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Abstract

China has undergone signifcant changes in the last 30 years and remains a massive market that no
successful multi-national company (MNC) can afford to neglect. This article revisits some of Chinas
core characteristics that are often underestimated or misunderstood. Five top global executives from
leading IT and advisory services companies share their insights about doing business in China. The
article frst analyses the importance of Chinas 12th Five-Year Plan and discusses China from the
structural (marketplace), client and workforce dimensions based on results of the executive interviews
and the authors own experience and research on China. It further explores the required pragmatic
approach necessary to be successful and its implications for management when doing business in
China.
57 57
CASE STUDY
Napoleon Bonaparte once likened Chi-
na to the sleeping dragon that would
shake the world when she woke up.
That was foresight. China is long awake
and fast making her presence felt in
every corner of the world. Chinas un-
natural advantage in the volume game
continues to be her core strength, put-
ting her ahead in competition despite of
her inherent challenges. Recent obser-
vations reinforce how she will remain a
market that no successful multinational
company (MNC) can afford to miss:
In 2010, the Chinese Ministry of Com-
merce counted 1,200 R&D centers
set up by MNCs with a total invest-
ment of USD 12.8 billion and regis-
tered capital of USD 7.4 billion.
1
In 2010, 11 out of 20 Huruns Richest
Self-Made Women in the World are
Chinese.
2
In 2011, 162 out of the 2000 Forbes
Top 2000 Global Companies were
Chinese Companies
3
, 3 were on
the Top 20 (ICBC, PetroChina, and
China Construction Bank). 2 of the
worlds top 10 banks are now Chi-
nese; 61 Chinese companies are on
the Global Fortune 500 list.
4
DANCING WITH THE
DRAGON
Top Global Executives Share Their Insights
About Doing Business In China
What does it take to be successful when doing business in China? Is Guanxi still
the only determinant that matters or is there much more that is at play? Learn from
fve top global executives from leading IT and advisory services companies on their
insights of what to keep in mind when navigating in the Chinese Market.
by Susan Heng
In 2012, China is the first country to
pass the 1 billion mobile subscrib-
ers
5
and will also surpass Japan to
become the Worlds largest luxury
goods market.
6
By 2014, The Economist predicts that
China will become the worlds largest
importer.
7
By 2020, Credit Suisse predicts that
China will become the worlds largest
consumer market.
8
Before 2030, World Bank predicts
that China is likely to become a high
income country and the worlds larg-
est economy.
9
This article aims to investigate some of
Chinas core characteristics that are of-
ten underestimated or misunderstood.
The fndings are based on expert in-
terviews conducted with fve top global
executives from leading IT and advisory
services companies with solid experi-
ence in the China business world. The
analysis is complemented the authors
own working experiences in China and
secondary research.
The article frst analyses the importance
of Chinas 12th Five-Year Plan and dis-
cusses China from the Structural (Mar-
58 58
CASE STUDY
ketplace), Client and Workforce dimen-
sions. It further explores the required
pragmatic approach necessary to be
successful and its implications for man-
agement when doing business in China.
Chinas Driving Force
Since founded in 1949, the Peoples
Republic of China has undergone sig-
nifcant growth and reform. With her
achievements in the last 30 years and in
preparation for future, Chinas 12th Five-
Year Plan (2011 to 2015) outlines Chinas
desire for a more sustainable and high-
er quality based economic growth with
stronger emphasis on Putting People
First and Scientifc Outlook Develop-
ment key themes (see also the articles
by O. Hanslik on page 14 and by M. von
Kutzschenbach on page 30).
Chinas aim is to move up the value chain
while keeping her traditional labor inten-
sive capability intact. Strategic indus-
tries and drivers for growth have been
identifed with dedicated investments to
promote education, rural development,
strengthening innovation and techno-
logical advancement required to trans-
form traditional industries. Chinas 12th
Five-Year Plan is a concept of inclusive
growth and is intended to shift her from
being an export based economy to one
that is driven by domestic consumption.
10

China wants to ensure that she will con-
tinue to grow as harmonious society
where she strives to spread wealth more
equally across her population. Structural
incentives are put in place to encour-
age investments in strategic industries
to drive regional development plans, fuel
job creation and develop in-China capa-
bilities to enrich the lives of her citizens.
