The Evolution of the Social Enterprise

Looking at virtually any major corporation’s homepage, it is clear that the selling point of firms has changed. Now it is more of a challenge to access a website and fail to find the words ‘sustainability’, ‘value’ or ‘responsibility’. This is a major change from the traditional emphasis on a company’s net worth and the focus on market value (as opposed to social value). So, how has this transition come about?

Essentially, it has been driven by changing social values. Whereas once companies were evaluated based on their profit margin, now it is their social impact which makes them more attractive. Though many companies are still profit-driven, they are no longer marketing this as their purpose in open forums, as illustrated by Staples Inc.’s new slogan: ‘Make more happen’. Other companies, however, are driven purely by a desire to achieve deeper social impacts and best illustrate the evolution from a traditional firm to a social enterprise.

Traditional enterprises were concerned with cheap labour costs, high returns on investment and protecting intellectual property. As a result, meaningful employment, social investment and technology transfers to developing areas were of seemingly little interest to companies. Gradually however, philanthropists within companies began appearing and considering such social issues. For the most part, however, these actors simply directed funds at external projects but played no active role in carrying them out. As a result many social projects simply revolved around donating products or services to ‘beneficiaries’, as opposed to empowering participants. From the unease over resulting dependency risks and lack of dignity, social enterprises were born. Finally, we began seeing companies powered by the desire to help others pave their own personal development. The question is: is it possible for all current firms to reach this stage of evolution?

For a company to truly reflect the values of a social enterprise, the influence on its stakeholders and wider community has to be bidirectional. Essentially, decisions must mirror the specific needs of society, not what the company determines they may be. Social entrepreneurship is essentially about asking the right questions and finding a way to add value through business. This means that addressing social issues creates added value for both the company and society. Hiring an equal number of men and women, for instance, does not simply tackle gender issues, but gives companies a wider perspective and access to different market segments. Hiring employees with special needs, also gives companies access to special skill-sets. For instance, ‘Dans Le Noir’, an international restaurant chain which gives customers the brief experience of being blind, benefits from the precision and comfort of its visually-impaired staff in the dark.

Such companies, however, are missing a simple element. Though many companies may be branding themselves as social pioneers and others actively working to modify their business model, they were not created to solve a social problem. So, does this mean that they will never become a social enterprise? Well, according to Clearvale, no. This company has now created a ‘Social Enterprise Transformation Program’ to facilitate knowledge-sharing and the modification of workplace habits. Though I remain doubtful that a company can simply undergo a ‘social makeover’ of this nature, it is clear that companies can benefit from building a bridge between their interests and those of society. In the future, we may only have social enterprises, but for this we have to move beyond the selling point to the point of existence.

 


Comments Off on The Evolution of the Social Enterprise / 24 Mar 2014 por anabeatriceacuna
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Re- Possible Business Etiquettes in China.

 

My earlier post and expectations all disappeared when I got to China. What a great positive shock. Indeed you need to live in a place before you can comment or say something about it. The large size of their beautiful airport, the high skyscrapers, modern super market, new efficient train stations and lovely traditional gardens are the woa memories I have about both Shanghai and Beijing. Even though my trip was very short these are the things that I learnt at Jiao Tong University and the companies I visited in China.

Joint Venture: The best way to known and also grow as a business is through joint venture if you are small or even a big company since that is very easy for you to penetrate through the market, and saves you a lot of hassle with the registration of your company

Marketing It is very important for you to research into the Chinese market before you start selling to them. The first thing you need to do is to adapt to their needs and wants, and know what scope of the market you want to cover since it is a very big market and their taste for foreign quality brands is high. 

Guanxi : It more then connections, It about creating a long term good relationship with your Chinese partner so that they can opens door for you in terms of need and you can not get Guanxi in a day, you need to develop contacts, attend social gatherings and be kind to them, be it festivals or not. The higher your Guanaxi the higher your business opportunities, access to key information and smooth operation of your business.

Mianzi. It represents your image, reputation, prestige either within the society, work place or among your friends. You can gain face if you drive expense car or give out expense gifts to your friend since luxury goods are all connected to face. You can also gain face if you able to accomplish something through your personal contacts that others cannot accomplish through their contacts, Another amazing factor which is very important for you is never to do is talk about your business partners either in the public or private places since this can make you lose face and it can cause harm to your business or your relationship with other people as well.

Trust – It is very difficult for a Chinese person to open up to you if they do not know much about you, they study people for a very long time before they can open up to them. As public companies are different from private companies so I was not that surprise when we invited Baosteel the “World’s Most Admired Company”. According to Standard & Poor’s, Moody’s, 116,702 employees, a company that enjoys the highest credit rating in the global iron and steel industry yet information was very difficulty to be accessed and in all this process what kept coming to my mind is they do not know much about us before they can be comfortable to relay information to us.

