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“Chinese companies, spurred on by an
enthusiastic government, are increasingly going beyond the country’s
borders to seek business opportunities. ”
theLINK Volume 1, 2016
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32
Lessons from a Global Journey
Ch i n e s e com p a n i e s , s p u r re d on
by an enthusiast ic government,
a re increas ing ly go ing b e yond
the countr y’s borders to seek business
opportunities. In the last decade, there have
been much publicised success stories and
often a lot less noise when deals fail. Many
Chinese companies are still finding their way,
and therefore look for success stories and
cautionary tales among those that have already
venturedabroad.Theyalso looktoCEIBS–
with its wealth of knowledge from the school’s
faculty, alumni companies and corporate
partners–toprovideguidance.
It was natural, then, for the issue of Chinese
companies going global to be the topic of the
4thAnnual CEIBS InternationalAdvisory
Meeting held at the Shanghai Campus on
October30,2015.Renownedbusiness leaders
from around the world gathered to discuss
the challenges companies face when going
abroad, and some successful strategies for
navigating them. Here are some excerpts from
presentations given at the meeting by TCL
ChairmanandCEOLiDongsheng(CEO2003),
FounderandChairmanofShenzhenMindray
Bio-Medical Electronics Xu Hang (EMBA
2002,CEO2008)andViceChairmanofTata
MotorsRaviKant inwhich they share first-
hand experiences of Chinese companies’ forays
abroad, as well as lessons on the globalisation
practicesofcompaniesfromothercountries–
lessons from which everyone can learn.
theLINK Volume 1, 2016
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“We must expand our share of the high- and medium-
end markets, in order to obtain higher global brand
positioning and better economic benefits.”
theLINK Volume 1, 2016
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34
Li Dongsheng: Transition, Upgrade & Go Out
The Chinese economy saw rapid
growth over the past 30 years, but in
2015itbegantoslowdown.TheGDP
growth rate is expected to be under
7% (editor’s note: the official number
turnedouttobe6.9%)for2015.This
slower growth is due to a sharp rise
in manufacturing costs – especially
labour costs which have risen 2.7
times in the past decade. TCL is a
manufacturer and has experienced
these changes i t se l f . With more
than 70,000 employees, the change
in labour costs, which have seen an
especially dramatic rise in the coastal
regions, has had a profound impact
on the company. Manufacturing costs
in China now exceed those in most
of the world’s developing countries:
if manufacturing costs in the US are
100, then in China costs are 94, in
India 82. In other words, the cost
advantage of Chinese manufacturers
no longer exists. China’s industrial
s t r u c t u r e i s b e i n g o p t i m i s e d ,
and economic growth is shifting
from being investment-driven to
innovat ion-dr iven. Investment-
driven growth may last for a while,
but it cannot last for long, since
rising government and enterprise
debts will place restrictions on the
investment-driven growth model.
T h u s I h o p e t h e e co n o my w i l l
become more innovation-driven in
future.
Over the last few years, the developing
countries’ contribution to world
economic growth has continued to
rise and, in the coming years, the
greatest growth potential in the world
economy will still reside in emerging
markets . In 2015 India, with an
economic growth rate of 7%, topped
allotherlarge-scaleeconomicentities.
There is also a reshuffle occurring in
the global manufacturing industry.
In television, computer and mobile
phone manufacturing where TCL
is focused, China, Japan and Korea
are the leading players in television
manufacturing,whileJapanesebrands
are losing market share. Among
computer manufacturers, the top
three are China, the US and South
Korea; while in the mobile phone
manufacturing industry, the US,
SouthKoreaandChinatakethefirst
three positions. Looking back five
years, Japanesebrandswere still the
major players in the market, but they
are now declining. I am convinced
that we will see a few new consumer
electronics companies come from
some emerging markets such as India
and Russia in the future, which will
give rise to another change in the
whole global market structure.
Where’s the opportunity for Chinese
companies?TCLhasbeenpromoting
the strategy of “upgrade, transition
and go out” over the past few years.
The whole industry is in need of
upgrading. In the early years we were
focused on learning and imitating,
and our products have always been
inthemediumandlow-endmarkets.
In future , we must expand our
shareof thehigh-andmedium-end
markets, in order to obtain higher
global brand positioning and better
economic benefits. The Internet and
intelligence-orientation are more
important in this transition process.
