Many were surprised by recent news that Shanghai Hero Pen Factory, a State-owned firm well known for its famous Hero fountain pen, intends to sell off a 49 percent stake in the company for 2.5 million yuan ($401,500). Founded in 1931, the company was once China's leading pen manufacturer, with total assets over 703 million yuan in 1996.

More than a decade and a half later though, the company's total assets have dwindled to just 24.98 million yuan, and data from the Shanghai United Assets and Equity Exchange show that the company suffered a loss of 4.72 million yuan in 2011, when its revenue stood at just 37.79 million yuan.

Many have cited weak demand for Hero Pen's financial woes and claim that the rise of computers and roller ball pens has usurped the popularity fountain pens once enjoyed.

Of course, it's easy to see that fountain pens have lost much of their former standing in society as shoppers look to more convenient writing tools, but falling demand cannot completely explain the current problems Hero Pen is facing, since foreign fountain pen makers have found a receptive and growing market in China. Parker, a UK-based pen company, for example, has seen its fountain pen sales increase consistently by 30 to 50 percent in recent years.

The real reason behind Hero's falling sales and waning position in the domestic market is its failure to develop a solid brand image. Even after many decades as the leader in the domestic pen market, Hero Pen never succeeded in making itself a high-end company. To Chinese customers, Hero Pen has never been anything more than an economical and reliable brand, so when people buy fountain pens as gifts or for their own collections, it's no wonder they are choosing brands that are regarded as more luxurious, such as Parker or Mont Blanc.

At the same time, Hero Pen has also made several missteps which have tarnished its image. One such poor choice was its decision to start accepting original equipment manufacturer (OEM) orders from its international and domestic competitors, a move which effectively downgraded it to the level of a manufacturer.

As foreign brands continue to carve out bigger portions of the domestic market, homegrown brands - even well-established names like Hero Pen - have to either raise their standing in the eyes of customers or prepare themselves for an inevitable decline.

The author is an analyst from Shenzhen-based Qianzhan Intelligence Co. bizopinion@globaltimes.com.cn