Continuous Improvement -- Made For Americans

April 21, 2006
Chinese consumers want more U.S.-made products, but are U.S. manufacturers listening?

Before his meeting with President Bush last week, Chinese President Hu Jintao made a stop in Washington state where he paid visits to Microsoft Corp. and Boeing Co. Hu's visit to the state with one of the highest export volumes to China was no accident. Occurring just eight days after Boeing announced that China agreed to buy 80 of its 737 jets, Hu's trek to the Great Northwest was meant to symbolize opportunity for U.S. manufacturers.

Of course, trade relations between the two nations have proved to be more opportunistic for China, as the U.S. trade deficit with China soared to $200 billion in 2005. And even if China revalues its currency and takes action against piracy of U.S. intellectual property, competitive challenges still exist for U.S. manufacturers.

One of those hurdles is gaining a better sense of what products Chinese consumers want and designing those goods to fit their styles and needs. That's not to say some U.S. manufacturers haven't been active in developing products specifically catered to Chinese consumers. General Motors Corp., for instance, has been extremely successful in China selling small, affordable cars, such as the Chevrolet Spark. (GM was China's top-selling foreign automaker in 2005.)

But competition among automakers in China is hot, and some market analysts predict it won't be long before GM is toppled by other foreign competitors or even China's growing domestic auto industry. One automaker that's been successful in both China and India is South Korea's Hyundai Motor Corp. Hyundai's Elantra was China's No. 1-selling car model in 2005. Hyundai's success in both markets has been attributed to its knowledge of its customer base and its design of products made to fit foreign consumer preferences. It's worked in India where the company designed its Santro model based on consumer demand for fuel-efficient, low-maintenance cars, according to an article published last year in The McKinsey Quarterly.

While affordability is critical for consumers everywhere, quality is a priority for Chinese consumers. According to a 2005 survey sponsored by UPS, 60% of 1,140 Chinese consumers polled said quality is the most important factor they consider when purchasing U.S.-made products. Meanwhile, only 18% of survey participants said price was a priority when buying U.S.-made products.

With that said, it's clear that simply being "Made in U.S.A." isn't enough for Chinese consumers. Kevin O'Connell, senior partner with O'Connell and Co., a law firm involved in Chinese foreign direct investment, summed up the survey results best when he wrote: "The survey indicates that Chinese consumers are more selective and more sophisticated than formerly thought. I believe that American companies considering making the commitment to the Chinese market should note these results and do their 'homework' paying careful attention to quality and price and focusing more carefully on their target markets."

The survey, conducted by Research International, also was telling of what type of U.S. products Chinese consumers want. Topping the list of most-wanted products were toiletries, books, music and video products, consumer electronics, apparel and fashion accessories and home appliances. But Chinese consumers also said they'd like to see a broader selection of these products, including 29% who said they want more choices from U.S. automakers.

This shows that Chinese consumers want many of the same high-tech gadgets and fashionable accessories available in the U.S., but they don't have enough access to a range of products that fit their wants and needs.

That means if indeed China takes steps to level the playing field, manufacturers still need to invest time and resources into learning about the culture, demographics and buying history of Chinese consumers.

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About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

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