BeijingMan: Insight: Chinese Business Wonders

Sunday, January 11, 2009

Insight: Chinese Business Wonders

Above: People are interesting. For that purpose Beijing has no better places than railway stations, parks, and TianAnMen Square. I went across TianAnMen on my way to Peking Hotel. Photo gallery below.

China Business Wonder No.1
THE GREAT BUSINESS PLAN

Beijing nine years ago, I heard my Chinese colleagues repeating JuDaZhongHua, the Great China. As we were participating a telecoms seminar, I asked if JuDaZhongHua had something to do with seminar topics. I had. It was about synchronized business development with Chinese spices.

My colleague explained that JuDaZhongHua was the word to describe China's four first telecom companies. Those companies are:

JuLong - meaning Great Dragon
Didn't make success. Telecom equipments. Distributor of Motorola's broadband cable-TV products.

DaTang - meaning Big Tang (Tang was the most prosperous dynasty)
Not a big success at least yet. Invested on TD-SCDMA 3G networks and handsets. Weaker than HuaWei and ZTE.

ZhongXing (ZTE) - meaning China raising up, prosperous China
Company has rapidly globalized and entered over 30 countries. ZTE's export is in rapid growth. GSM, WCDMA, CDMA, TD-SCDMA, GSM. Athens Olympic network vendor. Strong with seven R&D centers.

HuaWei - meaning China's strong ability in development
Crown jewel. Domestic domination while globalizing with speed. Already entered 100 countries. WCDMA, CDMA2000, TD-SCDMA, xDSL, cable-TV networks and much more. Seven R&D centers. Rapid growth in export.

Take the first part of each telecom company's name and you will get
Ju-Da-Zhong-Hua which means Great China.

China Business Wonder No.2
LET'S NOT COMPETE TOO HARD

News by Chinese media, February 6th 2004:
"China Mobile and China Unicom (= 100% market share in China) have reached a gentlemen's agreement to ease price competition in their latest effort to boost earnings. The understanding comes after both said the cut-throat price competition had eaten into earnings and driven down their share price."

"Consensus was reached that nobody wins if they both keep cutting prices. Both carriers agreed to compete on quality of service and value-added services instead of low prices."

China Business Wonder No.3
LET'S ROTATE CEOs

Official announcement in China, November 2nd 2004:
CEO shifting will take place among China's telecom operators:
- Mr Wang Jianzhou CEO of China Unicom to be CEO of China Mobile
- Mr Wang Xiaochu CEO of China Mobile to be CEO of China Telecom
- Mr Chang Xiaobin CEO of China Telecom to be CEO of China Unicom

Long time ago Premier Zhu Rongji ordered probably the first rotation: banking sector. Wrongdoings had been reported and that famous rotation helped to solve them by breaking the Guanxi links. Recent years many Chinese SOEs and institutions have accelerated their internal rotation speed in order to break links.

BeijingMan aka Kippo

List of BeijingMan Postings

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TianAnMen Square, Beijing
PICTURE STORY - Buildings and views

Pictures in this post are from TianAnMen Square area, Beijing. I used Canon 20D with EF-S 10-22mm zoom and EF 70-200mm F2.8 L IS zoom. Click to enlarge.

Above-1: TianAnMen Square, Beijing. Red flags, next People's Heroes Monument, then Mao Zedong Memorial Hall.

Above-2: TianAnMen Square, Beijing. People's Heroes Monument had small repair, two persons on top of it.

Above-3: TianAnMen Square, Beijing. A small repair work on top of People's Heroes Monument.

Above-4: TianAnMen Square, Beijing. Visitors.

Above-5: TianAnMen Square, Beijing. Ice cream seller.

Above-6: TianAnMen Square, Beijing. Visitors.

Above-7: TianAnMen Square, Beijing. Rules. Click to read.

Above-8: TianAnMen Square, Beijing. Guarding the National Flag. Goose-walk show every day when flag is raised at sunrise and taken down at sundown.

Above-9: TianAnMen Square, Beijing. The National Museum is east side of People's Heroes Monument. National Museum is also known as China Revolutionary History Museum, ZhongGuo GeMing LiShi BoWuGuan.