Withthisobjectiveinmind,TCLhas
come up with the “Double +” strategy,
namely, “Intelligence + Internet” and
“Products+Services”.Ouraimis to
include smart Internet applications in
more terminal products in an effort
to turn consumer products into smart
terminals, bringing customers more
value and experiences. In addition,
instead of merely selling products, in
future, we will also provide services
and support to service platforms.
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China’s joining the WTO in 2001 has
been a driving force for integrating
the Chinese economy into the global
economicsystem.Goingglobalwillbe
a new engine for Chinese companies
in the future, especially for large-
scale companies. According to our
datafor2015,thegrowthpotentialin
the domestic market in our industry
is very low, but the growth potential
in foreign and emerging markets
remains high. Companies who want
to maintain growth must speed up
globalisation of their business.
TCL was the forer unner o f the
globalisation trend among Chinese
companies. In 2004 we completed
two re lat ive ly large-scale cross-
borderM&Aprojects–acquisitions
of Thomson’s colour TV business
and Alcatel's mobile phone business,
which have boosted our overseas sales,
which have grown from a relatively
smallnumber toRMB47billion in
2014. Thanks to our global business
expansion, we rank fourth globally in
sales of colour televisions, and sixth
for mobile phone sales.
The backstory to the globalisation
of Chinese companies is the growth
of the Chinese economy. China has
risen to become a net capital exporter
i n 2 0 1 4 , a n d Ch i n e s e f i n a n c i a l
institutions have also been accelerating
their globalisation. Ten years ago, it
was very difficult to get support from
Chinese banks to do business overseas.
Now,thebigfourstate-ownedChinese
banks are all expanding globally, and
China Industrial and Commercial
Bank has seen exceptional ly fast
development in its overseas business.
China has a complete industr ial
system.InthiseraofInternet-oriented
transition, Chinese companies have
proven their advantage in Internet
applications and services. The world’s
top ten Internet companies are either
from the US or China.
The challenge we are facing now is how
to grow from a vast manufacturing
country to a strong manufacturing
country. How can we improve our
innovation capability? How can we
build brand influence? How can we
improve management capabilities of
globaltalent?TCLhassetitsmedium-
term target: accelerating the push into
emergingmarketsincludingIndia,Brazil
andRussia;enhancing its innovation
capability in technology. TCL has
invested heavily in technological
innovation in the past decade. We rank
third among Chinese companies for
number of patent applications.
Ta l e n t c u l t iv a t i o n p l ay s a ve r y
important role in the company’s
development.About50executivesat
TCL, includingmyself,haveattended
variousCEIBStrainingcourses.Iwas
among the first batch of participants
intheCEIBSGlobalCEOProgramme.
I hope that in future CEIBS wil l
continue to provide support for the
globalisation of Chinese companies.
I am really grateful to the nurturing I
receivedfromCEIBS.
“ Companies who want to maintain growth must speed up globalisation of
their business.” theLINK Volume 1, 2016
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Xu Hang: Mindray’s Global Journey
Confucius said, “A man of forty, free
from perplexity”. However, I applied to
CEIBSat40,butwithgreatperplexity.
At that time, Mindray was planning
to go overseas. Our thinking was that
it was now difficult to do business
in China, so why not go outside of
China? We actually had opportunities
to do business overseas; however
when we did, the company’s profit
was less than RMB100 million, and
the sales volume was also very small.
The question was, how could we go
out? During my two years of study at
CEIBS, I focusedon theproblemof
globalisation of Chinese companies.
This turned out to be my biggest
gainatCEIBS;mygraduationthesis’
topic was Mindray’s globalisation
strategy, and to my delight, it received
“excellent” marks from my professors.
Globalisation isan irreversible trend.
Entrepreneursgowhere thebusiness
opportunities are – they do this by
instinct. Huawei and Mindray both
began in Shenzhen. Mindray was
established in 1991, while Huawei
was founded in 1987. Now Huawei is
a top-rankedcompany in theglobal
communications market. Huawei’s
successful globalisation was driven
by localisation through technological
r e s e a rc h a n d d e ve l o p m e n t a n d
establishing R&D and talent centres
all over the world. Today in Huawei’s
overseasplants,75%oftheemployees
are local residents. Huawei expands
steadily around the world by focusing
on marketing and R&D.
All roads lead to Rome. Which road has
Mindray taken? In 2000, we decided to
make our first efforts at globalisation.