Counterfeits: Trademark and product counterfeits is a major problem for many foreign brands and local brand as well. Many brands yearly losses billions of dollars and it also cause serious harm to their reputations of brand due to this problem but there is a lot of pressure from internally and international community to put stop to this problem the good news is that there is a law out to put stop to this it but since part implementation is not easy I do not think counterfeits is over in China.

It was a great experience in terms of cultural diversity and learning, to sum it all China is not a country is a continents with great positive and dangerous oppournities at the same time.

 


Comments Off on Re- Possible Business Etiquettes in China. / 23 Mar 2014 por mavisasare
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Crisis: an opportunity to fill in the gaps

In 2001 Argentina entered a deep economic, political and social crisis. The currency lost its value, people had their money locked up in the banks, looting and protests were a daily sight… we even had 5 presidents in ten days. “In 2001, the year the crisis stroke, 38,5% of the Argentinean population lived in poverty and 13,6% in extreme poverty”.

Nevertheless, this grim situation was a inspiring for lot of people. Whether it was for own need or for empathy, it motivated many to start new things in order to improve the situation, it motivated innovation and solidarity. The gaps in the system had to be filled because they were affecting people: these gaps were pushing more and more people into poverty and marginality. Optimists and fighters started thinking about new things, new ways of solving social problems.

Crises are one side of the coin; the other side is all the opportunities that it creates. When something is gone, it leaves an open space for something new to happen.  Many people decided they would make it happen:   while some felt compelled to fill in the gaps with creative solutions that could help the society recover from the crisis, others heard about these new solutions and decided to trust  and support them.

These people who decided to give new solutions to social problems in sustainable ways are called social entrepreneurs. Their projects took different forms: NGOs, social business, cooperatives, new products inside regular business, are some of them. Social entrepreneurs are everywhere, and despite the institutional form their project takes, the idea is the same: give a solution to a social problem using their entrepreneurial skills. This doesn´t necessarily mean through a business, it means that they can “organize, create, and manage a venture to make social change”. The goals went from creating inclusive economic activities, to supporting education, or providing access to housing or health.

A great example of this social entrepreneurial spirit is Toty Flores. He lost his job during the crisis of 2001 and led the creation of a cooperative of unemployed workers that didn´t want to live out of the government subsidies. Through this cooperative called “La Juanita”, they decided to create their own income and as a first step they set up a bakery and a serigraphy workshop. The years went by, and they continued growing and looking for new economic activities. This is when Toty Flores met Martín Churba, a fashion designer that owned a very well known brand of women clothes. Martín Churba was already an entrepreuner, but Toty offered him the opportunity of including a social drive to his work. This is how they created the project “Let´s make work a trend” (Pongamos el trabajo de moda) that consisted in designing, producing and selling trendy and fashionable uniforms for workers.

The case of Toty Flores is just one example of and social enterprise that was born because of the crises. “La Juanita” with different projects they launched aimed to help fill in one of the many gaps the crises left. Lots of other social entrepreuners started working in that same moment in the same direction, and also in the years that came after 2001, because the gaps were so many …  and they still are. Of course the solution is much more complex and requires the engagement and action of different social actors, but these kinds of projects definitely contribute to it.

 

Some references

 


Comments Off on Crisis: an opportunity to fill in the gaps / 22 Mar 2014 por celinalesta
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Tropical Salvage

Tropical SalvageTropical Salvage is social enterprise, what it is called “a business with a cause”. Its business model is simple: import high-value hand crafted furniture, household accessories and architectural components. But it doesn’t end there, accordingly to their claim: “We never cut down a tree to make our solidwood furniture” and is there where the salvage part starts. The source of wood is any that one could imagine except logging, from timber floating down rivers to trees knocked down by earthquakes or volcanic eruptions.  This wood is recovered (salvaged) and used to craft different items by up to 95 qualified Indonesian carvers, whose employment is based on fair trade principles. The broad range of tropical species leads to unique figures and colours.

Tropical Salvage was created by Tim O’Brien after he saw, during a hike Gunung Lueser National Park (West Sumatra) in 1998, a vast area of recently clear-cut primary forest. The logging project had harvested only the trees’ trunks, leaving behind the crowns and stumps. He was so shocked and moved by the experience in Sumatra that he decided to take action by creating a business strategy that would help reduce destructive pressure on primary forests.

Different items made out of salvaged wood.

Different items made out of salvaged wood.

 

Salvage of a trunk.

Salvage of a trunk.

