19,99 €
Mehr erfahren.
- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Sprache: Englisch
The Innovation of Globalization – proven strategies to succeed and out-compete emerging competition
Does your company know how to compete effectively in the evolving global business arena? What tactics must your company use to overcome price discounting wars that cut into your margins? What are the strategies your new rivals incorporate that may prove more valuable to customers than the superior products you offer?
The China Factor equips Western businesses with a practical framework for competing successfully in today’s ever-changing global markets. Written by an expert in competitive strategy and global market expansion, this book is packed with insights gained through first-hand experience leading competitive programs at a high-tech multinational corporation and extensive research.
When it comes to globalization, the rules have changed—what was once nice-to-know is now need-to-know, and this book lays it out in a clear, no-nonsense style. Based on cases with over 50 countries, you will learn why a premium product, though domestically successful, may not be well received in foreign markets. You’ll also discover the critical factors that contribute to success in both emerging and established markets. Disruptive competitors are transformed from threats to examples as you learn to recognize opportunities for re-evaluation, and shift your strategy to stay ahead of the curve.
The economic rise of China and other new entrants is challenging Western companies in new ways. This book explains why, and provides actionable strategies for success in any market.
- Grow and maintain an Innovation Advantage using 5 models
- Learn from disruptors how to win your emerging markets customers
- Understand the power of politics in business
- Develop a deeper Culture IQ to expand your customer base
- Use a 5-part Strategic Framework to formulate new sales tactics
You’re already well-aware of the global threat to Western business, and endless analysis only goes so far toward a solution. You need to know how to respond, survive, and thrive, and just how to regain the competitive edge. The truth is that Western companies must change they way they do business, and push innovation beyond the product and into every aspect of every operation – they need to be innovative in how they do business abroad. The China Factor provides a clear action plan, and case studies from global leaders like Cisco, Xiaomi, and Apple with insightful strategies for changing and winning the game.
Sie lesen das E-Book in den Legimi-Apps auf:
Seitenzahl: 421
Veröffentlichungsjahr: 2016
Ähnliche
Contents
Cover
Series Page
Title Page
Copyright
Dedication
Foreword
Introduction
Section I: State of Affairs
Chapter 1: The Art of War…and Money
China Has Risen and Is Here to Stay
A Wake-Up Call for the West
A New Global Paradigm of Business
Chapter 2: East and West: The Current State of Affairs
The Western World Has Dominated with a Position of Strength
The (Perceived) Role of the East: Areas of Strength and Specialization
Chapter 3: How China Came Up the Ladder (and So Quickly)
Factors Contributing to China's Rapid Success and Growth
And Then the Shift Began…
Chapter 4: The West No Longer Rules
Melding of Positions
China Today
The West Today: What's Wrong?
But It's Not Game Over Yet for the West…
Chapter 5: Introduction to the Marketing Framework for Our Analysis
Understanding How to Position Your Market Offering
Framework for Analysis
Section II: China
Chapter 6: How the Chinese Do Business à la the 5Ps: A Brief Summary
Product (Solution and Innovation)
Price (Value-Add)
Place (Partnerships)
Promotion (Customer Relationships and Culture)
Politics
Chapter 7: Market Segmentation and Target Market Selection + China's Market Penetration Approach
Step 1: Market Segmentation
Step 2: Target Market Selection
General Barriers to Market Entry
Chapter 8: China: Product => Solution and Innovation
Product Superiority Does Not Always Win the Deal…
Sometimes It's the Free Fries and Extra Ketchup, Not the Burger: The Solution Approach
Plagiarism Is the Sincerest Form of Flattery
Pleasing the Customer: Always Say Yes to Customization
Innovation
Chapter 9: China: Price => Value-Add
Free! (Try to Beat That!)
Loss-Leader Approach as Part of Market Penetration Strategy: Discounting Till Death
Strategic Accounts: Must-Win Battles…or Buy Them
Chickens for Routers: The Barter System Is Alive and Well
Financing: Can't Afford It? No Problem!
Chapter 10: China: Place => Partnerships
How They Sell: Selling Direct versus via Partners
Partnerships and Alliances: Coopetition
Alliances
Challenges
Chapter 11: China: Promotion => Customer Relationships and Culture
Customer Relationships
Communications
Chapter 12: China: Politics => The 5th P—The Geopolitical Dimension
Politics: The Geopolitical Dimension
Nationalistic Philosophy—Venturing Out with Team China
A Partnership Approach
Countries with Resources
Ethics and Boundaries: Unfair Trade Practices
Security Concerns
Section III: The West
Chapter 13: Recommendations for the West and Application of the 5Ps
Recommendations for the West
The 5Ps of Global Marketing
Chapter 14: The West: Product => Solution and Innovation
Product Superiority Doesn't Always Win
One Size Does Not Fit All
Evolve Your Offers into Solutions: Free Fries and Extra Ketchup (Remember?)
