Insight: SaaS (47) Company boundaries and Chinese SaaS
Unlock a $500 SaaS Report — Join Now!
Join our exclusive Discord community (2023) today and instantly receive a complimentary SaaS report valued at $500! As a member, you’ll also enjoy weekly digital resource giveaways, keeping you at the forefront of SaaS insights.
How to Get Your Report
Ready to dive in? Click here to Join Our Discord Server now and claim your $500 SaaS report. Don’t miss out on this opportunity!
I did my research for the last two articles on Zapier. I’ve investigated and studied Zapier from the viewpoint of a SaaS entrepreneur. You can access the following link if you’re interested: ‘Insight: SaaS (45) Case Study: Zapier’s Secret (Part 1)’ and ‘Insight: SaaS (46) Case Study: Zapier’s Secret (Part 2)’.
When I began exploring Zapier, I got the impression that I already knew what the Zapier could and couldn’t do. There are some businesses that Zapier does not currently operate and never will.
These are company boundaries.
Good businesses are aware of their boundaries and compete within them. Their hunger is evident within their boundaries. They are preoccupied with controlling their territory rather than heedlessly exploring outside their borders.
Even reputable businesses choose to stretch their boundaries by implementing a cunning competitive strategy, perhaps with unique products or services. They don’t assault their opponents with particularly cruel means, like cheap strategies. Because once a market can no longer be monopolized, no one would be able to make a regular living, which is a form of market destruction.
You might exploit a short-term capital advantage to fight for the market, while others might employ more substantial cash to attack you in the future. New competitors will undoubtedly enter the market once you have obtained the monopoly position, stopping you from earning monopolistic excess returns.
The professionalism of the brand will be destroyed by blindly expanding the boundaries, which could also have an impact on the company’s position inside the original boundaries.
As they grow, successful businesses create new boundaries and stimulate the market inside those boundaries. A quality business will have a product or service that stands out from its rivals. Customers have more excellent options. Competitors are under pressure because of this to enhance their products and services.
I provide a simple anecdote from my life:
Chinese cabs were traditionally associated with subpar services in China. They won’t take on passengers (because your destination is too close or too far). They will not charge the amount on the meter. Non-local passengers will be diverted so they can charge more. Until Uber joined the Chinese market and DiDi started to compete with Uber, these phenomena did not improve.
If traditional cabs don’t improve their service, all customers will switch to Uber or DiDi.
Good businesses have their boundaries and compete within them in a controlled manner while creatively stretching them.
US SaaS companies solely concentrate on that limited sector while subtly retaining their own borders. Customers may employ a variety of SaaS portfolios with ease since they all have open APIs that enable them to connect and excel in their own responsibilities. In the SaaS industry in China, this phenomenon is essentially undetectable.
Chinese SaaS has a tradition of providing packaged overall solutions. A CRM SaaS company will develop ERP, HR, and Finance products. Since there is no data flow across SaaS products that clients purchase from various companies.
Customers will pick this packaged overall solution to avoid increasing communication expenditures. The CRM component of the package might be simple to use, but the other components will be awful. Customers will gripe about how difficult it is to utilize the product before finally refusing to renew.
Why then don’t SaaS in China set its boundaries?
Many claims that Chinese people like competitive cruelty and imitation. Although I believe they may exist, they are not decisive factors.
In my opinion: the lack of market space in China for each SaaS field leads to every SaaS company blindly expanding its boundaries. China’s SaaS guards the border to compete and can’t make money.
In my opinion: every SaaS company expands its boundaries heedlessly because there isn’t enough market opportunity for any SaaS industry in China. SaaS in China is unable to generate revenue within its boundary.
Although there are many Chinese enterprises, the B2B market, or the Enterprise market, is small. Companies prefer to hire more laborers to solve problems because China has had a huge labor force for a long time. For instance, it is challenging for Asana-alike SaaS to find clients in China. Since if Chinese companies feel that the management is inefficient, they will fire the employees they think are inefficient and replace them. In any case, there are candidates in job markets.
This solution of replacing tools with people has resulted in a low willingness to pay for companies in the Chinese enterprise market. In the US market with a high willingness to pay, the price of SaaS products is not high, let alone in China?
The solution of replacing tools with people has resulted in a low willingness to pay for SaaS in the Chinese enterprise market.
As a result, virtually all SaaS industries in China lack customers and income. Are SaaS businesses still able to guard the boundaries while they wait to die?
Expanding the boundary is like suicide while not extending the boundary is like waiting for death.
So what about the future of SaaS in China?
I have a pessimistic outlook.
China’s population has a fertility rate of 1.3, meaning that the average couple only has 1.3 children, but this number is still declining. There will be a lack of labor. This has resulted in a market downturn rather than rising labor costs and greater willingness to pay for SaaS technologies (because there is no consumption). Numerous firms will fail, and unemployment will increase significantly. What is SaaS going to do now that all of the enterprise customers have filed for bankruptcy? Because labor costs will be lower at this time, even financially sound businesses won’t purchase SaaS.
Chinese SaaS businesses are unconstrained and independent. Where is their future?
Please send me an email (jasperhanlingyi@gmail.com) if you have any questions or suggestions.
The next article ‘Insight: SaaS (48) 20 seconds: out or not’ is published. Simply send me some claps and feedback if you enjoyed my article.
