The Hangzhou Exchange Study Tour

15 - 18 October 2006

Group Report

Submitted by:

A Delegation of Postgraduate Students,

School of Business & Administration,

The Open University of Hong Kong.

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Table of Contents

1. Introduction 3

2. Itinerary of Activities 4

3. Visits to Organizations 5

3.1 Hangzhou Wahaha Group Co. Ltd (杭州娃哈哈集团公司) 5

3.2 Hangzhou Xihu Beer Asahi Co. Ltd (杭州西湖啤洒朝日有限公司) 6

3.3 Hangzhou Iron and Steel Group Co. (杭州钢铁集团公司) 8

3.4 Hangzhou Minsheng Pharmaceutical Group Co. Ltd (杭州民生药业

有限公司)

10

3.5 Alibaba Corporation (阿里巴巴) 12

4. Cultural Visits 13

5. Conclusion 15

Appendix I: Personal Sharing from Delegates 17

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1. Introduction

For a mass community, Hangzhou, one of the ancient capital cities of China, is a paradise

in reality where the poetic spirit of Chinese history and heritage could still be realized.

For us, Hangzhou is much more than this. It is a place of business dynamics where we

could gain insight how enterprises of different entities and their managers strive to excel in

response to both the domestic and global markets.

We from Hong Kong are aware and knowledgeable of the economic evolution of the Pearl

River Delta in the Guangdong Province since the early days of the economic reform policy

of China back in the late 70s. The rapid developments in recent years have drawn many

people’s attention to the Yangtze River Delta with Shanghai as its focus centre radiating

towards cities in its vicinity with Hangzhou being one of the major metropolis. The city

of Hangzhou, being the focal point of our tour, allowed us to zoom in, on one hand, to gain

a better comprehension of the development and challenges of selected industries and, on

the other, to acquire an understanding of the economic and business terrain of the Yangtze

River Delta region.

Whilst Hangzhou has been profiting from its natural tourism resources - the renounced

Xihu (西湖) for centuries, its economic growth in recent years has been phenomenal.

Today, the annual GDP of Hangzhou constitutes one-fifth of the whole of the Zhejiang

Province. Apart from being the world renounced traditional silk production centre, the

city houses a total of 7,000 enterprises of various sizes, types and ownership entities. Its

wide spectrum of industrial profile could be reflected in the itinerary of the tour both in the

types of industry (ranging from heavy iron and steel company to e-business organization),

and in the manner of ownership (ranging from state-owned enterprises to private entities).

In addition to the cultural visit, delegates also found time to stroll around streets to savour a

taste of local livelihood. In sum, the blending of formal visits, social interactions and

cultural experience provided a unique learning opportunity to gain a better understanding

of this complex and dynamic economic region.

This report is more than simply a documentary recollection of the happenings during the

Hangzhou Exchange Study Tour conducted between 15 – 18 October 2006. It is a

crystallized product combining our observations, discussions, experience sharing and

reflections arising out of the tour. Projecting from the organizations that we visited, the

report aims to provide readers with a multi-dimensional understanding of the development

and future prospects of Hangzhou under the context of the economic, political and cultural

perspectives. We also hope the memoir could offer some insights to readers to ponder

critically on the challenges confronting China in its path of development.

We must also reiterate that the learning process persisted beyond the 4 days in Hangzhou.

Delegates had been collaborating pre-tour for background research and preparation as well

as post-tour when we were anxiously sharing our insights and resolving questions in our

minds. The tour also nurtured friendship amongst 20 part-time postgraduate students as

well as between the delegates and Dr. Irene Siaw and Dr. P. K. Yeung of the School.

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2. Itinerary of Activities

Date Time Activity

16:00 Arrival at Hong Kong International Airport -

Hong Kong Express 港联航空(UO) Counter

17:55 Departure from Hong Kong by UO208

20:05 Arrival at Hangzhou &

Check-in Merchant Marco Hotel

马可波罗假日酒店

15 October 2006

(Sunday)

21:00 Free activities

07:00-07:30 Breakfast at hotel

08:30-11:00 Hangzhou Wahaha Group Co. Ltd.

杭州娃哈哈集团公司

12:00-13:00 Lunch

14:00-17:00 Hangzhou Xihu Beer Asahi Co. Ltd.

杭州西湖啤酒朝日有限公司

16 October 2006

(Monday)

18:30 Dinner

06:45-07:15 Breakfast at hotel

08:30-11:00 Hangzhou Iron and Steel Group Co.

杭州钢铁集团公司

12:00-13:00 Lunch

14:00-17:00 Minsheng Pharmaceuticals Co. Ltd.

杭州民生药业有限公司

17 October 2006

(Tuesday)

18:30 Dinner

08:00-08:30 Breakfast at hotel

09:30-11:00 Alibaba Corporation

阿里巴巴

12:00-13:30 Lunch

14:00-17:30 Cultural visits

20:35 Departure from Hangzhou by UO209

18 October 2006

(Wednesday)

22:40 Arrival at Hong Kong

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Future Cola非常可乐

3. Visits to Organizations

During this Exchange Study Tour, five companies namely Hangzhou Wahaha Group Co.

Ltd., Hangzhou Xihu Beer Asahi Co. Ltd., Hangzhou Iron and Steel Group Inc., Minsheng

Pharmaceuticals Co. Ltd. and Alibaba Corporation were visited. Three of which could be

regarded as private entities whereas the other two are classified as state-owned enterprises

from the shareholding standpoint.

3.1 Hangzhou Wahaha Group Co. Ltd. ((((杭州娃哈哈集团公司杭州娃哈哈集团公司杭州娃哈哈集团公司杭州娃哈哈集团公司))))

It all originated in 1987 when a gentleman at the

age of 42, who worked in an old school in

Hangzhou, disregarded the opposition from his

family and friends of raising a loan of RMB140

thousands decided to start his own business in a

school tuckshop to sell popsicles and other dairy

products. This entrepreneur, Mr. Zhong Qing

Hou (宗庆后) is now the owner and founder of

China’s leading domestic beverage producer

“Wahaha”.