We began with a strategy similar to our
domestic operation, which is to set up
offices everywhere, looking for agents
and attending exhibitions. We found
thisworkedinEuropebutfailedinthe
US. At that time we had many agents in
Germany,Britain,France, Italy,Spain
and the Netherlands, and we had more
orders than we could handle. However
in the US it was different. There are
only big companies, but no small and
medium-sizedcompaniesoragents in
the US medical device industry, so we
had to set up our own teams, and were
not able to hire locals. It is very difficult
for Chinese products , especial ly
medical products, to enter the US
market.Finallywedecidedtoglobalise
our company, not only our product
sales, but also by integrating more
resources. We listed on the New York
StockExchange(NYSE) in2006.We
were not short of money, but of others’
understanding and confidence. By
listingontheNYSE,wehopedtoshow
that we are a capable and responsible
company, and we will be responsible to
everyone who buys our products.
Right before the g lobal f inancial
crisis began in 2008, an opportunity
came up when the founder of our
American partner was about to retire.
After two months’ consideration we
acquired that company. It is to date
the largest overseas investment by
a Chinese company in the medical
device industry. The acquisition of
a US company has been very helpful
for our domestic operation; it has
increased domestic clients’ confidence
in our brand. Now that we have
entered the US market by acquiring
a US company, i t seems natural
for us to enter the Chinese market
and other developing markets. This
experience exemplifies the Chinese
idiom: blossoming outside of the wall,
perfuming inside.
T h e Am er ica n com pa ny i s ver y
traditional and complementary to
us. The biggest challenge for us with
the acquisition was integration. This
company used to cover many areas,
including production, sales, R&D
andafter-sales service.We found its
theLINK Volume 1, 2016
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strength was actually in sales and
after-sales service instead of R&D.
Therefore we employed the strategy
often used by Chinese companies
– we drew on its strength. Now its
R&D and production are all done
inChina; its clientbaseandmarket
intelligence have proven to be a great
help to our understanding of the
American market. What we had failed
to accomplish in the US before was
realisedonly after the acquisition–
we suddenly had hundreds of staff
workingonafter-salesservice,which
is of great significance. The US market
is basically an indicator of “which way
thewindwillblow”–whatappliesto
it applies everywhere in the world. In
total, 40% of Mindray’s global income
in the medical device sector is from
the US market.
We made another US acquisition in
2013, which is a leading ultrasound
t e c h n o l o g y c o m p a n y . I t h a d
exper ienced a major loss . Af ter
Mindray went public, I told them
that their technology was inadequate
and that our technology could help
them improve their products. At that
time they had just raised money, so
theyrejectedus.Fiveyears later, they
decided to sell the company. It was
still unprofitable, and its investors
thought it was the right time to sell.
We immediately decided to buy it.
Two ye a r s l a te r, we l a u n ch e d a
product co-produced by the two
companies which has enhanced
Mindray’s positioning in the area of
ultrasonography. [Co-producing]
such a high-end product saved us
more than three years [ in R&D
time].
B a s e d o n o u r k n o w l e d g e a n d
experience, I think there are still many
areas for Chinese companies to work
on before they go global. There are
many challenges, for example one
must have a clear-cut globalisation
strategy. It can be difficult hiring
local talent and there are also cultural
differences. Most of the time, Chinese
companies going g lobal only see
flowers but not the thorns beside
them, which means they need to
improve their risk awareness.
I think the time is ripe for CEIBS
t o t a k e t h e l e a d i n b u i l d i n g
communication between Chinese
and foreign entrepreneurs. The time
is right and the prospects are bright.
We can gain more useful knowledge
throughCEIBSprofessors’casestudies
and research into the experiences of
Chinese and Asian companies’ who
havegoneglobal. I alsohopeCEIBS
wil l continue to attract talented
professionals from overseas to China
and nurture local talent with a global
vision. This would make our overseas
recruitment efforts easier.
“ The biggest challenge for
us with the acquisition was
integration.”
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Ravi Kant: 10 Quick Lessons on Globalisation
Tata Motors had its first globalisation experience in 2004 when we acquired
South Korea's Daewoo CommercialVehicle Co. It was a great success, and
became a good example for our subsequent acquisitions (Tata Motors later
acquiredcompanies suchas JaguarandLandRover).Hereare10 thingswe
learned from our first overseas acquisition.
