Standing up to Asian Competition - JHKCBA Montreal


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JHKCBA McGill had the pleasure to invite Mr. Alain-Marie Carron, the Director at Secor Taktik, to share his views on the growing Chinese economy amidst this global economic restructuring. In recession, how do we leverage on opportunities available?

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Standing up to Asian Competition - JHKCBA Montreal

  1. 1. Standing up to Asian Competition Alain-Marie Carron Manager, SECOR-Taktik JHKCBA April 3 2009
  2. 2. Europe, America and the Rise of the Rest… <ul><li>We are witnessing the third tectonic powershift over the last 500 years </li></ul><ul><ul><li>The rise of Europe </li></ul></ul><ul><ul><li>The rise of the USA </li></ul></ul><ul><ul><li>The rise of the Rest </li></ul></ul><ul><ul><ul><li>Asia, Russia, part of South America, parts of Africa and the Middle East </li></ul></ul></ul>The Post American World. Fared Zakaria. 2008
  3. 3. Emerging Countries Grow Faster Source: SECOR Analysis; United Nations Statistics Division GDP Average Annual Growth Rate (in %; 2001-2006) China Vietnam India Brazil Canada Russia Thailand Mexico
  4. 4. Their enterprises get bigger Emerging Economies Developed Economies Market Capitalization by number of companies Emerging Economies Developed Economies Market Capitalization In Total Value Gross Margin In 2006 Developing Countries Developed Countries Net Margin In 2006 Developing Countries Developed Countries Mondialisation2.0 Ernst & Young May 2008 Within the 1000 biggest companies in the world
  5. 5. Export to USA : Quebec down, China up - - Sources : Industrie Canada, 2007; Analyse SECOR Exports from Québec (Québec, 1992-2007, Mds $) 27,7 57,6 69,9 Value of chinese exports to the US : + 93% in 5 years TCAC 1992 -1998 TCAC 1998 -2007 TOTAL 12,9 % 2,2 % AUTRES 5,9 % 7,0 % ÉTATS-UNIS 14,7 % 1,0 %
  6. 6. Demography is a weapon of mass construction <ul><li>Emerging countries are more than 3 times bigger than us </li></ul><ul><ul><li>China + India : about 2.6 billion people + Brazil (200M) + Russia (143M) + Mexico (110M) = more than 3 billion </li></ul></ul><ul><li>Main developed areas </li></ul><ul><ul><li>Europe (400M) + USA (300M) + Japan (127M) = 827millions </li></ul></ul><ul><li>… or is it mass destruction ? </li></ul><ul><ul><li>Africa : 1,7 billion in 2040 ? </li></ul></ul>The power of demography yesterday : more workers The power of demography tomorrow : more brains
  7. 7. More brains, good and unexpansive <ul><li>China: 2 nd investor in R&D in the world (136b in 2006) </li></ul><ul><li>Asia : from 15% to 32 % of R&D world investment in 4 years </li></ul><ul><li>30 000 young Chinese will get an MBA in 2008 (1998 = 0) </li></ul><ul><li>300 000 new engineers each year in China, 400 000 in India (USA = 70 000) </li></ul><ul><li>Large multinational companies create scores of research centers in China and India </li></ul>Shortage of talents ? In 10 to 15 years from now, intelligence will be a commodity
  8. 8. The main engine of growth : hunger <ul><li>Hunger for compensation </li></ul><ul><ul><li>1820 : English merchants control Bengal and fix the price for cotton : good for Manchester, but 12 M Bengalis die </li></ul></ul><ul><ul><li>1842 : « Unequal » treaty of Nanking, lead to Opium War </li></ul></ul><ul><ul><li>Vietnam wars: France 1945-1954, USA 1956-1975 </li></ul></ul><ul><li>Hunger, for food and comfort </li></ul><ul><ul><li>3 billion people or more in the emerging countries want to eat, to work, to reach a « western style » way of life </li></ul></ul>Shall we be prepared to a reverse colonization process ?
  9. 9. Chinese Competition Is Changing in nature <ul><ul><li>CIMC is a good example (China International Marine Containers) </li></ul></ul><ul><ul><li>How the worst in class became the N O 1 global container manufacturer </li></ul></ul><ul><ul><li>Through cost and innovation strategies </li></ul></ul>
  10. 10. Learn, Improve, Disrupt <ul><ul><li>Find a competitor’s weak link and break it </li></ul></ul><ul><ul><ul><li>Standard containers, economies of scale, acquisitions </li></ul></ul></ul><ul><ul><li>Blend new technologies and low costs </li></ul></ul><ul><ul><ul><li>Refrigerated containers, steel vs. aluminium, economies of scale </li></ul></ul></ul><ul><ul><li>Offer variety + new technologies + mass production + low prices </li></ul></ul><ul><ul><ul><li>Tank containers and special containers </li></ul></ul></ul><ul><ul><li>At each stage, invest in R&D at very little cost </li></ul></ul><ul><ul><ul><li>Folding containers </li></ul></ul></ul>Dragons at your door, Ming Zen & Peter Williamson, 2007
