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China'S Footwear Industry Is Out Of The "Virgin Land" Of Foreign Investment

2008/10/25 0:00:00 49

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ADI wants to leave China, mainly due to the "higher wages in China, resulting in higher production costs".

"In recent years, the overall cost of China's footwear industry has increased by 25% to 30%, while the average profit margin of the footwear industry is 5% to 8%, and nearly half of the shoe making enterprises and affiliated enterprises in mainland China have collapsed or shrunk", coupled with the "instability of the RMB exchange rate", resulting in the loss or even loss of the profits of ADI.

It is rumored that the international footwear giants such as Nike and Puma are also preparing to leave.

It is an indisputable fact that China is losing its competitive edge in manufacturing compared with other low cost countries.

After the adidas left, their foundries in China will follow suit and go to India, which is cheaper overseas.

So who will digest the labor force in China?

And through the land reform, 800 million farmers will be liberated from the land and flock to the cities.

The labor contract law, which has just been released by China, is indeed a protection for the disadvantaged workers.

But in China, the manufacturing industry has not yet become a trend, and it needs to rely on the labor intensive strategy.

Some people say, ADI Nike is necessary to sell that expensive?

The price of a pair of stores is 60 percent off, and the cost price is less than 1/10.

"In 2005, the gross margins of Nike and Adidas were 44% and 43% respectively," and the gross profit margin of ADI in the 08 year reached 50.1% of the historical record.

In the past 3 years, sales of Nike and Adidas have increased by 41% and 66%, respectively.

Both Nike and Adi are listed companies. Wall Street will grow at a rate of legendary growth.

Without the growth rate of 50%, the big guys in Wall Street are humming two times. The CEO are either up or down.

To increase rate, the cost can not go up.

Chinese are too expensive to find cheap Filipinos and Indians.

Besides, even though it's too expensive, Chinese people are jumping up and down buying Nike shoes.

ADI will add 1100 stores in China in 08 years, and its sales in the first half of 2008 have increased by more than 60%.

So it seems that Adidas run away from China seems helpless.

Recently, there is also AVON.

As a template of "Chinese style" direct selling, AVON became the first pilot pilot enterprise officially approved by China in 05 years.

But Deng Zhan's classmate, who has a Chinese characteristic direct selling system, went in, and AVON, who took the direct selling license from Deng's hand, was not clear, because Deng was in the process of taking bribes to help foreign enterprises make laws for foreign enterprises.

Foreign companies are really afraid of getting involved in such a "bribery door" because it will trigger their anti overseas bribery act.

In 05, an American medical equipment company fined California for $4 million 800 thousand for bribing hospitals in China.

An American who worked in China wrote a story about losing new China: American business, longing and betrayal.

1) "when I first arrived in Beijing, I was full of thoughts about China's rapid economic growth, business opportunities everywhere and the freedom they would bring to China, but soon they found themselves wrong: the new generation of adventurers had to give up their corporate moral civilization painfully, go to the countryside and follow the rules of China".

2) "Motorola representatives brag about how they bribe Chinese officials to open the market in a routine way. The managers of Asia Global Crossing destroy the company's expenditure records to cover up the company's losses; in order to cope with inspections, the Chinese enterprises use public funds to provide five star hotels and prostitutes services for the representatives of the head office."

3) "in my commercial circle in Beijing, success is not just measured by market share, but there are many other factors".

But foreign businessmen are obviously not "innocent angels":

1) more than 400 companies admitted that they had illegal or problematic pactions overseas. They admitted that they had paid up to 3 billion dollars in foreign funds to foreign government officials, politicians and political groups, and most of them were voluntary.

Of these companies, more than 117 companies rank among Fortune 500 in the world.

2) multinationals see China as a "tax haven". They run businesses in China to create man-made losses for tax avoidance and grab the wealth that is made in China and bring them back overseas.

More than half of the foreign companies in China show "loss", but foreign companies are still pouring in. "The tax revenue caused by tax avoidance by multinational corporations is more than 30 billion yuan per year".

China seems to be beginning to gradually change this bad business environment, but the road is still very long.

And on the road there will inevitably be a problem similar to ADI: the business environment is standardized, but some of the original competitive advantages have been lost.

Virgin land is very rough, but everywhere is opportunity.

If a virgin's identity is lost, if it fails to grow rapidly into a mature business environment, it will be not only barren but also lacking opportunities.