Entrepreneurship in China · 2021. 1. 8. · Entrepreneurship in the International Community NU...

Entrepreneurship in China:

Stimulus for Discussion

Jim Cook

Globatech Inc.

Sponsored by : The Kauffman Foundation

http://www.kauffman.org/

Entrepreneurship in the International CommunityNU School of Technological Entrepreneurship

Slide 2 of 14November 19, 2008

Can America Do Better?



Contents

➢Qualifying for the China Challenge

➢Chinese Society/Culture Basics

➢China’s “Chinese Characteristics”

➢Meet the People, Generation by Generation

➢Opportunity Segmentation of China

➢Sourcing/Selling Opportunity Templates

➢ “On the Ground Nitty-Gritty” Tips

➢OK, let’s open up China (to discussion)!



Yes, America can do Better!

➢ How’s our chances (as Americans) in China?

Decision must come from deep inside you, not infatuation

Get a native partner who has bonded to you and your goals

Understand, respect , and exploit the cultural differences

Be ready to substitute “trust” for contracts and recourse

Use “Chinese Characteristics” to build competitive advantage

Flow with the government policies and serve ignored markets

Be prepared for setbacks, delays, and disappointments

➢ Getting Started

Sourcing or selling, you must understand your market

Acquaint yourself with the legal/administrative landscape

Raise value adding investment capital, not just cash



Chinese Society/Culture Basics

➢ Every Chinese difference has an implicit advantage potential

➢ It’s an empirical, not theoretical, society (toss aside tedious projections)

➢ Politics trumps economics, so read policy signals and shifts

➢ Social instability will not be tolerated at any price (e.g., 1989)

➢ Business is relationship activated, not contract activated

➢ Communication is not what it seems, it’s richer than that

➢ If you’re not an “insider,” what you receive is show

➢ Image is important; Face is crucial; Ignoring this is fatal

➢ Generational differences are marked with opportunity indicators

➢ Your intellectual property (IP) is only as safe as you make it

➢ The regulatory environment has its own “Chinese Characteristics”



“Chinese Characteristics”

➢ Central policies pick favorites; currently it’s the Emerging West (and “green”)

➢ Land, buildings, capital, accommodation, and taxes are cheap for policy favorites

➢ State Owned Enterprises (SOEs) are a 1/3 of GDP (and all have a “Party Secretary”)

➢ Infrastructure (e.g., power, plastics, steel) is world class and usually economical

➢ Technological universities are a hub of connections and can be used as such

➢ Today, there’s a surplus of college graduates; China isn’t yet a Symbol Economy

➢ China doubled Japan’s economic miracle and could land a family on Mars first

➢ Returning Chinese (who have succeeded in the West) are welcome (“turtles”)

➢ Chinese institutions and SOEs don’t find, direct, nor motivate talent well

➢ Productivity figures are sometimes shockingly low, often despite very hard workers

➢ Trust through “guanxi” does the work of contracts, credibility, and character

➢ Chinese save over 30% of their gross salary and have large reserves as a result



Generational Demographics

DOB Age Defining Event Consequence + Characteristics - Characteristic

1948- 60

50

Cultural

Revolution

No/low university

education

Ethical, pragmatic Unsophisticated

1959- 49

39

Open Door

Policy

Experienced

struggle

Tough, hard

working

Not international

1970- 38

28

Spectacular

Rise of China

Expects automatic

success

Educated, bi-

lingual, global

Cocky

1981- 27

17

One Child

Policy

Spoiled, focus of

family pressure

Career focused,

globally astute

Weak social

skills

1992-

2002

16

6

2008 Olympics Electronics/Media/

Material addicted

Wide open to the

whole world

Overwhelmed (by

expectations)



Opportunity Benefits Summary

➢ Gov’t favorite #1: Emerging West (Sichuan, ChongQing, NE, …)

➢ Gov’t favorite #2: “Green” power, conservation, substitution

➢ Ignored markets: 2nd tier of over 100 cities > 1 million people

➢ Sell to the SOE’s (e.g., training – ISO, Deming, Finance, Law …)

