At a recent conference for the Australian Tourism Industry, I was asked to speak about consumer behaviour and emerging trends. During my research, all roads led to China.
The travel industry in Australia is in a good place. After all, it is not a hard product to sell. The outdoors, great cities, great people, lots of open space and one of my favourites; beaches, thousands of beaches.
The problem with being China right now is everyone is talking about China. The enthusiasm over the past decade for businesses to invest, produce and sell in China has been at the forefront of everyones lips.
This has been fuelled by the assumption that China has chosen the capitalist road and that business is a matter of free market competition without government intervention and interference. The costs of doing business are extraordinarily low in China and therefore, to be globally competitive, a company has no choice but to produce there.
These assumptions aren’t true. Whilst the ambition is there, China is only halfway onto the capitalist road with the local government far from withdrawing from the economy or the control of information. The Chinese government wants local companies to succeed in a wide variety of industries. A direct result is the hidden cost of doing business in China.
The old assumption is that things made in China were cheap and poor quality. To dominate world markets, we need to ensure what we are creating is better, better than the Americans and any other country in the world for that mater. So to combat this, China is getting very good at making things better in China. In fact, during my research, things are more often than not, “made better in China”. The direct result of this can be very high costs of doing business with China. Of course, far from having to produce in China to be globally competitive, the truth may well be the opposite.
China is a big economy. Big markets always look inviting and full of opportunity. There is a problem though with big markets. Seth Godin spells it out far better than I ever could;
The problem with huge markets is the same problem you’d have playing squash or raquetball on a court that’s too big. The ball doesn’t have a wall to bounce off of. Huge horizontal markets have no echo chamber, no niches, no easy entry points. To make a system like this work, everyone has to agree on the technology and then there has to be a huge push to get millions of people to make the same decision at about the same time. It might work, but it’s awfully expensive. Small markets aren’t as sexy, but they’re actually a better place to start.
Certainly any significant business needs to be extremely careful in how it deploys and operates in China. This is big business and they do big business well. The trends and the rise and rise of made better in China provide an opportunity for everyone, if you are prepared.
So, to take this conversation further, we have compiled our monthly report on the Rise of China, this is available through the iPad Newsstand and available to download now. It is 28 pages focusing on Chinese innovation.