Chinese firms aim big in India - the Chinese juggernault rolls on

Hello fellow bloggers,

I am back with yet another article on the Indian business scene. This time it is quiet an interesting find and to me it comes as a jolt that the Chinese brands that people thought were cheap and of bad quality are taking over the Indian consumer market in the electronics sector. Take for example the appliance manufacturer HAIER, I till today thought it was European or German, but it is infact made in CHINA and according to the article is "positioning - as the world's second largest appliances company". for years the Chinese companies have tried to enter the market and have failed miserably due to the barriers of entry placed by the Indian manufactures and a few quotas in place by the government. Another reason could also be the economies of scale that the Indian manufacturers enjoyed. These according to Porter under porters five forces curbs the threat of new entrants. As an example of this in the article the author quotes

"In the late 90s, consumer electronics major Konka closed shop after struggling for a while, two-wheeler companies like Monto Motors announced grandiose plans without following through, and TCL (which is coming back with a vengeance) failed to impress customers despite its partnership with a local company".

but that is all about to change soon, as said in the article

"The new Chinese bigwigs from Haier to telecom equipment major Huawei or Zte Corp, from PC maker Lenovo (which bought IBM's PC business globally) to China's number one mobile phone maker Ningbo Bird, from two-wheeler company Guang-zhou Motors to a host of steel majors like Bao and Capital (which want to source scarce iron ore and make steel), are all making a grim but determined effort to change the rules of the game".

I was rather surprised to again find out the Lenovo, one of the highest selling PC brands in India is from china and it has grown exponentially in the last 5 years and has also bought IBM's PC business globally as said in the article.

why is this happening, why are the Indians buying more of Chinese goods and not the previously popular Sony and Phillips, this is due to the new BUZZ word used by the Indian customers is high-tech technology and quality.

according to the author of the article,

"high-tech technology, investing in brand building and leveraging a strong R&D base, which helps them in churning out products that can match the offerings of US and European companies."

this can be explained by Hamel's Business concept innovation, as to where Chinese companies are branding their products with western names which attract the Indian customers to them, their core strategy is not to dump cheap quality products on to the market anymore but to provide the customers with high quality products made through thorough market research and R&D which increases its product/market scope under the Hamel framework. Offering such high-tech products at a reasonable price gives them the basis for differentiation under their core strategy under the Hamel framework.
they are also helping the customers by getting their pricing structure right which in turn fulfills the customer interface under the Hamel framework.

overall, according to the author of the article,

"Technology, quality and delivery of high tech products are in. Understanding the Indian market - which is not only about price but is value sensitive - is the new buzzword in the boardrooms of Chinese companies".

it has not been an easy ride for the Chinese companies in India but bit by bit, the perceptions are changing - led by determined Chinese companies who are looking at India as a long-term destination to do succesfull business.

pleasant reading,

siddharth sudhakar

Website: http://in.rediff.com/money/2006/apr/29spec.htm