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Open Door Policy: How Chinese Companies Strive to Be Western

Chinese companies are expanding into overseas

markets at a rate never seen before. Click here to find out

how you can take advantage of rapidly changing 中国！

Today, Lenovo is the largest computer manufacturer, Haier the largest appliance

manufacturer and Huawei has nearly overtaken Ericsson in the telecoms market,

receiving two-thirds of its revenue from outside China.

Why though is it that only in recent years have Chinese companies strived to go

down this route and expand beyond the Great Wall? There must be a whole list of challenges that await any company when

trying to make it in the global market.

A recent interview was conducted with Joel Backaler, author of the book “China

Goes West” and vice-president at Frontier Strategy Group, regarding this phenomenon. He has lived and worked in China for many years and offers some

valuable insights.

Chinese companies need to go overseas in order to survive, this is for various reasons. After the introduction of the

Open Doors Policy in 1978, international companies have arrived in China in droves to claim their piece of the

market.

Because of this, the local market is booming and making it more difficult for any companies to stand out among the

competition. They need to look overseas where they can incorporate the most

advanced technology, the best management personnel, and the most up to date policies.

They also look to global brands to help them appeal to foreigners and

establish a presence in other countries, which allows them to diversify away from the traditional Chinese market.

When looking at the consumer based companies, they do increasingly well in

emerging markets because they can easily adapt their products and business practices.

The business to business companies works best in already established markets as they gain

access to global technology and management from overseas to strengthen their business.

Business to consumer companies are still struggling somewhat, though, especially for those who are not

familiar with trading in a more strict regulatory environment.

Lenovo is one of the standout performers in this regard for a whole range of reasons like

their acquisition strategy as well as appointing global management to key senior positions

within their company. In recent years, they’ve managed to attract senior executives who

previously worked at IBM, Hewlett-Packard, and Apple.

Having headquarters in Beijing, USA, and Singapore, and having their executives move

around them frequently ensures they keep an eye on the global markets and the changes

around them. Another company who’s done very well around the world is Huawei although

they’re not very popular in the US just yet.

There are many motivations for companies to go global, but when looking at the core

of these, most are generated by pride even when those decisions don’t always make sense. For example, Weichai, who manufactures bulldozers have acquired

Ferretti, who manufactures yachts.

Dalian Wanda, which is a real estate conglomerate, purchased AMC movie theaters

which makes little sense as their primary business lies in entertainment. However, after

the purchase Dalian Wanda has made considerable investments in entertainment

and especially movie production.

The reason for this is because the trusted advisors to the heads of these companies are advising them to move

into various new markets they feel could benefit them commercially.

When companies like TCL take a dive after moving into the global market, it’s clear that many Chinese companies are

not yet ready for globalization. There are several aspects these companies need to master before they can consider moving

into overseas markets.

First, they need to know how to work with governments, local as well as international.

For a small company, this can be very daunting as to be able to move money around the world, they need to navigate around the regulations of numerous departments and commissions from the various countries.

Additionally, the advice of foreign governments is normally sought after

when looking for investment opportunities in those countries.

These companies also need to have the right relationship with their employees and make sure they have a team who’s

ready for any changes that may be incurred with their expansion.

They require a team on the ground wherever their investments are happening as well as a well-

organized management team at their headquarters. Chinese companies might also need to change the way they view their interaction with

their clients as the cultures in foreign countries will be vastly different, and that influences the

ways global companies do business.

Prior to 1978, Chinese markets were completely closed to the outside world. This puts Chinese companies at a major

disadvantage to those from other countries who’ve had centuries to learn from and adapt to dealing international

business.

This is one of the main reasons why so many Chinese companies are investing

in products and markets where they have no prior experience as it’s the

quickest and most efficient way to get a foothold in overseas markets.

Looking at Lenovo which as recently as 10 years ago only sold one product in

only their home country. Now they sell a variety of technological products in over

160 countries around the world and employ a workforce of around 46,000

employees.

The perception of China and their companies factor into the success of

those companies overseas. This has been most evident in Huawei who, due to

certain perceptions, haven’t managed to break through the American markets just

yet.

The level of influence it would have is more accurately determined by where the perception problem lies, i.e. government,

business or consumer. The politicized deals are in the minority but unfortunately

those are the ones that make the headlines and gain negative publicity.

Generally, it would seem that global markets are quite open when

welcoming investments from new companies emerging from China.

This is difficult to determine, but thus far it would seem that global

companies like to be seen as global companies instead of still being tied to

a single country.

Most Americans would look at a company like Siemens and probably

assume that it’s a US based company instead of German. That is exactly what these companies need to strive for and become a global entity that any citizen

can identify with.

BonusClick on the link below to read the full blog post.

https://blog.laowaicareer.com/open-door-policy-chinese-companies-strive-western

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