Monday, 20 April 2009

"Blue Ocean Strategy" and China

Some comments from blog readers are interesting. One such comment linked to a comment from a NY Wang on "Blue Ocean Strategy".

Sometimes it is useful for economists to look at the anecdotal evidence.

This article is interesting from two perspectives. First, the rapid rate of job losses amongst financial traders in Hong Kong and secondly, the use of the term "blue ocean strategy".

I must admit to not being fully aware of what this strategy actually is.

Here is a definition for those equally perplexed.

What is a BLUE OCEAN STRATEGY? The authors explain it by comparing it to a red ocean strategy (traditional strategic thinking):
1. DO NOT compete in existing market space. INSTEAD you should create uncontested market space.
2. DO NOT beat the competition. INSTEAD you should make the competition irrelevant.
3. DO NOT exploit existing demand. INSTEAD you should create and capture new demand.
4. DO NOT make the value/cost trade-off. INSTEAD you should break the value/cost trade-off.
5. DO NOT align the whole system of a company's activities with its strategic choice of differentiation or low cost. INSTEAD you should align the whole system of a company's activities in pursuit of both differentiation and low cost.

So how does NY Wang link this to China?

China: Banking Jobs for Blue Ocean Strategists?

If you are a "Blue Ocean Strategy" person, should you try to find a banking job in the Greater China region?

The obvious answer is yes. The power of China can be felt in the G20. Everyone seems to be waiting for China's $2 trillion foreign exchange reserves. The Asian Development Bank pegs China’s GDP growth at 7%*. Some economists predict that China will enjoy 8% GDP growth in 2009**.

However, I sent 10 emails to friends working in investment banks in Hong Kong last December. 5 out of these 10 emails bounced back. Yes, you are right. That is the worst sign you can imagine during a worsening market. Then I visited Hong Kong by myself to check out what was happening. Guess what? Among the 5 people whose email boxes worked fine two weeks before I left, two lost their jobs the same week that I visited them.

That does not sound right. The Chinese market seems to be booming. Investment banks are supposed to expand in the most promising markets. They should be hiring instead of firing people. What is the reason behind this?

During the downturn, investment banks tend to protect their roots first. They are not only protecting their headquarters in the States and Europe but also protecting their people. Accordingly, they are trying to cut costs by "re-engineering" the "outskirt" regions such as Hong Kong.

They are losing their market share in the Greater China region, one of the sexiest markets of the future, whilst some investment banks such as Nomura, CICC, CITIC are gaining market shares. But if your head dies - you die. It makes sense to protect your head first (US/Europe) instead of your hands (HK).

In the long-term, emerging markets will still be great places to go. However, in the short-term, if you would like to be an investment banker, most hiring is still in the developed markets.

What do I believe that blue-ocean strategists should do? Watch this space …

If everything now clear?

Sometimes it si easier to be an economist. All this business school speak is just common sense dressed up with catchy phrases that only a small group of other "management speakers" actually understand.


1 comment:

AIDEN said...

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