➢ Manage “trust” for speed and risk-capital benefits

➢ Use “trust” instead of plans, projections, and contracts

➢ Make universities a connections hub (copy Obama)

➢ Tap the frustrated unemployed, talented, college graduates

➢ Convert the enormous savings into something very secure

➢ Alleviate the pressures or shortcomings of the Generations

➢ Sell future success to the kids, each has 4 parents to buy/pay

➢ Sell productivity enhancements that increase employment



China - Five Distinct Opportunity Segments

➢ Affluent Coastal regions: e.g., JiangSu, Fujian, GuangDong, …

➢ Second Tier Cities: e.g., LuoYang, WeiFeng, ZiGong, …

➢ Emerging “Western” provinces: e.g., SiChuan, ChongQing, Jilin, HLJ, …

➢ Undeveloped provinces: e.g., GuiZhou, YuNan, GanSu, …



China Sourcing Template



China Selling Template



Sourcing/Selling Summary

➢ Emerging West for skill intensive production and selling infrastructure and second

wave of upscaling (repeat of Affluent coastals of the past twenty years)

➢ 2nd Tier Cities for labor intensive sourcing and selling American product

access/franchises (below the Western radar)

➢ Gov’t favors: Emerging West (central gov’t), green technology (central gov’t), and

centers of excellence (local) [Note: this “West” includes North East and Central China, too]

You can count on:

➢ High receptivity to locating in government industrial/technology parks

➢ Every consumer having a cell phone, credit card, and access to the internet

➢ Typically, college graduates having had over 8 years of English schooling



“On the Ground Nitty-Gritty” Tips

➢ Commerce is conducted by “trust”; 30% down/70% on delivery T/T

➢ Checks never, I’ve only see Wire Transfers, Credit cards, and Cash used

➢ Employment law requires insurance (Retirement, Unemployment, Hospital, Maternity,

Work injury, and Union dues) costing employers 40% and employees 10%

➢ Employers must pay severance of a month’s salary for each year served

➢ Customs is a mixed bag with some egregious gouging and delaying

➢ Contracts should be rare, bi-lingual, and specifying remedy by arbitration

➢ Corporate Structure Options: Cooperative Joint Venture (Chinese Partner +

$1,000 fees), Wholly Foreign-Owned Enterprise (minimum of $15,000 + $5,000 fees)

➢ Registration can require proof of suitability, resume, business summary,

references/agent, by-laws, directors, translated into Chinese (see:

http://www.jljgroup.com/index.php?id=75&lang=en#section2

➢ IP protection suggestions: log access to databases, withhold key process

parameters, design “black boxes” in, disburse suppliers and key people,

imbed logo holograms and the like into products, and assemble offshore

http://www.jljgroup.com/index.php?id=75&lang=en#section2



Finally China’s Open (for discussion)!

➢Questions and Comments

➢Thank you, again.

On the Internet (roughly 460 KB) at:

http://globatech.com/eic.pdf

http://cha4mot.com/eic.pdf



Jim Cook’s Journeys

➢ President, CEO of NASDAQ Listed Company (Software Tools) and on the board of two publicly held and numerous private companies, all high technology

➢ President, CEO of Exxon-Mobil financed venture (Electronics)

➢ President, CEO of Globatech, Inc. in Beijing (Japanese financial portal)

➢ Vice President (Technology) Computervision, Fortune 500 Company (CAD/CAM)

➢ Taught MBAs at UCSD (Economics of Mfg.), Worcester Polytechnic Institute (Advanced Mfg.) and U. of Melbourne (Entrepreneuring)

➢ Lectured on management at: MIT, NU, People’s University, and Chinese Academy of Sciences; BS math RPI, graduate math MIT, on CCTV news with Jiang Ze Min

➢ Consulted on management to: DuPont, Motorola, Bell Labs, D & B, …

➢ Interviewed 6 times on FNN (now, CNBC Financial) about High Tech investing.

Entrepreneurship in China · 2021. 1. 8. · Entrepreneurship in the International Community NU...

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