The World is Round

Here is my amazingly technical blog which was developed from hours of hardwork and a superior intellect most can only dream of! Enjoy.

Monday, July 17, 2006

Final Reflection

Ahhhh yes, China. Land of the free and the home of the...No wait, that's not right. Let me think... Oh, China... The communist country with the most capitalist economy on earth? Seems to make sense, right? Well, whatever you think, it is time to take notice of China and begin to prepare for its continued presence on the world scene.

Plain and simple, this trip was amazing. The business meetings and the tourist activities were all very memorable, but my lasting memories will be the great times I had with all the students and professors on the trip. This group of people, from the professors and organizers on down, is a one of kind group. I could not have asked for anything better to cap off one amazing year than a trip like this.

Although I was sometimes tired and grumpy, well rarely grumpy but often tired, I enjoyed every bus, train, boat, and plane ride that we took. I enjoyed every intelligent, funny, witty, and even obvious, question that my peers presented to each firm, and I am proud to say that I am part of the 2006 MBA graduating class of Cal Poly's Orfalea School of Business.

Although my fondest memories will be of my classmates and all the great times that we had in China, I did learn a few important business lessons. The first and most important lesson that I learned was that I do not want to do business with the Chinese. The corruption, the bribes, the confusing policies, the atrocious working conditions, and "the way business gets done in China" does not appeal to me at all. I can not deal with being told one thing, and having that person do another. I have been raised on the good ol' fashion American way of doing business - my word is my bond - and any other way of doing business, in my humble opinion, is inferior. From what we were told directly, and indirectly, by the many executives we met with, I gathered that the Chinese constantly lie, cheat, and steal in order to make a buck. This is not an environment in which I want to work, or have my family surrounded by.

That being said, I did find two positives that can be taken from the Chinese business model and applied to Western business practices. First, the concept of "guanxi" has been slowly disappearing from business in the United States. We are so focused on each deal that the human aspects of business are overlooked at times. We must remember that relationships, networking, past history, reputations, and friendship have a formidable impact on the creation of lasting business partnerships.

The second lesson that the United States can learn from the Chinese is in relation to customer service. Their clients are always completely taken care of and their needs are catered to. Now, there must be a fine line drawn between treating your clients right and bribery, but the way in which the personal side of business has dwindled in the United States seems to suggest that we are being too cautious at times. In every restaurant, bar, shop, hotel, or exhibit that we visited, the employees were at our beck and call. Some of this exceptional customer service has been lost in the United States. I'm not suggesting by any means that drastic changes need to be made, but by analyzing the Chinese culture we can be reminded what it takes to continue to be the best.

Switching gears a bit...

This trip was an eye opening experience. I have never seen such poverty and such poor living conditions - especially when much of the time they coexist right next to a brand new hundred story skyscraper. I know that this type of situation is not unique and that many large cities experience similar juxtaposition. However, I have been to many cities throughout the world and have never seen the type of massive poverty that exists like it does in Beijing and Shanghai -scattered throughout city in many different pockets and areas.

Despite the poverty, despite the massive pollution problems, despite the censorship (if the people are even aware of it), and despite having a communist government the people of China are remarkably happy. In every city we went I had locals go out of their way, far out of their way at times, to help me order food, find my way home, or just simply to talk. Our group was always met with a smile and I can't even begin to count the numerous instances when I was bargaining that both sides were laughing hysterically and enjoying each others company. The Chinese are an amazing race of people with a great heritage that I respect tremendously.

My Favorites:

City: Suzhou
Food: Peking Duck
Bar: Banana Bar - Beijing
Tourist Place: Forbidden City and Westlake
People: Everybody!
Night: Two top spots tie - last night in Senzhen and night out at the Banana Bar
Firm Visit: CBRE (first one)
Quote: From our beloved Drew, "I don't put anything in my mouth for less than thirty reminbees."
Beer: Tsingtao
Hotel: The one-nighter in Hangzou followed with a close second by the first Beijing place!

More to come...

