Profile: Runckel & Associates
The business of doing business in Asia requires a sound business plan. One company that offers such services is Runckel & Associates, a consulting firm based in Portland, Oregon, USA. It assists companies interested in investing, manufacturing or opening an office or factories in Asia, specializing in guiding small, medium, and family-owned businesses. Its clientele has included wire and cable companies. The company notes that it is uniquely qualified as its staff has lived and worked in Asia, speaks most of the languages and understands the law, culture and challenges of living and working throughout the region.
WJI recently interviewed company President Christopher Runckel who in 1994 was assigned to
as the first permanently assigned Hanoi diplomat since the Vietnam War. In 1997, he was awarded the U.S. Distinguished Honor Award, the highest U.S. Award for diplomatic service. He has served in foreign assignments in U.S. Hong Kong. . Fiji (two tours), Thailand and in London and he continues to advise federal, state and local government on a wide range of issues. China
WJI: Obviously, all consultants are not created equal, Can you tell us a little about your company and your background?
Runckel: Runckel & Associates is a smallWJl: How can a company determine whether it would benefit by either manufacturing or entering a joint venture in
based company with on extensive reach. We have associates in five locations in U.S. , China and Hanoi ( Ho Chi Minh City Saigon) in , Vietnam . Phnom Penh , Cambodia , Rayong and Chang Mai in Bangkok , Thailand , Laos and Singapore . Our website, www.business-in-asia.com, is one of the largest websites focused on business with Korea Asia. The site gets over a million hits a month and involves no advertisement or sponsorship but is dedicated to the principle that understanding more about business in Asiabenefits all, inducing our company. My wife and I, who own the company, each have more than 30 years of experience in Asia. We speak Thai, Vietnamese and Chinese, and we have lived and worked in all of these countries. Our background allows us to look at opportunities across Asia, not just , and to guide clients through the obvious and not-so-obvious challenges that come with locating a business in China Asia. Asia? Are there some genera "qualifying" rules that apply to any business?
Runckel: Whether as a point for sourcing of product, manufacture, OEM production, sales and/or in some cases design end engineering,WJl: Where could a company most easily go wrong trying to pursue "an Asian strategy"?
Asiaoffers a host of opportunities and challenges for companies in the and other countries. That said, we recommend going offshore only when there are no other options or as part of a long term strategy for expanding a business. I am not a big proponent of defensive business. If your focus on U.S. Asiais strictly on reducing costs, you ore missing out on part of the advantages of being there. The benefits of on Asian strategy apply to small and medium sized companies as much as to bigger corporations. Companies with $2 million to $5 million in sales have worked with us on projects in Asia, so the range of companies that can benefit in examining opportunities and challenges in Asiais considerable.
Runckel: The easiest mistake to make is not to spend enough time exploring options in terms of countries and regions within countries. For example,
and Shanghai in Guangzhou were both great places to site a project but both have become relatively expensive in terms of labor, rents and other costs. Today you need to look farther afield in China, say to the Zhejiang Province, which is about on hour's drive from Shanghai, or to the North to cities like Weihai and Yantai in Shandong Province, or even to Vietnam or to an old standby like Thailand, which can look more expensive at first but is actually quite competitive when all cost factors ore examined and compared. China
WJl: Does the fact thatRunckel: One should put aside any pre-conceived notions like China is always the cheapest or best location because that can easily be wrong, depending on what one wants to do. Look at all the costs and look at them in detail. Pay attention to taxes, fees and expenses as they can either limit your profitability or doom your operation. Focus on shipping, and not just the cost of shipping a 40-ft container but all the incidental fees, times in clearance, etc. These matters are not as clear as they may seem to be but they have to be factored into any business plan.
attracts so many multinational OEMs mean that it should be the place to go? China
Again, keep an open mind. In China, this may mean looking post locations you have heard of in favor of locations like Taizhou, if you have a project that involves plastics, plastic molds or automotive parts, or a place like Yantai or Weihai, if your project involves crankcases, tires, automotive spare ports or electronics, or to Hanning or again Weihai or even to Ho Chi Minh City if your project involves furniture. For wire and cable companies there ore several locations you might want to consider, such as
province in Zhejiang and China . For any sector, however, there are comparative advantages that cause like industries to co-locate there. It is a rare company that can choose a location and arrange for all the logistics on their own, so it is essential to go there with someone who is experienced in the country thorough in their research and able to understand you and your company. Royong, Thailand
WJI: Regarding your wire and cable customers, what were you able to do for them?