By 1989, the entity has expanded into Wahaha

Nutritional Food Factory and commenced

production of Wahaha Oral Liquid for Children

(娃哈哈营养口服液) which warranted huge success. Thereby the company’s sales

exceeded beyond RMB100 million within 3 years. In 1991, with the support of the

Hangzhou city municipal, Wahaha underwent a merger with Hangzhou Canning Food

Factory with a workforce of 2,000 employees and paved the way for the establishment of

Hangzhou Wahaha Group Corporation. Henceforth, the company started its rapid

expansion nation-wide through setting up 40 subsidiaries in over 16 provinces. In 1996,

Groupe Danone of France partnered with Wahaha and generated five new subsidiaries.

The joint-venture alliance enabled Wahaha to acquire knowledge and justify investment in

more advanced production technology and facilities.

Today, the group owns total assets of RMB4.4 billion and

captures a 15.6% market share of the total beverage

production in China. Its product portfolio encompasses

dairy, juice, carbonated and health drinks, tea and distilled

water. In 2005, the company ranked first amongst the

domestic non-alcoholic beverage producers in the PRC in

terms of production and sales volume, assets as well as

generation of tax and profit.

When speaking of coke, Coca-Cola or Pepsi Cola would

generally be implied. Without exception, coke has also

become the major beverage on the banquet table in

Mainland China since our motherland adopted open-door

policy in 1979. In the last 20 odd years, at least 8 types of

local labeled coke beverages were directly competing

Introducing Wahaha …

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Wahaha Entrance – Group Photo

against Coca-Cola and Pepsi Cola in the China market. The results being all of them were

opted out of the scene. This incident reinforced the launch in 1998 of Future Cola, which

was manufactured and marketed by Wahaha, its attractiveness to all people, especially

those operators in the beverage industry. Surprisingly, Future Cola survived the

competition and upheld the third best selling carbonated drinks after Coca-Cola and Pepsi

Cola. The success was attributed to the marketing strategy adopted by Mr. Zong and

Wahaha that targeted consumers in the rural areas as opposed to focusing on the urban

dwellers.

However, some analysts

predicted that this strategy was

not an all rounded favourable

approach for Wahaha because

townsfolk in China are reluctant

to accept a commodity which

was popular amongst village

inhabitants. As Coca-Cola and

Pepsi Cola were expanding their

markets and extending their

distribution channels to the

village, head-on competition

would inevitably be a very cruel

predicament. Probably, this was

the reason spurring Wahaha’s

introduction of a new blend -

Coffee Cola to compete against Coca-Cola and Pepsi Cola in the cities of China. We would

like to see if Mr. Zong and Wahaha would create miracles again.

Being the largest domestic beverage manufacturer in China, Wahaha’s future development

plan is ambitious and far-out. Other than diversification of its product portfolio into

children’s wears which is still in its infancy stage, plans are underway to establish

manufacturing base in South-East Asia as well as market its products to overseas market

including the U.S. The circumstance that bedazzles us is the parental structure of the

company whereby Mr. Zhong (now aged 61) takes the helm and dominates all aspects of

the operation. This could be the prevailing challenge of many Chinese owned businesses

which necessitate better succession plan as well as corporate governance.

3.2 Hangzhou Xihu Beer Asahi Co. Ltd. (杭州西湖啤洒朝日有限公司杭州西湖啤洒朝日有限公司杭州西湖啤洒朝日有限公司杭州西湖啤洒朝日有限公司))))

Our visit was undertaken with the expectation to

gain an understanding of joint-venture

operations – a very common nature of entity in

China. Hangzhou Xihu Beer Asahi (Stock) Co.

Ltd. is a large-scale manufacturing

amalgamation between Hangzhou Beer Factory

(a state-own company with 45% of shareholding)

and Asahi Beer Yitengzhong Co. Ltd. (a

Japanese company controlling the remaining

55% shareholding).

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Asahi Beer

Discussion

From the shareholding structure perspective, it was natural to

deduce that this is a Japanese beer company. However, its

brewery had been in operation in Hangzhou long before

Asahi together with its Japanese partners became the

dominant shareholder. It had been reported that majority of

the JVs in China fell through on account of the conflict of

interests between the Chinese and the foreign shareholders. It

was apparent that the Japanese and Chinese partners of

Hangzhou Xihu Beer Asahi were collaborating in harmony as

evidenced from the observation during our meeting with the

Vice Manager, Mr. Chen Chun Hui (陈春辉先生) that the

Chinese party heartily appreciated the working and

management culture, and production technology introduced

by the Japanese counterpart. The Chairman of the Board was held by Japanese while a

local Chinese took up the responsibility of General Manager – a vivid indication that the

Japanese fully understood and executed the principle of ‘resources localization’. This

should also be the basic foundation of good corporate governance from the oriental culture

perspective. Implicit agreement and mutual respect are the key elements for successful

cooperation.

Eastern China (where Hangzhou is located) is traditionally not a prosperous beer marker as

compared to Beijing and the Guangdong areas. In view of this, Hangzhou Xihu Beer Asahi

had purposely and strategically tailored her own products in order to excel in niche market.

The latest product launch are “GreenCrystal”(绿晶) and “GreenRain”(绿雨) targeted at the

market segment of working or office ladies whom they identified is an unexploited but

potentially resourceful consumer category. Furthermore, both products are light beers that

are welcomed by the young and trendy white collar workers. Prior to a tour of the

production facilities, our palates were also honored to try out one of their most successful

outcomes – GreenRain Xihu Beer – a low alcoholic low bitter taste beer - which

enabled us to understand that beers are consumables that need be tailored to different local

preferences. In the Hangzhou region, drinkers prefer light and low alcoholic beers to be

enjoyed in sips or gulps in room temperature during the winter seasons. Apart from the

transportation consideration, the point might explain why there are so many brands in

China.

