Reflective Essay

Nicholas Peter Charles Flood

SMBA6101 | International Business Project

INTRODUCTION

My experience in SMBA6101 has been one that has fundamentally transformed my

understandings and perspectives of the key factors that are shaping the globalization

strategies of Chinese enterprises. Furthermore, it has allowed for me to identify the

implications of this globalization process for Australian businesses. Equally

importantly, it has facilitated for real personal and professional growth which will

equip me as an emerging Australian business leader as China comes to take an

ever increasing position of centrality.

Pedagogically robust, the unit incorporated self-directed, classroom, peer and field

learning experiences. The key themes that arose as a consequence of the above

were; (i) Changing labour market dynamics; (ii) National obsession with innovation;

(iii) China’s distinct orientation toward time; (iv) Chinese business leader’s

preference for control, and finally; (v) The enormity of the opportunity represented by

China’s re-emergence as a global power.

This reflective essay seeks to build upon these insights, through more in-depth

analysis, to forge lasting understandings and will be used to inform specific action

plans aimed at addressing my professional preparedness to more successfully

engage in a rapidly changing international business context.

REFLECTION #1 | Changing Labour Market Dynamic

Perhaps one of the strongest associations that comes to mind when one thinks of

China is the nations’ huge population. This has conveyed tremendous competitive

advantage, allowing China to develop their economy rapidly through access to low-

cost labour. Reinforcing this point, Denend and Mckern asserted in 2004 that the

average manufacturing hourly wage of $1 set China apart when competing on the

cost of labour for low-skilled workers (Denend & McKern, 2004).

Whilst remaining a source of competitive advantage and one upon which huge

advances have been made, China now face a number of challenges in their

domestic labour markets. These challenges result from a great irony, best captured

by the Economist Intelligence Unit who identifies China’s huge population as both its

greatest resource and its greatest challenge (Denend & McKern, 2004). Whilst an

incredibly complex and multi-faceted issue, my experience in Shanghai helped me to

identify two key factors that are serving to radically transform the labour market.

These factors were; (i) Changing preferences, tastes & attitudes and; (ii) Drastic

inequalities in the distribution of wealth.

As a first-time visitor to Shanghai, I was not expecting to see the volume of striking

shop fronts for European designer clothing, handbags, automobiles and jewellery.

I’ve come to learn that designer brands, spanning the spectrum from Louis Vuitton

through Hermes are all orienting their operations to capture what they forecast to be

an almost insatiable demand for their goods among Chinese, the top consumers of

luxury goods globally (Australian Business Insider, 2014). An equally interesting

insight was that this dynamic extends beyond China’s boarders with over two-thirds

of luxury spending by mainland Chinese on designer goods occurring outside of

China in 2013 (Australian Business Insider, 2014). Whilst obviously catering for the

middle-upper classes, it speaks to a real thirst for these high-end goods among

Chinese and the growing number within the population who possess the purchasing

power to realise their aspirations to own these expensive items.

Another key indicator of these changing behaviours, attitudes and preferences is

manifest through a concept introduced to us by Professor Lu Wei in his presentation,

Marketing in China. I was intrigued to learn of the concept of “The Three Old Things”

and how this has been steadily evolving through specific generations of Chinese

(Wei 2014, p.29). The change in expectations among spinsters from the 1970’s

where the benchmark for an eligible husband was a bicycle, a watch and a sewing

machine to the situation in the 2000’s where a car, an apartment and a substantial

amount of money are seen as the preconditions for nuptials, speaks volumes to the

drastic change in both purchasing power and expectations (Wei 2014, p.27). To

realise these material expectations, it is clear that much higher salaries/wages will be

demanded by Chinese.

Whilst the above examples speak to changing preferences and growth in purchasing

power within Chinese society, our time in Shanghai presented us with exposure to

the reality that these developments are not universal. It was commonplace for a

member of the cohort to speak of idiosyncratic observations, for example; a Bentley

driving by a mother and child riding an old bicycle on the streets of Shanghai. Key

statistics presented to us served to corroborate these observations and speak to the

challenges that China faces as a consequence of income inequality. Although now

the second-largest economy measured on a purchasing power parity (PPP) basis,

China is still in the lower to middle tier for income measured on a per-capita basis

(Denend & McKern 2004, p.11). Quite rightly, the Chinese government have realised

the imperative to address such inequality and have precipitated a new focus on

worker rights and workplace protection as a tool to keep social unrest at bay

(Denend & McKern 2004, p.15). These policies, however, look to have increased

labour-related costs by as much as 20% (Denend & McKern 2004, p.15). Wei Li

corroborates this finding, highlighting an average growth rate in wages of 11.7%

between 2000 and 2013 (Wei 2014, p.29).

