Building a Future for Distributors and Dealers of Building Products
Volume 44, Issue 3 April 2005
IN THE NEWS
THE CHINA MARKET
A View from the Bottom of a Well
by Rosalie Leone
Okay, so I’m not a manufacturer or a distributor, but I do have ears. There is a lot of talk within the millwork industry regarding how manufacturers and distributors can “hop” on China’s building-boom bandwagon.
The daily newspapers and television reports tell us there are more U.S. companies doing business outside the United States than ever before. The millwork industry is no exception. The international market, particularly in China, is coming on strong and making its presence known here among the millwork industry, too.
It’s no secret that China’s total import of timber products has increased dramatically since the mid 1990s. The annual import value of timber products more than doubled and the volume tripled. Logs, and to a lesser extent lumber, led the increase in volume.
According to experts in China’s building products industry, the primary obstacles for U.S. companies that want to begin export sales to China include a lack of understanding the logistics and distribution system for building materials and finding reputable distributors and sales representatives in China. Many U.S. companies are uncertain about their strategy for China, but are alert that China’s construction market could positively affect their business.
China’s winning combination of what seems to be an endless supply of cheap labor along with its entrepreneurial fortitude is expected to produce major dislocations in the traditional import/export channels of the global finished wood products trade.
As Chinese conglomerates anticipate spending millions of dollars to build manufacturing plants for wood products, will U.S. manufacturers want in on the market? I think they will and already are, on some level. Are they looking before they leap?
On an anecdotal note, there is a local business, not five miles from my office, which expanded their operation to China. They already distribute their building product in more than 80 countries through a network of distributors and licensees. So naturally, initiating a business venture in China seemed to be a reasonable idea for this company, well seasoned in international business. After sinking about $1 million into the Chinese venture, the president discovered that his Chinese partners were skimming profits from their jointly-owned factory.
They were cautious. They used a Chinese-American employee to oversee the operation. The problem, as it turned out, was that no one was overseeing the overseer. One of several problems that occurred was that a pirated version of the company’s patented product appeared on the market. Clearly, this example illustrates that in spite of China’s market potential, like a frog at the bottom of a well, you can only see so much sky. Millwork companies thinking of expanding operations in the China market need to be extremely thorough in their planning and execution. Yes, there is profit to be had and friendships to be made in the China market, but vigilance is the key to success.
The Association of Millwork Distributors (AMD) recognizes and acknowledges the global changes as they affect the millwork industry and all AMD members. AMD’s affiliation with the National Association of Wholesalers (NAW) continues its lobbying in Washington, D.C., on pertinent issues on behalf of AMD members. AMD events provide a forum for networking opportunities and educational sessions. Members are updated on industry trends through the AMD website and monthly newsletter. The association is a vital resource for its members from all aspects.
If you are interested in the values and benefits of AMD membership, becoming a member or finding out more about AMD, contact the AMD headquarters at 800/786-7274, visit the AMD website at www.amdweb.com or send an email to firstname.lastname@example.org.
Rosalie Leone is the executive director of the Association of Millwork Distributors of New Port
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