Strategies for Competing in a Changed China
Strategies for Competing in a Changed China
Magazine: Summer 2004Research Feature July 15, 2004 Peter Williamson and Ming Zeng
This paper presents the results of the authors’ detailed research into competition between multinationals and local Chinese companies in 10 industries over the past five years. They conclude that local companies are now threatening multinationals’ plans to conquer the China market. They analyse this new competitive game in terms of a dynamic battle of competencies. Multinationals start off with better industry-specific technology and know-how, and a higher level of competence in key functions like marketing and financial management. Chinese companies enjoy a better understanding of the local market, lower overhead, higher flexibility and the ability to buy technologies and expertise in an increasingly open global market. Who wins the competitive battle in an industry is determined by which group matches the competence advantage of their rivals more quickly and efficiently. They argue that to come out ahead, multinationals will need to fundamentally revise their China strategies, for example, by expanding market coverage, dramatically lowering costs, streamlining distribution channels, localizing R&D and proactively driving industry consolidation.
The night before China’s entry into the World Trade Organization in December 2001, Motorola Inc. held its global board meeting in Beijing for the second time and announced an ambitious plan to increase investment, revenue and sourcing by $10 billion each in China over the next five years. Other companies have had similarly grand visions. Telefon AB L.M. Ericsson announced that it would more than double its investment in China to $5.1 billion, also over a five-year period. General Motors Corp.’s plans call for Chinese operations to generate more than $3 billion of revenue by 2008. By that same year, Bayer AG intends to have the second phase of its $3.1 billion production facility up and running
Magazine: Summer 2004Research Feature July 15, 2004 Peter Williamson and Ming Zeng
This paper presents the results of the authors’ detailed research into competition between multinationals and local Chinese companies in 10 industries over the past five years. They conclude that local companies are now threatening multinationals’ plans to conquer the China market. They analyse this new competitive game in terms of a dynamic battle of competencies. Multinationals start off with better industry-specific technology and know-how, and a higher level of competence in key functions like marketing and financial management. Chinese companies enjoy a better understanding of the local market, lower overhead, higher flexibility and the ability to buy technologies and expertise in an increasingly open global market. Who wins the competitive battle in an industry is determined by which group matches the competence advantage of their rivals more quickly and efficiently. They argue that to come out ahead, multinationals will need to fundamentally revise their China strategies, for example, by expanding market coverage, dramatically lowering costs, streamlining distribution channels, localizing R&D and proactively driving industry consolidation.
The night before China’s entry into the World Trade Organization in December 2001, Motorola Inc. held its global board meeting in Beijing for the second time and announced an ambitious plan to increase investment, revenue and sourcing by $10 billion each in China over the next five years. Other companies have had similarly grand visions. Telefon AB L.M. Ericsson announced that it would more than double its investment in China to $5.1 billion, also over a five-year period. General Motors Corp.’s plans call for Chinese operations to generate more than $3 billion of revenue by 2008. By that same year, Bayer AG intends to have the second phase of its $3.1 billion production facility up and running