Inventing:The Moment before the Spark Came
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In this era of easy availability of knowledge and technology, it is not inconceivable to drastically change a country's source of revenue in a matter of a single decade. A good example being the economy of China, where it was only a decade ago that they had rudimentary industries that are more associated with a third world country. China is today still being considered as a third world country, but if we were to add up all its many capabilities, then there is no doubt that being the second largest economy in the world and having the status as the factory of the world, it will easily reach developed status in another decade.
It is certainly an economy to keep a watch on, if we were to perceive it as a threat to other faltering economies trying to survive in this era of high oil and commodity prices. Partly due to its huge market and cheap land and labor, China has been the choice of foreign direct investments, especially from American and European sources. China's February 2008 FDI reached US$18.1 billion, an increase of 38.8% from a year ago. Because investors have no other alternatives, they are dumping their money into China, hoping to at least carve out a small piece of the cake. This has added more fuel to the already overheated Chinese economy, where inflation rate has reached a very uncomfortable level, as far as the large impoverished population of this land is concerned. Just imagine what will happen if the large poor rural populace who at this moment is facing survival threats from pricey essentials begin to run riot? The whole world will not be prepared for such a catastrophe!
It is indeed a shivering thought if we were to look around the other smaller economies. You will find that many of them are following in the same footsteps like China, replicating the kind of investments that will add no value to the world economy, except to add to the numbers of countries that can only say 'me too' also producing it. The world cannot sustain too many similar economies like those of China, each trying to replicate the kind of low cost production units. Resources should be more productively utilized in areas of newer technologies or newer products and services instead of being channeled into same old things. However, doing so will require new and stronger visions, least so from parties that can make decisions.
Along with this thinking, there should also be restructuring of economies that have been using import substitutions to sustain their economies. With low cost producing countries feeding their productions to buying nations, it is no more viable to keep these import substitution industries running. An important example being the vehicle industry, where competition among the few industry giants have brought about producing cars at a cost that small producing nations just cannot match. For them, an import substitution economy should cease as soon as possible and another sustainable method be introduced.
Perhaps one of the viable methods is to take the route of 'niche production' where specialization in highly niche industries seek and expanded. Niche industries have a very much higher risk for successes, but if ceaselessly pursued, will have long term benefits. It is certainly less competitive, but requires suitable marketing efforts and a longer gestation period for break even. For some developing countries that are not endowed with much natural resources, niche production might be the only alternative in order to remain relevant in a world economy that makes size a very important deciding factor where success is to be achieved or not.
Niche industries rely heavily on human resources. It relies on ideas and innovative thinking much more than material resources. An evergreen example to look at is the Swiss watch makers. A traditional watch exporting country that have very little natural resources, Switzerland has reinvented itself to exporting exclusive fine watches and cheap models that click well with the young and trendy. Being a traditional exporter of expensive accurate chronometers, it too has to reinvent itself when the quartz revolution came about in the sixties. All it had was the human factor and plenty of government incentives to turn the tide and reinvented itself to remain relevant today.
Most of the requirements for niche production are already available, except for the political will to pursue it. Economist have yet to take a deeper look into its many benefits, but with existing import substitution channels facing a bleak future, the time might be now to take a concerted interest to it. A world with diverse industries spread out among big, medium and small economies; with each able to carve out a fair proportion of trade will bring about stability and peace.
As an example of a niche industry that has a great potential, we have only to look at the robotics industry. Especially futuristic is the scenario where robots are used to take care of the burgeoning aging population. Robots that can be programmed to show interactive facial expressions will be on the menu in the not distance future, and might become man's preferable companion!
Here is a site that is dedicated for people who worshiped niche marketing and is the place where you can get new ideas and patents and other intellectual properties that can assist you to better compete with the other guys!
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What makes a country great? Circa 2009.
Someone once asked what makes a nation great is. You can be sure that the opinions are as diverse as the different species found in a natural pond. It is indeed a difficult question to nail. In order to get an accurate answer, we would have to look at all those countries that have managed to achieve at least a decent level of greatness. But there are not many of them to speak of, and based on what types of criteria to grade them, we could not count more than five.
