Archives 2007

Multinationals can learn from Chinese companies

Multinational companies hoping to stay out front in China should start by understanding the workings of the nation’s economic growth engine.

Many Chinese companies have grown at such an astounding pace that observers have wondered how so much change is possible in so little time.

It is the “Chinese Miracle” all right, but its roots lie in Japan and South Korea.

The nation began its quantum economic leap by borrowing a three-phase strategy first used in Japan and South Korea: They established local manufacturing, often for low-cost sourcing to multinationals; they acquired know-how and technology through licensing and joint ventures; and they bought assets and brands abroad to secure global positions.

But unlike their regional counterparts, Chinese companies have mostly done away with sequencing, instead condensing three phases into one. It took Japanese and Korean firms on average 25 years to reach global leadership; Chinese companies will achieve this in 10 to 15 years.

Such a shortcut taken by Shanghai Automotive Co Ltd. Started in 1984 as a manufacturer of farm tractors, the company later built its auto manufacturing arm, borrowing innovation through government-negotiated agreements, including those with GM and VW.

It also purchased a stake in South Korea’s Ssangyong Motor to blunt challenges from regional rivals. And in 2000, the company bought two models from Britain’s Rover Group to sell under its own brand.

Last month the automaker announced it will acquire the joint-venture assets of its parent company, Shanghai Automotive Industry Corp. The $2.4 billion deal brings all of the company’s partnerships under a single umbrella, making it the largest publicly traded carmaker in China.

In addition to compressing their build, borrow and buy phases, companies like Shanghai Automotive move ahead by harnessing the innovation and energy common to most start-ups, combined with the centralized, coordinated planning of nationwide turnaround projects.

We call this the “start-around” approach, one which has helped key players in China quickly overcome weaknesses and adapt to market changes.

Another reason Chinese companies can advance so quicklyis that they typically start off targeting the low-cost, lower-quality segment, where the high volumes make up for small margins.

These volumes put companies on a fast learning curve, accelerating the growth process and preparing them for the rapidly growing middle market. It’s what we call the “good enough” market, the segment of acceptable quality goods at unbeatable prices, and it’s a breeding ground for global competitors.

For foreign multinationals, the way to get ahead in China’s fast lane is to take advantage of what these companies are missing in their race to secure a global presence. There are three important areas where Chinese companies get stalled.

The most significant is customer loyalty, in terms of both the end consumer and intermediate distributors. Chinese companies historically dealt with fewer distributors, relying instead on mega-retail channels. Customer insight takes time to develop, and global firms have many more years of experience to draw upon.

The battle for talent will also be critical, as firms seek out people with global experience. Multinationals are experienced in developing strong leadership, and will rely on their best-in-class programs for recruiting, developing and deploying management.

Then there’s innovation. Corporations today are unlikely to repeat this mistake. Constant innovation and compressed product cycles will characterize Chinese and multinational firms alike.

Not only development phases, but various industries and sectors will be integrated: One day soon, R&D will converge across cosmetics, pharmaceuticals and food industries.

Emulation will become progressively more difficult; Chinese companies may find themselves continually playing catch-up.

In the end, however, it’s important to remember that the race will be won by those who endure the longest. Here, China has another advantage: The centuries have taught its people to be patient. With their emphasis on quarterly earnings, today’s multinationals may have yet another lesson to learn from China’s companies: the idea of thinking forward in decades.

Steve Ellis is worldwide managing director of Bain & Co. Orit Gadiesh is Bain’s chairman and Paul DiPaola heads Bain’s Shanghai office.

Pfizer cutbacks may set trend

PFIZER Inc’s plan to eliminate 10,000 jobs, or 10 percent of its workforce, may ripple through the pharmaceutical industry and prompt similar cuts from rivals such as GlaxoSmithKline Plc and Sanofi-Aventis SA.

Pfizer, the world’s biggest drug maker, said yesterday it would close two US factories, consider selling one in Germany, shut down five research centers in the US, Japan and France, and reduce its European sales force by 20 percent, according to Bloomberg News. The plan will slash annual spending by US$500 million to US$1 billion.

Chief Executive Officer Jeffrey Kindler is deepening cuts after Pfizer reported a 43 percent drop in fourth-quarter profit and generic copies of top-selling drugs began eating into revenue. Glaxo, Sanofi and other drug makers facing competition from cheaper copies would benefit by following New York-based Pfizer’s staff reductions and site closings.