Recognizing Chinas centrally planned
and regulated market nature, it is crucial
for MNCs investing in China to under-
stand and recognize how the Five-Year
Plan, like a roadmap, drives the countrys
transformation and behaviors. It is an
extremely relevant source to understand
Chinas investment priorities, economic
strategies and guidelines for achiev-
ing medium and long-term growth. The
plan contains specifc macroeconomic,
industry targets and key performance
indicators that directly impact business
outlooks (i.e. demand and supply) for or-
ganizations doing business in and out-
side of China.
For example, business investments
under the seven strategic emerging in-
dustries (SEIs) outlined in the plan will
beneft from the national capital invest-
ments, favorable policies and structural
incentives setup to drive achievement of
those goals. These SEIs are targeted to
account for 8% (versus current 2%) of
GDP by 2015 and comprise of:
11
Bio-technology
New energy
High-end equipment manufacturing
Energy conservation, environmental
protection
Clean-energy vehicles
New materials
Next-generation IT
To illustrate, high/new technology en-
terprises (HTNEs) are entitled to a pref-
erential corporate income tax of 15%
(instead of 25%), while 50% enhanced
deduction is provided for research and
development expenses.
12
Other structural incentives to promote
regional development include tax ex-
emption and/or deduction for HTNEs
setup in a special economic zone or the
Shanghai Pudong new area, and lower
tax rates on foreign investments in the
Western region of China. Where labor
ACKNOWLEDGMENTS
The author would like to thank the following Senior Execu-
tives for sharing their business insights and experiences:

Mr. Chin Wei Min, Managing Director, Capital Market,
Asia Pacifc, Accenture.

Mr. Egidio Zarrella, Clients and Innovation Partner,
Management Consulting, KPMG.

Mr. Girija P. Pande, Chairman, Asia Pacifc,
Tata Consultancy Services (TCS).

Mr. Nigel Knight, Managing Partner, Advisory Services,
Ernst & Young Greater China.

Mr. Steve Bingham, Consulting Services Leader, Growth
Markets, IBM Global Business Services.
59 59
CASE STUDY
costs in coastal areas continue to rise,
such measures serve as an attractive in-
centive to move MNCs production and
operations to cheaper inland regions for
a win-win outcome. As the plan is taken
seriously as the core reference on the
what and how to shaping Chinas fu-
ture, understanding and adapting MNCs
business strategies in consideration of
the Five-Year Plan is of paramount im-
portance. It is undoubtedly very valuable
knowledge for management of MNCs
when deciding on their business model,
investment priorities and talent manage-
ment strategies to address the anticipat-
ed opportunities and constraints when
doing business in and with China.
It Is a Fragmented Marketplace, Know
Your Strength and Target Your Niche
The Peoples Republic of China is a
single-party state governed by the Com-
munist Party of China (CPC) (see also
the article by M. von Kutzschenbach
on page 30). China is made up of 22
provinces, 5 autonomous regions, 4
municipalities (Beijing (Peking), Tianjin,
Shanghai, and Chongqing), and two self-
governing special administrative regions
(SARs): Hong Kong and Macau. Viewed
from the lens of IT and Advisory Servic-
es organizations, the Chinese market is
divided into 4 key segments:
Government
State Owned Enterprise (SOEs)
Privately Owned Enterprise (POEs)
Multinational Corporations (MNCs).
It can be further segregated by industries
and business types.
Given the geographic spread and client
segments, China presents a whole spec-
trum of market demand and opportuni-
ties. It is highly fragmented and diverse
in terms of needs, size and maturity
and geographic dispersion ranging from
SOEs seeking global expansion strat-
egies, foreign MNCs embarking busi-
nesses into Tier 2 and Tier 3 cities, to
proftable POEs embarking on their frst
business and IT transformation. Based
on Chinas market composition and
known challenges, it is neither feasible
to try to offer everything based purely
on demand nor is it viable to execute all
business plans concurrently. Prioritiza-
tion and adaptation are critical factors of
success when operating in this market.
Given the diversity, it is imperative to
identify a clear, addressable market
segment that provides you the premium
edge. Advisory service offerings have a
limited shelf life due to the high speed
of change in China, advises Mr. Nigel
Knight, Managing Partner, Advisory Ser-
vices at Ernst & Young Greater China.
Having a deep understanding of your
targeted client segment and customiz-
ing offerings to serve those needs and
local market differences is of strategic
importance. Industry depth and exper-
tise is equally important, adds Mr. Steve
Bingham, Consulting Services Leader,
Growth Markets at IBM Global Business
Services.
