In the pursuit of lower costs and increased margins, many companies have looked to Asia for product sourcing. Yet, low cost labor doesn’t always translate to low cost goods if a company ends up scrambling to meet delivery timelines. For businesses looking to source offshore, be it Asia or elsewhere, a realistic assessment of the logistics market conditions needs to been undertaken.  <p>
“Besides price, consideration needs to be given not just to the local expertise and capability of the service provider, but also the extent of the network from Asia to the rest of the world. Logistics is largely a network game, and each node within the Asia Pacific network serves a critical role in determining the strength, versatility and scalability of the entire chain,” says Karl-Heinz Matthes, CEO, Schenker Asia Pacific.<p>
Asia Pacific is a massive region and the state of logistics services and infrastructure across the region is extremely varied from sophisticated, high-tech Singapore, to rapidly developing Vietnam. “The sheer size and complexity of the Asian market needs to be managed with very tailored strategies,” says Matthes.<p>
With that in mind, here is an overview of five movers and shakers in the Asia Pacific region. Some offer globally competitive logistics services, while others are in their infancy. But regardless of what stage there at, the consensus is that the rate of logistics development is accelerating across the board.

Singapore

Singapore is one of the most developed and sophisticated logistics and business centers in Asia Pacific. It is the Asian head quarters for ten of the top 25 3PLs, as well as for many of the world’s multinational companies looking to establish a presence in the Asian market. According to a report produced by the Logistics Institute Asia Pacific, the country’s supply chain management systems are among the most sophisticated in the world, with the focus now on providing total integrated logistics solutions for businesses operating in the region. In fact, the country aims to become the leading integrated logistics hub in Asia by 2010.

Singapore serves as a major transshipment hub for the region. The country is home to the world’s largest container port, handling 24.8 million TEUs in 2006 and connecting to 123 countries and over 600 ports. Its airport is one of the largest cargo airports in the world and is connected to over 180 cities globally. The road networks are extensive and well maintained.

Additionally, Singapore is known as a key hub in the development of innovative technological applications and platforms for logistics, as well as developing talent and knowledge leadership specialized in logistics, says Charlie Kok, Managing Director, Schenker Singapore. The regulatory bodies and processes within Singapore are very efficient, says Kok. “Most permit applications and processes are automated with a very short turn-around-time, as Singapore customs operates 24/7/365.”

Because Singapore is a very small country (about 700 square km), it makes sense that domestic logistics would be efficient, but according to Kok, Singapore’s logistics abilities are bigger than the country. “The key point is that its role far exceeds its borders as a logistics hub for the Asia Pacific region for almost 6,000 multinational corporations (MNCs) in a multitude of sectors, including electronics manufacturing, chemicals, oil and gas and so on, with 60% of these functioning as the regional head quarters,” he says.

Singapore offers shippers a full spectrum of logistics services and value-added activities. This is complemented by pro-business initiatives and incentives from the government (such as the Major Exporter Scheme, and the Zero GST Scheme). “Besides having a business friendly environment, the government has initiated a comprehensive network of Free Trade Agreements (FTAs), with major global markets, such as China, U.S., ASEAN, Japan, Australia, India, Korea, and EU,” explains Kok.  

Unlike some other countries in the region, Singapore has strict intellectual property standards and policies in place to protect the rights of companies conducting R&D or developing new products. It is a very easy place in which to do business, and a relief for shippers overwhelmed by the intricacies of Asian Pacific trade in developing nations. Singapore, according David Lucyk, V.P. International Development, Mach 1, is by far the easiest place in the Asia Pacific to do business. “It’s like doing business back here [in the U.S.],” he says.

Thailand

Thailand is a market in flux. The fall of 2006 saw a military coup overthrow the former government of Thaksin Shinawatra amid allegations of corruption. Since that time, the new government initiated a monetary policy that placed some capital controls on the baht (Thai currency), followed earlier this month by changes to the Foreign Business Act (FBA) that tightened the rules of foreign business ownership.

“Investment has slowed while businesses try to get a good read on the new government,” says James Hsu, Managing Director, Asia Pacific, Menlo Worldwide. Despite this, according to Schenker’s representative in Thailand, “existing business is still intact; there are no immediate signs of factories moving their operations out of Thailand.”

