HAGC: Future Is The Point

Haier is transporting refrigerators for consumers. The picture is from www.haier.com.

It's inevitible to feel the chilly air in such turbulent circumstances for every country in the globalized chain. But China's problem is quite different from US and Europe, which is even much tougher——the problem of real economy is overriding that of virtual economy. To solve the problem, the most effective and probably also the most harmless solution, is to stimulate the domestic market, especially the potential rural market. Home Applicances Go Countryward (HAGC) is just one of what the Chinese government is doing to boost the rural market.

With the help of this plan, when every rural or suburban dweller buys an appointed type of applicances, he can enjoy an allowance granted by the government, which amounts to 13% of its total price. Since there's a big gap of ownership number on home applicances between urban and rural households, HAGC is supposed to help home applicances providers occupy the potential market in order to relieve the press on export decreasing.

Actually, it's really helpful to those providers, but perhaps indirectly, namely, for the future. "Although rural market is only a very small amount among our sales, we have to assure our products on the HAGC list," said Cao Chuancheng, vice chairman of supervisory board of Aucma, a Chinese home applicances provider, "because suburban market was always our major. If we lose the bid, our brand would be negatively influented to enter the rural market. And you know, it will be huge. With HAGC stimulating, some of our products was even out of sale during this Spring Festival."

Guo Qingcun, vice president of Hisense, another big provider, agreed very much. "HAGC can't make quick and big money for us now. What we concerns most is to let rural consumers know, like and be loyal to our brand. For this goal, we even offer allowances by ourselves for those products which aren't on the HAGC list. Moreover, rural market isn't the disposal area of inferior or lowend product. We must develop more suitable products." Mr. Guo's opinion probably denoted that the gap between rural and urban consumers is narrowing. "We noticed that the young rural consumers, especially those are ready to get married, prefer LCD TV to traditional CRT TV. It's a great change of the consuming trend. HAGC will have a huge impact on boosting the trend."

Why China Works?

It's really very difficult to evaluate your competitor objectively, just like what some westerners are doing to China in the global recession. However, there are still more and more different and wise voices, for example, Rana Foroohar, a senior editor in charge of all international business and economics coverage for Newsweek's overseas editions. In her recently published article Why China Works, she made a quite good summary on the Chinese 30-year rapid growth, with the distinct opinion that state control is not a hopelessly stupid choice but probably just the opposite.

Now that the United States and Europe are moving toward state control—by nationalizing the banking and car industries, and imposing heavy new regulation on the financial industry—the question has a new urgency. China, the poorest and most chaotic big economy, looks like the one best positioned to navigate what may be the worst global downturn in seven decades.

Ultimately, she even argued that China's successful use of command capitalism also carries, at most, limited lessons for the United States or Europe. It's much easier to boost growth by ordering engineers working in an autocratic system to build roads where there are none, as in parts in China, than to stimulate growth in a developed nation like the U.S. Still, the fact that an increasingly rich China still works so well is worth studying, not least because the credit crisis is provoking a wider questioning of free-market orthodoxy. 

Here's the full article. It is strongly recommended, both for westerners and Chinese. http://www.newsweek.com/id/178810

Why Apple Is Still Tasty

I'm a big fan of Apple and trying to get my first MacBook. Picture is from www.apple.com.cn.

Nothing can be a better news in such a turbulent economical winter than the Apple's fiscal 2009 first quarter, which registered record revenue and quarterly net profit. Business Week has the full story.

 http://www.businessweek.com/technology/content/jan2009/tc20090121_101972.htm

When everything is down, only excluding one, it is always likely to be considered as a miracle. Especially, the IT company is in a glutted and declining consumer electronic market, competing with other competitive giants. Many people, just like me, are likely to be curious about the question: why Apple is still tasty?

Someone perhaps attributes it to innovation. It's sound but seems unconvinced. By now, Apple has only published two cell phones, while Nokia, the market leader, pushed out tens of new products every year. Every market Apple engages in is mature and it is easy to find substitutes for its products, while Intel, the chip giant, dominates its market with monopolizedly technological advantage. 

