Multinationals in China - Paul Gillispaulgillis.org/mnc-in-china-2017-spring.pdfCase Study...
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Multinationals in China Paul Gillis PhD CPA Guanghua School of Management Peking University
Transcript of Multinationals in China - Paul Gillispaulgillis.org/mnc-in-china-2017-spring.pdfCase Study...
MultinationalsinChina
PaulGillisPhDCPAGuanghua SchoolofManagement
PekingUniversity
MNCsinChina• MNCsplayedacriticalroleinChina’sdevelopment– Providedtechnologyandexpertise– Providedcapital– Createdjobs– Earnedhardcurrencyfromexports
• MNCsmoreimportanttoChinathananywhereelse
History• 1800Chinahas1/3globalGDP– Dominatesglobaltrade– TradesurplusleadstoOpiumWars
– Chinafailstoindustrialize
– By1980Chinaisoneofworld’spoorestcountries
• 1980ReformandOpening(GaigeKaifeng)– LedbyDengXiaoping– China’straditionaladvantageskickin• Large,relativelywelleducatedpopulation
• Wellestablishedtraditionsinmanufacturingandcommerce
WhyMNCsweretheanswer• Poorcountrieslacktechnologicalcapitalofrichcountries– Mustacquiretechtoaccelerateproductivityofworkforce
– Foreigntechisexpensiveandmustbepaidforinhardcurrency
• SolutionwastoattractMNCstoChina– MNCsbringtechnologyaspriceofadmission
– MNCsexportgeneratinghardcurrency
– SOEsfocusedondomesticmarketanddidnotuseforeigntechbutinsteadpoliticstorigmarkets.
China’sstrategy• AttractMNCswithfavorableregulation,lowtaxes,andlowcosts
• UndervalueRMBtoencourageexports
• Capitalcontrolskeepwealthinthecountry
• Businessmodel– 80%ofqualityat60%oftheprice
– Extraordinarysurrenderofeconomicsovereignty
– Rentoutvastarmyofcheapworkerstoforeigncapitalists
ReformandOpeningUp• KeySuccessFactors
– GoodrolemodelsinTaiwan,SouthKorea,Japan.
– HongKong– gatewaytoWest
– Timing– inventionofshippingcontainerenabledtransformationofglobalsupplychains.
– Infrastructure– selllandtofunddevelopment
CaseStudy– ElectronicsIndustry• Chinaaccountsfor40%
ofglobalelectronicsexports(upfrom5%in2000)
• MostChinaactivityisfinalassembly– Largelycontrolledby
foreigncompanies(Foxconn)
– HighvaluecomponentsinhandsofglobalgiantslikeApple,Samsung,Intel
• Localchallengers– Lenovo– Huawei– Xiaomi
• H+X80%qualityat60%price
• Allprivate,butL&Hstatesupported
• Bottomofthesmile
Chinese companies have only learned how to organize workers, but have not learned how to organize engineers, they can only make a living in the most inhospitable terrain area of manufacturing. Wang Chuanfu - BYD
SmilingCurve- StanShih- Acer
Thiscourse• WewillusecasestudiestoexploreimportantissuesforMNCsinChina
• Iamnotexpertineachoftheseareas,butIdohaveexperiencewitheachofthem– Bewillingtochallengemyviews– Therearemanywaystolookattheseproblems.
• Guestspeakerswillbringdeepexpertiseincertainareas
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Analyzingcases
• Gettingoriented– Readopeningsection– Flipthroughpages– Readandrereadtheassignmentquestions– Definetheprobleminoneortwosentences
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Levendary Cafe• WhatisyourevaluationofthewayLevendaryCaféhasenteredtheChinamarket?
• Whatchanges(ifany)shouldMiaFostermake?Specifically,whatshouldshedoaboutLouisChen?Andwhatchanges(ifany)wouldyouproposeatheadquarters?
• PrepareaspecificactionprogramforFostertohelpherdealwiththeneedforcontinuedgrowthinChina.WhatshouldbeontheagendaforhermeetingwithChen?
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AnalyzingCases
• Identifyingproblems– Readtheentirecasecarefully– Highlightthekeymaterial–Whatconceptsarehighlighted?– Reviseyourproblemstatement
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AnalyzingCases
• Performinganalysis–Whatisfactandwhatisopinion?–Whatfactscontributetotheproblem?– Howisquantitativedatarelevant?– Identifyusefulinformation,readbetweenthelines– Thereareusuallynocorrectanswers– Haveyoudefinedtheproblemcorrectly?
