The Globalization of Chinese Companies

Contents

Acknowledgments

Preface

Chapter 1 : Reaching Out

Burning Passion

Surging Forward

The Collective Ambition

Things to Remember

Questions to Ask

What is a Truly Global Firm?

Chapter 2 : Realities and Aspirations

National Competitive Advantages

The Value of Globalization

Targeting Business Activities to Globalize

Common Pitfalls of Globalization

Stages of Globalization

From “Resource Advantage” to “Capability Advantage”

The Japanese Model

If the Japanese Can, Why Can’t We?

Beware of the Strategic Pitfall of the Japanese Model

The Paradox of “Chinese Price” and “Chinese Brand”

Know What You Want

Obstacles to Overcome

Summary

Chapter 3 : The Strategic Choices: Think Before You Jump

Profound Change

The Essence of Strategy

Globalization Strategy

The Key Questions of Globalization

Globalization Strategy Requires Candid Self-knowledge

Hidden Champions

Summary

Chapter 4 : All Roads Lead to Rome: Paths to Globalization

Choosing a Path

Organic growth

Mergers and Acquisitions

Strategic Alliances

Strategic Focus Influences Choice of Path

Global Capability Determines the Path

Self-knowledge

The Know-how of Overseas Acquisition

Learn from the Masters

Summary

Chapter 5 : People First: Building Global Competence

Organizational Capability: An Overview

Shortage of Global Talent

Starting from the Top

Fittest is Best

Preparing for the Future

Summary

Chapter 6 : Unity in Diversity: Shaping a Global Mindset

Cultural Differences: Blessing or Curse?

Cultural Challenges for Chinese Firms

Bridging Culture Gaps

Building a Global Culture

Summary

Chapter 7 : Providing the Right Support: Structuring Global Governance

Challenges of Global Governance

Common Global Structure

Global Structures Compared

Evolution of Global Structures

Designing Global Structure

To Centralize or Decentralize? A Balancing Act

Summary

Chapter 8 : China-rooted Global Outreach

Practical, confident and clear-minded

Know Your Rivals and Yourself

Improve organizational capability

Inspiration and encouragement from the management level

Appendix 1 : China National Aviation: A Comprehensive Strategy

Appendix 2 : CIMC Realizes Globalization with a National Competitive Edge

Appendix 3 : The Utilization of Overseas Resources by CIMC

Appendix 4 : ZPMC’s Global Strategy

Appendix 5 : China Mobile: Using Global Capital Resources to Build Value

Appendix 6 : Forming Strategic Alliances the Galanz Way

Appendix 7 : Trend Micro’s Hybrid Team

Appendix 8 : Talent Development in the Lenovo Group

Appendix 9 : Chinese Global Fortune 500 Companies 2008/09

Appendix 10 : Self-assessment

Appendix 11 : Action Plan

Bibliography

Index

Published in 2011 by John Wiley & Sons (Asia) Pte Ltd

2 Clementi Loop, #02-01, Singapore 129809

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as expressly permitted by law, without either the prior written permission of the Publisher, or authorization through payment of the appropriate photocopy fee to the Copyright Clearance Center. Requests for permission should be addressed to the Publisher, John Wiley & Sons (Asia) Pte Ltd, 2 Clementi Loop, #02-01, Singapore 129809, tel: 65-6463-2400, fax: 65-6463-4605, e-mail: enquiry@wiley.com.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional person should be sought.

Neither the author nor the publisher are liable for any actions prompted or caused by the information presented in this book. Any views expressed herein are those of the author and do not represent the views of the organizations they work for.