The Schenker rep says that within Thailand, the movement of goods is relatively free. Mach 1’s Lucyk agrees, saying the customs procedures within the country are straightforward. “It’s not really and issue; goods move in and out.”

There are privileges for factories and operations that operate within sectors or regions identified by the Board of Investment (BOI) or within the country’s Free Trade Zones. “Companies need to comply with customs and inland revenue regulations for imports into Thailand in order to enjoy tax free privileges,” says the Schenker rep.

The infrastructure within the country is reasonably good. “Major road network connections to main industrial areas in the country is good, and airport and major seaports are of international standard,” according to Schenker.

Thailand’s new International Airport, opened in September 2006, was equipped with modern technology in order to attract more shipments, says Menlo’s Hsu. Unfortunately, the facility is riddled with structural and design problems, leading the government to consider reopening Bangkok’s older airport to handle domestic transportation while the new airport is brought up to par. It could be a problem for goods coming in and out of the country explains Menlo’s Hsu, who says that shippers may be required to use two airports—one to move goods domestically, and another to ship them out of the country.

Thailand has several major seaports including Bangkok, which has a bonded warehouse offering several value-added services such as online inventory account reporting, more equipment for lifting and moving goods, and expanded storage areas. Laem Chabang is one of Asia’s leading ports and the most important commercial deep-sea port of Thailand.

Chiang Saen and Chiang Khong, located in Chiang Rai province, serve as Thailand’s gateway to Southern China, particularly Yunnan Province. Chiang Rai’s ports service the Upper Mekong Subregion as part of the Quadrangle Economic Cooperation Project to link trade among Thailand, China, Laos and Myanmar. Map Ta Phut, located in Rayong Province, is primarily a petrochemical complex. Songkhla Port on the Southeast coast services shipments to Malaysia. Phuket Port is the only international port on the Southwest coast, and Ranong, located on the western coast of Thailand is currently being updated. This facility, complete with a railway system to upload cargo and a Container Yard at Sai, Chumporn, is at the border with Myanmar, serving as a gateway to the Indian Ocean and BIMSTEC (Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka (Thailand)).

Shippers dealing with global providers have access to traditional value-added services such as distribution centers, warehousing and LTL and FTL services. Schenker’s experience has been that local providers tend to specialize in niche areas such as transportation, customs clearance, and no-frills warehousing.

Thailand’s rail service is extensive and connects with Malaysia’s national system, providing direct linkages down to Singapore. There are plans to improve the rail cargo system and to further develop intermodal logistics centers.

Vietnam

As one of the fastest growing economies in Asia, Vietnam has become the low-cost alternative for manufacturers struggling with rising costs in China. The economy is projected to grow by approximately 8% annually over the next decade. The country has been undergoing economic reforms since 1986, culminating this year with Vietnam’s accession to the World Trade Organization (WTO). Critical to this continued economic expansion is the further development of transportation and logistics services. While exports from Vietnam to North America have increased over the last five years, its export market is still largely dominated by Intra-Asian trade.

While growth has been impressive, the non-existent or crumbling infrastructure threatens to put constraints on development. “The drawback with Vietnam is its infrastructure,” says Lucyk, using the example of goods moving from a factory inland to the port. “We saw three motor scooters hooked together pulling 20 foot containers to the seaport,” he explains. Lucyk says that the problems are not only a lack of equipment, but of facilities as well.

A recent report Frost & Sullivan and APL states that container growth over last 10 years has been about 19% annually, leading to concerns over congestion at the ports. The port facilities are outdated and lack sufficient portside facilities. Additionally, the country has no deep water ports capable of receiving large ships. Ho Chi Minh City, which handles more than 70% of Vietnam’s container throughput, is currently nearing capacity and concerns are that expansion at the port will be slower than the growth in container volume. In addition to building new ports near Ho Chi Minh City, there are also projects underway in different provinces, many of which are being developed by foreign port operators.

Airports are also operating at or near capacity, although there are plans in place to build new airports for both domestic and international traffic. According to the APL report though, the government has a strong focus on developing the electronics and high-tech sectors, which should result in increased pressure to develop air facilities and services.

The report also states that only 19% of Vietnam’s roads are paved. In order to maintain and improve the roads, multiple levels of government must be involved making the process complex and onerous. In fact, in 2006 a huge corruption scandal was uncovered in Vietnam’s Ministry of Transportation, adding significant delays to highway construction already underway. The rail system is perhaps even worst than the roads, and as such is rarely used for shipping.