Develop Targeted, Market-Appropriate Products
Rapid Time-to-Market
Product Development Efficiencies
Positioning of Your Product and the Message You Send
Compete Hard
Chapter 15: The West: Price => Value-Add
The Discounting Game (Don't Go There—Compete on Value)
Learn How to Position Your Premium Pricing
Sell Like a Company, Not Like a Business Unit
Get Creative and Think Holistically Early in the Negotiation
Price According to Customer's Propensity to Pay
Offer Financing Options as Differentiators
Combat Unfair Pricing
Chapter 16: The West: Place => Partnerships
Selling Direct versus through Partners—Know Your Customer's Preference
Partners Are Key and So Is Your Involvement
Place and Presence
Chapter 17: The West: Promotion => Customer Relationships and Culture
(Really) Know Your Customer by Knowing Their Culture
Know Your Competition
Know Yourself
Analyze Using the Customer Profile
Build Relationships at All Levels
Help Your Customer Get to Yes More Quickly
Practice High-Touch Customer Relations
Adopt a Longer-Term View and Approach
Chapter 18: The West: Politics => The Geopolitical Dimension
Using the Corporate Government Affairs (GA) Group in Your Company
Government Regulatory Barriers That Hinder Competitiveness Overseas
The U.S. Department of Commerce (or Your Country's Equivalent) Is There to Help You
Fair Trade Is in the Emerging Entrants' Best Interest, Too
Chapter 19: Innovation Models: West and East
Introduction
Is the United States Losing Its Innovation Edge?
Being Strategic about Innovation
Innovation Models
Traditional/Sustaining Innovation
Disruptive Innovation
Market-Targeted Innovation for Emerging Markets (Reverse Innovation)
Business Model Innovation
Process/Supply Chain Innovation
Chapter 20: The West: Positioning
The 5Ps of Global Marketing Framework
So, How Do You Compete (in Global Markets with Emerging Entrants)?
Value-Selling
Get Started!
Section IV: Case Studies
Chapter 21: Frenemies: If You Can't Beat Them, Join Them
CASE STUDY: CISCO
Product => Solution and Innovation
Price => Value-Add
Place => Partnerships
Coopetition Outcomes: Playing in Each Other's Sandboxes
Promotion => Customer Relationships and Culture
Politics
CASE STUDY: XIAOMI
Product => Solution and Innovation
Price => Value-Add
Place => Partnerships
Promotion => Customer Relationships and Culture
Politics
Cross-Pollination Innovation
Global Expansion
Disruptive Innovation Approach
CASE STUDY: Pinnacle Engines
Product => Solution and Innovation
Price => Value-Add
Place => Partnerships
Promotion => Customer Relationships and Culture
Politics
Conclusion
Acknowledgments
Appendix A
Appendix B
Bibliography and Further Reading
About the Author
Index
End User License Agreement
List of Tables
List of Illustrations
Figure 13.1
Figure 20.1
Figure I.1
Figure I.2
Guide
Cover
Table of Contents
Begin Reading
Part 1
Chapter 1
Pages
i
ii
iii
iv
v
viii
xi
xii
xiii
xiv
xv
xvi
xvii
xviii
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
253
254
255
256
257
258
259
260
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
Praise for The China Factor
“The China Factor is right on the mark. It addresses a real need, one that very few others are tackling—the action that US and other Western-based companies can take in response to the China challenge. Global competitiveness is a huge problem for the West and companies are ill-prepared. The China Factor goes beyond what other books do, providing an important, insightful, and practical prescription on how companies can shift their strategy and be more successful when competing in, and with, emerging countries.”
—Ken Wilcox, former CEO and chairman, current Chairman Emeritus, Silicon Valley Bank
“High tech companies need to shift their innovation approach when going global and The China Factor is the ultimate guide to sustainable success in Emerging Markets. Innovation does not apply solely to products but also to business strategies, especially when looking at international expansion.”
—Jean-Baptiste Su, technology columnist, Forbes
“In The China Factor, Amy Karam discusses how the way we innovate has changed and evolved. It can no longer be done in isolation but involves going beyond international borders. As she points out, learning about the culture and uniqueness of new markets and tapping into what has worked (and what has not!) in other regions is critical to success.”
—Sangeeta Anand, SVP, Product Management and Marketing, F5 Networks
“For today's global strategists, Amy Karam's book, The China Factor, offers compelling insights into how to effectively win in the 21st century. Through detailed examples and case studies, she exposes the shortcomings of traditional Western approaches to competition and highlights the new strategic thinking being practiced in China and spreading into the rest of the developing world. In addition to the traditional 4 Ps of marketing, she explores a fifth P, the P called politics, which US-based organizations need to recognize, leverage, and occasionally counteract in order to be competitive. The China Factor blazes a new trail for business to follow in striving to achieve global success.”
—Dr. Juan P. Montermoso, professor of Practice in Marketing, Leavey School of Business, Santa Clara University
“Amy was directly involved in developing a sales strategy customer by customer for several years. She lived and breathed the battle of protecting existing accounts, or winning new accounts with a competitor whose price was a fraction of Cisco's.”