Above-10: TianAnMen Square, Beijing. Countdown clock for Olympic Games 2008 in front of China Revolutionary History Museum. Years ago similar clock was set here for the return of Macao, or Aomen as Chinese call it.

Above-11: TianAnMen Square, Beijing. The Lamp.

Above-12: TianAnMen Square, Beijing. Rostroom with Mao's picture is at the North end of the Square. There Mao announced the birth of P.R.China on October 1st 1949.

Above-13: TianAnMen Square, Beijing. Rostroom with Mao's picture.

Above-14: TianAnMen Square, Beijing. Rostroom with Mao's picture.

Above-15: TianAnMen Square, Beijing. Logo of China, national enblem, GuoHui, on top of Rostroom building.

Above-16: TianAnMen Square, Beijing. Rostroom building, east side of it.

Above-17: TianAnMen Square, Beijing. Rostroom with Mao's picture.

Above-18: TianAnMen Square, Beijing. Mao's picture at Rostroom.

Above-19: TianAnMen Square, Beijing. A guard in front of Mao's picture at Rostroom.

Above-20: TianAnMen Square, Beijing. Corridor under Mao's picture goes through Rostroom building into Forbidden City, home of emperors.

Above-21: TianAnMen Square, Beijing. Looking towards south and TianAnMen Square from under Mao's picture. ChangAn Avenue, National Flag, People's Heroes Monument, then Mao Zedong Memorial Hall.

Above-22: TianAnMen Square, Beijing. Rostroom, a postcard picture, shot with 70-200 mm zoom.

Above-23: TianAnMen Square, Beijing. Symbols in front of Rostroom building.

Above-24: TianAnMen Square, Beijing. Millions of tourists use trillions of pixels here every year.

Above-25: TianAnMen Square, Beijing. In front of Rostroom.

Above-26: TianAnMen Square, Beijing. Traffic police platform at north-east corner of the Square.

Above-27: TianAnMen Square, Beijing. Traffic police platform at north-east corner of the Square. Background building is People's Great Hall, RenMin DaHui Tang built in 1959. I have visited there for dance shows and concerts.

Above-28: TianAnMen Square, Beijing. Eastern entrance of People's Great Hall, 12 pillars. Lamps on sides. Great Hall can take 5000 quests and show can have hundreds of dancers, singers and players flowing through it's scene.

Above-29: TianAnMen Square, Beijing. Northern entrance of People's Great Hall, RenMin DaHui Tang has similarly 12 pillars as the main, eastern entrance had.

Above-30: TianAnMen Square, Beijing. Northern entrance into People's Great Hall. Guards at the ninth pillar from right.

Above-31: TianAnMen Square, Beijing. Guards at Northern entrance of People's Great Hall. I didn't go on to steps, just friendly wavings.

Above-32: TianAnMen Square, Beijing. This lamp has over 50 light bulbs. Northern entrance of People's Great Hall.

Above-33: On my way to Peking Hotel I passed NanChiZi Gate, or South Pond Gate at ChangAn Avenue, just beside TianAnMen square. It's a park and hutong area which used to be part of imperial palace.

Above-34: TianAnMen Square is already behind. On the way to Peking Hotel's Outback restaurant, in hotel lobby.

===END===

China Business Q/A

Q: How different is it?
Education, Guanxi, face,
hierarchy, sensitivity.
Respect. Media, Internet.
Business and selling/buying
in Chinese way. Partnerships.
Communication, indirectness.
Information availability.
Mentality, values, identity.
And entrepreneurship spirit
is strong.

Q: China for Individuals?
- Young man, come East!
Skilled young individuals
come to China to learn
Mandarin. They find local
partners and establish
companies: arts, marketing,
design, dance etc. Compete
with knowledge and quality.

Q: China for SMEs?
Most SMEs lack preparation,
and resources for Guanxi.
No image/brand, low margins.
SMEs face fierce price
competition in China.
China's scale is an enabler
but foreign SMEs' success
stories are rare.

Q: China for MNCs?
Most MNCs succeed in China.
Production for export and
for mainland markets. Have
image, brand and resources.
Ancient knowledge for new
innovations. Expats needed
for finance, business and
project management.
Insiders who understand
Chinese mentality, for BD.

