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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (4066)	1/4/2005 4:44:05 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

Facing China The country’s emergence as an economic power is changing the way people and companies everywhere live and work. Dominic Barton The McKinsey Quarterly, 2004 Special Edition : China today Whether or not you do business in China, you can't ignore it. Everyone knows the superlatives: how it consumes a huge percentage of global resources—25 percent of the world's steel and 50 percent of the world's cement, for example; how it is home to some of the largest companies on Earth, four of which cracked the most recent Fortune Global 500 list; how its economy will soon rival those of leading countries such as France and the United Kingdom. China's impressive growth has enhanced its global influence and, some would argue, helped shift the world's balance of power toward Asia. The country's vast production capacity and appetite for resources are changing the way its own people and people everywhere live and work. That is why so much attention recently has been focused on the pace and direction of the Chinese economy. Japan, for instance, owes its recovery in large part to China's buoyant domestic market; China is now its second-largest trading partner, after the United States. Likewise, China has assumed an increasingly important role in the global supply chain, so that economic development and change there immediately affect operations in companies around the world. Retailers such as Wal-Mart Stores are already sourcing billions of dollars' worth of products in China. Automakers such as General Motors are ramping up their supply efforts. Farmers in the United States also have an interest in the country: soybeans are among China's biggest US imports. It is a measure of China's importance to international business that the flow of foreign direct investment remains vigorous. A recent McKinsey Quarterly survey of senior executives showed that enthusiasm for investment there continues unabated in much of the world. Multinational companies are right to be optimistic. Yet China confronts not only great opportunities but also great challenges. Chief among them are the stability of its banking system, the social problems engendered by the restructuring of its state-owned enterprises and the consequent loss of jobs, an undeveloped pension and welfare system facing the challenge of its aging population, environmental degradation, and the reliability of energy and food supplies. Also high on the list are intellectual-property theft and potential industrial overcapacity. The way China tackles these issues will determine the long-term willingness of foreign investors to pour money into the country. But for now, they have voted with their dollars, euros, and yen: China already has become a vital component in the strategies of scores of the world's leading companies. Many are making money there, but a fair number are not. This special edition of The McKinsey Quarterly seeks to show senior executives how to capture the opportunities. In articles that cross functional and sector lines, the authors discuss ways of overcoming the country's cultural, regulatory, logistical, operational, and organizational obstacles. These obstacles are particularly evident in one of the hottest topics among managers today. "Getting sourcing right in China" examines the problems facing companies that procure goods there and what the most successful are doing to achieve short-term cost savings (in one case, of more than 20 percent). But every industry has its own set of issues in China. The world's biggest packaged-goods companies, for example, must figure out how to serve its vast middle market without damaging sales of their premium offerings—a problem analyzed in "Marketing to China's consumers." Although the secrets of business success may vary by industry, we hope this special issue shows clearly that one factor holds for all players: China represents a major, if challenging, opportunity. Foreign companies with a winning China strategy can look forward to lower costs and an excellent source of growth. mckinseyquarterly.com