—Tam Dell'Oro, CEO of Dell'Oro Group
“I loved this book. The China Factor will provide you specific guidance and invaluable insights for expanding your business and achieving success globally.”
—Nanette J. Bulger, CEO, executive director of the Strategic andCompetitive Intelligence Professionals (SCIP) Association
“Awesome. I loved the way Amy goes from the strategic to the tactical but then offers practical templates for doing business successfully in China and in other emerging markets. She explains Chinese thinking and business strategies in an insightful and meaningful way.”
—Fred Schwien, former executive secretary of the U.S. Department of Commerce and Boeing Executive
“The China Factor offers a fascinating look into what it takes to successfully compete in Emerging Markets. She really gets Emerging Markets and the long-term investment that needs to take place in these regions, as she has been a leading architect of our sales success in Emerging Africa.
“This work is a compelling guide into the complexity and the great rewards of doing business in Emerging Markets—and for those who are looking for new growth opportunities for both products as well as services.
“Emerging Markets are not for the faint of heart, but the rewards will be great for any company that is really going to be serious about expanding into emerging markets. The China Factor is the ultimate guide into sustainable success in Emerging Markets.”
—Anthony R. Vonsée, former managing director sales, Emerging Africa, Cisco Systems
“Amy Karam is a visionary writer! As a global mentor, not only am I going to use it myself as a reference, but will also suggest it to start-ups to use it as a guide! She has eloquently highlighted how to harness competition, partnerships and cross-cultural learning to stimulate innovation & business success.”
—Hulya Koc, serial entrepreneur, Angel Investor & Global Mentor, co-founder of Keiretsu Forum Istanbul Chapter
The China Factor
Leveraging Emerging Business Strategies to Compete, Grow, and Win in the New Global Economy
Amy Karam
Cover image: © Getty Images [Background: Shutterworx; Globe: mstay] Cover design: Paul McCarthy
Copyright © 2016 by Amy Karam. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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 permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at www.wiley.com/go/permissions.
Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with the respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor the author shall be liable for damages arising herefrom.
For general information about our other products and services, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002.
Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.
Library of Congress Cataloging-in-Publication Data:
Names: Karam, Amy, author.
Title: The China factor : leveraging emerging business strategies to compete, grow, and win in the new global economy / Amy Karam.
Description: Hoboken, New Jersey: John Wiley & Sons, Inc., [2016] | Includes bibliographical references and index.
Identifiers: LCCN 2016011574 | ISBN 9781119274018 (cloth) | ISBN 9781119274148 (ebk) |
ISBN 9781119274247
Subjects: LCSH: Export marketing–China. | Export marketing–Western countries. | International business enterprises–China. | International business enterprises–Western countries. | Strategic planning. | Competition, International. | Developing countries–Commerce.
Classification: LCC HF1416.6.C6 K37 2016 | DDC 658.8/40951–dc23 LC record available at https://lccn.loc.gov/2016011574
Dedication
To Sienna, Talia, Aiden, Jake, and CristianoMay you always “breathe a new fire” and thrivein this ever-changing world.
Foreword
Just a few weeks ago, we held a special event at the Rosewood Hotel, in the heart of Silicon Valley: “Innovation 2015: From China to Silicon Valley, Expert Analysis and Inside Look into the Future of Innovation in China and the U.S.” Conferences with titles like this one, unthinkable only a decade ago, are becoming commonplace. The course of events has seemingly catapulted us into a new era. Similar to the shifting of tectonic plates, the old world order is being ground down and is gradually giving way to a new one. The developing world, until only recently viewed as incapable of the kind of innovation that would enable a nation to gain prominence, is rising; and at the forefront is China.
There are now stronger players than ever before from developing countries. The era in which British Petroleum, aided by the CIA, can depose a Mossadegh and replace him with a Shah in order to head off nationalization is gone forever. Instead, the economies of the developing world are beginning to produce global companies themselves, which are challenging the hegemony of the Western giants. China, and eventually the entire so-called developing world, is no longer exclusively on the receiving end of Western policy and competitive action. China in particular is now beginning, in some areas, to dictate policy to the West.
Not all aspects of this ultimately massive shift are proceeding at the same rate. This is why we are experiencing what many of us perceive as a kind of schizophrenia on the part of China. While I was in China for over four years, leading the creation of a joint banking venture between Shanghai Pudong Development Bank and Silicon Valley Bank, I experienced this firsthand.
On the one hand, China appears, as a nation, to be suffering from an immense inferiority complex. Underlying this complex is China's belief that it has suffered “150 years of humiliation” at the hands of the West. According to this view of history, beginning with England's forced entry into China's markets, now known as the Opium Wars of the 1840s, through Japan's brutal invasions of Northeastern China, Shanghai, and Nanjing in the 1930s, and continuing with the U.S. “invasion” of Korea in the 1950s, the West has systematically repressed China. This view is captured in the words on the plaque at the entrance to “The Road to Rejuvenation”—a permanent exhibit at the National Museum of History in Beijing:
After Britain started the Opium War in 1840, the imperial powers descended on China like a swarm of bees, looting our treasures and killing our people.…Achieving national independence and liberation of the people and making the country strong and prosperous and the people happy became the two great historic missions of the Chinese nation throughout its modern history.
