I watched Brits Get Rich In China on channel 4 yesterday. According to the program every day Brits arrive in China, seduced by wages of 20p an hour, dirt-cheap production costs and over a billion potential customers. The program claimed to “follow the dramatic missions of three British trailblazers as they try to make their fortunes in China: the real dragon’s den.”
We were introduced to Tony Caldeira whose once-thriving Merseyside cushion business had apparently been ruined by cheap Chinese imports. In a desperate bid to save his company, he’d borrowed two million pounds and flown out to China and taken on a Chinese partner to build a cushion factory in a paddy field from which to relaunch the business.
He focused entirely on buying the cheapest products, with the lowest labour costs so he could compete on price. This is in my mind a terrible mistake as competing on price has already caused the business to fail once. Instead he should be focusing on ways to add value to his service or repositioning his products to focus on the premium end of the market.
Seth Goddin summed this up very succinctly:
Maybe the reason it seems that price is all your customers care about is…
… that you haven’t given them anything else to care about.
I believe that to keep moving your manufacturing to the cheapest source of labour is also doomed to failure, after all it’s not long ago that all cheap products were made in Taiwan and with golobalisation, growing worldwide consumerism and the increased speed of worldwide communications I predict that the cost of labour and goods in countries like China will increase faster than ever before.Email This Post