Hong Kong Manufacturing SMEs: Preparing for the Future

118by Chinese industrial enterprises in the future. It isquite likely that several of these outward industrialinvestors will run their international operations, ormake their international investments, from HongKong-listed and / or domiciled subsidiaries, and itis quite probable that some will even place theircorporate headquarters in Hong Kong.Rising affluence in China and India, as well asin the rest of the developing world, will result incomplex segment structures across a wide rangeof industries. While more affluent countries andsegments within developing countries will seegreater fragmentation and specialisation in demandand supply, at the same time hundreds of millionsof developing country consumers will create massmarkets of unprecedented size. The result will bethat there will be a wide range of strategies, coststructures, and production locations that will beable to succeed, even within a single industry. Thiswill make identifying, understanding, and servingspecific customer niches even more important, andpotentially even more valuable, in the future thanthey are today.New PressuresThere will be pressures on Hong Kong industry aswell as opportunity. Costs will continue to rise inthe traditional production locations of Hong Kongfirms. Chinese officials will continue to work torestructure the economy of the Pearl River Delta.Mainland companies will rise to compete directlyagainst Hong Kong companies in more and moreindustries. Foreign buyers and retail chains willcontinue to exert tremendous pressure on theirsuppliers to reduce prices while improving qualityand expanding service levels. In addition, we canexpect that over the next several years resourceconstraints and environmental considerations willcontinue to grow in importance. The rise of Chinaand India imply resource demands that will strainglobal supplies. Companies will have to developproducts and processes that use resources moreefficiently. Under all these pressures, we wouldexpect to see some industries in which HongKong companies compete to consolidate, othersto be transformed, and some to diminish or evendisappear. And even in those that remain, successand even survival might be difficult to achieve forindividual companies.But while many existing companies will comeunder pressure, the overall picture remains one ofopportunity for Hong Kong industry: opportunityto serve the world’s fastest growing consumermarkets, opportunity to participate in the world’slargest industrial base, opportunity to takeadvantage of closer interaction with the ChineseMainland, opportunity to benefit from the influx ofcorporations into Hong Kong, and opportunity toride the wave of increasing specialisation. This is notto say that opportunity will automatically lead tobusiness success. In fact, in order to take advantageof the opportunities it will be necessary for HongKong industry to reinvent itself one again.The Need for ReinventionThis reinvention will involve a clear understandingof economic, business, and policy trends. It willinvolve developing the skill sets to develop, design,produce, and sell products that can meet markettests in China, the rest of Asia, and elsewhere. Itwill involve developing the capabilities to manageoperations in Hong Kong, in South China, inthe rest of China, and elsewhere. It will involvemastering modern communication and informationtechnologies as research, management, andmarketing tools. It will involve moving beyond thelimited set of industries in which Hong Kong wasonce a leading production location to embracethe entire range of industrial possibilities affordedby access to China. It will involve learning how toserve rapidly emerging niches is rapidly emergingmarkets. It will involve taking on more activitiesthan the simple OEM “order taking” pattern ofmuch of Hong Kong’s traditional companies. It willinvolve developing compelling business strategiesthat identify specific unmet needs and tailor abusiness proposition to meet those needs. It willinvolve higher levels of professionalism in internal