This view of history provides the justification for the uneven playing field that many Western companies find today when they seek to do business in China and when they compete with the Chinese in global markets. The most lucid defense of this uneven playing field that we have seen can be found in a book by a Korean economist, Ha-Joon Chang, entitled Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, in which the author argues that Western countries owe it to developing countries to allow them to create slanted playing fields until they can catch up with their Western competitors. According to this view, the West is superior, the East is inferior, and that is why the West should give the East a hall pass on adhering to the standards of the WTO.
At the same time, China often appears to be suffering from a superiority complex. The other aspect of the myth cited is that since the beginning of time until the British invasions in the 1840s, China was the most advanced country in the world, and therefore now deserves to return to that, its original status. The desire to document this truth through great works can be seen in the colossal infrastructure projects. In just one city—Shanghai—China has produced three remarkable feats of infrastructure development in the past 10 years: the deep-water port, capable of hosting larger ships than literally any port in the United States today; the “Maglev,” a magnetic levitation train, far more advanced than any train in the United States; and the recently completed Shanghai Tower, one of the tallest buildings in the world. These are all intended as proof statements: China is indeed superior to the West. Equally symbolic of China's rise is the newly established Asian Investment Bank, an Eastern counterpart to the World Bank, only this time led by China, and with the mission ultimately to be far larger and better than its Western precursor.
These tectonic shifts have been made possible only by corresponding shifts in the Chinese economic model. Since the demise of Mao and the onset of capitalism as introduced by Deng Xiaoping, China has shifted from more or less true socialism to “state capitalism,” which is decidedly un-socialistic. At the same time, and somewhat ironically, the United States has shifted from “private capitalism” with elements of socialism, to private capitalism with strong elements of socialism. Our Medicare and Social Security systems are, on a per capita basis, the most expensive in the world today. Ironically, one could argue that they are being financed in significant measure by China. Put simply: We buy vast quantities of inexpensive goods at Walmart, most of which we import from China; China builds up a huge trade surplus, which it then invests in U.S. Treasuries; and the United States uses those ever increasing borrowings to finance our socialist system, namely Medicare and Social Security.
Against this backdrop of two superpowers, almost perversely economically intertwined, highly ambivalent in their respective views of each other, Western companies come to this leader of the developing world looking for opportunities for growth. The ambivalence continues. On the one hand, Westerners are amazed at the enormous infrastructure projects, but on the other hand, they are frustrated by the poor air quality, the systematic obstruction of the Internet, the insidious corruption, and the seemingly intentional mysteriousness of the political system.
Once they get past these initial impressions and settle into the routine of trying to do business, they will face the reality of doing business in today's China. It turns out that James McGregor, the author of One Billion Customers, meant his title to be ironic. Although the American Chamber of Commerce in Shanghai, as well as McKinsey, will continue to publish reports suggesting that most Western companies in China are doing very well (some actually are), the stories that get told around the tables at the Camel (a local bar in Shanghai frequented by the trailing spouses of Western expats) and around the conference table at the semiannual meetings of The Conference Board (an international association of multinationals with a branch in Beijing) reveal a different truth. Westerners also experience similar challenges with the Chinese when they are doing business in other countries.
Some of the reasons why these Western companies complain are fairly obvious. IP theft continues to be a serious and ongoing problem. Contracts seem meaningless, in that the Chinese attempt to renegotiate any time they feel that their leverage has improved. Or, worse yet, they frequently appear in the first place to pay no attention to often heavily negotiated contracts. Financial statements are unreliable, and there are often different versions for different constituencies. Business ethics are at best different, and at worst wanting. The Chinese seem to place more value on relationships that on product quality; and Westerners, who by definition don't have preexisting relationships with indigenous entities, naively expect that product quality will carry the day for them. Even when preexisting relationships are not the driving focus, the Chinese seem to value speed and price more than product quality; and both speed and price favor Chinese companies, as Chinese control supply chains (speed) and Chinese competitors are often subsidized (price). Western innovators focus on product and product quality; Chinese innovators focus on business models and distribution systems.
What surprises Westerners most is the extent to which the Chinese government is involved in business—within China and outside of China. There is not a substantive difference between business people and government officials; they are often one and the same. The government not only regulates business, it actually does business as well.