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Group Photo – Hangzhou Iron and Steel

Exchange views ….

Whilst visiting the production facilities, we were

told that the Japanese brewing technology differed

from that of Germany. As advised by the

Technology Director of Hangzhou Xihu Beer

Asahi, rice or corn powder was added in by

Japanese as one of the raw ingredients for the

brewing process. The flavour of the beer produced

in this unique manner is light and fresh, whilst

German beer has a much stronger and bitter taste.

Moreover, Hangzhou Xihu Beer Asahi had

implemented new production technology whereby

a virus- or disease-free process and environment

are enforced in the beer brewery. The resultant

beer would acquire the freshness of draft beer but simultaneously deter the on-set of

deterioration. The success of Hangzhou Xihu Beer Asahi reinforced that continuous

innovation is the core competence of every business.

From their presentation, we were impressed to know that the concept and practice of

environmental protection were deeply rooted in the heart of the employees of the company.

Glass bottles were recycled; plastic crate for carriage of the glass bottle was standardized to

avoid wastage and undue damage during transportation; water pollution was minimized

through waste water treatment before drainage into the river or ducts.

3.3 Hangzhou Iron and Steel Group Co. (杭州钢铁集团公司杭州钢铁集团公司杭州钢铁集团公司杭州钢铁集团公司))))

Upon entering the BanShanQu

area ( 半 山 区 ) at which

Hangzhou Iron & Steel Group

Co. is located, huge clusters of

grey buildings of all sizes

cropped up before our eyes. We

knew we were not visiting

merely a company but a

community built upon heavy

manufacturing facilities.

Hangzhou Iron and Steel Group

Co. is currently ranked 94 among

the largest 500 Chinese

enterprises in China. With

more than 41 subsidiaries, the

group has total asset value of RMB 18.4 billion and is listed on the Shanghai Stock

Exchange. Apart from operating 3 furnaces in the region, the company has a further 16

production lines measuring up to international standards. In comparison with the largest

steel manufacturer - Shanghai Baosteel Group Corporation (上海宝钢集团公司) with an

annual output of 23.8 Mton (million metric tons) crude steel, Hangzhou Iron and Steel

Group Co. is relatively small with an annual output of only 1.06 Mton. Apart from iron

and steel manufacturing, the group has undergone diversification into versatile business

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Our delegates

Briefing by staff-in-charge

fields, including real estate, trading, hotels, tourism, environmental protection and gold

mining.

We were received by the head of the Industrial Tourism Department(工业旅游部) Mr.

Weng and were delighted that visit to two of their major manufacturing facilities as well as

a tour of the exhibition hall would be conducted. A designated guide – XiaoLing was

assigned to accompany us and responsible for detailing of the manufacturing processes of

the company.

Firstly, we were escorted into the steel rope manufacturing facility in which the

manufacturing line had been upgraded through installation of imported equipments from

Germany and the U.S. The ropes produced are mainly for construction purposes. In the

huge plant, we felt the intense heat of red-hot steel strands continuously ejecting from the

furnace and witnessed how the machine converted the semi-finished output into big coils

after cooling. We were then directed to another small-size steel rolling plant, a part of

which was under routine repair and maintenance whereas elsewhere workers were engaged

with the production of long thin steel bars intended for construction purposes. The visit

concluded at the exhibition hall which spelled out the story of the company development

since 1957.

The orientation was surely an eye-opening opportunity for participants like us for whom

heavy industries are merely words and pictures captured in books. Through this visit, we

not only gained a brief understanding of the iron and steel industry, but also acquired

insights behind running a transitional state-owned enterprise. Hangzhou Iron and Steel

Group Co. has around 10,000 workers on its payroll. Shadow of state-owned enterprise

still overcasts – the concept of “cradle to grave” seems ingrained. Other than

manufacturing plants, the industrial complex, comparable to a self sufficient community,

constitutes dormitories, nurseries, schools, hospitals, shops and all other necessities for its

workers and family members. For the people working within, the Group is their provider

as well as organizer of daily livelihood. As we understand, PRC government has been

closing down old and inefficient steel plants in north-eastern provinces. Hangzhou Steel

and Iron Group Co. has successfully been transformed into a competitive enterprise

yielding a profit of 2 billion annually.

The Group has devoted considerable effort on environmental protection and plant site lots

have been designated as green areas to alleviate the atmospheric pollution. We have to

understand that steel mills are industries that bring about externalities and social costs.

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Group Photo – 80

th Anniversary, Minsheng

Speech by Mr. Zhu, Chairman of Minsheng

Over the last decade, the China steel production has been growing rapidly and today is

being proudly ranked first amongst all countries globally in terms of million metric tons

crude steel production - 349.4 in year 2005 (Source: World Steel in Figures 2006).

Industrial and economic analysts had raised alert about the coarse and low-value nature of

most Chinese manufacturing facilities and the Nation could be paying heavy prices in quite

standard productions against enjoying only meagre margins. Scrutinizing the other side of

the ledger, China is also the largest steel importer in the world - 33.2 million metric tones

(Source: World Steel in Figures 2006) with a profile of high quality and value steel

products which could only be produced through more sophisticated process. It is believed

that local demand of steel remains strong as China is undergoing rapid urban development,

not to mention all the building projects to be accomplished before the advent of the 2008

Olympics in Beijing. It is important to realize that the success factor is moving beyond

merely volume and size.

Exhibits in the hall are historical relay of Hangzhou Iron and Steel Group Co.’s struggling

survival through the political turmoil since 1949 and how the Group had strived through

restructuring and modernization since the days of economic reform. Nestling in the hall is

a stone casting dated 1958 during the era of the “Great Leap Forward” regime (大跃进)

with the bold inscription “To surpass England in steel production in 15 years”. The spirit

still holds true today in terms of knowledge and skills.

