Roland Berger, a leading global management consultancy, has released its latest annual flagship report, Foresight 2025: Roland Berger China Annual Trends Report, which shares critical insights into the intensifying competitive challenge from Chinese companies' rapid development and cost efficiency. This dynamic is profoundly reshaping global markets, demanding urgent strategic adaptation from Western businesses.
In 2024, Chinese companies have achieved significant global expansion, with key goods exports like electrical machinery, advanced equipment, integrated circuits, and automobiles surging by 20–50%. Non-financial outbound investment increased by approximately 11% over 2023, surpassing USD $100 billion, with China ranking in the top three globally for overseas investment for 12 consecutive years. Many leading Chinese firms now generate over 50% of their revenue from overseas operations, alongside increasing profitability. This success spans commercial vehicles, automotive OES, automotive OEMs, and heavy machinery.
However, Roland Berger's analysis reveals a critical gap: Western firms lag in material cost, time to market, and customer attunement. This disadvantage leads to struggles against Chinese competitors, often being "too slow," "too expensive," and "too little attuned to changing customer needs." The need for decisive action is immediate.
Achieving "China Speed" and "China Costs"
Chinese OEMs achieve their remarkable speed and cost advantages through:
Speed:
- Accelerated product development: Characterized by shortened strategy phases, leveraging supplier platforms, and selective high vertical integration.
- Parallel processes & MVP approach: Emphasizing agile development and minimal viable products.
- Lean, hierarchical organization: Enabling quick market adaptation and accelerated global expansion.
Cost Levels:
- Conscious product trade-off: Design decisions are driven by customer attunement.
- Stringent cost-out operating model: Utilizing both technical and commercial levers.
- End-to-end procurement accountability: Direct responsibility for cost management across the value chain.
Strategic Imperatives for Western Companies
Roland Berger advises a focused, three-step strategic approach for Western companies:
1. Define your competitive arena: Understand where and how you compete, against whom, and with what products.
2. Benchmark and identify gaps:
- For "China speed," analyze your Product Development Process (PDP) and benchmark products to pinpoint inefficiencies and accelerate development.
- For "China costs," perform product teardowns and BOM analysis to identify cost gaps and develop strategies to close them.
3. Adjust your cost-out operating model.
Further Insights
"Foresight 2025" provides a comprehensive understanding of trends and strategic imperatives for succeeding in China's evolving economy. To download the report, click here.
