cal poly mba china trip

Cal Poly MBA Trip Final Reflections

2006-07-12T18:00:00.000-07:00

Prior to our China trip, we attended meetings and information sessions with businesspeople familiar with doing business in China. Through discussions and readings, we all learned a little more about China to prepare us for our journey. Yet, none of it could have prepared us completely for what we experienced. Our trip from June 15, 2006 through July 2, 2006 was an eye-opening experience that has changed me in so many ways. The juxtaposition of wealth and poverty in China is so difficult to understand, especially having had the opportunity to grow up in Novato, CA. The countless number of foreign multinational companies investing in China has turned the skyline into something more fit for a futuristic movie, yet within the alleyways and backstreets, there are Chinese citizens living in appalling conditions. Despite the unprecedented economic growth China has experienced in the last twenty years, it is evident that there is a long way to go before the disparity between the rich and the poor is reduced.

What had the largest impact on me during the trip was our stop at English Corner in Tsinghua University. Once there, we learned that citizens gathered to discuss everything – only they did so in English. One gentleman I spoke to, named Andy, was a computer engineer, and he was curious about how I spoke English and Mandarin, so we began our discussion on my background. However, the interesting parts of our conversation focused on his desire to learn more English, as well as the restrictions he faces daily from the Chinese government. Without going into specifics, Andy gave me the impression that many of the Chinese citizens live in a society where knowledge is controlled such that they can only learn what the government wants them to learn. While this was to be expected after our pre-departure discussions on media control and information restrictions, it was a little surprising that Andy had asked me how I would deal with the situation and what I think needs to be done so that China is not left behind the rest of the world in the information age, as it once was when China closed its doors to foreign countries. Before our conversation, I did not think of the possibility that despite China’s economic growth, it could be potentially catastrophic to have a country of 1.3 billion citizens grow up and be educated, and have the scope of their education and knowledge base limited such that it becomes a liability. What good would a country of 1.3 billion bright citizens be if they lacked the creativity to think outside of the box? Anytime our discussion tended toward deeper government issues, Andy smiled and politely changed the topic.

Andy and I also spoke about his current job, and what he wants to do in the (near)-future. English is the undeclared language of the world, and Andy feels that he lacks the command of the language to become a manager. Yet, Andy works on his English skills on his own, without the help of books (many of which are censored and unavailable as I learned through a conversation with two students), and with minimal time outside of work to devote to his studies. If I had one experience during our China trip that changed the way I think, it was my conversation with Andy. His dedication and thirst for not only knowledge but self-betterment has made me feel like I did not deserve the privilege to grow up in the United States.

Another experience that made a significant impact was our trip to the two factories, with assembly lines composed of human labor. While the wealth gap is growing larger in China, we forget to take into account the rest of the population in the western part of China that live in conditions incomprehensible to someone who has never experienced it. The question is not how will the poor react to the success of the wealthy, but how the government plans on integrating the western part of the country into the economy? It seems that two China’s are emerging, one in which the way of life has been the same for thousands of years, and the other in which the way of life resembles that of a large metropolitan city in the United States. Being able to integrate the traditional Chinese culture into the new culture will define China’s sustainability as a country. China’s economic sustainability will depend on the government’s ability to narrow the gap between the poor and the rich, as it is almost certain that the level of growth China has been experienced cannot be perpetual.

To me, this trip meant more than learning about the Chinese economy and business practices. I feel that this trip helped me mature as a young adult, and has taught me to look for solutions to problems from different perspectives. Yet, I still sometimes think about what Andy asked me, and try to pose the question in different ways in an effort to find a solution. To me, China is all about juxtaposition – whether between the rich and poor, traditional and modern cultural values, skyscrapers and villages, or thirst for knowledge and information restrictions. Being able to see things from both sides is what I take away from this trip, and I cannot wait for the opportunity to visit China again.

June 5, 2006. Predeparture Research

2006-06-05T17:05:00.000-07:00

Shenzhen:

ShenZhen NewlyEverRise Electronics Co., Ltd. - Joint venture company that manufactures power transformers, switching transformers, degaussing coils, indusctors, filters, and other electronic components for use in electrical appliances and household electrical appliances.

