From mass production to a new paradigm. By Antonio Valverde Sanz, Director, AGM Corpfin
Marketing’s experience says you’re not going to remember a message until it has been repeated so many times, probably not less than seven. So, I would like to be the first one to tell you something you will read and hear time and again: China’s Government (so it means “all Chinese”) doesn’t want to be World’s Manufactory for ever and ever. They will be too (until someone do it better, probably in East-Asia or Africa) but they are ready to begin quality’s battle. You’ll hear many times in the coming years and it’ll become true in less than expected, as everything about China.
If that’s true you need to work right now to be ready to challenge. We will compete in price but in quality too. We ever say European companies have lost price’s war but will ever win quality’s one. As someone said: “It would be right if you could trust it”. I’m going to give you some arguments to question it:
- National incomes increase yearly. So history and trend says they won’t ask cheapest but quality and branded products. Do you think Chinese companies are going to lose the opportunity and leave the business only for European/American companies?
- Areas as Beijing, Shangai or Guanzhou have become extremely expensive nowadays, not less than premium cities all over the world. So they are not able to produce now in the same cost than years ago. They have just a couple of possibilities: move inland (where costs are lower) or evolve to added value products/services. Probably both will happen. So a percentage of them will begin to produce high standard’s products. Only the fact their brands don’t have same prestige as old European ones offers us some advantage but nobody knows if it will be so ever.
- We are exchanging money by knowledge since many years ago. We show them our technology to produce in a reduced cost and thanks to “low cost costs” we become competitive in our local markets. Now they have learned our old technology.
If you don’t want to trust what I say, trust what you read. Just take a look to “China’s 12th Five-Year Plan” and news coming from official sources (Xinhua’s Agency, China Daily, CCCTV,…). A common message rides: “Share the wealth between urban and rural areas, it’s time for “the rest of China””. And R+D+i together quality are being focused as key tools to get it.
Please, don’t’ be so dreamer to think Chinese companies will ever produce under a “best cost” focusing. Try to imagine they will be competing with you in the luxury market. They have the money (some main brands are being bought by them) and they will have the knowledge. If you think so you won’t repeat same mistakes than yesterday and you’ll be beginning to win the future. Don’t wait until seventh time!!!
Antonio Valverde Sanz
The information included in this Newsletter is intended for guidance purposes only and should not be regarded as a substitute for taking proper legal advice.
Author: Antonio Valverde Sanz, at AGM Corpfin, Spain