Standing up to Asian Competition
Alain-Marie Carron
Manager, SECOR-Taktik
JHKCBA
April 3 2009
2
Europe, America and the Rise of the Rest…
We are witnessing the third tectonic powershift over the last 500 yearsThe rise of Europe
The rise of the USA
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
9,7
7,67,3
6,2
5,1
2,9 2,6 2,3
Source: SECOR Analysis; United Nations Statistics Division
GDP Average Annual Growth Rate(in %; 2001-2006)
China Vietnam India Brazil CanadaRussia Thailand Mexico
4
90% 78%
10% 22%
2000 2007
95%81%
19%5%
2000 2007
Their enterprises get bigger
Emerging Economies
Developed Economies
Market Capitalizationby number of companies
Emerging Economies
Developed Economies
Market CapitalizationIn Total Value
Gross MarginIn 2006
14%
25%
Developing Countries
Developed Countries
Net MarginIn 2006
8%
16%
Developing Countries
Developed Countries Mondialisation2.0Ernst & YoungMay 2008
Within the 1000 biggest companies in the world
- 5 -
Export to USA : Quebec down, China up
Sources : Industrie Canada, 2007; Analyse SECOR
TCAC 1992 -1998
TCAC 1998 -2007
TOTAL
12,9 % 2,2 %
AUTRES
5,9 % 7,0 %
ÉTATS-UNIS
14,7 % 1,0 %
Exports from Québec(Québec, 1992-2007, Mds $)
27,7
57,6
69,9
Value of chinese exports to the US : + 93% in 5 years
6
Demography is a weapon of mass construction
Emerging countries are more than 3 times bigger than us
China + India : about 2.6 billion people + Brazil (200M) + Russia (143M) + Mexico (110M) = more than 3 billion
Main developed areasEurope (400M) + USA (300M) + Japan (127M) = 827millions
…or is it mass destruction ? Africa : 1,7 billion in 2040 ?
The power of demography yesterday : more workers
The power of demography tomorrow : more brains
7
More brains, good and unexpansive
China: 2nd investor in R&D in the world (136b in 2006)Asia : from 15% to 32 % of R&D world investment in 4 years30 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
8
The main engine of growth : hunger
Hunger for compensation1820 : 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 comfort3 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 a reverse colonization process ?
9
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
10
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
11
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
12
Their strong points … or ours ?
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
13
Their competititve advantages that we cannot duplicate
1 billion 300 millionHuge 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 cheaperVery low salaries
300 million rural dwellers want to move to a cityAn enormous labour pool
14
A unique advantage
Mass productionMass productionLow
SalariesLow
Salaries
R&DR&D
InnovationInnovation
VarietyVariety
Low G&ALow G&A
Cost-Innovation
A New Competition
Model
Cost-Innovation
A New Competition
ModelNicheNiche
The FilterThe Filter
15
Why this competiton will increase
1- Demographic pressureThey need to give work to their growing population
2 - Fierce local competitionHigh level of entrepreneurship leads to overcapacity
3 - Natural need to growTo get richer and because it’s safer to be big than small
4 - They have the capacityTalents, capital, hunger
They start from zero, with hundred years of frustration to overcome. We are overfed and a little short on
motivation
16
Now, let’s deal with it !
We cannot change the reality : globality means
«Competing with everyone from everywhere for everything»
But we can change our reality :Get read of counterproductive attitudes
Never temper with the fundamentals of excellence
Transform our enterprise into a Small & Medium Multinational company
17
Excellence here is not enough anymore
Our SMEs have to become Small and Medium Multinational companies
“If you can’t beat them, join them !”
Meet them on their own playing field
Give ourselves the same advantages they have
Develop agile companies
Within 10 years, 1 billion new consumers (and producers) will enter the world market
18
SM - M = building the best conditions for success
An SM-M builds an international value chainGets supplies where the prices are lowestOutsource non-essential servicesExports into mushrooming marketsManufactures where costs are lowChange any of those elements when necessary
The name of the game here : orchestrate a network company
19
The 4 axes of SM-M
Manufacturing
Operational Excellence
Managerial Skills
Openness to other cultures
Sales and marketing
InnovationR&D
Global Logistics
ITC
UserEnd-Client
Production
LiaisonIntangible
Assets
20
Some SM-M in Quebec
Quebec, China Winter bootsQuebec, Ontario, China, Vietnam
Quebec, India, Poland
22
Sources (some)
Why Mexicans don’t drink Moslon. Andrea Mandel-Campbell. DouglasMcIntyre. 2008The post american World. Fareed Zakaria.Norton. 2008Dragons at your door. Ming Zen & Peter Willamson. Harvard Business school press. 2007Competing in a flat world. Fung, Fung and Yoram Wind. Wharton School publishing. 2008Emerging Markets. Nenad Pacek and Daniel Thorniley. The Economist. 2007The emerging markets century. Antoine Agtmael.Free Press. 2007Globality. Sirkin, Hermerling, Bhattacharya. Business Plus. 2008Made in Monde (How we compete) Suzanne Berger. Seuil. 2005La terre est plate. Thomas Friedman. Saint-Simon. 2006Produire le monde. Hervé Juvin. Gallimard. 2008Staying competitive in the global economy. OECD. 2008The Futurecast. Robert J. Shapiro. St Martin’s Press. 2008