High speed trains - faster than 350 km/hour - have a future in China. From Hong Kong to Shanghai predicted future trip would be only six hours. Equally - if not more relevant will be the lines between coastal cities adn mainland China. A wide coverage of high speed train network is planned for all of China by 2015, approved early this year in congress.
The high speed train will transform business in China. Cities will be accessible easier and faster. Impact for trade is huge. Chinese will be more exposed to consumption and service economy. Expectations for local retail will increase. Marketing and sales will have an impact.
WalMart has already opened business in China through a joint venture. Opportunities for retail business will increase through the transformation of transport and the expected increased purchasing power of the Chinese.
And yes, I had a chance to take a train with 430 km/hour. Smooth ride!
Report from eMBA study trip in Hong Kong - Shanghai.
Friday, September 24, 2010
Sunday, September 19, 2010
Role of OEM´s in China
Challenges for original equipment manufacturers (OEM´s) in China the past years have been following:
* Cost of resources and energy have increased
* Value of RMB has gone up by 25%
* New employment law makes it mandatory to buy an insurance for each employee. Also compensation has changed in terms of layoffs.
* Environmental protection requirements have increased after the Copenhagen summit. This causes a 5-10% investment increase for businesses.
Altogether - cost of operations in China in the past has increased 15% at least. China is still world´s manufacturer but this equation creates a problem.
How should the problem be tackled and what does this mean for OEM´s?
To start with, it is crucial to transform China from a manufacturing market to a service based economy. The improved standard of living will enable higher income and exposure to a wider international taste.
The support for OEM business will decrease. In the future, development strategy will support a new kind of development within services and technology, and coordination of regional economy. One of the examples is the Yangtze river region around Shanghai. Covering approximately 11% of China´s population, it accounts for 24% of the economy. Within a few years, this area is expected to have a population of 250 million people - same as in USA. Professor Sheriff from Hong Kong Polytechnic University´s bet for multinationals is to go for the three growing regions: Hong Kong / Guangdong, Yangtze and Beijing / Tianjin.
Report from eMBA study trip in Hong Kong - Shanghai.
* Cost of resources and energy have increased
* Value of RMB has gone up by 25%
* New employment law makes it mandatory to buy an insurance for each employee. Also compensation has changed in terms of layoffs.
* Environmental protection requirements have increased after the Copenhagen summit. This causes a 5-10% investment increase for businesses.
Altogether - cost of operations in China in the past has increased 15% at least. China is still world´s manufacturer but this equation creates a problem.
How should the problem be tackled and what does this mean for OEM´s?
To start with, it is crucial to transform China from a manufacturing market to a service based economy. The improved standard of living will enable higher income and exposure to a wider international taste.
The support for OEM business will decrease. In the future, development strategy will support a new kind of development within services and technology, and coordination of regional economy. One of the examples is the Yangtze river region around Shanghai. Covering approximately 11% of China´s population, it accounts for 24% of the economy. Within a few years, this area is expected to have a population of 250 million people - same as in USA. Professor Sheriff from Hong Kong Polytechnic University´s bet for multinationals is to go for the three growing regions: Hong Kong / Guangdong, Yangtze and Beijing / Tianjin.
Report from eMBA study trip in Hong Kong - Shanghai.
Friday, September 17, 2010
Glimpse of Chinese economy
Representing more than a fifth of world´s population, the economic effect of China is vast.
Despite slowdown of investments in China in 2009, the expected GDP growth rate in China until 2015 is predicted to grow. After this, the prediction is for it to decrease whereas rest of the world´s growth rate between 2015-2050 remains even. After the slowdown of 2009, China GDP growth rate early 2010 was 11.9% and expectation for next year 10-11%. Expectations of total retail sales of consumer goods maintain a huge growth rate of 20% in 2010. According to professor Sheriff from Hong Kong Polytechnic University this is crazy. Why is this growth rate a problem?
China´s growth is investment driven. Since the saving rate in China is above 25%, this will prove difficult in case of economic downturn. Should foreign investors stop investments, Chinese government is able to issue bonds to replace part of salaries. This development is not healthy. Growth should not be driven by investments but consumption. Question is how to transform the culture of China to support a higher standard of living. Part of this will be by governmental legislation, strenghtening the younger generation´s position in urban areas and improving their education and purchasing power. Another is the transformation of China to a service based economy through economic development programs.
Report from eMBA study trip in Hong Kong - Shanghai.
Despite slowdown of investments in China in 2009, the expected GDP growth rate in China until 2015 is predicted to grow. After this, the prediction is for it to decrease whereas rest of the world´s growth rate between 2015-2050 remains even. After the slowdown of 2009, China GDP growth rate early 2010 was 11.9% and expectation for next year 10-11%. Expectations of total retail sales of consumer goods maintain a huge growth rate of 20% in 2010. According to professor Sheriff from Hong Kong Polytechnic University this is crazy. Why is this growth rate a problem?
