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Strategies & Market Trends : True face of China -- A Modern Kaleidoscope -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (2974)	3/7/2008 11:07:28 PM
From: RealMuLan	Respond to of 12464

Booz Allen/AmCham Shanghai Study Finds Companies Adopting China as Both a Growth Market and Manufacturing Hub Are Two-Thirds More Profitable Than Others Posted : Tue, 04 Mar 2008 13:51:41 GMT Author : NY-BOOZ-ALLEN/AMCHAM earthtimes.org NEW YORK - (Business Wire) The era of China as a low-cost, manufacturing-for-export market has come to an end. Companies that integrate China into their global supply chains as a source of competitive advantage are far more successful than companies that pursue narrower objectives in China, finds a study jointly conducted by management consulting firm Booz Allen Hamilton and the American Chamber of Commerce (AmCham) Shanghai. More specifically, companies that pursue China as both a growth market and a market for lower-cost labor and sources, and integrate these operationally, enjoy significantly higher profits than companies pursuing just one of those objectives. Companies that employ dual sourcing and sales strategies report an average profitability rate two-thirds higher than those focused on just one of those objectives (29.6 percent compared with 17.8 percent). Despite the returns that this approach can generate, only one out of four companies is able to combine a strong in-country market growth effort with their manufacturing and sourcing operations. The first annual study, “China Manufacturing Competitiveness 2007-2008,” found that while a stronger Chinese currency and rising wages were putting pressures on manufacturing margins, failures to deploy operational best practices and to fully leverage China as both a growth market and source of labor and products are also limiting profits. “The manufacturing philosophy employed by many foreign multinationals in China in recent decades is in need of an overhaul,” said Ronald Haddock, Vice President, Booz Allen. “China’s changing cost and currency structure have shifted, forcing companies to rethink how they structure their Chinese operations and how they perceive China in their overall global strategy. At the same time, China is increasingly a major source of product and business model innovation. We’re seeing globalization at work and China’s role has changed.” More than half of the surveyed foreign-owned or foreign-invested companies manufacturing products in China believe that the country is losing its competitive edge in manufacturing to other low-cost nations. As a result, nearly one in five manufacturers surveyed has concrete plans to relocate or expand China operations to other countries, with Vietnam and India seen as the top alternatives to China. Among the study’s key findings: “China’s phenomenal economic growth and market reform story, together with a dynamic and challenging business environment, will continue to put pressure on manufacturing companies,” said Brenda Foster, President, AmCham Shanghai. “They will have to focus on continually improving their competitiveness and devoting more resources to innovation as they pursue their strategies and plans in China.” Study Methodology Booz Allen and the American Chamber of Commerce Shanghai surveyed 66 of the largest foreign-owned or foreign-invested manufacturers in China, representing more than 10 percent of the 600 largest foreign-owned or foreign-invested manufacturers in China. Online survey questions, on-site visitations, and in-depth interview methods were all deployed. Of the companies surveyed, 81 percent were wholly owned by foreigners, 10 percent were joint ventures between multinationals and Chinese partners, and 9 percent were categorized as “other.” The manufacturers’ industries included consumer, industrial, healthcare, and materials. The study was conducted between September and November of 2007. The countries of origin of these manufacturers included the United States, Japan, and several in Western Europe. Approximately 30 percent of the respondents have an additional major presence in China beyond their manufacturing footprints, including representative offices, regional or global headquarters, regional or global procurement centers, and regional or global R&D centers.