Archive for the ‘China’ Category

We Are the J Students! We Are Proud!

August 19, 2011

Yesterday’s news brings yet another tale of unanticipated reputational threat arising from the terminally outsourced world in which we currently live. We can, I think, confidently say that the Hershey chocolate company never in its wildest imaginings considered the possibility that employing international students through a government program would become a “sweatshop” flash point as reported in today’s New York Times 

This most recent example of the networked enterprise focuses our attention once more on the critical need for employers to have transparency in their supply chain.  Many years ago, energy companies tried to argue that because the tanker truck in the freeway pile up was operated by a contractor, they bore no responsibility.  That argument didn’t wash then and any suggestion that a long outsourced HR supply chain absolves Hershey of responsibility for work performed to get its own product to the end customer would be equally wrong.  The vigilence is all, and having ordinary managers who can spot an obvious disconnect when they see one.

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Pawning the Family China

December 29, 2010

We’ve grown used to superlatives about the Chinese market, its billions of consumers, trillions in investments, the all-consuming maw of its energy needs.  Global companies have proved willing to do almost anything not to be left out of the competition to meet these needs, even when the costs and risks have been astonishingly high.  Now the Wall Street Journal reports on two massive deals in which GE agrees to combine its global avionics business with AVIC, the Chinese aviation company and GM expands its joint venture with SAIC, the Chinese automotive company, to sell its no frills Wuling mini-van throughout Southeast Asia.

We can leave to more competent analysts such issues as the intellectual property risk. There has already been pointed commentary on the joint venture that Kawasaki Heavy Industries and Siemens  created with a Chinese partner in high-speed railroads that has in short order produced a competitor for them all over the world.  What interests us is the increased reputation risk that GE, GM and other companies have taken on with these intense and intimate partnerships.

We make no allegations against any specific Chinese companies, but it is clear that a century or more of corporate reputation building by GE and GM is not matched by their fledgling (if giant) Chinese partners.  The ethical care and commitment to international standards across a broad swathe of business practices exemplified by companies such as these stand for respected corporate brands that have now been placed in the hands of their Chinese partners.  Having spent decades ensuring that their supply chains around the world are behaving in accordance with their own standards, these companies now arguably face reputation risk on an unprecedented scale.

In avionics henceforth, at least so it looks from the outside, GE is AVIC and AVIC is GE.  A manageable challenge, certainly, but  no-one should mistake the shift in the order of reputation risk magnitude that has taken place.

The Market State

November 17, 2010

Last year, corporate executives spent a lot of time talking about the problem of headwinds in a difficult economy.  They never talk about tailwinds in a good economy but that’s another story.  What they have talked about this year is “uncertainty” by which they apparently mean excessive government regulation brought on by the global fiscal crisis. A McKinsey white paper published earlier this year suggests that companies would be better off preparing for much more activist national governments and the challenges they will present than whining about uncertainty.  The authors of the study suggest that the challenge for sovereign states in dealing with slower economic growth while still providing affordable safety nets will entangle the private and public sectors in the future in ways that are unthinkable in today’s developed economies.

While there are clearly financial and operational implications of this shift, there are also reputational dangers and opportunities.  If McKinsey’s predictions are correct, the term corporate social responsibility may take on entirely new meanings.  U.S. companies have long bemoaned the emergence in the 1950s of employer-supported health benefits.  If the market state is truly the wave of the future, they may have seen nothing yet.

Atahuallpa’s Complaint

July 6, 2010

After complaining about the poverty of the translation provided by the Spaniards at their first critical meeting in 1532, the Incan emperor Atahuallpa responded to the Spanish address at great length.  Unfortunately, according to one of  the translators, “the Spaniards present who could not tolerate the length of the discourse had left their places and fallen on the Indians.” 

Business negotiations for American leaders rarely end quite this badly but communications and cultural differences will play a huge role in the coming wave of acquisitions by foreign companies of US assets.  Today’s financial coverage alone reports on four related developments that suggest it is time for both sides to develop better understanding of different communications cultures.  Here they are:

1) US steel makers press administration on Chinese plans to buy US steel assets 2) Felix Rohatyn warns against US antipathy to foreign infrastructure investments 3) Turkish mega caps invest abroad 4) China mooted to split sovereign wealth fund from state-owned banking stakes to overcome US restrictions on foreign investment.

Issues of pride and prestige, differing interpretations of post-acquisition control and a myriad of other cultural misunderstandings threaten what could be critical investments in the US economy.  We have written before about the vanishingly small number of emerging market executives on US corporate boards but this remains a significant blind spot.  The time for quaint primers on which hand to eat with, what colors signify bad luck and which way to point the soles of your shoes is past.  The US needs some intense research industry by industry, country  by country into the decision-styles, prejudices and expectations of business leaders from all over the world.  Failure to invest in this intelligence seriously endangers  a new engagement between US and emerging market titans that is good for American jobs and global economic stability.  Let’s give Atahuallpa the last word: “if we seek to talk through interpreters and messengers who are ignorant of both languages it will be as if we were conversing through the mouths of beasts of burden.”*

*from Nicholas Ostler’s “Empires of the Word.” (Harper Collins, New York, 2005)

Chinese at Play

March 10, 2010

As usual, the statistics relating to China are mind-numblingly large.  According to a McKinsey Quarterly article first published in the Harvard Business Review, 384 million Chinese consumers spend 70 percent of their leisure time on the Internet.  Much of this web surfing is taking place on mobile devices because China’s cellular providers recently started offering widespread 3G service, according to the article.

These numbers are a timely reminder that it is far from premature to start monitoring Chinese blog traffic and to get to know influential Chinese bloggers even if you don’t market a big global consumer brand like Nestle or Nokia.  One US company, for example, facing a product contamination issue that was not big news in the US, was taken aback that the Chinese Internet was ablaze with commentary, due, of course, to China’s experience with this issue.  Corporate brands, not just consumer brands need to be ramping up to meet this challenge.  Death by 384 million cuts sounds quite painful.