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Article Excerpt
The last decade has witnessed dynamic changes in business logistics requirements. However, firms, or logistics users, often lack the competence to operate logistics activities internally while facing increased global competition and higher customer expectations; thus an increasing number of companies are outsourcing their logistics activities to third-party logistics (3PL) firms so that they can concentrate on their core competencies (Sanders et al. 2007: Vaidyanathan 2005) and achieve competitive advantages by providing customers with superior services (Arroyo et al. 2006: Sum and Teo 1999). In particular, developing countries, such as China, India, and Mexico, have seen the emergence of 3PL outsourcing (Wang et al. 2006).
As the largest emerging economy in the world (Zhao et al. 2006), China has become a global manufacturing center with its rapid economic boost of a nearly 10 percent annual GDP growth in the last decade (National Bureau of Statistics 2007). To take advantage of its immense market potential and low-cost labor, multinational and transnational enterprises have moved their production into China. The rapid expansion of manufacturing industries has led to a rapid growth in the logistics industry. The total amount of social logistics increased, with an average annual growth of 23 percent during the 10th Five-Year Plan (2001-2005) period (Badham and Sense 2006), 24 percent in 2006, and 26.2 percent in 2007 (Logistic Information Center of China Federation of Logistics and Purchasing 2008). In 2007, China's logistics contributed about RMB 1.7 trillion of added-values, 17.6 percent of the added-values of the servicing industry, with a year-to-year increase of 20.3 percent (Logistic Information Center of China Federation of Logistics and Purchasing 2008). With the agreement that China would open up the logistics market at the end of 2005, China's accession to the WTO in 2001 set its logistics industry to grow even faster as well as to bring competition challenges from global players. The intensifying competition of the logistics market has forced mainland China 3PL providers to improve customer service and operation efficiency to promote their business performance. Many mainland China 3PLs have set to adjust their strategies to improve competitiveness.
Hong Kong has developed a more mature logistics industry. Value-added created by logistics amounted to HK$71.5 billion in 2006, accounting for 5 percent of GDP, with an average annual growth rate of 6 percent from HK$53.4 billion in 2001 (The Census and Statistics Department of Hong Kong 2008). Historically, Hong Kong was a logistics hub for mainland China's import/export businesses, especially for the Pearl River Delta (PRD) area, the first area that was developed after the opendoor policy was initiated in 1978 (Zhao et al. 2006).
Hong Kong industry acted as a valuable fugleman for mainland China's logistics development. The expertise and experience accumulated from the long-time development of Hong Kong logistics set up an excellent reference for mainland China's logistics industry. In light of increasing interest in the development of mainland China 3PL providers and the infancy status of research on mainland China's logistics (Zhao et al. 2007), the comparison between mainland China and Hong Kong is warranted. The comparison can shed light for mainland China 3PL providers to learn the valuable expertise and lessons from the logistics development of Hong Kong, so that mainland China logistics can develop better strategies to avoid the pitfalls that occurred in the logistics history of Hong Kong.
The primary objective of this study is, therefore, to compare various aspects of 3PL in mainland China and Hong Kong. The rest of the article is organized as follows: In the next section, the literature is reviewed regarding logistics in mainland China and Hong Kong, followed by a description of the research methodology. Then, the comparison results and discussion are reported. Finally, conclusions and implications are presented.
LITERATURE REVIEW
Logistics in Mainland China
Although the research on mainland China's logistics is still in its infancy, the rapid economic growth of mainland China has attracted increasing academic interest (Zhao et al. 2007). For example, Jiang and Prater (2002) described mainland China's traditional distribution system, recent developments, and reform efforts and concluded that three factors (i.e., China's booming economy, its accession to the WTO, and e-commerce) drove the improvement of China's logistics system and infrastructure, although some barriers to logistics development still exist. Goh and Ling (2003) found that the inferior logistics infrastructure hampered the ability of multinational companies to leverage China's full potential by analyzing logistics infrastructure in China. Despite these barriers, the future of the logistics industry of China is promising. Hong et al. (2004) examined the usage of 3PL services by Chinese manufacturers and found an increasing number of firms outsourcing logistics services. Lau and Zhang (2006) found that economic factors (e.g., cost saving and capital investment reduction) were strong motivations for outsourcing while some obstacles still existed. Hong and Liu (2007) investigated industry structure, current status, and future prospects of China's logistics and found that most 3PL providers in China had confidence in the Chinese logistics industry's growth, although underdeveloped market mechanism, institutional problems, and inadequate infrastructure remained as barriers restricting logistics development in China.
A number of studies examined strategic decisions of 3PLs in mainland China. For instance, Wang et al. (2006) examined the strategic postures of China's 3PLs and found that differentiation strategy outperformed cost leadership strategy and companies pursuing cost leadership were shifting towards differentiation strategy. Lai et al. (2006) investigated the impact of information technology (IT) on competitive advantage and financial performance and found that IT strategy significantly influenced financial performance in a nonlinear pattern. Similarly, Lai et al. (2007) found that efforts to improve IT systems could be effective only if the...
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