The company collaborates also, in partnership with the Institute for Culture and Ecology (IFCAE) and the Jepara community, to develop the Jepara Forest Conservancy, a botanical park and environmental education centre to improve local environmental conditions and raise environmental awareness on the Mount Muria peninsula in North Central Java.

 

 

To know more: http://tropicalsalvage.com

 


Comments Off on Tropical Salvage / 17 Mar 2014 por juancarlosgomezmartin
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When in China, behave as the Chinese do (part 2 of 2)

Chinese strategy and trends to tackle imbalances and reach a sustainable growth

Chinese are very quick to react and adapt to a changing environment. China is hectic, it moves really fast. There are amazing ROI rates: you can recover a capital investment in 2-3 years (Melia Hotel Group recovered a 10 USD million investment in hotel renovation in only one year!).

Yet China has huge imbalances: geographically agriculture is not equally spread, moreover the natural resources are located more in the middle of the country while their use is mainly needed in the East (due to poor domestic connections and moreover to the amount of resources needed for its industries, China has been importing resources). The East now is about 3 times richer than the West: unequal share of income and opportunities creates problems, social and economic.

How is China facing these issues and what are the future strategies and trends?

There are signals China will move away from privatization and reform the SOEs (State Owned Enterprises) because they are not efficient, not competitive. Main goal of SOEs is to secure employment, not to be profitable and reward the shareholders. SOE will take the money of the investors but use it for their purposes and not care about dividends: there are no incentives for shareholders to invest in SOEs.

Talking of SOEs, China had initiated a privatization process in the 1990s but it had kept the largest companies fully owned by the state (example of Baosteel, the steel giant we visited) or the ones in strategic sectors with only the possibility for foreign investors of having a 50% of a Joint Venture (for instance in the automotive industry Volkswagen has a strong presence but only through a JV). Almost worrying to see – as a confirmation to what I knew about the control over the information – how difficult it was to have even basic information (such as the number of employees of a plant) of SOEs or JVs compared to wholly private companies.

Another important aspect is that China is changing the direction of its 5 year growth plan. The general guidelines of the 2010-2015 plan were to boost export and investments but they are shifting towards boosting the domestic consumption, key economic driver for the years coming. Exports and FDI have been central pillars of Chinese fast growth, but these are not working as well anymore. Relying on exports and foreign investments has many downsides: gap rich-poor, dependency from other countries, risk of financial bubbles. For instance the property market in China is a risk: if the bubble bursts it might bring down the whole global economy. But luckily there is a difference with the collapse in the US where people were leveraged, buying houses with loans and mortgages; here they buy mainly by cash.

How to boost domestic consumption?

Increasing the salaries, that are growing up to 15% per year (this fact, and the consequences of the one-child policy that might cause a shortage of workers, determine that China as the factory of the world will not be true anymore).

And pushing for urbanization to provide people with jobs: the National People’s Congress is incentivizing this shift so people have a higher income and can increase the consumption levels. In fact China has experienced amazing urbanization rates: 200 million of people moved to cities between 2010 (650m) and 2012 (850m) – biggest migration ever – and yearly about 70-80 million people are still moving.

The good news for the companies is that urbanization and an increased income brings potential new customers. Very interesting opportunity when considering that in China brand differentiation is at its infancy. People who move to cities have no real knowledge about the brands, once they increase their income they go out and look for the best options. Moreover, low brand awareness translates also in really low loyalty rate to brands (especially true in the countryside): exposed to so many brands, they are like adventurous shoppers who do not know which one is best for them and keep trying out new ones. They rely on the bouche-à-oreille and on the social medias (Renren and Weibo are the Chinese surrogates of Facebook and Twitter that in China are blocked like many thousands of other social and information sites, even Bloomberg has been banned after they published an article in which they mentioned social and political issues to explain economic trends. Something obvious for a Western mentality but not accepted here). Chinese consumers also have a skeptical approach: they don’t know what the real value proposition of a brand is. The final purchasing decision for a notebook for instance could arrive even after 6 months of thinking over and gathering info.

One advantage for foreign brands is that Chinese people have a perception of low quality of the Chinese products (or else a good perception of products of foreign brands and products made abroad), especially for luxury goods and health related products. Also, perception that big large companies are more trustworthy. Interesting to note also that China by 2015 might overtake Japan and become the largest consumer of luxury brands in Asia, 2nd in the world only after the US.

In the case of consumer products, if the companies want to take advantage of these opportunities, when defining the communication and promotion approach it is important to have a strong online presence and a social media strategy, especially if targeting younger demographics who spend most of their free time online and hardly watch television (not allowed in the colleges’ dormitories). Besides, they should identify the local media and tv broadcasts because each province has its own and many consumers prefer to watch regional and local tv (tv still relevant for older people). Worth to mention that China offers many chances for creative and design related jobs: creativity is not part of their DNA.

