Jun 30, 2006

Western Woes Reach China Marketplace

China's legacy of global low cost prowess seemed destined to launch a new wave of large, emerging chinese companies onto the global scene. With great fanfare, Qingdao Haier - the large PRC appliance maker - has made aggressive moves to acquire ailing US competitor Maytag.

But new Haier earnings announcements coming out of China illustrate that even in that marketplace, an anemic growth strategy overly focused on low prices as the sole differentiator is a no-win treadmill. Indeed, a 32% decline in Haier's net profits is being attributed to intensifying competition among chinese white-goods makers.

Some business truisms are universal. The need to sustain real value added differentiation as a long-term path to earnings growth is apparently one of them!

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