360 04 i Case Heng Dancing With the Dragon

8/11/2019 360 04 i Case Heng Dancing With the Dragon

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Abstract

China has undergone signicant changes in the last 30 years and remains a massive market that no

successful multi-national company (MNC) can afford to neglect. This article revisits some of China’s

core characteristics that are often underestimated or misunderstood. Five top global executives from

leading IT and advisory services companies share their insights about doing business in China. The

article rst analyses the importance of China’s 12th Five-Year Plan and discusses China from the

structural (marketplace), client and workforce dimensions based on results of the executive interviews

and the author’s own experience and research on China. It further explores the required pragmatic

approach necessary to be successful and its implications for management when doing business in

China.



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“Napoleon Bonaparte once likened Chi-

na to the sleeping dragon that would

shake the world when she woke up”.

That was foresight. China is long awakeand fast making her presence felt in

every corner of the world. China’s un-

natural advantage in the volume game

continues to be her core strength, put-

ting her ahead in competition despite of

her inherent challenges. Recent obser-

vations reinforce how she will remain a

market that no successful multinational

company (MNC) can afford to miss:

– In 2010, the Chinese Ministry of Com-

merce counted 1,200 R&D centers

set up by MNCs with a total invest-ment of USD 12.8 billion and regis-

tered capital of USD 7.4 billion.1

– In 2010, 11 out of 20 Hurun’s Richest

Self-Made Women in the World are

Chinese.2

– In 2011, 162 out of the 2000 Forbes

Top 2000 Global Companies were

Chinese Companies3, 3 were on

the Top 20 (ICBC, PetroChina, and

China Construction Bank). 2 of the

world’s top 10 banks are now Chi-nese; 61 Chinese companies are on

the Global Fortune 500 list.4

DANCING WITH THE

DRAGONTop Global Executives Share Their Insights

About Doing Business In China

What does it take to be successful when doing business in China? Is Guanxi still

the only determinant that matters or is there much more that is at play? Learn from

ve top global executives from leading IT and advisory services companies on theirinsights of what to keep in mind when navigating in the Chinese Market.

by Susan Heng

– In 2012, China is the first country to

pass the 1 billion mobile subscrib-

ers5 and will also surpass Japan to

become the World’s largest luxurygoods market.6

– By 2014, The Economist predicts that

China will become the world’s largest

importer.7

– By 2020, Credit Suisse predicts that

China will become the world’s largest

consumer market.8

– Before 2030, World Bank predicts

that China is likely to become a high

income country and the world’s larg-

est economy.9

This article aims to investigate some ofChina’s core characteristics that are of-

ten underestimated or misunderstood.

The ndings are based on expert in-

terviews conducted with ve top global

executives from leading IT and advisory

services companies with solid experi-

ence in the China business world. The

analysis is complemented the author’s

own working experiences in China and

secondary research.

The article rst analyses the importanceof China’s 12th Five-Year Plan and dis-

cusses China from the Structural (Mar-



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ketplace), Client and Workforce dimen-

sions. It further explores the required

pragmatic approach necessary to be

successful and its implications for man-

agement when doing business in China.

China’s Driving Force

Since founded in 1949, the People’s

Republic of China has undergone sig-

nicant growth and reform. With her

achievements in the last 30 years and inpreparation for future, China’s 12th Five-

Year Plan (2011 to 2015) outlines China’s

desire for a more sustainable and high-

er quality based economic growth with

stronger emphasis on “Putting People

First” and “Scientic Outlook Develop-

ment” key themes (see also the articles

by O. Hanslik on page 14 and by M. von

Kutzschenbach on page 30).

China’s aim is to move up the value chain

while keeping her traditional labor inten-

sive capability intact. Strategic indus-tries and drivers for growth have been

identied with dedicated investments to

promote education, rural development,

strengthening innovation and techno-

logical advancement required to trans-

form traditional industries. China’s 12th

Five-Year Plan is a concept of “inclusive

growth” and is intended to shift her from

being an export based economy to one

that is driven by domestic consumption.10

China wants to ensure that she will con-tinue to grow as harmonious society

where she strives to spread wealth more

equally across her population. Structural

incentives are put in place to encour-

age investments in strategic industries

to drive regional development plans, fuel job creation and develop in-China capa-

bilities to enrich the lives of her citizens.

Recognizing China’s centrally planned

and regulated market nature, it is crucial

for MNCs investing in China to under-

stand and recognize how the Five-Year

Plan, like a roadmap, drives the country’s

transformation and behaviors. It is an

extremely relevant source to understand

China’s investment priorities, economic

strategies and guidelines for achiev-

ing medium and long-term growth. The

plan contains specic macroeconomic,

industry targets and key performance

indicators that directly impact business

outlooks (i.e. demand and supply) for or-

ganizations doing business in and out-

side of China.