Q: I could not find much information on this company, but am curious as to whether the JV is between a Chinese company and an American company? I assume the JV was formed to exploit low labor costs in China. I am interested in hearing how the company plans to stay competitive in the future if and when labor costs increase in China. Flocking to China for low labor in the short term is OK, but what is their long term strategy and how are they beginning to implement it?

BBK Cell Phone Factory - This company manufactures many consumer electronics (cell phones, DVD players, mp3 players, stereos, etc.) Looking at the pictures from Dr. Carr and Dr. Wu's trip to China, the assembly line is labor intensive.

Q: I am interested in finding out if the quality of their products are sacrificed for labor intensive assembly? What are the most common problems they encounter with labor intensive electronics assembly? Do they have plans to implement more automation? (Understandably, automation and capital investments are probably too costly to implement, but what is their future plan for increasing quality and lowering costs, which are goals of every company?)

Yantian Seaport & Logistics Center - Import/export hub of Shenzhen located very close to industry and the 2nd largest port in China behind Shanghai.

Q: I wonder if the Chinese have the same labor issues we have in the US for port workers?

Shanghai:

Pricewaterhouse Coopers - Offers assurance, audit, tax, and consulting services to the many global and growing companeis in China. Based in the United States, PwC is one of the "Big Four" accounting firms and with the Chinese economy booming at an incredible rate, PwC has captured a large market share and solid reputation in China by being voted the best tax advisor of 2006 according to the Survey of Asian Tax Advisors.

Q: How have the accounting standards in China evolved within the past 10 years, given the growth of the economy, as well as accounting standards implemented in the United States due to corrupt companies?

Q: What barriers and difficulties does PwC encounter when dealing with Chinese firms, especially considering the large "guanxi" and relationships executives and managers like to develop with other firms? Does this make it difficult to produce a truthful audit?

CB Richard Ellis - The commerical real estate giant has capitalized on a Chinese-firm partnership on the growing Chinese economy by establishing itself as the leader in providing consulting services and asset management. On its Chinese website, CBRE offers many services, and even lists properties for sale and lease. They have offices located in Shanghai, Beijing, Guangzhou.

Q: What kinds of barriers are there to a foreign firm conducting real estate services in China? How has the Chinese commercial real estate market changed over the past 5 years?

Shanghai Urban Planning Exhibition Hall - Showcases the urban expansion planning designs for the city.

Q: How much of the model is actually implemented into the city planning?

HSBC - The Hong Kong and Shanghai Bank Corporation is one of the world's largest banks. HSBC has a larger presence in Asia as opposed to the United States, since it was founded overseas and has grown and expanded into the Western countries.

Q: I wonder how HSBC plans to futher establish the use of consumer credit cards in China give the country's high saving rate compared to the United States?

RR Donnelley - The commercial printing giant offers a wide variety of printing services for businesses. RR Donnelly entered the Chinese market in 1993 through a joint venture.

Q: What kind of censorship restriction does the firm face, and how closely are they monitored by the Chinese government?

Microsoft Global Technical Service Center - Launched in 1998, the GTSC provides technical support to customers all over the world - East Asia, America, and Europe. Located in Shanghai, the center employs over 500 Chinese workers.

Q: With the lack of intellectual property enforcement, how does Microsoft provide service to customers needing support despite their use of pirated software?

Carre-Four - This French retailer is the 2nd largest worldwide, and offers a wide range of items for sale in its location, similar to Wal-Mart. Carre-Four initially entered Taiwan in 1989, and has since expanded further into Asia. Opposed to Wal-Mart, who has had trouble gaining traction in the Chinese market, Carre-Four has been successful at retail in China.

Q: How does the company adapt to the cultural differences of each country it operates in, and what kind of market research does it conduct?

Shanghai Museum - Over 120,000 pieces of art are on display at this museum. It will be interesting for me to see the works of art and look at the culture my grandparents were familiar with growing in China.

Hangzhou/Suzhou:

Suzhou Industrial Park - Created in 1994 through a joint venture with Singapore, this industrial park is home to many organizations, from a motherboard manufacturing facility to a world-class golf course.

