Even Chinese companies feel pressure from increased costs, whether from material or labor.
“To Chinese enterprises, price is determined by the supply-demand relation, so it seems clearly different for various industries in aspect of the influences they suffered from the material price rise as well as the speed and extent of transferring the influences to their downstream enterprises.”
Some western capitalist companies don't want to recognize the Toyota model, where Profit = Price – Cost. Many western companies still believe in the Price = Cost + Profit model, where if one component of cost goes up, they must obviously be entitled to price increases, to keep their profit entitlement. In reality, if one component of cost goes up, you must be willing to reduce costs in other areas in order to maintain profits.
Here is an article about a company that is moving a China factory to the Philippines, mostly due to cost concerns.
What do you think? Please scroll down (or click) to post a comment. Or please share the post with your thoughts on LinkedIn – and follow me or connect with me there.
Did you like this post? Make sure you don't miss a post or podcast — Subscribe to get notified about posts via email daily or weekly.
Check out my latest book, The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation:
