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BIZCHINA> Top Biz News
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Report identifies building blocks of bussiness success in China
By Zhang Qi (chinadaily.com.cn)
Updated: 2009-01-08 16:47 If the strong performance of China's businesses in recent years has been enabled largely by low-cost labor, resources and capital, how can those businesses continue to excel as costs rise and those advantages start to disappear? That question was recently addressed by the international consulting firm Accenture in a research report, which identified three areas - market focus and position, distinctive capabilities and performance anatomy - necessary for companies to become "high performers", unequivocally outperforming their peers in returns to shareholders, revenue growth, consistency, and positioning for the future. Today's operating environment is characterized by a turbulent combination of structural changes such as rising raw material and labor costs and a tightening of the environmental regulations. At the same time, external demand is declining as a result of the global economic downturn. The research indicates that China's business leaders are well aware of the challenges at hand. Over 70 percent of the executives surveyed mentioned the higher cost of production as a key factor that would impact their business over the next three years. Over half the respondents believe they will be affected by government measures such as monetary and environmental policy. The report also finds that nearly 90 percent of Chinese high performers are prioritizing investments that will add more value to their products and services over the next three years. But half of the low performers are still focused on trying to maintain the low-cost advantages that have propelled them this far but which will not carry them very far into the future. While Chinese companies continue to enjoy strong revenue growth compared to their global peers, the rate of this growth is declining. It is only the "high performers" that are closing the gap with their global peers when it comes to profitability. According to the analysis, the profitability performance of the average Chinese company remains stagnant at best. The report provides China with specific insights into each of the three areas Accenture identified as the building blocks of high performance: Market focus and position: specifically a company's ability to be in the right markets at the right time, always ready for the next big development. Companies that have mastered this building block are not only adding more value to their products and services - building high-end products that command higher profit margins - but are taking more control of other parts of their value chains, either upstream, on the supply side, or downstream, in their sales and distribution channels. They are also globally aware and "super local". In addition, they are implementing controlled and pragmatic growth. Distinctive capabilities: the unique ways in which a company does business in order to create value. This building block is derived from innovation on many levels and on positive customer experiences at every point of interaction between the company and the customer. Chinese high performers put a premium on innovation in many forms. They want to lead the market with new products and technologies fitted to their customers' needs. They build innovation systems. Their approach is to make innovation sustainable, not accidental. They also build businesses with the customer at their core. (For more biz stories, please visit Industries)
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