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Competing with China: Lessons from South Korea’s Manufacturers

October 11, 2012 by Sunghun Park
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In This Article
  • The 2008 financial crisis reminded many countries that a strong manufacturing sector is required to maintain a healthy economy and to compete globally.

  • Developed nations that neglected their manufacturing sector have begun to rebuild it. However, they are finding that they have a formidable rival: China.

  • South Korea’s manufacturers have long felt the heat of Chinese competition.

  • Examining the competitive advantages of South Korean and Chinese manufacturers, and which South Korean industries are most vulnerable to Chinese competitors, holds lessons for companies and countries looking to maintain an edge.

 

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The 2008 financial crisis reminded many countries of a fundamental reality: a strong manufacturing sector is required to maintain a healthy economy and to compete globally. Earlier in the decade, many developed nations saw their financial sector grow to dominate their economy. The global meltdown, however, made clear the risks and detrimental effects of one sector assuming such a pivotal position and of countries moving away from producing tangible products. As a result, developed nations that neglected their manufacturing sector have begun to throw their full weight behind rebuilding it.

As these countries refocus, however, they are finding that the competitive landscape has changed. China has become a formidable rival. During the past decade, the country’s manufacturing sector has grown exponentially, aided by low wages, a large domestic market, and government support.

South Korea’s manufacturers have long felt the heat of Chinese competition and feared being surpassed despite being more productive and technologically more advanced. A recent reappraisal of the sector by The Boston Consulting Group found that South Korea continues to have an edge over China regardless of the latter’s incessant focus on supremacy.

Our research included an assessment of the main sources of competitive advantage for each country’s manufacturing sector and determined which South Korean industries are the most and least vulnerable to Chinese competitors. This article discusses these findings, which hold lessons for all countries and companies that have a rival in China and are looking to maintain their edge.

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