Ground Floor Sheila O'FlanaganWhen I go to Spain I buy shoes. Not especially because they're cheaper than in Dublin (although generally they are) but because they make them in my size! There are only a few shops in the capital which regularly stock size 3 (which is a 35 European and not a 36 as so many shoe shops try to insist) but most continental countries carry smaller sizes.
I also buy them because I have a slight weakness for shoes. I'm not compulsive about shoe buying and sometimes I can wear the same pair for days on end, but I do love pressing my nose against the window of a shoe shop and coveting whatever's on display.
In Valencia, shoes are big business. The city of Elche, not far from Alicante, is home to a shoe industry which has been in decline for the past number of years, under pressure from the current Chinese powerhouse. Last autumn, local residents organised a protest outside the warehouse of a Chinese shoe importer during which the premises were allegedly set on fire by protesters shouting "Chinese out".
The Chinese point out that it's not their fault that companies in Elche are going out of business, saying that they only account for about 20 per cent of business there. But 20 per cent is a huge chunk!
They also say that they're targeting a different market, manufacturing mainly footwear for the construction industry, trainers and low value shoes. Yet there are now at least 60 outlets in Elche, the shoe capital of Spain, selling Chinese manufactured products.
I was astonished when I first read about this because from my shopping perspective, shoes made in Elche are already extremely cheap, retailing at between €20-30 a pair from a factory outlet. It's difficult to know what local manufacturers can do in the face of still cheaper goods unless it's to reposition themselves in the market and target high spenders. But when tourists flock to the outlets, it's cheap shoes they want.
The other problem facing Elche manufacturers is the market for heavy-duty shoes used by construction workers, where Chinese product is severely undercutting local factories. It's on the basis of this pricing that the EU has started a probe into Chinese shoe imports into Europe, a probe which has caused relationships with the runaway economic miracle country to chill somewhat.
Basically, the European Commission wants to find out whether or not the Chinese are dumping shoes on the European market by selling them at below cost in order to win market share. The Chinese are outraged; but the EU thinks that a year-on-year rise of almost 700 per cent in the import of Chinese footwear merits investigation. If the Chinese are found guilty of dumping, the EU could levy duties against them.
It's a difficult situation. Dumping in order to win market share is something which is not acceptable in international trade. Nevertheless, it's a ploy that has been used before and will doubtless be used again.
As I said last week, Europe can't fight China. People will buy the product if it's good enough. Developed markets will continue to come under pressure from developing markets which can offer goods at cheaper prices. That's how global trade works.
And companies in any sector will try whatever they can to either break into or dominate a market. Such battles are not just fought between countries. In 2001 the EU opened an investigation into whether or not Intel used its dominant position to influence the market for its processing chips. The investigation meandered along without getting very far, but Advanced Micro Devices, which passed information to the EU, is now suing Intel, alleging that it has bullied 38 companies to secure a monopoly in the market.
The lawsuit accuses Intel of forcing major customers to use its products exclusively in return for cash payments disguised as discounts. It particularly cites the situation in Japan where it had 22 per cent market share until, it alleges, Intel paid Sony multimillion dollar sums in exchange for an exclusive contract.
The company claims that its market share has not kept pace with its technical leadership in microprocessor manufacture because of Intel's misconduct and cites a raft of companies with whom it once did business but who now exclusively deal with Intel.
Intel now has over 90 per cent of the market, AMD 9 per cent and everyone else 1 per cent.
The 48-page filing reads like the script for a Hollywood movie. Generally, business stories are quicker than any others to wrap up the following day's fish and chips, but people love to see the doyens of industry having to spill the beans about their company's practices in court and this particular story, with its David and Goliath theme (as seems so often the case in the IT industry) is intriguing.
But regardless of whether AMD wins or not, the whole saga simply highlights the fact that in business, big or small, companies will do whatever they can to break into a market or increase their share of an existing one. Most consumers don't care what sort of chip is inside their computer once it does what it's supposed to do when it's supposed to do it.Most consumers don't care where their shoes are made once they do the job - whether that job is making them look good in high heels or whether it's making them feel safe with re-enforced toes.The EU didn't get very far with the Intel probe. The probe into below-cost selling of Chinese shoes is supposed to take nine months. But at the end of it, even if the Chinese are found to have broken regulations, the shoemakers of Elche will still have to fight hard for their market share.
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