Mr. Girija Pande, Chairman, Asia Pacifc
at Tata Consultancy Services (TCS), fur-
ther advises to Focus on a few things
frst. Target on segments that bring a
high degree of product or technology
differentiation and expand from there.
He shares that when TCS frst set up
operations in China, most of their busi-
nesses involved serving MNCs. Then
TCS quickly expanded to work with well-
known local customers, what TCS terms
as National Champions. These are lo-
cal Chinese companies going global or
regional, like Tata Group expanding out
of India. It is important to work with well-
known local clients, a same philosophy
we have when doing business in India.
You do not only do business with MNCs.
Focus on a few things first. Target
on segments that bring a high
degree of product or technology
differentiation and expand from
there. Girija P. Pande, Chairman, Asia Pacifc,
Tata Consultancy Services (TCS)
60 60
CASE STUDY
We adopted the same approach in pick-
ing our major sectors of specialization
like local Banks, and expanded from
there, adds Mr. Girija Pande.
Ensuring local presence and staying
close to your clients is particularly impor-
tant in the advisory services industry, and
also applies in China. A well planned geo-
expansion strategy is pivotal to ensure
leverage and alignment with Chinas na-
tional and regional development plans,
shares Mr. Steve Bingham. IBM has a fo-
cused expansion program into Tier 2 and
3 cities and has 31 branch offces serv-
ing clients in 320 cities. Global delivery
centers are setup in Dalian, Chengdu,
Wuhan and Nanjing to be close to IBMs
top clients headquarter locations, rather
than clustered in major cities such as
Shanghai and Beijing.
According to Mr. Nigel Knight, the differ-
ent cities can further be split based on
their economic wealth, degree of devel-
opment, concentration of industry and
business type. For example, Shanghai
is a sophisticated Metropolis, while there
are still approximately 100 cities in rela-
tively early stages of development with a
population over 1 million, where Putong-
hua may not necessarily be the preferred
language of communication. There are
approximately 293 listed languages in
China
13
next to the offcial national lan-
guage Putonghua, and this amplifes the
criticality of local talents required to de-
liver the localized service provision ex-
pected of the Chinese market.
Despite the ambiguities that China pres-
ents, it remains a huge market poten-
tial too attractive to be missed. Based
on experiences of those already doing
business in China, a longer-term view is
deemed necessary (before real returns
are realized) due to the inherent eco-
nomic, geographic, structural and social
constraints China possesses. Having
realistic expectations on timeline and
business results is of absolute impor-
tance to ensure a pragmatic and sound
investment plan. Besides a comprehen-
sive growth strategy, MNCs will need
to ensure that their business strategies
are adequately complemented with ag-
ile structures in place, to anticipate the
ongoing changes of the Chinese market.
A robust yet adaptive business model is
a pre-requisite to success. Achievement
of this agility requires a glocal team,
blending best of the local and foreign
61 61
CASE STUDY
leadership, knowledge and capabilities
to drive the desired business outcome.
After all, The Chinese are doing what
everyone else is doing, and more
they are internationalizing with Chinese
Characteristics, advises Mr. Egidio
Zarrella, Clients and Innovation Partner,
Management Consulting at KPMG.
The Base is Guanxi
The most frequently discussed chal-
lenges about doing business in China
pertain to the importance of established
business connections, commonly known
as Guanxi, and to the complexity sur-
rounding the Chinese regulatory and
structural systems. While they are prev-
alent in the Chinese context, they are
nonetheless as important in any busi-
ness dealings globally. Building trusted
relationships is as essential to business
success in China as it would be in Spain
or Italy. In one sense, China shares
certain characteristics with other Asian
countries in that the Chinese are more
inclined to do business with those advi-
sors with whom they have already estab-
lished a direct or personal relationship.
As a result, it typically takes six months
or longer for clients to get to the point
of signing a consulting contract, almost
twice as long as in western countries.
This requires a long-term mindset and
investment capability, advises Mr. Nigel
Knight. In China, once you are awarded
the contract, it is not unusual that it can
take up to 25-50 signatures for approval.
MNCs need to be aware and take into
account the longer administration time
required and factor for it as part of their
business planning process.
On the cultural dimension, achieving
consensus, stakeholder alignment and
speaking the local language still carries
signifcant weight in business dealings in
China. The Chinese are very loyal and
have high respect for authority. Once
youve signed the contract, everyone is
committed to get things done and show
results. It is a culture of if you say you
will get it done, youd better get it done,
shares Mr. Steve Bingham.
