Diversification is a key direction being discussed in many boardrooms as geopolitical tensions rise. In particular, Asia beyond China is becoming an increasingly attractive destination for manufacturing and sourcing.
Based on this trend and our consulting experience, our experts Jingwen Tong and Jost Wübbeke have studied the adaptation strategies of more than 80 companies in 12 industries.
The study analyzes four main adaptation strategies: 1. China Plus, increasing presence in China while developing backup plans. 2. Relocation, exiting China and moving to third markets. 3. Doubling Down, deepening activities in China; and 4. Re-shoring and near-shorting, moving to home or nearby markets.
Based on these findings, Sinolytics suggests that companies first identify geopolitical risks before embarking on an adaptation strategy. Diversification is a question of "how" and "to what extent" rather than "should" or "shouldn't." Remaining successful requires highly tailored, company-specific response strategies that allow for product-level differentiation.