1.Once you dec ide on an
acquis i t ion, you must
centralise al l resources and
respond rapidly, because you
have rivals targeting the same
properties. In the case of our
acquisition of Daewoo, there
were 10 companies bidding for
it, including companies from
South Korea and Europe, so
we had to respond quickly to
succeed.
2.Fi gure out an es t imated
value quickly. If you are
obsessed w i th de ta i l s , you
will get lost in them and miss
the overall picture. Only by
knowing the whole picture can
one have confidence in deciding
whether or not to carry out the
acquisition. In the Daewoo case,
we found that they possessed
3.Be prepared for unknown
challenges. For example,
all the statistics we got were in
Korean;andDaewooemployees
disliked Tata Motors, because
t h e y h a d t h e i m p r e s s i o n
that Indian technology was
backward. In the first round
of interaction, we asked some
middle managers,“Please tell
us frankly. What do you want?”
They replied, “Sir, we really
want to work with European
companies, because we think
that would be better for our
future.” From their angle, I
understood very well. I knew
what we were trying to buy was
not only a company or property,
but a business, a sustainable
business. When you are trying
ver y s trong manufactur ing
capabilities and were highly
complementary to our products,
so we only took about 10 days
to make the decision on the
acquisition.
to buy a company, it’s natural
for employees to question who
you are and what you mean for
their future. We needed more
conversation. Therefore we began
to tel l them the story of Tata
Motors.
Four years before, the Korean
C h a e b o l [ t h a t h a d o w n e d
Daewoo] went bankrupt, leaving
a heap of problems behind, so
corporate governance was very
important for them. We talked
about how wel l we had done
w i th Tata Motor ’s cor porate
governance in the past several
decades,whichtheKoreanscould
learn from us. Though we belong
to the Third World, we have our
own excellent technology along
with technology from all over
the world. After a 20-minute
conversation about this, they
started to ask us, “What can we do
to help you?” The communication
was ver y successful . Later on
w e b e g a n t o p r o v i d e s o m e
promotional material to them,
and by doing so, we began to
workwiththeKoreanemployees.
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4.Be prepared to be evaluated.
Acquisition doesn’t mean
you can just tell everyone, “What
I say goes!” In the investment
process, one must be sincere
and frank. Everyone will look
critically at everything about
yo u , i n c l u d i n g yo u r b o d y
language.
5.Ob t a i n f i r s t - h a n d
knowledge of clients and
markets. We interacted with
people in the market to gain
statistics. If we found anything
the clients were not content
with, we would try to learn what
we could do to satisfy them.
6.Pay attention to details. They
are what determine success
or failure.
7.Set specific aims, and delegate
powers to teams. We have
many people working at the
frontline, and they have a lot of
8.Le a r n a b o u t r i v a l s . We
d i d n ’ t k n o w w h o w e
were competing with for the
acquisition, but we needed to
figure out the reasons why they
chose to purchase this company,
so that we could work out the
prices other bidders were willing
to offer. We needed to know
something about the competing
price offers.
9.Fo c u s o n p e r s o n n e l
i n t e g r a t i o n a n d
communicat ion. We gave a
three-day personnel training
course to the teams from the
acquired companies. Before
dispatching our people to South
Korea, we needed to let them
understandKoreanculture, the
labour practices there and the
Korean foodculture.After the
acquisition, the Indian team
based in South Korea had to
learn the Korean language,
and we also provided English
trainingtotheKoreanteam.
10.In t e r n a l a n d e x t e r n a l
c o m m u n i c a t i o n . W e
c o m m u n i c a t e d w i t h n o n -
K o r e a n i n t e r n a t i o n a l
companies to get an in-depth
understanding of industrial
re lat ions in Korea; we also
s p o ke t o Ko re a n i n d u s t r y
organisations to understand the
local market environment and
the secret of success, and we
alsokept in touchwithKorean
government agencies.
The acquisition of Daewoo took
six months, which earned us
status and reputation in the market.
Years later, another Indian company
succeeded in acquiring a Korean
company. They said our success in
South Korea had paved the way for
their acquisition. I think these lessons
apply to Chinese companies, Indian
companies as well as companies from
other countries. If one company
can build a good reputation in a
foreign land, it will be easier for other
companies from the same country
to make an acquisition or develop
a new market there. If you are not
performing well and cause resistance
from the locals, it will be a disaster for
other companies from your country.
power. If there is any problem,
they can give me a cal l . We
have very good communication
among us.
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“If you are not performing well and cause resistance from the locals, it will be a disaster for other companies from your country.”
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