Mr. Girija Pande adds that The Chinese
have realized that delivering on time is
important and they do it with military pre-
cision whether they are building a bridge
or implementing an IT system. You just
dont miss deadlines. Cultural aware-
ness and understanding the Chinese
business style is fundamental knowl-
edge to managing business expecta-
tions, from both the client and service
provider standpoint.
At the end of the day, its about having
empathy and respect for the local culture,
which is a requisite to doing business
anywhere, states Mr. Egidio Zarrella. It
is vital to keep an open mind when do-
ing business in the Chinese market, as
things may not always be what you think
they are. For example, while red in Chi-
na signifes that the stock market is up,
it means exactly the opposite in the rest
of the world. It is just a different para-
digm. adds Mr. Chin Wei Min, Managing
Director, Capital Market, Asia Pacifc at
Accenture. Mr. Girija Pande concludes
that close proximity to our customers
was a key enabler for TCS to build long
and lasting relationships.
The Chinese Want a Practical Approach
Chinese clients are developing fast and
are becoming increasingly sophisticat-
ed both in terms of needs and expec-
tations. After the recent global fnancial
crisis, there have been some changes
as Chinese leaders look to fnd their own
path and are less willing to merely adopt
proven western practices, says Mr. Ni-
gel Knight. There is just no comparable
model in the rest of the world that can
be directly emulated, advises Mr. Chin
It is vital to keep an open mind
when doing business in the Chinese
market, as things may not always be
what you think they are.
Chin Wei Min, Managing Director,
Capital Market, Asia Pacifc, Accenture
62 62
CASE STUDY
Wei Min. To illustrate, Chinese mobile
telecommunications providers have over
600 million subscribers, whilst typical
big-4 state owned banks in China have
over 100 million clients, served by its
more than 200,000 employees across no
less than 15,000 branches/outlets, some-
times operating on 7 days per week (for
retail banking). This makes them unique
due to their sheer volume.
As a result, a frequent challenge faced by
advisory services organizations is con-
vincing their Chinese clients, since their
extensive proven international advisory
experiences are often not comparable in
scale.
In fact, top Chinese banks have a big-
ger market capitalization and cost eff-
ciency ratios than their global counter-
parts. With top Chinese organizations, it
is not about merely copying, but rather,
it is about selecting what serves them
well. The Chinese are more interested
in knowledge about innovative products
and global expansion strategies rather
than about globally homogenous stan-
dard offerings. adds Mr. Chin Wei Min.
Recognizing and addressing their
uniqueness is a key business require-
ment in China. The ability to skillfully mix
and match the existing knowledge base
of proven international models and to
carefully localize it with the massive scale
required for the Chinese market is a po-
tent recipe for success. Additionally, as
the whole country is focused to move up
the value chain, client engagements that
promise accelerated knowledge transfer
to build local capability and shortened
time to value will be highly appreciated.
Another observed difference of the Chi-
nese is their preference of delivery de-
tail by advisory services organizations.
Chinese clients are prepared to pay sig-
nifcant investment for premium advisory
services. There is however a difference
in the level of details required. Strategy
work is much more operational in China,
shares Mr. Steve Bingham.
Chinese clients are rightly looking for a
practical approach and are less drawn
to study type of engagements. They
want to know exactly how it will work
in detail, from a business, process, and
capabilities angle. This is one reason for
the success that many Chinese enter-
prises have in executing rapidly, states
Mr. Nigel Knight. This is a trait prevalent
in growing economies, where manage-
ment focus and investments are targeted
at strengthening in-house expertise to
establish a sustainable knowledge man-
agement system, especially innovation-
building capabilities in anticipation of po-
tential rising production costs.
Where Chinese organizations need to
grow rapidly and at the same time need
to innovate in order to stay ahead of com-
petitors, Paretos (20:80) Rule serves as
a good principle for decision making
when faced with the choice between
customization and standardization (to
avoid reinventing the wheel).
In the SAP space, IBM has built a lot of
localized industry models suited to the
Chinese market. We have a demo cen-
ter in Beijing which showcases a fully
localized manufacturing solution which
runs on SAP. It is developed based on
the accumulated experiences gained by
working with our Chinese clients in man-
ufacturing space in the last 10 years and
adopting what has proven useful, says
Mr. Steve Bingham.
