Since I have been in Singapore for more than half a month from the beginning of this year, I have had many chances to engage in discussions with members of local subsidiaries. I have heard that it is not enough for the local office to only communicate and collaborate with their perspective corporate headquarters in Japan, although they have already begun conducting business in Southeast Asia, including Singapore.
What this means is that on one hand, corporate headquarters do not grasp what really matters within their local offices, and on the other hand, their local offices do not completely understand the effort of developing technologies and products in their headquarters. As a result, products planned and developed in the limited scope of understanding within the Japanese headquarters cannot be marketable in Southeast Asia. This is because the product’s specifications and prices are not suitable for the local markets.
Recently, we have been receiving frequent offers for consultation to build the structures of business development, to include global businesses. Reflecting on those discussions in Singapore, I realized the importance to involve the local offices that have ample amounts of knowledge about their local markets, not only in selling, but also in the preparation of planning and developing the appropriate strategies.
In my last column, I introduced the 7 points For Industrial Marketing In Global, and I described the details of the first three points (Figure 1). In this column, I will describe point No. 4, “Benchmarking global competitors without preoccupation.”
As a matter of course, competitors also attempt this approach to customers. So we have to offer a differentiation of value to customers.
Manufacturers of industrial goods tend to focus on product specifications, technologies, and patents. But it is much more important to win in the game of business than it is to only win in the game of products. So it is necessary for manufacturers to benchmark their competitors at the business level.
When you benchmark a competitor overseas, you should get rid of your prejudice about the competitor’s business, even if it is in the same category of industry, because it will have a very different business model.
For example, here is a case of a domestic major equipment manufacturer:
The Japanese manufacturer (hereafter, labeled “A Inc.”) formed an alliance with a Chinese manufacturer (hereafter, labeled “B Inc.”) to enter the China market. The main objective of the alliance was to procure the core components of a high technology part that A Inc. would give B Inc. and B Inc. would provide other materials at a lower procurement cost to A Inc. A Inc. would target the high-end market and B Inc. would target the middle to low-end markets. For both companies, the alliance was a Win-Win.
As a side note, A Inc. realized the business model of B Inc. only after the alliance. It was very impressive to A Inc. because the business model was not ordinary in Japan.
As part of B Inc.’s business strategy, it does not pay its bills to their suppliers for the parts for two years. It might be against an, “act against delay in payment of subcontract” in an advanced nation, but it was usual at this point in China (maybe now also).
B Inc. collected bills while it did not pay costs. Through this structure, B Inc. would have plenty of cash and was able to invest in other businesses to earn much more revenue. This is a portion of the background to China’s rapid economic growth. As a result, B Inc. could invest into its principal business, and it grew.
It was only after the alliance was forged that A Inc. began to realize how B Inc. made money and the reason why B Inc. was so strong. Through the negotiation of the alliance, A Inc. came to understand this secret little by little.
This case proves that competitors in foreign countries can conduct business in very different ways. You should be open-minded to benchmark without prejudice.
Overseas, it is more difficult to gather intelligence, but this is also the same for your competitors. To ensure your superiority over your competitors, you should have a “business intelligence function” through communication and collaborations of local offices and your headquarters.
In my next column, I will introduce point No.5, “Global Brand Strategy for industrial marketing”.