Note: this is an interview I did earlier this year, but all the issues are current and exciting and I thought it should get front page coverage on the Blog.
One of my first-year undergraduate students is an international businessman of some note. Steven Pawsey was recently awarded Victorian Young Entrepreneur of the year for his Stevie Marx business. I recently took the opportunity to interview him exclusively for this Blog about his experiences. Below is the first part of this conversation:
Andre: What products do you sell?
Steven: Stevie Marx Australia produces ladies fashion umbrellas. The range varies from super small mini umbrellas up to the large jumbo golf-style umbrellas.
Andre: Do you make these umbrellas yourself, or does someone else manufacture them?
Steven: All Stevie Marx umbrellas are produced in China in the city of Guangzhou. The factory specialises in the production of umbrellas and makes 30,000–60,000 umbrellas per day.
Andre: Why did you choose China as the sourcing location? What advantages did that location have?
Steven: In the modern economy, for most goods the desired production location is China. China has developed the correct infrastructure and support structure to allow buyers to satisfactorily get what they need at the price they desire. The advantage of China is that, because there are so many makers located in China, the free market competiveness works well in keeping prices relatively low. Many people associate this primarily with the cheaper labour available, however, this is only one of the many factors. The main factor is that competion is so strong in China that to maintain business they work on turnover. They know that if they earn less per product it does not matter, as they can produce 10 times as much as can otherwise be produced in other countries. So much more money is flowing in.
Andre: What have been the main challenges in managing the relationship with the manufacturer? What are the major risks?
Steven: The number one challenge in managing an effective relationship in China is the difference in language and culture. In China the language barrier can become haphazard and miscommunication can lend itself to problems of quality, production timelines and even being offered the wrong product entirely. I have had times when my maker in China has said ‘yes’ and I interpreted that as a ‘I agree’, then one week later I found out that yes meant ‘I understand what your saying but I don’t agree’. The culture difference between the West and East is also significant. Western culture endorses larger amounts of spending on things such as development, samples, production etc. Asian culture is more about conserving money, e.g. making exactly the right amount and only offering a specific amount of samples (thus minimising waste and saving money). This can get very frustrating when you have say a Target or Big W in Australia wanting five different styles of umbrella samples and the maker refuses so he can ‘save money’. This is pretty common right across China no matter what good is being produced.
In relation to risk management the major risk associated with China is quality. You need to find a maker that satisfactorily produces to your quality expectations, the consumer’s expectation and local legal requirements. You may remember a complete recall on Chinese-made Mattel toys earlier last year. This type of recall or problem always remains in the back of any importer’s mind. Their producer could make the wrong decision and lead to a disaster.
Later this week, I will post more of this conversation (Part Two is now up here). I am sure Steven would love to hear your feedback and questions thus far (I certainly would). Fire away.
Update: Steven popped back into the International BS Studios (well, he replied to my emails!) to answer the many question below. See his responses here and here.
Tags: Australia, China, entrepreneurs, entrepreneurship, fashion industry, Internationalisation, Marx, outsourcing, startups, Steven Pawsey, Stevie Marx, Strategic management, umbrellas
November 11, 2008 at 8:26 pm |
stevie,
good knowing your business is doing well. however, 2 questions about doing business in china has also interest me.
Firstly, in your opinion, how do you see the negotiation process and business transaction in china, as opposed to the one in the western countries. Is it more of a stipulated in the contract kind of agreement or are contracts vague? Is there any changing trend?
Also, how do you think an entrepreneur can protect themselves against deceptive manufacturer in China. I have seen incidents and know people who have been con by chinese businessman, such that they failed to deliver upon their promises or deliver sub-quality product, unlike promised.
thanks
November 12, 2008 at 10:55 am |
Hey Stevie,
Congrats on the successful business venture. André, yet another insightful blog! My question regards the current global financial crisis. What impact, if any, has it had on your business? Is there anything you can do to minimise the impact or is it a macro-level effect out of everyone’s hands?
Shaun
November 12, 2008 at 3:16 pm |
Good on you Stevie. That’s a great accomplishment. My friend also imports a range of products from China and he has found that due to the decrease in value of the aussie dollar he is obviously making less money to the point where he is not going to ship in any more product until things improve again. I wonder if you are going through the same motions?
An aside: In this current climate, social responsibility is on the backburner. However, when the financial crisis settles down I am sure it will become pertinent.
How do you ensure your practices are socially responsible? For instance do you source from factories which do not employ child labour and meet OH&S standards? Are the manufacturing processes environmentally friendly and sustainable?
In the event you choose to supply to larger retailers these may be the hard questions you may face in the future. I know ANZ (whilst obviously not directly related to your business) asks these questions of its suppliers.
November 19, 2008 at 1:11 pm |
Thanks for sharing with us this insightful interview, Andre! It’s always nice to read on how entrepreneurs start their businesses and the insights one will be able to learn from these stories.
If you’ll be in touch with Stevie, just a question from myself:- how did you come to select that particular manufacturer in China? As I understand it, there’s a lot of manufacturers in China (especially in industrial cities like Guangzhou) and they’re all vying for your business. Sometimes, they’ll even resort to desperate measures (as Ami mentioned – the social responsibility issues, and by Charles – the possibility of deception). And as you’ve stated, language is a barrier, too.
Also, what about future concerns? Apart from the forex issues, manufacturing costs in China are escalating too, and this might make it expensive for businesses to have their products manufactured in China. Have you considered expanding your production activities elsewhere in the near future?
Best of luck, Stevie.
November 25, 2008 at 6:17 pm |
Steven has answered some of these questions in my follow up chat with him at
http://internationalbs.wordpress.com/2008/11/25/the-umbrella-seller-fella-answers-your-questions-part-one/)
February 11, 2010 at 8:03 pm |
I got Steve back online for some more grilling, check out the latest here:
http://internationalbs.wordpress.com/2010/02/11/catching-up-with-the-umbrella-seller-fella-part-1/
And there’s more to come…
April 19, 2010 at 7:47 pm |
congratulation bro!!
September 11, 2010 at 11:09 pm |
I think we’ve all been talking to the wrong mastermind of the “stevie marx” empire. I think you may have overlooked where all the money, connections come from and why it looks very similar to another business and its partners…