A classic example of how this often works would be that of Gamesa, a Spanish wind turbine company that came to China well over a decade ago. Initially, Gamesa captured a large part of the Chinese market. But then the Chinese government forced it to use local suppliers. Gamesa, in its attempt to avoid creating a local competitor, divided its product into a series of subsystems and farmed them out separately to individual local suppliers, teaching each supplier only the portion of the technology necessary to the production of the individual subsystem that had been assigned to it. Of course, in time these individual suppliers banded together and created a Chinese competitor, with financial support from the government. This Chinese competitor recaptured a large part of Gamesa's market share in China for “China, Inc.,” and it proceeded to compete against Gamesa globally as well. Here we see the modern application of The Art of War in the economic sphere.
In most western countries, Gamesa would have gone to court. That would not have worked in China. The reason should be obvious: The same Party that engineered the entire scheme controls the courts as well. Further, the Spanish government could have registered its discontent, but it is unlikely that doing so would have made a difference.
Western companies cannot change the circumstances described here. Neither can the governments of the countries behind these Western companies, even if they are so inclined. However, they can change their own approach to doing business in China as well as in the greater developing world.
First and foremost, they can recognize the situation for what it is, and they can begin to speak openly about it among themselves. At so many of the conferences we attend, pretense reigns. Western companies talk about their successes, but seldom about the obstacles they face and the setbacks they endure.
In addition, Western companies need to stop resting on their laurels. The doctrine of American exceptionalism has clouded our view of reality. The world has changed. In their own way, the countries of the developing world, first among them China, are exceptional as well, and bring different strengths to the table. Unless and until we recognize that, and start talking about it realistically, progress will be slow, if not nonexistent. Of course, Western companies often have significant advantages over their Eastern counterparts, the first and foremost of which is product quality and innovation. However, they often lose the race in the developing world, product quality notwithstanding.
Western companies need to understand their Eastern competitors' strengths as well as their shortcomings, and they need to understand their own as well. Only then can they begin to address their competitors' strengths and their own shortcomings in ways that will enable them to compete more effectively. This book describes exactly what those strengths and shortcomings are and what Western companies can do to address them and to become more successful in global markets.
So, what can Western companies do to compete?
In The China Factor, Amy Karam does an excellent job of providing very practical answers to this question. Highlights, with which I particularly concur given my experience:
Western companies can emphasize their strengths. Often as not, their products are technologically superior. And, although less relationship-oriented, they are often much more professional in the way they conduct their business.
Western companies can copy the strengths of their emerging competitors. Yes, they can learn from China! They can try to be less risk averse, faster, more high touch, longer term, and more and better localized, with respect to
all
aspects of localization.
Western multinationals tend not to want to build products for a specific country or geography. Instead, they want to take a product created for the American or European market and then localize it in Asia. This approach does
not
enable success.
Western companies should choose the expats they send over very carefully, on the basis of seniority and experience, emotional IQ, resilience, open-mindedness, intellectual curiosity, respectfulness, and gregariousness. Expats should be abroad for longer rather than shorter tours. It takes at least three to four years just to begin to understand the local culture, meet a few important key contacts, and learn how to maneuver in the new environment. And they should have a solid repatriation plan in order to capitalize and grow from their valuable studies.
Western companies should take action in the event that their competitors engage in unfair trade practices. They should first attempt to deal with the matter themselves, respectfully and behind closed doors. To the extent that this does not bring the desired result, they need to seek help from others, meaning either their own government or the WTO. Also, U.S. citizens in particular, who are not inclined to rely on the government for help, need start leveraging whatever assistance may be available to them in Washington. It is ridiculous for American business to lobby against the Ex-Im bank, as they have, and at the same time complain that Chinese companies receive financial support from their own government.
Western companies need to develop the right mind-set, if they wish to succeed in their competition against companies from the developing world. They need to think “leverage” rather than “contract” or “fairness.” The need to think “co-opetition” rather than pure “competition.” And they need to focus on clients rather than risk avoidance.
Above all, we need to resist the temptation to rest on our laurels, to rely on the old saw that the “Chinese can't innovate, they can only copy.” Our sense of exceptionalism must be replaced with an even keener sense of paranoia. The developing world, led by China, is rising and its rise will continue. Our “pivot to Asia” needs to be more economic and less military. Our mental models need to evolve. We need to become friends rather than enemies, but this friendship will have to be based as much on leverage as it is on affection. And, in any case, we have to behave in a way that will result in benefit to both sides; we have to demand that the other side do so as well.
It is important to remember—and Amy Karam makes this point very well—that the business relationship between China and the United States is not limited to the geography of the two countries. As China “goes global,” Chinese companies will bring their strengths—and weaknesses—into the global arena. U.S. and other Western companies will be competing in markets they have traditionally dominated, and they must adapt—or pay the price.
Again, in the developing world, and particularly to the extent that it is to be led by China, leverage is king: “Speak softly and carry a big stick,” knowing the other side intends to do so as well. The world has changed, and the way we deal with China has to change along with it.
