Frequently Asked Questions
- Does China have truly global MNC companies now?
- What does it mean to be a truly global MNC?
- Does business success in China guarantee business success overseas or globally?
- What is success?
- My company is selling to overseas customers; does that mean I am internationalizing my company?
- What does it mean to really internationalize my company and what should the CXO being doing?
- What resources are the most important for PRC CXO's to invest in? What is the cost of not investing?
- Why do US and European MNC's tend to dominate when they compete?
- What can we learn from the Korean experience?
- What can we learn from the Brazilian experience?
- What can we learn from MNC's and their CXO's?
- What can we learn from India and Indian CXO's?
- Will Indian or Chinese MNC's become truly global first?
- What are the biggest obstacles/challenges for Chinese CXO's?
- Is M/A an option for Chinese CXO's?
- Is building international sales and distribution the answer?
- What are the lessons of branding?
- For Chinese companies, to borrow from Vladimir Lenin, "What is To Be Done?"
- What are the most important key lessons when going abroad? What did your parents tell you about leaving home?
According to the China Summit of the World Economic Forum, PRC CXO's and international scholars and academics uniformly agree that they do not yet see any global MNC emerging in China yet. Chinese companies, both state owned and privately owned, operate in some overseas markets but are not considered by international economists and business groups as being truly global MNC's yet. There are no PRC companies yet that can compete in multiple industries on a global scale like GE or P&G or Walmart. The experts have stated that the emergence of the Chinese global MNC is at least one or two decades away. Why is this the case?Top
The Global MNC has the leadership and management team that possess The vision and commitment to invest and acquire the resources (capital, technology, know-how, personnel, intellectual property, external and internal human resources) to be able to compete and dominate in any market on the planet successfully and effectively. The global MNC Invests in world-class people, ideas and know-how. They do not focus primarily on the number of employees, the amount of assets owned and the level of production.
They are focused on ensuring that the entire supply chain and value chain guarantees a competitive advantage in every market they decide they wish to participate in. This statement is true for almost all leading Fortune 500 companies worldwide. The Chinese company management team that can understand, embrace and commit to approach has a chance to become a global MNC twenty years from now. For those managements that cannot commit to this idea, who will not invest in the future, to commit to acquire the world-class resources needed to compete, then such companies in reality are just local or regional companies that have some export markets and some limited brand recognition.
It is widely believed that India and Korea may produce global MNC's in the next decade while few Chinese companies have the chance to achieve this. Even Chinese companies from Taiwan and Hong Kong who have mastered worldwide supply chain and branding issues have done so only in one or two related sectors. Naturally China has a number of companies that are approaching this capability in their selected one or two sectors.Top
Success in the PRC market is clearly not a guarantee of success in any other market. The market conditions in China are so unique that many Chinese companies are not well equipped to deal linguistically, culturally or competitively in a head on toe to toe competition with their competition in other markets. Access to capital, market access know-how, legal conditions and requirements, basic communicating skills, labor conditions, brand power and operational skills are vastly different in countries outside China. These different conditions require different skill sets for management teams in non-Chinese markets and the challenges to be faced and overcome are often radically different than what is needed in the Chinese market.
Many Chinese companies do not have the resources and know-how internally to address these challenges successfully and many CXO's lack the international mentality to spend resources to invest in acquiring such management skills to guarantee success. Often Chinese company executives are using a Chinese baseline to select the human resources that could make the difference between success and failure in a market.Top
Success in the PRC market is clearly not a guarantee of success in any other market. Success can mean many different things to different groups or even divisions within a Group. The process of defining "success" is a basic pre-condition for most western MNC's and their CXO's. Few, if any, Chinese companies define success, measure success, set goals or have formal procedures to calibrate and evaluate degrees of success. The elements of success include strategic insights and the ability to implement practical solutions. Securing both of these components is critical to determining the trajectory of a company's future; if a company is missing either strategic insight or the ability to implement a practical solution, then a company not going to be the dominant competitor for people, resources, markets and profits. The way global CXO's compete for the human and other resources and information needed to insure strategic insights and implement practical solutions is vastly different than the ad hoc manner in which Chinese CXO's gather these capabilities and attributes.Top