However, Nokia and Intel are both going down due to the declining purchase power while Apple is still growing up. By putting Jobs' health on the frontpages frequently, American newspapers and magazines have expressed their answers about the core competitivity of Apple: it's Jobs. 

Thanks to Jobs' unbelievable creativity and vision, Apple is always able to bring out the directional philosophy of industry ,which manages to excite consumers, before its rivals. 35, 000 Apple's wicked-smart employees are resposible  to transform the philosophy to real products, which create the demand, not simply satisfy the demand. For examle, before iPhone was born, we all only knew the input tool of a cell phone is either keyboard or handwriting pen used to touch the screen, but Jobs told us that the best is exactly our fingers.

Apple's innovation is not the simple product innovation, but the philosophy innovation featured by the objective of excitng the consumers, which is the scarcest among the Chinese companies.  I once asked an executive of a big home applicances provider, "well, except the improvement of performance index, are there more that can excite the consumers?" He had hesitated for a while,  and then responded, "what we concerns most is the speed of our growth."

The answer is virtually universal. Nowadays, most Chinese companies have paid much more attention to innovation. However, the majority aims for reducing the product cost, such as localization or imitation of foreign products. This kind of innovation really has a quick effect to facilitate the cost reduction and the market expansion and is still fundamental according to Chinese current technological level and position of global industrial chain.

But if philosophy innovation companies like Apple could not be born in China,  we should be clinched at the low position of globalizationally industrial chain, forever.

Stop Blaming and Start Cooperating

Business week published an article recently, which compared today's China to the US in the Great Depression. This is another delegate of the diffusing tone that China is trying to export their way out of this crisis.

It's not difficult to understand such blaming. There's a best explanation of the phenomenon in Organizational Behavior. When something right has been done, one is likely to attribute it to his own effort, nevertheless, when it is proved to be wrong, objective reasons or other people become the excuse or criminal, just like the blamed China.

Although it is so universal, I'd like to tell those guys who try to escape from their own duty: Stop Blaming and Start Cooperating. Globalization is the accelerator to spread the financial crisis, but not the cause. Therefore, it's unfair to hoot at China which really earns a lot during the globalization, because that doesn't denote China could compel the American bankers to offer large amount of loan to those who bought unaffordable big houses. Endless risky speculation and shortage of effective financial supervison in Wall Street, is exactly the one. 

Actually, the globalization features the slump quite different from the Depression and also gives birth to hope. The US, Europe, Asia, Latin America and even Russia, in deed have their own benefit, but more in common due to the already-very-close globalizational tie. It's impossible for any country to export their way out of this crisis, certainly including China and also Uncle Sam. Cooperation based on trust is the right way to be better off.

3G: The Probable Booster of Pattern

G1, the first cell phone based on the open Android, in my opinion, stands for the trendency of terminal in 3G era.

When  I first played Heroes: Might and Magic on my PPC phone, the familiar manipulation and delicate pictures really shocked me. I was absolutely captured. But the passion didn’t last for long. One month later, the most usual things I dealt with my phone were making oral calls and sending SMS, which the simplest cell phone was competent enough to do.

Now, since licenses of 3G has been distributed to the new three telecom operators in China, the tough but essential problem they have to confront is how to stimulate consumers like me constantly with innovative and useful products. In another term, the Big 3 should definitely respond to consumers: why should I upgrade to 3G?

It is much more difficult than just enjoying the high profit from the traditonal business. However, it’s quite necessary for the future. Cell phones have become so popular that the satiety of the market is approaching. Revenue from phone calls still constructs approximately half of the profit, but has already been sliding. Value-added services based on the speedy 3G are exactly the hope.

To boost the rising star, the Big 3 need a new thought of making money. Price will be the biggest obstacle to break through.  It denotes that operators should make attractive price policy to let more consumers in, and then, conquer them completely thourgh diverse applications such as push-mail, shared videos and music, community online, e-business and etc.

In this new business pattern, ads and divided benefit with CPs and SPs will probably be huge, and even finally replace the traditional business as the new mainstay for the telecom operators.