How we want to transact is important too: Chinese companies as market disruptors.

 

Market Disruption

 

Much continues to be made of the rising tide that is “CHINA”. Regardless of which lens you use to view this country, they are a power in every sense, and much of the current discourse focuses on how it will evolve in the next 50 -100 years.

This morning I read an article by the London Business School called: Making the leap into developed markets which discusses in great detail the process by which Bottom of Pyramid companies (companies who make cheap goods cheaply) have historically tried to disrupt the incumbents. In the context of this article the focus is on how companies in India and China might disrupt their Western counterparts in the future, as Japanese companies have done.

You can read the article for yourself to get all the details, but there was one aspect that wasn’t addressed and that is the psychology and philosophy of business and how we transact and more importantly want to transact. Speaking from personal experience, as I sit here in Guangzhou China, the primary focus of the vast majority of Chinese companies is to extract as much profit as possible while giving as little as possible in return…thereby maximizing profit.

Examples of this abound but here is a personal one: I paid 4000RMB for my gym membership. The gym opens at 10AM and closes at 11PM but management refuses to turn the air conditioners on until 5PM during the peak hours. The same applies to the lighting. They only turn 30% of the interior lights on during the day because from their perspective if the gym is only 25% full, they are wasting money keeping it cool and well-lit. The change room is always kept at a sweltering 29 degrees. Despite repeated complaints over a six month time frame, nothing changes because customer service isn’t viewed the way we do in West. They simply do…not…care…

This isn’t just a casual observation either. Driven by frustration after having attended two different Chinese owned Gyms I did a little research and found a report by Deloitte on the state of the Fitness industry in China which highlighted several problems.

The reality is that many gyms are in trouble, chasing short-term cash flow and churning members. All
too often in China, the default tactic for attracting members is to compete and differentiate on price.
This may bring short-term gains, but in the long-term damages the revenue model and erodes both
brand equity and member loyalty.

This is but one example, but the mentality of business owners is the same from the mom and pop level all the way to the biggest organizations. You could buy your fruit from a local vendor down the street on a weekly basis, engage in wonderful conversation, tell them you live just across the street and plan on recommending all your friends, and then find out that the vendor has been charging you 3 times the market price.

Yes I know as a foreigner this is part and parcel with the territory so maybe it isn’t the best example, but Im trying to get at the psychology of the matter. Rather than seeing long-term benefit from the fact that I live across the street, will become a regular customer and will tell all my friends in exchange for good service and a fair price, the vendor sees short-term dollar signs by charging me 3 times the going rate despite the fact that I now wont go back.

Now look at the global market as it stands today. Chinese consumers flock to Western brands because of the perceived quality and integrity of the products (as well as status of course). Whether or not its a conscious decision or not, the honesty and transparent way in which most Western companies operate surely helps. If you don’t like something, or it isn’t up to your standards, or you changed your mind about something, the industry leaders will go out of their way to make it right.

So, am I saying that things wont change or that Chinese companies wont adapt? No, more likely than not, they’ll hire foreign talent and expertise and attempt to adjust to what the foreign markets demand. The reality is however that when you buy something you get more than the tangible. You also get a story, a feeling, and a degree of service, things that are much harder to replicate when customer service doesn’t come naturally. Therefore any discussion surrounding the likelihood of disruption by BoP companies must also include a measure of philosophy if we are to get a proper understanding of the factors which lead to market disruption.

 

 

 

 

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Link

Send Europeans to Asia to learn how to work – FP News.

People here in China are hungry, but contrary to popular belief, they arent looking for their next meal. No, they are looking for their next “Pot of Gold”. They work long hours, cut corners where they need to and often have little regard for their fellow man. More and more of them are driving nice cars and own multiple properties. Life for many is about making money and working long hard hours. Did you know that education and health care isn’t free in China? I was shocked when I found out how little the State provided for its citizens. The result is that people cant depend on anyone but themselves.