  11. 11. The List Is Getting Longer Mass production variety and innovation Build on the brand and technological innovation Turn a niche market into a mass market
  12. 12. Their strong points … or ours ? <ul><ul><li>Technological Innovation </li></ul></ul><ul><ul><li>Research & Development </li></ul></ul><ul><ul><li>Make of a niche product a mass product </li></ul></ul><ul><ul><li>Variety (at small price) </li></ul></ul><ul><ul><li>Economies of scale </li></ul></ul><ul><ul><li>Brands (coming soon ) </li></ul></ul><ul><ul><li>Money is not really a problem </li></ul></ul>
  13. 13. Their competititve advantages that we cannot duplicate 1 billion 300 million Huge Market 3 to 4 times less ... and relatively low paid Roughly 300 000 new engineers a year A lot of well-trained brainpower… Up to 30 times cheaper Very low salaries 300 million rural dwellers want to move to a city An enormous labour pool
  14. 14. A unique advantage Mass production Low Salaries R&D Innovation Variety Low G&A Cost-Innovation A New Competition Model Niche The Filter
  15. 15. Why this competiton will increase <ul><li>1- Demographic pressure </li></ul><ul><ul><li>They need to give work to their growing population </li></ul></ul><ul><li>2 - Fierce local competition </li></ul><ul><ul><li>High level of entrepreneurship leads to overca pacity </li></ul></ul><ul><li>3 - Natural need to grow </li></ul><ul><ul><li>To get richer and because it’s safer to be big than small </li></ul></ul><ul><li>4 - They have the capacity </li></ul><ul><ul><li>Talents, capital, hunger </li></ul></ul>They start from zero, with hundred years of frustration to overcome. We are overfed and a little short on motivation
  16. 16. Now, let’s deal with it ! <ul><li>We cannot change the reality : globality means </li></ul><ul><li>« Competing with everyone from everywhere for everything» </li></ul><ul><li>But we can change our reality : </li></ul><ul><ul><li>Get read of counterproductive attitudes </li></ul></ul><ul><ul><li>Never temper with the fundamentals of excellence </li></ul></ul><ul><ul><li>Transform our enterprise into a Small & Medium Multinational company </li></ul></ul>
  17. 17. Excellence here is not enough anymore <ul><ul><li>Our SMEs have to become Small and Medium Multinational companies </li></ul></ul><ul><li>“ If you can’t beat them, join them !” </li></ul><ul><ul><li>Meet them on their own playing field </li></ul></ul><ul><ul><li>Give ourselves the same advantages they have </li></ul></ul><ul><ul><li>Develop agile companies </li></ul></ul>Within 10 years, 1 billion new consumers (and producers) will enter the world market
  18. 18. SM - M = building the best conditions for success <ul><li>An SM-M builds an international value chain </li></ul><ul><ul><li>Gets supplies where the prices are lowest </li></ul></ul><ul><ul><li>Outsource non-essential services </li></ul></ul><ul><ul><li>Exports into mushrooming markets </li></ul></ul><ul><ul><li>Manufactures where costs are low </li></ul></ul><ul><ul><li>Change any of those elements when necessary </li></ul></ul>The name of the game here : orchestrate a network company
  19. 19. The 4 axes of SM-M Manufacturing Operational Excellence Managerial Skills Openness to other cultures Sales and marketing Innovation R&D Global Logistics ITC User End-Client Production Liaison Intangible Assets
  20. 20. Some SM-M in Quebec Quebec, China Winter boots Quebec, Ontario, China, Vietnam Quebec, India, Poland
  21. 21. Start running and think out of the egg ! Alain-Marie Carron [email_address] Thank You
  22. 22. Sources (some) <ul><li>Why Mexicans don’t drink Moslon. Andrea Mandel-Campbell. DouglasMcIntyre. 2008 </li></ul><ul><li>The post american World. Fareed Zakaria.Norton. 2008 </li></ul><ul><li>Dragons at your door. Ming Zen & Peter Willamson. Harvard Business school press. 2007 </li></ul><ul><li>Competing in a flat world. Fung, Fung and Yoram Wind. Wharton School publishing. 2008 </li></ul><ul><li>Emerging Markets. Nenad Pacek and Daniel Thorniley. The Economist. 2007 </li></ul><ul><li>The emerging markets century. Antoine Agtmael.Free Press. 2007 </li></ul><ul><li>Globality. Sirkin, Hermerling, Bhattacharya. Business Plus. 2008 </li></ul><ul><li>Made in Monde (How we compete) Suzanne Berger. Seuil. 2005 </li></ul><ul><li>La terre est plate. Thomas Friedman. Saint-Simon. 2006 </li></ul><ul><li>Produire le monde. Hervé Juvin. Gallimard. 2008 </li></ul><ul><li>Staying competitive in the global economy. OECD. 2008 </li></ul><ul><li>The Futurecast. Robert J. Shapiro. St Martin’s Press. 2008 </li></ul>