UK's technologies and skills + China's experience in improving manufacturing processes = winning formula?
*EM = emerging markets
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‘Scaling up’ is the new challenge facing British companies who want to tap into Chinese markets and growth rates, according to a professor of international management at Cambridge Judge Business School.
Prof. Peter Williamson says Prime Minister David Cameron’s recent visit to China will help oil the business wheels for British companies, but that they need to think ‘bigger’ than they have done in the past:
“Everybody is now looking to China for growth. The Chinese have appreciated that there is backing at the highest level for trade and alliances, therefore it is a starting point but it is not going to get us the whole way,” he says.
“Air China announced a large order for Rolls-Royce engines a couple of weeks ago [late November] and that was on top of the deal that was announced during Cameron’s visit with China Eastern Airlines also buying Rolls-Royce engines. The focus on exports alone is not the biggest gain we can achieve from this collaboration. Closer links between Britain and China, thinking about winning in China and thinking about exports is not thinking big enough. The real prize out there is the chance for British companies and Chinese companies to pool their resources and capabilities to win in global markets.”
Professor Williamson says there are already examples of new partnerships emerging between China and the rest of the world and that scaling up was a solution to the UK’s anticipated slow growth rates:
“If there are market opportunities and strong profits to be made by collaborating we will find a way to do it. We are already seeing new deals being done, such as between General Motors and SAIC, the Shanghai automotive company. They will pool their resources and invest $650 million in trying to break into the mainstream car market in India. I haven’t seen many examples of British and Chinese companies doing this, although you do see a couple. The Audio Partnership in Cambridge is taking its core technology and combining it with companies in China that have design skills. They are improving the value of the technology so that they can break into the mainstream market rather than being in a specialist niche market.
“If you sit in an economy that is growing quite slowly – and I think we won’t see UK and US growth bounce back any time soon – you can’t experiment with new technology quickly enough. But in a country like China that is growing so fast, you can go through cycles of piloting things very, very quickly because the market is growing faster. Britain has a lot of interesting technologies and by combining these with this wonderful ‘sandpit’ in China, which allows you to experiment, is a way to speed up the commercialising process and avoid some of the difficulties of slow growth in the UK at the moment.”
Partner China for mass markets
Mass markets hold the key to commercial success in the future, says Prof. Williamson:
“We need to be able to combine our technology and product design with the kind of process design and manufacturing skills that exist in China to make sure we can produce products which can access the mass markets around the world. These markets will continue to grow in Latin America, Africa and the rest of Asia. As we continue to face the issues of this [economic] crisis and its aftermath there is going to be a big value-for-money market in the US and Europe, so we need to get our products out of that high end niche and into the mass markets and the Chinese can help bring complementary skills that enable us to do that. “
He said new partnerships between British and Chinese firms would be more radical than previous associations that existed between the two countries.
“This about China playing a role that is much deeper through the value chain to take our prototypes and turn them into commercialised products. We really need to use Chinese partnerships in the latter stages of development to make the product more competitive and to develop new manufacturing processes to make that new technology. So this is looking at a much bigger partnership rather than the old kind of sourcing and assembly approach of the past.”
On the issue of human rights, Professor Williamson says change would be very slow: “China, in development terms, is probably where Britain was in the nineteenth Century. It will be a long haul to sort out the problems of human rights. We can put some pressure on them, but it is not going to make China move in that direction if we say we are not going to trade with them, it is cutting off your nose to spite your face. The Party is changing in China, but it might not end up as a multi-party democracy as we are in Britain.”
To listen to Prof Williamson’s full podcast click here