Unprecedented Opportunities Await Manufacturers Who Do Their Diligence

By Sabine Dekker, European Marketing Manager

Glovia China Information Sessions
In February, the EMEA Headquarters in Eindhoven (NL) responded to requests and held an information session about China. We discussed local requirements, Glovia support, cultural issues, and more. The session was highly appreciated and will be held again in April 2004. For more details you can contact your Glovia account manager.

Low Wages, Huge Markets
China is hot. The country has 1.2 billion inhabitants-one in four people worldwide lives in China — and a long and impressive history. Over the past 25 years China has slowly opened its borders to foreign investors and in that time, manufacturing exports have surged 560 percent. In 2002 alone, foreign companies invested more than $52 billion in China. The country now ranks as the fourth largest exporter of manufactured goods behind the United States, Japan, and the European Union. By all accounts, China is a force to be reckoned with.

To compete with China in labor-intensive manufacturing is economic suicide. According to the Economist magazine, manufacturing wages in China average just 5 percent of the average manufacturing wage in the US. Many manufacturers, attracted by China's low wages, already have manufacturing operations in China and many more are now looking for opportunities to begin. Lower wages mean much lower costs, the decisive factor for the vast majority of customers.

Another reason for expanding into China is the huge market and an economy that continues to progress rapidly — in 2003, China's GNP increased by 8.5 percent.

Barriers To Entry
Although the most critical factors for China expansion are favorable, naturally there are hurdles to overcome. For example, quality issues. You often find that companies expand their production facilities to China for simple products and keep product engineering in their home country where high-technology knowledge is available. This also means that they stay near their customers, which saves time and results in a faster time-to-market.

Intensive quality control and continuous testing are a necessity for China-produced goods. The good news is that although the Chinese are inexperienced in this area, they are ambitious and eager to learn. They welcome Western companies who can help them grow their knowledge in delivering quality products.

The risk to intellectual property is also serious. The Chinese are known for their imitations, although controls in this area are improving. Still, trademark infringement, something that affects manufacturers from metal fabricators to makers of consumer products, can cost a company 25 percent of its sales in a market like China. There are stories of Chinese companies literally stealing equipment from their foreign joint-venture partners and starting up competitive production next door! Recently, a manufacturer of home made cooking equipment won a major infringement lawsuit.

Yet another concern is the Chinese infrastructure. China is a large country and the level of infrastructure can vary greatly, which can make distribution and warehousing complex. Likewise is true for communications. Again, caution and diligence are advised prior to investment.

Local IT and ERP Issues
Among the issues that have to be considered when opening manufacturing facilities in China are several that have an impact on software and hardware decisions:

• Software Requirements
  Most Chinese do not speak English, so if you want to keep efficiency high you cannot rely on the average user's ability to read English. Does your software support the Chinese language?
  
  
• Chinese Business Rules Requirements
  China is known for bureaucracy and control by the government. How do you live up to the governmental inspection matrix and VAT issues?
  
  
• Chinese Reporting Requirements
  Reporting is another area under strong governmental control. Companies have to deliver financial reports in the local reporting standards with pre-defined formats. How do you live up to these requirements?
  
  
• Database Set-up
  Single byte? Double byte? What are the advantages and disadvantages and what exactly are your needs?
  
  
• Hardware and Infrastructure
  The infrastructure is not the same everywhere in China. What is the local situation? Do you connect a server in the home office or do you install a server at the remote facilities in China? What are the risks and what are the benefits?
  
  

Glovia has the knowledge to help you with these issues and offers ERP functionality to meet the local requirements. Glovia also provides the information you need to make the right decisions for your specific situation.

Fujitsu and Glovia in China
Fujitsu has been active in China since 1974 when it implemented the undersea telephone system linking Japan and China. Fujitsu currently has several offices in China. For more on this, please see the Fujitsu column in this newsletter.

Fujitsu, based on years of experience with global and Japan-based manufacturing companies, has a powerful capacity to deliver complete hardware, software and service solutions on a localized basis. This consistent, strong global structure and long-term Chinese presence allows Fujitsu to provide quick and accurate local support to global companies with manufacturing operations in China.

Glovia of course benefits from the strong China presence of its parent company and offers extended ERP solutions to global manufacturers. Glovia professionals have a solid knowledge of the Chinese requirements and language and work closely with companies that expand into China. Glovia supports all extended ERP needs and conducts a conference room pilot to map a customer's solution requirements. Glovia also provides Education & Training and services such as integrated testing and month-end support.

Let us know if your company is considering China expansion and if you would like to know how Glovia could help support you. We will continue to keep you informed about the opportunities of doing business in China and the success that Glovia customers are having there.