For example, business investments

under the seven strategic emerging in-

dustries (SEIs) outlined in the plan will

benet from the national capital invest-

ments, favorable policies and structuralincentives setup to drive achievement of

those goals. These SEIs are targeted to

account for 8% (versus current 2%) of

GDP by 2015 and comprise of:11

– Bio-technology

– New energy

– High-end equipment manufacturing

– Energy conservation, environmental

protection

– Clean-energy vehicles

– New materials

–Next-generation IT

To illustrate, high/new technology en-

terprises (HTNEs) are entitled to a pref-

erential corporate income tax of 15%

(instead of 25%), while 50% enhanced

deduction is provided for research and

development expenses.12

Other structural incentives to promote

regional development include tax ex-

emption and/or deduction for HTNEs

setup in a special economic zone or the

Shanghai Pudong new area, and lowertax rates on foreign investments in the

Western region of China. Where labor

ACKNOWLEDGMENTS

The author would like to thank the following Senior Execu-

tives for sharing their business insights and experiences: ᐅ Mr. Chin Wei Min, Managing Director, Capital Market,

Asia Pacic, Accenture.ᐅ Mr. Egidio Zarrella, Clients and Innovation Partner,

Management Consulting, KPMG.ᐅ Mr. Girija P. Pande, Chairman, Asia Pacic,

Tata Consultancy Services (TCS). ᐅ Mr. Nigel Knight, Managing Partner, Advisory Services,

Ernst & Young Greater China. ᐅ Mr. Steve Bingham, Consulting Services Leader, Growth

Markets, IBM Global Business Services.

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costs in coastal areas continue to rise,

such measures serve as an attractive in-

centive to move MNC’s production and

operations to cheaper inland regions fora win-win outcome. As the plan is taken

seriously as the core reference on the

“what” and “how” to shaping China’s fu-

ture, understanding and adapting MNC’s

business strategies in consideration of

the Five-Year Plan is of paramount im-

portance. It is undoubtedly very valuable

knowledge for management of MNCs

when deciding on their business model,

investment priorities and talent manage-

ment strategies to address the anticipat-

ed opportunities and constraints when

doing business in and with China.

It Is a Fragmented Marketplace, Know

Your Strength and Target Your Niche

The People’s Republic of China is a

single-party state governed by the Com-

munist Party of China (CPC) (see also

the article by M. von Kutzschenbach

on page 30). China is made up of 22

provinces, 5 autonomous regions, 4

municipalities (Beijing (Peking), Tianjin,Shanghai, and Chongqing), and two self-

governing special administrative regions

(SARs): Hong Kong and Macau. Viewed

from the lens of IT and Advisory Servic-

es’ organizations, the Chinese market is

divided into 4 key segments:

– Government

– State Owned Enterprise (SOEs)

– Privately Owned Enterprise (POEs)

– Multinational Corporations (MNCs).

It can be further segregated by industries

and business types.Given the geographic spread and client

segments, China presents a whole spec-

trum of market demand and opportuni-

ties. It is highly fragmented and diverse

in terms of needs, size and maturity

and geographic dispersion ranging from

SOEs seeking global expansion strat-

egies, foreign MNCs embarking busi-

nesses into Tier 2 and Tier 3 cities, to

protable POEs embarking on their rst

business and IT transformation. Basedon China’s market composition and

known challenges, it is neither feasible

to try to offer everything based purely

on demand nor is it viable to execute all

business plans concurrently. Prioritiza-

tion and adaptation are critical factors ofsuccess when operating in this market.

“Given the diversity, it is imperative to

identify a clear, addressable market

segment that provides you the premium

edge. Advisory service offerings have a

limited shelf life due to the high speed

of change in China,” advises Mr. Nigel

Knight, Managing Partner, Advisory Ser-

vices at Ernst & Young Greater China.

“Having a deep understanding of your

targeted client segment and customiz-

ing offerings to serve those needs and

local market differences is of strategic

importance. Industry depth and exper-

tise is equally important,” adds Mr. Steve

Bingham, Consulting Services Leader,

Growth Markets at IBM Global Business

Services.

Mr. Girija Pande, Chairman, Asia Pacic

at Tata Consultancy Services (TCS), fur-

ther advises to “Focus on a few things

rst. Target on segments that bring a

high degree of product or technologydifferentiation and expand from there.”

He shares that when TCS rst set up

operations in China, most of their busi-

nesses involved serving MNCs. Then

TCS quickly expanded to work with well-

known local customers, what TCS terms

as “National Champions”. These are lo-

cal Chinese companies going global or

regional, like Tata Group expanding out

of India. “It is important to work with well-

known local clients, a same philosophywe have when doing business in India.

You do not only do business with MNCs.

“Focus on a few things first. Target

on segments that bring a high

degree of product or technology

differentiation and expand from

there.” Girija P. Pande, Chairman, Asia Pacic,

Tata Consultancy Services (TCS)

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We adopted the same approach in pick-

ing our major sectors of specialization

like local Banks, and expanded from

there,” adds Mr. Girija Pande.