Whilst by no means an exhaustive analysis of the factors that are at play, a key

learning that I depart SMBA6101 with is an appreciation that China is entering an era

of higher cost, which in turn, will serve to drastically influence the globalisation

strategies of Chinese enterprises as they seek to maintain comparative labour

market advantage. A key direction that this is forecast to take is for a shift in

production to other markets in Asia, a phenomenon that I intend to monitor closely in

order to identify the IT opportunity presented within these new markets.

REFLECTION #2 | Innovation

Having explored one of China’s main historic sources of competitive advantage, it is

a fitting to turn attention to an emerging source. We learnt throughout the course that

one of China’s key objectives is to create an innovation based economy (Benelux

Chamber of Commerce et. al. 2012, p.1). As an employee of an organisation which

prides itself on being an innovation leader, I was very eager to observe a sovereign

nation pursuing a similar agenda. Whilst innovation and technological progress are

widely accepted as being advantageous to any nation, it was only in listening to

Professor David Gosset that the antecedents of and the real fixation upon innovation

within China truly shone through. Professor Gosset helped to re-orientate my

mindset from one which saw China as an emerging power to a re-emerging power.

This helped to convey his subsequent insights when he spoke to the Chinese elite’s

desire to embrace innovation so as to avoid the detrimental impacts they

experienced when China was late to the industrial revolution (Gosset, 2014). In

providing such a powerful analysis of the underlying anxieties, the experience helped

me to better appreciate the importance that Chinese place on innovation.

Experiences in the field, including; (i) my visit to the Shanghai Science & Technology

Museum and; (ii) enjoying the panoramic views of the spectacularly modern

Shanghai skyline, helped to crystalize in my mind what has been described as a

national obsession on innovation among the Chinese.

In undertaking self-directed research following these introductory experiences I have

come to learn of some commentator’s views as to the challenges that China faces

around innovation. These challenges exist despite far-reaching institutional support,

best reflected by the shift in the 12th five-year plan to focus on strategic emerging

industry and innovative technology (Wei, 2014, p. 12). Harvard Business Review ran

a March 2014 editorial, entitled “Why China Can’t Innovate” concluding that whilst

China is a place where R&D is diligently pursued, true breakthroughs are rare

(Abrami et. al. 2014). MNC’s and Chinese companies alike propose that talent, IP

protection and cost are among the challenges faced. Whilst there may be barriers

faced at present, my experience throughout SMBA6101 has galvanised in my mind

the resolve shared by the Chinese to overcome these impediments and I strongly

believe that the breakthroughs that I will see coming from China in my lifetime will

fundamentally transform the world.

The importance of China for companies as a regional and global hub for innovation

is clear. These developments have very real outcomes for the globalization

strategies of Chinese enterprises and implications for Australian businesses. Not

only are leading enterprises innovating within China to capture value within the

domestic market they are learning how to successfully develop products, services

and processes for global markets (Benelux Chamber of Commerce et. al. 2012, p.7).

As an emerging leader, I will take heed of two specific recommendations tabled by

the Benelux Chamber of Commerce when they recommend that: (i) MNCs should

ready themselves to face Chinese companies that possess strong – maybe superior

- innovation capabilities and; (ii) MNC’s should study how Chinese companies are

using their own innovation techniques so as to replicate within their own organisation

(Benelux Chamber of Commerce et. al. 2012, p.10). To ensure that the

understandings I develop can be used to the benefit of my own organisation, I have

initiated a mentoring relationship with the Managing Director of IBM Global

Technology Services in Hong Kong.

REFLECTION #3 | Time orientation

Of all of the frameworks I’ve been introduced to throughout SMBA6101, Gert

Hofstede’s Cultural Dimensions has the highest immediate utility. Perhaps as a

consequence of my current circumstances as a time-poor MBA candidate, the 5th

dimension of this model, namely Long-term Goal Orientation (LTO) particularly

resonated. Defined as “the extent to which a society shows a pragmatic future-

oriented perspective rather than a conventional historical short-term point of view”,

China has been identified as a highly long-term oriented society (Mckern, 2013, p.

3).

I blogged about the differences in time orientation I encountered whilst in China. The

first example when I observed this was during Professor David Gossett’s lecture on

Day 1 of the China Module. In providing contextual insights into the Chinese

government’s strategic planning, I was interested to learn that not only does the

People's Republic of China (PRC) issue five-year plans documenting their social and

economic development initiatives, but when speaking of these plans they reference

its position in the history of ongoing planning process (e.g. Tenth Plan, Eleventh

Guideline etc.). Whilst, in my experience, similar planning exists within the Western

cultural context, I have not witnessed a similar emphasis on the importance of

continuity nor reverence for a plan’s place within a longer-term process of strategic

planning.

