The electronics industry is a “relationships” business. It has always been. I daresay, though, that electronic component distributors have tended to build, nurture and value “relationships” as an integral part of business functions more than any other segments of the market. The Chinese call this “guanxi” referring to the network of trusted relationships that a company has and which it can tap into when necessary.
In 2015, your company will need all of the “guanxi” it can call upon, assuming you have spent enough time cultivating trusted partnerships. Before diving into why this may be case, let me explain what “guanxi” is, what it isn’t and what its goals are. First, it’s an informal network of partners, contacts, colleagues and other business resources that an enterprise and its key executives have built over an extended period.
Let’s be blunt. There are many uncertainties ahead in 2015 for all sectors of the economy and all regions of the globe. Crude oil prices have cratered delighting some and igniting panic elsewhere. Meanwhile, the electronics market is now a part of all segments of the economy, which means it will feel pinched by problems in any sector. Chipmakers and other component vendors now sell parts and systems into markets as diverse as automobile, aviation, banking, consumer, industrial, manufacturing, medical, mining, pharmaceutical (for drugs delivery mechanisms, etc), telecommunications and so on. Each one of these sectors has challenges that will only intensify in the year ahead.
That’s why the International Monetary Fund and the World Bank are predicting sluggish global growth for 2015 and European politicians are already sounding the alarm about the dangers of a recession. Japan is already in the throes of another recession while Chinese growth is retreating from the giddy pace of the last several years. Further, the number and intensity of political problems in parts of the world have surged in the last year amidst fundamental struggles between power centers, religious groups and political beliefs.
The electronics industry will not be able to avoid the fallouts from many of these economic and geopolitical challenges. Growing uncertainties will impact the ability of companies to forecast demand for their products or give proper guidance to suppliers, distributors and contract manufacturers. In turn service providers will take steps to avoid excess inventories that could hurt profitability. Demand and supply imbalances could result and for various products.
Electronics manufacturers will hope for and expect the best in 2015 but many of them will enter the new year suspicious of forecasts and manage expenses conservatively. This strategy will impact capital expenditure at all levels until clear demand signals become more obvious. Until then, companies will fall back to a tested strategy of relying upon and trusting only the partners they are truly connected with. That’s where your company’s Guanxi will be tested.
For many, guanxi conjures up the image of a “mafia” or a network of people who give unfair support to each other at the expense of others. That’s not the “guanxi” an enterprise can benefit from on a long-term basis and it’s not what a business should aspire to build. Rather, it is an accumulation of critical distinguishing factors obvious to an enterprise’s partners and the public.
These are positive corporate traits many companies talk about but often fail to deliver upon. They include trust, reliability, commitment and dedication, fairness and the tendency to treat everyone fairly. Companies with the “right” guanxi can be trusted to deliver what they promise on schedule, treat partners fairly, stick with them even in lean times and never undercut or impose unfair contract terms on them.
Guanxi goes beyond your company’s corporate image or reputation, however. Yes, these are very important but the best “guanxi” are built for a company by individuals whose reach beyond the corporate walls are not only extensive but also trusted. They are closers of knotty deals and the ones who make critical phone calls to an otherwise difficult but essential partner. My crystal ball tells me we are all going to need folks like these in 2015. I hope you have bushel loads of them. Happy 2015.
A version of this article was first published in the January, 2015, edition of Electronics Sourcing North America.
Bolaji Ojo is editor-in-chief and publisher of Electronics Purchasing Strategies. The views expressed in this blog are those of the author alone who promises to base his sometimes biased, possibly ignorant, occasionally irrelevant but absolutely stimulating thoughts on the subjective interpretation of verifiable facts alone. Any comments should be sent to the author at firstname.lastname@example.org.