Runckel: I was able to help them develop a logical and well researched
Asiastrategy that proved that there were considerable opportunities. Two of them were looking to manufacture and the research showed that both would be smarter to initially start with sourcing and some OEM manufacture with owning their own plants as a later stage in the plan. In one of the cases, we have narrowed the location to one particular area in Asiaand we are discussing various land options with developers. One of the others is still deciding between two potential locations.
WJI: A company considering establishing a presence in
Asiaunderstands that this is not a simple matter. Can you give us an example of a few of the types of logistical problems that can happen that might be outside of the realm of what one might expect?
Runckel: The changes in oil and other commodity prices have been a worldwide phenomenon. Plastic is derived from oil and the prices for plastic resins have often moved rapidly. These oil related cost increases have had affects across the spectrum of projects this past year. Although all companies in
Asiahave born the brunt of these cost increases, some have been less willing to pass along all of the costs of the increase and this has affected selection or best sourcing and OEM partners. Shipping costs both inland freight and sea freight have also been affected by this but again the effect has not been evenly spread across all countries. Some have been affected more than others and this has affected selection of the best company and country for a project.
WJI: What factors might make other Asian countries a better location?
is a very good choice for some projects, but it is not the best solution for everyone. China is low cost in many areas but not so low in others. The lack of a convertible currency is a hindrance but can be dealt with. The risk of currency appreciation moving forward is increasing although I believe still a ways off. The weak rule of law and lack of predictability of commercial dispute resolution is more of a worry. China Is a particularly bad choice if the project involves substantial intellectual property (IP) as the reality In China is that China 's continued performance in this area is very unsatisfactory. China
In terms of other countries,
is fast coming up as o low cost place for many projects such as computer software, furniture and some metal projects. Vietnam is a great location for projects where a wide range of well trained and experienced suppliers are critical. Thailand can also be a good choice although it is gradually becoming a relatively higher cost location and there often has to be more substantial value added in the project to justify being there. Malaysia is a low cost country but a country where we do not recommend many projects as the political and security situation there has become less predictable. Indonesia can also be a good choice for some projects although it remains a very bureaucratic country where much more revision of procedures and laws is still most needed. A company needs to compare various Asian locations (say India , China , Thailand and Vietnam or some other combination) in terms of what business costs, incentives for location there and long term growth prospects they offered. India
on an unstoppable momentum roll for world manufacturing? China
Runckel: I am not as willing as some to count American business out of the competition.
has strengths, but it also has lots of weaknesses. I believe the news stories ore generally only seeing pert of the picture. Yes, costs are low. The reality, however, is that most of the manufacturing base in China was built on cheap credit, is running at less than 50 percent of capacity and that thousands of factory buildings and even whole factories have been built on "spec" without a reasonable business plan and without the sales and customers that would drive an investment decision in the west. I believe many Chinese factories are not economically viable for the long term; that Chinese manufacturers have no sufficiently valued the importance of knowing their customers and developing a sales network. Many U.S. companies undervalue their own knowledge of customers and what will sell and what won't and ultimately there will be a shakeout on both sides and American business will find opportunities to adapt and profit by being closer to the customer, more attuned to where the market is moving and ultimately more agile than the competitors. China
Runckel & Associates can be contacted through its website, www.business-in-asia.com, or by e-mail at firstname.lastname@example.org or by calling tel. 001-503-244-4551
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