The logistics system in Vietnam, says APL, is very immature. Because the logistics network has been developed haphazardly, total logistics costs in Vietnam average between 15- 20% of GDP, nearly double the rate of developed nations. The lack of infrastructure and facilities “are hampering the growth of efficient logistics practices in the country,” states the report.

It is expected that the logistics landscape will improve as more international operators become involved through investment and joint ventures. Changes are already underway; since officially becoming a WTO member, Vietnam has seen a sharp increase in involvement by supply chain companies. In 2006, DHL and Fed Ex made agreements with the government to establish alliances, NYK Line has committed US $200 million into shipping and logistics projects (including port and ship building initiatives, and TNT is currently expanding its Asia road network to Vietnam.

Malaysia

Slow and steady seems to be the sentiment for Malaysia, particularly in terms of development and infrastructure. The country has earned a reputation as a steadily growing economy with well thought out development plans. In fact, a World Economic Forum report stated that “Malaysia has one of the most efficient economies in the region.”

In order to run efficiently, the country has slowly developed and upgraded its infrastructure. Kuala Lumpur is home to Malaysia biggest airport and to Kuala Lumpur Sentral, a transportation hub for all major rail transport networks. The country boasts well-maintained highways linking major centers to seaports and airports. Recently, a Kuala Lumpur-Bangkok-Kuala Lumpur containerized service known as the Asean Rail Express (ARX) has been launched with the hopes that it will expand into a Trans-Asia Rail link that will include Singapore, Vietnam, Cambodia, Laos, Myanmar and China.

Malaysia relies largely on its ports to support trade; in fact, 95% of the country’s trade is through Malaysia’s seven international ports—Port Klang, Johor Port, Port of Tanjung Pelepas, Kuantan Port and Kemaman Port in Peninsular Malaysia, and Bintulu Port in Sarawak. Two of the ports—Port Klang and Port of Tanjung Pelapas—have been rated as among Asia’s ten best sea ports and terminal operators.

Air cargo facilities are well-developed in the five international airports—the Kuala Lumpur International Airport (KLIA), Penang International Airport and Langkawi International Airport in Peninsular Malaysia, Kota Kinabalu International Airport in Sabah, and Kuching International Airport in Sarawak. Cargo import and export procedures are fully automated at the KLIA ensure the smooth flow of cargo.

Industry in Malaysia has been developing at a steady pace over the years, with the country having established a reputation as a significant manufacturing area, “somewhat on par with China,” says Lucyk. As costs in the coastal areas of China have increased, manufacturers have looked to other areas in the region to locate their facilities and operations. Malaysia has been a good alternative.

Most industries in Malaysia are located in industrial estates or parks, or in the Free Industrial Zones (FIZs). FIZs are export processing zones focused on serving export-oriented industries. Companies in FIZs are allowed duty free imports of raw materials, components, parts, machinery and equipment required for the manufacturing process.

Malaysia is set on encouraging further development of the logistics sector, as outlined in the government’s 3rd Industrial Master Plan (IMP3), with incentives for companies to develop integrated logistics solutions across the entire supply chain. Both Kuala Lumpur and Penang are active markets for supply chain management services with several global service providers operating in these cities.

Indonesia

Since the collapse of the Asian markets in 1997, Indonesia has been struggling to establish its economic footing. Foreign investment in the country has never fully rebounded, and a corrupt bureaucratic and legal system has hindered growth, but things appear to be changing. 

“Indonesia has a new president who appears to be very pro-business,” says Hsu. As a result, political stability is improving, and companies are once again looking to invest in Indonesia. There are still concerns with the government though, adds Mach 1’s Lucyk. “There are variances between the national and local governments and this can cause difficulties for shippers,” he says.

Hsu says that the low labor rates in Indonesia are beginning to once again attract investment. “We are seeing more requests to do work in Indonesia.”

Indonesia is the world’s largest archipelago and consists of over 17,000 islands. As a result, any logistics system serving the country must consists of extensive air and sea networks. While there is a push to develop this infrastructure, the country still has a long way to go. Under former President Suharto, much of Indonesia’s infrastructure was neglected. As a result, this past November, the new president asked foreign investors to pump U.S. $22 billion into the country’s infrastructure. “Indonesia is not as mature as the rest of the region in terms of logistics development,” comments Hsu.

