Dragons at Your Door: How Chinese Cost Innovation is Disrupting Global Competition
By Ming Zeng and Peter Williamson
Harvard Business School Press, $55.00

A key problem with globalisation is that the Chinese might turn out to be the best at, well, everything.

Zeng and Williamson note that in the past 10 years Chinese companies have broken into - and in some cases have come to dominate - markets that were once the preserve of venerable Western firms. The writers are interested in finding out how and where the process might be going.

China's economic advance is certainly founded on low labour costs and huge demand in the domestic economy, but this does not seem to explain how the country has moved along the value-added scale in key areas.

Zeng and Williamson believe that Western firms usually think of innovation as a means of developing more sophisticated and higher-margin products. The Chinese focus, on the other hand, has been on keeping costs low through innovative methods of production.

Technology transfer plays a key role. Chinese companies tend to be weak at basic R&D, but crucial information is supplied by the return of Chinese who have worked or studied abroad. The relatively weak protection of intellectual capital in China means, say Zeng and Williamson, that technical knowledge circulates more freely in China than in Western countries (although there is a long-term cost to this).

In terms of international expansion, the Chinese strategy is to look for 'loose bricks', or vulnerable segments, of a market. Whitegoods manufacturer Haier, for example, broke into the US market through the odd route of hotel mini-refrigerators. Carmaker Chery cut its export teeth in the peripheral market of Syria.

Zeng and Williamson emphasise that there is no single explanation for China's success - it is a matter of the interaction of cost base, technology availability, and the globalisation of markets. But the model also reveals important vulnerabilities. Margins in peripheral niches are small, and exporters often have to absorb large losses before making headway. Quality is a continuing problem, and within China the most respected brands are mainly foreign.

For non-Chinese companies, there are useful lessons in Dragons at Your Door. Perhaps the most important is to avoid any 'loose bricks' in your own market, and to not simply cede territory that looks too hard. It should also be possible to combine Chinese cost innovation with Western production quality, and some companies are doing so.

One way or another, the Chinese challenge has to be met. Dragons offers an important analysis, and anyone in the global market - that is, all - should be aware of what it has to say.

50 Great e-Businesses and the Minds Behind Them
By Emily Ross and Angus Holland
Random, $34.35

Making money out of the internet is much easier said than done, but a common element among those people who do is that they seem to have a lot of fun.

So do Ross and Holland, with categories such as 'Don't Try this at Home' (for companies such as Kayak and Lulu) and 'Little Shops That Could' (e-Pharmacy, Net-a-Porter).

There are several Australian firms that have done particularly well, some (like RSVP) which have taken old ideas and giving them a techno-twist, and others (Crikey) which have seen how the internet can be used to fill a market space. It's entertaining, and there are also important business lessons here.

Connected: 24 Hours in the Global Economy
By Daniel Altman
Macmillan, $35.00

The underlying idea of this book - taking a particular day, 15 July 2004, and looking around the world to see what happened, to assess the impact and processes of globalisation - is intriguing.

But the linkages that Altman tries to make never really solidify. As a collection of essays, however, the book has no shortage of ideas. It tills some unfamiliar ground, such as the cost of corruption in South Africa and the impact of oil wealth in East Timor. Interesting parts, but Connected is less than it should be.

Reference: November 2007, volume 77:10, p. 77