Monday, February 16, 2009

" Made In China " - A Threat for India ?

I receive lot of interesting questions from some of my Friends or Associates and most of the topics will be related to Leadership, Marketing, Hiring, Change, Strategy or Time Management. These questions actually come to my mind several times when I sit to write some thing on the blog.

Yesterday I received a call from an Entrepreneur friend of mine who is into manufacturing. While talking about his business, he asked me an interesting question which is the seed for this article. Let me quote him, " I have spend the last ten years bringing up my Company with lot of pain and we were extremely competitive in the market till recently. But now we're getting killed by imported products from China. How can we stay alive? "

I guess he asked me this question, since I had the opportunity to travel around the world over the past several years ever since I got into the foreign trade business for my Company. One Country I have often traveled to is China and my first visit was a decade back, during 1998. I could travel across China to various Provinces and interact with Entrepreneurs , Middle and Top Executives from different industries.

Coming back to the question my friend asked me, will there be any manufacturing jobs left in certain sectors in our Country if Chinese keep lowering and lowering the price of their products? Can our Government always protect the local industries with a temporary ban ( like the Chinese Toys banned for six months recently ) or keep on imposing anti-dumping duty? I know there is no easy answer to this China question! On the other side, we hear about China's problems - being an export depended economy how they are hit badly with present recession, its scarcity of middle managers, poor Intellectual Property Laws and the massive number of poor farming families moving into unprepared cities with not enough jobs to support them. We have also heard about Country's Banks troubled with close to 20% bad loans.

But I feel, for China these aren't mountains to be scaled, and they have grown big enough to handle any crisis. Increasing prosperity from spectacular economic growth over the past twenty years has given the Chinese enormous self-confidence. And China has more, a massive pool of low-cost, hardworking laborers and a rapidly expanding number of well-educated engineers and English speaking youngsters.

And, then, they have their work ethics, which may be their single biggest strength. Entrepreneurship and competition seems to be baked into the Chinese culture. During my last visit to China, I was watching a Television Program on the legendary political leader and statesman of Communist China, Mao Tse-tung. It showed his visits to all the villages and in all his speeches, he kept on telling his country men one thing, " work hard, work hard for the country " . No wonder, even today they follow Mao's ' work hard for the country policy '. I was at a city called Taishan and a girl visited me to have a business discussion traveling 320 Kms! She said every day she's at the office from 7.00 am until 6 p.m, goes home to join her husband and son for dinner till 8.00 pm., and then returns to work until midnight. " This is very typical here ", she said, six days a week " !

So faced with the inevitability of China, what do we do? First and foremost, get out of the tank. The sense of panic I heard from my friend is perhaps understandable and he could be one among several like him, but it doesn't take us anywhere.

It's not as if our country is next to any other country. We have a large consumer and industrial market, all thirsting for products, with great brands and distribution networks. We have an open economy and mature legal systems. Ours is a transparent society with democratic government and good education and good social systems. Even though the world has just discovered it, our growth story is not new and we are heading to be the world's largest economy sooner or later.

Our business has fully developed management processes. Many of our Corporates have gone global and successfully acquired several Big Brands and Companies. The rise of globally competitive Indian Companies like Reliance, Jet Airways, Infosys, Wipro, Ranbaxy, Tata Motors, TCS, Bharati, ICICI tells the story of Indian success. I am sure, the Indian success is market led whereas China's is state induced. The list of our competitive advantage could go on and on. So let's think positively. At the very least, ' a can-do attitude ' is a place to start. I agree, with recession and competing with Chinese products, some are in the worst of times.

But in the heat of battle, it always feels like the worst of times. Low-cost competitors are not new. History says, Hong Kong, Philippines and Taiwan have been in the game for over forty years. But how did China get on top of all these countries? Simple - because they changed. They grabbed the new technology and transformed themselves, emerging stronger than ever. And change is what China demands of us now. But the question is how?

Let me try to get an answer from the Japanese. As a part of " Association of Technical Scholarship's " training program, I went to Japan and visited several big factories including Toyota and Daifuku. And I learned whether its in Japan or in China, they all ride on three old warhorses of competition - Cost, Quality and Service - and drive them to new levels, making every person in the organization see them for what they are, a matter of survival. Lets zoom into these three factors.

Costs : Everyone needs to be searching everywhere, inside the company and out, for best practices. Find where and how every single process should be performed to increase productivity. Like I heard from the Japanese and Chinese Companies, don't think about reducing the costs just by 5 to 10 percent. We have to find the ways to reduce it by 20 to 30 percent. In most cases, that's what it will take to be competitive in the China world.

Quality : I have always heard people quoting that Chinese products are of cheap quality and I always correct them. Its not that Chinese produce only cheap quality products, they produce products to match any price and what we happen to see is just one of those low priced cheap quality product. But lets realize that, they can produce excellent quality products and most of the international brands which we bench mark as quality products are Made in China! They spend lot of money into R&D and we need to look into that aspect as well. On quality, we just can't have a trial and error approach. Getting it 95% perfect is not good enough. We need to use Six Sigma or any other methodology we like in order to deliver the best quality and get rid of defects.