Lucyk says that many shippers are trying to avoid shipping direct from Indonesia to the U.S. “They don’t want to send [freight] through Jakarta. The export permit process is challenging and expensive and most companies try to avoid it.” Lucyk says that most customers they deal with are sent out of Indonesia via Batung and on to Singapore. The goods terminate in Singapore and are re-tendered as a new shipment and then sent on to the U.S. The process also works in reverse. “Companies are really trying to avoid Jakarta. The diversity and local political environment and cultural challenges are huge,” says Lucyk.

Another watch out for companies is the legal system, particularly as it relates to intellectual property. “If it’s a low cost, mass labor product, then Indonesia is okay,” says Hsu, “but if it’s a high-end, information technology product with lots of margin, then you need to be more careful about where you choose to go.”

The next frontier

Getting goods from Asia to North America is far easier than it once was. Even countries with under developed logistics industries and lagging infrastructures will benefit from the advances by other players.

“Logistics companies are beginning to offer time-definite delivery to the U.S. from South East Asia, which speaks to the fact that logistics procedures are not as difficult as they once were,” says David Lucyk, V.P. International Development, Mach 1.

The next few years should see even further changes in the local logistics markets of the Asia Pacific countries. The next frontier, according Mach 1 CEO Mike Entzminger, will be to become a player in the local markets. “Most in-country routes are developed. It’s no problem getting goods moved; the shift will be in who’s doing it,” he says. Many major international companies are establishing operations throughout the region to gain a share of the domestic markets of the different countries.

It’s a wise strategy, agrees Matthes. “The impending shift in the purchasing power of the large consumer markets in Asia signals very strongly the need and demand for logistics and supply chain services as an enabler for the region to sustain its growth for many years to come.”

Sidebar: "Importing, Exporting, and Investing in China," by Alfred Ho

With a gross domestic product rapidly approaching $3 trillion U.S. dollars, China is one of the world’s largest economies with a growing and unsaturated market demand for everything from cell phones to consumer technologies to fast foods. 

Given its population of 1.3 billion, China is both a production and consumption powerhouse that no other Asian country, or perhaps no other country in the world, can match, as it is a remarkable, low-cost manufacturing center for the global economy in both labor and land. It offers competitive pricing, and the skills of its workers and the quality of its product have improved as of late.

On the other hand, China is a vast consumer market for imported products. China has a fast-growing middle class of 250 to 350 million people with unprecedented demand for foreign products ranging from raw materials to commodities to consumer goods.

China’s middle class is roughly the entire population of the U.S. Reflect on that statistic for a moment: even if only a small percentage of China’s middle class buys your products, your company has the opportunity to reap potentially huge rewards. 

In making the most of your company’s ventures in China, what are the key considerations to undertake when doing business in this complex, vast market?

Due diligence

Evaluating and understanding specific challenges when entering and operating in China are the first steps to developing a strategy that fits a particular company’s overall goals. A company must first conduct detailed due diligence in a number of areas to enable it to make an informed decision on how to engage China. Company executives should also visit China beyond the showcase cities of Beijing and Shanghai, as smaller cities may be more viable candidates for a manufacturing plant. Some areas that require research include: market and industry information, location comparison, state and local requirements in capital, environmental issues, taxes and duties, employment laws, intellectual property laws, and licenses and permits.

Once that is accomplished, a company can make an informed decision as to how to enter China, which can be in the form of a joint venture, a wholly-owned foreign enterprise (WOFE), an acquisition of a Chinese company’s assets, contract manufacturing, or, if a company is not ready to make major investments in China, open a sales office or establish a distributorship for exporting goods to China. It is important to note the need to constantly verify information before implementing a plan because policies and regulations can change over the months it takes to complete the due diligence. Developing an exit strategy should also be a key component of your overall plan.

Fundamental challenges

When evaluating a China strategy, political and social structures as well as the macroeconomic horizons of China should be considered. As a one-party Communist government, politics and the economy are particularly interrelated in China. Before investing there, businesses need to consider what it will mean to their company if issues such as human rights, terrorism, arms sales, U.S. trade deficit and the Chinese currency (renminbi) begin to have a negative impact. Other politically-charged domestic issues include Taiwan, Hong Kong, and to a lesser extent, Tibet.