3.4 Hangzhou Minsheng Pharmaceutical Group Co., Ltd.

(杭州民生药业有限公司杭州民生药业有限公司杭州民生药业有限公司杭州民生药业有限公司))))

On route to Hangzhou Minsheng

Pharmaceutical Group Co., Ltd, we were

delighted to be advised that Mr. Zhu Fu

Jiang (竺福江 ), the President of

Minsheng, would join us during the visit.

Upon arrival, we were directed to a

conference room that displayed a

traditional contemporary China décor

with porcelain teacups, wet hand towels

and small fruit baskets in place for our

delegates. Minsheng, established in

1926, was one of the 4 earliest

pharmaceutical factories in China and

the company is going to have its 80th

anniversary celebration later in the year.

Upon settling down, Mr. Zhu, who assumed

the presidential helm in 1995, walked in and

delivered his presentation. Mr. Zhu,

conversant of the Chinese pharmaceutical

industry, gave us an overview of Minsheng

under his direction over the last 10 years as

well as some major challenges facing the

industry. Under Mr. Zhu’s guidance,

Minsheng was successfully transformed

from a SOE into a collective-owned limited

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Sanofi-Aventis Minsheng Phar. Co. Ltd

company with an annual turnover reaching RMB 800 million. Mr. Zhu further advised

that today the State only owns about 5.1% of Minsheng’s shareholding. Citing a lively

metaphor of playing chess game, Mr. Zhu illustrated how the restructuring of ownerships

and management over the past decade had

dramatically revitalized the company in terms of

business development and product innovation.

The President recalled with pride that during the

process of company transformation, no

employee had been laid off. Today products of

Minsheng range from over the counter

pharmaceutical products to APIs (Active

Pharmaceutical Ingredients: active chemicals

used in the manufacturing of drugs). Products

are both for local as well as export markets, in

particular APIs of which 70% are for export to

over 38 countries and regions. Its “21 Gold

Vitamin” is one of the most successful products in the Chinese market. Minsheng

established a joint-venture operation with the French pharmaceutical company

Sanofi-Aventis to incorporate Hangzhou Sanofi-Aventis Minsheng Pharmaceutical Co. Ltd.

(杭州赛诺菲安万持民生制药有限公司). The JV facilitated Sanofi-Aventis to outsource

manufacturing to lower-cost region whilst enabling Minsheng access to international

networks.

Chinese pharmaceutical firms, including Minsheng, are facing immense challenges,

particularly in terms of product standards and testing. Standards of drugs used in China

are regulated by the State Drug Administration of China (SDA). Today in China with

over 4,000 manufacturers of all sizes and imaginable ownership, there have been concerns

about malpractices and counterfeits which will undoubtedly jeopardize the development of

the industry. Exploitation of export markets is even more challenging considering the

variance between standard protocols of SDA and the world recognized FDA (Food and

Drug Administration). Stressing research and development is of utmost importance for

players in the industry. Mr. Zhu was confident that given a period of flux and the

elimination process of the market mechanism, the industry would settle down with an

established arena.

In comparison with India, backed by a sizeable domestic market and longer track record in

pharmaceutical industry, China is behind the pace in terms of both endowment and

expertise. The advancement of the Chinese players in the industry, in the foreseeable

future, will depend very much on the ability of learning and knowledge transferring from

foreign companies. Rather than focusing on development of new drugs from scratch,

competitiveness of Chinese pharmaceutical firms lie primarily in the improvement of

existing medications.

Despite having to overcome all these challenges, prospects of the Chinese pharmaceutical

market is encouraging taking into account both the favourable factors of huge populations

and the continuous improvement of living standards. Government policy continues to

have significant impact on the industry. The recent implementation of state-run health

insurance and policy would surely have important implications for the players in the

industry including the price containment policy which will affect not only the pricing of

medications but also their distribution patterns.

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Office Reception & Lobby, Alibaba

Souvenir Presentation

3.5 Alibaba Corporation (阿里巴巴阿里巴巴阿里巴巴阿里巴巴))))

Alibaba Corporation was established in

1999 with minimal start-up capital by its

founder, Mr. Jack Ma, in collaboration

with 18 other partners. In 1995, Mr. Jack

Ma set up a company called China Pages

which was considered to be China's first

internet-based company. Thereafter, he

accepted an invitation from China's

Ministry of Foreign Trade and Economic

Cooperation (MOFTEC) to head the

information department of the China

International Electronic Commerce Centre

(CIECC). He left MOFTEC and pursued

his own dream in early 1999.

In 2000, reinforced by large capital and investment funds from venture capitalists like

Goldman Sachs and Softbank Corp., they commenced to adopt a giant and rapid expansion

from year to year. According to “Alexa.com”, the authoritative independent company that

tracks website usage, “Alibaba.com” is now regarded as the world's largest online

marketplace for global trade and assumes a leading position in terms of traffic among

e-commerce and trading websites. The Alibaba group of companies currently has five

core businesses on the internet, namely:

[1] “alibaba.com”, globally the largest import/export website matching foreign buyers with

exporters in China and other manufacturing countries;

[2] “china.alibaba.com”, China's largest online platform for domestic B2B trade;

[3] “taobao.com”, a leading online platform for C2C and B2C transactions within China;

[4] “alipay.com”, an online payment system which partners with China’s leading banks to

provide online payment services for individuals and business corporations;

[5] “yahoo.com.cn”, a leading search engine and portal, acquired from Yahoo! Inc. in

October 2005.

Alibaba Corporation is young and

energetic. The first impression derived

from the office visit was that all people

were exceedingly young, so much more

than an average norm. The office layout

was totally different from what we saw in

other companies and enterprises visited in

the first two days of our study tour. This

office projected a very smart cyber decor:

a big reception lobby, trendy lighting, job

finders zone, glass door patrolled with

digital electronic lock, etc. A number of

medals were displayed on a multi-layer

shelf depicting the successful milestones

of Alibaba.com Corporation as well as its

CEO, Mr. Jack Ma. In the working areas, there were only a few enclosed rooms for senior

managers. All other staffs worked in an open office within their own cubicles equipped

with a LCD monitor desktop computer. Some employees even wore headphones

13

XiHu(西湖) with Leifeng Tower

indicating that some online communication or meetings were on going. As we strolled

through the office, we might even wonder if we were amidst a company in Mainland

China.

