Finding customers abroad: Chinese firms start to take the gamble.Eight years ago, a manufacturing company from northern China set up shop in the Maryland suburbs near Washington, D.C., but tan into trouble getting visas for some of its technicians. The firm appealed to the state governor for help; after a year of promises, someone finally advised the company to get a lawyer instead of a politician. While the company eventually did bring in skilled workers, the facility was ultimately shuttered due to personnel problems.
"In China, the government runs everything, so the company appealed to the state governor for assistance with the visa problem," said Neng Liang, a management professor with the China Europe International Business School China Europe International Business School (CEIBS) is an international business school located in Shanghai, China. History
CEIBS is the only independent business school in Mainland China, a unique situation that prompted the Chinese government to designate CEIBS' in Shanghai (CEIBS CEIBS China Europe International Business School (Shanghai, China) ), who accompanied 30 Chinese executives to the U.S. to meet during a week with Wharton faculty and executives from nine companies, including Goldman Sachs The Goldman Sachs Group, Inc., or simply Goldman Sachs (NYSE: GS) is one of the world's largest global investment banks. Goldman Sachs was founded in 1869, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street. , Johnson & Johnson, Merck, American Express American Express (NYSE: AXP), sometimes known as "AmEx" or "Amex", is a diversified global financial services company, headquartered in New York City. The company is best known for its credit card, charge card and traveler's cheque businesses. , ABC News
ABC News is a division of American television and radio network ABC, owned by The Walt Disney Company. Its current president is David Westin. , Saks Fifth Avenue Saks Fifth Avenue is a chain of upscale American department stores that is owned and operated by Saks Fifth Avenue Enterprises (SFAE), a subsidiary of Saks Incorporated. It competes in the elite luxury department store market with Neiman Marcus, Bergdorf Goodman and Barneys New and Campbell's. "Learning about the way things run in the U.S. is one of the reasons this group is here."
The firm, Wangzi (Prince) Cashmere cashmere
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3. Liang. "Although it was more cost-effective to manufacture in China and export to the U.S., Wangzi used its $5 million manufacturing facility in a Maryland business park as a marketing tool." The front half of the facility was an exhibition hall and office, and the back half was used for manufacturing. "The firm ultimately folded this particular operation," Liang said. "In addition to the visa challenges, a manager left the firm, taking client information, and started his own business. Unfortunately, Wangzi knew little about how to do business in the U.S."
In recent years, U.S.-based companies have flocked to China to set up manufacturing and other operations, taking advantage of favorable labor rates that are often a fraction of those in America. Now, however, Chinese companies Chinese owned companies can be defined as enterprises within mainland China, Hong Kong, Macau and the Republic of China (Taiwan):
Indeed, a report last week in USA Today USA Today
National U.S. daily general-interest newspaper, the first of its kind. Launched in 1982 by Allen Neuharth, head of the Gannett newspaper chain, it reached a circulation of one million within a year and surpassed two million in the 1990s. said Chinese acquisitions in the U.S. rose to $3 billion last year, "more than in the previous four years combined." That investment flow, which reflects in part the Lenovo purchase, "runs counter to the huge trade surplus China enjoys at U.S. expense," the paper noted, adding that by spending domestic profits abroad, "China is able to accelerate its emergence as a global trading partner while tamping tamp
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Yet despite deals like Lenovo's, many China-based companies have a long way to go when it comes to understanding foreign markets, said Liang, pointing out, for example, that pricing and marketing strategies are still in an early stage at many companies. "When we visited Vanguard, we explored the concept of unified, company-wide branding. Ideas like that haven't penetrated many firms [in China]. The use of consultants is another concept that has yet to gain acceptance, since many Chinese companies find it odd to pay a person for intangibles like connections."
One student in the program, an executive with Nanchang-based Jiangling Motors The Jiangling Motors Corporation Limited (in Chinese: 江铃汽车公司 or 江陵汽車公司) abbreviated JMC , noted that expanding Chinese firms face a variety of internal and external challenges. "For a long time we operated in a protected environment, so our companies were not very concerned about things like customer service," said Clark Cheng, who heads the overseas expansion of Jiangling's farm and automobile sales. "But as we expand into the European, and now American, markets, we're finding that customers expect a higher level of service."
Lengthy supply chains are another obstacle that can hold back performance. "The combination of the sheer size of China, and an infrastructure that is still being developed, meant that our supply chains evolved with multiple levels between the manufacturer and the retailer," he added. "Of course each participant looks to slice off some profit, so the goods can be fairly expensive by the time they reach the consumer."
Lacking Long-term Vision
Other emerging business concepts in China include best practices in addition to field marketing research that has already been accepted in America and Europe, noted Wang Xulu, another participant and the manager of business development with Unisono, a Shanghai-based marketing and merchandising firm. "Best practices and retail customer contact are still relatively new in China," she said, adding that they are already present "in global companies like PepsiCo and Unilever. Now we are working to bring them to local Chinese companies."
As part of the educational process, the last stop of the Wharton-CEIBS program involved a stop at Harrah's Atlantic City Harrah's Atlantic City is a hotel and casino, located in the marina district of Atlantic City, New Jersey. Harrah's has three sister properties, Bally's Atlantic City, Caesars Atlantic City (which were acquired by the Caesars Entertainment merger with Harrahs) and Showboat Casino, casino hotel. Harrah's Reggie Full-wood, vice president of service strategies for Atlantic City Atlantic City, city (1990 pop. 37,986), Atlantic co., SE N.J., an Atlantic resort and convention center; settled c.1790, inc. 1854. Situated on Absecon Island, a barrier island 10 mi (16. operations, and Jenny Holaday, vice president, marketing, for Harrah's, Bally and Showboat showboat. In the early 19th cent. entertainment was brought by boat to the pioneers that settled along the western rivers (especially the Mississippi and Ohio) of the United States. At first companies only traveled by boat, performing on land. properties, spoke with the executives about the challenges of integrating corporate cultures, customer relationship management and expanding to new domestic and global markets in a highly regulated industry. The casino's parent company, Harrah's Entertainment, recently acquired Caesars Entertainment in a $9 billion deal involving cash, stock and the assumption of Caesars' debt.
The group's observations shared some underlying themes. One executive noted that effective data management and mining is crucial to a successful business, adding that the merger of R & D, technology and customer relationship management (CRM (Customer Relationship Management) An integrated information system that is used to plan, schedule and control the presales and postsales activities in an organization. ) yields an important competitive advantage.
Recalling the group's visit to pharmaceutical firms, one of the Chinese executives pointed out that instilling a focus on corporate vision and values in the workforce is an ongoing, long-term process. "The effort must be embraced by top management and must be a very visible part of a firm's activities," he said.
Likewise, another manager pointed out that many China-based companies do not have a long-term vision. "Often, they don't look beyond turning a profit from a current deal," she said. "In the U.S., a market economy drives corporate behavior. But China's two-track system--driven by the market and by a command-oriented government--hinders the development of a best-practices mentality. Also, American companies tend to be less structured and more innovative than their Chinese counterparts."
This article is reprinted with permission from firstname.lastname@example.org, an online source affiliated with the University of Pennsylvania's Wharton School of Business.
Illustrations by Eduardo Salgado Nader