EP, My trip in China mainland has been extended and am now in Wuxi. Meeting a private tycoon type after meeting with client, with annual revenue of 8 billion RMB engaged in various industries and the one my client is interested in.
Apparently what has happened in this one particular intermediate good industry is representative of quite a few other industries, and the players are comprised only of domestic private and intl invested, and absolutely no state-owned.
The internationals are getting hurt in China by the domestic privates and the same killers are beginning to directly aproach international clients. Playing strictly on and around price, quality, distribution, service, flexibility of approach, experimentation, and capital investment, and so far, no particular R&D, just reverse engineering by a lot of inexpensive university graduates.
The int'l, because of global market saturation, are reluctant to move capacity or build capacity or consolidate capacity, and the domestics, because of domestic growth, are more than willing to build new capacity, and off of domestic killings, making inroads overseas against ... how shall I say ...
Well, one client manager puts it this way, "the international majors, they are like the lions, each on their continent hill top, looking down; the int'l major minors, they must move like a puma, or they go hungry and die; the chinese domestic upstarts, like the wolves, hungry, moving in packs, and attack from all sides and by all different ways."
I say cockroaches, a swarm, ferocious, in onslaught mode, and unstoppable.
Judging by the fact that all players in the industry in question are private, and knowing the volume and margins, I say there is some serious moolah out here in private hands.
In the particular industry I am now helping the client with, I figure either international consolidation will be done by the client, by leveraging what they have in China (25% China mkt share), or by their largest chinese domestic competitor (35% China mkt share, starting from zero in 1993), or any one of 20 upstarts if allied with Koreans or Japanese or major overseas vertically integrated customer, either on own or with help of the financial houses.
The largest domestic competitor is doubling capacity, and when in place in a few months, will have 75% of my client's global capacity, but all in china. Client is the largest and leading global independents.
The client, a 80+ year entity with mucho history and much glory, is simply stunned about where the threat is coming from and how, all from zero, off of their own disgarded equipment not so very long ago. The private domestic took that disgarded equipment and has built up a who new town around the core, and went through several generation of upgrades and expansions already. Onslaught mode.
My job is to lead team to figure out an effective and deadly response, ala Unreal Tournament 2004, Last Man Standing Death Match. Implementation may take a while after strategy formulation. And so we first scout the environment, and get in tune with the Force.
I now think, by analogy, it is possible that the Walmart/Kmart will be taken apart before the cycle is out and done with, and only the way of apartness is in doubt, whether disintermediated, purchased, or married off.
Chugs, Jay |
