Book Review: Poorly Made in China by Sujay Desai

Book Review: Poorly Made in China

(Sujay Desai, Jan 18th 2010)

When most Americans see the words “Made in China” on a consumer item, they immediately think of low prices.  Fueled largely by Wal-Mart and other national discount superstores, we tend to focus more on the price tag of the item and less on the item itself.  Our love affair with low prices has become one of the trademarks of our culture.  After all, when it comes to basic consumer items such as soap, shampoo, or toy cars, the price is all that counts.  Or is it?  In his book Poorly Made in China, Paul Midler provides a fascinating and disturbing look inside China’s consumer products manufacturing machine.  Using a storytelling format, Midler’s book is an autobiographical tale from the front lines.  Midler relates his experiences working in China as an intermediary between Chinese manufacturers and American importers.

By making price the primary focus, Americans have allowed the Chinese to manipulate the production game to their own advantage.  Midler very successfully explores the importance of understanding culture, psychology and law when doing business in a foreign country.  For example, we Americans, who are accustomed to a strong legal system that enforces contracts, are quite bewildered by China’s complete absence of a legal system.  And as Midler explains, the Chinese are masters at exploiting this lack of law and order to their advantage every step of the way.  In addition, despite the impressive advances in Chinese infrastructure, Midler illustrates that China is far from a first world country when it comes to the backward nature of its business dealings.  While we Americans are interested in reducing everything to a number, namely price, we see firsthand how this tunnel vision is dangerous, both economically and ethically, when it comes to China.  Ultimately, the beauty of this book is that it entertains while it educates.  It is a thoroughly enjoyable and educational account of gamesmanship at its finest.

Poorly Made in China is as much a revealing glimpse into Chinese culture as it is a mirror on the American psyche.  Many American entrepreneurs have flocked to China in search of lower prices and a quick buck.  However, every cloud has a silver lining.  When we look at the recent financial crisis, the American hunger for short-term gain proved to be devastating for many.  In the same way, Midler shows how the Chinese have exposed and exploited the weaknesses in the American psyche.  The consequences are dire not only for the American importer, but also the consumer.

(Sujay Desai is an aspiring writer and film enthusiast.)

Book Review: Poorly Made in China

Chinese Companies Masters of Obfuscation

By Phil Randell

VERY RISKY: Unlike the legal protections in Western countries for people in business, doing business in China poses mind-boggling risks in a country in which norms have been turned upside down from traditional culture, according to business consultant Paul Midler. (wiley.com)

I just returned from an amazing, eye-opening journey to China. However, I never left the United States.

While reading Poorly Made in China, An Insider’s Account of the Tactics Behind China’s Production Game, by Paul Midler, it was as if I was there with the author as he detailed the misadventures of Western importers being out-maneuvered by mainland China manufacturers at almost every turn.Through a vivid narrative of his own experiences, Midler, a Mandarin-speaking consultant for Westerners trying to do business in Asia, exposes the mind-boggling risks of conducting business in a country in which norms have been turned upside down from traditional culture. Yet, the author’s style is humorous at times and often light.

In the West, businesses often court each other with caution at first, and then slowly develop trust as the business relationship evolves. Through the descriptions of about eight business pairings, the reader is shown how Westerners are at first lavishly treated. However, once they make their initial investments, their situations become progressively more difficult. Midler uses pseudonyms for the people and companies he describes.

One pairing between an importer and manufacturers was the story of Bernie, the savvy owner of Carter Johnson, a body-care products company, and the Chinese company King Chemical. Through his story, we learn of “quality fade,” a deliberate, incremental, and surreptitious process in which manufacturers reduce the quality of ingredients to widen profit margins. One of the products Carter Johnson hired King Chemical to produce was shampoo. When the factory owners were caught using smaller, inappropriate labels, they continued to do so until the supply ran out, despite protests from Midler and the importer.

The thickness of the plastic shampoo bottles was slowly reduced until they broke under pressure while being warehoused, causing a mess and a considerable financial loss. The factory owners passed the cost onto the importer. Bernie had provided King Chemical with the formulation for the shampoo, but when quality problems arose and he asked to see a list of the ingredients, he was told it was proprietary information.

Through all the accounts in this book, it becomes clear how Western countries have become plagued by defective products, such as exploding tires, poisonous toys made with lead paint, and as reported in The Epoch Times, drywall that emits poisonous fumes.