The office ambience delivered a feeling of freedom and passion. On each office floor, a

large resting area was available for functional activities like staff gathering and networking,

and group discussion or interview. Photos and messages were seen on the boards as well

as on the walls of corridor in the resting area.

The Alibaba accompanying guide, Ms. Yue, did not quite spell out what Alibaba’s corporate

culture exactly was. However, posters, pictures, messages, charts, and aphorism were

prominently seen everywhere in the office. All these conveyed to us a lot of messages

about this company as well as its corporate culture. The first big poster that we came

across had a list of 10 recreation, interest or entertainment groups named “Ten Pai” (十派)

available for all the employees participation. There was a group called “Killing”

intimidating all the delegates of the Exchange Study Tour. Ms. Yue explained this was a

group specialized in online computer game. No one would deny that informal and

non-business functional groups could help boost morale as well as the centrifugal force of

the organization. It would be an erroneous judgement to think that employees did not

perform industriously in a relaxed office atmosphere. As confirmed by Ms. Yue, the

employees in Alibaba had to work very hard so as not to lag behind the whole team.

However, Ms. Yue emphasized that overtime job was not encouraged. Despite the job

pressure, they were content and enjoyed working in Alibaba.

As an employee, we ought to know precisely whom we work with and for. This statement

is pretty simple but always ignored by most employees in an organization. When we

toured the office, it caught our attention that there was a funnel-shaped organizational chart

displayed on the wall. This hierarchical structure set CEO, Jack Ma, at the bottom

whereas the frontline staffs were inversely positioned on the top. Mr. Ma intentionally

like to remind all managers that they should perceive their subordinates as their customers

and thus to provide services as well as support for them. This concept or idea was totally

revolutionary from the traditional thinking that the juniors should otherwise serve the

seniors. The chart also clearly showed individual identity, who was who, and where the

relevant expertise could be sought.

4. Cultural Visits

Macro Polo labeled Hangzhou as “the

finest and noblest city in the world” when

he visited it in the late 13th

century.

During our stay, we’d been able to visit

XiHu, the famous scenic attraction prior to

our return flight to Hong Kong. Since

ancient times, XiHu has been associated

with poetic legends, romantic poets and

epic heroes. This natural tourist resource

still generates huge revenue for Hangzhou

and it can be seen that the city has spent

considerable efforts in preserving and

further developing its potential.

14

The Legend of White Snake

Lei Feng Group Photo

The new Leifeng Tower (雷峰塔), which

was unveiled in 2002 (the original one

having collapsed in 1924), revived the

famous scenery of Leifeng at Sunset (雷峰

夕照) (one of the famous 10 scenic spots of

Xihu). The new tower, made of steel

instead of brick and equipped with elevators

alleviate visitors the burden of climbing the

stairs. A RMB45.00 entrance fee would

afford a panoramic view of the lake as well

as the 3-D wood carvings of the legendary

story of Madame White Snake (白蛇传)

which attributes towards the monument’s

fame. Above all, there is an observation hall on the foundation level which enables

visitors to pay tribute to the actual original relics from the collapsed tower.

A casual stroll along the famous Su Causeway (苏堤) and then governor Su Dong Po (苏东

坡) of the Song Dynasty enabled us to appreciate this captivating silhouette of swaying

willow trees frequently patronized by fellow countrymen far and near as well as tourists

from around the world. In commemoration, a statue of Su stands aloft at the end of the Su

Causeway. The legendary poet, Su has conferred upon Hangzhou’s Xihu a gifted

blessing – a world renowned scenic attraction and the much acclaimed local delicacy –

Dong Po Meat (东坡肉). The mouth watering dish still enjoyed by almost every visitor to

Hangzhou has now been adapted for consumption with bread and bun to lessen its

greasiness to accommodate today’s lifestyle.

There is a Chinese saying “the best domicile is in

Hangzhou, the best cuisine is in Guangzhou” (住在杭

州, 食在广州) – a brief stroll along Xihu would be

sufficient to win your concurrence with the statement.

You could savour the tranquility of the scenery with a

tantalizing blending of nature’s creation and human

refinement. According to a survey conducted by the

China Europe International Business School this year,

the degree of contentment of Hangzhou residents

surpass their counterparts in comparable metropolis

including Beijing, Shanghai and Guangzhou. From

this finding, we believe that though living standard and

future prospect do contribute to happiness, the living

environment and ambience also matter.

15

5. Conclusion

In Chinese saying, the expression “a propitious place with great people” (地灵人杰)

appropriately befits Hangzhou. For centuries, people endorse the blessings of both the

geographic location and poetic scenery of Hangzhou. Throughout the trip, we discovered

inspirational virtues also lie in the determination and courage of Hangzhou extraordinary

entrepreneurs such as those of Mr. Zhong of Wahaha and Mr. Ma of Alibaba who created

their ventures from scratch. We also learnt from the footsteps of practitioners like Mr.

Zhu of Minsheng and Mr. Chen of Hangzhou Xihu Beer Asahi who brought about the

transformation of policy-driven state-owned enterprises into successful market driven

entities.

The study tour is exceedingly fruitful in the sense that we walked out of the classroom and

applied what we have learnt in the field. Given the chance to share and exchange with

local practitioners and managers is particularly rewarding for the delegates. By way of

the intense interactions, not only did we gain a better understanding of the latest

development of various industries in China, but also had the opportunity to appreciate the

variance and complexity of management and practices through application in local context.

