Viewpoint -- China As A Competitor

Oct. 27, 2005
The U.S. can compete if we use our imagination and reinvent our marketing strategy quickly.

Roger Lewandowski is CEO of World Competition Consultants.

Everyone knows the strengths of the Chinese, who are producing with low-cost world labor, but they too have their weaknesses, they are not unbeatable. I believe we can compete if we use our imagination and reinvent our marketing strategy quickly.

This does not mean to just improve on manufacturing, but to make bold new strides forward. The weaknesses they do have should be understood and exploited.

  • We must use speed as a competitive weapon. Our reduction of all lead times by a minimum of 50% is critical. China's distance from our marketplace is definitely a factor which requires forecasting to compensate for travel time and material processing and we all know the difficulty of accurate forecasting. (Built in slow moving inventory, obsolescence and not what is needed now.)
  • In order to prevent the shortage of material for the customers, companies in China or their customers must carry excess inventory for "just in case needs."
  • Again, because of the distance from their customers and the need to ship in containers to be economical, companies in China can't react in days. If we get our act together, we can react within hours.
  • Regardless of modern technology and communications, nothing beats face-to-face contact. Additionally due to cultural differences spoken communications might not take place either.
  • As we saw in Mexico, as people were trained by either the U.S. or other countries, the Mexican people then began to shop their skills for higher compensation. The result was a turnover rate of over 30%. We are starting to see this in China.
  • The base of production supervisors and hourly employees will continue to escalate in China. In Hangshou, supervisors earn $9, 268 per year and in Hong Kong, supervisors earn $32,407 annually. Consequently, the base structure of wages in China will escalate much higher and result in faster increase of costs than in the United States. Closing the wage gap will be a continuing occurrence.
  • The Chinese financial specialists have tied the Chinese yuan to a fixed position as compared to the U.S. dollar, so as the dollar fluctuates the yuan maintains its position causing a distinct trade advantage. As world financial markets are paying close attention to this situation, at some point China must break away and increase the value of the yuan in a meaningful manner.
  • The percentage of the Chinese population that is experiencing this economic boom in China in terms of employment and purchasing power is small. The uneven distribution can cause jealousy and greed. The more affluent population will become harder to control. Therefore the combination of a small percentage with a great deal of wealth combined with the more larger poorer population and a government trying to hold onto an obsolete system can become a power keg in the future.


Choose your outsourcing carefully when it involves China, and if possible leave a base in the U.S. that can flex up volume if needed so your company can react if something goes wrong in China.

I see competition for Chinese resources from other parts of the world escalating. This is especially true in Europe as the Euro becomes stronger relative to the dollar and experiences a higher cost structure.

Finally, I believe that using imagination and passion, we can offset the advantages that China has. Why not consider the possibility, with large customers, of "decentralizing the manufacturing process" either into customers' plants or leasing smaller facilities as close as possible to customers to provide real time delivery?

Roger Lewandowski is CEO of World Competition Consultants.

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