All local or regional companies sell overseas. Selling overseas does not make a company international. That does not require that the company grow and change in order to secure the most competitive supply chain and value chain to guarantee worldwide success. This type of changes happens at the CXO level and is driven down to the lowest level employee and upward again from the frontline of the market to the board room. If it were so easy, then everyone is international since there are no borders to seas and markets. That is NOT the process of internationalizing your company. Sorry for the bad news but there is no easy substitute for true internationalization.Top
The mentality of the CXO's and senior management must be on a global scale understanding and executing on a mental level that is not just China-based. The staff must be internationally capable. The company must be prepared to compete for international talent with international compensation packages to secure, retain and utilize well the world's best talent. Corporate governance, full transparency of management, full accountability and responsibility by teams of internationally capable staff, full disclosure, international accepted accounting principles with international leadership at the top and also at the operational business levels. Being internationalized is not talk; it is about voting with one's mind, budget and business culture.Top
Internationally capable professionals who can advise and analyze information and situations for CXO's, who know Chinese as well as international business, who will have the integrity and capability to help a CXO understand the full range of options, risks and consequences are invaluable resources for MNC CXO's. The team of advisors is not a Chinese "think tank zi nang tuan." It is not a plaque from a law firm sitting on a wall from a cang nian fa lu gu wen. It is about a working long term advisor team or a project team. The Italian "counselor" to the patriarch. Not investing in this by Chinese CXO's is a risky and negligent blind spot. No MNC CXO's moves without the team of advisors. The chess moves are mapped out and planned. Information, perspectives and bridging skill sets from internationally-capable advisors who understand Chinese business culture and realities are often an Achilles heal for Chinese companies in cross-border negotiations and situations; this is true even for projects in China.Top
They concentrate and organize ideas, people, technology and know-how and human capital. They hire the best. They use the best. They buy and sell the best. They have passion for the best and to be the best in every way. Can Chinese companies learn from this? Why do they obtain and hire the best? Garbage in, garbage out. They want the best advisors and best professionals that money can buy since second best or being discounted is not acceptable to the world's leader in an industry.Top
A few years ago, the financial crisis facing Korea was headline news. The break-up of the conglomerates was daily fare. Now a few years later, Korean companies are global in IT, electronics, plastics, steel, shipping and many other sectors with companies being conglomerates and competing successfully in global markets. This success is not due only to brand development but to a fundamental re-tooling and localization process on a global scale. It means that Korean companies have localized everywhere and this has allowed them to become global everywhere. Chinese companies have largely failed to localize abroad. Consumers in North America, Taiwan, Europe and elsewhere are writing about service and quality standards that rival all leading producer nations and also compete on price. The Korean MNC's are committed to competing successfully on every level, in every sector, in every market. This is the rule and not the exception in Korea.
In China, it is the exception to the rule. Why? Is it the insularity of the Chinese corporate culture? Is it the commitment to succeed? It is the local view of the management and the staff and the processes running throughout the Korean MNC organization? Can Chinese companies change? Can your company change?Top
In the 1960's Brazil began to transform itself with massive infrastructure investment, innovation in technologies, opening up internal natural resources, growing urbanization, financial reform. Utilizing capital from abroad to invest and generate jobs, attracted foreign manufacturing capability and technology to generate exports as well as meet domestic demand, undertook massive development in energy sector to meet the needs of its domestic market growth, attempted to reduce dependency on foreign oil and energy conglomerates, focused on improving the quality of life not unlike xiao kang.Top
The CXO's of global MNC's have the vision and the resources and the advisors to compete in any market on the planet successfully and effectively. They invest in people ideas and know-how and people. They do not focus primarily on the number of employees, the amount of assets and the level of production. They are focused on ensuring that the entire supply chain and value chain guarantees them a competitive advantage in every market they decide they wish to participate in. This statement is true for almost all the top Fortune 500 companies worldwide. It is a statement that is not yet a reality for Chinese CXO's. This is a mentality and commitment problem.
The Chinese company that can understand and embrace and commit to this has a chance of becoming a global MNC. For companies with a CXO team that is incapable of grasping this idea, or that is unable to invest in the future, then such companies are doomed to be just local companies that have some export markets and maybe some local or regional brand recognition. Thus Chinese CXO's should study and learn from MNC CXO's and also the advisors and counselors of MNC CXO's.Top
Why will India's economy produce global MNC's a decade before China? Is it about language? Is it about culture? Is it about business culture? Is it about adaptability and diversity? China's insular culture, strength at home, is viewed as a possible impediment overseas. Yet overseas Chinese have succeeded in competing in worldwide markets. Can China's CXO's learn from this? Global Indian players like Tata, Infosys and others are household names globally.