China is very concerned about its social stability and has a tendency to adopt many administrative policies in dealing with issues that may impact social instability. Although China is now allowing more economic liberty and adopting some democratic reforms, the country still does not permit political freedom to the extent enjoyed in a full democracy.

In the 1990s, China’s economy was achieving double-digit growth in GDP, and today is maintaining nine to ten percent growth. How can this rapid growth be sustained? The government has introduced administrative policies that intervene in an attempt to slow the economy in hopes of creating a softer economic landing.

In comparison to the dollar, another issue is the revaluation of China’s currency, Renminbi, which currently is appreciating by about two percent, but in the past year appreciated 3 to 4 percent after an official adjustment of 2.1 percent in 2005, still too slow for some economists. From China’s perspective, their economy does not present the luxury of quickly introducing appreciation or changing the currency on large scale, so it’s safe to assume the Renminbi is likely to continue appreciating slowly.

While China’s admission into the World Trade Organization (WTO) offers benefits for foreign countries by requiring China to provide a more level playing field for foreign investors, it also allows competition the Chinese economy has not previously experienced.

China has substantial infrastructure challenges and any company seriously considering doing business there needs to closely inspect and rationalize the structural conditions for impact on their business. For example, there are differences in rules and regulations between regions that are constantly changing with the legal and judicial systems quite different and not as developed as in the U.S. The same is true for the accounting, banking and logistical systems such as ports, roads and rail.

China has been undergoing banking reform for several years, in part due to the admission into the WTO, making the financial industry more adequate by internal standards. Historically, Chinese banks have been very decentralized with insufficient capital and equity. In the past, they’ve had a weak risk management system and have lagged behind international standards and practices, so the control of branches and compliances can still be complex. However, reforms and changes in recent years have brought improvement.

Logistics

Some of the softer, but equally important matters to consider are differences in languages, cultures, customs and values which can all vary among regions within China’s own borders. With 12 to 13 hours of time difference, there are no common business hours between the U.S. East Coast and China. Building a business relationship (guanxi) is very important in China as well as background checks of local employees. Certain business practices are different in China, for example, honoring contracts and acceptance of gifts.

Best practice--rely on experts

American companies can best mitigate risk by engaging financial and legal professionals with China-specific experience to assist in establishing and conducting business in China.

Alliances with experts that understand the various legal and banking complexities can help companies mitigate risk, get paid faster and improve cash flow. China can present a wealth of business opportunity with accurate information and the right business partners.

Sidebar: "Zebra Technologies Goes to China"

Headquartered in suburban Chicago, Zebra Technologies Corporation (www.zebra.com) is the leading global provider of on-demand printing solutions for business improvement and security applications. The company’s products are sold in 100 countries around the world and are used by more than 90 percent of Fortune 500 companies.

In 2006, Zebra launched major operations in China through its own subsidary. The steps required to establish its Chinese corporation took the company on a long and interesting journey of challenge and discovery.

“Eight years ago we had no employees in China,” recounts Todd Naughton, Vice President and Controller of Zebra Technologies, a leading provider of specialty printing solutions such as bar code and RFID printers and plastic ID cards. But as key customers started setting up China operations, pressure mounted for Zebra to follow.

Today Zebra maintains a warehouse and distribution operation in Shanghai, but originally began marketing in China on a more limited basis. First they opened a sales office in Beijing, repping product. “It grew to be a pretty nice size business,” says Naughton. Initially the printers and integrated solutions were going to government projects, then to early-mover manufacturers with operations in China. “We weren’t selling directly to end users but to Chinese re-sellers,” he notes.

Overseas growth continued with international revenues now accounting for more than half of Zebra’s annual $800 million. China represented a major opportunity but there were limits imposed by being a re-seller of equipment manufactured in the U.S. “Customers said they wanted to buy in local currency,” says Naughton. “In addition, they wanted shorter lead time. At that time, they either had to pay air freight of wait 6-8 weeks for shipment by water. They also wanted better repair services and, because of import and export restrictions, the repair depot had to be in China.”

“To expand our business, we needed to be a Chinese company,” Naughton and his colleagues concluded. In 2004, the company began the process of becoming a “wholly foreign owned enterprise” (WFOE) in-country – fully equipped to handle its own sales, marketing, operations, warehousing, logistics, IT, and HR– rather than funnel operations back to the U.S. Todd Naughton acted as Zebra’s Project Manager in this initiative.

