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THE IMPLICATIONS OF CHINESE GLOBALIZATION FOR THE LOGISTICS INDUSTRY

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By: Phil Sneed

(TANDEM LOGISTICS NEWSFEED  9/15/11): The next ten years will see a seismic shift in the balance of power in global supply chains, predicts John Manners-Bell, CEO of Transport Intelligence.

Chinese manufacturers are fast developing from low cost suppliers of cheap goods for foreign OEMs into global brands in their own right.

This shift has been largely prompted by the Chinese authorities who have encouraged companies to migrate up the value chain. This is sensible in an economic environment where inflationary pressures are making it increasingly difficult for Chinese manufacturers to compete on cost alone. There is also a political imperative which sees globalization as the next logical step for Chinese companies.

This has major implications for the associated logistics market. Bringing a Chinese brand to Western consumers will mean that these companies will be increasingly taking control of their supply chains. They will establish distribution networks in North America andEuropeand in some cases have already done so. This is a long way from the factory-gate strategies that all pursued in the 1990s.

Haier is perhaps the best known of these emerging brands.  It has already achieved leadership in the domestic appliance market with a share of about 6%. It now not only manufactures inChinabut inItaly, theUSand in various countries throughout the developing world. Where Haier led many are following: Lenovo, Huawei, ZTE,Tsingtao, Datang Telecom and China Telecom are just a few of the most expansive. ZTE, for example is the world’s fourth largest mobile phone manufacturer, a market in which it is competing against Nokia, Ericsson as well as domestic rival Huawei.

Why is this development so important? Simply put, a wave of Chinese companies will enter Western markets in need of downstream logistics services.  This is not necessarily a completely new phenomenon. However, the trend will gather pace and logistics service providers will need to be aware of this change in customer profile if they are to take advantage of the opportunities it offers.

Moreover there are deeper reaching consequences for the structure of the global logistics industry. There is no reason that the trend of globalization of Chinese companies should be reserved to manufacturers. As their supply chains spread throughout the world, there would be a natural inclination for exporters to use Chinese logistics providers to facilitate their growth. Hong Kong based Kerry and IDS have already entered the global M&A market, and there is no reason to think that Sinotrans,China’s domestic giant, should not do the same.

If this is the case, the global logistics market could look very different in the coming years with the possibility that Asian providers emerge as the dominant force.

Content provided  by Transport Intelligence.