Tragedy Of China'S Footwear Industry: Simple Repetition, Lack Of Thinking

Professor Sloan, School of management, Huang Yasheng

The tragedy of Chinese manufacturing industry: simple repetition and lack of thinking

In January 25th, this is an unthinkable story, but it is true.

A Turkey Company has gone to an enterprise in Guangdong, China.

For Chinese companies, this requirement is not hard to satisfy.

But the tragedy still happened.

When the Turkey Company executives saw the shoes from Chinese companies, they suddenly exploded: the right foot shoes were good, and the left ones had a nail.

However, Chinese manufacturers took the appearance of the shoe innocently. The sample was pulled out at the Canton Fair, so the nail stayed on when one of the shoes was pulled out.

Huang Yasheng, a professor at the Sloan School of management at Massachusetts Institute of Technology, told the story in an interview with reporters. He regretted that this is not just a tragedy of a company. Behind this is the sadness of Chinese manufacturing industry: simple repetition and lack of thinking.

Factories are not companies.

Reporter: from the US financial crisis to China

Huang Yasheng: I think China's manufacturing environment in 2009, 2010 or this year is not optimistic.

The simple processing of China's manufacturing industry is highly dependent on exports, and the crisis triggered by the global financial turmoil has not yet passed. There are still many uncertainties in the future.

In a sense, the real estate bubble obscures the challenges faced by many manufacturing industries.

Whether reinforced or cement, real estate has stimulated demand and promoted the growth of GDP.

Now, the Chinese government also thinks that real estate is overheating, hoping to slow down the pace of rising real estate prices.

At the same time, inflation began to rise.

If the real estate has cooled down, the export of manufacturing industry has not been fully recovered, I am worried about such an embarrassing situation.

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Reporter: in the context of the complete recovery of exports, the problem of manufacturing industry will be exposed more and more after the real estate bubble has subsided in China. What do you think is the biggest problem facing the pformation of China's manufacturing industry?

Huang Yasheng: the structure of Chinese manufacturing companies is not so much a factory as a company.

The so-called factory is a factory director, others are workers.

I think the Chinese company is a heavy body with a heavy head. Foxconn is the most typical example.

Chinese foundry enterprises do not have much management content because they do not have any managers.

The reason is also very simple. Enterprises get orders from foreign enterprises, and the other party directly specifies the specifications and styles, all of which are ready-made.

Chinese enterprises do not have to think for themselves, such as how to predict the trend of American clothing market and what young people in the United States like.

Chinese companies do not even need to know whether the product is supplied to Europe or the United States.

The only thing that a Chinese agent needs is a person who understands English, can plate the other's request into Chinese, and then give it to the workers to produce it.

The story of Turkey's OEM shoes shows that these factories in China do not need any management at all, and even the common sense problem of why they need a nail on their shoes will not be considered.

The simple mode of long term orders and production has made Chinese enterprises give up thinking: it doesn't need to think about these problems, you tell me what I do.

To change this situation, there must be a corresponding management mode.

On the one hand, we must have the marketing ability, and we must be able to judge and predict the market.

On the other hand, from the angle of production, enterprises need engineering and technology besides simple production.

Behind the pformation needs talent support.

For example, the China global operation leader project launched by Shanghai Jiao Tong University Massachusetts Institute of Technology is aimed at training talents with international vision in manufacturing and operation.

We see China's demand in this area, hoping to cultivate talents in this field and be used by Chinese companies.

But in effect, most of our graduates have chosen foreign enterprises. That is to say, Chinese companies have not yet seen that they need this type of talent so far, which is the gap between foreign companies and Chinese companies.

Blind and optimistic business owners

Reporter: from the perspective of entrepreneurs, does China's manufacturing entrepreneurs have the wisdom of leading the pformation of China's manufacturing industry? What do they need to do as the helmsman of an enterprise?

Huang Yasheng: I have lived in the United States for many years, and I think the advantage of the enterprise in the United States is that it always feels that it is in a state of crisis.

And Chinese enterprises are different. They can take orders, and their vision is very short.

Take some business owners in Zhejiang as an example. They have a mentality that they can cope with what happens in the world and I can digest them myself.

If this is the case, he does not need to predict the future trend: if I can digest afterwards, why should I know this in advance?

They may be wrong, for example, the financial crisis, they think they solve it by themselves.

In fact, this is not the case. The government has provided the 4 trillion economic stimulus plan.

Maybe the economic stimulus plan has no direct help to these enterprises, but indirect help is positive.

Reporter: China's demographic dividend is gradually losing. The biggest advantage of China's manufacturing industry is the low labor cost.

How do you think China's manufacturing companies should cope with and absorb this rising cost?

Huang Yasheng: the labor cost of China should be rising in the long run, and rising is a good thing.

For example, WAL-MART's logistics relies entirely on technology, rather than on demographic dividend. It can also reduce logistics costs very low. TOYOTA, in a sense, also reduces logistics costs.

If China's demographic dividend is gradually lost, Chinese companies will also be able to manage their logistics by using technological means, which will make it possible to reduce costs.

Rising cost is a double-edged sword. For enterprises, higher wages mean higher costs, and for employees, higher wages may have more consumption.

So from this point of view, I think the improvement of manpower cost is actually a stimulative effect on China's economy.

Reporter: after the globalization of the supply chain, the manufacturing industry in the United States is becoming less and less. What do you think of the manufacturing industry in the us today?

Huang Yasheng: now the manufacturing industry in the United States accounts for a very low proportion of GDP.

But from another point of view, the proportion of the US manufacturing industry in the world is different: GE, for example, is not in the US, but in China and in India.

So if we look at the position of the US in the global manufacturing industry, we can not just view the problem in terms of geography. From the perspective of corporate control, I think the United States is still the largest manufacturing country in the world.