China CEO: Voices of Experience Part 1

There are essentially many books written doing business in China. Juan Antonio Fernandez, a management professor and Laurie Underwood, a business journalist's China CEO: Voices of Experience from 20 International Business Leaders interviewed 20 global companies' top executives plus 8 consultants in China. These companies come from diverse range of industry(retail, finance, pharmaceutical) and with wide duration of business experience(Standard Chartered has been around since the 1920's)

I will present here a couple of snippets from what I gather from this book. Starting with the strategy to invest in China.

To JV or not JV?

During the 1980's China governement requires companies that wanted to invest into China to form Joint Venture with local company selected by China's government. However things change since the inception of China into WTO in 2001. In the 80's multinational companies are obligated to choose local companies selected by the government, but these days MNC is more likely to choose its preferred local company.

The problem with JV with local companies, which has been documented in many books, including a case study between Pepsi and Sichuan Radio and TV Industrial Co. that led to a messy and protracted legal battle due to issues related to funds mismanagement and property rights.

One thing for sure is that there is nothing sure in China. Whether its best to Joint Venture or not make sure you do your homework by checking the local laws and regulations there and most of all take your time to understand the scenario and in JV case, your partner.

The general rule of thumb for many CEOs interviewed is if you can afford not to JV, then don't. JV presents a whole lot of business complications, from different cultural assimilation to different business objectives.

Small business should most usually venture in on their own. They need to understand the market scenario in the local, (Shanghai has culture and regulation not to mention language that is very dissimilar with Guangzhou for example).

Next: How to battle with competitors in China?