War for Talent
Chinas economic growth has intensi-
fed competition for talent among MNCs
and local companies. Attracting and re-
Chinese clients are rightly looking
for a practical approach and are
less drawn to study type of engage-
ments. They want to know exactly
how it will work in detail, from a
business, process and capabilities
angle. Nigel Knight, Managing Partner,
Advisory Services, Ernst & Young Greater China
63 63
CASE STUDY
taining the right talent are amongst the
top challenges of business managers in
China. All fve executives indicated that
talent management is a key priority of
their organizations, along with a local
talent hire policy. We believe in attract-
ing and developing local talent both in
sales and delivery. 95% of our staff in
China are locals, says Mr. Girija Pande.
IBM hires over 1,000 graduates annual-
ly and has established partnerships with
over 60 universities in the felds of tal-
ent development and research projects.
They also sponsor over 100 Shared Uni-
versity Research programs, covering
domains that are critical to Chinas sus-
tainable growth including technology,
services, smarter planet and Internet of
Things under IBMs Cultivate Talent for
China theme.
These are important initiatives to show
our long term commitment and support
for China, and they help to continue
building and maintaining the attractive-
ness of the brand IBM as an employer of
choice to the Chinese. Complementary
to local hiring strategies, there is a real
thoughtful human resource (HR) man-
agement program in place to optimize
the value out of international assignee
and also to ensure that they culturally
ft, explains Mr. Steve Bingham.
All fve of the interviewed organiza-
tions have established graduate hire
programs with elite local universities.
In addition to leveraging their global
brand value, initiatives such as setting
up Centers of Excellence, Research
and Development facilities in Special
Economic Zones, and Contributing
Back to China through their Corporate
Social Responsibility initiatives across
the country have further enhanced their
local presence as Employer of Choice.
These initiatives demonstrate their or-
ganizations long term commitment in
China where giving back to society is
highly valued.
Similar to the West, money is only one
factor. According to all fve executives,
career and interesting work are cited as
the top drivers for attracting, motivating
and retaining Chinese employees, espe-
cially in high value added jobs. Great
clients, great people, great rewards, and
great environment are four elements that
need to be right in any great advisory
business. People are generally willing to
take on a lot more and give their best if
they enjoy what they do its as simple
as that, advises Mr. Nigel Knight.
A formal support and feedback mecha-
nism is also critical as a structured meth-
od for managers to listen to the voices
of their employees in order to ensure
that proactive and remedial actions are
taken effciently as part of a continuous
improvement process. Work ethic is ex-
ceptionally high among the Chinese pro-
fessionals. Once youve built trust with
your people, they will open up and have
strong loyalty. It also helps to speak a
bit of Putonghua to add a connection,
adds Mr. Steve Bingham.
Chinas one-child policy has created a
gender imbalance. By 2020, there will
be 13 million more men than women be-
tween the ages of 25 and 34. Women are
playing an increasing role in the econo-
my. Their participation in the workforce
is already high 67 percent in 2009.
Assuming the working participation rate
among females continues, McKinsey
expects that more than half of working
women will have an offce job by 2020.
14

The changed workforce profles and
a higher share of female employees
working in MNCs calls for more com-
prehensive diversity and inclusiveness
Work ethic is exceptionally high
among the Chinese professionals.
Once youve built trust with
your people, they will open up and
have strong loyalty. It also helps to
speak a bit of Putonghua to add a
connection.
Steve Bingham, Consulting Services Leader,
Growth Markets, IBM Global Business Services
64 64
CASE STUDY
programs, amongst other talent manage-
ment initiatives that have gained promi-
nence in China of recent times. These
include efforts to offer more fexible work
arrangements, e.g. time off from work,
career moves into corporate functions,
fexible working hours and the option to
work from home, to improve staff reten-
tion and especially to cater for female
talents with family priorities.
Empowerment and providing autonomy
to your trusted local team are further cit-
ed as important motivational drivers for
the Chinese workforce. The fundamental
issue is trust. When the local employees
dont see that [trust], they will leave. The
problem with many MNCs is that systems
to promote locals are still ad-hoc.
15
Top
talent programs for accelerated career
progression are initiatives established
in respond to the highly competitive
employment market conditions in China
and are deemed necessary to manage
top talent expectations. Diligent monitor-
ing of the career progression of these
talents is also critical to ensure that the
best talents do not leave the organiza-
tion unnoticed.
Unique to China, business managers
need to be aware of Hukou which is the
residency system that limits the mobility
of Chinese citizens across the country.