“In the face of stalling sales with limited new-product flow and significant generic competition for a lot of the big brands, it does make sense that the industry unilaterally disarms” after a 15-year expansion, said Deutsche Bank analyst Barbara Ryan yesterday in an interview. “Pfizer is the 800-pound gorilla.”

Drugs generating a combined US$23 billion in annual sales, or almost 10 percent of the US market, lost patent protection last year, according to health research firm IMS Health Inc. Cheaper copies can drive prices down as much as 80 percent.

Alice Hunt, a spokeswoman for London-based Glaxo, and Steve Brown, a spokesman for London-based AstraZeneca Plc, declined to comment on how Pfizer’s plan would affect their need for sales staff. Jean-Marc Podvin, spokesman for Paris-based Sanofi, declined to comment before the company’s February 13 earnings release and press conference.

At Pfizer, fourth-quarter revenue rose less than a percent to US$12.6 billion as generic competition weighed on sales of the antidepressant Zoloft, Pfizer’s third-biggest drug. The company repeated a forecast that revenue won’t grow this year and next year above last year’s US$48.4 billion.

Pfizer’s sales will plummet after 2011 when it loses patent protection for its Lipitor cholesterol pill, which accounts for almost half of profit, analysts predicted. In the fourth quarter, revenue from the drug declined to US$3.34 billion from US$3.36 billion a year earlier. The product’s sales for 2006 rose six percent to US$12.9 billion, missing the company’s goal of US$13 billion.

Pfizer shares gained nine percent in the New York Stock Exchange in the past 12 months, underperforming a 13 percent rise in the 14-member Standard & Poor’s 500 Pharmaceutical Index.

Breaking Down the Recruiter Bill of Rights (Part 5)

We¡¯ve reached the half-way point of our Recruiter Bill of Rights, and we¡¯ve come to a topic that some candidates shy away from: Salesmanship. A top recruiter knows that a candidate can have a great background and huge plans for the future, but never even get close to landing the job they want because they simply can¡¯t or aren¡¯t willing to sell themselves.Now, we¡¯re firm believers in hiring qualified people for the job, but if you have the skills a company needs, you have to show them that or you can quickly get overlooked for somone with less experience and less ability. Companies want to know how you can help them, and recruiters want you to demonstrate that you fit that company¡¯s needs. Not everybody is fond of throwing out the sales pitch, but it will help recruiters help you, and it will help you get closer to the job you want. The folks at Guerilla Job Hunting summed it up rather perfectly, so we once again go back to their quote for inspiration:

¡±Employers don¡¯t care about what you want to do or even who you are until after they¡¯ve hired you. So stop telling them about your dreams and start selling to their needs.¡±

We¡¯ve often talked about the need for urgency on the part of hiring managers. Urgency can play a part for candidates, as well. This doesn¡¯t mean that we want people to take the first job that comes along or to engage in suspect search practices with sub-par search tools just to land a job quickly. However, it¡¯s important to stay focused on the present and to give hiring managers and recruiters a sense of what you have to offer right now:

¡±It¡¯s not about your past or what you used to do for someone else. It¡¯s about how you come across right now, in the present moment. That means you have to sell yourself so people get a powerful snapshot of you . . . one that makes them sit up and pay attention to you!¡± (From Job Search Secrets)

We don¡¯t want you to pull cheap tricks like coming in dressed as a clown or singing a song in your interview in order to ¡°get noticed.¡± We just want candidates to give recruiters and hiring managers the best possible chance to match them to the right job. This means candidates have to know what they have to offer and what a company is looking for. We¡¯ll provide the tools to make that happen, but candidates will have to take it from there.

Tariff cuts may ease trade surplus

CHINA will further reduce import tariffs on energy, raw materials and advanced technology in a bid to ease the country’s growing trade surplus, Fu Ziying, assistant minister of commerce, said over the weekend.

The rapidly expanding trade surplus is “threatening the economy with the danger of rebounding investment and rising inflation,” Fu said at an economic conference in Beijing.

China aims to narrow the surplus, which jumped 74 percent to a record US$177.5 billion last year, in an effort to adjust economic structure and curb rapid foreign exchange inflow that floods the world’s fourth-largest economy with liquidity and adds pressure on its currency to rise.

China’s exports rose 27 percent, and imports gained 20 percent in 2006, according to government data cited by Bloomberg News. To slow exports, China raised export taxes on oil, steel and nonferrous metals in November. In the same month, it cut import tariffs for alumina, the raw material for aluminum.

