Mr Liu is staying away from the US market. "We don't dare to boast about that. They have Apple."