Talking of products, impossible not to mention the counterfeiting issue. China is the homeland of counterfeiting (if you go to one of the fake-market malls in Shanghai, you get a very good picture of this). For the Chinese imitation is a good strategy. Yet lately there is a lot of pressure from the international arena and also internal pressure to stop this phenomenon because it is starting affecting also local manufactured products sold in China. Now the rules are out there, clear, but the problem is the implementation.

This said, there is also another point of view when talking of counterfeiting of luxury goods. On one hand the counterfeiters make money and the government does not have to subsidize them; on the other hand counterfeiting is not seen as bad from brands, not affecting them: sometimes from the companies point of view counterfeiting make products affordable to more people and “keep the brand dream alive”. You know you are successful if your products are imitated: it means a stronger desire for that brand. But a fake good does not provide the same status. So in a country where the “face” and the appearance are so important, people will buy the real product as soon as they can afford it.

To introduce the next two trends I want to highlight, it is very interesting to see the role of the Chinese fiscal policy as a tool to push the geographical development in some provinces or supercities (Go West trend) or to drive the investments towards certain sectors of the economy (high technology trend).

Based on its Western Development program started more than 10 years ago, China has been investing a lot in infrastructure in the West and now incentivizes investments to make companies “Go West”. From the business point of view, now the West provides more opportunities (for instance Chongqing within the Sichuan Province is the new developing supercity whose growth is stimulated and incentivized by the central government policies) but there are more challenges as there are less clear regulations. West can already be a good option for large sized companies but it is still complicated (risky, far away) for small ones.

Another trend is the switch to services and higher added value products / high technology, pushed by fiscal incentives as mentioned above. Until 2008 there has been a push on attracting foreign investments for manufacturing options (2 years tax holiday, then half taxes). Then various reforms to push for capital investments (for instance they made representative offices more difficult and expensive, because they do not bring capital expenses) and offer a lower income tax rate for enterprises with new/high technology. This shift is nothing new though, it’s a world path toward success, look at Japan after WW2, or Korea more recently: depreciate currency to boost export, get cash, and move up the value chain from cheap to high value added products.

Internationalization is the next trend I would like to highlight, and it comes as a consequence of this switch towards higher added value products: China needs to create local brand champions and to do this the only way in a globalized economy is to play internationally. China incentivizes acquisition of foreign companies and brands to get technology, brand reputation and heritage. Examples of acquisitions are: Volvo by Geely, Weetabix by China’s Bright Food ($1.2 billion deal), Smithfield Foods’ bacon by China’s Shuanghui International ($4.7 billion deal).

China is also signing commercial treaties with other Asian countries to favour the trade. Some companies are already taking advantage of this, take the examples of Piaggio that set up a manufacturing plant in Vietnam to export to China and to the rest of Asia; and Ducati who is trying to do the same in Thailand.

Finally, what are the impacts of all these trends? Growth for growth’s sake does not work for a long time as rich gets richer, it gives room to speculation and increases the pollution (which is an environmental and social problem). Pollution is actually the element that could bring to protests and create problems to the Government (main concerns of people in China are pollution and children’s health and education). That’s why the new policies also dedicate relevancy to anti-pollution measures.

The current President of the People’s Republic of China, Xi Jinping (since March 2013) aims at the completion of becoming a “moderately prosperous society”. China should slow down its growth (big challenge for the current president) to make it sustainable but in a way it needs to grow (how to create jobs for the 8 million graduates out of college each year?).

In this amazing path of economic growth in China many companies have made lots of money, even if many players in the same sectors: until now the lower cost of labour and the high demand enabled most of the players to be successful and profitable. There was room for everyone. Yet, looking ahead, there will be many M&A (Mergers and Acquisitions) and only the companies that are looking outside of China, that are better structured, managed and organized, only the ones that are trying to diversify and implement practices for environment and social issues will survive and succeed. That’s why we could already see in large companies (such as Wolkswagen Shanghai and Mann+Hummel) a good level of respect of quality controls and EHS policies (Environment Health and Safety) and the first steps of CSR practices.

These practices are also a tool for the companies to create a brand culture, to try to retain employees and thus tackle the high turnover ratio (consultants say employee turnover is about 20% but the managers say it can go up to 110%). With salaries growing up to 15% per year, it’s not always possible to offer too much more than market prices to be competitive they said at Mann+Hummel. In Mondragón they manage to provide salaries 15% higher than the minimum set by law (it changes by province) but they leverage also on better working conditions (in Orbea warmer areas, music… More responsibility and engagement: in the assembly line every employee in charge of one bike, no production chain; for the frame finishing, each one is responsible of the quality of his/her product).