In September, it cut export incentives for steel and textiles.

The commerce ministry will further cut export rebates, Fu said, without elaborating. It will also adjust toll policies on companies that import raw materials and then export processed products, he added, without providing further details.

A more flexible currency is helping the government’s effort to ease the trade surplus, Fu said. The yuan rose 0.31 percent to 7.7739 against the United States dollar in Shanghai last week, according to the China Foreign Exchange Trade System. It has risen 6.3 percent since a fixed exchange rate of 8.28 to the dollar ended in July 2005.

The government has asked the Export and Import Bank of China, a state-owned policy lender, to increase lending to importers, Liang Xiang, assistant president of the bank, told reporters on Saturday.

China Mobile moves abroad

CHINA Mobile will buy a majority stake in a Pakistani carrier for US$284 million in an arrangement that’s expected to be sealed next month, the companies said yesterday.

The venture will be the world’s biggest mobile phone carrier’s first international deal and is seen as a symbolic start for its global expansion strategy, industry insiders said.

Beijing-based China Mobile will pay cash for an 88.86 percent stake in Paktel Ltd, a unit of Luxembourg-based Millicom International Cellular SA, which operates networks in developing countries.

Paktel, ranking fifth in Pakistan with 1.5 million users, is valued at US$460 million, according to a statement from Millicom.

China Mobile confirmed the deal yesterday but declined further comment.

The arrangement still needs regulatory approval.

“Chinese telecommunications carriers are making strategic moves to focus on international markets as the domestic market is now growing slowly after several years of rapid expansion,” said Yi Mingyu, an analyst at Beijing-based CCID consulting, a research firm under the Ministry of Information Industry.

Among all Chinese carriers, China Mobile’s growth is still considerable, Yi said.

Hong Kong-listed China Mobile earned 96.8 billion yuan (US$12.1 billion) last year, up 23 percent from 2005. The company’s total user base hit 318 million, a 20 percent increase from the previous year, the company said in a statement last week.

China Mobile’s development strategy is to invest overseas, especially to explore emerging markets, company Chairman Wang Jianzhou said in September.

China Mobile wants to export to emerging countries the marketing tactics and technology it developed in the rural areas of China, the world’s largest market by users.

The company also can’t afford the high cost of expansion in Western countries, where mobile penetration rate is already around 100 percent, Yi said.

China Mobile failed last July to acquire Millicom, which operates networks in 16 emerging markets including Latin America and Africa.

“The sale of Paktel allows Millicom to focus on the 16 markets where we have already established strong market positions,” Marc Beuls, Millicom president and chief executive, said in a statement.

Job-hunting Burnout

Career Expert Offers Tips for jump-starting a lengthy job search.

When people think of burnout, they tend to think of overworked employees, but those putting in long hours on the job hunt also may be affected.

Weary candidates often suffer the same problems as overwhelmed workers, including reduced productivity and morale, says Career Expert Tracey Turner.

“It continues to be a very challenging time for job seekers, some of whom have spent many months looking for new opportunities,” says Turner. “Switching gears and exploring different career avenues can help the unemployed re-energise and identify new leads.”

“Jobseekers don’t have to dramatically alter their strategies to be effective. For example, volunteering one or two days a week with a nonprofit isn’t a big change, but it could have a major impact if the candidate acquires a new skill or meets someone along the way who can help him or her professionally.”

Turner offers the following ideas for jump-starting a job search:

Make the call

You may have sent out a flurry of resumes, but have you followed up on the phone? Find out who the hiring managers are, and call them to express your interest and discuss your qualifications.

Divide your time

A lot of job seekers focus primarily on searching job listings and sending out resumes. But networking is equally important. Spend at least half of your day reaching out to others and making new contacts.

Put your work on the Web

A professional website providing work samples, a printer-friendly resume and your contact information can be an impressive job-hunting tool for any professional. A simple site is fairly easy to create, but if you’re not web-savvy, consider hiring a local web design student to develop your site for you.

Create a business card

Develop an attractive card to hand out that briefly describes your expertise and gives your contact information, including the URL to your professional website if applicable.

Launch a publicity campaign

Submit articles in your area of expertise to local business and trade publications, or give talks to nonprofit groups or industry organisations. These activities can enhance your professional visibility and expand your network.

Follow the laws of supply and demand

If your skills and experience are in low demand, identify the positions that are in high demand and try to acquire the necessary qualifications.

