January 7, 2014
5 Business Lessons from China
At the back end of 2013, I was lucky enough to travel to Macau and parts of mainland China to attend the ‘Young Managers Forum’ hosted by the Asian Association of Management Organisations. The week-long program saw us visit a number of Chinese and foreign-owned multinationals operating in Southern China, with the implications for managers discussed.
I was one of two delegates representing Australia on behalf of the Australian Institute of Management, with attendees from Malaysia, Singapore, Nepal, Mongolia, Macau, Hong Kong, Sri Lanka, India, Pakistan and New Zealand also participating.
After a week of fascinating business visits, in-depth discussions with Chinese business leaders and some brilliant cultural experiences, I’ve put together my top five business lessons from China.
China is no longer a cost-leader
This was probably the thing that stood out the most. Of the four or five manufacturing facilities we visited, all of them mentioned that on the back of increasing minimum wages (which have risen by around 15% a year for the last decade), China’s cost advantage over the rest of the world is diminishing. Countries such as Indonesia, Thailand and Brazil can now manufacture products at considerably lower prices than can be achieved in China.
As a result of this diminishing cost advantage, the second finding was…
China’s focus is moving from price to quality
With their own cost-of-business going up, to maintain its status as the “world’s manufacturer” China has had to put a much greater emphasis on quality. Increased focus has gone into supplier selection and management, input testing, product durability testing and more as it tries to compete against lower-cost manufacturers from other parts of Asia.
This shift from simply focusing on cost-minimisation to now caring much more about the quality of the final product results in the third finding….
Western management practices are becoming the norm
If I had a clicker for every time I heard a mid-90’s management buzzword I would have broken it by the end of the week. “Lean manufacturing”, “continuous improvement”, “work-life balance” were just a few of the typically Western management constructs that were dropped into presentations and discussions by nearly every business we visited.
From my perspective, it seemed as though the application of some of these ideas were still a few years behind ‘best practice’ elsewhere, but the intent was clear; China’s businesses are getting serious about being globally competitive on their own, not just as a supplier to someone else.
Because this was also a largely “young manager” themed program, plenty of questions regarding Gen Y talent were asked, which led to the fourth finding…
Gen Y stereotypes are just as prevalent in China as in Australia
In fact, I was quite surprised at just how similar the (in my opinion incorrect) stereotypes of the younger generation were between China and Australia.
- “Gen Y are lazy and self-absorbed.”
- “Gen Y don’t want to work and just get money wired from mum and dad.”
- “Gen Y aren’t loyal to their employer”
At one company, the HR team ran scenarios that were designed to train managers on how to deal with Gen Y staff. The scenario involved a company dinner where the individuals born in the respective decades acted as follows:
- Employee born in 1970’s – “I’ll sit next to the boss to make a good impression”
- Employee born in 1980’s – “I don’t want to sit next to the boss, that will take away the fun”
- Employee born in 1990’s – “I am the boss.”
Believe it or not, that scenario was how this particular business was training its own managers on how to deal with Gen Y staff.
The speed of business progression is mind-blowing
I believe it would be a great mistake to think that China’s businesses will continue to finish runner-up to Western business over the coming years. The speed of progress from the last decade is phenomenal, and the growing Chinese middle-class evident everywhere you look, with many of these businesses now reporting a doubling of their domestic demand in just the last few years.
With improved management practices, and a more affluent domestic consumer buying its products, it might not be long before we start seeing China in the same vein as Japan or Korea when it comes to innovation, product quality and business leadership.
Been to China? Agree/disagree with my observations? Let me know in the comments below.