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Book Review
Author: George Zhibin
Gu
Publisher & webpage: www.Trafford.com/05-1822
ISBN:
1-4120-6911-4
Date:
September 2005
Chapter 3
All Players Are Important
Today China is the
biggest new frontier for international companies. In many ways, the Chinese
market has a more international flavor than many
other markets around the globe. Many unique characteristics have evolved
along the way. Countless international businesspeople are singing their favorite songs and doing their traditional
dances—all in one theater. So far, some have
danced better than others.
Overseas Chinese Inc vs
foreign multinationals
Up to now, the
“Overseas Chinese Inc.” has been the biggest investor in Mainland
China.
The United States is in
second position, followed by Japan
and numerous European nations and South Korea.
Businesses from Hong Kong had an early start. Most if not all of the
factories in Hong Kong have moved over the
border. Today, about 240,000 Hong Kong residents work and live in China. Their
employers are mostly small and midsize companies. They mostly focus on
low-end consumer products. Their strengths are best shown in their vast
numbers.
China’s
expanding market has created tremendous opportunities for the global giants,
especially in capital-intensive and high-tech sectors. These giants have made
a huge difference in connecting China to the global markets.
US multinationals vs others
Overall, on a global basis,
the U.S.
companies as a group are the biggest. The power of the United States
is the most influential in many markets. In China
as of now, U.S.
players are just one among many foreign business groups.
Relatively speaking, the
Koreans are more active today than the Americans. To the Koreans, coming to China is a
necessity, for their home market is small. They aim to use China as a
new engine for growth. But the U.S. companies have a huge market
at home. They are less willing to venture out. Except for a few large players
and high-tech companies, most sizable American companies have only 10% or less
international business. This is quite different from the situation for many
leading companies in Europe, Japan,
and South Korea.
They may have much bigger international sales than their U.S.
counterparts.
In China, many
Korean companies have been latecomers in relation to Japanese and Western
companies. But they have made great strides. Several are already household
names, especially LG, Hyundai, and Samsung.
LG has been a star
performer. By 2003, LG had invested $2.4 billion in China. The
company has become a leader in the consumer electronics and home appliances
sector. Its China
business reached $8 billion in 2003 and $10 billion in 2004. LG is still
expanding its investment programs and hoping to make China its
second home.
Samsung is another success
story. Its product lines—semiconductors, mobile phones, consumer
electronics, and home appliances—fit China’s needs. By
now Samsung has transferred most of its personal computer manufacturing to China.
What underlies the success
of Korean companies is a combination of good timing and the right products.
Above all, the Koreans are committed to China for the long term. The
Korean success has inspired envy among international competitors.
In fact, Korean companies
now treat China
as their own production center as well as a big
market. The average monthly salary for a manufacturing job is $1,524 in Korea, but only $115 in China. In
addition, China is a huge
market, much bigger than Korea—something
the Korean companies cannot ignore. They intend to move most of their
production from Korea to China,
increasing the efficiency and profitability of expanding around the globe.
It seems that the Korean
giant Samsung has found jade in China. Samsung intends to make China its
biggest market, hoping to reach $14 billion in sales by 2008. To this end the
company has been adding new programs. This has already made Samsung a leader
in China.
The Korean giant will become even more powerful, for it has found a big space
in China.
How do Chinese consumers
view foreign players in general? They seem to pay less attention to national
origins than one might think. In many ways, they are rather indifferent to
nationality. To consumers, all the foreign players are important.
Auto
competition
In the auto market, all the
American players are in China
today. As is true internationally, GM and Ford are only two players among
many in China.
The largest player so far is Volkswagen. Volkswagen has been operating in China since
1985. But GM set up its Shanghai
joint venture only in the late 1990s. Volkswagen has kept its leadership role
by expanding its programs and adding joint ventures. In Volkswagen’s
global sales, China
now accounts for about 20%. Volkswagen is adding 10 billion euros and wishes
to make China
a center of its global business.
Moreover, GM confronts numerous competing
players in its price range. Honda and Toyota
are two of these. Korea’s
Hyundai landed in China
in 2002. Hyundai hopes to make China its biggest market and is
now in a hurry to achieve this goal. So far, progress has been huge. In 2004,
Hyundai sold 150,000 cars in China,
making it one of the top four car makers here. Another U.S. giant,
Ford, does not want to be left behind. Its most recent project was to build
an auto factory in Nanjing in partnership with
Japan’s
Mazda and a Chinese company. At the present time, all global auto players are
busy. They expect China’s
auto market to reach 10 million by 2010, from 5.2 million in 2004.
All in all, China has
become a new arena for global business. All multinationals have taken their
unique roles. They are all important for now, and they all want to become
even more important. In order to do so they must fight hard with one another,
besides China Inc.
Copyright: George Zhibin Gu
George Zhibin Gu is a business consultant based in China.
He is the author of a forthcoming book, China's Global Reach: Markets, Multinationals, and Globalization (Haworth Press, Fall 2005). He can be reached at
gzb678@yahoo.com.cn
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