Consider temporary work

Working with a specialised staffing firm can help you make new contacts and acquire additional job experience while earning a paycheck.

Wage growth, spending lift HK job rolls

HONG Kong’s jobless rate held at the lowest point in almost six years, fueling wage growth and consumer spending among the city’s seven million inhabitants.

Seasonally adjusted unemployment for the three months ending on December 31 was unchanged at 4.4 percent, the government said yesterday on its Website. That’s the lowest since January 2001 and matched the median estimate of 15 economists surveyed by Bloomberg News. The average jobless rate for last year fell to 4.8 percent from 5.6 percent in 2005.

Banks, transport companies and retailers are benefiting from proximity to the Chinese mainland and hiring workers to expand. A labor shortage has forced employers to raise salaries, helping to spur retail sales and increasing inflation.

“It’s a very good number,” said Vincent Kwan, chief economist at Hang Seng Bank Ltd in Hong Kong, predicting further declines. “With the jobless rate falling, salaries will rise and that should strengthen consumer spending.”

Employment jumped by 9,100 to a record 3.52 million, while the number of people unemployed fell by 4,500 to a five and a half year low of 157,100, the government said.

The Brunswick Purchasing Managers’ Index, a measure of economic activity, rose to 57.4 in December, the highest in more than six years, as companies received more orders and production increased.

Hong Kong’s “buoyant” financial markets and economy helped to produce “very strong job growth,” and unemployment is likely to fall to four percent by the end of the 2007, Kwan said.

Career Plan In China£º10 New Year Resolutions to Help with your Career

10 New Year Resolutions to Help with your Career

It’s that time of year again when you have to re-evaluate your career.

It’s that time of year again when you have to re-evaluate your career, determine what your next step will be and where you want to go next. So whether your resolution for the upcoming year is to land yourself that killer raise or boldly become the company’s next CEO, here are 10 resolutions vital to furthering your career.

1. Put the extra effort into your work

It’s so easy to fall into the “doing your time” rut of a nine-to-five job. Why not spend those extra hours working late on those projects your boss needs done by the end of the week? This doesn’t mean cramming more work onto your already full plate, but rather taking initiative and doing something extra. The added benefit is that it will make you feel good and proactive, and your boss is likely to notice your hard work.

2. Improve yourself

The New Year is the perfect opportunity to step back and look at what areas you want to brush up on. Don’t allow yourself to fall into a ‘couch potato’ mind-set. Learn a new skill this year that you can add to your CV. Or learn a new language, especially if you wish to take on a new position with an international feel, requiring travelling and socialising with other cultures.

3. Keep on top of what’s going on in your industry

Get a “big picture” view of your industry by subscribing to one or more trade publications. Or resolve to read professional publications or attend conferences or workshops in your field.

4. Network, network, network

This year, learn how to network. Maintain contacts from your past while continually seeking out new, beneficial relationships.

5. People skills

Don’t forget your people skills. If you don’t know how to interview, work with a team or handle your boss, chances are you won’t go far.

6. Update your CV

Doing an annual or biannual touch up of your CV is a great idea. If it’s been a while since you rewrote your CV, you may want to seek professional CV advice.

7. Go for an interview

Although you should be extremely discreet about it, keeping your options open is the best career move you could make – even if it’s just to hone your interview skills and practice your responses.

8. Join a professional association

Join a professional association in your field. It is an excellent addition to your CV!

9. Dream Job

Learn about competitive salary ranges for your dream job. This is especially important if you are about to enter into a job negotiation or are working with recruiters.

10. Work-life balance

Have fun. Looking for a job and boosting your career is hard work. Don’t forget to take time out and enjoy yourself along the way. Make time for friends and family, exercise, hobbies and life. Remember, all work and no play…

And finally, right after getting that annual bonus, insulting your boss at the office party and photocopying your behind, remember to stick to your resolutions this New Year.

Premiums follow boom times

CHINA mainland’s insurance market expanded 14.4 percent to 564.1 billion yuan (US$73 billion) last year as the world’s fastest-growing major economy generated more demand.

Insurance companies’ total assets rose by 29 percent to 1.97 trillion yuan, according to documents issued at the China Insurance Regulatory Commission’s annual conference in Beijing yesterday.

The premiums on property and casualty cases jumped 22.6 percent to 150.9 billion yuan, while life premiums rose 10.7 percent to 359.3 billion yuan, the regulator’s chairman, Wu Dingfu, said at the conference.

