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Tales from the Development Frontier
Guangdong, but also, in small numbers, from the Beijing and Shanghai areas. Competitiveness and Binding Constraints Lin and Fudebao overcame several constraints to become competitive in the furniture business. Worker skills. The biggest constraint has been the lack of skilled workers to operate the new production line and the lack of senior management and sales personnel. As Fudebao expanded and quality improved, it needed to scale up its staffing. In 1997, Lin attended a marketing lecture by Lu Wei, a professor at Shanghai Transportation University. The lecture helped Lin realize that he needed advisers who could help him work out a long-term strategy and modernize the company’s marketing and governance practices. Lu became Lin’s senior marketing adviser. Following Lu’s suggestions, Lin revamped the company’s marketing strategies and invested heavily in promoting his products at large furniture expositions, bringing his company greater name recognition. Lin also worked on building a nationwide retail network, using a franchise model. Fudebao applies a standard—the terminal franchise technology system—to help franchises market their products with the support of the company’s training, logistics, and after-sales service networks. Fudebao now has a network of more than 700 franchised retail agents, allowing Lin to expand production in both domestic and foreign markets. By 2010, Fudebao had 1,400 employees, 80 percent of whom were migrants from rural areas. Half the employees had only a primary school education. All new workers receive 10 days of training on company rules, values, manufacturing processes, and operations. According to Lin, staff training accounts for about 10 percent of the company’s expenditures. Lin also uses other methods to upgrade staff quality. Since 1997, all new marketing recruits have had to undergo a week of military-like training, regardless of the weather. The aim is to improve teamwork and endurance. In recent years, many coastal regions have experienced a shortage of both skilled and unskilled workers. The average monthly salary for an unskilled worker was about Y 2,000 ($295) in 2010, more than double the salary three years earlier. The company provides free