We saw that compromises are an imperative in the negotiations. Will China be able to find a compromise itself to solve its imbalances? Will the competition rules of a global market (which China, even if it is a socialist country, has to comply with) really succeed in bringing environment and social topics at the top of the companies and government’s agenda?

With the size of this country and the importance of its economy, I really hope so.


Comments Off on When in China, behave as the Chinese do (part 2 of 2) / 17 Mar 2014 por guidopreti
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When in China, behave as the Chinese do (part 1 of 2)

“Being in China means respecting the culture, customs and societal rules (in business and elsewhere)” (J. Inch, 2014)

Here I am, back from my study trip to China. Enriching experience. As a tourist, I really enjoyed what we visited in Shanghai and Beijing, I was fascinated by the diversity I could spot and I loved the mix between the Asian touch and modernity: for instance, street food on improvised stalls blending into an environment of record-high skyscrapers (2000 skyscrapers built in the last 5 years in Shanghai…), innumerable shopping malls and super efficient and clean metro/train stations.

As for the objective of the study trip – “How to make business in China” – I learnt many interesting and peculiar things of the Chinese culture, their habits, and the business opportunities this country still provides.

Focusing on this aspect, what are my main takeaways from the lectures we had and the company visits we made? I’ll try to merge into a consistent speech all the inputs I got.

The first thing to mention is the scale: almost 1.4 billion people, 170 cities with over 1 million inhabitants (Shanghai, the most populous with its 24 million inhabitants, has other 3 more cities with more than 5 million people within 1 hour drive). Due to this, the magnitude of the market is just amazing and the dimension of the business is totally different. Numbers are too big to consider all China as a single target. You need to segment. When approaching China for business, you should regard it more as a continent than as a single country, not only for its dimensions but also for the differences. Each province and supercity (large metropolitan areas that due to their size have rights as provinces) is different for the dialect, people, needs, demand and regulations (sometimes even within a city: in Shanghai for instance they can differ based on the district). Also, be careful about minorities because even if small numbers, they are very important for the country stability and the business environment. Many of the ethnic problems China has to face come from these minorities.

Business in Asia and China is different, it is critical to understand the habits and consequently adapt if you want to have stable and profitable relationships. It’s necessary to prepare culturally to adapt our behaviour to China (and to the Asia Pacific region); besides, you can look at the local markets as well as at the “export consumers” that spend their money abroad on holiday and shopping (often cheaper than in Shanghai for instance, due to high import taxes and positioning strategies of the brands: Orbea, a bicycle manufacturing company part of the Mondragón group, decided to adopt prices even 20% higher than in Europe to position itself as a high quality brand in a market where consumers who can afford these products are richer than European ones). Then, what are the main cultural characteristics?

In China it’s all about connections, the Guanxi. More than a network, it’s a reciprocal obligation or a power relation to open back doors. In order to build up your Guanxi you need to go out and attend events, go to functions and moreover you have to do favours: be generous and give presents, food gifts during festivals, invite out for dinner. And of course keep good relationship with the Chinese government. Guanxi is everywhere, it is how the business is done. Maybe of decreasing importance for the new generations but still very important and it takes time to develop it. All the lecturers we had stressed the importance of the Guanxi but there can be a thin line between Guanxi and bribery. And the current government of Xi Jinping is actually trying to fight corruption with the “Tigers and flies” program addressing both large and small players. Trying to understand whether Guanxi and at what extent could affect the business practices of a large company, I asked this question to the manager of a multinational filtration company we visited, Mann+Hummel Group. The official answer was that they have to deal with suppliers that comply to the code of conduct and thus (officially, Ed.) avoid others that still rely heavily on Guanxi: the point is that bribery infringement can be prosecuted in Spain Germany or UK even if carried out in China.

Another relevant cultural concept is the Mianzi, the Face. For Chinese people their perception in the eyes of others is very important. It decreases if we don’t know the other person. When relating to a Chinese, the preservation of face must be taken into account. It’s all about face. Never, never say something bad or critic someone in public (even in private, be cautious), never say no directly, never fire people… this would cause a “loss of face” which is hard or impossible to repair. Face can also apply to a company or to a country. For instance in a dispute between the Chinese government and Google, the latter refused to comply, this caused a loss of face for the government, hurting the feelings of the people. As a consequence, Google for many years has been doing a relatively small business in China.

Also related to face is the show-off principle: you have to impress people, buy a luxurious car (apparently people prefer to invest money in an expensive car before than into an apartment) so that people think your business is successful and trust you as a partner. The car become a status projector: it’s an investment, it generates respect.