—Ken Wilcox
Former CEO and chairman, current Chairman Emeritus, Silicon Valley Bank
Introduction
We are in Kuala Lumpur, Malaysia, at a training session for the Asia-Pacific sales team. Despite the long flight from California I'm excited to be there, because an integral part of my role is getting as close to the sales teams as possible. The regional teams also appreciate visitors from corporate headquarters because the visits underscore the importance of the area to the larger business. My objectives are twofold: to gather competitive intelligence and to understand the challenges of this region's sales teams and the support they need from the company in order to be more successful.
We were there to learn together—after all, if we were going to get smart about competing with the Chinese, understanding the principles and practices of their strategy was essential. Although this was the Asia team and it was well versed in Eastern business culture, Western business practices were still the standard mode of operation because we worked for a U.S.-based company.
Our guest speaker was an eccentric Chinese professor who lectured us on The Art of War by Sun Tzu. He was fascinating. Unusually tall even by Caucasian standards, he was heavyset and commanding, both in his physical presence and in his persona. He had a colorful personality and spoke with flair, with an unsubtle confidence that bordered on arrogance. His disposition may have been fueled by the fact that professors or “knowledgeable ones” are especially revered in Chinese culture. His fingers were covered with ornate rings adorned with large gems—it was clear that he wanted to make a statement proclaiming his boldness and stature.
I discovered that this fascination was mutual. He wondered how such an important, top-secret competitive-intelligence role at corporate headquarters could be awarded to a woman who didn't remotely look Chinese or speak the language. How competent a spy (his word for me) could she really be? He inquired about my mandate and about our strategy. In a land where information is currency, literally and figuratively, I politely replied that I wouldn't be a very good spy if I answered his questions. I suppose I was practicing the Art of War principle of “keeping them guessing.”
Where Is This Book Coming From?
The China Factor offers Western companies actionable business strategies and competitive tactics to succeed in their global expansion, while encountering emerging competitors like those from China. This book is based on my first-hand experience at a renowned high-technology multinational, Cisco Systems, where I was the global lead for a CEO-sponsored competitive sales support program. I was tapped for the role due to my persistent proposals to executive management on the importance of concertedly pursuing emerging markets. This passion and conviction around the exponential growth possibilities of emerging markets grew stronger over years of research and analysis, starting with my graduate studies in international business and continuing through my practical experience in the high-tech industry.
The essence of my role as the corporate leader of this program was to assist sales teams worldwide to win strategic deals when challenged by a primary Chinese competitor. These deals were escalated to our program office at Cisco's corporate headquarters when they were in jeopardy and salespeople could not address issues at the regional level. If a team had challenges from a company such as Huawei, whether that company was competing with us in Belgium, Dubai, or Kenya, we brought the resources and know-how to the table and figured out how to save the deal.
Another primary part of my role involved proactively advising and training sales teams in all regions on a new way of selling and positioning. In so doing, we could shift our strategy and become more knowledgeable about doing business differently with emerging competitors and in new market environments.
The mandate was large, the resourcing was thin, and the learning was exponential—across the entire organization and up to the executive levels. This was a type of competition that we had not experienced before—at least not to this extent. We soon learned that we needed to do business differently—significantly differently—in order to be more successful globally, particularly in emerging markets. The power of understanding cultures, the impact of politics on business, the urgency of establishing a value-selling defense, and the need for new solutions and new innovation practices were just a few of the discoveries and evolutions. One function at a time, the innovation of our new approach to global business began, as we defended and grew approximately $750 million per year in strategic deals across more than 50 countries.
I subsequently created my consultancy practice as I felt compelled to share these new ways of accomplishing global business success, which involved being more innovative in our approach, evolving our sales strategies, and rallying the organization to adapt and change. The interdependency of developed and emerging economies is stronger than ever before and there is no escaping this new reality. China sits in its center and other emerging countries are following.
Time has passed and my passion for this topic continues. However, I no longer want to “keep others guessing”—instead, I want to share what I've learned in the interest of helping other companies compete effectively in this new global landscape.
And so the story begins….
Macroeconomics and the Interdependency of Nations
Like it or not, you have no choice but to figure out how to position your business in light of the changes.
—Ram Charan, Global Tilt
My small story leads into the bigger macro story, and it's one that businesses need to be more knowledgeable about, because failure lurks where understanding is lacking. China's role and identity have been transformed profoundly into a newly resurrected powerhouse that is challenging long-existing rules of competition. International business dynamics have shifted and changed in a significant way.
The Chinese stock market crash in the summer of 2015 and the uncertainty it created as it shook the United States and other stock markets was proof of how intertwined the world is today. Headlines like “Global fears about China's economic slowdown are shaking stock markets around the world” and “World markets plunge as China stocks crash” reinforce this precept. It is no longer us versus them. Of necessity, we must build on each other; there is an interdependence that cannot be denied. Past successes in international trade and historical economic strength aren't always indicators of the future. It's crucial that we no longer separate politics from business or ignore how a country's culture affects business. We're going to delve deeply into those issues in this book.
The interdependency of nations—developed markets and emerging markets—exists on many levels, whether looked at through the lens of a demand-and-supply equation (manufacturers versus consumers), a trade balance discussion, or stock market movers.
