• Unparalleled opportunity awaits international water treatment firms in China -- if they approach the market with proven strategies for success, says Lux Research
BOSTON, MA, Dec. 2, 2010 -- China's meteoric rise to global economic pre-eminence has come at the cost of widespread water pollution that, in many regions, has rendered entire watersheds worthless -- even for industrial use. International water treatment firms salivate at the immense opportunity this signifies. But China's bandit business culture, byzantine regulations and lax enforcement of IP make entering the game almost as risky as remaining on the sidelines. In its latest report, Lux Research investigates the opportunities and challenges that China poses for international firms, and outlines successful strategies current players have applied to tap China's water market.
Entitled "Taming the Water Dragons: Opportunities and Challenges in the Chinese Water Sector," the report draws from interviews with Chinese officials and international water treatment firms offering engineering services, capital equipment, and monitoring. All companies interviewed have an active presence in China, and the report analyzes their strategies to learn what has made some more successful than others.
"We found that even companies familiar with China's water treatment market often struggle to maintain their competitive presence," said Brent Giles, a Senior Analyst for Lux Research and the report's lead author. "One rule of thumb was that international firms need to bring something genuinely novel or superior to what the Chinese currently have. It can't simply be a black box that does something wonderful. Companies need to provide a service contract that keeps it running, or a lot of know-how that can't easily be duplicated."
Among the report's other key insights:
- The central government is tightening the screw on local authorities. The central government seems determined to enforce newly minted environmental laws and drive a wedge into the cozy relations between polluters and local officials that lead to widespread corruption. Last year, it abandoned trivial fines for illegal waste discharge and began to enforce industry compliance by charging factory executives with the same laws used to prosecute terrorists who poison water supplies. The most serious cases are punishable by death.
- Western business competes only at the high end of China's market. Most companies interviewed see greater success addressing industrial water, where the need to comply with tightening standards gives an edge to internationals that bring a unique, high-tech solution. Although not the largest sector of the market, the overall scale of industrial water treatment is large enough to support many successful players.
- As Chinese innovation emerges, the IP playing field will level. The global commercial relevance of Chinese intellectual property remains under-developed, which gives China little incentive for aggressively enforcing foreign IP rights. However, over the next decade, as innovation from within China grows in export value, Western entities will benefit from quid pro quo enforcement of IP rights within China. Consequently, non-Chinese companies that establish and maintain a presence during these early days will be better positioned to grow as the IP landscape in China matures.
Join Lux Research for a complimentary Water State of the Market webinar, "Opportunities and Challenges in the Chinese Water Sector," on Tuesday, December 14th at 11:00 am EST. Register now.
"Taming the Water Dragons: Opportunities and Challenges in the Chinese Water Sector," is part of the Lux Water Intelligence service. Clients subscribing to this service receive ongoing research on market and technology trends, continuous technology scouting reports and proprietary data points in the weekly Lux Research Water Journal, and on-demand inquiry with Lux Research analysts.
About Lux Research
Lux Research provides strategic advice and on-going intelligence for emerging technologies. Leaders in business, finance and government rely on us to help them make informed strategic decisions. Through our unique research approach focused on primary research and our extensive global network, we deliver insight, connections and competitive advantage to our clients. Visit www.luxresearchinc.com for more information.
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