Monday, June 12, 2006

Website Reviews

Shenzen:

ShenZhen NewlyEverRise Electronics Co., Ltd: It seems from the pictures on the website that this company produces a variety of electronic components mostly having to do with household appliances, from televisions and microwaves to air-conditioners and audio devices. The facility looks very new and modern, and it looks like it could placed here in the U.S. I assume the company produces quality components based on the quality of the web-page. With a little research I found that the company has about 500 employees and the facility is over 6000 square meters.

Question 1. Where did all the equipment come from? I’ve heard that many Chinese companies buy used equipment very cheaply.

Question 2. Did your company have foreign guidance to set up the facility or was it all done in house?

BBK Cell Phone Factory: BBK seems to manufacture a variety of communication equipment, obviously focusing on cell phones. From the pictures, it also looks like they produce other electronic equipment like DVD’s and MP3 players. This factory, it seems, is much larger than NewlyEverRise Electronics. From searching online, I found that this company was founded in 1995, has around 20 production lines, and has over 4500 employees!

Question 1. Is the United States your main market? What other markets do you sell to and which do you plan to try and enter in the next few years?

Question 2. Where do you see Shenzen five years from now? Ten years from now? How will your company fit into that prediction?

Yantian Seaport and Logistics Center: It will be extremely interesting to see this place after the talk we had about logistics and shipping. This port looks massive from the pictures online, and it also seems that this is the ports 20th anniversary! Congratulations Yantian Seaport and Logistics Center. It’s amazing to see how far this town has come in just 20 years; this port is a huge reason for that exponential growth. I read that this port covers more than 200,000 square meters! Wow! I wonder how that compares to some of the other major ports of the world?

Question 1. Is this port based on similar designs from other ports? What are some of the unique aspects of this port, specifically the logistics center, that differentiates it from others?

Question 2. Does this port ever operate at full capacity? If not/so, what is full capacity and what ramifications will this have on future growth?

Shanghai:

PriceWaterhouseCoopers: PWC helps businesses large and small by providing industry focused assurance, tax, and advisory services to build trust and create value. They are one of the world’s financial giants servicing the consumer and industrial products, technology, entertainment, energy, transport, real estate, and more. They also offer consulting services for young and experienced businesses, and to focus on the China aspect, especially setting up businesses in China. PWC has over 130,000 employees in 148 countries, and they have nine offices in China with a staff of about 6,500.

Question 1. How long did it take PWC to establish a presence in China? What was the main difficulty, and has that been completely overcome yet? What hurdles are still on the horizon?

Question 2. What has PWC done to differentiate itself from other foreign competitors? Why will PWC be successful in China in the upcoming years?

CB Richard Ellis: It sure is nice to be able to read what the website has to say! This whole language barrier could present Brian Cronin and I with a few major problems on our travels after the class leaves (I know, groundbreaking thoughts I have sometimes). I thoroughly enjoyed hearing the presentation on CB Richard Ellis in our pre-departure meetings, and I am anxiously awaiting this tour/meeting as well. This company is a provider of high quality real estate services to developers, investors, and occupiers all over the world. They have a competitive advantage over their competition because they combine local market knowledge with a regional and global network of offices. This means that they can provide their customer with support almost anywhere in the world, and in almost every area of real estate, including research, consulting, valuation, investment and asset management, and leasing/sales. They have offices in most major Chinese cities, and from the presentation we heard, plan on expanding this as the years come.

Question 1. Why has CB Richard Ellis been so successful, not only Globally, but specifically in China?

Question 2. What were some of the major mistakes that your company made in expanding business into China? What would You/your Company do differently if you could do it all over again? Why?

Shanghai Urban Planning Exhibition Hall: I am looking forward to seeing this place because it will give the class an opportunity to see how Shanghai has changed so quickly. I also am excited to see this exhibition hall’s forecast of the future for the city. When I first came to Cal Poly I was an Architecture student, and I still have a passion for the subject so this stop will hopefully be one of the highlights for me.

Question 1. What kind of environmental standards does Shanghai/China have for development?

Question 2. Are there lobbyist groups in China that push for such causes as environmental concerns? If so, can they be vocal and do they have any affect?