In Korea, Japan, and Hong Kong, people work equally hard and long because they believe if they work hard they will be able to earn the privileges many of us take for granted.

Im thankful our society doesn’t resemble that of China’s or Japan’s or Korea’s but as the linked article explains, we seem to have forgotten the principles which have gotten us to our present level of development. Surely there are many lessons we could be observing and learning from our Asian neighbours.

Inspiration: TOMS

Recently I was asked by one of my Bookers (the people who get you work as a model), whether I wanted to model for a long time. I wasn’t able to give him a direct answer, but what I was able to tell him was what I saw myself doing in the not so distant future.

I have come to realize that the most rewarding experience I’ve had professionally, was Managing the Annual Giving Call Centre at the University of British Columbia. I managed all aspects of the fundraising operation and together with my team of 60 or so students, we raised well over $1,000,000. It was like running a small business and that set me on a path that I currently find myself on.

Since working in the not for profit sector, I’ve been influenced and inspired by social entrepreneurs who have created for-profit businesses that address societal issues. One of the businesses at the forefront of this movement is TOMS.

If you didn’t already know, TOMS and it’s Founder, Blake Mycoskie, have been huge inspirations to me. Blake is a young entrepreneur who is bringing about social change while (I assume…) doing very well for himself. In his words, he is “doing good by, doing well.”

Chief Shoe Giver – Blake Mycoskie

I’ve decided to share an article that was published on my birthday. It’s obviously a signal from the heavens that this is my destiny, and in his own words, Blake does a great job of explaining why this business model is so exciting to someone like me, who is already fascinated by philanthropy and social entrepreneurship.

If you’d rather listen to him, I’ve also included a YouTube clip. Without further ado, the man himself…

A new model for philanthropy
2 December 2011

I never meant to get into the shoe business, and would have said you were crazy if you told me five years ago that’s what I’d be doing today. The idea to start TOMScame during a trip to Argentina back in 2006. I met some volunteers who were holding a shoe drive to collect used or slightly worn shoes for children in the community. One of the volunteers explained that many kids lacked shoes, an absence that not only complicated every aspect of their lives but also exposed them to a wide range of diseases. I spent a few days traveling from village to village, witnessing the real effects of being shoeless: the blisters, the sores, the infections—all the result of the children not being able to protect their feet from the ground. I wanted to do something about it. But what?

Like many would-be philanthropists, my first thought was to tackle the problem head on: I could start my own shoe-based charity, but instead of soliciting shoe donations, I would ask friends and family to donate money to buy the right type of shoes for these children on a regular basis. But, of course, this arrangement would last only as long as I could find donors. That was the traditional model of philanthropy: identify a cause and initiate a never ending hunt for donors. I wanted something more sustainable. These kids needed more than occasional shoe donations from strangers—they needed a constant, reliable flow.

Then I began to look for solutions in the world I already knew— business and entrepreneurship. An idea hit me: Why not create a for-profit business to help provide shoes for these children? It was a simple concept that I call One for One: Sell a pair of shoes today; give a pair of shoes tomorrow. And that’s when TOMS was born.

So far, Toms has given more than two million pairs of new shoes to children in need and recently launched its second One for One product, TOMS Eyewear. TOMS is only one example of a new breed of company that is succeeding at this volatile moment in capitalism. In this fast-paced and constantly mutating world, it is easier than ever to seize the day; but in order to do so, you must play by a new set of rules—because increasingly, the tried-and-true tenets of success are just tried, and not true.

What we’ve found is that TOMS succeeded precisely because we have created a new model. Business and philanthropy are no longer mutually exclusive. We’ve been able to find a sustainable way to give in the areas we serve. Through a simple purchase, a consumer is making a direct impact on someone’s life around the globe. There are no formulas or percentages. It’s simple. You buy something today and help someone tomorrow. One for One.

The giving component of TOMS makes our shoes and eyewear more than a product. They’re a part of a story, a mission, and a movement anyone can join. That, it turns out, is a compelling proposition.

Remember to LOVE LIFE everyone,

AvK