As discussed in our April Report China Today & Tomorrow, China over the last decade has experienced a new set of business dynamics that have had a negative effect on both on margins and sales revenue for both the China domestic and export markets. This more competitive environment has been a distinct departure from the high growth years of the 1990’s - mid-2000’s and this new business climate has been described as China’s New Normal.
Western multi-national companies now must not only understand the new business realities in China, they must then assess their business model and determine what must be done to continue on the growth curve in China given these new realities.
For many companies, this evaluation requires a complete assessment of their operational and commercial business models, including:
- Manufacturing model & Integration
- Sources of supply
- “Make or Buy” decisions
- Sales & Distribution models
- Product Offerings
- Human Resources Alignment
- Organizational Structure
- Logistics & Supply Chain
The recent 2013 AmCham Member Survey of US companies operating in China indicate most US companies are having to assess their China strategy and implementation practices because of China’s current economic situation, including increasing labor rates which continue to negatively affect their business, combined with high employee turnover and increased competition from new Chinese competitors.
These US companies are committed to servicing the China/Asia Pacific markets because of the growth potential and thus, must assess their own operations and identify the right operational practices to ensure they are growing in this China market.
To provide specific examples of how companies are assessing and implementing new practices at their China-based facilities, we have included a Case Study of a US company who was experiencing operational problems at their Chinese factory. East West Associates worked with the company to assess their China operations and strategy and implement “Corrective Actions”.
The Commercial and Operational Assessment case study was a classic assessment of the company’s manufacturing and commercial position with-in their market space in China. This assessment identified the main drivers causing a decline in sales to Western companies, lack of sales to Chinese companies and their overall poor economic performance.
Based on our experience running China-based companies for Western firms, East West Associates developed and implemented with the company’s executives a series of “Corrective Actions” at the China manufacturing plant.
For this company, East West Associates leveraged our Chinese operational experience to conduct the assessment in a timely manner and provide actionable data the US company was able to implement quickly.
Please enjoy the Case Study and feel free to contact us with any questions.
In mid-June, East West Associates will be conducting a webinar on Operational Assessment and Performance Improvement of China-based operations. Further details as to time and date will be provided in the very near future.