Watch the horizon and see India's rise. Why? If you do not know the answer, then ask how you gather and process information and data. Your Indian competitor knows much more about you than you know about them. Does that scare you? Does it make you think? Do Indian CXO's gather more diverse information from wider sources and perspectives to be able to compare and test and analyze? Can they make mistakes in test situations rather than on the corporate battlefield?Top
Indian Groups are already complex corporate conglomerates operating and competing successfully across several sectors and in global markets. The quality of their information and their advisory teams helping their CXO's is materially superior to the limited resources available to Chinese CXO's. The use of independent directors and an army of lawyers, financial advisors and counselors help guide Indian CXO's to better decisions.Top
The obstacles faced by Chinese CXO's are the strength and depth of their culture and mentality. Chinese CXO's know what they know. Chinese CXO's desperately need support to understand what they don't know. The information and data flows related to their narrow fields they understand well. What they need help and guidance with is what the MNC CXO's also need. The MNC CXO's invest in the professional teams to get answers and deal with the issues and date and questions that the CXO's cannot understand. MNC CXO's hire lawyers, management consultants, finance advisors, M/A specialists, Intellectual property specialists. Chinese CXO's fail to do this so there are blind spots and greater risks. When a CXO has a serious medical problem, there is no reluctance to hire an appropriate physician. One finds a heart doctor for a heart problem. If a CXO is told to undergo a preventive medial program to insure a better general health condition over time, most intelligent CXO's will take the advice and not wait for a massive crisis. In business, many Chinese CXO's wait till the legal or business heart attack or crisis has happened. MNC CXO's as a regular policy and behavior pattern hire teams to smooth the operations and anticipate and address the problems in advance. Managing the business and protecting the long term interests of the company requires that the CXO shield his company from being a "white mouse". MNC's use experts. Many Chinese CXO's do not understand how to set up programs and get teams to assist. Spending the money to acquire these resources and reservoirs of know-how is legitimate company investment in the future or protecting the company. Trying to "save" the money by not taking the steps to acquire the knowledge and skills to open new or protect old opportunities, is not intelligent. In MNC's a CXO would be subject to question since making bad business decisions is a very expensive way to learn that professionals need to be hired. Mistakes cost much more money than proper investment and acquisition of professional resources. Successful MNC CXO's are surrounded by good professional advisors. Ask yourself why? Ask yourself whether this is true for your company? Ask yourself whether this is due to your mentality. Deciding to make the change is not the first step to fix this handicapped mentality. The first step is acting to make the change, not deciding to make the change since doing and deciding are not the same. Do it and put your company behind it as an organization.? Taking half the medicine doesn't make a patient well deciding to take the medicine doesn't make the patient well. Only taking the medicine and doing the entire health improvement program can make the patient well. So, why do you do it differently for your business? Is your business automatically healthy without the right professional care? Every ten years half the leading companies change. Some lose. Some win. This is life. The half that disappeared did not use the right professionals or get the right advice or make the right decisions and believed it could not happen to them. There are winners and losers in business. That is the reality of every business. Opportunities come to those that are well prepared. The more one invests and sweats in peace, the less they bleed in war. Many MNC companies believe that business is a manifestation of war. They prepare and compete very effectively. Losing or the potential of losing is not an acceptable option for MNC CXO's. Should Chinese CXO's be complacent when the competition is coming to take your customer?Top
Mergers and acquisitions, rather than "greenfield" ie building something from a greenfield starting point may save time and accelerate production. There are many complex advantages and disadvantages. One takes the positive attributes as well as the negatives of a target company. Naturally the risks and rewards of realizing the benefits of the combination turn entirely on the success of the integration of the two business cultures. Why were some Japan/US combinations successful and some spectacular failures? The key to success was not how one made a Yankee into a Japanese or a Japanese into a Yankee. Those are two impossible goals. They are also the wrong goal. The key was to make everyone work together. To integrate the teams to make new and better processes and decision-making. That change in order to succeed had to append very fast and be led from the top down through all the ranks with complete "buy in" from the teams below and above. Entrenched old ways was not the key to success. Can Chinese companies learn to be "new" and "better" with "better processes? If it is merely buying an asset and not the integration of the living tissue then the grafting will not be successful. Thus M/A can be the answer or not. Over 2/3 of the M/A's worldwide are deemed to fail to deliver the expected promises, largely due to this factor.Top
The ability to bring ones services and products to market efficiently and cost effectively to meet market demand of course is a company goal. To the extent your product and services can be tailored to markets overseas with labeling, packing, approvals, licenses, permits, relevant inspections, this has the potential, if done properly, to drop funds to the profit line for the shareholders and stakeholders of the company. Capable CXO's and management teams realize that profits and revenues do not have nationalities in the MNC world and that the CXO's must command resources and develop professional skills internally as well as externally to expand into markets and revenue generating territories in pursuit of their obligation to maximize rational profit.Top
Many MNC's have taken "brand management" as a direct target of management priority. In the consumer area, P&G and other consumer groups have massive value attached to their brand which can multiply the value of their product and service. This reality extends beyond the consumer market as well as the brand reflects the reputation and reliability of the product and service. Brand management, intellectual property protection and having legal teams to protect them and public relations teams to promote them are the most basic tools available to MNC CXO's and management teams. Almost all of the Fortune 500 companies invest in protecting this value. Culturally, in most places in the world, the infringement of intellectual property or any policy which is less than "zero tolerance" is viewed as a reflection on the entire company and its management. It is narrow illegal and unethical. Most MNC's and international partners consider any group that does not maintain a "zero tolerance" on intellectual property matters as equivalent to a drug dealer and not a suitable partner in business. If your company does not share these values, then internationally you do not speak the same language as most of the world.Top
Know yourself, know your enemy. One thousand battles, one thousand victories. Why do the MNC CXO hire the best team of professionals? Why do they hire Li Wen and Partners, Liu Shen & Associates and Pamir Law Group?Top
Look all ways when crossing the street. Hold hands with someone who does this regularly. Don't talk to strangers. Be safe and be prepared. Get help from an adult who has done it before. Listen to your parents.