Q: Biz words in Mandarin?
New words are invented,
verify the accuracy!

Q: Talents available?
Yes but Confucian education system suppress innovation.
How to find real talents?

Q: Innovated in China?
Glorious past. But now
Chinese are latecomers,
have confidence problem.
Good in refining existing.
SMEs as innovation force.

Q: Indirect communication?
Smart way to communicate,
sometimes very exciting!
In families, workplaces,
meetings and negotiations.
For foreigners frustrating.

Q: Jump to assumptions?
Chinese don't speak directly
and don't take just face
value of the speech. They
are used to read between
the lines, make assumptions.
For foreigners frustrating.
If Chinese hold a strong
position In negotiation,
they can be very direct.

Q: Bad news never told?
It's difficult. Sometimes it's
a face/fear issue, a problem,
or part of hierarchy.

Q: Sharing information?
Not enough. Info is an asset,
give and expect to receive.
Access to info needs Guanxi.

Q: Personal responsibility?
Usually avoided with ifs,
buts, excuses and conditions.
Group responsibility.

Q: Problem solving ability?
Not bad, but no systematic
approach, preventive planning.

Q: Front Door or Backdoor?
Chinese are masters removing blocks by using backdoor. Most rule-of-law foreigners don't know about backdoors.

Q: Details or concepts?
Chinese are detail oriented,
abstract concepts not wanted.

Q: Proactive or reactive?
No confidence for own ideas,
reactivity rules. Proactive
attitudes driven by rewards.
Short-term, not long-term.

Q: Chinese hard working?
Often yes. But culture and
system prevents efficiency.
Result is too often just
about, not perfect.

Q: Readiness for teamwork?
Every Chinese is expected to
be head taller than others.
Trust and sharing difficult.

Q: Quality and Standards?
Often different standards.
Quality, assumed/expected
might be acceptable for
a Chinese, but might be
imperfect for a foreigner.
This is changing better.

Q: Projects in China?
Personal action points
and deadlines not wanted.
No systematic approach.
No project management.

Q: Progress by plan?
Chinese approach is step
by step. After each step
re-evaluate, then next step.
Guanxi needs flexibility,
not format or schedule.

Q: Risk taking, decisions?
Chinese have learned to
avoid mistakes and to seek
Confucian middle way. But
money is the key booster.

Q: Results oriented?
Result counts, but mainly
based on clear rewards.

Q: Guanxi in Mainland?
More than connections. It's
business art and career
enabler. Exchanging favors.
Differentiation in situation.
Learn about Guanxi but let
Chinese to master it.

Q: Is MoQi important?
Build MoQi, "silently agree"
makes working smooth.
Enables invisible support
by Chinese colleagues.

Q: Chinese and emotions?
Poker face reputation!
But very low threshold
on controlling emotions.
Critical views may cause
emotional reaction, not
followed by the reasoning.

Q: Face saving problem?
Face is stronger than facts.
To admit problem is complex
issue: pride vs loss of face.
Lack of open communication
causes confusion at work.

Q: Red Face, White Face?
Role playing is common
in Chinese negotiations.
Good cop, bad cop system.
When in very strong position,
Chinese can be very direct.

Q: Laws and rules?
Has laws but legal
protection still weak.
Find an industry expert
to clarify the practices.

Q: IPR, piracy realities?
Not a copy. Our creative
persons just have similar
experience background
as yours, said a Chinese
VP of a NASDAQ listed
lcompany, about their
100% proven copy product.
Successful products may
get copied in China.

Q: Corruption, bribery?
Fight continues but taking
bribes, kickbacks or
"consulting fees" is not
considered as a crime.
Factors: mindset, rules,
transparency, Guanxi,
auditing, approvals.

Q: Competition in China?
Fierce, not always fair,
sometimes unhealthy.
Besides price and features
it's Guanxi and Brand.
Learn Chinese sales process.
Learn what is essential in
Chinese sales presentation.
Learn Chinese image and PR.
Chinese businesses have
certain culture advantage.

Q: Sourcing in China?
Industry experts are the key
in finding quality with
rock-bottom prices,
otherwise overpay.

Q: Investing into China?
Successful Chinese companies
are eager to combine best of
China with best from West.