Q: What changes has the area seen during the economic boom China has recently been experiencing?

Beijing:

US Embassy/Commercial Attaché - This site offers comprehensive information for businesses looking to do enter the Chinese market. In addition, the site offers Chinese firms assistance in procuring US suppliers.

Q: I'm interested in finding out which companies this firm has helped do business in China, and to the extent of the help they offered.

Sun Microsystems Engineering Center - Sun is a major server and workstation producer, and they are also the pioneers of Java. Located near the top Chinese universities, this engineering center is the heart of innovation for Sun in China.

Q: Does the firm face similar piracy and intellectual property enfringements as Microsoft?

Beijing University - Founded in 1898, Beijing University is one of the top universities in China.

Tsinghua University - Established in 1911, this university is more focused towards government studies and politic, as well as polytechnics.

Panjiayuan Collection Market - Located in Beijing, this market deals in secondhand goods, as well as arts and crafts. Established in 1992 as a flea market by traders, it moved in 1995 to houses.

May 11, 2006. Review: Harvard Business Review on Doing Business in China

2006-05-11T17:12:00.000-07:00

Harvard Business Review on Doing Business in China is a collection by several authors, and begins immediately by describing the transition China has made from being a closed economy to one that enjoys a 9% annual GDP growth. The opening chapter presents a historical context with which the authors describe China's attractiveness to multinationals, as well as the changes China implemented to become a global economy, from the infrastructure investments following the 1997 Asian financial crisis, to technological advancements that allowed manufacturing to shift from textiles to electronics.

Each chapter provides an executive summary that allows the reader to get a feel for what the ensuing chapter is all about. In juxtaposition to The World Is Flat and One Billion Customers, Harvard Business Review does a good job of being impartial and unbiased. The statistics the authors use to back their claims seem genuine, and very rarely is personal opinion apparent in the text. Particularly, I found the chapter on Chinese Negotiation to be of most interest for a businessperson contemplating doing business in China. The chapter does a very thorough job of describing the cultural differences between Americans and Chinese, and how to approach the negotiation process once in China. Mostly, the chapter stresses the importance of understanding Chinese culture, and being Americans in China, the importance of patience in the negotiation process. One theme in the book is "guanxi," which we have been discussing quite a bit in our predeparture meetings. The authors describe guanxi as forging long-term relationships, and to be successful in China, managers need to understand that reciprocity is paramount to making reliable networking contacts.

The strengths of this book include the executive summaries that allow the reader to develop a framework for the ensuing chapter, as well as the useful and interesting charts and graphs that, for instance, describe the differences between American and Chinese negotiation styles. The chapters are well organized, and the authors use examples of companies that have successfully entered the Chinese economy, which are very informative and interesting.

The major weakness of this book is that there are no personal experiences from the authors - if the strategies presented by the authors are as successful as they claim, then why haven't they pursued business opportunities in China themselves? Throughout the book, I was hoping there would be a few sections of the authors' personal experiences, sort of like One Billion Customers. However, the book does an excellent job of being what it is - a handbook of strategies from other companies that have been successful in China. Another thing I thought was frustrating is the lack of specific dates associated with many of the examples, and also some of the examples seem outdated and many go back to the 1990s. With the global marketplace changing so quickly, more recent examples would have been appreciated.

Overall, this book offers a very solid framework for businesspeople doing business in China. The advice and strategies are helpful and allow businesspeople to avoid some of the pitfalls of doing business in China. I would recommend this book to anybody interested in international business, especially the negotiation strategies presented by the authors.

May 1, 2006. Review: The World Is Flat, by Thomas Friedman

2006-05-01T14:16:00.001-07:00

"The World Is Flat," by Thomas Friedman, is a thorough account of globalization from the businessperson's perspective. Throughout the book, Friedman emphasizes that globalization has made doing business a level playing field for all parties involved, and in his "10 Flatteners" describes historic events and technological advancements that have attributed to a flatter global marketplace. Each of these events are widely known, so it is not surprising to see that Friedman chose the evolution of Netscape and the Internet as one of the most important business and technological advancements. Just as important, Friedman argues that the fall of the Berlin wall marked the widespread acceptance of capitalism versus communism.

