With a rational cost structure, China-based companies, be they foreign or domestic, need to develop strong brands to succeed there while clearly targeting at their niche markets, a Shanghai-based financial consultant said yesterday.
"Competitive advantage has replaced government relationships as China's business currency," Jonathan Woetzel, a director in McKinsey & Company's Shanghai office, said yesterday at a presentation in Taipei to launch his new book, Capitalist China: Strategies for a Revolutionized Economy.
Even though potential Chinese customers have a preference for famous brand names, multinationals operating in China still have to get ready for a stiff price competition with local Chinese brands, whose products are, on average, cheaper by 30 to 40 percent, Woetzel added.
Sharing a similar view, Alfred Chen (陳飛龍), chairman of Namchow Chemical Industrial Co (南僑集團), which also operates in China, warned that Chinese brands are beginning to emerge and pose threats to multinational brands.
"Any companies that plan to succeed in the upcoming branding competition in the world have to tap into Chinese markets as a base," Chen said at the book launch.
With a 1.2 billion population, China is not only the world's most competitive manufacturing base but also a vast market that presents both commercial opportunities and challenges especially in the fast growing small cities and rural consumer markets there, he said.
However, business opportunities and challenges in China vary from sector to sector.
According to Woetzel -- a 16-year veteran of China's business scene, the Chinese are designing and adopting new technologies at a breakneck pace, which helps beef up their competitiveness as original-equipment manufacturers (OEMs) in the semiconductor and consumer electronics sectors.
But Taiwanese high-tech companies still enjoy the upper-hand in formulating technological proce-dures and production management as well as in their role as investors, Woetzel said.
"I see a great opportunity for cross-strait business collaboration," Woetzel said, adding that the chance for Taiwanese businesses to benefit from China's high-tech, semiconductor and food sectors is hopeful.
Huang Ho-ming (黃河明), former chairman of the Institute for Information Industry (資策會), said digital industries such as short messaging and broad-band businesses in China are growing rapidly and have attracted many Taiwanese players.
As China-bound investments are unstoppable, Woetzel urged the government to relax regulatory restrictions on any capital-raising mechanism that it is formulating and allow capital flight to China, adding that sources of funding in China are moving toward a capital markets model.
He said the source of business funding from Chinese capital mar-kets is expected to grow to 56 percent in 2005, up from 36 percent last year and 20 percent in 1996.
Dismissing the "China threat" mentality, Woetzel said economic competition among Asian countries is "not a zero-sum game since China has driven the restructuring of Japan from which almost all of Asia has benefited."
RSS