What is the source of China's competitive advantage in manufacturing? Where will it head in the future?
Low labor cost advantage, latecomer's imitation advantage, institutional advantage... these are common explanations. But are these interpretation enough?
Recently, the idea of integrated industrial communication and marketing has gradually formed in my mind. So I hope to better understand the rise of China's industry, manufacturing, and enterprises from a macro perspective, as well as the future trend. That's when this book caught my attention - "Made in China: The Genetic Advantage and Future Transformation of Chinese Manufacturing".
The author of this book is Professor Bin Guo of Zhejiang University's School of Management. He proposes the original "Catch-up Ladder Theory", which I think is the greatest highlight and most inspiring part of this book.
The essence of catching up is a learning process
The advantage of low labor costs and the advantage of being a latecomer are not unique to China. For example, these two advantages are also possessed by several other BRICS countries. However, only China has carved out its own path and achieved remarkable economic growth since the reform and opening up in 1978.
Moreover, although "China" is often viewed as a single entity with 1.3 billion people, in reality, "China" is a country with strong diversity.
The best technology and the worst technology, the latest products and the outdated products, the most complex product demands and the entry-level product demands can all exist in one market at the same time.
Because of this diversity, our understanding of the Chinese industry cannot be simply attributed to the factors mentioned at the beginning of this article.
What is "catching up"? The author explains that "catching up" can be understood as a learning process. In this process, enterprises are constantly improving their own capabilities.
However, catching up requires a large amount of resources and enough time, and also requires a certain degree of absorption capacity.
Regardless of whether it is technology catching up or market catching up, the construction and development of capabilities are the most important core.
The development of a business
It is almost impossible and incorrect to explain all the facts of China's economic growth using any single theory. The focus of this book is to reveal the "key but neglected" factors and mechanisms of the rise of China's manufacturing industry.
The author points out that the essence of the development of a country's manufacturing industry is a market and technology pursuit process, and during this process, enterprises in the country will form a ladder-like structure due to differences in ability, technology level, and market positioning.
For any enterprise, its learning and ability improvement process is embedded in such a pursuit ladder. Each enterprise has the smallest knowledge gap with neighboring enterprises and is also the easiest to imitate.
For a large emerging economy like China, such a pursuit ladder will have some specificity, thus enabling enterprises embedded in this pursuit ladder to achieve more efficient pursuit.
How can an enterprise survive in such a market? The author summarized 9 points:
- Capture unmet market demand
- Low-cost manufacturing capabilities
- Integrating localized innovation
- Seeking an ultimate balance between low cost and reasonable quality
- Using the power of business model innovation
- Maintaining a rapid response to the market
- Exploring breakthrough business opportunities
- Utilizing global localization advantages
- Run, never stop
Finally, the author pointed out that China's manufacturing industry not only needs to make contributions to the growth of China's economy, but also needs to make contributions to the world in terms of management theory, methods, and tools—this is one of the true signs of the rise of China's manufacturing industry.
This is also the latest proposition given by our age. The future has come, let us run together and never stop.