The key to American businesspeople in this book is understanding Friedman's analysis of the current US economy and how it compares to the rest of the world. The fact that much of the developing countries have superior education systems is a cause for concern. Friedman argues that the United States must get back to basics so that we are not overtaken in innovation and knowledge, though many US firms are complacent. Continual outsourcing and offshoring of services (such as auditing and other activities that require specialized and knowledged workers) will only make matters worse. For the American businessperson that is worried about having his or her industry outsourced or offshored, Friedman argues that specialization and innovation will prevail in keeping the industry domestic.

The major weakness of this book is the fact that Friedman does not go in-depth on current political instabilities in Eastern Europe and Asia that can cause unforseen consequences. He mentions that the tensions in Iran and North Korea are very real and can "unflatten" the world, but for the businessperson trying to tap into the global "flat" marketplace, he does not give any advice as to how to prepare for Iran and North Korea's ever-growing nuclear concerns. It is almost as if Friedman treats these rogue countries as constants, yet their actions could add to his "10 Flatteners." Future attempts at globalization will definitely need to take into account additional political tensions.

The most important parts of this book are the 10 events that Friedman describes. I would recommend that any businessperson reading this book to be as unbiased as possible. While Friedman presents both sides of the story, his emphasis on America's need to level the playing field points to his belief that America needs to remain the undisputed superpower of the world. Personally, I feel that globalization has just the opposite effect and makes the world "flatter," and while Friedman argues the same, he seems to want to make it round by keeping America dominant, yet contradicts himself by saying America's actions in the global economy make the world flat. Confusing to say the least. Overall, I thought the book was insightful in that it provided many perspectives. I think the goal of this book was to create confusion and lead the thought-process, and it is successful at doing that.

Mar. 23, 2006. Review: One Billion Customers, by James McGregor

2006-03-23T10:18:00.000-08:00

One Billion Customers, by James McGregor, reveals the shortcomings and virtues of doing business in China. The book is a collection of real stories, many of them describing foreigners doing business in China and how they dealt with Chinese business men and the Chinese government. The main purpose of the book is to enlighten businesspeople of what to expect in China, and more importantly, what not to do in order to survive. At the end of each section, McGregor summarizes the main points in his version of "The Little Red Book of Business." The summaries emphasizes many do's and don'ts that is expanded upon in each story, and offer practical business advice. The informational value of the summaries are very good, and should serve as a basic guideline for foreigners looking to do business in China.

The major strengths of the book are its detailed, yet concise sections entitled "What This Means to You" and "The Little Red Book of Business." These sections summarize the story and emphasize the major pitfalls or shortcomings that were made in the business dealings, and how to avoid them. For instance, McGregor's personal experience with the Xinhua news agency describes his company's (Dow Jones) difficulties in keeping the Chinese news service and government from putting him out of business. McGregor goes to great lengths to describe the meetings and interactions he had with the Chinese government, and points out cultural differences along the way that businesspeople need to take into account to be successful.

McGregor's advice to study Chinese negotiation stategies and tactics is excellent advice, especially given the fact the differences in negotiation styles between Americans and Chinese. McGregor suggests Lucian Pye's Chinese Negotiating Style as the benchmark in helping foreign negotiators understand how to use Chinese negotiation tactics. For the businessperson looking to enter the Chinese market, both McGregor's and Pye's texts are invaluable in offering competitive advantages and most importantly, a better understanding of Chinese business culture.

McGregor makes it clear that his experiences have led him to believe that the current state of China (in particular, businesses and government) makes it difficult for anyone except large multinational companies to enter the market. As McGregor explains, without the large brand name and pocketbook of a multinational corporation, small and medium size companies can be easily taken advantage of by the Chinese. Thus, McGregor explains that for entrepreneurs without the luxuries of a multinational corporation, it is wise to wait until better infrastructure is established in China before attempting to enter the market.