We could sense the pride and confidence of managers and practitioners during

communications in all organizations. The confidence could be reinforced by the fact that

Hangzhou, with a population of around 3.9 million, accounts for 22% of the annual GDP of

the whole Zhejiang Province (with a population of 47 million). They are optimistic of

their future prospects, business and career opportunities. The proposed construction of a

high-speed train connecting the city with Shanghai (expected to be completed in 2010)

would certainly further gear up this strong engine in the region.

Challenges lie ahead. Some experts believe that the major arena of China’s development

is here and now when the economic engine of the country has to change rail to run on a

more efficient and valuable platform rather than merely on higher speed. All

organizations we visited are working towards this target in order to move away from fierce

competition of commodity products to high value-added and knowledge-intensive output.

Positioning Hangzhou in the broader geographic scope of the Yangtze River Delta, we

could easily see its contribution in this polycentric economic region. There are multiple

cities within the region and each of which has its own merits and advantages. We could

witness the interdependence of roles in “the golden triangle” - the Hangzhou Bay with

Shanghai assuming the service and financial centre, Ningbo undertaking the manufacturing

centre of electronic and appliance products and Hangzhou excelling as the centre of food

processing and beverage products and high-tech development. It is anticipated that the

role of Hangzhou as well as cities in the vicinity will focus on enhancement and

specialization along the development path whilst interdependence and complementary

collaboration will become increasingly significant.

On a lighter front, our cultural visit to Xihu and the famous Leifung Tower were quite

heartening experience for us.

We would like to take this opportunity to express our greatest gratitude to CASH Education

Fund donated by the Celestial Asia Securities Holdings Limited for their generous

sponsorship of our tour and also to Mr. Cai De Shao （蔡德绍老师）for his assistance in

16

Sanofi-Aventis Minsheng Phar. Co. Ltd

Night discussion cum late dinner

Iron ladies at Hangzhou Iron and Steel Group Co.

Iron men at Hangzhou Iron and Steel Group Co.

liaison with the various visit points in Hangzhou. We would also like to thank all

organizations we visited for providing us all the rewarding learning experience, and in

particular their managers and practitioners who have received us and given us so much

insights. Last but not least, the tour would not have been possible without the

coordination and preparatory works of the MBA Association of the Open University of

Hong Kong and the School of Business & Administration of the Open University of Hong

Kong and its academics, particularly Dr Irene Siaw and Dr. P.K. Yeung, serving as the

Heads of the delegatation.

Our team had benefited immensely from the trip (in terms of experience sharing, the

invaluable friendship cultivated, memories generated and supports solicited), and would

like to express our deepest gratitude to all the above-mentioned parties as well as all visited

organizations. “THANK YOU VERY MUCH”.

17

Appendix I: Personal Sharing from Delegates

CHAN Hing Tai, Jimmy (DBA student) The trip enabled me to understand that Hangzhou more than being a

place of scenic spots and historical heritage, is a venue filled with

energetic commerce. Through visits and interactions, I had a better

comprehension of the business environment, market transition as

well as the local culture of the Yangtze River Delta region. The

meetings and sharing sessions with the local managers and

practitioners were particularly rewarding in helping me visualize the

challenges and opportunities of the dynamic Chinese market. The trip also afforded an

eye-opening capture of huge iron and steel production and beverage production facilities.

To sum up, the blending of formal visits to the broad range of industries, social interactions

and cultural experience within the 4 days had brought me both unique insights and

exposures. Last but not least, the diversity of the delegates’ background truly enriched the

overall experience of the exchange study tour.

CHAN Yim Kam, Alice (MCG student) Through these four days’ exchange study tour, my knowledge about

beverages, medicine and steel operations had been much enriched. It

was amazing to witness large scale production plants complemented by

numerous blocks of staff quarters. As compared with Hong Kong

SMEs, they were much larger in terms of size and capital investment and

were comparable to a small self sufficient community.

Furthermore, I was also impressed by Alibaba’s energetic image. The working

environment and ambience resembled very much that of a playground rather than an office.

The contemporary management philosophies, enforced by most of the companies, also

aroused my curiosity to further explore their clues of success. Through the cultural

appreciation of XiHu on the final day, I came to know more about this renowned beautiful

natural scenery.

On the other hand, although most of our delegates came from varied industries, a recount of

bitter encounters in distance learning study life were mutually shared. Overall, it was

really a memorable trip.

CHIK Kwok On, Roy (MHRM student) This was a fruitful and enjoyable trip for me even though I had

previously been in Hangzhou over 5 times. This was especially true in

that Hangzhou had undergone a tremendous and amazing facelift since

my last visit a decade ago. Hangzhou was the old capital city with

unique beautiful scenery, especially the XiHu. However in addition to

those sightseeing attractions, what stood before our eyes today were

nationally famous brandings and corporations that had been quoted in

business research topics or cases in MBA courses, such as the successful

story of Wahiawa. It was not realistic to expect that all the answers could be obtained

from a brief visit of only a couple of hours. However, this exchange study tour did

enhance my personal viewpoint as well as my mindset. I also appreciated that all the

delegates were very amicable and put in active contribution.

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CHOW Tak Chi, Gigi (MPA student) The trip afforded gave me numerous eye-opening opportunities, in

particular, visiting large production facilities. It was really rewarding

that I could apply classroom knowledge in different context and culture.

I was also grateful that I was able to share insights from other delegates

who came from diverse background and experience. Moreover,

Hangzhou is truthfully an enticing city.

I finally would like to thank the Open University of Hong Kong and the OUHK MBA

Association for offering such a wonderful trip for MBA students. Without such

generosity and effort, I believe such an opportunity of exploring several diverse industries

within the four days timeframe could not have been realized. This was quite a worthy and

fruitful experience.

CHUNG Take Sun (MBA student) I found great pleasure participating in the Hangzhou Exchange Study

Tour which was so successfully concluded. We had a wonderful

team of members coming from different disciplines.