As dramatic as it sounds, there is a new global paradigm: Western companies cannot simply recycle their domestic strategies in emerging markets and trust that they will succeed. China has redefined the competitive landscape and is here to stay as a formidable global player and competitor to Western companies. Both sides need to better understand the other and the methods by which they succeed in business—and thus far, China has been more zealous than the West on this learning front.
For Western companies, knowing how to compete within this new environment is no longer a nice-to-know but a need-to-know. These are survival issues, not merely strategies. Emerging markets have become critical targets—for existing and aspiring multinationals—and learning how to play in a new and larger sandbox with diverse participants and different rules is imperative. According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2014, foreign direct investment (FDI) in developing economies reached a new high of $778 billion in that year, and $108 billion of FDI went to transition economies, such as China and the former Soviet Union (see Figure I.1). Developing and transition economies now constitute half of the top 20 economies in terms of FDI inflows.
Figure I.1 FDI Inflows, Global and by Group of Economies, 1995–2013, and Projections, 2014–2016, in Billions of Dollars
Source:UNCTAD World Investment Report 2014: Investing in the SDGs: An Action Plan, xiii.
Cross-cultural understanding of your competitors, as well as your customers, is paramount to success in your global expansion efforts. The strength of relationships with customers in emerging markets will often trump product quality or company brand status. Traditional advantages, such as innovation and product superiority, are no longer enough to win business in international markets—particularly in emerging markets, where China is now a big player. Flying into an emerging-market country, say in Africa, for a few days of meetings, then doing a 24-hour safari and heading back home does not resonate well with emerging-market locals.
It is important to note that we are not only talking about Western companies knowing how to do business in emerging markets—it has become much bigger than that. It is also about Western companies encountering emerging competitors in developed markets; their home turf now has new foreign players that use different tactics. For example, foreign direct investment (FDI) outflows by emerging economies surged in 2014, accounting for 39% of total global FDI, according to figures compiled by the Geneva-based UNCTAD. And that surge was driven almost entirely by Asian investors, who also overtook North America and Europe as the world's biggest regional source of foreign direct investment.1
Go Global, Be Global, Know Global
California is becoming the east coast of Asia and Asia is becoming the west coast of California and Silicon Valley is in the center of it all.
—Comment made at Churchill Club presentation with guest speaker Michelle K. Lee, Undersecretary of Commerce for Intellectual Property
Emerging markets are no longer a novelty pursuit for companies, as they often have been in the past. A key theme of this book is that going global and being global is a must-do for corporations. A report by Franklin Templeton Investments, Nov. 13, 2015, confidently concurs, saying, “In our view…emerging markets simply can't be ignored. They are a significant part of the global economy today in terms of world land mass, population, gross domestic product (GDP) and equity market capitalization.” See Figure I.2.
Figure I.2 Emerging Markets Can't Be Ignored
Source: Economist Intelligence Unit; Consensus Economics, Sept 30, 2015.
Further adding to the shift toward emerging markets are younger generations who are seeking careers with a greater sense of purpose and impact. Millenials are demanding programs from universities specific to emerging markets, and the likes of MIT and NYU are responding.
Global leaders from Silicon Valley and organizations like 500 Startups are leading the charge in this new view that emerging markets aren't areas to simply dabble in and that they are the dynamic source of the next growth wave. Later in the book, we analyze Apple CEO Tim Cook's emerging-markets strategy and highlight how Mark Zuckerberg, the founder of Facebook, makes emerging markets a priority.
The lines continue to blur between competitors and collaborators, producing a hybrid strategy that we call coopetition. Rivals need access to each other's markets as well as their respective areas of expertise in order to grow and accelerate time-to-market at an exponential pace. China and the United States, the East and the West, are becoming more intertwined and are capitalizing on each other's strengths in order to expand in new ways and into new territories.
This dynamic requires Western companies to revisit their sales and marketing strategies and reposition themselves in order to meet new types of customer demands, compete more effectively with up-and-coming competitors, and hopefully avoid some of the competitive losses of recent years. For example, the U.S. solar industry was decimated when the Chinese came in and undercut U.S. suppliers. And although the Chinese steel industry had neither economies of scale nor a technological edge, steel from China has been selling for 25 percent less than U.S. and European steel. Similarly, in spite of the fact that China has one of the smallest areas of forest per capita, China has become the world's largest paper producer, selling at a substantial discount compared to U.S. and European producers.
The Power of Politics in Business
How do you navigate the political systems in other countries (and sometimes in your own) to achieve success? Politics and industry are more tightly intertwined than ever. The power of politics in the global business environment, particularly in emerging markets, cannot be overstated. The West has not been a strong performer in this area, nor has it realized until recently how significant a role politics plays in business, the repercussions of playing incorrectly, and the losses from not playing at all. The East, on the other hand, is very savvy in this domain and has quickly taught the West how it is done during its disruptive growth and ascent.