In contrast, after reading a few of the stories, it seems that McGregor has had very negative business dealings with China, and this sticks with the reader. In describing the corruption, the lack of infrastructure (both politically and technologically), and the way Chinese people do business and negotiate, McGregor paints a dismal picture of doing business in China. While his candid honesty is refreshing and welcome, McGregor seems content most of the time on bashing the Chinese for what they aren't, instead of offering unbiased opinions on the state of industry in China. However, McGregor does offer insights on understanding the Chinese business culture better as an American, and presents leadership examples (Bob Hitt, Austin Koenen) that serve as models and guidelines for American management.

McGregor presents the Chinese in a way that seems culturally insensitive, despite his efforts to offer advice on being culturally sensitive Americans doing business in China. McGregor seems to include too much personal emotions and experiences in describing the Chinese, however, it is understandable given the fact that he is sharing his personal business experiences and any frustrations that occurred as a result. Overall, this does not take away from the message of the book, but it does make doing business in China seem like a collection of bad experiences.

By including personal experiences as well as those of colleagues, McGregor offers a no-nonsense book of stories about doing business in China. The stories allow entrepreneurs to forecast and plan appropriate strategies and tactics in dealing with the Chinese businesspeople and government. The information provided by "The Little Red Book of Business" is probably most helpful for business people to understand. This information often times includes advice on how to deal with cultural differences, and how to use these differences to your advantage. In addition, McGregor offers to his readers the notion that as businesspeople, they should stand up for themselves and sometimes use Chinese negotiating tactics to gain respect from the Chinese. McGregor would argue that the Chinese need foreigners just as much as we need them to experience economic growth.

Overall, the book offers excellent stories and experiences for which to draw upon while doing business in China, or contemplating whether or not to enter the Chinese domestic market. By focusing attention on political issues in China, McGregor explains what to expect when dealing with the Chinese government. The summaries offer invaluable tips and advice, and should be used to establish a business advantage over Chinese counterparts. As McGregor explains, the Chinese respect businesspeople that understand them and their culture, and the tips provided by McGregor go a long way to help a businessperson from inadvertently offending the Chinese. The experiences in One Billion Customers offers businesspeople an excellent starting point in knowing what to expect when doing business in China.

Mar. 21, 2006. Good Management vs Bad Management

2006-03-21T10:36:00.000-08:00

While reading "One Billion Customers," by James McGregor, one section really stood out to me. After describing the lagging CICC venture by Morgan Stanley and China Construction Bank, McGregor describes the management style of Austin Koenen. To the Chinese employees, he was "openhearted," and it seemed his style motivated his employees to work hard for him. All through Organizational Behavior, Professor Rami Shani emphasized the role that motivation plays in managing. Mr. Koenen's predecessors were unattached to the employees, and communication was largely difficult due to language barriers. However, Mr. Koenen was able to convey his sincerity to his employees, which made them want to work hard for him. It is not shocking that CICC was faltering prior to Mr. Koenen's arrival, and it is unfortunate that he was not able to lead the company further due to a fatal heart attack.

Yet, looking at the U.S. business environment today, I have a hard time naming any company that stands out as having good management, even among the most well-known companies. From what I've experienced and learned, only Yahoo comes to mind as a company that understands the role managers need to play in an organization. I read somewhere that between 50-75% of Americans dislike their job, and while that is alarming, it is not surprising.

The question is how many managers really know what they are doing? I'm sure they are competent enough to be managers, but are they capable to be leaders? How do you motivate your employees to work hard, and stay upbeat? How do you retain employees, because it costs so much to train new employees? I think I can say with reasonable certainty that a majority of the managers are not concerned with establishing a rapport with their employees, but are concerned with their personal payday. As a manager, the primary role should be to motivate and lead your employees. Be a mentor, not a dictator. Maybe it is more difficult than it seems, but I find it disturbing that the current business environment is what it is. I commend the firms that are managing and leading the right way, and I wish we could do more case studies of good vs. bad management in our MBA program.

