New goals emerge in China

27 January 2012

BEIJING: Brand owners trading in China are focusing on attracting customers and accessing local talent over areas such as enhancing their manufacturing capabilities, a study has revealed.

PricewaterhouseCoopers polled 1,250 chief executives globally, and found 37% of the panel from mature markets were pursuing expansion schemes in China, versus 24% of CEOs in fast-growth economies.

Some 79% of the corporations now active in China hoped to increase the size of their customer base, and 55% were eager to identify domestic talent.

A further 49% wanted to augment internal service delivery capabilities, encouraging the better formulation and implementation of strategy. Building up a stronger manufacturing presence scored 30%.

For 34% of these firms, securing raw materials or components was a core objective, whereas 27% proved keen to strengthen research and development programmes or acquire intellectual property.

At present, 46% of organisations trading in China are modifying existing products there, while 26% are creating goods specifically for the country, and 25% use the same products as in their home market.

When assessing the prospects for revenue growth in the next 12 months, a 51% majority of CEOs from Chinese companies were "very confident", measured against 72% last year, although some business leaders are considerably more positive.

"There is still large room for improvement on the living standards of most of the Chinese population. We have not yet reached a balance point on this, so this will constitute a strong driving force for future domestic consumption growth," said Cheung Yan, chairlady of Nine Dragons Paper.

Talent management was one notable obstacle, as 54% of Chinese firms said failings in this area had hampered R&D, 45% took this view for missing a potential market opportunity, as did 41% for falling short of overseas targets.

Overall, 54% of indigenous players were seeking to establish new business models, 56% were cutting costs, 63% outlined the goal of improving current products and 64% were planning new launches.

"We have expanded our development of personal computers to include smartphones, tablet computers and smart TVs. Therefore, we have a broader space and stage in which to develop," said Yang Yuanqing, CEO of Lenovo.

Other popular restructuring activities incorporated entering alliances on 45%, outsourcing certain business functions on 36%, engaging in cross-border mergers and acquisitions on 23% and "insourcing" processes on 21%.

Data sourced from PricewaterhouseCoopers; additional content by Warc staff