As we wrote in our recent white paper, “Beyond Fear and Greed: Capitalizing on Opportunities in the Current Crisis,” immense opportunities await companies with the stability and wherewithal to take advantage of the recession and their competitors’ adversity. China seems to agree with us. Although some people have reasoned that the global downturn would hurt Chinese companies because they depend so much on exports, and would perhaps even cause political instability in the country, recent articles say Chinese companies are trying to take advantage of the crisis by being aggressive.
In the Atlantic, James Fallows makes this noteworthy observation (emphasis is ours):
In Beijing, in Shanghai, in Shenzhen, and elsewhere, I’ve recently visited companies that are trying to use the disruption of this moment to enter wholly new markets and do what so few Chinese firms have yet done: make high-tech, high-value products that bring high rewards. In a country as big and chaotic as China, you can find illustrations of any “trend” you want. But in only a few weeks of asking, I found indications of companies that were growing rather than shrinking, and of corporate leaders who were pouring in money based on their belief that now, when competitors are at their weakest and talent and assets could be snapped up cheap, is the time to prepare for their next big advance.
In Shenzhen, north of Hong Kong, I went to see Liam Casey, the Irish entrepreneur I described two years ago as “Mr. China” for his success in matching big, famous foreign companies with small, obscure Chinese factories that can produce brand-name products quickly and well. Casey said that of the top 100 Chinese companies he works with regularly, not one had gone out of business. While many were struggling, some viewed the recession as a chance to move into higher-value work and introduce their own advanced products rather than serving strictly as subcontractors.
The article gives numerous examples of aggressive moves that Chinese companies are making to take advantage of the downturn.
The Wall Street Journal has a related article about the rise of Craftmaster Furniture Inc., a maker of upholstered furniture with two factories in Taylorsville, N.C. Sales in the $80B U.S. furniture market is off by an estimated 20% over the last six months, and Craftmaster competitors like La-Z-Boy Inc. and Ethan Allen are posting huge declines in sales and earnings. Craftmaster, on the other hand, pulled off a 4% gain in revenues last year and a 5% gain since January.
Craftmaster, as it turns out, is owned by Dongguan, China-based Samson Holding Ltd. Craftmaster leverages its parent to operate an especially efficient supply chain that ships fabric, wooden frames, and other parts from China to Craftmaster’s two assembly plants in North Carolina. Insulated in part by the financial wherewithal of its parent, Craftmaster is aggressively pursuing market share at the expense of weakened competition. In one example described in the article, Craftmaster pounced when a competitor, Norwalk Furniture Corp., filed for bankruptcy last fall. Craftmaster quickly hired Norwalk’s head of sales and five regional sales associates. Norwalk quickly reemerged from bankruptcy with a new group of investors, but, by that time, Craftmaster had already snatched up much of its former customer base.
We think it’s worth learning from the Chinese example.