HSBC: The Hong Kong and Shanghai Banking Corporation Limited was established back in 1865. Since that time they have developed into one of the world’s largest banking and financial services (The company that I will be working for suggests using one of their credit cards. I just thought this was interesting because I received a welcome packet two-days after our pre-departure presentation from HSBC). HSBC has 12 main branches in China, complimented by 12 sub-branches. They have recently moved their home office Shanghai. I look forward to hearing more about the changing banking climate in China, especially the issue regarding credit cards and citizens saving/spending habits.

Question 1. What will HSBC have to do in the upcoming years to continue to grow and maintain competitive advantages over foreign banking/investment companies?

Question 2. What kind of interaction does HSBC have with the Chinese government? How does this interaction influence business decisions, if at all?

RR Donnelly: This company is involved in all aspects of printing including digital photography and large commercial solutions, and everything in between. In 2005, RR Donnelley was ranked number one in the printing industry for the fifth straight year on FORTUNE magazine’s list of most admired companies. In addition, by looking on their website it is easy to see that this company has been extremely successful; the company received 55 Gold Ink awards last year, while their closest competitor received less than half that amount. Also, RR Donnelley is not only concerned with making money, they have a slogan that says, “doing good is good business.” They claim to contribute to programs that enhance the cities and towns in which their employees live and work. It will be interesting to hear if this motto has/will been maintained while setting up business in China.

Question 1. I don’t know anything about the printing business (lucky we have Chris Riffel), but what kind of competition is there in China? Is it mostly local print shops?

Question 2. When you enter new markets with new languages and styles does that present any problems for your technology, or is it able to handle differences like this fairly easy?

Microsoft Global Technical Service Center: This technical service center was opened in Shanghai1998, and was the first of its kind to be opened by any Fortune 500 company. The center has more than 500 employees, which provide support for customers from all over the world including the United States, Europe, and Asia-Pacific.

Question 1. What were some of the ethical issues that needed to be considered when first opening this technical center 8 years ago?

Question 2. How does Microsoft help the community in which it operates?

Carre-Four: Wow! I have never heard of this company before this year, and I still didn’t recognize how large of a corporation they actually are. They are the second largest retail in the world, trailing only Wal-Mart, employ over 436,000 people, and had just over $93.6 billion in sales as of 12-31-05.. They are French based and are the self-proclaimed pioneers of the hypermarket - a combination of a supermarket and a department store. Currently in China, there are 270 stores, 64 being hypermarkets, 8 supermarkets, and 212 hard discounters.

Question 1. What separates Carre-Four from Wal-Mart? Who will be number one in China and why?

Question 2. Does Carre-Four believe they have had a positive effect on the Chinese people? How have they influenced the Chinese lifestyle, if at all?

Shanhai Museum: This museum opened up to the public in 1952, and moved a few times before it found its current home at the very center of Shanghai. The museum houses over 120,000 pieces of art including everything from ceramics, calligraphy, bronze statues, drawings and paintings, and anything else you can imagine. The current museum has a floor space of 39,000 square feet that houses 11 exhibit halls and three special temporary exhibition spaces. This stop is going to be truly amazing for all of my peers. We will get a unique look at cultural relics and symbols that we would not be able to see anywhere else on earth. I can’t wait for this stop. I am becoming so excited as I see and research more firms and cultural opportunities.

Beijing:

US Embassy/Commercial Attache:
If I ever do decide to take work, or create work for myself in China I will definitely take a long look through this website, and visit with someone in one of the six offices that are located throughout most major cities (although the embassy is located in Beijing). It seems in has everything I could think of about doing business in China. The website has recent surveys regarding communication services in China, information on how to find Chinese business partners, where trade shows are happening within China’s borders, and the latest updates on anything business related. The website breaks down its information by region, and by industry. The website was easy to navigate and provided many useful nuggets of info.

Question 1. What kind of interaction does the embassy have with Chinese officials?

Question 2. How many people does the US embassy have working on business related news and info.?

