‘What can we do against low-cost, good-quality China products?’

Q: We’re in the consumer durables category and we’re surrounded by competitor products from China.  Every time there’s a new import from China, our product development and R&D people immediately go to work and assess its technical and quality aspects. Almost always the assessment report tells us that in addition to a low and lower priced product, the import is good and many times of high quality.

As the revenues of the affected brands in our consumer durable line continue to go down and continue to do so at an accelerating rate, we decided we just have to do something against these invading imports.  Some two or three years ago, we read a Marketing Rx column answering a local construction tiles manufacturer experiencing a similar threat and seeking advice from you.  Have you had new insights into this problem other than what we already read three years ago and which can help us cope?

A: Since three to four years ago, we learned one or two new insights or lessons that should be of some help to you.

The first of these told us that this China threat is a case of history repeating itself.  Essentially, it’s a repeat of what the Japanese companies after the second World War did when they entered the overseas markets including the US with products that had good enough qualities but at lower or much lower prices.  The economic havoc that the affected businesses suffered, for example, in the car industry practically bankrupted Detroit as the Japanese car brands of Toyota, Honda, and Nissan over a period of three decades took over market leadership in the US market and even in Europe.

The lesson from the economic history tells us that the predator country will take a long time in dominating its target country markets.  But during those decades the local businesses will suffer.  Many will count as casualties.  However, there will always be survivors.  When business historians analyzed how some companies managed to remain alive and do well during this economic occupation, they found two basic sources of business—growing for those few who did well.

These were product innovations and entering underserved and/or unserved markets.  As one of the many ordinary mortals, to expect that you can be one of those few product innovators and/or “blue ocean market strategists” is closer to day dreaming than to being practical and realistic.  So we shift to the second insight and lesson.

It is anybody’s guess when the on-going China threat will eventually be completed and what categories and industries it will most affect and to what extent.  The evolving but rapidly growing research on how to foresight and manage the unpredictable future has profound lessons to teach us.

The Senior MRx-er’s seminar on “How to Foresight and Manage the Uncertain Future Market” classifies the future into 3 categories:

(1) a future of almost zero visibility at one end,

(2) a future of almost perfect visibility at the other end, and

(3) a future that’s a hybrid of these two and so is about 50 percent visibility.  The future of the China threat is in the middle of an almost zero and a 50 percent visibility but closer to zero.  So it follows that what you should do is a combination of foresighted strategies for a combination future of an almost zero and a 50 percent visibility.

In a future that’s an almost zero visibility, Nassim Taleb’s foresighting model (detailed in his 2007 best-selling book, The Black Swan: the Impact of the Highly Improbable) recommends that if you can’t predict the future, then you shouldn’t waste your time and resources on predicting.  Instead, invest in getting prepared.  Actually, way way back, the inventor Louis Pasteur, said something similar: “Chance favors the prepared.”

For today’s generation, the coach Yogi Berra also said something along the same line:  “You got to be very careful if you don’t know where you’re going, because you might not get there.”

What exactly do you prepare for?  Get ready for what you know had happened to the kind of business you’re in when such an unpredictable future that’s an almost zero visibility had taken place in the remote or recent past.  As we mentioned, that was the Japanese post World War II threat and its aftermath.  Learn how companies in your category that were similar to your circumstances were able to cope and manage.

What about the future that’s about 50 percent visibility?  What should you do with this kind of future?  There are two reputable futurists and foresighting authorities whose foresighting models can enlighten us.  Edie Weiner’s 2006 best-selling book, FutureThink: How to Think Clearly in a Time of Change, talks first about engaging yourself in a Trend-Countertrend-Synthesis analysis of the business and industry you’re in and at the time when a similar past threat took place.  Continuing with that similar past, learn next in what stage in the 3-stage cycle of Trend-Countertrend-Synthesis was your industry located.  Then for those regular and ordinary companies who survived,  how did they effectively saw the next stage and took part in it.

The second trend spotting authority whose foresighting model is just as helpful is Mark Penn.  In his 2007 best-selling book, Microtrend: the Small Forces behind Tomorrow’s Big Changes.  According to Penn, all businessmen and marketers are focused on megatrends.  But these trends all started as microtrends.  So it is toward microtrends that you should keep a close watch because they hold the key to future success.  The book has a collection of compelling cases to illustrate this theme.

The Senior MRx-er’s market foresighting seminar is also replete with illustrative cases and examples on each of the three preceding foresighting models.  Unfortunately, this column’s space does not allow us to include them here now.  We’ll probably reserve the next or future columns for them.

Keep your questions coming.  Send them to us at [email protected] or [email protected]. God bless!