As a sub-sector of the home decorative products industry, the ceramic industry has kept a low profile in China. But now its status in the overall decorative market is gradually rising. Whether it is viewed from the perspective of staffing quality, manager mindsets, management practices or operational processes, the ceramic industry in China is a promising one. The amounting pressures from environmental regulations, fierce market competitions and rising RMB have not put off the vitality of the Chinese ceramic industry.
Management quality to be improved
Since the 1990s, the booming domestic and international demand for ceramics had led to the development of some large scale ceramic companies, which in turn had given birth to some quasi-professional talents in the ceramic industry. The rapid development of China’s electronics industry in recent years is partly due to its effective cultivation of a large number of management talents, so the ceramic industry is keen to follow the step to enhance its own staffing quality, by recruiting management talents from other successful industries.
Having said that, there are still many family-run companies in the Chinese ceramic industry, and the widespread nepotism among these companies will no doubt put a constraint on their long term development. Although some family-run companies are starting to appreciate the importance of professional managers, the trust between them is still lacking. It is not unusual to see an entire management being removed by the boss in this industry. The key to this issue is probably not about whether a company is family-run or not, but about whether the owner has the awareness to employ modern management philosophies and methodologies to manage the business.
Advanced production techniques
China’s ceramic production today has been quite modernised and industrialised, and the extent of automation is also increasing. Despite management practices and company cultures may differ between different provinces, the use of technologies and production processes are quite similar among companies. This has inevitably led to homogeneity between product styles, with high volume but low differentiation products in the market. The high volume could certainly give pricing advantages to ceramics exports from China, but they’ve also attracted a considerable level of anti-dumping criticism from other countries. Many Chinese ceramics are sold as OEM products for foreign brands with no origin labels. Otherwise, many Chinese consumers would probably find that their imported TOTO toiletware at home are actually “Made in China”.
Therefore, some industry insiders have pointed out that while the manufacturing processes are quite good now, the Chinese ceramic industry is still lacking a branding and marketing mentality. On a positive note, some companies have now realised the importance of international management and innovation and begun to pilot new management and operational models.
Innovative thinking and design still weaknesses
Copycat products are rampant in the decorative product industry of China. Many Chinese ceramic companies are good and quick at copying products, and this is the reason why Chinese ceramic representatives are not welcomed at some international trade fairs. While Chinese companies can make perfect copycat products, many of them are short at innovative ideas and design works. Dr Zhang Mengyou, CEO of Eagle Brand Holdings, a Singapore-listed Chinese ceramic company, commented that apart from technological and manufacturing developments, Chinese ceramic companies should also pay attention to marketing innovation. He said that comprehensive marketing awareness is not about planning a single campaign or event, but about mobilising all organisational personnel to achieve marketing innovations all the time, hence a quantum leap from “Made in China” to “Created in China”.
Compared to other decorative products such as floor, furniture and lighting, the Chinese ceramic industry is now facing more environmental pressure and controversies in an already competitive market. The newly introduced energy efficiency measures by the central government will no doubt lead to more stringent environmental requirements on ceramic companies in most provinces. Whether environmental issues can be properly solved is not only the key to a ceramic company’s compatibility with its local environment and resources, but also an important measure of a company’s social responsibility in the community.
Low industry concentration
Compared to many other overseas tiles or ceramic sanitaryware industries, the Chinese ceramic sanitaryware industry still doesn’t have a market dominant brand, and this is also reflected in the whole decorative products industry. There are some larger size companies, but there haven’t been any true leaders. Although many large companies have established nationwide sales networks, their competitive advantages are often contained in their home regions. Therefore the Chinese ceramic industry is calling for more brand influences.
On the other hand, the need for improvements and consolidations can also mean opportunities and prospects. For those decorative product companies which are trying to build their brands, or those first movers which have benefited from the booming capital markets, they certainly have the potential to become bigger and stronger. The relocation and restructuring of provincial ceramic industries and the rise of regional brands will no doubt intensify market competition in certain regional markets. Despite their differences in brand positioning and target customers, the surge in regional brands is likely to bring significant impacts to the Chinese ceramic industry in the near future.
The ceramic industry may not be a typical sunrise industry, but it still has lots of opportunities ahead. The strong demand for ceramic products in China, as a result of overall economic development and the positive real estate demand, has presented an unprecedented opportunity to the ceramic industry. From a macro point of view, there are still considerable growth room for decorative consumptions by Chinese households, and the demographic mix of the country is also pointing to a peak period for family establishments and associated consumptions. The trend for using more fashionable and niche decorative products in China is also bringing vast potentials for the ceramic industry. Therefore, it can be reasonably concluded that even though there are certain issues, we should remain optimistic about the outlook for the ceramic industry in China.