C R A C K I N G T H E A M E R I C A N R E TA I L M A R K E T 231 to pay a premium for a product that worked as promised and could be easily serviced if it failed to function correctly. China had roughly 300 companies manufacturing refrigerators when Zhang took on the failing Qingdao factory. Nearly all of the factories were producing mediocre products. To get a different per- spective, Zhang went to Germany and made a quick comparison between European appliances and those being produced in China. The Germans were not necessarily smarter than the Chinese, Zhang reasoned, so why couldn't Chinese products be just as good as those of the Germans? Zhang defined his strategy: "First we observe and digest," he said. "Then we imitate. In the end, we understand it well enough to design it independently." Zhang began by licensing the latest technology from Germany's premium refrigerator manufacturer, Liebherr. Back in China, he marketed the factory's revamped production line under the brand