What also becomes obvious is what a weak bargaining position the Westerners are in. They are in a country in which they do not understand the language or business tactics. Businessmen know that in negotiations, information is power. The Chinese manufacturers written about in the book were masters of obfuscation, obtaining much information, while disclosing little, and creating illusion after illusion. Most importantly, the mindset and negotiation strategies many Westerners used seem to be anchored in the legal protections that they had in their own countries, but that do not exist in China.

Midler, who has an MBA from Wharton, was even-handed; he also showed how some importers were trapped by their own greed. Other Western business people were more sympathetic subjects. Without clarity of their situations, they were trying to help their companies in an ever-changing world economy. In addition, the author shows great sympathy for many of Chinese citizens he meets who are trapped within a system they did not create.

Midler said in an interview, “There are a lot of people who remain in denial about the China opportunity.” Commenting about the factory owners, he said they “forever keep foreign partners at a break-even point,” shifting all of the profits to themselves. Through the author’s eyes and ears, the reader is transported into a business environment where appearance triumphs over substance and quality, workers rights are almost non-existent, and safety standards are completely arbitrary.

In addition, one is given an inside view into an industrial environment almost devoid of designers, but filled with experts in copying, retrofitting, and counterfeiting. As I closed the book, I thought of the made-in-China umbrella that I had recently used only twice, which sprang apart into many parts as I opened it. I was grateful it was not a device that I depended on for safety.

Midler did not start out intending to write a book. During the course of his experiences, he took notes, thinking perhaps he would create a brief for his clients. He eventually realized that the understanding he had gained could benefit many. The 236-page text is a fast, enjoyable read. There are a few times when the pace does slow, but the author is explaining simple situations in great depth to give the reader more understanding of business and interpersonal dynamics.

Poorly Made in China is an invaluable book for anyone considering doing business in China or teaching a course in international trade. This is also a book for all consumers in countries that import products from China.

Poorly Made in China, An Insider’s Account of the Tactics Behind China’s Production Game, by Paul Midler (2009), is published by Wiley and is available at Amazon.com.

Book Review: Poorly Made in China

Midler, Paul. Poorly made in China : an insider’s account of the tactics behind China’s production game. Wiley, 2009.

Paul Midler could be said to be biting the hand that feeds him. After all, he has built a lucrative career as a China-based manufacturing consultant, using his expert knowledge and insight into Chinese history, language, and culture. And yet, he has penned a work that, while frank in its admiration for many Chinese cultural idiosyncrasies, is also sharply critical of both the questionable ethical basis on which the Chinese have built their gargantuan export economy, and the impatience and greed of American businesses in rushing to embrace the perceived advantages of having their product lines manufactured in China.

In the 240 smoothly written and eminently readable pages of Poorly Made In China, Mr. Midler recounts his daily experiences in creating and managing relationships between Chinese factory owners and American importers, giving us example after example of why the Chinese, in his opinion, win at every hand dealt at the negotiating table of price and quality. Thus the importer and the U.S. consumer often have a good chance of ending up with a product that either degrades in quality over time or increases in cost without benefit to the consumer, or both.

For example, a manufacturer will agree to initial product specifications at a price the importer jumps at. The manufacturer then figures out how to unilaterally change some specifications for his own increased profit, while appearing to offer the same product. A shampoo bottle might be made of progressively thinner plastic in order to save the manufacturer on material costs. When the importer discovers a shipping container full of collapsed bottles and unsaleable product, the manufacturer says there is a production problem.

The importer demands that it be corrected. The manufacturer agrees that it should be fixed, but it is not possible at the originally agreed price point, so the price on the product goes up in order to restore the original quality. If this sounds like negotiating in bad faith, read Mr. Midler’s book to find out why, on the shores of mainland China, foreign importers have no choice but to play by Chinese rules or take their business elsewhere, and why many importers have realized that this is no choice at all.

Epilogue: Midler also points out that the Western stigma attached to the production of “counterfeit” goods does not exist on the same scale in China due to their cultural reverence for the skill of the artist / producer — even if the goods are not original creations. Midler’s point is driven home by a recent Wall Street Journal article (via ProQuest | via WSJ.com ) that describes the status of Hong Lei, creator of China’s popular “Tomato Garden” pirate edition of Windows XP.

“People regard Hong Lei as a talent, a national hero,” said Liu Fengming, vice president for Microsoft in Greater China. “This is part of the problem.”

Guest reviewer Marlys Ray is a librarian at the Institute on Aging at the University of North Carolina at Chapel Hill.

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