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Knowing China intimately and having a family with multiple businesses in the countries has given me an unique understanding of the business world in the country

by camz 16y ago

Knowing China intimately and having a family with multiple businesses in the countries has given me an unique understanding of the business world in the country (they own factories in southern china that produce clothing for American companies like armani exchange and RL and are constantly required to deal with the government in regards to labor, customs and etc). The main reason why every American company will fail in China is because of cultural differences. American companies lack the ability to understand the Chinese mindset and often that leads to misunderstandings that wont be easily forgiven. American companies that truly want to succeed in China need to readjust their business model. You cant bring an American company to China, you need to invest and develop organically a Chinese company that is substantially owned by an American company so that the citizenry and the state will allow and appreciate its existence. As for competition among the Chinese companies, it is often the case that developing a relationship with the government is vital. But, developing a relationship or "guanxi" is a very different concept in Asian culture compared to American culture. Giving a "red envelope" is considered a necessary sign of respect and acknowledgment of their status, but in the US its a straight out bribe. To curry favor with the people is simple, just give lots and lots of free data, products or whatever the people want. Whether that data is copyrighted, patented or otherwise. That's how baidu did it, thats how youku did it and thats how the next big thing is going to do it. China's next big wave is going to be to develop its own silicon valley of sorts because its very popular to copy American startups and put an Asian spin on the idea to create a NEW multi-billion dollar company.

PakG1 16y ago
I think it can be simpler than that. It's just about how products are made for China. Honeywell has an amazing success story in China, and I got to hear their top Asia executive this year at the APCAC 2010 Conference in Beijing, organized by the China chapter of the American Chamber of Commerce. He noted that China proved that Honeywell couldn't just waltz in with their products, localize a bit, and succeed. When they tried that approach, they got decimated by numerous copycats because Honeywell products were too expensive and too feature-rich for what China needed. He said Honeywell's Chinese copycat competitors often said, "Honeywell created the market and the demand, but we had to provide the supply." So Honeywell changed tactics and set up R&D centres in China to deeply understand why Chinese companies were buying imitation products instead of Honeywell products, and then create products that were better suited for the Chinese market. They got a lot more intimate knowledge of the market and for the first time were making major global product design decisions outside of the USA. Then with their new R&D centres, they were able to make better products at an acceptable price point to the Chinese. They dominated. Today, only a few of those copycat competitors remain and are considered a real threat by Honeywell, whereas in the past, there were almost a hundred of them. The approach was so successful, it became Honeywell's blueprint for how they want to enter all emerging markets from now on. His main point is that you can't expect an emerging market to lap up western products just because they're western. You need a hardcore local presence doing hardcore local product development, because the market needs will often be unique. Fascinating story. He's writing a book about everything he learned, and I'm definitely buying it when it gets released. I'd put the guy's name down, but I can't remember his name off-hand; have it at home in an APCAC 2010 program somewhere. No doubt local presence helps with guanxi and all that, but I do bet you that as the Chinese economy and market gets more and more sophisticated, guanxi will matter less and less compared to product and service quality.

by camz 16y ago

PakG1 16y ago

I think it can be simpler than that. It's just about how products are made for China. Honeywell has an amazing success story in China, and I got to hear their top Asia executive this year at the APCAC 2010 Conference in Beijing, organized by the China chapter of the American Chamber of Commerce. He noted that China proved that Honeywell couldn't just waltz in with their products, localize a bit, and succeed. When they tried that approach, they got decimated by numerous copycats because Honeywell products were too expensive and too feature-rich for what China needed. He said Honeywell's Chinese copycat competitors often said, "Honeywell created the market and the demand, but we had to provide the supply." So Honeywell changed tactics and set up R&D centres in China to deeply understand why Chinese companies were buying imitation products instead of Honeywell products, and then create products that were better suited for the Chinese market. They got a lot more intimate knowledge of the market and for the first time were making major global product design decisions outside of the USA. Then with their new R&D centres, they were able to make better products at an acceptable price point to the Chinese. They dominated. Today, only a few of those copycat competitors remain and are considered a real threat by Honeywell, whereas in the past, there were almost a hundred of them. The approach was so successful, it became Honeywell's blueprint for how they want to enter all emerging markets from now on. His main point is that you can't expect an emerging market to lap up western products just because they're western. You need a hardcore local presence doing hardcore local product development, because the market needs will often be unique. Fascinating story. He's writing a book about everything he learned, and I'm definitely buying it when it gets released. I'd put the guy's name down, but I can't remember his name off-hand; have it at home in an APCAC 2010 program somewhere. No doubt local presence helps with guanxi and all that, but I do bet you that as the Chinese economy and market gets more and more sophisticated, guanxi will matter less and less compared to product and service quality.