China races to close the quality gap

China races to close the quality gap

A decade ago, many of us were apprehensive about buying a product made in South Korea. Today many consumers wonder whether they should purchase a Chinese product or not. Let’s be frank: how many of us have had good experiences with every ‘Made in China’ product we’ve owned?

China has been the centre of countless scandals related to product quality and safety, from milk and meat to electronics, cars and motorcycles. Consumers can be forgiven for their lack of trust.

South Korea was facing similar challenges not that long ago. But the TV shopper who would have insisted on buying a Sony Bravia a decade ago would probably not hesitate today to choose an equally high-quality product from Samsung or LG. In fact, it is the Koreans who are setting the pace for TV model innovation these days while the Japanese play catch-up.

After taking the electronics industry by storm and passing the Japanese goliaths, now the South Koreans themselves have rivals breathing down their necks, with the influx of new and cheaper electronic products from the mammoth production lines that are operating in China.

Chinese products are becoming more sophisticated while boasting lower unit production costs. Thus the manufacturers are able to flood the market with cheaper products that are gradually catching on among consumers from Thailand to India and beyond.

What is missing in this jigsaw puzzle is the aspect of quality and reliability.

From leaking batteries made in China to the use of other counterfeit and low-quality components, many Chinese products have a way to go before they can earn public trust.

There are exceptions of course; the Chinese appliance manufacturer Haier has become a household name in the United States and elsewhere by focusing on quality and adopting global best practices. In the end, only by offering good-quality products at reasonable prices have companies such as Samsung and LG been able to dethrone global incumbents, just as Sony, Panasonic and other Japanese companies once bested Whirlpool, GE and other American brands in the contest to become part of consumers’ daily lives.

The changing landscape in Asia is very evident these days, especially with billions of dollars of market capitalisation being wiped out of South Korean companies amid intense and growing competition from Chinese contenders.

The competition is seen most clearly in the electronics sector, but the automobile industry is also becoming a more hotly contested battleground among Korean and Japanese producers as well as Chinese newcomers.

South Korea for some time has been making vehicles that are world standard, with Hyundai and Kia the flagships, though sales abroad have been modest. The Japanese, who have been dominating the industry for decades with reliable everyday vehicles and now luxury cars, are starting to face the challenges from their Korean counterparts and the Chinese are not that far behind.

Chinese car companies have been on an acquisition spree as they seek to carve a niche in the world market, acquiring knowhow from established Western marques. For example, SAIC took over MG of Britain, while Geely, which began life as a refrigerator maker before shifting into cheap compact cars, now owns the Swedish brand Volvo.

The launch of various models by Chinese and South Korean automakers is a testament to the changes that are happening in the industry. The Korean companies are now chasing their Japanese counterparts while the Chinese are looking to challenge the Koreans.

One thing hasn’t changed, though. Success will continue to be dependent on the quality and reliability of the products that enter the market. Even the most appealing new consumer electronics or cars need to be backed by good after-sale services. The Koreans have done a good job in this area with electronics, but the record for Korean automotive products in this part of the world is spotty, leaving a sour taste among owners and potential future clients.

The Chinese are already aware of the challenges ahead and therefore are tying up with some big names to try to tap the Asean market. SAIC, for example, has tied up with Charoen Pokphand Group to tap the Thai and other CLMV markets with its MG branded vehicles.

What the South Koreans need to do is to adopt a similar strategy to create a backbone for future success. Specifically, they need a stronger network of distributors and service centres to be able to dethrone the likes of Toyota and Honda in this region. Korean vehicles today offer similar quality to their Japanese counterparts but not the same degree of after-sale service, and it is the latter that will make the big difference in the long term.

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