Report advises midmarket companies to pool resources to build Chinese supplier networks
By Staff -- Manufacturing Business Technology, 11/1/2005 7:00:00 AM
Small and midsize businesses (SMBs) caught between a rock and a hard place—that is, thinking they are incapable of entering the Chinese market, and fearful of being squeezed by Chinese incursion at home—need not idly tremble.
According to New York-based McKinsey & Co.'s Quarterly Report,"Rather than wait passively for the day when these competitors show up on their doorsteps, [SMBs] can pursue strategies to overcome barriers to entering China's domestic and export markets."
Conceding that barriers are sizeable, waiting will only increase the challenge as multinational customers move forward to build Chinese supplier networks of their own, the report states. As Chinese suppliers hone their skills serving these customers, they'll become more formidable global competitors, particularly as trade liberalization advances in basic machine tools, automotive components, and home and office furniture markets.
One strategy used by SMBs seeking Chinese market entry is to work with national trade membership bodies that offer collaborative support for entrants. Such groups can provide shared sourcing so as to screen and short-list qualified Chinese vendors; and enable economies of scale for market research, sales, and distribution. Companies also can strengthen ties with multinational companies willing to "share infrastructure, establish relationships with industrial parks, navigate China's investment approval process, and recruit talent."
According to the report, "Most small and midsize manufacturers must face up to the challenges posed by China or risk being squeezed out of their home markets in the years ahead. Cutting operational costs is essential, but companies can turn the China threat into an opportunity if they pool resources and share capabilities and experiences, [allowing them to tap into] the entrepreneurial energy that helped them establish themselves in the first place."