CB Richard Ellis: Once again, as a leader in real estate ventures around the globe, CBRE will take us on a tour of their Beijing facilities. This will be another great opportunity for us to learn more about the real estate market in China, as well as the real estate market in general. I know that I don’t know much about it and relish the opportunity to gain insight from industry insiders.

Sun Microsystems Engineering Center: I find it fascinating how these Mandarin websites still have English titles in many instances. This just shows how fast integration is happening between our two cultures. (A side note, I just had lunch with a friend who is in the agriculture business, and he said I better listen up while I’m there because even agricultural goods are being exchanged at an exponential rate compared with just a few years ago. The Chinese are beginning to demand US foods and vice versa, although not quite as much the other way around). In order for technology-based companies to continue profitable business ventures, they must maintain their intellectual capital leads. Being located on the outskirts of Beijing near the 216 research institutes of Beijing University, it is no wonder Sun decided to set up shop there. Sun is the pioneer of UNIX based servers and computers and is also the creator of JAVA. Sun was one of the first computer-based companies to enter into China (1987) and have grown very fast. They now have offices in Beijing, Shanghai, Guangzhou, and Chengdu, and employ 800 workers.

Question 1. Anything about intellectual property. I am sure that we will have a great discussion on such issues.

Question 2. What moral/ethical dilemmas does Sun Microsystems face in China?

Beijing University: This University is also known as Peking University, and was established in 1898. They offer a wide variety of degrees including 101 undergraduate programs, 224 masters programs, and 202 doctoral programs. They have a prestigious MBA school called the Guanghua School of Management, which is one of the best MBA programs in all of China. The school has many research departments, and aims to combine groundbreaking research with top-notch educational programs. It has been a few years since I have visited any other college campus here in California, so having an opportunity to see and talk with students from China will be extremely memorable. I imagine a huge campus with dedicated students. I also imagine that the MBA degree here is a little more demanding than ours has been.

Question 1. What kinds of standards are there at Beijing University? That is, is there a minimum level of accomplishment that must be met in order to stay in school?

Question 2. What kinds of choices to students have for secondary schooling? Is it easy to choose schools, visit different schools, scholarship availability, study hours, partying, etc?

Tsinghua University: The first thing I noticed when I visited this web page is that the main bullet point is, “President of University of Maryland Visited Tsing,” which shows me that China and the University system has modeled itself after United States institutions and to this day is very much trying to emulate US standards. The school was founded in 1911 as a prep school to send students to Universities in the United States. Undergraduate students were accepted in 1925 and the research segment was opened in 1929. After the PRC took control of China, a nationwide restructuring of Universities occurred in which most were changed to polytechnic universities to focus on engineering and mathematics, Tsinghua followed suite. Currently, Tsinghua has over 20,000 students. The campus looks absolutely beautiful and I can’t wait to visit.

Panjianyuan Antique Collection Market: This place is one enormous flea market. The website says, “The Panjiayuan folk culture market is a market in Beijing dealing in secondhand goods of private citizens and art and craft articles.” I better bring by one-dollar bills, my negotiating expertise, and a large bag to carry all the goods I am going to buy.

Wednesday, June 07, 2006

Book Review: "One Billion Customers"

One Billion Customers is a great book. I found a few small flaws, which could have made the book even better, but in the end McGregor accomplishes his goal of giving the reader a plethora of hints, tips, tricks, and rules for doing business in China. The overriding conclusion of McGregor's book is that, with some common sense, a clear idea of what you want to achieve and how to do it, and a reasonable amount of patience and pragmatism, the new generation of foreign business people can walk through what was once a seeming minefield, and emerge not only unscathed but possibly successful.

McGregor has the imaginative idea of encapsulating the main messages of each of his chapters with small Mao-like slogans on what to do, and what to avoid. Some of these should be placed on neon signs a mile high at Beijing Capital Airport. “Chinese negotiators are masters of making you feel you need them more than they need you.” “The Chinese will ask you for anything because you just may be stupid enough to agree to it. Many are.” “To be truly powerful in China is to be able to avoid responsibility for your decisions.”