Q: Joint Ventures in China?
Risk of competitor creation.
Often fail but if you have
over 80%, you have a say...

Q: Foreign companies?
US/EU Chamber of Commerce
estimates: about 60-70%
of foreign companies in
China are profitable.

Q: R&D unit in China?
• Localization of products
• Chinese standards
• Research projects
• Cultural findings
• Inventions and patents
• Lower cost

Q: Mission, vision, strategy?
Careful with all business
and industry specific
words. Most Chinese are
confused with new business
words. Their exact meaning
is seldom understood and
clear in mainland China.

Q: Chinese mentality?
Provincial/SOE mentality
still very strong.
Market economy develops
rapidly but Chinese
individuals change in
slow motion. Recruit
with thought.

Q: Gamblers by nature?
Chinese are born gamblers,
have gambling mentality,
feel good when gambling.

Q: Chinese Backchannel?
If face is lost, emotions
may take control. This can
lead to badmouthing and
defaming activities, and
lose of control.

Q: Chinese bureaucracy?
Has scale, width and depth,
Might become a roadblock.
But situation is improving,
basic procedures often
available via Internet. Test
your nerves with Beijing
Tax Claim software.

Q: Chinese analysts?
Often lack global perspective,
have limited angle and
horizons, resulting
subjective view.

Q: U.S. or EU style?
China goes towards U.S.
business style. Power of
money and marketing gets
mixed with Guanxi and
privileged information.
Career, then consume,
but in Chinese way.

Economy and Markets?
China's economy mix now:
1/3 SOEs
1/3 Chinese private
1/3 Foreign investment
Change in some industries:
Imported prods vs. Domestic
in 1998: 80% vs. 20%
in 2009: 20% vs. 80%
Guanxi often has the
major role in deals.

Q: Chinese Trends 2009?
Chinese SOEs consolidate
to gain efficiency, scale
and to reduce competition
in foreign markets.

Growth continues as every
year 10-15M migrant workers
move into cities. They need
it all: housing, medical...

Online shopping will florish.
Consumers search for lowest
price from the internet.

Q: Foreigners weak point?
No doubt the Chinese way.
Chinese themselves say
about foreigners:
Even if you tell them, they
still don't understand.

HQs abroad can become
barriers as they lack
insider view and realities
about Chinese way of
business conduct.

China consultants abroad
(foreigners or Chinese)
seldom have practical
expertise about Chinese
industries.

Q: China Myths, Mysteries?
No mysteries, no myths,
but Guanxi and change.
Progress towards market
economy made. Joining WTO
released China's potential
and filled streets with cars.
(Beijing 3,6M cars in 2009)

Ask BeijingMan

QUESTIONS BY EMAIL

Q: Why so many foreign businesses fail in mainland China?
Mainland Chinese way is different in selling and buying, planning, taking risks, making decisions, assigning tasks, taking responsibility, solving problems, project management, communication, sharing info, negotiation, standards, hierarchy, sensitivity, face, respect. To succeed, learn the mainland Chinese way.

Q: What is it foreigners don't get right about business in China?

No.1
Major barrier is the culture: Chinese way how people think, have learned to behave and do. JVs, SMEs and projects fail because of misunderstanding the culture and management issues.
No.2
Language barrier leaves most foreigners an outsider.
No.3
Guanxi, the way of doing business. Your product is just 50%, your Guanxi is the other 50%. To win deals, Guanxi is needed.
No.4
Lack of understanding China’s scale and market potential of industries and product categories, and requirements. This has impact on your service, product, and credibility in Chinese eyes.
No.5
Western experience doesn’t prepare well for China. Foreigners are stuck into their lawful and rational model. Most are blinded by China's modern surface.
Your China dilemma is how to stick to principles, while needing flexibility to cope with local business environment and handle Guanxi.

Q: What is it Chinese don't get right about business abroad?
• Analysis, information services
• Consulting services
• Research and innovation
• Project management
• Branding, marketing, PR
• Process-based business
• Rational decisions
• Values

About BeijingMan

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BeijingMan - Esko Kippo
All rights reserved. Ask
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Cultural Elements

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BeijingMan

Sunday, January 11, 2009

Insight: Chinese Business Wonders

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