The Chinese have been very astute in negotiating trade agreements with countries en masse, as China Inc. Huawei, the Chinese telecommunications giant, was one benefactor of such government and political support, as they grew exponentially in the global marketplace for over a decade. This was not only achieved by initially undercutting its rivals on price—sometimes to the point where complaints were raised to the World Trade Organization—but also purportedly by financing their customers' purchases with government subsidies. This is the kind of politics-in-business tactic we'll look at throughout the book.
Some Silicon Valley companies have taken hits in China because of politics, while others have taken certain actions because of it: Google's decision to exit China due to the government's insistence on censorship, for example, not only impacted the search company, but also affected 1.4 billion Chinese end users and all visiting foreigners who were denied access to its service. The ripple effect of political decisions can be extensive.
Edward Snowden's revelation that the United States was spying on China resulted in further protectionist actions by the Chinese government, which shut out U.S. companies from the massive China market. However, the resiliency and persistence of U.S. companies continues, as innovators find creative and collaborative ways around the barriers. Hewlett Packard (HP), not wanting to forgo the significant revenue potential of the Chinese market, agreed in the spring of 2015 to give 51 percent of their Chinese server business to a Chinese partner as a concession, in order to maintain access to this market. Says the CEO of HP, Meg Whitman, “HP is making a bold move to win in today's China.”
Cisco also understands well the necessity of being tenacious despite political hurdles and the need to swim in the tricky political waters of the East. It established a joint venture with Inspur in China in the fall of 2015 and is boldly taking a collaborative, local partnership approach in order to further grow its business in China. This is another example of coopetition, a concept and practice that we'll look at further in the book. In coopetition, business competitors collaborate or establish practical alliances and even partnerships with the intention of mutually beneficial results. These alliances might be for a single venture or for project-to-project joint efforts, but regardless—the old competitive rules don't apply.
And at the macro level of coopetition, the United States and China signed an agreement during President Xi Jinping's U.S. visit in October 2015 that neither country would support online espionage. U.S. president Barack Obama said he had reached a “common understanding” with his Chinese counterpart, President Xi, that both sides would not “conduct or knowingly support cyber-enabled theft of intellectual property,” including trade secrets or other confidential information that could be used for commercial advantage.
The Innovation Advantage
An enduring maxim throughout history is the wisdom of learning from the competition. The best U.S. corporations evolve and survive when competition forces them to win in a new environment.…The logical place to start, then, is to understand the strategies of the strongest competitor and then to customize those ideas to fit one's unique makeup and situation.
—Ann Lee, What the U.S. Can Learn from China
Hard lessons are telling us that U.S. and Western competitiveness is in jeopardy. The West needs to retain its innovation advantage by evolving its approach to innovation in response to this new global economy.
We'll analyze the strengths of the West and of China, and the areas of growth for each, in Chapters 1 through 4 of this book. We look at the roles each has played in the global economy in the past, and the journey China has taken to reemerge as the great power it is today. Despite the strengths of and the challenges faced by each side, the bottom line is that the West's innovation advantage is the coveted prize. The Chinese and other emerging challengers are seeking this unique and differentiating capability, which is also sometimes called disruptive entrepreneurialism.
The Chinese are becoming innovative at being innovative. In their striving to acquire this skill, they are in effect creating new innovation models by leveraging their traditional strengths (watching, learning, and emulating) and applying grass-roots market demand variables to create new solutions. They are taking the best from the West and adding their own flavor by capitalizing on their local differentiators. This illustrates our current environment of the interdependency of nations, which learn from each other to grow. More on this in Chapter 19.
Consider that Chinese smartphone manufacturer Xiaomi has become the third largest smartphone manufacturer in the world in five short years, rivaling Apple and Samsung. And this, simply put, was achieved by building on the best of Western innovation and talent. The Chinese applied local Chinese consumer trends and demands to this foundation and created a successful new solution—which resulted in the company becoming a globally ranked player. A detailed case study in Chapter 21 outlines Xiaomi's strategy in achieving this success.
Thus the assertion and fundamental, primary premise of this book is that the West must uphold its innovation advantage by evolving its innovation approach in light of this new global economy. Another aspect of the West's need to evolve its approach is the need to create solutions specific to the needs of emerging markets, as opposed to simply modifying and recycling what was originally intended for developed markets. We explore this through looking at the concept of reverse innovation which holds that innovating specifically for emerging markets can also ultimately revive a developed-market customer base. General Electric provides one of the book's many examples that bring these considerations to light.
The China Factor also explores and systematizes some practical solutions to combat the West's global competitive teetering. In Chapter 19 we cover five different innovation models, including the disruptive innovation model and its application. Intuit's approach is but one of the many case studies that illustrate how new market solutions are derived from disruptive innovation.
Additionally, we explore examples of how corporations such as Nokia, BlackBerry, HTC, Safaricom, and Tata Motors have maneuvered within the global competitive maze, putting a magnifying glass to their business evolutions, dynamics, and the outcomes of their actions.