The most interesting part about “One Billion Customers” is the theme of negotiating with the Chinese that runs throughout the book. I found the stories that related to negotiating especially pertinent because my peers and I (Cal Poly students) had just finished taking a negotiation class. In our class we learned different philosophies and different means to accomplish our goals, only a few of which would actually work in China. (We did learn many skills, however, that would transfer to any negotiation). During some of our practice negotiations, students used negative examples or talked down to their negotiating partner to try and persuade them to see it their way. McGregor says that this is not at all acceptable in China. He says to always keep your message positive. Be patient. Play their game. Make them squirm with tough questions just as they try to make you squirm by asking the same set of questions over and over again. Negotiating with the Chinese is an art not a science. And above all you can’t embarrass the system.

Some of my peers in their reviews have cited one weakness of the book being that McGregor at times gives too much detail about each story. They say that this depth of detail takes away from McGregor’s main points and relevance of the information. I, on the other hand, believe that the minute details and in-depth background information was the one thing that made this book interesting to read. Not only does McGregor succeed in writing a book about business, but using small details he manages to give many unique comments/examples of Chinese culture that is separate from business. Without all of the particulars, McGregor’s writing would’ve sounded more like a textbook with no feeling, emotion, or color. This quote is a great example of how McGregor mixes business information with culture, “…But he had traits the Chinese admired: a fierce chain-smoking habit, a constant stream of good natured profanity, and the ability to guzzle beer and trade shots of mao-tai late into the night with any banquet companion foolish enough to challenge him…As he rode in cars and buses on country roads going to and from isolated airplane factories, he was endlessly amused by the sights and sounds of China. Watching a bicyclist wobble down the road with a live hog on the handlebars and a dozen squawking chickens bound to the back, he would laugh out loud. Every day in China you see something you don’t see every day.”

The tone of McGregor’s advice could be classified as cautious, but I would lean more toward pessimistic. Quotes like, “In China, the art of getting licenses and approvals is to tell the government whatever it wants to hear, and then do whatever you want after permission is granted. You can always work around the system,” create this pessimistic atmosphere. In addition, McGregor seems to contradict himself at times. For instance, the above quote comes in the middle of the chapter titled, “Caught in the Crossfire,” in which at the end he says, “Follow explicitly all the rules of your government. Taking shortcuts will come back to haunt you.” Although these contradictions are few and far between, they did take away from his persuasiveness when they occurred.

The major complaint that I have about One Billion Customers is that McGregor rarely used explicitly positive examples about success stories. Yes, his examples were very helpful in understanding the landscape of the Chinese business dos and don’ts, but one major success story should’ve been used somewhere. Off the top of my head, one of the only overtly positive examples he used was of Austin Koenen. This New Jersey farm boy, who happened to graduate from Annapolis with four degrees, was an executive at Morgan Stanley who was given the CEO position at CICC. He didn’t speak Chinese and he knew little about Chinese history or culture, but he was able to win the respect of his Chinese employees by going out of his way to show respect. I really like this example because it shows that any of us have an opportunity to be successful in China if we use the skills we have. We don’t have to speak Mandarin or be an expert on Chinese history. Being sincere, honest, and as the Chinese called Koenen “openhearted,” goes a long way.

Overall “One Billion Customers” was very easy to read, used a pleasant structure that reinforced each and every main point, and gave many unique and personal insights that any businessman can put into practice when doing business in China. Despite a few minor flaws, which were inconsequential for the most part, this book was full of information about business, culture, and history. James McGregor’s writing is simple and straightforward, and I have recommended this book to my friends and family.

Monday, March 27, 2006

Book Review: "The World is Flat"

The industrial revolution of the 18th and 19th centuries brought a drastic increase in productivity, and standard of living. "The World is Flat," by Friedman, claims that we have entered a new era that is just as, or more, significant than the industrial revolution was 200 years ago. Friedman calls it, "Globalization 3.0," in which the world is becoming ever more integrated, connected, and interdependent.

