John F. Kennedy once said, "When written in Chinese, the word 'crisis' is composed of two characters. One represents danger and the other represents opportunity." With that quote, he validated what economists have long tried to theorize and demonstrate by way of case studies: that wealth is often generated during uncertain times. Asian suppliers, however, have a new and succinct spin on this wealth-during-crisis theory and it goes along this line: the economy is only as barren as one makes it out to be.
It's undeniable that Year 2002 was crisis-laden, beleaguered by media mogul/CEO beheadings, corporate scandals, chaotic business cycles and war/terrorism-related anxieties. No question—it's scary out there. And as if these aren't bad enough, in the weeks preceding this report, SARS (severe acute respiratory syndrome) plagues many parts of Asia. The safe-haven image of China, Hong Kong and Singapore—the worst-hit areas—crumbled in the face of the mutant virus: stock markets dipped, exhibitions canceled, airplanes grounded, investors turned tail. Besides causing casualties, the virus is now sending these economies—which are highly dependent on tourism/ hospitality and investor confidence—into cardiac arrest, minor or otherwise.
But it's times like this that test the mettle of an organization, forcing it to innovate and to find hidden opportunities while working the downturn. Asian suppliers, especially those in the SARS-affected areas, are taking preventive measures, deliberating over containment/quarantine issues and educating their staff on keeping healthy and safe. To our knowledge (and immense relief), no cases have been reported by any of the suppliers interviewed here.
It's interesting to note that once again technology is propelled to the frontline. It rescued Asian suppliers in the 1980s when intense competition—especially from the more innovative and advanced North American/European companies—almost forced them out of the picture. Now, because of the travel advisory on Hong Kong and China, publishers and suppliers are relying more than ever before on digital communication, FTP server and tele-/videoconferencing to see through their projects.
Of Checks and Balances
Publishers are now busy devising better sell-through plans, pushing harder for shelf placement and trimming P&Ls to produce healthy bottom lines. On the other hand, print manufacturers are busy peddling contract-volume, lauding shorter make-ready and searching for better margins.
Today's print manufacturing landscape, especially in Hong Kong/China, is intensely crowded, allowing publishers even more leverage in terms of price. It's also equally fragmented, making it possible for niche and small publishers to find the best fit for their project. For suppliers, these are cautious times, when results matter more than ever and innovation is more important, not less. Offering low prices in exchange for huge volume sounds great. If nothing else, this keep the presses running. But how deep can price-slicing go without ultimately injuring profit?
For savvy Asian suppliers, juggling cost, profit and innovation is part of a gamble in which winning is everything and where toy-makers, greeting card companies and the Mickey Mouse enterprise are all fair game. It takes a lot of chutzpah to even dream of competing against industry vanguards such as R.R. Donnelley, Banta or Quebecor. The thought of Asian suppliers—with their traditional mom-and-pop management, ancient technology and seemingly insurmountable cultural/language differences—emerging as a force to reckon with was at one time ridiculous, if not downright impossible. Now, competition across the Atlantic and the Pacific no longer finds it laughable.
Adding It Up
The report card is in: exports of paper and paperboard (based on CIF value) from Hong Kong/China to the U.S. shores hit $813 million in 2002. That's an increase of about 10% over the previous year. Categorization and price adjustment issues aside, the industry looks as healthy and stable as it could possibly be in these turbulent times. The children's book market has also shown significant growth.
As usual, when asked for a 2003 forecast, most suppliers are keen to low-ball expectations, citing a lame economy. If recent news is any indication, China is slowly but surely consolidating its hold on the global printing industry. Its Printing and Publishing Technologies Training Center—a U.S.— China cooperative effort established in Shanghai two years ago—has funneled major bucks to ensure that its printing community is up to snuff. Throw in Hong Kong— trained management/expertise at the helm of most printing companies both sides of Lo Wu, and you'd better brace yourself for the dawn of a new, improved printing hub.
As part of the World Trade Organization agreement, Beijing will open its book trade to foreign investment on a 51%—49% joint-venture basis in 2003. Over the next five years, this regulation on limited foreign investment will be gradually lifted. The monopoly by state-owned behemoths China Post and Xinhua Bookstores is coming to an end. But publishers itching to corner the Chinese market won't have it easy. Distribution is limited to books published domestically, at least for the foreseeable future. The government has also imposed strict laws on the types of books permitted for circulation and joint-venture publication. Needless to say, rights activism, democratic governance, gay/ lesbian literature and whatever topics are deemed threatening to its ideologies will not see the light of the day.
