2. Introduction
1 China at A Glance
1.
2. Emerging China:
Changing Dynamics
Official China
Competitive China
Consumer China
3. Shaping China
Strategy
4. Conclusion
3. China at a Glance
Goldman Sachs projected that Chinese economy will grow by
more than 11% in 2010
Growing perception Chinese govt. has hardened its attitude
toward the outside world, blaming the US for creating the global
financial crisis, & favoring local companies over foreign ones.
The govt. still prevents foreign co’s from entering core sectors
such as telecommunications & media.
The number of Pvt. Co’s in China shot up from 140,000 in 1992 to
6.6 million by the end of 2008 & number of Foreign Corporations
grew to 435,000. Of the Fortune 500 companies, about 480
already in China.
China surpassed the U.S. as the world’s largest automotive
world s
market in 2009.
The top 500 Chinese Co’s net profits exceeded 1st time to $170.6
billion in the rest half of 2009, over the top 500 American
companies, which were $98 9 billi f th t period.
i hi h $98.9 billion for that i d
4. Emerging China
Changing Dynamics
Ch i i
Official China
Old Strategy: Customers, Competitors, & the Company.
Adding one more for Strategy “Context”
Co’s who wish to enter in China must understand the govt.’s
g
priorities & modify their strategies accordingly.
Eg. GOOGLE Case :The decision to physically enter China & expose
search results to censorship drew a lot of criticism & Google has
been of two minds about the decision as it will mean
compromising Google’s Mission.
YAHOO Case : Opted for a minority stake in a joint venture with
China’s Alibaba.com as the market is dominated by Sohu.com.
China will remain a communist nation in future. The party’s 75
million members dominate govt. & society who believe
China’s development can take place only under its
leadership.
leadership
5. Emerging China
Changing Dynamics(Contd.)
Ch i i
Competitive China
China opened markets when economic reforms began. Has
World’s largest number of start-ups such as Lenovo, Haier,
Huawei, & ZTE & attracts the most foreign co’s Resulting in
g g
intense Competion & Business Opportunities
Large investments & cheap labor have propelled economic
growth in China until now.
Co’s in China will have to reduce their consumption of raw
materials, mitigate th
t i l iti t the environmental i
i t l impact of th i
t f their
operations, radically improve quality & hone their
management skills. That will make them even more
competitive.
p
6. Emerging China
Changing Dynamics(Contd.)
Ch i i
Consumer China
China’s growth created a substantial middle class. Has more
products & brands than Japan or the United States.
Chinese city population growing more than rural population.
Approx. 200 million people by 2020.
Creation of Differentiated & Multitierd Segments
8. Q1
In spite of legal restrictions
on both the nature of Few sectors in China are
corporate ownership and completely off-limits but
off limits,
the products and services, the rules can be complex.
companies must monitor E.g. Both foreign automobile
the extent to which—and co’s & foreign banks are
the pace at which—the permitted to set up f ll o ned
p fully owned
government frees industries operations in China, but the
from controls. former may hold a 50% share in
a local company, whereas the
latter may control only 25% of a
Companies should build Chinese bank’s equity.
connections (guanxi) with Chinese government will
key officials as a source of still intervene whenever it
competitive advantage.
titi d t deems it necessary.
9. Q2
Sourcing Centric & Sales
Centric Business Models
Smart co’s combine both
models as they expand.
E.g. They design some product
lines both for China’s wealthiest
consumers & for export to the
developed world, while aiming
p , g
less expensive products at a
broader range of consumers in
China’s upper-tier markets—
large, cosmopolitan cities such
g , p
as Shanghai, Beijing, &
Guangzhou
Managing multiple business
models is tough but necessary
to cash in on the opportunities
in China.
10. Q3
Anticipating
p g specific
p
changes is impossible, but
leaders should be ready to
act when opportunities or
new constraints appear
appear.
E.g. HAIER’s Executives are
fearless experimenters who are E.g. Toyota learned doing
willing to learn, launch, adapt, business in China & gained
and improve in quick bursts. greater control over the venture
The Chinese market demands than its rivals had. By 2008
managers who see things in a Toyota was China’s largest car
nonlinear fashion and can act company by revenue the
boldly when necessary. second largest by sales
11. Q4
In order to keep costs down,
p
co’s will have to integrate their
China operations with their
businesses elsewhere. By
developing products in China
p g p
and manufacturing them in
other Asian countries & vice
versa.
This will make management
more complex, but it will be
essential if these enterprises
are to remain globally
competitive.
E.g. For instance, a little more
than half of the handsets Nokia
develops in China are sold in
other countries
countries.
12. Q5
First Stage involved setting up
g g p
manufacturing facilities there,
Second involved making China
a major sourcing location.
Third co’s incorporated their
co s
China facilities into their global
manufacturing networks even
as they started building
distribution networks to reach
China’s prosperous regions.
Fourth stage co’s are making
China a key part of their value
chains.
chains This entails moving E.g.
E g By monitoring research
some operations from labs, enterprises are drawing on
headquarters to China. Chinese R&D as it matures.
Also extending their value
chains from China
13. Conclusion
China’s integration
g
with the global
economy is
increasing creating a
g g
bewildering array of
possibilities.
Latecomers can set up globally integrated
businesses from the outset, which will
transform them worldwide. In fact, that’s an
opportunity they are best placed to exploit.
