Action Asia Business Leaders Seminar Two
In the early days of importing from China the products were typically of low quality and offered minimal packaging compared to products from the UK and New Zealand. The Warehouse now operates a highly sophisticated purchasing operation in China with 50 staff in Shanghai engaged in sourcing products for the company.
Over the decades Stephen Tindall has dealt with businesspeople in China and other parts of Asia, he has found Asia to be very open to working with New Zealand, and the FTA with China means the future is bright for New Zealand in that market. However, he pointed out that while government “has set the scene, it’s up to companies here to follow up on the opportunities.”
"We need to export more in order to reverse the continuing balance of payments deficit", said Tindall, who then went on to discuss the New Zealand companies that he thinks can offer business models for others to follow. “The effect of the current financial crisis will be to reduce our standard of living unless we get smart about what we do.”
The answer is being demonstrated by design-led companies such as Wellington-based firm Formway, which profitably sells its chairs for a third of the price of a comparable product in the United States. Like most of the firms with business models to emulate, Formway designs its products in New Zealand, but manufactures in China. Other firms, such as Phitek, Icebreaker, Cabco and Phil & Teds all have in common that they are design-led and manufacture in China.
Another technology firm, Pure Depth, is doing well in Japan, supplying Sanyo and Japan's pachinko industry with LCD screens that incorporate 3D screen technology developed in New Zealand, but manufactured in China. Macpac, after resisting moving its production offshore for as long as it could, now manufactures in China. Importantly, Tindall said, it maintains strict control over the supply-chain and all materials. It is because they have increased the quality of their production and lowered their costs that they remain successful. By building relationships based on trust and careful selection of business partners in the first place, these firms have managed to protect their intellectual property.
It is essential that if New Zealand is to maintain its standard of living, more firms become design-led and that we protect our intellectual property when we take manufacturing offshore. Garment manufacturers using Merino wool has demonstrated how New Zealand can use clean, green technology to grow companies with help from manufactures in Asia.
Not all firms manufacture exclusively offshore. Some like Navman (now foreign-owned) are conducting volume manufacturing in China, but also make some components in Auckland. Manufacturer of electric motors Wellington Drive Technologies has factories in Auckland and China. If we are to maintain our standard of living, we need to grow more design-led firms that are careful to protect their intellectual property and leverage off the lower-cost, high-quality manufacturing bases Asia has to offer.
IceBreaker, Pure Depth and Methven are all companies thatthrough their ingenuity and capacity for innovation have built strong brands and developed niches for their products around the world. Because New Zealand can’t hope to compete over the next 5-10 years with China’s low overhead cost structure, rather than try and compete head-on, we should leverage off the higher end of the quality spectrum China can offer as a source of competitive advantage. By owning brands and IP, New Zealand companies will be well placed to market their goods and services to the rest of the world.
The seminar was held at the offices of Minter Ellison Rudd Watts in Auckland.
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Questions?
Contact James Penn on +64 9 368 1435 or email jpenn@asianz.org.nz.
