Competing with (and against) Asian countries

How to compete with Asia without counting on Asia?

Counting on competitive products and services is one of the main raisons d’être of companies; they assign important human and economic efforts to this. However, the lack of competitiveness of most consumption products manufactured in Europe becomes evident against Asian ones (we have begun to observe the repetition of this fact regarding services).

The ‘old world’ businessmen have run out of competitiveness resources; even those that are very drastic like staff reduction, cost and benefit reduction are not giving the expected results. On the contrary, even in recession times, Asian countries are still growing above the average. Their macroeconomic data still surprise us… and scares us.

Paradoxically, one of the few effective tools to compete with Asia is counting on Asia; it seems that the road toward competitiveness involves producing and developing in Asia thus maximizing the virtuous circle it has created. Despite being competitive, results are still ephemeral, and they imply the consequence of ‘putting ourselves in our enemy’s hands’, supplying them with financial, technical resources and very valuable commercial and logistic information.

On the contrary, even in recession times, Asian countries are still growing above the average. Their macroeconomic data still surprise us… and scares us.

Asian people have evolved from being mediocre -but economical- suppliers to technological experts, with the same (if not more) means available to the west. We have begun to observe the first steps of Chinese multinational companies, with brand value, which settle physically to produce in Europe.

Is the struggle for competitiveness a battle lost beforehand by Europeans? Does our only way out really involve focusing on services, going for innovation and R&D? Should we resign our factories?

One of the best solutions adopted by companies to continue being competitive, especially in United States, has implied the separation of the brand and the product portfolio from the industrial management. This initiative has allowed computer, electronics, toy companies, etc. to experience a rapid increase in their commercial portfolio, with the subsequent increase in the economic benefit. However, they are still relocating their productions; this has had socially long-term effects; strikes, factory closings, early retirements, etc.

Reactive economies like the American one have been capable of overcoming and surmounting the productive gap, thanks to the capacity of identifying and generating new opportunities in a proactive way, although it is difficult to recover industrial volume. In other less reactive economies like the European one, the recovery from the industrial gap is a virtually impossible task. Is there any recipe applicable to Europe?

Introducing a change in the ‘internal business model’ as regards productive aspects, distinguishing the business management (brand and product / service catalogue) of productive units is clearly useful.

We have already identified that the separation of functions makes the expansion of the companies’ marketing supply possible, enabling them to focus on the necessary market responses; but who produces? How does it produce?

Unlike what happens within the marketing activity, in productive terms not thinking about a specific market makes it possible to focus on technology and provide competitiveness beyond the price. Industrial management regardless of the brand and market management (productive activity) without resorting to relocation must be one of our goals to increase our capacity; this will surely imply technological selection and concentration effort.

In order to reduce pressure and short-term to productive management, we shall count on a third actor; the expert in logistics and distribution. This makes the necessary flexibility and specialization possible to compete in global markets, to pay attention to consumption fluctuations and to give competitive responses to productive series of small volume. The great repercussion and growth that stock-selling companies like Privalia are undergoing constitutes an example of this.

This distribution of roles implies a change in the internal business model: valuing intangible assets and revaluing the tangible ones in a different way; this will forced us to redefine the relation with suppliers, the concept of loyalty between the ones and the others until we reach a stage that will allow total transparency and the vital information flow for the development of the activity.




Mª Luisa Vives – Jaime Gross

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