American Business in China: Dealing with Top Concerns
Written by: Jouko Virtanen, President for GIA North America
While U.S. companies remain committed to competing in the China market, most are less optimistic about their business prospects in China, with bureaucracy, an unclear regulatory environment and a lack of transparency seen as key hindrances to business in China - on top of rising costs and increasing competition. Indeed, much uncertainty also hangs in the air regarding the once-in-a-decade changeover in the political guard this year.
The good news is that nearly eight out of 10 American companies report they are still “profitable” or “very profitable” in China, according to the 2011–2012 China Business Report released by AmCham Shanghai in February 2012. Highlighting China’s increasingly important role in the global strategies of US businesses, 66 percent reported that their revenue growth in China exceeded that of their operations worldwide.
During GIA's Emerging Markets Experts road shows in North America, U.S. competitive intelligence managers candidly voiced their anxieties with regards to operating in China. Here, we elaborate on their three main concerns:
How to plan with the new party?
An event on the horizon to watch is the transition to a new generation of Chinese political leaders, foreseen for the middle of 2012. It is difficult to predict the exact outcome of the transition on businesses, as there is no published political program associated to it. However, a few facts can be gathered to make some forecasts.
First of all, the new generation of leaders was brought up in a very different context compared to the current one. Having been raised during the Cultural Revolution, the new generation is likely to be protective of Chinese national interests. Secondly, while we saw a stronger development of private businesses in the last few years, the new leadership is likely to seek to empower State Owned Enterprises.
Moreover, the change in party will mean that there will be a test period during which local governments will test the length of the autonomy that the new central authority is ready to give them. As a result, new opportunities might arise locally but with the risk of seeing them cancelled a bit later.
How to be aligned with the legal system?
China has a legal system that comprises both traditional as well as some Western elements. The market reforms spearheaded by Deng Xiaoping led to the integration of some international systems and standards. As a result, two systems coexist within China: the traditional system having a stronger legacy within state owned enterprises and the new one more followed by private businesses. However, in both cases, it is necessary to comply at least partly with both systems.
China has its own legal logic that is extremely different from what most Western companies are used to. First of all, the laws are not easy to come by and are divided according to a complex hierarchical architecture. The highest level of decisions can be based on guidelines that leave local governments some margin for interpretation. As a result, even with the text of the law or guidelines, it is extremely difficult to assess the level of enforcement region by region, and the exact meaning and philosophy of the text.
How to identify the real picture?
Reliable information and clear frameworks continue to be a challenge for many companies. The available resources, differences in development, culture and mentality all contribute to blur the picture and make it difficult for American companies to understand and predict what is seen as necessary or welcomed by local authorities.
Decision makers and businessmen in China retain traditional business approaches based on Confucian values. For this reason, information is often not publicly disclosed but rather provided through a very tight network of friends (guanxi) within which one needs to be accepted to receive accurate information and insights: a process requiring time and skill. Local businessman will only consider establishing relationship with people they know, as opposed to companies.
Furthermore, penetrating deeper into Chinese markets, especially across tier two and three cities, requires more and more sophisticated competitive intelligence and understanding of customer segments. Each of China’s 32 provinces and 5 autonomous regions has an extremely high level of independence, ranging from their own regulations and policies to their consumer preferences. Understanding all the different nuances of operating in this diverse market is critical to success. For example, investigating an industry based on the number of companies is fairly straightforward in most countries but almost impossible in China, due to the sheer size of the country, wide variation in modes of business and lack of comprehensive structure for capturing the real number of registered and un-registered operations serving a given market.
In general, the U.S. competitive intelligence managers all agreed that adapting intelligence practices to local reality is particularly important in China.
Looking ahead to the rest of 2012, U.S. companies will continue to be challenged to stay flexible and open about their assumptions on China, a fluid and booming marketplace in constant change.
About Global Intelligence Alliance: Global Intelligence Alliance (GIA) is a strategic competitive intelligence and advisory group. GIA was formed in 1995 when a team of competitive intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.
Today, we are the preferred partner for organizations seeking to understand, compete and grow in international markets. Our industry expertise and coverage of over 100 countries enables our customers to make better informed decisions worldwide.
