When people in China think of the utilization of the latest modern equipment and high technology available, one is as a matter of fact mainly interested in the actual procurement and application of these means of production first, without really taking into consideration an optimal use or allocation of production factors during the production process.
Although the awareness with regard to the need and importance of a positive return is often present, the awareness with regard to an optimal allocation of production factors is usually lacking.
In doing so, one should make a balanced calculation in advance concerning the equipment that one plans to purchase on the basis of its economic life span, the necessary depreciation (costs of replacement), the available capacity (in volume and time), maintenance and repair, and the course of additional costs during the period of use. This is done too little. In connection with this matter, a calculation of an optimal allocation of labour is rarely made, in the qualitative as well as the quantitative sense.
To calculate an optimal ratio for the production factors that are to be allocated is not self-evident yet. The labour factor is too cheap to ignore and to replace it quickly with the factor capital. This is clearly reflected in the purchasing policy of Chinese companies with regard to equipment. One doesn't make a proper assessment of purchasing costs on the basis of the economic life span, capacity, etc.
On the Chinese side, one is often too much concentrated on the initial costs and the technical life span of equipment. They are generally hardly interested in either service and repair or training and instruction if it is included in the overall price of the quotation, one is even not supposed to charge something like this according to certain Chinese business partners! An adequate handling of machines and systems does not have enough priority with them. This may have significant consequences later for the actual benefit during utilization and the ultimate satisfaction with the acquired equipment. In this way, future orders may be in danger.
Next comes the fact that Chinese companies are too much product oriented. They are too much focused on the production process, while study into the market potential is far from sufficient. The marketing discipline did not reach the same particular importance yet as it did in most of the western economies and emerging markets.
Yujie Services comes each month with a premise that focuses upon a certain aspect of the Chinese business culture where things may go wrong.
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