Introduction1 China at A Glance1.2. Emerging China: Changing Dynamics Official China Competitive China Consumer China3. Shaping China Strategy4. Conclusion
China at a GlanceGoldman Sachs projected that Chinese economy will grow bymore than 11% in 2010Growing perception Chinese govt. has hardened its attitudetoward the outside world, blaming the US for creating the globalfinancial crisis, & favoring local companies over foreign ones.The govt. still prevents foreign co’s from entering core sectorssuch as telecommunications & media.The number of Pvt. Co’s in China shot up from 140,000 in 1992 to6.6 million by the end of 2008 & number of Foreign Corporationsgrew to 435,000. Of the Fortune 500 companies, about 480already in China.China surpassed the U.S. as the world’s largest automotive world smarket in 2009.The top 500 Chinese Co’s net profits exceeded 1st time to $170.6billion in the rest half of 2009, over the top 500 Americancompanies, which were $98 9 billi f th t period. i hi h $98.9 billion for that i d
Emerging China Changing Dynamics Ch i i Official ChinaOld Strategy: Customers, Competitors, & the Company.Adding one more for Strategy “Context”Co’s who wish to enter in China must understand the govt.’s gpriorities & 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 75million members dominate govt. & society who believeChina’s development can take place only under itsleadership.leadership
Emerging ChinaChanging 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
Emerging ChinaChanging 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
Q1In spite of legal restrictionson both the nature of Few sectors in China arecorporate ownership and completely off-limits but off limits,the products and services, the rules can be complex.companies must monitor E.g. Both foreign automobilethe extent to which—and co’s & foreign banks arethe pace at which—the permitted to set up f ll o ned p fully ownedgovernment frees industries operations in China, but thefrom controls. former may hold a 50% share in a local company, whereas the latter may control only 25% of aCompanies should build Chinese bank’s equity.connections (guanxi) with Chinese government willkey officials as a source of still intervene whenever itcompetitive advantage. titi d t deems it necessary.
Q2Sourcing Centric & SalesCentric Business ModelsSmart co’s combine bothmodels as they expand.E.g. They design some productlines both for China’s wealthiestconsumers & for export to thedeveloped world, while aiming p , gless expensive products at abroader range of consumers inChina’s upper-tier markets—large, cosmopolitan cities such g , pas Shanghai, Beijing, &GuangzhouManaging multiple businessmodels is tough but necessaryto cash in on the opportunitiesin China.
Q3Anticipating p g specific pchanges is impossible, butleaders should be ready toact when opportunities ornew constraints appear appear.E.g. HAIER’s Executives arefearless experimenters who are E.g. Toyota learned doingwilling to learn, launch, adapt, business in China & gainedand improve in quick bursts. greater control over the ventureThe Chinese market demands than its rivals had. By 2008managers who see things in a Toyota was China’s largest carnonlinear fashion and can act company by revenue theboldly when necessary. second largest by sales
Q4In order to keep costs down, pco’s will have to integrate theirChina operations with theirbusinesses elsewhere. Bydeveloping products in China p g pand manufacturing them inother Asian countries & viceversa.This will make managementmore complex, but it will beessential if these enterprisesare to remain globallycompetitive.E.g. For instance, a little morethan half of the handsets Nokiadevelops in China are sold inother countries countries.
Q5First Stage involved setting up g g pmanufacturing facilities there,Second involved making Chinaa major sourcing location.Third co’s incorporated their co sChina facilities into their globalmanufacturing networks evenas they started buildingdistribution networks to reachChina’s prosperous regions.Fourth stage co’s are makingChina a key part of their valuechains.chains This entails moving E.g. E g By monitoring researchsome operations from labs, enterprises are drawing onheadquarters to China. Chinese R&D as it matures. Also extending their value chains from China
Conclusion China’s integration gwith the globaleconomy isincreasing creating a g gbewildering array ofpossibilities.Latecomers can set up globally integratedbusinesses from the outset, which willtransform them worldwide. In fact, that’s anopportunity they are best placed to exploit.