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China Is Cheap So Brits Get Rich?

on May 30th, 2007

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.

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13
  • 1

    china is a very complex business arena, especially main land china due to corruption….beware is my advice

    richard hayward on August 25th, 2007
  • 2

    I don’t care where you are in the world, if your products aren’t at good value then who is going to buy them?
    It doesn’t take a “bill gates” to work out that buying the cheapest products will mean to a buying something of less quality that people probably won’t look twice at.
    However it may work for someone working in a highstreet market place next to the pet shop

    Jonathon Richards on November 13th, 2007
  • 3

    I have read that China is moving very fast towards higher end products rather than just the factory production line services to western companies. Cheap production in places like China and India only has a short window of opportunity, which many companies will take advantage of, but I feel to compete in the future (as stated above) companies really do have to look at other aspects and not price alone

    Julian Bradbrook on November 26th, 2007
  • 4

    Very true, especially as China starts to produce it’s own high tech products and services.

    John on November 27th, 2007
  • 5

    How many Chinese car makes and models can you name ?
    You probably struggled to answer that question.
    The new wealthy in China are importing prestige western cars to display their new found wealth but as Chinese mnaufacturers cotton on to this, I’m sure there will be an avalanche of Chinese car manufacturers popping up to cater to demand from the bottom end of the market to the top.
    Give it 5 years and I’m sure you will be able to name many more makes and models of Chinese cars.

    Julian Bradbrook on November 27th, 2007
  • 6

    I could not name any. Doesn’t a Chinese company now own MG/Rover though?

    John on November 27th, 2007
  • 7

    I think you are right there John – should give them a good start if they capitalise on the MG Rover brand which should help with their marketing within China.

    Just done a search and it is a Chinese company called NAC – here is an interesting snippet –
    “In only one year NAC completed the construction of a huge, modern production facility in Nanjing and had its first MG cars rolling off the assembly line on 27th March 2007 – which was also the date of the 60th anniversary of the company. NAC is also proud to have won the award for the ‘most attractive car’ at the Shanghai Motor Show held in April 2007.”

    Julian Bradbrook on November 27th, 2007
  • 8

    I think china is going to be new power of the economic world.

    jamuna on December 10th, 2007
  • 9

    It’s already a significant economic power and it’s role is sure to grow.

    John on December 10th, 2007
  • 10

    While China is a minefield, there are great opportunities there, and the idea that they are cheaper so rubbish really is not the case. But like anything you do, you need to make sure you have control over the process.

    What I really mean is make sure the QA is yours and done at the factory :)

    Gary on January 18th, 2008
  • 11

    A few years ago i walked out of my job of 20 years an an IT engineer, traveled to China, saw many opportunities and stated a small importing business, its been hard but very rewarding.
    chinese products vary in quality, you have to go there and see before ordering, and price is not an indication of quality.
    They are doing well because they are motivated, and anything can be achieved. That simply is their mentality.
    Remember all the top European and US brands are made their nowadays, clothing, computers, even VW and Audi have plants as well there for the Domestic market in China.

    Jon on February 10th, 2008
  • 12

    @john

    rover is owned by an Indian company known as http://www.tata.com

    kapil on September 21st, 2008
  • 13

    @kapil
    MG-Rover is owned by NAC
    Tata and Rover collaberated and built the CityRover (Europe) which was also the Indica in India

    bobby on November 4th, 2008

 


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