The second time when I observed this was during my team’s initial consult with the

Evergreen leadership. In providing the history of the organisation - and the

motivations of the founder – an element that soon arose was the founder’s time

orientation. The CEO spoke of how the founder was seeking to “build a company

that would last 100 years”. This stuck me as an objective that contrasted sharply

from my own experience as a professional within a US-headquartered organisation

that places highest emphasis on the achievement of revenue and profit objectives on

a quarterly basis. The key take-away from these experiences truly sought to

crystalize in my mind the criticality of developing a thorough and complete

understanding of the long-term objectives of the Chinese business system, across its

three business strategy dimensions of (i) firms; (ii) markets and (iii) institutions.

These understandings will inform how successfully I can tailor my value propositions,

how accurately I can gauge likely receptiveness to my ideas when I seek to table

proposals with Chinese business leaders and how successfully I can satisfy their

desire to understand how these initiatives will benefit them over the long-term.

REFLECTION #4 | Control

An initial learning from the course was that one specific feature that characterises

Chinese business practice is a preference for control. Many of the guest speakers

throughout the pre-departure weekend, including John Titchen from Goldwind

Australia Pty Ltd and George Su from CITIC Securities Australia, spoke of their

experience in observing this cultural preference manifest in business engagements.

An example that helped to crystallise this dynamic in my mind was when Professor

Hendrischke and Dr Wei spoke of the trends & patterns they had identified as part of

their yearly study into the foreign direct investment trends of Chinese entities in

Australia. The report made clear that there was a “tendency for majority stakes”

(Heindrischke & Fergusen 2013). This is a strong indicator of the aforementioned

preference for control. With these insights in mind, I was eager to observe how my

own experience in engaging with Chinese business leaders supported or questioned

these ideas.

Of all of the cultural learnings I obtained prior to my departure and throughout my

time in Shanghai, this is perhaps the one that has consistently manifest in the field.

Three specific examples that have helped me to fully appreciate this cultural

difference include;

(i) The “Great Firewall”. Throughout the Shanghai project, a major adjustment

the cohort had to make was to function without Google and Facebook. In

exploring with our hosts the reasoning behind the government’s choice to

block these sites, a preference for control among China’s governing elite

was regularly offered up as an explanation;

(ii) Our team’s engagement with our hosts. In both, providing initial feedback on

our team’s proposed market-entry suggestions and when providing

background on the thinking underpinning the president’s decision to found

the company, this preference shone through. A specific quote from the

CEO of our host company provided in a personal exchange, serves to

illustrate this point; “it is better to be the head of a rat than the ass of an

ox.”

(iii) The future plans of our host company. In discussing what the future held for

our company, the Managing Director spoke of their intention to IPO

various pillars of their business throughout the year(s) ahead. Two binding

caveats were, however, to be placed on these plans. The first of these was

that the holding, or parent, company would always remain private and the

second being that the holding company would maintain a controlling stake

in each of its subsidiaries. Both intentions are indicative of a leadership

style whose preference is for control.

The feedback I received from Professor Hendrischke as part of my Shanghai blog

has led me to reflect further on what the conditions might be for a Chinese business

professional to be more willing to relinquish control. Having considered this point,

I‘m led to conclude that one of the main drivers is the strength of trust that exists

between the two parties. The question then, is what can a businessman do to build

trust and of the available options, which is the most effective?

A powerful design point of the unit was how it has been structured so as to provide

ample opportunity for peer learning. One specific scenario that has served to help

me to gain a foundational understanding of how to build trust within the Chinese

business context was in attending my classmate’s Victoria Bolton’s presentationIn

recounting her team’s experience in engaging with their hosts she introduced to me

the concept of guanxi, defined as “the individual link within the social network” (Wei

2014, p.18).

Listening to Victoria’s group’s experience and in observing them assess key

engagements on an improvised “guanxi meter” helped me in three distinct ways.

Firstly, it introduced me to a simple cognitive framework through which I could better

visualise the level of trust within the relationship. Secondly, her use of examples of

what her team had done to build trust and how she perceived this to have impacted

upon guanxi helped me to apply a similar methodology in gauging the success of

similar tactics our team have employed. Finally, it reinforced in my mind that trust is

dynamic, it ebbs and flows over the course of time and one must be conscious of this

if trust is to be built, grown and maintained over a long period. This last point, given

the time orientation of Chinese business leaders, is critically important.

