It is no longer acceptable in polite company to admit that your organization does not have a China strategy. Inhabited by a significant segment of the world’s population, if your company has the capability of focusing on China and it is not doing so, it is almost certainly missing opportunities. Even with rising production costs China remains one of the best deals in town.
Management and oversight is very difficult for a Western company with a China presence. Access to accurate information is one of the major hurdles. China’s government is notoriously private about the nation’s macro-economic situation and, with a language barrier and cultural differences, discerning the facts amid the fog of war is extremely difficult. Missed opportunities and outright failure occur for lack of accurate data alone.
The opportunity for rapid share and revenue growth in China is enormous. But managing the implementation risk, based on accurate information, is the key. Companies are now finding that their solutions come down to cost reduction which is also closely associated with complexity reduction: either simplifying operations or finding purchased commodities or services at a lower price point.
On both the supply and demand side, oversight and management of China operations entails finding the facts and comparing them with the status quo, then calculating projections on how to either grow revenue or reduce costs by changing the strategy and the structure. For example, many firms fail to strike the right balance between direct and indirect sales within China. There is a tendency to choose either one or the other: to either sign a master distribution contract with a single entity to manage all of China, or to put all of your eggs in the basket of direct sales. A better bet is a mix of the two strategies. Ascertaining the correct balance and implementing this strategy effectively is an example of why oversight and leadership of management in China is crucial.
Success in China also demands keeping focused as the market changes rapidly. Production costs in China are rising and the days of dramatic savings from outsourcing manufacturing to China are fading. China’s importance is shifting from the supply side to the demand side. But too often, the C-Suites in the West are operating from outmoded views based on yesterday’s news. Keeping up with the real situation on the ground in China requires an ear placed firmly on the railroad track. As this giant moves, ripples become waves very quickly. In six to twelve months, an entire market can shift, leaving missed opportunities in their wake.
Among other success factors, wise oversight and management for operations in China requires: