Sunday, February 6, 2011

Winning ( Chapter 20 ) Here, There, and Everywhere - Outlook of luxury goods market in China

In the final chapter of Winning, Jack Welch lists out several questions which he misses in the previous chapters. I pick out one of the questions about China which it becomes the greatest competitors among the world.

Q: We spent the last ten years bringing our company up to speed with training and process improvements, and with our low-cost labor, we were extremely competitive. But now we’re getting killed by China. How can we stay alive?

Jack Welch reports that a lot of workers from villages in other countries are coming gain a job in the factories in urban areas. They are all threaten by the massive of cheap labor and well educated engineers in China. In fact, Beijing organized the Olympic Games 2008 and Shanghai held the 2010 World Expo, everyone would like search for business opportunities in China in these 2 major cites.

Three old warhorses of competition are introduced by Jack Welch. They are cost, quality and service. He recommended the managers to find ways to reduce the production cost around 30-40% and implement the six sigma methodology in the production line. Take a look of the CEO of Starbucks Howard Schultz, he visits China twice in a year for studying the 500 Starbucks branches in China. He finds out there is an enormous speed of growth of sales revenue in China than other countries. The cost of the frappuccino in Hong Kong and China is nearly the same. However, there is a significantly difference in the cost of labor and rental of the store in China than in Hong Kong. China can provide cheap labor which can reduce the cost in the production line.   
Recently, China is poised to become the world’s largest market for luxury goods by 2020. Several reports from Hong Kong Trade Directory Council indicate that the growing of household income in every Chinese family would like to spend money on luxury items. Chinese consumers would like to travel to US and UK in Chinese New Year Holiday. They would like to purchase luxury branded name goods such as Louis Louis Vuitton and Hermès. Plenty of retails in New York and London would like to hire the staff with Mandarin language over the period of Chinese New Year. Upgrade the quality and service could be a competitive advantage among the others.

Instead of investing in China or upgrading the staff quality in luxury goods outlets, Jack Welch introduces the companies to join venture with the Chinese company. On 27th December 2010, Walmart is poised to take a stake in China’s fast growing online retailer The world’s biggest retailer is teaming up with online ecommerce business in Beijing. The ecommerce is growing fast in China. The local citizens would like to purchase online. It is around 420 million internet users in China and the researcher predicts China’s online shopping market will exceed 1,000bn yuan in 2013. Nevertheless, you can look at China and fee victimized. Or you can look at it and be excited about conquering the challenges and opportunities it presents.

Starbucks to Expand in China

China Luxury Boom Moves Inland

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