Chapter 56 Section 4 Shock Made in Asia

Fiorina's other hope at the time was to earn ink cartridges once and for all after selling the printer.This strategy did not work either. In addition to technical and commercial factors, there is a deeper reason, which is the impact from Asia.Made in China seems to be a buzzword these days as China supplies the world with everything from toys and clothing to home appliances and even luxury goods including Burberry and Armani.However, the Asian manufacturing I want to talk about here does not mean that Europe and the United States carry out outsourcing processing in Asia (such as Taiwan’s Guo Taiming), but refers to companies like Asians completely replacing European and American companies in some industries, such as Toyota and Honda replacing General Motors And Ford, Lenovo instead of IBM, etc.Unfortunately, HP was a victim of the Asian shock.

Most of the information technology after World War II originated in the United States, and Silicon Valley is the center of innovation in the world.Although Silicon Valley was the hardest hit by the dot-com crash in 2000, it is still the center of information technology and (represented by Genentech) biotechnology innovation. However, unlike before World War II, every new technology originating in Europe and America is It would not be long before the Japanese, and later the Koreans and the Chinese, took over.Therefore, after a technology comes out, European and American companies can make a time difference and earn a high profit when they have no Asian competitors.In the past, this time difference was several decades, but now it has been shortened to several years or even shorter.For example, fifty years ago, Japanese companies such as Hitachi and Panasonic took more than ten years to create an oscilloscope comparable to HP. In the 1980s and 1990s, it took almost no time for Canon to imitate HP's inkjet printer.As a result, companies such as Hewlett-Packard will have to compete head-to-head with Asian companies.

In the late 1990s, with the popularization of digital cameras, the market for high-quality inkjet cameras grew rapidly, but the profits of inkjet printers were greatly compressed due to the competition from Japanese companies such as Canon and Epson.A high-quality color inkjet printer can cost around $100 by itself.Therefore, it is obvious that you can't make much money by selling printers.HP originally set the price of printer ink cartridges very high, a set of ink cartridges was about half the price of the printer.This is how Gillette makes money for blades through razor holders.However, there is a big difference between HP's cartridges and Gillette's blades.You get what you pay for razor blades, Gillette blades are much better than cheap low quality ones, and razor blades are a special commodity, don’t be careless about them, it’s no fun to shave your face with an inferior blade thing.Therefore, the public will prefer Gillette blades.Printer ink cartridges are different. HP ink cartridges are produced by Chinese OEMs. There is no difference in use between them and compatible ink cartridges, but the price difference is five to ten times. Therefore, many people do not buy HP’s so-called ink cartridges. Original ink cartridges are used instead of compatible ones.Later, HP banned the sale of compatible ink cartridges, but Canon and Epson did not, so people simply stopped buying HP printers.When inkjet printers first came out, HP dominated the market, but now, although it is still the largest manufacturer in this field, its share in the world is only around 40%.

The impact of Made in Asia is not just in limiting profit margins, but in the involvement of Asian companies in setting business models and the rules of the game.Without Asian competitors like Canon and Epson, HP might still be able to adopt Gillette's business model and make money once and for all.Now, it not only has to compete head-to-head with Japanese companies to earn the petty profits of the printer itself, but also has been cut off from earning money for ink cartridges once and for all.In order to offset the impact of Asian manufacturing, European and American companies strongly encourage and support OEM-like Asian manufacturing, which can reduce their costs, but will do everything possible to prevent Asian companies from building their own brands, because this will pose a threat to them.It can be said that American companies like the OEM king Terry Gou very much, but they don't like Konosuke Matsushita and Huawei's Ren Zhengfei very much.

From 2003 and 2004, the entire Silicon Valley began to recover, and many companies returned to and exceeded the level in 2000.However, HP is showing no signs of improvement.Wall Street continues to be bearish on HP's stock, and the unbearable shareholders finally decided to drive away Fiorina, who had no achievements.According to the practice of American companies, HP provided her with a generous pension, and then she offered to resign herself, so that everyone would look good.Fiorina also took hundreds of millions of dollars in cash and stock from HP investors before she left.But shareholders would rather pay her to go.The day Fiorina left, HP's stock jumped 10%.This is a painful lesson, and it shows that if a company cannot pick a good leader, it will be very expensive to replace him later.