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Facing Asian Competition

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Emerging countries, mainly China, are changing the world economic order. This presentation explains how they do it and what kind of competition the "old countries" are now facing.

Emerging countries, mainly China, are changing the world economic order. This presentation explains how they do it and what kind of competition the "old countries" are now facing.

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  • 1. Alain-Marie Carron Director, SECOR Facing Asian Competition… and others
  • 2. Europe, America and the Rise of the Rest…
    • We are witnessing the third tectonic powershift over the last 500 years
      • The rise of Europe
        • XV th century and Renaissance
        • XIX th century onward
        • Science & technology, commerce & capitalism, agricultural & industrial revolution: prolonged political dominance of western nations
      • The rise of the USA
        • More powerful nation since imperial Rome
        • World dominance since the collap se of the USSR
      • The rise of the Rest
        • Asia, Russia, part of South America, parts of Africa and the Middle East
    - - The Post American World. Fared Zakaria. 2008
  • 3. Emerging Countries Grow Faster - - GDP Average Annual Growth Rate (in %; 2001-2006) China Vietnam India Brazil Canada Russia Thailand Mexico Source: SECOR Analysis; United Nations Statistics Division
  • 4. Their enterprises get bigger - - Market Capitalization by number of companies Market Capitalization In Total Value Gross Margin In 2006 Net Margin In 2006 Mondialisation 2.0, Ernst & Young, May 2008 Within the 1000 biggest companies in the world 25% 14% 16% 8% Emerging Economies Developed Economies Developing Countries Developed Countries
  • 5. Emerging blue chips - - The Emerging Market Century, Antoine van Agtmael Li & Fung Hong Kong Mrkt cap: 93.31 B CEMEX Mexico # 1 cement EMBRAER Brazil #1 regional jets HAIER Hong Kong #3 refrigerators HON HAI Taiwan # 1 electronic parts HYUNDAI Korea #1 shipbuilding INFOSYS India # 2 IT services LENOVO China #3 computers SASOL S. Africa #1 synthetic fuel TMSMC Taiwan #1 chip founder YUE YEN China #1 athletic shoes CIMC China #1 marine containers POSCO Korea # 4 steel maker RELIANCE India # 2 polyster fiber SAMSUNG Korea #1 flat screens BYD China #1 iron, #2 maganese ZTE China Mrkt cap: 93.31 B M&M India Mrkt cap: 93.31 B Goodbaby China # 1 strollers Pearlriver Piano China # 1 pianos JOHNSON ELECTRIC Hong Kong #1 micromotors RANBAXI India #2 or #3 generic drugs CVRD Brazil #1 iron, #2 maganese TENARIS Argentina #1 seamless steel pipes
  • 6. They take a bigger part of our markets - - China’s market share in various large-scale economies (as a percentage of total imports of the economy at issue) Note: * For Russia, the percentage indicated for 1990 actually corresponds to 1996. Sources: United Nations Merchandise Trade Database (COMTRADE); data on the EU drawn from OECD World Trade Statistics (2006). PARTNER 1990 2000 2001 2002 2003 2004 Japan 5.2 14.5 16.6 18.3 19.7 20.8 United States 3.1 8.6 9.3 11.1 12.5 13.8 Korea 2.1 8.1 9.5 11.6 12.4 13.4 Australia 2.7 7.9 9.0 10.3 11.3 13.0 EU 15 2.5 6.2 6.8 7.7 9.1 10.7 Canada 1.0 3.2 3.7 4.6 5.5 6.8 Russia* 1.6 2.1 3.9 5.7 5.7 6.3 Turkey 1.1 2.4 2.3 2.7 3.9 4.8
  • 7. A demographic map of the world - - North America never looked so slim…
  • 8. Demography is a weapon of mass construction
      • You want cheaper products, you come to us
        • China + India + Brazil + Russia + Mexico = more than 3 billion
        • Europe + USA + Japan = 827millions
      • … or a potential for destruction?
        • Africa : 1,7 billion in 2040?
    - - THE POWER OF DEMOGRAPHY YESTERDAY : MORE WORKERS / TOMORROW : MORE BRAINS
  • 9. More brains, good and cheap
      • China: 2 nd investor in R&D in the world (136b in 2006)
      • Asia : from 15% to 32 % of R&D world investment in 4 years
      • 30 000 young Chinese will get an MBA in 2008 (1998 = 0)
      • 300 000 new engineers each year in China, 400 000 in India (USA = 70 000)
      • Large multinational companies create scores of research centers in China and India
    - - SHORTAGE OF TALENTS? IN 10 TO 15 YEARS FROM NOW, INTELLIGENCE WILL BE A COMMODITY
  • 10. The main engine of growth : hunger
    • Hunger for revenge or compensation
      • 1820: English merchants control Bengal and fix the price for cotton : good for Manchester, but 12 M Bengalis die
      • 1842: « Unequal » treaty of Nanking, lead to Opium War
      • Vietnam wars: France 1945-1954, USA 1956-1975
    • Hunger, for food and comfort
      • 3 billion people or more in the emerging countries want to eat, to work, to reach a «western style» way of life
    - - SHALL WE BE PREPARED TO RESIST A REVERSE COLONIZATION PROCESS?
  • 11. Chinese Competition Is Changing in nature
      • CIMC is a good example (China International Marine Containers)
      • How the worst in class became the NO1 global container manufacturer
        • Through cost and innovation strategies
    - -
  • 12. Learn, Improve, Disrupt
      • Find a competitor’s weak link and break it
        • Standard containers, economies of scale, acquisitions
      • Blend new technologies and low costs
        • Refrigerated containers, steel vs. aluminium, economies of scale
      • Offer variety + new technologies + mass production + low prices
        • Tank containers and special containers
      • At each stage, invest in R&D at very little cost
        • Folding containers
    - - Dragons at your door, Ming Zen & Peter Williamson, 2007
  • 13. 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 Brazil beauty, cosmetics
  • 14. The Cost/Innovation Method - - Mass production Low Salaries R&D Innovation Variety Low G&A A New Competition Model Niche The Filter
  • 15. Their 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
  • 16. Their strong points (looks familiar?)
      • Technological Innovation
      • Research & Development
      • Make of a niche product a mass product
      • Variety (at small price)
      • Economies of scale
      • Brands (coming soon )
      • Money is not really a problem
    - -
  • 17. Why this competition will increase
    • 1. Demographic pressure
      • They need to give work to their growing population
    • 2. Fierce local competition
      • High level of entrepreneurship leads to overca pacity
    • 3. Natural need to grow
      • To get richer and because it’s safer to be big than small
    • 4. They have the capacity
      • Talents, capital, hunger
    - - They start from zero, with hundred years of frustration to overcome. We are overfed and a little short on motivation
  • 18. China in the crystal ball of experts
      • Twice the US GD P in 2050
        • PriceWaterHouse Coopers (Sept 2006): the GDP of China will be 130% of the US GDP in 2025
      • KPMG: China will be ahead of US in FDI in 5 years
      • China buying the world
        • Currency reserves: close to 2000 billions US$
          • Sovereign fund - China Investment corporation - 200 bUS$ to spend
        • First quarter of 2008: Chinese companies have spent 19.34 b US$ in acquisition abroad (+ 353% compared to same period last year)
    - -
  • 19. Let’s think out of the egg ! - - Thank You!