While such criticism is not unfounded, it is not the whole truth. Since its reform and opening up some 40 years ago, China has been gradually opening different sectors to foreign participation. Today, while some sectors, such as
Though there is a 50-50 joint venture requirement for automotive manufacturing, China’s automotive market as a whole is very open in terms of products and markets. And, Beijing has just announced it will
. An increasing number of fast-growing, sizeable innovative companies are emerging that have built large ecosystems of collaborative partnerships.
China has found its own development path, the “China development model”. At the top, the central government actively plans the direction of the country. At the grass-roots level, entrepreneurship is thriving, driving
Given this evolution, corporate decision-makers need an informed and sophisticated view of the country to devise an effective China strategy.
Companies should participate in China’s thriving innovations, rather than being bystanders due to a lack of awareness or unwillingness to take risks
First, their strategy requires a thorough understanding of the China context, which is evolving in a peculiar and multidimensional manner. While China’s reform has been largely gradual, changes can at times be
. Too often, foreign companies enter China with a market strategy at the business-unit level, using a linear, incremental approach. By focusing on the micro conditions, they often miss the big picture.
Second, China should be at the core of any global strategy. The speed of development, uniqueness, complexity and strategic importance of China requires foreign multinationals to fully embrace China as an integral part of their strategy and organisation, not just one of many markets.
, rather than being bystanders due to a lack of awareness or unwillingness to take risks. Companies could consider engaging in businesses that may not be their traditional core but could provide opportunities for growth, and also form ecosystems with Chinese companies.
I am not advocating diversifying aimlessly. However, I have seen numerous cases when CEOs missed opportunities in China because they either didn’t know about them or felt they needed to focus on their “core competencies”. As a result, they also missed out on the chance to learn from Chinese consumers and the best Chinese companies.
Foreign multinational companies should train China managers as thought leaders and place them at senior levels
, a leading Chinese online automotive advertising platform, Telstra, an Australian telecom and media company, whose core business in China is restricted by foreign participation rules, made a profit of around US$2.5 billion in less than 10 years.
Fourth, foreign multinationals should train their China managers to be thought leaders and place them at senior levels. Too often, they treat their managers in China merely as operational people. Strategy and major decisions come from the global or regional headquarters, making it difficult for businesses to come up with an effective strategy for China.
Finally, foreign companies need to shorten their decision-making process and become more agile and flexible. After all, China is evolving fast and competition is intense. Chinese companies are known for bring fast, nimble and innovative. Foreign multinationals should become “more Chinese than the Chinese”.
are changing the country – and the rest of the world – fast. China is on the verge of a sustained, generational rise that will generate even more opportunities, and challenges, for global businesses. Foreign companies need to figure out how to deal with this.
is not entirely fruitless but that is not where the real game is being played. China will reward those who are innovative and discover new ways of creating value. This requires foreign multinationals to approach China with a different mindset.
China will continue to open up and embrace the rest of the world, perhaps not all in one go, but its direction is clear. CEOs and boards should ask themselves: “How can we capture the potential that China offers us?”
Edward Tse is founder and CEO, Gao Feng Advisory Company, a global strategy and management consulting firm with roots in Greater China. He is also author of China’s Disruptors
This article appeared in the South China Morning Post print edition as: Mindset for success