Shanghai for example has a friendlier pol-
icy to promote talent attraction relative to
other cities; the local authority would help
transfer talents Hukou records to Shang-
hai. The Chinese workforce in general
is mobile otherwise. Where possible,
we endeavor to reduce traveling and to
use local offce talent to service the lo-
cal clients. However, this may not always
be possible depending on the expertise
match, shares Mr. Chin Wei Min. Given
the size of the country, business travel is
unavoidable and travel time could be sub-
stantial, such efforts are greatly appreci-
ated to promote better work life balance.
As the top echelon of talent is most
Company In China since
Total Employees
(Global)
Total Employees
(China)
Offce Locations
Accenture
1993 in China
1989 in Hong Kong
246,000 6,500-7,000
5 offces (Beijing, Shanghai,
Dalian, Guangzhou, Chengdu)
Ernst & Young
1981 in China
1968 in Hong Kong
152,000 approx. 10,000
15 offces (Beijing, Hong Kong,
Shanghai, Chengdu, Wuhan,
Shenzhen,
Guangzhou, Dalian, Suzhou,
Qingdao, Hangzhou, Tianjin,
Xiamen, Macau, Nanjing)
IBM
1992 in China
1934 Installed the
frst IBM system in
Xiehe Hospital
over 400,000 over 20,000
31 branches (catering for
320 cities)
KPMG
1992 in China
1945 in Hong Kong
145,000
9,000
professionals
13 offces (Beijing,
Shanghai, Shenyang,
Nanjing, Hangzhou,
Fuzhou, Xiamen, Qing-
dao, Guangzhou, Shenzhen,
Chengdu, Hong Kong, Macau)
Tata Consul-
tancy Services
(TCS)
2002 in China 240,000
over 2,300
employees
6 offces (Beijing,
Shanghai, Hangzhou, Tianjin,
Shenzhen, Dalian)
65 65
CASE STUDY
sought after especially in China, the abil-
ity to identify and develop raw talent is
of strategic signifcance. After all, people
are the main asset of any successful or-
ganization.
Chinese Leaders Have Other Priorities
Leaders of State Owned Enterprises
(SOEs) have different priorities. Besides
having general commercial success as
their corporate objective, their business
decisions are also driven by initiatives
and outcomes that help to drive the larg-
er national agenda.
According to Mr. Chin Wei Min, There
is nothing radically different about doing
business in China. 95% is the same as in
the West. To do business in China, one
needs to have the appreciation of the
Chinese environment and understand
the psyche of Chinese executives and
how it drives their decisions. Develop-
ing that understanding and knowledge
is vital to help organizations differentiate
themselves when planning and strategiz-
ing on how best to maneuver within the
Chinese market.
As the CEOs of SOEs are centrally
elected by the Government and then ro-
tate across top SOEs, they are naturally
inclined to consider the bigger picture in
their business decisions, explains Mr.
Chin Wei Min. This makes the Chinese
market more harmonious compared to
traditional capitalist economies. MNCs
need to be aware how this impacts the
priorities and decision psyche of Chinese
leaders when building the value propo-
sition for them. Typical business priori-
ties, such as cost cutting, headcount re-
duction, or increasing market share, may
be less important when the larger state
agenda schedules for moving 450 mil-
lion Chinese out of poverty by creating
employment opportunities. Nonetheless,
the degree of impact of these goals de-
pends on the organizations nature, ma-
turity and the industry it is operating in.
The Chinese are more driven by growth
imperatives and are concerned with set-
ting up world class governance structures
and processes. They are more inclined
The Chinese are more driven by
growth imperatives and are con-
cerned with setting up world class
governance structures and
processes. They are more inclined to
efforts that drive consolidation,
integration and standardization
outcomes.
Egidio Zarrella, Clients and Innovation Partner,
Management Consulting, KPMG
to efforts that drive consolidation, inte-
gration and standardization outcomes.
The Chinese Government is interested
to provide better public services offer-
ings to her citizens. They have the same
usage of technology like the West, but
for a different effect (or purpose) and in a
massive scale. While many are drawn to
the Cloud technology due to its cost sav-
ings potential, the Chinese governments
predominant adoption driver is to provide
infrastructure access to Chinas citizens
as part of Chinas Urbanization Program
to virtualize its nation, shares Mr. Egidio
Zarrella.
