by Renaud Anjoran
In the course of the few Global Sources forums that I attended recently, I was part of discussions between executives representing Chinese exporting companies (manufacturers and traders).
One thing that struck me was that it is possible to make predictions on the future success of these companies, just by listening to their leaders and their strategies.
From there, it is easy to make distinctions between the good “forward-thinking” leader, and the typical “old-school” leader.
In this context, a good leader is…
He looks at the trends: demand for smaller orders and shorter lead times, growing product categories, and so on. He focuses on what the market wants and sees this as his starting point. He does not look for ways to “push” his products to the market.
The bad leader thinks “I sell XYZ. How can I find new customers who will buy it?” He expects the market to demand what he offers. This strategy is riskier and riskier, as customers’ demand shifts from one year (or one season) to the next.
He has a strategy, based on the way he sees the market. He makes choices and sticks to them.
For example, he may decide that selling to mid-size European retailers is his best strategy. He will engage all his marketing efforts in this direction. He will become good at understanding what makes his target customers “tick”.
The bad leader goes after any opportunity he perceives. He tries to sell to customers at very different quality and pricing levels, he tries new channels like Taobao, he tries to have a brand as well as sell OEM, etc.
Why try to grow the factory 30% a year, if it means taking unprofitable orders from big customers that are expert at squeezing suppliers’ margins? The good leader is aware that his business might be just at the right size. He knows that small and medium order are usually more profitable and more stable.
The bad leader, much like most factory owners of 10 years ago, is consumed by the desire to grow. He dreams of showing off: thousands of employees, large office rooms, expensive cars, and so on.
The good leader avoids selling 40%+ of his volume to one customer. He knows that, if ever that big source of revenue disappears, it will be a disaster.
The bad leader is always happy to work on huge volumes. He is blinded by “economies of scale” that are supposed to make the unit price so much lower in big batches. He sees every new customer as a stepping stone, as a reference that will attract other big names.
He knows that competition will force him to improve his staff’s productivity. It means buying them the right tools and machines so that a line of 5 operators can become more productive than 8 operators today.
In contrast, the bad leader is fed up with his staff. “They are more expensive and less loyal than 15 years ago”, he complains. His objective is to automate production fully, and to manage machines instead of humans.
The good leader knows that he should avoid the “race to the bottom”. There will always be another company that offers a lower price. And there are many strategies to avoid being judged solely on price: setting up a brand, positioning oneself in a high growth category, specializing in high complexity & high quality, and so on.
The bad leader takes price as the unavoidable basis for competition, and pushes his staff to work harder and faster. Naturally, when everyone does this, it no longer provides an advantage.
Do you agree with this description of the good and the bad leaders? Can you recognize some of your suppliers in the above descriptions? What did I forget?
Renaud Anjoran has been managing his quality assurance agency (Sofeast Ltd) since 2006. In addition, a passion for improving the way people work has pushed him to launch a consultancy to improve factories and a web application to manage the purchasing process. He writes advice for importers on qualityinspection.org.