China Life Insurance Co, Ping An Insurance (Group) Co and other insurers are benefiting from economic growth to sell more protection and investment products.

Government efforts to dismantle the cradle-to-grave welfare system are also spurring sales.

“The insurance industry’s growth is likely to be faster in coming years, as economic expansion will make the Chinese more willing to spend on insurance products,” said Tuo Guozhu, an insurance professor at the Capital University of Economics and Business.

Gross domestic product expanded 10.5 percent in 2006, down from a 10.7 percent pace over the first three quarters, National Development and Reform Commission head Ma Kai said on January 12. Still, the growth is the fastest among the world’s biggest economies.

The mainland’s insurance market may grow about 20 percent this year and in 2008, Tuo said.

Rapid premiums growth has made mainland insurers more attractive to investors. Shares of China Life more than quadrupled in the prior 12 months for the biggest gain among insurers worldwide, according to data compiled by Bloomberg News. Ping An more than tripled and PICC Property & Casualty Co doubled in the same period.

China Life’s yuan-denominated shares on January 9 more than doubled on their first day of trading on the Shanghai stock exchange, making the company the world’s second-biggest insurer by market value. The surge gives Beijing-based China Life a market value of US$128 billion, surpassing ING Groep NV, Allianz SE and Axa as the biggest insurer after American International Group Inc.

China Life raised 28.3 billion yuan selling 1.5 billion shares, or 5.3 percent of its enlarged capital, on the mainland last month.

Health and accident premiums rose 19 percent to 53.9 billion yuan, Wu said.

Insurance companies’ total returns on investment were 5.8 percent last year, 2.2 percentage points higher than 2005.

The changes in mainland’s health and pension systems to encourage consumers to spend more and save less have also helped to boost the insurance industry, Tuo said.

Mature Workers Not An Option in China

Expatriates are a big part of the business life in China. They have brought a good amount of technology, management and practical knowledge to bear on the challenges that face China¡¯s industrial base. In many ways you could say that they brought a new manufacturing platform to China and the economy has been at least partly built around it.

Unfortunately, expatriates tend to bring both the good and the bad with them. It cannot really be any other way, and it¡¯s not in any way a criticism.

For expatriates holding recruiting or HR positions in China this means that they bring the processes and models that relate to the hiring of staff in their home country. They hold these models in their head and they often try to apply them to the market here. Sometimes they know they are doing it, and try to minimize the damage. At other times they are not even aware that their assumptions are not valid.

In China, like much of the world, we are currently experiencing a ¡®War for Talent¡¯. It would actually be more accurate to say that this war continues to rage, but let¡¯s not split hairs. It¡¯s been going on for about 20 years but it ramped up significantly after China acceded to the WTO in 2001. One thing that caught my attention recently was a throw away line by an expatriate workforce development professional that companies around the world are solving their War for Talent, to some extent, by tapping into the pool of mature workers in their country. The suggestion was that this would work everywhere because, obviously, ¡®everywhere¡¯ is suffering from the retirement of the post-War Baby Boomers.

The reaction here in China was a kind of embarrassed incredulity, and a degree of irritation at such a lack of understanding of the market. So what was the basis of this lack of understanding?

Exponential Growths
First a little background material. Without laboring the point too much, demand for skills is a direct result of expansion in industrial production or increased demand for services. There is a lag in this demand but it can be shown that the overall demand has a direct correlation to the GDP growth of the country. Broad GDP growth leads to a broad growth in demand for skills and people.

In China things are a little different. The typical scenario for the growth of a particular industry has been that the government liberalizes the industry and it takes off fast, within a very short time. Latent demand kicks in and the sheer scale of opportunities causes an inrush of suppliers and manufacturers.

Simply put, the government gets out of an industry and allows private players to take the lead. Foreign players then form joint ventures with the local players and the quality and quantity of product increases. Meanwhile, the introduction of newer manufacturing methods drives the price down and this in turn drives more demand.

The problem is that this growth tends to be massively exponential. So what you see is a series of exponential growth curves that represent the take off in telecommunications, automotive, banking, shipping and so on.

If you remember anything about your high school mathematics courses you will see instantly see that it is very difficult to look back through the skills pipeline to find strong skills going back to the time before the market was liberalized. The available skill set for a given age group tends towards zero very fast.

So you are going to find it extremely difficult to find a 20-year veteran in any given industry in China coming to you with a real understanding of modern production methods. And of course you won’t find the depth of experience in the younger professional who does have the understanding of modern production methods.