Service : It is the easiest advantage to exploit. China is thousands of miles away from most developed markets. But still they manage to get new customers, give them good service and retain them. I think, our challenge is not just to improve service. It is to break the service paradigm in our industry or market so that customers aren't just satisfied, they're so shocked that they tell strangers on the street how good we are! I am sure we can do much better than China in giving the best service to Customers.

While we have to innovate to improve Cost, Quality and Service, lets go beyond that. Take a new, hard look at our market and search for untapped opportunities; find new niches. The market we're serving may seem saturated, but it is filled with plenty of demand for exciting new products, services or technologies.

And finally, while we are innovating and searching for new products and markets, lets realize the fact that China can be much more than just a competitor. I think, its time for us to think of China as a market, an outsourcing option, and a potential partner. Unlike Japan in its early development, China's huge market is relatively open to direct investment. It may be a good idea to think about selling our products or services in the Chinese market while sourcing products for our home market.

Now, I don't want to sound like a brand ambassador of China. Its presence is a real game-changer in business today. And even if trade restrictions get enacted, its currency is allowed to fluctuate, and intellectual property laws are passed, we cant ignore them and move ahead in business. Let me quote Jagdish N Sheth in his fantastic book "Chindia Rising " ( do read this book, its an amazing one ), ' the future is uncertain, but the present day makes clear that, China & India are rising, and much evidence suggests that, this trajectory will continue. "

I think, its time for us to stop looking at China as a competitor and it is a classic case of the ' glass half empty or half full '. We have two options, look at the situation and feel victimized or look at it and be excited about conquering the challenges and opportunities it presents. I prefer to pick the latter. How about you ?

Have a wonderful week ahead.


Anonymous said...

Dear Shameem,

I think that was a great eye opener. Indian MNC’s are the pride of the Nation, achieved success in the international market through same success mantras Cost, Quality & Service. This is from a global angle, but I would also look at it from a different perspective. When the matter comes to offering services or products to the domestic market, the service levels does not equal the quality of product does not equal the cost. I hope you get my point. Indian companies would not be able to reap the hidden success of domestic business opportunities until and unless they offer a truly global product/service maintaining global quality at a competitive domestic price. India has reasons too. Like China, India’s wealth is still its massive population/manpower. Indian players should not fear the Chinese import if they are able to match these ingredients in the right mix.

I guess one thing that is still lacking in the Indian system is confidence and attitude building. I have, similarly had the chance to interact with a large number of global and Indian company CXO’s on various business requirements. I see and feel the difference in attitude even from the grass root level. I hope this is injected into the education system in the country consistently and I am sure you can see the results.



Bala said...

Hi Shamim, I never thought, I can get such a quick answer for the question I asked to you the other day. Well, truly an I opener for me and I really appreciate for your guidance. Yes, agree with you, no point in fearing the Tiger, its better to fight it out. We will work hard and see to it that, we will compete with the Chinese products. Never thought in the angle of Cost, Quality & Service. Once again, thanks a ton Shamim. You are awesome! T.C - Bala, Chennai

Anonymous said...

Very Interesting and informative article. It has got lot of inner meaning and do write more on similar topics. S.K.Nair

Anonymous said...

Hi Shamim,
An excellent write up and i too believe that its high time we stop cribbing about China , as a game spoiler or a competitors . it all depends upon how one takes the basic tenets of the management and exploit to be competitively superior and that is what China did . Like for Eg. US had a first mover advantage on automotive industries but then Japanese,perfected the whole system by implimenting perfectly on the likes of total quality management , JIT , ETC..Etc , which all had the origin in the US and turned the tied against the US auto industries to be the leader in various auto segment . So its true as Shamim, said off the two choices which one to take . I too prefer to take the later one . Cheers!!! P.M.Ramesh

arun said...

Dear Shamim
you are really a veteran in china trade..since 1998.Since iam also taking advice from you for my import of petproducts from china and from my personal visits made to china for this,i really support your views.
Since iam also in to educational consultancy,i have made tie ups with few univbersities in china to send students from here for medical & engineering studies,i really can make out the professionalism they follow when they deal with us.The biggest surprise was that in this age of internet ,i recieved new greeting card sent by a university in china,righty delivered to my office in cochin on the day Jan 1 '09...hats Off !
"CQS " thats the buzz word ,indian companies should try to adopt.i also feel creation of more white collar citizens will aggreveate the existing problems we have here now.
"India lives in the villages" it is absolutely right.there should groups in each small village to create skilled labourers who can become the workforce india wants now.
- your well wisher - Arun Nayar

vikram said...

hi shamimm

Very excellent representation of your articles on management knowledge upgradation. However, we can not down load its ppt.

please keep on doing such good work


vikram mhaske-patil