The Great Translation - article by Kenneth Lieberthal and Geoffrey Lieberthal - blog by Karl Janowski
At the start companies moved to China to manufacture products that they will sell abroad. Now corporations can go after the domestic market.
China’s two main opportunities: domestic market and lower labor costs due to human capital and infrastructure investment
Multinationals – china and external company form a venture
State owned corporations have stress political skills over managerial skills in Chinese labor
Many companies came to China with domestic plans but China forced exporting goods, trade surplus
China will remain the fastest growing major economy for the next decade
China has created oversupply of capacity to overcome shutting down of state run enterprises
EJV- Equity Joint Venture – working 50-50 with a company in China
WFOE – Wholly Owned Foreign Entity – company externally owned
3 phases of expansion
Entry – establish a presence, build a brand, learn the environment – need management that works well in unstructured environments and that is creative in finding resources
Country development - expand into localities, establish “one face to China” for political negotiations, need senior management with strong ties to home office
Global Integration – fully integration of China and global ops, need senior management that can work with several divisions
CEO Advice
Focus on nesting China effort into organization as a whole and show “one face” to China
Have national and tailored local strategies
Have a “Show me attitude” to EJVs – government promotes companies that are down, Chinese many time are more concerned with maintaining a large labor force than downsizing to increase profit,
Limit the risks of operating in China – hire China experts, do not put all resources in China for critical operations, keep China out of critical technology
Avoid irrational exuberance in response to the opportunities China will present
China’s two main opportunities: domestic market and lower labor costs due to human capital and infrastructure investment
Multinationals – china and external company form a venture
State owned corporations have stress political skills over managerial skills in Chinese labor
Many companies came to China with domestic plans but China forced exporting goods, trade surplus
China will remain the fastest growing major economy for the next decade
China has created oversupply of capacity to overcome shutting down of state run enterprises
EJV- Equity Joint Venture – working 50-50 with a company in China
WFOE – Wholly Owned Foreign Entity – company externally owned
3 phases of expansion
Entry – establish a presence, build a brand, learn the environment – need management that works well in unstructured environments and that is creative in finding resources
Country development - expand into localities, establish “one face to China” for political negotiations, need senior management with strong ties to home office
Global Integration – fully integration of China and global ops, need senior management that can work with several divisions
CEO Advice
Focus on nesting China effort into organization as a whole and show “one face” to China
Have national and tailored local strategies
Have a “Show me attitude” to EJVs – government promotes companies that are down, Chinese many time are more concerned with maintaining a large labor force than downsizing to increase profit,
Limit the risks of operating in China – hire China experts, do not put all resources in China for critical operations, keep China out of critical technology
Avoid irrational exuberance in response to the opportunities China will present