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back to index backASIAtalk November,  2005


Will Chinese Businesses Lead the World?

Consider this. You are in a race which you lose. How do you explain it in a way that activates you to improve your performance? Do you ask -- What are they doing to us? Or -- What can we do better?

Question Number One may well be true. The problem is: it takes you nowhere. Question Number One may, in fact, be the preferred question that Western organizations are increasingly making. Just why that may be a trend is a point I'll return to. Question Number Two "What can we do better?" sets the scene to examine possible causes for shortcomings that lie within ourselves, meaning here - why did we not succeed as well as we expected to, or at all, in our competitive marketplace against the rising Chinese brand competition. This question may not, any longer, be the one that is being asked in the West.

Right now, that Chinese competition is mostly experienced at the bargain basement end as low price competition on consumer goods mass produced at minimal cost. This is what Chinese companies are good at, notwithstanding that they cut corners to reduce costs. But this hardly defines some surging global Chinese brands such as Haier appliances, Lenovo computers, TCL appliances and QingDao breweries.

A comparison with post-war emergent Japan is relevant. The "Made in Japan" label was transformed from post war "cheap and unreliable" to premium quality at a value price. Japanese motor cars are a leading example, being complex, multi-technology platforms with high consumer sensibility. Surveys of European drivers generally rate the seven leading Japanese car manufacturers ahead of major European car brands. Can Chinese manufacturers claw their way up to become the next generation of global industry brand leaders? There are two reasons why they may.

Western economies' have shifted to services, away from manufacturing, science and engineering. This is proving very instructive to outsourced target countries like China. And it has, in the West, led to a loss of real capability, coupled with a rise in the belief in abstract and self-defeating management ideas about how people work. The US and UK economies are around 80% service based, as measured by labour force occupations. China has around 70% of the labour force in manufacturing and agriculture. Their skill base is rising but the practical capabilities, valuable know how and execution ability that underpinned success in the West is gradually being lost. We note a declining appreciation with the innovative and productive functions of science and engineering as evident in the lower social and financial credit accorded them compared to entertainment, law and finance. These service economies are characterised by individualism at the expense of community development.

In the West, the loss of practical management skills has other social dimensions; the rise in short term expectations and quick gratification, a decline in respect for the work ethic, risk avoidance under the guise of risk management, yet risky personal financial behaviour, all collectively evident in less than sound economic fundamentals that we observe in countries like the United States, the United Kingdom and Australia – i.e.: a credit based consumer society. The belief that everyone can fulfill their dreams is ever present, yet unrealistic.

Paradoxically, "thought leadership" so-called, is part of this Western management malaise. Invented by management consultants, most of who could not fix a leaking faucet [tap] but could pontificate for hours on neat management theories that can never be proven to work.

This short take on why the West may lose its business leadership position does not automatically guarantee a dynamic resurgence for Chinese businesses. But why may Chinese companies do better?

That it is widely attributed to the Chinese that they breach copyrights and imitate rather than invent is an artifact of recent Chinese social history. Chinese civilization and innovation stretches back some 5,000 years. One example of this is naval ascendancy. Around 1,000 years ago the Chinese became a rising naval and trading power, with large ships, supported by technical mastery in navigation - they invented the compass, measured depths and distances, installed lighthouses, advanced understanding in astronomy, geography and tides and developed marine charts. Not the hallmark of a people incapable of ingenuity and practical ability.

Back to the present and at the enterprise level, how may the Chinese workforce manage their resurgence? Chinese organizations are bureaucratic, slow, and ideological and they lack transparency. But they learn, especially from outsiders. And they learn well.

Less well appreciated are China's efforts with its space industry, where more credit is due to internal capabilities, research and local expertise than what has been bought in from Russia and elsewhere. Looking at technical skills more generally and in recognition of local capabilities developed to a high level, major American technology corporations now outsource major research and development projects and plants to Chinese technologists and researchers, of which there is a seemingly inexhaustible supply. The economics of cost have taken precedence over Western national strategic concerns, but that is another matter.

Forecasts are one thing, outcomes are another. Just whether more Chinese brands can globally assert themselves through organic growth and expansion by acquisition of foreign companies remains an open question but the push is underway and it is a process that we can observe over the next two decades.

Source: CBIZ.cn - GAI


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