Learning From China's Entrepreneurs
In theory, effective international brand management focuses on rapid expansion and reach. A premium is also placed on ensuring that the growth is consistent with the strategic and tactical goals set back home. But theory doesn’t get you to the finish line first. The reality is that successful international expansion requires adaptation.
Despite wanting a brand to be recognizable worldwide, chasing international strategic uniformity rarely works, due to cultural norms, economic climates and political pressures. Effective organizational planning is also a must have. If any of these is managed poorly with a one size fits all strategy, you might find yourself in last place playing catch-up, rather than being a market leader.
This was made quite clear to me during a recent trip to Asia with a group of business students. I’ve been taking similar trips for 15 years, but this time I unified the visits through a single theme: international entrepreneurship. We visited senior leaders at over 10 firms, in industries ranging from medical devices to financial derivatives. While each of the companies is identical in trying to maximize revenue and minimize expenses, actual local practices, even within the same industry, proved to be quite dissimilar. Their methods offer good lessons not only for entrepreneurs, but also for any established company looking to expand internationally.
Bigger is not always better.
For U.S. firms, the thought is bigger is always better. This is especially true for those sporting successful track records, particularly when they introduce their latest product. But this approach doesn’t automatically translate worldwide. One of China’s leading for-profit, private healthcare firms is on an expansion tear nationwide and poised to open its 10th office. They promote Western medicine and cater to China-based expats and wealthy Chinese. Given how well they’ve done, any future expansion should, in theory, be fast, routine and formulaic. But it’s not. Unlike in the U.S., where everyone chases as large a customer base as possible, this Chinese venture is taking an almost opposite tack. They consistently begin with a finite number of services. Why? To ensure better control and quality. This gradual approach positively contributes to the firm’s long-term profitability. And, significantly, it wins points with political officials, since everyone can provide ongoing input on future strategic and tactical adjustments.
Cheap labor is neither a competitive, nor strategic advantage.
Costs vary worldwide, so when an opportunity presents itself, why not immediately chase pockets of cheap labor? Because, business history has proven capitalizing on inexpensive costs never provides a long-term competitive advantage. A U.S. multinational, which has been successfully operating in China for more than 20 years couldn’t agree more. For its latest consumer product, it’s maximizing Chinese labor, but not for the cost savings. Rather, the company is forming a cross-functional worldwide team to increase productivity. They’ve included engineers from the People’s Republic to signal support for the country through long-term R&D investment and are hoping the perspective of Beijing-based staff will ensure the product is better received by Chinese customers. In fact, executives at headquarters concede Chinese labor costs are practically equal to worldwide standards, so incorporating local input is more of a longer-term “cultural” investment.
Smaller investments are good testing grounds.
So many U.S. startups, and their investors, place a premium on achieving first mover advantage in the biggest market possible from inception and with the largest investment. It’s almost business heresy to consider testing a concept on a smaller scale, especially in a strong economic climate. This is the reason that one of my favorite visits in Hong Kong was to a new style investment fund.
The partners impressed me on what types of companies they’re backing and how they’re investing their money. It’s nice to see them taking a measured, long-term approach. Real estate and finance moguls and job seekers looking to join behemoth multinational firms, have defined much of Hong Kong’s history, so these new entrepreneurial tendencies are welcome. Hong Kong’s population of 7 million is also a good test market, and could pave the way for entry into China… whose border with Hong Kong is located only a short trip away.
Ease in international expansion has never been easier. But another key takeaway from this trip is how much Asian business is still focused on interpersonal relationships. Thanks to improvements in technology, nearly any measurement metric worldwide is only a few key clicks away, whether it relates to brand management, expansion and/or implementation. However, to the executives I met, most believed the data management is relegated to second place. They race to win by putting people management first, respecting cultural idiosyncrasies and regularly adjust their strategies based on new information they receive, as opposed to treating it as cast in stone.