Other peculiarities: Chinese are more cooperative and with closer boundaries, China is a group oriented society, Westerners are more individualistic. They have a hierarchical culture, relationship oriented. They make decisions in a group and don’t want to take responsibility of the decision, fearing the consequences of a potential failure/mistake. This makes the decision making process very long and difficult. In China there is a lot of mistrust, they assume all the basket is full of rotten apples.

There are differences in the negotiation process, they are less direct. You should accept compromises: don’t drive too hard the bargain, try to maintain harmony and not make lose face. You might win one deal but no chances to make further business in the future. Every party has to win something. And it’s better not to discuss the business at the meeting table, but to make the deal at the dinner table… So you should learn their table manners (who should seat where – from the way you are seated at a table you can know how well you are regarded – toast with your glass lower to show respect) and apparently very important learn holding your drinks! (if you don’t drink with me,we are not friends…).

One special mention of course goes to the barrier language. As for the written Chinese, the pictograms are something fascinating but totally unintelligible. The sound of the spoken Chinese also is something really far from the European languages. As for the business world, according to the lecturers we had, there are still good opportunities for no-Chinese-speaking professionals. Yet, once you start working in China, you should really make the effort and start learning it, even just as a sign of respect. It will help your relationships.

In the second part of this blog post I’ll analyze the trends of the Chinese economy and the related business opportunities.


Comments Off on When in China, behave as the Chinese do (part 1 of 2) / 17 Mar 2014 por guidopreti
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DISCOVERING HOLY LAND

Shanghai Study Trip 2014

After almost 12 days spent in China, there are so many different ideas to share and some of them are really difficult to transmit in the correct way. This huge country is still keeping my breath away and while I´m writing these lines I also trying to order my ideas and the awesome experiences that I have lived there.

If I had to describe China in one word it would be really easy for my: enormous. That is the main idea that I´m sure all of us are coming back with. However, another key matter in my opinion, is the profitability of making business China. I think that is a very big effort move to China and the culture shock is also a disappointing stuff that is gonna be there. Despite of that, I´m sure that the holy land in terms of business is China. I would try to explain myself deeper lately, but let me now make another difference that I think is crucial: Shanghai is not China. From my point of view, the China that is inside Shanghai is totally opposite of Beijing ones, for instance.

Thanks to the classes that we have had, there are some clues and steps that we have clear now if we want to sept up a business in the Asian Giant. Some of them were very obvious from the beginning, nevertheless there are others that I’m sure we will never forget. As the days pass, there were some main ideas that appearing continuously. For instance, the best way to start a new company in China is through Hong Kong, Manaus or Taiwan. In those places, is cheaper to invest in a company and the government restrictions are lower. From these areas, then it would be really coherent to move to China. Apart from that, the best opportunities in terms of business in this amazing country, nowadays are allocated in the centre or the west regions. Here the population is more rural and there is a luck of many relevant services that could provide with to a growing population. Also, the market competition is much lower than in the big cities of the east area.

Another important topic that we front during the lessons, is the culture fact. Sincerely, this is one of the most important weakness when you think about living in China. The culture in China is totally different from Western Countries and before thinking about establish there, you need to learn the most important skills that you will use to deal with Chinese people. For example, “Guangxi” is one of the most important words that you can learn in Chinese. Is a kind of corruption for foreign people, and it is use daily in their life. You must take under control the meaning of “Guangxi” if you want to become successful in your business in China.

The Communist Party is very awkward as well. Is also a concern that you must be aware about. The relationship between your business and the Party will be correct unless you miss that you have to care about it. Once you do it, your business will over. So be really careful with this point will make your company profitable.

Finally the visits of companies that we had, merit special attention. There were some of them that the information was totally inexistent but we learn some different points of big companies in China. On the other hand, there were very interesting ones and useful for our goals. Anyway, all of the help from the personal of the companies was grateful and the effort that they make with us was awesome, especially in Mann-Hummel, Mondragon-Corporation, Intuuchina and of course the huge effort of Antonio Torres from Linkes Company, with his collaboration the experience in China was unforgettable.

I would like to add a mention about Intuuchina people that helped us to have a version of how to set up a new idea in this difficult market. Of course it is impossible to do it without the knowledge and the professional behavior that is essential for being profitable, especially in this region. In the case of this company they showed us both of them, that´s why I strongly recommend to anyone that needs help to start businesses or any kind of studies in China, to contact them. I´m sure that they will help you as much as they can with excellent results. I let you here the website: http://intuuchina.com

To sump up, in my opinion China is the country of the future. A region where the future companies will be born and the important ones will increase their benefits. Is the best chance for a new beginning. From my point of view, China is the Holy Land of our days. However, for me the entrance barriers are so big and the cultural chance is too significative. That´s why I don’t thinking to move to China for now. We will see in the future…


Comments Off on DISCOVERING HOLY LAND / 17 Mar 2014 por guillermojoselatorre
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Talking about China

China, what an unknown and diverse country… When I first arrived there on the second of March, the contrast was that big that it was difficult to realize that China was part of the world we live in. I had some preconceived ideas on this country which I posted two weeks ago on this blog, nonetheless, i have to admit  that one must “live it to tell about it”.

