Global pres­ence doesn’t make a multi­na­tional

China Daily (Canada) - - ANALYSIS -

As Chi­nese com­pa­nies ramp up their pres­ence on the in­ter­na­tional stage with a string of head­line­grab­bing ac­qui­si­tions that cat­a­pult them to global fame, some ex­perts urge cau­tion: Most still can­not truly be called multi­na­tion­als.

“I think there are a small num­ber of Chi­nese com­pa­nies that are al­ready global com­pa­nies, but it is a very small num­ber, like Len­ovo and Huawei,” said Stephen Phillips, chief ex­ec­u­tive of the Chi­naBri­tain Busi­ness Coun­cil.

“Some Chi­nese banks have a very sig­nif­i­cant in­ter­na­tional pres­ence as well, but they mostly serve the Chi­nese cus­tomer base, rather than serve the in­ter­na­tional cus­tomer base, so they are only part of the way to be­come truly global in my view.”

De­spite many Sta­te­owned en­ter­prises that have an in­ter­na­tional pres­ence and pri­vate sec­tor com­pa­nies, which are be­gin­ning to in­ter­na­tion­al­ize quite rapidly, there are very few that are glob­ally rec­og­nized.

“But it is chang­ing re­ally quickly, much more quickly than with prob­a­bly any other coun­try,” Phillips said.

Phillips said the world will con­tinue to see more and more Chi­nese com­pa­nies in­ter­na­tion­al­iz­ing, and they need to do it for at least two rea­sons: one is to di­ver­sify mar­kets and the other is that, if they gen­uinely want to be lead­ers in that field, they need to be ex­posed to global com­pe­ti­tion, whether in ser­vices or prod­ucts, and by go­ing out­side the home mar­ket and com­pet­ing with the best of the world.

“If com­pa­nies man­age that in that process, both ac­cess­ing new mar­kets and mov­ing up the value curve, then they are go­ing to be very suc­cess­ful, but not all of them will suc­ceed. It is not easy; it is very com­pet­i­tive.”

Zhang Yang, a se­nior con­sul­tant with Spencer Stu­art, an ex­ec­u­tive search and lead­er­ship con­sul­tancy, said that the in­creas­ing over­seas as­sets and over­seas in­come can only be a pa­ram­e­ter of in­ter­na­tion­al­iza­tion.

“If a com­pany just in­vests in cheap re­sources over­seas and then makes profit out of it, it is not truly in­ter­na­tion­al­iza­tion, be­cause they may not be a global com­pany that adopts in­ter­na­tional stan­dards and rules.”

In­ter­na­tional com­pa­nies have dif­fer­ent strate­gies and tar­gets for dif­fer­ent mar­kets, and op­er­ate glob­ally, she said. Their man­age­ment sys­tems, gov­er­nance and di­verse tal­ent are im­por­tant yard­sticks. But if Chi­nese com­pa­nies are gauged by th­ese aspects, most of them would get low grades.

She cites tal­ent as an ex­am­ple. In many multi­na­tional com­pa­nies, about 20 to 40 per­cent of the se­nior ex­ec­u­tive po­si­tions are held by tal­ent sought glob­ally, but in Chi­nese com­pa­nies, the per­cent­age is usu­ally quite low: less than 10 per­cent.

Qiao Jian, vice-pres­i­dent of the world’s largest per­sonal com­puter maker, Len­ovo Group, said that glob­al­iza­tion is not just

We have seen many un­suc­cess­ful cases of Chi­nese com­pa­nies go­ing global, and the key is the dif­fer­ences in cul­tures, stan­dards and con­cepts be­tween the home coun­try and the desti­na­tion coun­tries.”

for­mer head of the depart­ment of Euro­pean affairs in the Min­istry of Com­merce

prod­ucts or cap­i­tal go­ing global. An in­ter­na­tional en­ter­prise’s cul­ture and lead­er­ship are key, which is what she learned from Len­ovo’s fail­ures.

In the first four to five years af­ter Len­ovo ac­quired the per­sonal com­puter busi­ness of IBM, its busi­ness met great set­backs, she said.

“When we re­flect on it, at that time, we paid a lot of at­ten­tion to prod­ucts and strat­egy, but ig­nored the cul­ture and lead­er­ship com­po­si­tion,” she said. “Man­ag­ing peo­ple from dif­fer­ent coun­tries is not merely re­ly­ing on poli­cies and reg­u­la­tions but more about win­ning recog­ni­tion from lo­cal cus­tomers, ex­ec­u­tives and em­ploy­ees cul­tur­ally, so that we do busi­ness hold­ing the same val­ues.”

Since 2008, Len­ovo has made great ef­fort in global en­ter­prise cul­ture build­ing, and its rev­enue is 15 times that of 10 years ago, she said.

Sun Yongfu, for­mer head of the depart­ment of Euro­pean affairs in the Min­istry of Com­merce, said that a com­pany’s abil­ity to in­te­grate with the cul­tural and so­cial en­vi­ron­ment in a given coun­try is an im­por­tant part of suc­cess­ful in­ter­na­tion­al­iza­tion.

“We have seen many un­suc­cess­ful cases of Chi­nese com­pa­nies go­ing global, and the key is the dif­fer­ences in cul­tures, stan­dards and con­cepts be­tween the home coun­try and the desti­na­tion coun­tries,” he said.

“We are used to some op­er­at­ing meth­ods in China and take them to Europe and other parts of the world, but their cul­ture, tra­di­tions and laws are quite dif­fer­ent from ours.”

For ex­am­ple, Chi­nese em­ploy­ees would work over­time to get dou­ble pay, but Euro­peans might not hold the same view, he said.

Chi­nese com­pa­nies should be able to adopt the desti­na­tion coun­try’s ways of op­er­at­ing and man­ag­ing com­pa­nies, he said.

“They need to in­te­grate with the lo­cal cul­ture, re­spect lo­cal rules, get fa­mil­iar with their man­age­ment ways, do good in lo­cal com­mu­ni­ties and strengthen cor­po­rate so­cial re­spon­si­bil­ity. Cur­rently, many com­pa­nies are still de­fi­cient in th­ese aspects.”

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