International Managers don’t underperform in China intentionally. Leck of understanding of culture, way of working that create problems.
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China Top achievements in industrial development.
China has made remarkable achievements in industrial development. This is due not only to market-oriented reforms and an open market in China, but also to the correct industrial strategy and changing industrial policies.
Compare your China operations against the performance of your American counterparts in Europe, Japan and the United States. This is a critical question that you might not realize. Within a decade, your organization in China may not be a star in the company’s performance firmament.
The conditions for success have changed in China. Multinational companies are expanding in China to smaller cities and towns to better serve the growing middle class of Chinese citizens and small and medium-sized enterprises. They often have to incur higher sales, marketing and distribution costs, as well as new organizational challenges, in order to meet the demands of their customers in these markets. They are also facing stiff competition from national and regional Chinese competitors, who often know their customers better and have established business relationships in local markets. These rivals compete relentlessly for price in areas where consumers have less money than in big cities.
Many multinationals are still far ahead of the curve in China because manufacturing labor costs in China are only a fifth of those in Europe and America. McKinsey’s recent study of 30 Chinese multinational factories found that waste reduces profits by 20-40 percent. We found that while many multinational retailers source goods from China, they save between 20 and 40 percent. However, we have studied the products they purchase and discovered that they could achieve far greater savings, often twice what they are able to today, if they managed their procurement processes as well as those in established markets.
China’s managers don’t intentionally underperform.
China’s manufacturing plants are plagued by waste partly because multinationals have inherited legacy processes, employee mindsets and manufacturing methods. Changes in regulation and a chaotic environment are all factors that can make it difficult for companies to succeed. Inefficient production lines, poor market research, inefficient distribution networks and underleveraged procurement are all hard to overcome. Managers should focus on growth and not operational improvement if margins are high and the business is growing. As China’s businesses grow, “good enough” execution will not be sufficient. Companies like Danfoss and GE, KFC, Johnson & Johnson and Nokia have shown that execution matters in China. They adopted a different approach to China, putting more emphasis on operating rigor and high performance standards. These high-performing businesses took best practices from other operations and applied them to China’s realities.
The China-specific strategies companies have developed might not be regarded as good elsewhere. However, China’s operations reflect market entry strategies and a high growth environment that allowed companies plenty of room. This includes a low level of competition, powerful partners, price power and wealthy buyers who are hungry for global brands. These systems, processes, functions did the job and were easy to accept.
10 Factors that will lead your industrial business to success
Global industrial market is constantly evolving. In 2022, what are the success factors on which an industrial company should focus? After reviewing the winning strategies of the biggest industrial companies this year, we have selected 9 factors which will lead you to success.
1 – Management
Management is the key to make your team more efficient. What characterises a good manager? He must exercise its leadership, must be able to set goals and encourages the team toredoubles its efforts to reach the goal and must also create a team spirit. Rewarding their efforts and positive results and ensuring that your team clearly understood what you expected of her (ask for feedback) are also some points you should not overlooked.
2 – Cost control
Control its production cost represents a considerable challenge for all the companies in the industrial sector. A loss of cost control will inevitably lead you failure. Minimising costs must remain your key motivation.
Recruitment is strategic. It is important to pay attention to the recruitment of your staff according to the needs of your company. When it comes to recruit managers and frameworks abroad, it is strongly advised to call upon a company specialised in recruitment in the country concerned, , which offers advice in human resources to help foreign companies in their recruitment strategy in China.
4 – Staff training
To be more efficient, workers must benefit from regular training, and even more in the industrial world which is constantly evolving. “Challenges in terms of training are not the same abroad. If you have a multicultural team, it is important to take it into account. In China, the education system is not comparable: diplomas are different and Chinese people do not have the same qualifications. You must discern knowledge and skills of each person according to his/her academic and professional background and adapt training in order to be able to achieve everyone’s potential.” said Fil Control, a French industrial company specialised in yarn cutters manufacturing whose core business is textile machinery building. The firm has been present on the Chinese market since 2005.
5 – Selling to Chinese Clients a paintpoint
The most interesting customers for a company in the current industrial market: Chinese people! Due to a constant rise of Chinese workforce costs, China has changed its strategy to keep its important place in the industrial sector: the country now focuses on added value products manufacturing, which requires a full industrial restructuring and a modernization and automation in its means of production. The demand for industrial equipments is very high in China. However, make sure you receive the payment from Chinese customers.
6 – Keeping the technological edge
A golden rule in the industrial sector: staying ahead your competitors in terms of technology. To achieve this, your company should focus on innovation; your products must be cutting-edge technology in order to make a difference in a very competitive sector.
7 – Being a leader in terms of quality
European industrials and especially French one are well-known abroad for the quality of their products. Thus, it is important to try to earn a position as leader in terms of quality. China, to restructure its economy, is looking for machinery and industrial technologies which are more and more sophisticated. That is why Chinese people really appreciate the high quality of foreign technologies, and especially French technologies.
8 – After sales service and customer service
Another step which is still too often neglected in the industrial world: after sales. Offering a quality after sales service can play a major role in your customers’ satisfaction and can help you to compete with your competitors. Customer follow-up is also very important: it will allow to gain customer loyalty, and it is unfortunately often ignored by industrial companies.
9 – Professional Exhibition
How to promote yourself, meet other industrial actors and find contacts? By participating in professional exhibitions organized all around the world! Professional exhibitions are not to be missed, especially in BtoB: the biggest industrial actors are present in these exhibitions even if we know it is difficult in 2022.
Now you know the factors which have been proved in the industrial world. Focusing on sales, professional exhibitions and meetings in the industrial sector is particularly essential.