Let us not be awed by military might because as we can see, it could become a bane when a country is engaged in military adventures that sucks up real money. A case in point is the US military engagement in Iraq where troop withdrawal is a big problem.
What about countries with technology might then? If we were to look at countries like Japan, Germany, United States, Korea, Taiwan and the UK, we can certainly discern that there is a great future for them in the years to come. These countries took years to build up what they have now but how far they will go is any body's guess. Of the group, the US, Germany, UK and Japan are ahead of the pack. But not far behind, we have countries like China and India breathing down their necks. With plenty of investment dollars going to these two developing countries, it would not be wrong to predict that they will be in the front running in a couple of years time.
Great economies make great nations. If we were to follow this dictum,
then countries like the US, Japan, Germany and China would make the
grade. However, having a great economy might not be enough as having
great managing skills is equally important. If we were to take a look at
how the US is managing its economy, then we could not come of with a
feeling of anxiety because there seems to be too many issues to tackle.
In the US, monetary issues seem to be an insurmountable problem with the
falling value of the dollar. Employment, trade balance issues are the
other items which could be sticky ones to overcome as well.
Perhaps we should look closer at the trade issues because trade surpluses seem to be an important element; in this case, it is strong surpluses that are the issue. Perhaps when a country sells a lot of its product, it will have a strong bargaining power. A case in point is the issue between China and the US. With a constant annual GDP rate of increase of 10 percent for China, the US has been aggressively pressured China to increase its monetary exchange rate so as to reduce its huge trade surplus with the US. China has only acceded to the US wishes marginally, dragging its feet along the way. How long this could go on is a big question mark, whilst the rest of the economies wait in abated breadth.
How did China managed to become such a huge elephant? Who is to be blamed for such a situation? There are no surprises here; the blame could only be justifiably nailed to US. For more than a decade, it has gobbled up to 60 percent of China's export. Not only that, it has also pumped in billions of dollars of investment in China. Why only China, you might ask? Well, the answer is the huge market size. The thinking was that if you invest in China, part of the manufacturing output could be absorbed in the host country. On paper, this looks like a great investment proposition, at least from the banker's point of view. In reality, most of the exports went back to the US. Could you then say that a country becomes great when they can sell more than they can consume? Yes, this seems to be the new old economic truth given a new twist!
Inventive Ideas by Terry
Factory to the world and yet brand less
As we are approaching the end of tumultuous 2008, there is one thing that is very evident and that is the great factory to the world, that is China, if you don’t know, is having its factories closing shop like a stack of falling cards. Why is it so?
The reasons are two fold. For one, building factories to just cater to flimsy orders from all over the world is madness to say the least. Orders are normally not placed due to confirmed demand; it is only a prediction and like all predictions, can go haywire when the economic well being of consumers vaporized.
For two, making products but bereft of a sales channel is suicidal. If we look at the great brands of the world, we can see that each of them has its own network of sales outlets. It took years to nourish, but it will make the brand withstand during bad times, like now.
China, in its haste to move forward in the world economy, has got the formula wrong from the start. Its economy is primarily based on contract manufacturing. It used its large and cheap manpower resources to churn out articles that the world was hungry for. On its way, much of their competitors from smaller economies suffered with no alternatives but to close shop. And to rub salt into the wounds, these competing countries ended up buying from China those products that they were producing before.
Now, with orders shrinking at a fast rate, China is facing great difficulties, with factories closing by the hundreds each day, just because Americans can no longer afford to buy. And to make it worse, China has got no brands and therefore no where to dump its manufactured goods! In short, it is a factory to the world, but it has got no backbones of its own and so the only way out is to close shop.
Why did Chinese leaders not know of their weaknesses? Yes, they did, but they were too occupied with the wrong politics and they never had a leader that has run a corporation before. Learning from this lesson, it would be best for enterprises to build their company basing on a strong strategy of brand building as its core activity. Contract manufacturing can only bring about short term feel goodness, and never a wise business sense. To insure a continuous growth, enterprises must make innovation their hallmark so as to not become obsolete in this fast moving world. Two things to remember, one is to always innovate and two, to make branding your top priority.