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back to index backCHINAtalk July,  2005

A global march with Japanese characteristics - The WTO column

China's starting global march shows, at least superficial, interesting similarities with Japan's road into the global markets, now decades ago.

China's companies have enough money to acquire foreign companies, they try to do so, although just like Japanese companies initially not in a very smart way. Japan did so the same with Columbia Pictures, Rockefeller Center, Pebble Beach as a reader pointed out, after reading my previous column.

The first Chinese car, the Landwind has entered recently the European market, triggering off laughs, fears and a huge media interest. Those who are old enough to remember the first Japanese cars and other products entering the developed markets might see the similarities. Nobody could image that those inferior products from Asia could convince the spoiled consumers in the West. They proved to be wrong, Japanese companies did not wipe out its Western competition but did capture a sizable market share and even introduced new management styles that changed the way how companies conducted their business.

Is China conquering the world economy in a Japanese style? The history does not repeat itself, my professors already warned me during my history study and I think they are also right in this case. While it is tempting to pick some easy similarities, the differences seem more compelling.

First, China is different in size and in the level of development. Japan as a whole could and had to lift off to a higher economic level because it was much more developed and could not rely on cheap production for a long time. Unlike China, Japan had to focus much faster on quality.

Second, the Japanese management style facilitated global expansion much more than the Chinese management style, if something like that exists. In some industries Japan developed a previously unknown efficiency combined with very cost-effective logistical systems that have changed many of their Western competitors beyond recognition. It might take a while, but when the Japanese start, eh, marching, it is very hard to stop them.

While a similar Chinese management style might still emerge, the chances are not huge it will happen. What makes Chinese management so different from Japanese is its lack of direction. In every moment of the process, planning, after signing contracts, during the execution of plans, continues changes are not only possible, but normal. Even when there appear to be consensus about the route to take, new discussions will emerge and new directions will be explored. That Chinese flexibility and - indeed - creativity creates an uncertainty that drives business people from other cultures, including the Japanese, crazy. Chinese companies might do things cheaper, doing it more efficient might be tougher.

Japan had systems in place that could steer all its noses into the same direction: strong coherent government policies, its domestic organizations, its media, and its culture. All these unifying elements are not in place in China. China is institutionally much more diverse and lacks communication tools to let their business people walk in the same direction, even if it wanted it to happen.

So, the basic sentiment is a search to do things cheaper. That made China into the workplace of the world, and that might drive its global economic emergence in de decades to come. No bells and whistles, no expensive consultants, no heavy investments in brands. That might be the real cultural clash between Chinese and Western companies: the devastating price wars.

Domestically Chinese firms are used to those corporate killing fields that have brought down prices for teddy bears, shoes, TV-screens and mobile phones to their absolute lowest prices. But that struggle might be hard to transplant to other parts of the world, where a strong regulated labor markets, fixed wages, compensations and other costs might not allow a similar gruesome competition.

The new 'Landwind' five-door SUV is selling 40 percent cheaper than its European competitors sell. I do not see how they could make the car that cheaply in Europe itself.

Source: - GAI

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Other articles from the same issue (July,  2005).

The Five Biggest Myths About Doing Business in China
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Is The China Market Back?
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A global march with Japanese characteristics - The WTO column
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Outsourcing "Points of Pain" in the Supply Chain
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Automotive industry affected by recent guideline changes in China
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China's machine tool market
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China Tightens Employment Regulations for Hong Kong, Macau and Taiwan Nationals Working on the Mainland
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China's Currency Revaluation
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Spanish Government Directs Investment at Western China
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China's Still On A Roll
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