Profit Optimization.
CHINA TIP 7 (week 26, 2008)

It is believed that China offers unprecedented possibilities for economic success in any sector. The country has a large well-educated population and employees work hard against competitive salaries. Roaring stories about business success follow one after another. City-life has improved dramatically and consumption is, after 20 years non-stop economic growth, still buoyant. 
 
This ever-optimistic approach has, however, it downsides. Many entrepreneurs forget to stay alert. The low salaries and seemingly low costs per product made many entrepreneurs lazy in controlling the overall production standards. A recent McKinsey study under 30 multinationals showed that managers taking their job to easy were responsible for loss of production productivity and rising costs. The study showed cases where net profit lagged 20% to 40% behind the possibilities. In the long run, missing out such a substantial part of the net profit will have devastating results.

Try to reduce your production costs. Reduction of costs has nothing to do with less salary. On the contrary. Good and satisfied employees are the foundation of your success! A fair income and relevant training is as important in China as it is in Europe. The same applies to your production processes. Value and control these in China the same way as you would do in the West.

Our advice is to be flexible on cultural differences but to stay a Western entrepreneur when it comes the process management, and cost reductions. 

The competitive advantages of high quality facilities, limited malfunctions, efficient warehousing, high labor productivity per working hour etc. all contribute to overall profit in Europe. There is no reason to believe that these characteristics of maximizing profit should not work in China.