It's a no-brainer to say that China represents a huge gold deposit to would-be investors. Consider the following: 650 million people under the age of 24, 70 million students in primary and secondary schools and no less than 11 million in universities all over the mainland. Then there is China's Generation Yellow—the rising middle-class age 18 to 35—armed with newly available disposable income.
Technology Still Reigns
With the contagion-like enchantment with 8- and 10-color presses and bullet-proof PDFs, it is sometimes all too easy to forget that not every publisher orders 500,000 copies of a title using special inks or the latest high-tech solution. That brings us to the question: How much is too much? At what point will bells and whistles—multihued hologram foils, ever-more-complex pop-ups, digital this-and-that and the never-ending search for the novel and abnormal—become as distracting as split-screen TV? Will we ever get back to the basics?
Judging by the rapid adoption of CtP (computer-to-plate)/digital workflow, of anything capable of improving speed-to-market and cranking up the "wow" factor, the answer is probably "never." Talk to an Asian supplier (or for that matter, any supplier in the world) and you'll get the drift. To them, technology is the answer to almost all their problems.
Perhaps we should assign the blame for technology delirium on management guru Peter Drucker, who proposes that "the best way to predict the future is to create it." No wonder equipment/technology/workflow suppliers like Heidelberg, Roland and Creo are working overtime and advocating change as the status quo. However, the availability of new technology does not equal immediate adoption. Proliferation of new technology takes time. Adoption is usually prompted by customer demands, and in the case of CtP, Hong Kong suppliers weren't persuaded until wide (and successful) implementation in Europe and the U.S. makes the step crucial to retaining their competitiveness.
Serves You Right
During the 1970s, the cry among Hong Kong suppliers was "Print lots!" Then it mutated into "Quality sells!" Today, it dances to the tune of "Repeat orders!" Most publishers are going gung-ho with the print-to-a-minimum principle by keeping just enough inventory to fulfill confirmed orders and deliver to bookstores just in time to skip the warehousing-cost issue. Orders of 500,000 or even 250,000 copies are as rare as pink rattlesnakes. To the immense relief of suppliers, however, publishers normally compensate for small orders with frequent reprints.
But the strength of Hong Kong/China suppliers is not just about their lower prices or ability to meet reprint orders. It has more to do with their service mantra: treat new customers like royalty, treat long-time ones like family. Under the promise of one-stop-shop operation, some Hong Kong/China suppliers are going the extra mile for their customers, offering pre-media and post-media solutions, cross-media preparation and project management/ sourcing down to direct-to-store delivery.
Matthew Yum of Hung Hing offers this observation: "In this age of homogeneity, everybody in the printing industry is pretty much using the same equipment, identical workflow and those few shipping companies. The distinction between one supplier and the next has eroded, and it now rests solely on human elements: customer service, personalized communications and supplier-client rapport. It's no exaggeration to say that the industry is now effectively high-tech and high-touch."
The Sum of All Things
M&A (merger and acquisition) has become a reality to many, even though joining forces with another firm is never easy. It calls to mind some recent examples in the Hong Kong/China printing industry: Leefung-Asco/Jefferson-Smurfit, Everbest/ Times Printers, Midas/Chuang's Investments, South China Printing/CVC, Paramount/Next Media and Excel/SNP.
Generally, it's believed that sooner or later, the entrenched book publishing industry will undergo fundamental change. Already harsh critics of Amazon.com—which has overhauled book ordering, destroyed the hegemony of the bricks-and-mortar concept and is finally out of the red—are eating humble pie. To top it all, Stephen King has some of us reading pages on the screen. Yet nobody—not even the mighty Microsoft or Adobe—has successfully lured us away from paper-and-ink. However, it must be said that if downloadable files become more reader-friendly on computer screens or PDAs, e-books will have their day.
It's a fact that any new technology or methodology implemented by publishing houses will trickle down and spill over to the suppliers. But Asian print manufacturers aren't daunted. On all counts, they have proven diligent in reinventing themselves to suit the situation: think CtP adoption, digital workflow, Western-style management and strong overseas representation.
The Asian printing industry is bubbling with energy, its momentum significantly enhanced by China's WTO membership and subsequent legislative amendments. But Adam Smith issued a (generic) warning decades ago: economies have to face the fact that eventually, periods of prosperity will peter out and hot markets—which in this context aptly describes hand-assembly and book-plus segments—will cool off. Ultimately, what sustains the best companies through the highs and lows remains constant: superb quality, excellent service and innovative management.
