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3 No's of China.PPT


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3 No's of China.PPT

  1. 1. The 3 No’s of China Speaker: Joseph V Fabian Case Study of the “Failure to Understand the 2 Culture Business mindset” Rollins College Crummer School of Business Orlando Florida
  2. 2. Brief Background There are 3 areas in China that account for most of the country's output; Guangdong, Shanghai & Beijing. Guangdong Province • Major cities are Dong Guan, Guangzhou and Shenzhen. • Same size at Missouri, with 15 times the population - 36 Million, most of them from Western Provinces. • Produces 11%+ of China’s GDP • All areas within a 4-hour drive of each other. • Hong Kong is the busiest harbor in the world.
  3. 3. The primary motivation for the majority of the people of China is survival. Unemployment is running at 4.3% - 20% depending on the area, officially 19M but reality may be closer to 35M. Factory workers are facing forced retirement at 50. The Chinese can no longer depend on government owned factories with guaranteed jobs. Unemployment insurance for the lucky few in the ‘rich’ areas (Shanghai) is around $34 / month. They have no guaranteed social security, welfare or food stamps. They are on their own.
  4. 4. The result ? As a nation, the people are focused on survival and money they equate it to success in whatever they do. They had to quickly adopt an entrepreneurial spirit to live. Production workers in the factories are focused on making the best products. There are no personal discussions during the work hours. When there are problems, production is stopped, the problems are resolve and documented.
  5. 5. American Business • Production in the USA always plans for failure, shrinkage and fallout. • Build 1,005 to meet the order for 1,000. • Track the failures (no fault mentality). • Documentation is haphazard due to time constraints. Chinese Business • Production in China plans for success • Build what was ordered, 1,000. • Failure is personal, perfection is rewarded • Detailed documents ensure repeatability. • The company is a 24 / 7 operation since the employees live there.
  6. 6. ma yo wen ti (No Problem) In the rush for the Chinese to please the customer and build their business, almost any request is responded to with ‘ma yo wen ti’ (no problem). This plays in to the American companies’ expectations of a ‘Can Do‘ attitude. • Corporation needs cost benefits now - stock market • Mandate a move of production to China • Start production after 3 months • Approve and start shipping after 6 months • Chinese companies say ‘ma yo wen ti’
  7. 7. ma guang si (No Matter / Mind) Once the contract was signed and started, problems became apparent. • Approved parts only available in USA • Substitute parts are not tested or approved • Procurement times exceeded the delivery date • First time build at the factory, new documentation • Purchased parts did not match drawings • Reluctance of American middle managers to the move operations to China slows the process. • Ultimately the Chinese believe that all the problems lie with them, it is their responsibility ‘ma guang si ‘
  8. 8. ma bann fa (No Way !) After enormous effort by the Chinese to understand and fix the problems and meet their commitment, they reluctantly say, ‘ma bann fa’ and lose face. • But the failure is reflected back to the Americans – Unknown USA assembly techniques aka; ‘tribal knowledge’ – Defective components, poor documentation – Unrealistic production start dates – Poor product forecast – Movement of tooling was not factored in timeline – Regulatory approvals were not factored in timeline – Shipping, duty, customs delays were not factored in costs
  9. 9. Thus the 3 rules of China Operations were born Due Diligence, Due Diligence, Due Diligence The outcome of the effort was the successful transfer of production with reasonable cost savings. But it can cost careers The jobs of the Group President, VP / GM of a division, the controller and the purchasing manager. The resulting turmoil at the American company damaged the development of Quanxi (relationship) between the staff of both companies.
  10. 10. Advantages for American businesses in China • Growing university educated middle class, with 300M+ per YEAR. • Broadband Internet, satellite TV, cell phones creates a desire for more. • Huge demand for high style foreign goods available for a very limited few. Disadvantages for American’s trying to do expand into China • Dual Income families in China spend from 10 - 25 times their annual income on homes. • Disposable income cannot support imported goods. • The majority demand low cost domestic products over imports.
  11. 11. • Almost every American has an extremely limited view of China. – It is a sweat shop manufacturing country – The population is uneducated living in abject poverty – Everything produced in China is tainted and poor quality – The manufacturing companies don’t care – The country is completely repressive and the spirit of the people have been broken
  12. 12. • The reverse is closer to the truth. – Like every country, there are “sweat shops”, even in the USA. Due diligence dictates that you visit the factory, observe the people and if possible, observe the workers after normal working hours. – The majority of people are uneducated, for the last 10 years China graduated more Engineers than the entire USA graduates in all categories, 400,000+. – Chinese products are tainted and of poor quality. But quality control is our responsibility and our lack of due diligence is our fault. We have our own problems with spinach, lettuce, carrots and cars, we even have formal recall processes in place. – Chinese people do care about producing quality products and they will stop production when there is a defect!
  13. 13. It is difficult to talk about China and give the audience a true sense of reality, without showing you the contrasts. China is a conundrum. As you will see in the following slides, there is abject poverty next to unexpected opulence. A country struggling to pull themselves into the 21st Century with unexpected sights every day. But, there is a unique spirit within the people, a spirit of friendship with a burning desire to learn.
  14. 14. Shipping Container Homes 14 one room homes Largest 2 story Wal Mart in the World Opulent condominiums in Shenzhen
  15. 15. Luxury Golf Course Condo 216 Hole Championship Golf course 1 – 18 Hole Course is open 24/7
  16. 16. Delivering Acetylene on a motorcycle Chinese built Buick Shanghai Toyota Land Cruiser Police cars Modern Expressways, Dual Language
  17. 17. Even Friday nights take their toll on the working man
  18. 18. Thank You for your time, here are a few suggested Links for China Business Squire Sanders Law Offices - Searchable database with newsletters on China discussing IP and other regulations. Newsletter on issues in HK, China and Asia,they have a newsletter that comes out several times a week, Hong Kong newsletter Chinese newspaper in English