However implementing the project proved challenging.

Naughton recalls: “It was a difficult decision. For Americans, doing business in China can be strange and mysterious. First, there’s the language barrier. We already do business in different languages, such as French and German, but you’re still using the same alphabet – which isn’t the case in China. When it comes to doing business in Mandarin, there’s a higher level of complexity.” There were also differences in business customs, legal practices and, most notably, intellectual property. As Naughton aptly points out, “All these things made it harder. It’s not as simple as going to Delaware to form a new company.”

The process in China of becoming a bona fide legal entity took over a year, although Naughton points out that since then the system has been streamlined somewhat. Why so long? “There’s a whole series of steps that have to be done sequentially and that require a government official to check off. Each step can take several weeks,” he explains. “For example, a business license requires a feasibility study at the local level, then provincial approval and ultimately approval from the central government. Today the contral government approval is not always required.”

Next, bank accounts had to be established, requiring wiring of cash into a capital account that must be authorized and verified. Then the company must file with the tax bureau.

In total, Naughton estimates there were some three dozen different hurdles to clear.

“To their credit,” he notes, “the Chinese are working very hard to meet all their obligations to WTO. They are constantly reviewing the requirements and making modifications, trying to improve things. But that also means as you go along, the rules can keep changing.”

How frustrating was the process? Naughton asserts, “It was harder than we thought it would be. When we began, I received some good advice on setting up a business in China. Number 1: Everything is harder than you think it will be. Number 2: Nothing is impossible. Number 3: When you’re ready to give up, re-read Numbers 1 and 2.”

Regarding lessons learned, Naughton notes: “I found we would have gotten more done by going there more often and having short in-person meetings with the right people, rather than communicating via e-mail. The Chinese respect the time, cost and effort you have taken, and they know you’re really serious. Relationships are important and they should start face-to-face. Then you can do some things over the phone and via e-mail.”

From the time Zebra made the decision to enter the China market until the first product shipped was a year-and-a-half. Naughton says, “This first year has been a transition year. As we go about doing business, we learn more and have already made some changes.”

One change was office space. Zebra took a two-year lease, anticipating the space to be adequate for three years and potentially longer. The reality was that more administrative employees were required and the company wound up running out of space in eight months. As a result, the company just completed another move to a new and larger office facility.

Clearing customs was another process Zebra changed. Naughton explains: “When we went into China, we planned to be the importer of record. But because of paper work requirements, we discovered you can clear customs 3-5 days faster with an import-export agent. So we now use an import-export company that is a Chinese government-owned enterprise.”

To fulfill order-to-delivery operations efficiently, Zebra partners with UPS Supply Chain Solutions.  They operate the warehouse, receive the orders, pick and package the products, ship, deliver and verify to Zebra.  The first orders were received and fulfilled last May. In terms of in-country logistics, Zebra was able to situate itself well, locating in an area around Shanghai were domestic logistics is quite well developed. The company maintains 25,000 square feet in a logistics park built and owned by an American warehouse developer.

The final challenge for Zebra Technologies was assigning a name to its Chinese subsidiary. “Just getting the name we wanted was difficult, because of existing Chinese trademark laws where the first-to-file gets the name,” says Naughton. “Following their rules, we wanted to be Zebra Trading Company, Shanghai Limited, but had to settle on another name – the English translation of which is Genuine Zebra Technologies Trading company, Shanghai Ltd.”

For companies doing business in China, intellectual property protection remains a concern. “A lot of technology goes into our printers,” he notes. “We do everything possible to make sure out patents are registered and enforceable in China and we follow their procedures. We believe they will honor those patents and the court will uphold them. However, whether we are in-country or not, our products can be reverse-engineered just as products of other manufacturers have been. Protecting intellectual property is a problem worldwide, not just in China.”

For example, he says, “Some indigenous Chinese competitors have reverse-engineered Zebra printers and built similar looking products, stripped of features and specifications not required by the customers they serve. They put their name on it and charge less for it. They’re not necessarily doing anything that is illegal or unethical. It’s just competition.”

Can Zebra compete against these knock-offs in China? Naughton responds: “It depends on who the customer is. For multinational companies, we can sell same product anywhere in world and service it anywhere. Our customers only need one software and one interface anywhere in the world. Can Chinese companies do that? In addition, we are a major company and recognized industry leader with great financial stability. We can compete on that.”