Due to economic success of china I was interested in discovering their strategy of business and tried to understand how does it differ from Western countries. I learnt that China appear to have differnt management thinking compare to western management style. Its state owned enterprises are regulated giants that are experimenting with Western management pratices.
I agree that, china's best private companies are not yet pioneering new management approach like some Japanees company 50 years ago such as Toyota. Chinese strategy tought me
- Responsiveness
- Improvisation
- Flexibility
- Speed
These ability give them a critical edge. They have learned to manage the business differently in state captalism, runway growth, massive urbanization, fierce competition and endemic curruption.
Chinese manage the team differently. Culturely they see the members of their organizations as family but in return management demand lot from them. If we see the begining of all big chinese brand, they started from no or minor business background such as many of the leader was previous trader, teachers and clerks etc. although growth strategy is seems pretty clear
- Build alliances constantly
- Develop new product prolifically
- Venture into unrelated business all the time
Businesss leader in china also having two different approach. One view that they have to create their own ecosystem and they will have to build everything such as give basic skills in recruts, suppliers, govt ties, capital sources, school for employees kids etc. Best example is Hai Di lao
Their second view is, they have to be as adept as managing the state as they are at managing operations. Because they knew that they have to tap officials to get licences to operate, lease space, find workers, import materials, and raise capital. However they learned to make the system work for them
Unique management practice
I have learnt that chinese management display trading mentality, confucian preference for simple organisational structures with everyone reporting to top and fear within team. However most often they have high aspiration and opennes to experimenting with different technics.
Simple organisational structure: Generally leadership are notorious for controlling company from top but in the same time they are highly dicentralized not interm of heirachy but inform of autonomy and accountability. For example Midea (second largest home applince maker) and Haier (dominant home appliance maker). There are thousands of minicompanies directly reporting to Chairman of Haier unlikely to western management beleive that multiple reporting lines protect them from risks and uneven product standard.
Companies in China operates in two time frames (present and future) and appoint seperate autonomous and responsible manager for both the objectives.
1) Management insure that they are executing today business and
2) Preparing for double in size, between 3 to 5 years
Chinese executives make decisions in an ad hoc manner and are micro managers. Employees are entrepreneurial and ready for rough and tumble which lead the companies for high employee turn over.
Localizing value propositions: Business preferences goes locally for example Sany who build low end construction machine and acquired German Putzmeister.
They hire the manager base on their local networking in the business sector to develop the business. Which make them stay ahead in competition and gave them economy of escale to go abroad. Another example, construction company ready to pay premium price for the cement which dries quickly rather choosing durability of cement.
Developing product quickly: Skills of chinese companies rely mainly on downstream industrial competences. They dont involve the upstream creation of technology, original designs, selection of materials and design of equipment, customer knowledge or market suvvy.
Ability of chinese company to launch new offering with exisiting technology is impressive for example Midea, Wanxiang (making bicycle part), KFC China and Goodbaby. Goodbaby produce 100 new product on average each quarter which helps them to beat rivals.
Chinese companies generally keep engineering and manufacturing close, often colocating them(smes). They trend to acquire new technologies either throught formal licensing deal or by reverse -engineering. They keep physical work of experimentation and production in house.
Nonmarket strategies: Building relationship with govt and its institutions is critical in china; it takes more partners to get anything done there than anywhere else in the world. Smat companies work to understand state agency charts and the underlying power structures in every provice. The trick is in knowing which officials to approach for what and where their interests lie so that mutually beneficial deal can be put together
In general its looks like bribe or curruption but in country context its not the same, it is about helping govt to achieve their goal in return getting other benefits such as market, tax solution etc. There are plenty of companies as an example, Neusoft, Wanxiang, Alibaba etc.
Asian business is all about adaptation to the context, china is one example. In contrast western management work hard to stay lean, methodical and nimble. Hence, in International business todays managers has to know how to balance top-down approach to bottom-up strategic approach.
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