Mar. 17, 2006. China's booming auto industry

2006-03-17T15:16:00.000-08:00

Excellent article regarding China's growing automobile manufacturing industry:
http://www.nytimes.com/2006/03/12/business/yourmoney/12ford.html

I have always been intrigued by the automobile industry, and I think China has been fortunate to have so many foreign companies establish an infrastructure for them.

It is interesting to juxtapose the troubles of US auto manufacturers with the growth of Chinese auto manufacturers. At this point, I think both suffer from lack of creativity and innovation, however, China is not burdened with labor/union disputes compared to GM. The challenge for Chinese auto manufacturers in the future will be to establish an infrastructure that will allow for sustained growth. It seems that right now, Chinese workers are more than happy to work for low wages, but how long will that continue until the industry becomes developed?

Someone please correct me if I'm wrong, but I think Japanese workers and auto manufacturers also have strong union/labor ties. However, I think the difference between US and Japanese manufacturers has been in the innovation. You don't have to worry about trimming your workforce when they are producing products in demand. GM/Ford and also DaimlerChrysler need to begin designing products that are forward looking and ahead of its time. Out of the three, I think only Chrysler has recently recognized that. But I think it's too late for GM, and they probably won't be able to turnaround until they declare bankruptcy to clear itself of its debt.

I could talk all day about the auto industry, and what I think manufacturers need to do to be successful. If anybody has connections at an auto manufacturer, please let me know. Next to running a sports organization, my passion is in the auto industry.

Mar. 13, 2006. Art of War, by Sun Tzu

2006-03-13T17:36:00.000-08:00

I was going through my stuff, and found my Art of War book and decided to read it again. It is a quick read, only about 130 half-length pages. In response to Peter Begley's comments on Starbucks (http://credoadvisors.com/blog/business-ethics/starbucks-new-rwanda-blu-bourbon-coffee/), I found an interesting quote from Sun Tzu's military guidelines: "One who recognizes how to employ large and small numbers will be victorious."

I think Peter's effort towards advocating awareness is commendable, but earlier I thought they were wasted because awareness by itself does not create change. However, the more I think about it with Sun Tzu's strategies, I think Peter is right. If after reading an internet blog, one would-be Starbucks customer decides not to buy anything from Starbucks, then I think it is worth it and change is being made. That one customer will tell ten more people, and if one of those ten people decides not to buy anything from Starbucks, and in turn tells ten more people, and the cycle continues, then suddenly what began from one person's internet blog becomes public awareness. So to Peter, keep doing what you're doing, and hopefully more people will catch on. For now, I will try to avoid Starbucks, and try to begin the cycle by raising awareness of those around me.

edit: By the way, I am not advocating the boycott of Starbucks just to boycott Starbucks. The real issues at hand are questionable Fair Trade practices, and the elimination of small, family owned coffee shops. I am not advocating small business for the sake of small business. If a small, family owned coffee shop engaged in the same practices as Starbucks, then I would not support them either. I feel that Starbucks has the power to change its image, but fails to do so because it will cut into profits. I am almost certain Starbucks can ensure farmers of its coffee beans are guaranteed Fair Trade level prices, but fails to do so because it would be an extra step and an extra dollar spent. Instead, Starbucks deals with middlemen and claim it offers them Fair Trade prices, but the farmers don't get the full price for their crop. That is what I have trouble with; marketing its coffee as Fair Trade, while the reality is that the farmers don't get what Starbucks say they do.

Feb. 15, 2006. China Trip meeting

2006-02-18T16:36:00.000-08:00

Mr. Wain Beard spoke to the MBA class, and shared his experiences of doing business in China. Mr. Beard's candid honesty was refreshing, and his stories helped me visualize the cultural differences that need to be studied and accepted in order to successfully do business in China.

I thought it was interesting that Mr. Beard forecasts that China will be a leader in technology and innovation in the near future, yet I think many changes need to be made for China to make that step. The lack of intellectual property rights and protection is one of the biggest barriers to innovation and needs to be addressed for China to move forward. However, given the fact that China is graduating many engineers (more than India and the United States) and encouraging foreign companies to employ their workforce, the knowledge base is there but just needs more government support in order for it to fully develop. It will be interesting to see the political changes that China will face.