China´s growth is investment driven. Since the saving rate in China is above 25%, this will prove difficult in case of economic downturn. Should foreign investors stop investments, Chinese government is able to issue bonds to replace part of salaries. This development is not healthy. Growth should not be driven by investments but consumption. Question is how to transform the culture of China to support a higher standard of living. Part of this will be by governmental legislation, strenghtening the younger generation´s position in urban areas and improving their education and purchasing power. Another is the transformation of China to a service based economy through economic development programs.
Report from eMBA study trip in Hong Kong - Shanghai.
Sunday, September 5, 2010
Service business opportunities by integrating megatrends and customer needs
Tekes, the Finnish funding agency for technology and innovation has published a report on the future of services business innovations. Tekes report is created for any organization who wants to challenge and renew their current thinking on services business. Tekes report wants to take a challenging and questioning role in businesses looking into their current assumptions.
The report itself is entertaining and provides a business minded and practical approach rather than a scientific one. For Finnish companies this opens good perspectives since Tekes takes a global view.
The key perspective from the service business innovation is to find opportunities in the crossroads of service innovation megatrends and the perceived customer needs. Through the opportunities identified, organizations come up with innovations that must be supported by high class organizational capabilities and implementation.
And what are the Tekes´s identified 10 megatrends?
* The cloud
* Web based delivery
* Mobile value delivery
* Everything as a service
* Experience design
* Sensing and monitoring
* Collaborative contributions
* Social networking and communication
* Climate change and sustainability
* Globalization with local reference.
The report itself is entertaining and provides a business minded and practical approach rather than a scientific one. For Finnish companies this opens good perspectives since Tekes takes a global view.
The key perspective from the service business innovation is to find opportunities in the crossroads of service innovation megatrends and the perceived customer needs. Through the opportunities identified, organizations come up with innovations that must be supported by high class organizational capabilities and implementation.
And what are the Tekes´s identified 10 megatrends?
* The cloud
* Web based delivery
* Mobile value delivery
* Everything as a service
* Experience design
* Sensing and monitoring
* Collaborative contributions
* Social networking and communication
* Climate change and sustainability
* Globalization with local reference.
Sunday, August 22, 2010
Services becoming an essential element for engineering success
Services are becoming an element of future success for Finnish companies. Even the foundation of Aalto university in Finland is a decent example of logical way of introducing more commercial and arts related skills to engineers and vice versa. It has been argued in public discussions that we lack marketing, brand and design skills. But looking at the educational offering today, things are way different than 10 years ago. For the better.
Talouselämä magazine wrote an article on industrial engineering companies in Finland who are expanding their offering to services. But can Finns master services without the successful background of engineering?
Companies like Kone, Wärtsilä, Metso and Nokia Siemens Networks are now putting great emphasis on services. Offering maintenance, training and development provides further opportunities to acquire better share of the market and an improved relationship with customers. Kone is increasing their service culture through educating "ambassadors" who do not just offer services but are skilled to communicate and market the offering. These companies have built their success on engineering.
According to Talouselämä, Vectia´s Kaj Storbacka thinks the services business in Finland may expand but will be limited. According to Storbacka what Finns may concentrate on is service concepting and management.
Can we build companies will full scale service skills; combining our engineering skills and experience with a specialized service culture? What is it with our culture that limits offering turn key solutions based on our services skills? And if we cannot, what would limit us from acquiring needed skills from abroad and building the success on what we do well? IBM turned from an IT company to a service and consulting house. If engineering as an industry in Finland is showing the signals of providing improved offering through services, will we limit it based on our culture, or are we able to learn and grow globally, acquiring skills and experience needed to make a turnaround business?
Talouselämä magazine wrote an article on industrial engineering companies in Finland who are expanding their offering to services. But can Finns master services without the successful background of engineering?
Companies like Kone, Wärtsilä, Metso and Nokia Siemens Networks are now putting great emphasis on services. Offering maintenance, training and development provides further opportunities to acquire better share of the market and an improved relationship with customers. Kone is increasing their service culture through educating "ambassadors" who do not just offer services but are skilled to communicate and market the offering. These companies have built their success on engineering.
According to Talouselämä, Vectia´s Kaj Storbacka thinks the services business in Finland may expand but will be limited. According to Storbacka what Finns may concentrate on is service concepting and management.
Can we build companies will full scale service skills; combining our engineering skills and experience with a specialized service culture? What is it with our culture that limits offering turn key solutions based on our services skills? And if we cannot, what would limit us from acquiring needed skills from abroad and building the success on what we do well? IBM turned from an IT company to a service and consulting house. If engineering as an industry in Finland is showing the signals of providing improved offering through services, will we limit it based on our culture, or are we able to learn and grow globally, acquiring skills and experience needed to make a turnaround business?
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