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Competitiveness
Hard facts about Chinese companies: Unearthing the art of being competitive in a Chinese market
New IMD data will gradually shed light on sector-by-sector secrets of those firms reinventing themselves for the world’s second–biggest market with success
How likely is it that a given firm will successfully move toward a new knowledge discipline with competence in its effort to be competitive, innovative, and prepared for the future in the Chinese market?
This is what we have been tracking at IMD, and the results come in the form of the China Company Competitiveness Indicator.
The inaugural edition covers the food and beverage sector (23 firms) and determines who the top players are by measuring their revenues against those from the Chinese market.
Kweichow Moutai Co. Ltd came first, The Coca-Cola Company second, and China Mengniu Dairy Company Limited third. Kweichow Moutai Co. Ltd, a partially publicly traded, partially state-owned firm that produces and sells the baijiu spirit Moutai, reached the top spot in the F&B survey thanks in large part to its consistent business performance – despite the personal scandals of its former chairman – in combination with radical digital experiments and their fast-paced ecosystem building. It is a dancing elephant. Moreover, to diversify its leadership team, this month the company announced the first female leader in the top job in its history.
The ranking is based on eight main factors: business success, business robustness, investors’ expectations of the future, R&D efforts, early innovation results in the Chinese market, business diversity, customer engagement in the Chinese market, and ESG.
Keeping today’s core business healthy while building robust future growth engines
It is clear that efforts to develop new categories, embrace digitalization — including a strong amount of digital business model experimentation — and take them seriously are paying off in the eyes of the consumer.
Coca-Cola’s performance is highly impressive. The iconic American company did well across the board in this survey of the Chinese scene in supply chain, customer insights, business diversity, and brand value measures. Its success can be appreciated even more by comparing it to that of PepsiCo, which works in partnership with a local company in China and yet lags behind its competitors. The company excels at balancing building core resilience while exploring new revenue growth opportunities, especially leveraging its top-notch consumer data and analytics capabilities.
Dairy firms stand out in this sector, too. They have managed to reinvent themselves, putting a heavy emphasis on digital transformation. Mengniu Dairy Company Limited, with headquarters in Mongolia, manufactures and distributes dairy products and ice cream. Digitally speaking, it closes the loop from the grass in the field to cows and milk production, all the way to the table of the consumer. Their wide embrace of AI on the farm and with their partners is exemplified especially when they launched the first-ever GPT-enabled AI nutrition expert.
Contrary to popular belief, Chinese companies that are mixed in ownership – hybrid state and private – are performing the best. This is surprising in the consumer market because it is a highly competitive one in which consumer behavior largely determines company success; it is a game of market forces at large.
To calculate the Indicator, we collected historical data for each of the companies. We then performed calculations for each variable before we identified and treated the outliers and standardized the criteria data. Next, we aggregated variables to the main factors and then determined the overall ranking. For comparison, we ranked each company from best to worst, on a scale of 1 to 100.
We leveraged the methodology from the Future Readiness Indicator, localizing it to China and applying it to the food and beverage sector when it came to data sources, data verification, variable selection, the factor weighting system, and the use of Random Forest for our prediction algorithm. Random Forest is a popular machine learning algorithm used for both classification and regression tasks, in particular for a dataset with different attributes related to companies to rank.
The eight main factors comprise 37 variables with equal weight assigned to each. All our variables are hard data; they are publicly available on company websites, annual reports, press releases, news stories, and special reports on topics such as corporate social responsibility.
The Indicator is the start of a pan-Asian IMD project encompassing markets from Indonesia to Australia with the ambition of providing hard facts about company competitiveness in the region with a strong industry-specific focus.
Authors
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