- Price matters, more than you imagined.
- Try buying a car in the United States. The salesman will talk to you about Bluetooth, radio, speakers, traction control, acceleration, heating, air conditioning, colors, comfortable seats, lighting options, and then he will get to the optional features where you can spend more money. All of that is ridiculous. Air conditioning? I hope you aren't serious. Charles Lindberg flew across the Atlantic in an uncomfortable wicker seat instead of nice and heavy leather. In other words, an excavator digs holes and lifts stuff, a loader carries stuff, neither is a machine designed for comfort.
- Secondly, the way that we build things is expensive. Our labor is expensive. Roughly 8-10 times as expensive. Our designs are expensive. Our materials are expensive, because of their quality. How many engineers does it take to design a new machine? Somewhere between 20 and 100, and they aren't cheap.
- Everyone in the US supply chain has to make an American sized profit of what 5-70%? In Asia, a 0.5% profit margin is making a profit. With three billion people economies of scale work really well.
- Reliability is about the stuff that takes more than three people, basic welding, or simple lifting to fix. Dented fenders or sheet metal, cracked windows, rusted bolts, a terrible pain job, leaky fluids, squeaky joints, no exhaust filtering, moderate cracks like a cracked bucket, and other problematic issues in the US are not problems in most of these places. In fact these other countries are similar to what a typical farmer might have access to on his farm. The ability to weld a crack or ignoring a cracked window or taking safety gear off the machine are all standard procedure. However, an engine problem, a cracked frame, or other issue that requires serious skills to replace, that is unacceptable. In short, make sure the critical stuff will last, ignore the other stuff.
- Relationships matter more than the transactions. This is probably changing in the US with the Facebook generation, but it is especially true in Asia. For example, in Pakistan I had tea with a Pakistani at his climbing shop for 30-40 minute and afterward I bought an ice axe for 1/3 of what it would cost in the US. No employee at REI would sit with me and talk for over half an hour while we sipped tea just for me to buy a $38 item. I don't expect them too, but in Asia, the relationship happens before the transaction, not because of the transaction. Three Cups of Tea is the perfect example of this idea. If it took 30 minutes and tea to get me to spend nearly $40, how much more is required to sell a $200k piece of equipment? The other aspect of the relationship is the unspoken question, 'will you be here in ten years when I have a difficulty?' That is the problem the US withdraw from Afghanistan is up against now. Do we really care about making it better? It will take a generation or more. There is plenty of blame to go around, not just big US companies or countries but the indigenous people as well. In short, relationships matter more in Asia than in the Americas and relationships take time to develop.
That in a nutshell is the key to the Asian markets. Can you compete on price to the point of selling at a loss for years so that over decades you can make your profits? Can you make sure that the right stuff breaks and the right stuff does not break? Will you take the time to develop the relationships?