Last week during a factory audit I was performing in China, I was discussing with the CEO of the electronic factory I was auditing about differences between western (or even japanese) usual long term vision one side, and Chinese rather short term plan.
I gathered interesting information about how chinese manufacturers think, explaining why their mind is usually short term minded for quick profit. Those are the main reasons the electronic manufacturer in Shenzhen I audited explained to me:
1./ Culture and history
The CEO of this electronic factory told me :
“Imagine if you would live in a country where the law is changing very quickly and that you have no power to control it. Imagine if your life would be not so predictable. If you would be in this case, would you be patient enough to see what’s happen next ?”
He got a point ! Indeed, if you would be in this sitution, probably not . You would try to bank as much money as possible as soon as possible and keep it safe.
For longtime, life in China has been full of surprise: law and politics changing without any voice from people, taxes getting implemented quickly without people voice being heard, etc… In a sense, I understand them.
In a country where things are unpredictable you may feel insecurity constantly, so you would try to save what you can, when you still can.
2./ Customer’s speech overbuying
Then he told me the folloing : “One reason why we don’t necessarily think long term is because we have heard thousand of time potential buyer making us believe they would be their long term customer, but we finally discover they may switch to the competitor from one order to the other”
On this base chinese manufacturers are particularly lucid about the overbuying promise that they would reach important amounts over the time, but in reality they rarely reach them. With all the customes I serve, I have frequently experienced it too.
This is the reason why in my post about how to ask for quote to Chinese manufacturer I clearly mention :”be honest in your quantities and volume announcement”
3./ They still don’t know if they will be alive tomorrow
To continue with the said CEO, he told me the following:” Currently the economy is not very good, especially with Europe. We run on tight margin, so if we loose too many customers too quick, then we may go to bankruptcy the next day!”
The same way they advance the cultural and politics issue, they also mention the economy who according to them doesn’t go as well as they would like.
Remember that Chinese manufacturer are most of time working on tight margin and are betting on volume mostly, which in general doesn’t give a high tolerance for safety in terms of cash flow.
4./ Being accomplished quickly
For Asian, it seems to be a real accomplishment to drive a big car (even if you drive it with flip flop, and hawaian shirt), have a nice watch, etc…
I remember two CEO of manufacturing companies based in China and in Cambodia, who told me the same things: the first things a husband in a family would buy as soon as they could would be a car and not a house. I was shocked because in my country this is the opposite.
But here is the fact: I live in Shenzhen in a normal appartment compound without luxury (but still clean) in a building mostly for young people. The appartments there, are not very big, hence I suppose this is not for high class rich people. However, if you go to the parking you will notice there are 50% BMW, 25% Mercedes, a few Porsche, and even a rolls royce.
If I would have enough money to buy a Porsche, I would probably not live in this area of Shenzhen but in another one more up.