After visiting some utilities in China such as Volkswagen  and Mondragón group among others, I was able to draw some common insights and conclusions. All these enterprises recognized the fact that the cost of production in China was indeed much cheaper than producing in their country of origin. Nevertheless, they confirmed that this trend was changing as a result of two main adjustments in government policies. China is starting to move towards a model of production where quality control is starting to become significant.  But also, the country is taking much into account the salaries of the workers with a significant increase in their wages.

Counterfeiting is also considered to be a big issue in China. Even though in some industries this phenomenon tends to happen more easily than in others,  it needs to be said that companies settled in China are always alert and cautious in this regards. For instance, in Mann Hummel Filters, it was highlighted the fact that scrutinizing the products in much detail was  the company´s usual practice when trying to  avoid counterfeiting.

When it comes to the lectures we had in Jiao Tong University, to learn the Chinese culture, values and history helped me better understand the way businesses are made in China. During the first lecture I learned that China needs to be considered as a continent instead of as a country merely because it is so diverse. In the East part of China is concentrated  most of the economic activity as opposed to the West where still business opportunities are not being exploited. Nonetheless, it seems that in the next years this region of China will flourish.

Guanchi was a key word during the entire study trip and it was repeated during the different lectures as well as visits. Having the perfect partner in China is essential when doing business. It is important to work on your long term relationship to succeed.

Mianxi and the concept of face was also another concept that cannot be avoided. It could be described as a combination of honor, reputation, social standing and influence. In China gaining and losing face is considered to be a serious business.

Luxury goods are connected to the concept of face as well. It seems that to certain extent it is  all about showing off. If you have an Audi you will be more prone on getting your business done than if you have a Golf.  Why?  Merely because you will be seen as trustworthy with the necessary money to develop the business.


In my opinion, Joint Ventures are the best option when doing business in China even though other alternatives can be found. After listening to different lectures i have come to the conclusion that it seems the easiest way to penetrate into the Chinese market.

Marketing is also essential to market penetration. It is very important to know what the values and the culture of the Chinese is in order to be able to understand them and to start  doing business with them. It is important to adapt instead of trying to change it. The example of the Melia Group illustrates such situation. What is more, it is important to evaluate who your target is in order to be able to adjust to the “needs” of the Chinese.

To conclude, with Fernando and Marc, we saw how entrepreneurship was priced within China. It is about hard work and responsibility. It is about trying to explore a new world full of opportunities. China is just China and  without any doubt this country is the country.


 


Comments Off on Talking about China / 15 Mar 2014 por inescamarero
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Chances and Challenges in China

Through the eyes and experiences of businessmen and academics, I have come to see China as a land of opportunities – and challenges. For anyone with a flair for social networking, a willingness to learn Mandarin and cultural compassion, China’s arms are open. Yet this enigma of a nation, requires some unravelling; for which I will leave you all with the puzzle pieces of my journey and allow you to form your own conclusions…

 

 

 

 

 

 


Comments Off on Chances and Challenges in China / 14 Mar 2014 por anabeatriceacuna
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Returning from the land of the dragon

When I left for China two weeks ago, I thought that I had some general ideas about this far away country. Looking back, I have to admit that my knowledge was very limited and that this study trip has changed my impression a lot. Several lectures at Jiao Tong University, company visits and cultural events taught me more about China, than I would have imagined. But what exactly have I learned? Let me share some ideas and key learnings with you.

Our very first lecture at Jiao Tong University – Chinese History, Geography, Culture, Values and Way of Life – was held by Jason Inch, who has many years of working experience in Asia Pacific. Besides introducing us to the Chinese way of thinking, which is characterised by a moderately high power distance, collectivism, masculinity and long-term orientation, we got to know two key cultural concepts: Guanxi and Mianzi. Guanxi means to have a personalized, long-lasting network of people with influence, while Mianzi stands for the concept of face – one should always assure to treat people with respect and to prevent your counterpart from losing its face. Both concepts are crucial to take into consideration when doing business in and with China and have been referred to during many other sessions. Furthermore it is important to know that wealth and economic activities are mainly concentrated in the eastern regions around super-cities such as Bejing, Shanghai, Hong Kong and Tianjin, while eastern regions lack infrastructure and economic opportunities. Even though the government tries to promote the economy in western regions, the gap between east and west is growing steadily.

