Are China Manufacturers Simply Low-Cost Producers – or Serious Global Competitive Threats?

While China has obviously seen exceptional growth as a source of finished goods and component supply for Western and Japanese corporations, are Chinese companies strong threats to those same companies in terms of global competition down the road?

The answer seems clearly to be Yes, but many Western companies appear not to take the potential competitive challenge too seriously.

A recent survey of over 1000 companies by McKinsey, for example, found that 41% of executives believe overall Chinese manufacturers are “weaker” than competitors from most other countries.

McKinsey notes that “Besides lower prices, companies in China have little to offer global markets, say respondents, who particularly dismiss Chinese product quality, marketing skills, and brand strength. From the Chinese perspective, the results suggest that low costs will go only so far and that moving up the value chain is more important than ever.”

The perception that Chinese companies are laggards, McKinsey says, might explain why many executives report mounting a muted business response to Chinese competitors at best, viewing manufacturers as a low-cost source of supply and little else.

But is that view a smart one?

Chinese Dragons are Coming after Western Business

In their recent book “Dragons at Your Door: How Chinese Cost Innovation is Disrupting Global Competition,” authors Peter Williamson and Ming Zeng eloquently described how a new generation of Chinese competitors is using total “cost innovation” in product design and the supply chain – not just low labor costs – to gain competitive advantage and growing market share in a number of markets and industries. (See The Supply Chain and China's Dragons.)

(Global Supply Chain and Logistics Article - Continued Below)