Chinese agchem manufacturers going downstream in international markets
−− adopt fifteenth century admiral Zhenghe’s art of collaboration
Oct. 19, 2012
- C S Liew
C S Liew, Managing Director of Pacific Agriscience Pte Ltd, based in Singapore, has more than 40 years of international experience in the agricultural chemical ...
The world of generic pesticides belongs to the Chinese manufacturers because they manufacture the widest range of products as well as having most of the key raw materials available locally. They need to go down the supply chain in overseas markets. They need to invest in registrations, employ overseas/foreign staff, collaborate with overseas partners to gain market access and promote their own brands. This then allows them to extract more value out of the supply chain compared to the current scenario where they merely make Technical grade generic pesticides as well as formulated products and export them to overseas registration holders. Because of the large numbers of manufacturers per molecule or per formulation, they are squeezed by the overseas customers on price, leaving them with miserable profit margins and a non-sustainable business model.
They need to break out of the foreign-imposed "the Chinese" or “Chinese products” branding. This means that as far as overseas dealers and farmers are concerned, there is no distinction between one Chinese manufacturer’s products from another’s.
Their government encourages them to invest overseas. But, unlike the Indian manufacturers, they have a higher barrier to entry due to their lack of foreign language skills as well as a lack of cultural understanding and appreciation of foreign markets and players. Worse than the lack of linguistic capability and cultural awareness is their recent new-found successes and wealth which make some of them arrogant. They need to understand that their successes up to now have been based on low-cost labor and low-cost manufacturing which is becoming irrelevant with costs rising very rapidly. In contrast, the major international manufacturers’ successes are based on technological innovation and international marketing prowess which is a much more sustainable business model.
Admiral Zheng He mounted seven expeditions from China to South East Asia and all the way to the Middle East and eastern Africa during the fifteenth century, nearly one hundred years before Columbus set sail and discovered America. The hundreds of Chinese generic agrochemical manufacturers should learn from his bravery, management, logistics, diplomatic skills, and foresight and similarly make attempts to explore and to exploit the opportunities available in overseas markets down the supply chain. Most of all learn from his Art of Collaboration. His four pillars of sustainable success factors namely Capability Building, Communication, Coordination and Continuity should be emulated or adopted.
Zheng He did it all without laptops, iPads, cellphones, and planes. If he could mount seven missions and gained sustainable successes overseas without all these modern tools, so can the modern day Zheng He amongst the hundreds of Chinese generic agrochemical manufacturers.