Reflection # 5 | Enormity of the Opportunity

The rate of development underway in China was immediately apparent upon arrival

in Shanghai. In sharing the good news with my family, having secured a place in this

year’s cohort, my father bought me a book entitled; The Bund & Architecture of One

Century (Xuyuam, 2008). The time-lapse photography within the book helped me to

observe the astonishing development of the precinct. Seeing the absolutely

spectacular Shanghai skyline from the Roosevelt rooftop bar on the Bund, however,

helped me to truly grasp the scale, beauty and extreme engineering feats of the

Shanghainese. As a symbol for China’s re-emergence as a global power, it has no

equal.

These experiences sought to reinforce what I had been hearing on nightly news

broadcasts and reading in the press for several years. Graduating from my

undergraduate degree in the midst of the Global Financial Crisis (GFC), a period

where graduates for the first time in many years faced career uncertainty, served to

enhance the personal interest I took in China’s economic development. Keeping

abreast of the views of many observers and commentators, I came to understand

that China’s experience of the GFC would play a large role in ensuring that the crisis

did not delve to new depths nor last for a prolonged period. These sentiments are

perhaps best encapsulated in the quote by David Miliban, British Foreign Secretary

following the 2009 G9 summit where he started; “After 1989, capitalism saved China.

After 2009, China saved capitalism” (Denend & McKern, 2004). With these insights

in mind, I came to an understanding as a young man that China’s & my future were

interconnected.

Six years later and well into the early stages of my career, it is this very same

dynamic that opens to me tremendous opportunities as an emerging business

leader. The opportunities in China for expats, particularly those who are highly skilled

and who possess five years’ experience, are significant, given that such candidates

are in short supply (Harper, 2013). Furthermore, China has overhauled its visa rules

to attract overseas talent, including issuing the new R visa specifically tailored to

candidates with such a background as part of China’s Thousand Talents program

(Harper, 2013).

The enormity of the opportunity that this represents for a young aspiring executive

came to the fore throughout my participation in this unit. Put simply, my perspective

now mirrors that which I held as an undergraduate, all those years ago, whereby I

saw the brightness of China’s and my future to be inextricably aligned. Whilst

SMBA6101 has truly enhanced my ability to take advantage of this opportunity, it will

only be through ongoing development and growth that I will be able to extract

maximum value. The three key actions I will take to ensure that I remain on this path

are; (i) Maintaining and growing my professional network with Chinese professionals

and those who have/are undertaking business in China; (ii) Establishing a mentoring

relationship with the Managing Director of IBM’s Global Technology Services

business in Hong Kong and; (iii) Enrolling in the Chinese Standard Program at the

Confucius Institute at the University of Sydney to develop my skills in the Mandarin

language. Furthermore, I will seek to maintain close ties with my SMBA6101

classmates and Professor Heindrischke.

CONCLUSION

In conclusion, my experience in SMBA6101 has illuminated the possibilities presented by the re-emergence of China as a global power. The experience has allowed for me to develop specific understandings as to the key factors that are shaping the globalization strategies of Chinese enterprises and the implications of this globalization process for Australian businesses. I have come to appreciate Chinese business systems differ from those in Australia in key ways, including; (i)

Evolving labour market dynamics; (ii) National obsession with innovation; (iii) A distinct orientation toward time; (iv) An overriding preference for control, and finally; (v) An astonishing rate of growth and opportunity. I finish the unit with the very clear objective of pursuing expatriation to China with my current company in the medium term. Furthermore, it has prompted me to identify several key steps I can take personally develop the relevant leadership skills, knowledge and attributes necessary to put these ideas and concepts into practice. Specifically, I have (i) Established a mentoring relationship with the Managing Director of IBM Global Technology Services in Hong Kong; (ii) Sought candidature in the standard course at the Confucius Institute at the University of Sydney; (iii) Dedicated myself to building and maintaining my network of Chinese business leaders and/or those familiar with conducting business in China, and finally; (iv) Making my career intentions clear to my employer, manger and key sponsors. The SMBA6101 experience, although such an incredibly rich learning experience has been richer still in that I conclude my studies well versed in the application of a framework through which I can continually build my capability prior to, throughout and following this next stage of my career journey. The process of educating myself on developments in China, through reference to the available literature and ongoing dialogue with those doing business in this market, by examining these insights in light of my own experiences and through ongoing reflection, I will continually hone my skills and capacity to be effective as a manger and leader in this market. With all of this in mind, this reflective essay represents but the first instalment of an iterative process I will continue to employ throughout the years ahead.

REFERENCES

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