11 January 2008
The pitfalls of China’s rough capitalism
Posted by Roger under: Bad Suppliers; Business in China; Chinese Suppliers; Sourcing products .
Recently, I came across an excellent article on yahoo entitled “The pitfalls of China’s rough capitalism“which is noteworthy and worth commenting on.
He just said he wasn’t too worried about the quality,” said Devereux, who declined the request. “They think: ‘Everything is made in China. Let’s just place an order over the phone.’”
The article chronicles the experiences of two different buyers in China and is well worth the read as here in “the world’s factory,” simply not sourcing product in China is impossible. Even those who are specifically choosing to source product from elsewhere, inevitably find that a certain portion of their orders will still mostly like originate from China in one form or another. “For new products at the right price, China is “the only option at this time.” China (often with the help of joint-venture partners) produces a fair amount of products which are of decent quality, reasonable price and simply excellent values. But getting those products to market on schedule, according to quality/safety standards and doing so consistently is an altogether completely different challenge.
“It’s a cutthroat, predatory world where many factories cut corners to make an easy buck or just stay ahead of the thousands of others vying for their business. Safety scares, copyright ripoffs and outright thuggery are endemic.”
The rough and raw form of commu-capitalism seen here today is better likened to the American Wild west of the 1800’s. Yet I am always amazed (and at times amused) at how inexperienced western buyers continue to show up in droves on buying missions with a “its the same as back home” and “I can just do it myself mentality.” Worse yet is their innability to associate how this mentality can (and often does) translate into real liabilities, heachaches and even financial ruin back on their home soil.
There are a few quotes from the article below which are worth specifically pointing out:
- Quote: The American dealers plunked down $22,052 for a shipment of 2,740. But the lifelike dolls turned out to be knockoffs. Rust and Kozub were slapped with a lawsuit that could have cost them their home in Harmony, Pennsylvania. The dealers had sold most of the order when they got sued by Ashton-Drake Galleries, a major American dealer that owns the copyright to the doll’s design, including its clutchy little hands.
- Lesson: Just because the locals fearlessly copy that “hot design” without even thinking twice, doesn’t mean that rule applies to you. “When in Rome” does not apply here because eventually you will need to leave Rome.
- Quote: “Before we ordered the dolls, we asked if the design was theirs and they said, ‘Yes,’ ” said Rust.
- Lesson:Learn that in China, white lies are considered completely acceptable in the context of business. Its wrong to lie (unless it’s in business)! Take things with a “grain of salt.”
- Quote: Such incidents feed perceptions in the West that the Chinese can’t be trusted. But Robert Kapp, a business consultant with a doctorate in Chinese history, noted that the term “snake oil” was invented in the United States during the era of cowboy capitalism. “Every country goes through this period,” said Kapp, who headed the U.S.-China Business Council from 1994 to 2004. “It may be that China is going through a growth phase we went through some time ago.”
- Lesson:Its not that Chinese cannot be trusted but rather that trust-based assumptions are best left back home. Mainland Chinese should be given a limited amount of trust in light of the realities of the environment in which they work in. In all fairness, its difficult for an upstanding Chinese businessman to be dwelling on the trust issues of foreign buyers while at the same time operating in such an environment. Relegate “trust” to the backburner for sometime in the future and stick with due-dilligence for now.
- Quote: The Irishman, who now prefers Tsingtao beer over Guinness, worked with a family-run factory in the southern Chinese city of Foshan. They became so close that he was invited to the matriarch’s birthday party at the family’s luxurious compound with swimming pool and snooker table. But one day, the quality control worker employed by Carroll discovered invoices at the factory office for American-standard foam. That meant the 2,000 upholstered Regency-style chairs that Carroll had ordered couldn’t be sold in the British market, which requires flame retardant “BS-standard foam.”
- Lesson: You might become friends with a customers. ACF likes to think we are friends or at least on good terms, with all of the people we work with. But your Chinese supplier? They are NOT your friend. Make no mistake about it - you are “friends” because you are putting money in their pockets. “Friend” in China has a very different meaning then back home. In fact, if you read my previous post on funding your own competitor, you will know your friend might be planning on set up a competing business right next door to yours without even batitng an eye!
- Quote: “One of the wives began sobbing and urged him to forgive her husband and take the chairs as a face-saving gesture.”
- Lesson: Be on the lookout for theatrics. There are times when people do become genuinely emotional and this should be taken into consideration, however, in China, have noticed a certain propensity towards using various displays of emotion IF its in your interest or will help in swaying things in your direction. Switching techniques and adapting to the situation with whatever works best is more then clever: Cry if you need to, beg if you must, threaten and see if it has an effect. But be warned - when you come across this as it may all be an act.
- Quote: “They weren’t willing to fix the problem,” he said. “They said, ‘Can’t you sell these chairs anyway? We won’t tell anyone. Nobody will know.’”
- Lesson: See above - again, your supplier is not your friend. Especially when a problem turns up!
I hope you will take a moment to read the article in full and comment on your own experiences here. For those with browser problems or pages not loading properly the full link to the story is here: http://news.yahoo.com/s/ap/20080111/ap_on_bi_ge/china_raw_capitalism_2 )
HaoHao This