During the tour, we had the opportunity to visit the most outperformed

enterprises of various industries in Hangzhou. Apart from the

captivating scenery of XiHu, I was astonished by the massive scale of manufacturing

enabled through adoption of advanced automation in those beverage, steel manufactory and

pharmacy industries. I was extremely impressed by one of the most successful B2B and

C2C internet platform in the PRC, Wahaha’s people caring culture and her sense of

dynamism, learning and innovation.

Reinforced by the snapshots captured from these corporations, we could identify the critical

success factors of the state-owned and private listed enterprises and the manner in which

they compete and surpass their competitors in the rapidly changing economic and business

environment in the PRC which constantly faces challenges from all over the world.

For my future career and personal development, I believe this will be one of my much

value-added experiences.

HO Kari Hon, Caron (MPA student)

Through this exchange study tour, I have gained better understanding

and witnessed the passions of the participants. Hangzhou was a

scenery heaven rather than an industrial city as indeed we felt it was a

beautiful city where scenic attractions were abundant everywhere,

especially around the Xihu.

Within the arranged tour itinerary, we were overwhelmed with visits to the beer brewery,

steel mills, pharmacy plant, beverage production facilities and a leading e-commence

operation. The complexity and sizeable dimensions of the automated manufacturing setup

were hard to come across in Hong Kong.

This tour was most rewarding as it enabled me to gain insight of its economy as well as to

grasp some indications of the business environment in the Mainland China. The strides of

China’s economy and its increasingly prominent global status provide further leverage for

development and above all reinforce my heritage pride as a descendant of the dragon.

19

LAM Wai Man, Ronnie (MBA student) I am more than delighted to have the opportunity to participate in the 4

days exchange study tour, sponsored by CASH and organized by the

University this year. I had rewarding moments in Hangzhou

establishing friendships with other delegates and had certainly learnt

through sharing experiences with fellow students during the tour.

This was my third visit to Hangzhou, however not as a tourist but a

fervent observer. It was a down to earth way to learn and get to know the economy

through visiting organizations and manufacturing facilities as well as conversing with the

entrepreneurs and executives of the establishments. I was really taken aback to see the

economic dynamism even in this secondary tier city of China. Hangzhou has now taken

on a different perspective in my perception – it’s energetic and promising, yet lovely and

beautiful. Behind all the booms, I could feel the “puppet shadow” of the State behind

many large entities that we visited. Government’s policies and regulations still cast

overruling influences and impacts, regardless of trades and modus operandi.

LIANG Miranda Gerowati (MPA student) This was quite an informative trip as it provided me the opportunity to

acquire a better understanding of the manner in which various types of

businesses are conducted in China. Hangzhou is a very special city in

China as it is blessed with both its “hereditary practices” and the “onset

of modernization”. Culminating from the city’s cultural heritage, the

people in Hangzhou have capitalized their entrepreneurial spirits

supplemented with modern technologies to establish diverse industries,

such as pharmaceuticals, beverage, steel manufacturing and internet services.

Through the eyes of group members who originated from different background, I could

gain different insights into the multi aspects of Hangzhou and thus broaden the parameters

of my mind-set. Overall speaking, this exchange study tour was a very precious

opportunity for all of us to be more acquainted with our Motherland as well as our fellow

students.

LIU Po Chu, Monse (MCG student) I was glad to join this exchange study tour group. I was much

impressed by fellow delegates’ earnest learning attitudes. Prior to our

first briefing, the majority had commenced their researches on the

enterprises to be visited. In discussions, all took on a serious approach

as if tackling OUHK assignment. During the visit, they actively

participated - raising questions, recording the materials, seeking

information and clarifying queries from time to time. Despite the short

span of only four days, lasting friendships were cultivated by the end of the trip. Not only

did we gain insights from the institutes we visited but also acquired inspirations from our

team-mates. All participants from different industries or trades contributed towards

experience sharing. In fact, the element I really treasured most was our discussion

processes that enhanced not only my knowledge but also social skills. All in all, they

undoubtedly constituted a valuable fraction of my memory. I would like to conclude that

the tour was a fruitful harvest.

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LIU Xiaohong (MBAC student)

10 月 15 日至 18 日，我跟随香港公开大学杭州学术交流团，在中

国古都杭州，一个因西湖美景而闻名于世的城市，经历了一次令

人难忘的杭州企业行。在出发之前，管理学院就召集准备会，向

大家通报行程、分小组、搜集企业数据、整理交流问题，可以说

做了充份的准备工夫。但在和企业那么近距离的接触后，在亲耳

听到、亲眼见到甚至品味过后，感受还是很强烈。有惊叹，为了

现代化的生产线、整洁的厂房、完全市场化的运作；有迷惑，因为有些问题没有得到

解答；更多的是意外的感动惊喜，因为在国内一个普通二级城市，孕育出那么多国内

甚至国际知名的民营企业。

感谢公开大学，给了我一个走出课堂，走进企业交流的机会。虽然时间安排很紧张，

每天六点起床，跟打仗一样一天走访两家公司，比上班还辛苦，但可以把课堂上学到

的知识在实际的企业中得到印证，尤其是和香港的老师同学们共同更深刻感受到了国

内企业的发展，就觉得再辛苦也是值得的了。

LO Cheung Chuen, Eric (MHRM student)

“Up above is Paradise, down below are Suzhou and Hangzhou” (上

有天堂，下有苏杭). These stated grounds are also acclaimed places

propitious for giving birth to great men (地灵人杰). I felt so

excited being able to join the Exchange Study Tour to Hangzhou from

15 to 18 October 2006. The orientation visits widened my vision on

the application of different models of management practice adopted

alike by those renowned state-owned enterprises (SOEs) and private enterprises in the PRC.

Echoing through my mind was a Chinese proverbial saying, “To read ten thousand books is

least comparable to travel ten thousand miles”. We had visited 5 celebrated enterprises in

the four-day tour. I had benefited from the invaluable sharing sessions with those senior

managements on the corporate policies, marketing strategy, organizational culture… etc. I

was appreciative of the tour which provided an optimum opportunity for knowledge

enhancement as well as sharing of working experience and personal endeavours amongst

fellow delegates.