Other Wiley Editorial Offices

John Wiley & Sons, 111 River Street, Hoboken, NJ 07030, USA

John Wiley & Sons, The Atrium, Southern Gate, Chichester, West Sussex, P0198SQ, United Kingdom

John Wiley & Sons (Canada) Ltd., 5353 Dundas Street West, Suite 400, Toronto, Ontario, M9B 6HB, Canada

John Wiley & Sons Australia Ltd, 42 McDougall Street, Milton, Queensland 4064, Australia

Wiley-VCH, Boschstrasse 12, D-69469 Weinheim, Germany

Library of Congress Cataloging-in-Publication Data

ISBN 978-0-470-82878-6 (Hardcover)

ISBN 978-0-470-82880-9 (e-PDF)

ISBN 978-0-470-82879-3 (e-Mobi)

ISBN 978-0-470-82881-6 (e-Pub)

Acknowledgments

The book is based on a book first published in Chinese under the title

Special thanks go to various colleagues and members of the faculty of CEIBS who helped us make this book available in English. In particular, we would like to thank the Management Committee of CEIBS for funding this research project, and Nancy Dai, one of our core research team members, for conducting extensive interviews and analyzing the huge amount of data. We are also grateful to Victory Zeshi for undertaking additional analyses.

Thanks go to Lena Hong Ye and Chrystal Xie for translating chapters of this book, Elise Chai and Marion Park for continuous improvements on the text, and Henry Han for providing us with updated data and organizational support.

Preface

In the first half of 2010, the Chinese economy became the world’s second-largest in gross domestic product (GDP) terms, behind only that of the United States. In 2009, China also became the largest exporting nation and is striving to consolidate this position into the future. Now more than ever, with the globalization of the world economy, the game is being played on the largest potential playground.

In the last 50 years, numerous companies have entered the global market and changed the market landscape in their home countries and around the world. After World War II, U.S. firms took the lead, with European companies following soon after. In the 1970s, Japanese consumer-electronics and auto companies entered the lucrative markets of the industrialized world. In the ’80s, Korean companies followed and became serious competitors to new entrants and established players alike. Now, Chinese companies are using their competitive advantages to establish themselves as global players.

The subject of globalization, particularly for Chinese companies, contains many issues worthy of analytical research: Why do companies want globalization? How can they position themselves in the globalized economy? What paths are available to them and which paths are more suitable for specific businesses to follow? What kind of globalization fits the organization’s capabilities, and how can they create the necessary capabilities quickly and effectively?

Facing these complex issues, firms in China and around the world may easily become blinkered in their thinking; for example, seeing only the benefits of globalization while ignoring the costs. They may only see the opportunities and forget to examine the scope and strength of their capabilities. We have found that many experts and scholars indulge in cheering success and criticizing failure, but fail to provide constructive solutions. They introduce the best practices of multinational companies without providing systematic analysis and reflection.

In 2009, the number of Chinese companies listed in the Global Fortune 500 list increased from 34 to 43 (see Appendix 9), and their revenue growth was impressive. However, coupled with the gains, there were also pains that few people know about. In fact, very little is known about how China has managed to ascend to the position it occupies today. But one thing is certain: there were many hardships along the way.

The purpose of this book is to shed light on the current situation of Chinese firms and to help Chinese entrepreneurs who want to undertake the challenges of globalization. We offer a thorough analysis of the current developments in this area; help aspiring candidates to develop a systematic approach; and help them to avoid errors in their thinking by providing a “navigation map” and a set of practical tools and instruments for managing the task of globalization.

This book is designed to provide a systematic and pragmatic approach to global expansion and competition for Chinese entrepreneurs and is based on both clear frameworks and detailed case studies. We believe that the book will be of practical benefit to Chinese senior executives facing the challenges of both global expansion and competition, and to managers, scholars, and students around the world who are interested in understanding how firms in China are striving to emerge in the global arena.

At the end of the book, we provide a self-assessment questionnaire covering all of the issues raised in these pages (see Appendix 10), something that can be utilized as a practical reference to the content. Immediately following, we provide an action plan (Appendix 11) which gives the reader/manager an opportunity to assess the current situation of their company in the context of going global. This tool has already helped to focus the strategic discussion within many companies in the course of going global. It is also available through the authors in Chinese/English and they will gladly assist with the interpretation of the results.

We firmly believe that the globalization of Chinese firms in the twenty-first century will be one of the most noteworthy events in the development of the world economy, and sincerely hope that this book will be helpful in contributing toward the rise of China’s own “Sony and Samsung.”

Arthur Yeung

Katherine Xin

Waldemar Pfoertsch

Shengjun Liu

Shanghai, 2010