I cannot remember the book, it said that some Chinese manufactures do not worry about being the best in their field. Being the best costs a lot and though the profits margins are higher per unit sold, fewer people can afford to buy the best. What the idea is that Chinese manufactures aim for 75% quality that sells for 25% of the best's cost and sell more units and make even more profits than the costs. The idea is at 75% quality, most people will find that acceptable for the price they paid.
Bob, to my opinion your view is right. Niche markets is the only thing to keep the US and Europe running. Look at the car industry in Germany: It is booming! Every successful Chinese wants a BMW, Audi or a Mercedes, as simple as that. The same for the defense industry in the US: Beautiful products they make. China definately will buy some of it.
But our modern management brought away all of our own knowledge of making 'simpler' things. The things we all need. They all brought it to China, for free. They gave that ancient knowledge (from generations to generations) away. From producing copper tubes to producing modern electronic parts. And look what is happening? Look at -for example- Rigol in China? Rigol makes oscilloscopes and competes touch v.s. the low end scopes from Tek and Agilent. Amazing and sad as well. Very annoying and the fact that our modern managers are job hoppers is not doing us any good either... I find that THIS is the basis of all our problems: Modern management combined with a part of too big of greed.
Good comments Sylvie. But the "niche and custom" market is probably the only thing that is keeping many companies in business these days. Let's hope China never figures out how to play that market. But I'm not all that optimistic. Their resources are huge...
That looks like a pretty interesting read... I'll look it up on Amazon now.
"China does not need to master breakthrough innovations to achieve success" - that reminded me of something I heard a lot while on a press trip in Italy. The manufacturers we spoke to said that in order to compete with China, they had to make everything unique and customized to their customers specific needs. Because they knew that any innovation would be quickly copied and replicated thousands of times by the Chinese. But the power of Chinese manufacturing is also, to some extent, its downfall, because while making tons and tons of the same thing over and over will win in terms of volume, there will always be a market for "niche" and "custom" and China can not, as yet, win in THAT space.
The former. Breznitz provides an excellent analysis of what's really going on on the ground in China because he talked to all of the keys players in government, industry, finance. That's why we thought his argument about the center of Chinese innovation being in Shenzhen was so compelling. The conventional wisdom says all those shiny new buildings in Beijing and Shanghai are symbols of an innovative economy. The facts on the ground argue otherwise.
Hi George, when you mention sausage-making, are you referring to the "grind-it-out" kind of work effort that many around the world do as part of serving a large market, or are you referring to what the old Ad-Prac'ers of Harvard Business School fame of the 50's and 60's referred to as the sausage game: start with a great all-meat sausage that everyone loves, and over time introduce more and more sawdust to increase your margins? Or both?
Assume, Neo1, you are referring to the cup example. Breznitz may not have the firmest of grips on technologies like semiconductors, but he has thoroughly researched the nature of Chinese technology innovation. His book focuses on the technologies that Beijing deems strategic. One of these is IC design. (That's one reason why we have focused much of our coverage on China's emerging fabless IC industry.) The book is not strong on technology, but it thoroughly explores the sausage-making aspects of innovation in the world's second largest economy and the holder of much of our debt.
This book might have a few things other's haven't realised but overall as it stands claiming innovation factory based on millennia old facts wont cut it. What matters is the present and how each fares vis-a-vis others in the new game called technology. Now almost everybody has access to a wide range of similar resources, which, never before happened in the history of the world, so the present is a much better measure of what each country can do.