LUI Lai Shan, Vivien (MEC student) It was a pleasurable occasion to participate in the Hangzhou Exchange

Study Tour co-ordinated by OUHK School of Business &

Administration and the MBA Association. This was really an

interesting life long experience. There was commendable team spirit

wherein all had conscientiously accomplished the assigned tasks. I

treasured and thanked my fellow delegates and shall anxiously await

the sharing of more joyful moments together.

MA Wing Han, Ellen (MBA student) This exchange study tour had revoked my biased perception of

Chinese enterprise. Despite the leverage for innovation, it was not

easy at all for China to have achieved its current status and I have

every confidence in the future business potential of our Motherland.

During the discussion, it was only natural to encounter varying

points of view for which the answer was not simply just ’right’

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or ’wrong’. I discovered that business success were not consequential on written theories,

concepts or strategies. On the other hand, there were endless secret recipes and success

formulas which could not be readily extracted from MBA handbooks. Due to variance in

political background, corporate culture, business climate and national leadership behaviour,

China’s business success had its unique model which differed from that of its western

counterparts. Audacious ventures would revolutionize success miracles.

MAK Kin Hung, Mac (MBA student) Through these orientation visits, we had unveiled the clues of success

of the organizations and furthermore enhance our analytical skills of

a company from its cultural, operational and structural perspectives.

Notwithstanding only a 4-day tour, the delegation conducted

observations that could not be gained from textbooks. Though

abundant information could be derived from company publication

and website, a physical encounter would afford a broader view from an alternative angle.

It was a most memorable visit undertaken by twenty postgraduate students under the

guidance of two knowledgeable School Academics. During the trip, we shared our

experience and recollections and no other meetings could have imposed such significant

impact. It was so amazing that twenty business studies enthusiasts from different

industries all upheld the common objective to capitalize on the Hangzhou Exchange Study

Tour. Similar opportunity is invaluable and participation is highly recommended.

NG Kit Fun, Grace (MBA student) This was my first visit to Hangzhou. By way of this exchange study

tour, I gained better insights of the city’s outlook, its cultural

livelihood and recent business accomplishment. During the 4-day

visit, I was immensely impressed by the enterprises’ management

philosophies and aggressive development plans and had also observed

the set in of management culture revolution. At Alibaba, I was

spellbound by its unique corporate culture with emphasis on team

spirit building. Visits to Hangzhou Iron & Steel and Minsheng Pharmaceuticals had

broadened my horizon in my first encounter with these industries. All in all, the tour

provided me an invaluable opportunity to acquire industry knowledge that would inevitably

assist me to reinforce my business concepts and in my pursuit of future academic

aspirations.

SHER Wing Wah, Montgomery (MBAC student)

本人从事中国贸易多年，参观过不少工厂，今次随香港公开大学访

问的杭卅企业考察团，确实令我大开眼界，因为所参观的企业均代

表了中国改革开放 20 多年后开始走向世界前端的基石。譬如民生

药业，它代表了由国有企业如何排除万难，逐步演成民营企业，又

面对市场竞争而不被淘汰。所以作为香港人怎样去对策才不被边缘

化，这是很值得探讨的课题,亦是我们修读 MBA希望所学到的。

TAI Siu Wai (MBA student) It was an enjoyable occasion to conduct sharing exchanges with

fellow delegates who come from various industries – marketing

entrepreneur, banking loan executive, accountant and young IT

professional. They highlighted a number of interesting aspects

specific to individual organizations perceived in different context

22

and perspectives which I had overlooked. For me, having stationed in a local power

utility as an electrical engineer for two & a half decades may have nurtured a subconscious

tendency of maintaining status quo.

The exchange study tour had served as a convenient vehicle to unleash the underlying

realities inside these representative state-owned and private enterprises. Through this

avenue, I can acquire first hand knowledge and conduct candid encounters with companies

within a wide spectrum of endeavours e.g. Alibaba. The tour had accordingly re-affirmed

that the roaring dragon engine was imminent in most parts of the territories.

WONG Cheung, Isaac (MBAC student)

今次杭州交流，能带出对当地实地理解和认识加深，可以参照现实

与文章有多少距离，透过公司高层介绍和对话，及参观生产流程，

可增加此公司整体工作味道。同学之间感情，因今次交流彼此深入

认识，由对方不同行业背景，开启了广阔视野，那经验交流冲击沉

睡已久想象力，浑然天成的创新思维涌注于工作里面，与此同时既

琢磨人生价值观，补上观摩交流这一缺。

WONG Wai Hung, Michael (MPA student) The exchange study tour offered an invaluable opportunity or me to

visit varied types of organizations in China, encompassing state-owned,

Chinese-foreign joint venture and private entities. Of particular

interest was the metamorphosis of state-owned corporations being

gradually transformed under private ownership – a unique

phenomenon in the business environment in China. Last but not least,

I was delighted to meet with fellow schoolmates and share their

different life experiences.

WONG Yuk Chin, Ken (MHRM student) This was the first time I set foot in Hangzhou – consequently all

happenings provided fresh inspirations. The exchange study tour

had afforded a showcase of the Mainland China and facilitated me to

capture an in-depth comprehension of the manufacturing industry in

the PRC. On account of China’s open door policy, increasing

number of state-owned enterprises had been transformed to

collectively-owned or publicly listed business entities. Hangzhou is

a renowned cultural heritage and also the homeland of many celebrated writers and epic

heroes. I was amazed to learn that there are a total of 14 tertiary institutions within its

domain – much more than any other cities in the country in terms of population ratio.

In my opinion, the binding terms and conditions for Hangzhou foreign direct investment

(FDI) have already been well established. Any entrepreneur seeking business

opportunities beyond Hong Kong may consider the aforesaid uprising metropolitan as a

commendable alternative.