Friedman attributes this flattening to some political, but mostly economic factors. He describes 10 key flatteners (some of which are much stronger than others such as "steriods"), ranging from the fall of the Berlin wall to "supply chaining," tells how they converged, and describes the innovative technologies involved that allowed the development, and access to previous undeveloped world markets. Just like the industrial revolution made physical strength no longer a competitive advantage, the flattening of the world makes physical location no longer an enabling or prohibiting factor. Individuals, corporations, and nations are finding themselves competing with, collaborating with, selling to, buying from, and employing people around the world. The global "playing field" is being leveled.

Most of the book is dedicated to describing how different countries, developing and developed, corporations, groups, and individuals can cope and/or take advantage of the opportunities that the flattening of the world presents. Friedman makes many credible arguments, and it is hard to disagree with most of them. They are well researched, and backed by first-hand interviews with well-known successful executives and intelligent minds from around the world. Despite the fact that Friedman's ethnocentrism rears its head throughout the book, and he tends to be biased at times, he makes a conscious effort to present/consider both sides of the story.

I found his analysis of America's current position in the "flat" world spot-on. The United States must not get complacent with it's current position in the world market, get off its high horse, and get back to some of the core strategies and values that got the U.S. to where it is today. Specifically, Friedman discusses at some length the "Quiet Crisis" that America is faced with. The "Quiet Crisis" refers to the fact that the United States has a shrinking information base in the fields of science and mathematics; many of the United States great minds are of the baby-boom generation and getting older, the percentage of college graduates in these fields is declining in comparison to China and India, and we are no longer attracting foreign students at the same rate to study domestically. The point is that we won't see the results of this decline until 20 years down the road, but by that time it will be too late.

The power to fix this problem lies in the hands of U.S. policy makers. Unless they recognize this problem and, like JFK, make science and mathematics a priority, the U.S. risks losing much business to rapidly developing countries that have already recognized this need and have put programs in place to satisfy it. Friedman compares this crisis to the way America confronted communism, "What this era has in common with the Cold War era, is that to meet the challenges of flatism requires as comprehensive, energetic, and focused a strategy as did meeting the challenge of communism."(p. 277) Another great quote, "The job of the politician in America, whether at the local, state, or national level, should be, in good part, to help educate and explain to people what world they are living in and what they need to do if they want to thrive within it."(p. 280) "Politicians can make us more fearful and thereby be disablers, or they can inspire us and thereby be enablers."(p. 283) Our current administration continues to be disablers to America's progress and uses fear, instead of information, to motivate their policy decisions.

Although "The World is Flat" is full of useful information and insightful comments, Friedman tends to simplify the world by focusing solely on the effects of economic factors. This fault is most evident when he discusses that he believes no two countries in the DELL global supply chain would go to war with each other. (This is very similar to his discussion in the Lexus and the Olive Tree when he says that no two countries with a McDonalds have ever gone to war with each other). I agree that economic interdependence can positively effect foreign relations, however, there are a myraid of other factors that are just as important. Take for example WWI and WWII. France and England were two of Germany's largest trading partners, yet war still occurred.

Another section of the "World is Flat" that I questioned was Friedman's discussion of the "disempowered" people of the world that are stuck between the flat and the un-flat world. Specifically, he discusses how he believes that the central reason for Muslim radicals and fundamentalists hatred of the West stems from their inability to access information and the resulting lack of opportunity. He overlooks years of war, invasions, the crusades, and other deep rooted factors that are much more influential on Muslim thinking than the "flattening" of the world. However, he still does present a credible argument by citing outside sources.

As I first starting reading The World is Flat I questioned whether the contents really deserved to be a book, as opposed to a long magazine piece. I thought that much of Friedman's book was intuitive and repetitive, but as time goes on, I realize how much quality information is packed within the 473 pages. I find myself quoting different elements and stories in the book to friends and colleagues all the time. I refer to what a great company UPS is, the problems the United States faces, and the threats that China and India pose to the U.S. Despite my earlier disagreements with a number of Friedman's points, I believe that it would be a mistake for anyone who wishes to understand the world around them and the economics of the 21st century, not to read this book. At the very least, "The World is Flat" will open the eyes of aging Americans and baby-boomers that have missed the boat when it comes to the latest innovations in communication and information sharing.