When establishing a business in China, there are different legal forms to consider, as Dr. Lorenzo Riccardi taught us. Foreign investors can mainly choose between a joint venture (JV) and a wholly owned foreign enterprise (WOFE). Establishing a JV can be more difficult at first hand, because a suitable partner needs to be found and a unanimous approach is needed for many issues. However, since WOFEs can be more expensive and the business scope is very narrow, nowadays most foreign businesses are establishing JVs. Regarding the tax system one can see the difference in the regions again, since each province has their own local authority and therefore different types of tax. Several tax incentives exist in order to promote businesses to “go west” and to invest in environmental protection or energy saving. Overall one needs to take into consideration, that the government plays an important role in every business.

While visiting Baosteel and Volkswagen Shanghai, we were able to see some examples of state owned enterprises. Both companies made a really good impression, but it was interesting to see how the companies struggled to give out in depth information to visitors. Since I have been working in the automotive industry in Germany, I was able to find many similarities between the Shanghai Volkswagen plant and what I knew from German automobile plants. This shows that, even though the company is a joint venture between Volkswagen AG and SAIC Motor, there is still a huge influence from Volkswagen.

Simon Campostrini from the European Chamber of Commerce depicted the importance of European companies joining forces, in order to influence decision making in China. While decision making in the EU is very complex, in China there are only two lines: the government and the party. Since the country is so diverse, Mr. Campostrini advises new companies to start a pilot project, before moving on to new cities or districts.

Our visit to the Mondragon Group has been a good example of how European companies can benefit from each other in an industrial park just outside Shanghai. The companies here are close enough to the city, but can also benefit from lower salaries and property prices. This visit also showed that there are different dimensions when talking about business in China. While the Mondragon Group is the 7th biggest employer in Spain, it is not even under the top 100 in China.

As Allen Wan explained in his lecture on the Chinese Political and Economic System, Chinas economy is expected to face a hard landing. There has been a huge overinvestment in the east, while the west is missing out on the boom. The Gini coefficient ratio shows that the gap between rich and poor is growing steadily. Therefore the National Peoples Congress is trying to narrow the gap with different initiatives: The Hukou Reform, which allows migrant workers the same benefits as local workers, and Urbanization. However, both of them are linked with further problems and it seems as if these are only patchwork fixes, causing additional problems.

Prof. Jacobus Root from Jiao Tong University gave us a deeper insight about Negotiation and Partnership with Chinese Business People. He did not only refer to the important concepts of Guanxi and Mianzi, but also to the much broader context of culture and values which one has to understand when doing business in China. It is important that we, as foreigner, adapt to Chinese habits and do not expect them to change their way of doing business.

The same principle needs to be considered for Marketing in China. Foreign companies should adapt to the local habits and different target groups. Chinese are willing to spend more money on lifestyle-goods that are consumed in public and they want to display their status. Furthermore, they invest in their child as much as possible. However, it can be beneficial to a company when they have a foreign connection, especially when it comes to the Luxury Market. Key success factors are brand storytelling, experience, excellent communication and adaptation to the Chinese market. A good example for the adaptation to the Chinese market is Melia Hotels. They do not only consider the different consumer expectations, but also benefit from the quick return of investment in Asia-Pacific. Mann+Hummel Filters are a good example of how a company can benefit from the opportunities of the Chinese market and the need for customized solutions. They are developing more and more products in the automotive aftermarket and see a great opportunity in water filtration.

Since China is making huge efforts in education and internationalization, foreign students who are trying to settle down in the Chinese business world, need to be aware of the great competition. Even though there are great opportunities, one needs to work hard and differentiate themselves from others, as Intuuchina Co-Founders Fernando Zavala and Marc Ramon Hernandez explained.

As part of understanding the Chinese way of doing business, one should understand the historical and cultural value of the country. Therefore we have visited several cultural sites in and around Shanghai, such as the Shanghai financial district, Nanjing Road, Yu Garden and Suzhou. Additionally, some of us took the opportunity to spend the weekend in Bejing. Seeing the differences between these two cities was clearly a highlight for me. We have seen Chinese business world in Shanghai, while Bejing opened its cultural values for us. The Forbidden City, Tian’an men square, the Temple of Heaven and the Olympic Park had been stunning, but climbing the great wall was for sure the most breath taking adventure.

It has been a rich experience to dive into the Chinese world and I take back home, that doing business in China offers great opportunities but many things should be considered beforehand. To sum it up, I can say that China is not only the land of the dragon, but also the land of new opportunities; cultural beauty; where extremes meet and much more.


Comments Off on Returning from the land of the dragon / 14 Mar 2014 por claravalentinakupper
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