Marketing matters: from IBM to Kyndryl
Prior to joining Kyndryl as Chief Marketing Officer, Maria had a 25-year career at IBM, most recently as the tech giant’s CMO where she oversaw all marketing professionals and activities across North America, Canada and Latin America. She has held senior global marketing positions in a variety of disciplines and business units across IBM, most notably strategic initiatives in Smarter Cities and Watson Customer Engagement, as well as leading teams in services, business analytics, and mobile and industry solutions. She is known for her work with teams to leverage data, analytics and cloud technologies to build deeper engagements with customers and partners.
With a passion for marketing, business and people, and a recognized expert in data-driven marketing and brand engagement, Maria talks to Business Chief about her new role, her leadership style and what success means to her.
You've recently moved from IBM to Kyndryl, joining as CMO. Tell us about this exciting new role?
I’m Chief Marketing Officer for Kyndryl, the independent company that will be created following the separation from IBM of its Managed Infrastructure Services business, expected to occur by the end of 2021. My role is to plan, develop, and execute Kyndryl's marketing and advertising initiatives. This includes building a company culture and brand identity on which we base our marketing and advertising strategy.
We have an amazing opportunity ahead at Kyndryl to create a company brand that will stand apart in the market by leading with our people first. Once we are an independent company, each Kyndryl employee will advance the vital systems that power human progress. Our people are devoted, restless, empathetic, and anticipatory – key qualities needed as we build on existing customer relationships and cultivate new ones. Our people are at the heart of this business and I am deeply hopeful and excited for our future.
What experiences have helped prepare you for this new opportunity?
I’ve had a very rich and diverse career history at IBM that has lasted 25+ years. I started out in sales but landed explored opportunities at IBM in different roles, business units, geographies, and functions. Marketing and business are my passions and I landed on Marketing because it allowed me to utilize both my left and right brain, bringing together art and science. In college, I was no tonly a business major, but an art major. I love marketing because I can leverage my extensive knowledge of business, while also being able to think openly and creatively.
The opportunities I was given during my time at IBM and my natural curiosity have led me to the path I’m on now and there’s no better next career step than a once-in-a-lifetime-opportunity to help launch a company. The core of my role at Kyndryl is to create a culture centered on our people and growing up in my career at IBM has allowed me to see first-hand how to prioritize people and ensure they are at the heart of progress in everything Kyndryl will do.
How would you describe your leadership style?
I believe that people aren't your greatest assets, they are your only assets. My platform and background for leadership has always been grounded in authenticity to who I am and centered on diversity and inclusion. I immigrated to the US from Chile when I was 10 years old and so I know the power and beauty that comes from leaning into what makes you different from other people, and that's what I want every person in my marketing organization to feel – the value in bringing their most authentic self to work every day. The way our employees feel when they show up for themselves authentically is how they will also show up for our customers, and strong relationships drive growth.
I think this is especially true in light of a world forever changed by the pandemic. Living through such an unprecedented time has reinforced that we are all humans. We can't lead or care for one another without empathy and I think leaders everywhere have been reminded of this.
What’s the best leadership advice you’ve received?
When I was growing up as an immigrant in North Carolina, I often wanted to be just like everyone else. But my mother always told me: Be unique, be memorable – you have an authentic view and experience of the world that no one else will ever have, so don't try to be anyone else but you.
What does success look like to you?
I think the concept of success is multi-faceted. From a career perspective, being in a job where you're respected and appreciated, and where you can see how your contributions are providing value by motivating your teams to be better – that's success! From a personal perspective, there is no greater accomplishment than investing in the next generation. I love mentoring younger professionals – they are the future. I want my legacy as a leader to include providing value in work culture, but also in leaving a personal impact on the lives of professionals who will carry the workforce forward. Finding a position in life with a job and company that offers me a chance at all of that is what success looks like to me.
What advice would you give to your younger self just starting out in the industry?
I've always been a naturally curious person and it's easy for me to over-commit to projects that pique my interest. I've learned over years of practice how to manage that, so to my younger self I’d say… prioritize the things that are most important, and then become amazing at those things.