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Actionplanning
• Listpossiblerecommendations
• Whatlessonsarelearned?
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Casesummaries• Submitforeachcasewediscuss– Doneingroupsofuptofourstudents.
• Maximumoffoursinglespacedpages– Formatflexible,needstoadapttoassignmentquestions• Problemstatementforeachquestion(butnotalways)• Summarizekeyfacts– perhapsconsolidatedforallquestions
• Recommendations/lessonslearned– Theidealcasesummaryresemblesareporttoseniormanagement/boardontheissuespresented
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Courserequirements
• Writtencasesummariesforeachcase– Doneinteamsofuptofour
• Activeparticipationincasediscussions• Researchpaper&presentation
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Researchpapers• InterviewexecutivewithMNCinChina
– Identifykeyissuehis/hercompanyfacesinChina– Reviewextantliterature– Makerecommendationsonappropriateresponses
• Advisemebyemail([email protected])ofexecutiveandMNCbyMarch15.
• TwopagepapersummarizinginterviewdueMarch31.• Aresearchpaperofnotmorethan3,000wordsonanissuerelevant
toMNCsinChina– AdvisemeoftopicbyApril15byemail– About10doublespacedpages
• PaperdueonMay12atmidnight(10%offgradeeachdaylate)• Studentsshouldbepreparedtogiveabriefsummaryoftheirpaper
beginningApril26.
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www.paulgillis.org
Grades
• Classparticipation 20%• Writtencasesummaries 30%• InterviewofMNCexecutive20%• Researchpaper 30%
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ClassSchedule• February23– Introduction• March2- ManagingInternationalOperations–Levendary Café
• March9– NegotiatingwithChinesebusinesspartners
• March16– Samebeddifferentdreams– HBT• March23– Directselling– Amway• March30– Jointventures– NestleandTotole
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PaulGillisPhDCPAGuanghuaSchoolofManagementPekingUniversity
[email protected]@profgilliswww.chinaaccountingblog.com
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Source:USCBC
Hasthegoldenagepassed?
• Businessconditions• Corruption• Anti-monopoly• Intellectualpropertyprotection• People• Pollution
WhatdoMNCsdoinChina?
52%
5% 4%
13%
5%
21% Manufacturing
Utilities
Wholesaleandretail
Realestate
Businessservices
Source:ChinaStatisticalYearbook
MNCsinChinavUSAForeignMNCsinChinaemploy3.3%ofChineseworkers
FDIstockof$1.3trillionis14.6%ofChinaGDP
Sources:ChinaInvestmentYearbook,UNCTAD
ForeignMNCsinUSAemploy5%ofAmericanworkers
FDIstockof$2.7trillionis15.7%ofUSAGDP
Sources:OrganizationforInternationalInvestment,UNCTAD
People
Source:USCBC
Chinahaslostcostadvantage
Beijing/Tianjin/Hebei areaisChina’smostpolluted
Makesup0.4%ofplanetUses4.8%ofthecoal
Corruption
Source:CPC
0
NewCopontheBeat?• FineagainstGSKof$500millionforcorruptionisthirdlargestinworldafterFCPAfinestoSiemens($800m)andHalliburtonKBR($579m)
JPMorgan’sSonsandDaughtersProgram
• ProgramtargetedrecruitingchildrenofChineseofficials
• FairlycommonpracticeofMNCsin1980sand1990s
• SECandDept ofJusticeinvestigatingpossibleFCPAviolation
Anti-monopolyinChina
• In2008Chinaintroducedantimonopolylaws• HighprofileactionsagainstQualcomm,Microsoft,Audi,Chrysler
• PremierLiKeqiang claimsonly10%ofcasesareagainstforeignenterprises
Source:USCBC
Source:AMCHAM
IntellectualProperty
Source:USCBC
Source:USCBC
Source:USCBC
Source:USCBC
GreatFirewall
• 56%ofAmericanMNCssayChina’sinternetrestrictionsimpactabilityofcompanytooperatenormally
• Restrictionsone-commerceareincreasinglyproblematic
