Awakening of the sleeping dragon

After few years from the Deng Xiao Ping’s reforms, China became the most powerful magnet for multinational companies. It is undeniable that they are, for many years, the most loyal amongst China’s friends. Mainly, following the access to the WTO, China has attracted thousands of foreign companies. For them, China was almost a heaven, with some sporadic clouds. As an irony, those MNCs are now battling the local companies they helped to grow for market share. Chinese companies have graduated from their backwardness and are now ready to challenge the former masters. Traditionally, the market arena was rigidly set: costs in favor of the Chinese companies, while quality was exclusive for the western companies. Now, we have a different ballgame: sophistication and innovation is no longer an exclusive feature of the west as China has staked its claim too.
Take the dairy industry, for example. Danone, the biggest yoghurt producer in the world, recently decide to suspend operations in its factory in Shanghai, thus limiting its production to its plant in Beijing. At the same time, the Swiss giant Nestle announced that one of its 3 ice cream factories< will be closed. The official reason behind the decision is internal restructuring, but it is widely known that both MNCs suffer a fierce attack from the Chinese competitors. Consequently, they are unable to match their costs and quality and are exposed to a stringent competition. The Chinese companies made tremendous progress, learning quickly and profitably. They lead a virtually non-existent industry among the highest ranking in the world. China now holds the 3rd position in the international market after India and USA in terms of milk production. Nowadays, dairy products are common drink and meal in China, despite a different culinary tradition in the country. The most important players in China are Inner Mongolia Yili Industrial Group and China Mengniu Dairy. Both emerged from wise acquisitions and after the tainted milk scandal of 2008. Their domination of the ice cream market (whose value is approximately US$ 5 bin) is obvious, with a market share constantly surging. Yily holds 17% of share of market (SOM), Mengniu 15%, while Nestle’s market share is confined to a meager 3%. More importantly, these results come from a relatively free market.
Despite some procedures and safety regulations, local and foreign products are easily accessible in China. Western distribution giants are long established in the country, to cater the needs of both Chinese and expatriates’ clientele. Gone are the times when the foreign products, especially cheese, were sold only in expensive delicatessen stores in the international hotels. The marketing too has grown, to reach the ambitions of young and urbanized local society.
Local companies are now equipped with competence, expertise, and equipment. More importantly, they know better how to intercept the demands from the increasingly discerning customers. They are no longer tributaries to the western technology and marketing strategies. Ironically, this time, the “same level playing field” is favorable to the Chinese companies.