Given Chinas size and desired vision,
innovation and technology will undoubt-
edly serve as key enablers to achieve the
reach and speed China requires hence
should be carefully considered as part
of MNCs business strategies when do-
ing business in China and when advising
their clients.
Dont Tame the Dragon, but Learn To
Dance With Her
China is here to stay. She is a country
with a rich history, and she is experienc-
ing a dynamic rate of change that is un-
precedented.
Put in simpler terms, China is like a
huge conglomerate that is growing at
an amazing speed, with a highly varied
66 66
CASE STUDY
market, know your strengths, focus
on a few things first, and expand from
there.
Recognize that you need a long term
view when doing business in China.
Have realistic expectations on time-
line and business results, and adopt
a pragmatic approach.
Embrace China: Stay close to your
clients. Keep an open mind and con-
versations alive with your top local
clients to understand what they want
and need.
Guanxi is part of Chinas social fab-
ric. Endeavor to establish trusted and
long term relationships with your lo-
cal clients.
Accept that China has her unique
characteristics and preferences:
Adapt and localize accordingly.
Right talent mix is pivotal to business
success in China. Having a compre-
hensive talent management program
should be managements top priority.
As China consciously transforms from
merely Made in China to Innovation in
China, efforts to optimize her potential
and compensate her weaknesses will
be enormous. It is likely she will require
specifc expertise and external support,
hence representing business opportuni-
ties for MNCs investing in China. As Chi-
na continues on her incredible journey
to become the worlds largest economy
before 2030 (which is twice the size of
the United States if measured in terms
of purchasing power parity (PPP))
16
, she
will remain a massive market that cannot
be neglected. Where some of her unique
characteristics will remain a permanent
fxture of whom she is, business manag-
ers will need to be prepared to anticipate
and handle the perpetual changes that
she will undergo and display. While it is
not an easy task, it is defnitely one that
is exciting and potentially very rewarding
for those who persevere. After all, we are
talking about a nation of 1.3billion people
(which is one ffth of the worlds popu-
lation), all embracing change and trans-
forming at the same time.
and diverse base of business subsidiar-
ies all maturing at different rates, and a
talent pool with tremendous potential. To
achieve her aspirations China will require
a strong centralized function to drive her
over-arching corporate vision with clear
plans that outline her priorities and ex-
pected outcomes. A robust centralized
governance model is essential to provide
a guidance (with suffcient control and
autonomy embedded) to ensure achieve-
ment of an end state that is balanced and
sustainable across her subsidiaries. The
intent is to unleash the most optimized
potential of her respective subsidiaries
based on their specialization and geo-
graphic competitive advantage while not
forgetting the overarching corporate vi-
sion.
Those attempting to be successful in
this nation will need to understand this
fundamental principle: Dont tame the
Dragon, but learn to dance with her. As
China continues to focus on developing
a knowledge-based economy and creat-
ing sustainable in-country capabilities to
reduce disparities across the nation, her
demand and appreciation will reside with
those able to demonstrate their contribu-
tion in supporting her pursuit of modern-
ization.
There is no one size fts all model that
will work for the whole of China. MNCs
should continue adopting a GLOCAL
Think Global, Act Local approach to
leverage on the synergies of their estab-
lished global brand name, products, and
services, while ensuring best ft to the lo-
cal needs and customize it accordingly
as seen ft.
When entering the Chinese Ballroom it
will be essential for MNCs to be aware
of the following:
China is still a regulated market. The
Chinese Governments national poli-
cies and Five-Year Plans have sig-
nificant bearing over business out-
looks. Understand them and align
your business strategies accordingly.
Opportunities are plentiful, but frag-
mented. Have a clear idea of the
67 67
CASE STUDY
Service
AUTHOR
Susan Heng is a business strategy and change management specialist with close to
10 years of consulting experience advising and working with Global and Asian MNCs.
Susan is a SAP Global Business Transformation Manager, SAP Associate Business
Process Expert, a Certifed Information Systems Auditor (CISA), Member of the IS
Audit & Control Association (ISACA) and a Lifetime Member of the Golden Key Honour
Society (Australian Chapter). Prior to SAP, Susan worked in a leading global Business
& IT Advisory Consulting frm and supported their top international clients in ERP & Ap-
plication Assessments, IT Risk Management, Sarbanes-Oxley Compliance and Busi-
ness Process Advisory engagements. Susan holds a Master of Commerce from the
University of Sydney and a Bachelor of Business & Commerce from Monash University.
susan.heng[at]sap.com
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