A learning dragon with long strides

Title: The Globalization of Chines Companies, Strategies for Conquering International Markets. Author: Arthur Yeong and Katherine Xin. Photo: Special Arrangement   | Photo Credit: Scanned in Chennai_grrks

“China is a sleeping giant. Let her sleep, for when she wakes she will shake the world.” With this quote of Napoleon Bonaparte (1803) opens ‘The Globalization of Chinese Companies: Strategies for conquering international markets’ by Arthur Yeung, Katherine Xin, Waldemar Pfoertsch, and Shengjun Liu ( >

‘Dragons’ and ‘tigers’

The authors identify TCL Group, one of China’s largest appliance companies, as a pioneer in aggressive overseas acquisition; for, in September 2002, it announced the acquisition of substantial assets of Schneider Electronics AG, creating a European base for colour televisions, and thus bypassing the European Union’s aggressive anti-dumping regulation against Chinese electrical-appliance firms. “In July 2003, TCL chairman Li Dongsheng formally announced the Group’s ‘Dragon and Tiger Plan’ to establish two competitive businesses in global markets (dragons) and three leading businesses inside China (tigers).”

The book chronicles how, in April 2004, TCL and Alcatel announced a joint venture for manufacturing mobile phones. Injecting 55 million euros for a 55 per cent shareholding, TCL became the world’s seventh-largest mobile phone manufacturer, and also acquired core 3G technologies in network and wireless access systems. “It thus became one of the few Chinese manufacturers of mobile phones with a core technology, which meant that it not only bought market share, but also acquired capabilities to prepare for the future.”

Forward surges

Other examples of ‘surging forward’ mentioned in the book include the acquisition in February 2003 by BOE Technology Group Co Ltd of the Hydis Company, the Hyundai Group’s TFT-LCD business, the key component for flat panel screens; and the purchase of IBM’s worldwide PC business by Lenovo on the Christmas eve of 2004.

The new Lenovo became one of the global top three, increasing its global PC market share from 2.3 per cent to 8.3 per cent on the back of revenues of $13 billion and sales of 14 million PCs, the authors note. They cite the quote of Yang Yuanqing, chairman of the new Lenovo, who felt ‘it was just like the Arabian Nights,’ when the possibility of the deal had first been raised by IBM a few years earlier.

In the mobile phone space, again, there is the BenQ example; in June 2005, it acquired the global mobile phone business of Siemens and emerged as the world’s fourth-largest mobile phone brand, one learns. “In the process of the acquisition, BenQ did not spend a single cent, but rather received a ‘dowry’ of 250 million euros from Siemens…”

Integration woes

Revisiting the BenQ case, elsewhere in the book, the authors fret that, after the Siemens deal, the company failed to achieve its stated aim of “completing 10 years’ work in two years,” reported a loss of 840 million euros in less than a year, and saw its global market share drop from 4.8 per cent to 3.2 per cent.

Adding that, eventually, it had to amputate the Siemens branch to survive, the authors reason that the failure resulted from a lack of ability to integrate and run the acquired business effectively. “Among the 15-person BenQ-Siemens management team, there were only two members from BenQ: the chairman and the chief financial officer; the CEO position continued to be held by a German.”

The problem, as the book dissects, was that the German team was slow to respond to consumer trends; the chosen design departed from the trends, and so the first dual-brand model performed far below BenQ’s expected standards. Underlining that the slow response to market trends proved to be a fatal weakness and made losses inevitable, the authors observe that in the process of integrating with Siemens, BenQ showed a lack of experience and self-confidence.

Floating warehouses

On how the outcomes of dramatic acquisitions are not always positive, the case of TCL-Thomson Electronics (TTE) can be instructive. The company’s expectation was to become the largest television manufacturer in the world, but by the first year, almost half of the shareholder equity disappeared, owing to harsh competitive pressures. A big problem, as the authors explain, was that both TCL and Thomson focused on clunky old models that used cathode-ray tubes, despite the fact that the market favoured flat screens.

Interestingly, flat-screen panel manufacturers were not doing particularly well either, as the authors recount. “Flat-screen manufacturing facilities cost billions of dollars, and in return for this investment producers often watched the price of their product drop by as much as 10 per cent a month as a result of heavy competition.”

Watching the rapid fall in the price of flat-screen panels, TTE believed the key element for success was not just technology (the panel) but also the control of inventory, the book traces. “A conventional TV set took 90 days to make and send to America, by which time the price would have fallen. TTE wanted to shorten that to less than 30 days, including the 20 days it took the TVs to cross the Pacific. Boats used to be seen as time-wasting transport, but were regarded as floating warehouses holding products while sales were arranged…”

Success stories

Here is a sample of success stories, from among the many discussed in the book:

a) Acoustic Technologies Corporation, situated in Shenzhen, holds 40 per cent of the contracts for the world’s cell phone speaker production; and, apart from micro- acoustic devices, it has expanded into other consumer electronics including MP3 players, game consoles, notebook computers, and car alarms.

b) Verisilicon Inc., founded by Wayne Weiqiang Dai, with the biggest chip-design library in China, generates the bulk of its income from intellectual-property licensing fees and royalties, while the remainder income comes through ‘microchip design and turnkey services that develop initial specifications into packaged and tested chips for a wide range of industries that include automotive, machinery, toys, voice-control audio, and wireless communications.’

c) Hon Hai Precision Industry Company Ltd, the foremost producer of joint-design, joint-development, manufacturing, and assembly services to global computer, communications, and consumer electronics companies.

The last example, however, may be familiar through its popular name, Foxconn, a biggie in the manufacturing services arena with more than $50 billion in revenues, earned through producing parts for Apple, Dell, Hewlett Packard, Sony, Nintendo, Microsoft, Motorola and Amazon. “The only thing Foxconn does not have is a brand, which means that the general consumer does not know what a great global company it is.”

Multicultural team

Tucked in the book’s appendix is Trend Micro, in the anti-viral software industry, extolled for its hybrid team comprising Mahendra Negi of India as the CFO, and Zheng Yili of Taiwan in charge of global product services. Originally, all decisions were made by the company’s founders, Steve and Jenny Chang and Eva Chen, but with the multicultural team in place, the decisions are collectively made, the authors recount. “So successful is this approach, in fact, that the Harvard Business School uses the company’s decision-making process as a case study in transnational management.”

Useful takeaways from Trend Micro are two communication principles which are promoted within the company to smoothen intercultural communications. These are: ‘No ego,’ which prioritises the needs of the company over those of the individual; and ‘Be you, be the best of yourself,’ which encourages everyone to be true to themselves when working in a team.

Imperative addition to your ‘China’ shelf.



“Wonder whether the electronic voting machines worked so slowly…”

“That the queues got longer?”

“And that the preferences changed drastically during the waiting time!”


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Printable version | Jul 29, 2021 2:45:27 AM |

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