Where will local distributors go? Also talk about good faith

Recently, much attention was paid to my article because of many replies, including those replies from top management, so that the words in replies and continuous replies exceed 1000-word text, which seems as if it was foot-binding cloth. Mike, editor of International Electron Business Information website, encouraged me to continuously exchange experiences with extensive professional managers in special topic form by aiming at "local distributors management", I jumped at his advice because I was confused by many issues; unlike treasure, the better it is, the more experiences are shared. Let's share distribution management experiences to make progress together.

In previous replies, I cannot immediately comment good-faith-related opinions from two guys named "relay expert" and "bartonsun". I think this issue is unavoidable but not explainable simply. For example, "bartonsun" guy was inspired by Ding Ding Wang as follows: "A society should develop further in tangly rational and moral choices". This seems simple, but "tangly" is never solution. Similarly, "relay expert" guy explained good faith between boss and staffs in Chinese environment. Ok, let's confront good faith.

For us as distributors managers, we almost face good faith every day. How to handle the kickback on salesman when a client placed an order? How could you believe your salesmen didn't seek private gains? How could you know if your purchasers got best prices when they bargained with suppliers? In case of not best prices, the purchasers were kicked back? How could you guarantee that the person in charge of HR didn't place his/her relatives certain positions in your company? How could you find the money to be used for your office fitment went to an executive person partially? Why did your logistic department selected this express agency, not another? If your freight fees partially became bonuses distributed among logistic staffs? How could you know clients cancelled your orders because they found cheaper goods? How could you know your staffs went to interview with another company when they asked for leave?

Everybody, please think over your ability to solve these problems when you want to be a boss. If not, please carefully look before you leap. If you were already a boss, congratulate you, at least you already boarded 'good faith' pirate ship, moreover you are still alive!

Good faith is a simple but blurry concept. It means "what you said" is final and reliable. Good faith isn't an objective indicator, certainly nor a simple or operational solution to business management. However, good faith is a sharp sword hanging over business managers who aim to keep evergreen business foundation. If you are extremely suspicious, you may be accompanied by a group of mediocre persons or become loner. If you aren't good-faith, this sword will stab your enterprise (the temple still exists even if monks run away) although not stabbing you (because you may run away when you make money).

I was hired by USA Stack Ele to run an office in China in 1995. Before this hire, I had worked with Converge (former NECX) for more than one year. Converge had 250 persons then, which realized yearly sales up to USD 0.7 billion and implemented completely networking + clearly structural organizational management. Shenzhen Segem has been known well since1995, in which there was an industrial building with each floor full of thickly dotted counters. A fewer persons used computers then. Generally, one counter was equipped with one pen, one notebook and a facsimile telephone, even some vendors looked after their kids beside their counters. The most famous company was China Electronic Appliance because of independent office. Each floor of Segem building was crowded, in which many vendors gave part number of components one after another like patter. After having visited, I was greatly disappointed, meanwhile I was happy secretly and believed opportunity was available. If family counters were so busy, the market was more potential for NECX's network + structural management. On this account, I left Stack Ele and founded Chitron in Shenzhen in1996 to make Chinese Converge(NECX)dream. To differ from Segem, I deliberately located my office in LuoHu far from Segem.

After having experienced 12 years, in despite of more than 200 staffs, sales of Chitron are far behind RMB 0.7 billion, say nothing of USD 0.7 billion. During said period, good faith issues have been more difficult than business management and transaction affairs. Year 2002 was the most difficult year when I dismissed 8 sales representatives due to good faith. Every year, I distributed secret questionnaires among staffs to ask: "Do you think seeking private gain exists in our company via collusion between the internal and the external?" Nobody answered "serious"; less than 3% of them answered "yes, but not serious"; less than 5% of them answered "heard"; and more than 40% of them answered "don't know" and "No" respectively. Therefore, I dare not to say my company is clear 100%, but 98% or 99% of staffs believe in good faith.

Component distribution industry generally adopts market principle in China. As far as I knowledge, no state-owned component distributor exists in China (except China Electronic Appliance?). Local distributors do businesses based on counters mainly. Among a few distributors, each possesses more than 50 persons. However, all distributors share more than 50% of the market; in other words, more than 50% of components purchased by final users are supplied by local distributors. Components were transferred into China market via Hong Kong, Taiwan and Singapore etc 10 years ago. Nowadays, many large/medium-sized distributors in Hong Kong, Taiwan and Singapore as well as America and Europe entered into China via hubs in Shenzhen, Beijing, Shanghai, Chengdu and Xian. When facing impact from overseas distributors, how will fish/shrimp rated companies deal with this challenge? Of course, many persons thought of counterfeit and sham products, but some began thinking better of the issues, such as good faith.

If good faith is a difficulty with which is confronted commonly in Chinese business management, it is more difficult for Chinese distributors management! If Segem mode made great contribution to Chinese electronics and IT industry, such mode still makes great contribution?


Posted 2009-1-22 17:50 by Lilian
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