“Ensuring local presence and staying

close to your clients is particularly impor-

tant in the advisory services industry, and

also applies in China. A well planned geo-

expansion strategy is pivotal to ensure

leverage and alignment with China’s na-

tional and regional development plans,”

shares Mr. Steve Bingham. IBM has a fo-

cused expansion program into Tier 2 and

3 cities and has 31 branch ofces serv-

ing clients in 320 cities. Global delivery

centers are setup in Dalian, Chengdu,Wuhan and Nanjing to be close to IBM’s

top clients’ headquarter locations, rather

than clustered in major cities such as

Shanghai and Beijing.

According to Mr. Nigel Knight, the differ-

ent cities can further be split based on

their economic wealth, degree of devel-

opment, concentration of industry and

business type. “For example, Shanghai

is a sophisticated Metropolis, while there

are still approximately 100 cities in rela-tively early stages of development with a

population over 1 million, where Putong-

hua may not necessarily be the preferred

language of communication.” There are

approximately 293 listed languages in

China13 next to the ofcial national lan-

guage Putonghua, and this amplies thecriticality of local talents required to de-

liver the localized service provision ex-

pected of the Chinese market.

Despite the ambiguities that China pres-

ents, it remains a huge market poten-

tial too attractive to be missed. Based

on experiences of those already doing

business in China, a longer-term view is

deemed necessary (before real returns

are realized) due to the inherent eco-

nomic, geographic, structural and social

constraints China possesses. Havingrealistic expectations on timeline and

business results is of absolute impor-

tance to ensure a pragmatic and sound

investment plan. Besides a comprehen-

sive growth strategy, MNCs will need

to ensure that their business strategies

are adequately complemented with ag-

ile structures in place, to anticipate the

ongoing changes of the Chinese market.

A robust yet adaptive business model is

a pre-requisite to success. Achievementof this agility requires a “glocal” team,

blending best of the local and foreign



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leadership, knowledge and capabilities

to drive the desired business outcome.

After all, “The Chinese are doing what

everyone else is doing, and more –they are internationalizing with Chinese

Characteristics,” advises Mr. Egidio

Zarrella, Clients and Innovation Partner,

Management Consulting at KPMG.

The Base is Guanxi

The most frequently discussed chal-

lenges about doing business in China

pertain to the importance of established

business connections, commonly known

as “Guanxi”, and to the complexity sur-

rounding the Chinese regulatory and

structural systems. While they are prev-

alent in the Chinese context, they are

nonetheless as important in any busi-

ness dealings globally. Building trusted

relationships is as essential to business

success in China as it would be in Spain

or Italy. “In one sense, China shares

certain characteristics with other Asian

countries in that the Chinese are more

inclined to do business with those advi-

sors with whom they have already estab-lished a direct or personal relationship.

As a result, it typically takes six months

or longer for clients to get to the point

of signing a consulting contract, almost

twice as long as in western countries.

This requires a long-term mindset and

investment capability,” advises Mr. Nigel

Knight. In China, once you are awarded

the contract, it is not unusual that it can

take up to 25-50 signatures for approval.

MNCs need to be aware and take into

account the longer administration timerequired and factor for it as part of their

business planning process.

On the cultural dimension, achieving

consensus, stakeholder alignment and

speaking the local language still carries

signicant weight in business dealings in

China. “The Chinese are very loyal and

have high respect for authority. Once

you’ve signed the contract, everyone is

committed to get things done and show

results. It is a culture of ‘if you say youwill get it done, you’d better get it done’,”

shares Mr. Steve Bingham.

Mr. Girija Pande adds that “The Chinese

have realized that delivering on time is

important and they do it with military pre-

cision whether they are building a bridgeor implementing an IT system. You just

don’t miss deadlines”. Cultural aware-

ness and understanding the Chinese

business style is fundamental knowl-

edge to managing business expecta-

tions, from both the client and service

provider standpoint.

“At the end of the day, it’s about having

empathy and respect for the local culture,

which is a requisite to doing business

anywhere,” states Mr. Egidio Zarrella. “It

is vital to keep an open mind when do-ing business in the Chinese market, as

things may not always be what you think

they are. For example, while ‘red’ in Chi-

na signies that the stock market is up,

it means exactly the opposite in the rest

of the world. It is just a different para-

digm.” adds Mr. Chin Wei Min, Managing

Director, Capital Market, Asia Pacic at

Accenture. Mr. Girija Pande concludes

that “close proximity to our customers

was a key enabler for TCS to build long

and lasting relationships”.

The Chinese Want a Practical Approach

“Chinese clients are developing fast and

are becoming increasingly sophisticat-

ed both in terms of needs and expec-

tations. After the recent global nancial

crisis, there have been some changes

as Chinese leaders look to nd their own

path and are less willing to merely adopt

proven western practices,” says Mr. Ni-

gel Knight. “There is just no comparablemodel in the rest of the world that can

be directly emulated,” advises Mr. Chin

“It is vital to keep an open mind

when doing business in the Chinesemarket, as things may not always be

what you think they are.”Chin Wei Min, Managing Director,

Capital Market, Asia Pacic, Accenture



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Wei Min. To illustrate, Chinese mobile

telecommunications providers have over

600 million subscribers, whilst typical

big-4 state owned banks in China haveover 100 million clients, served by its

more than 200,000 employees across no

less than 15,000 branches/outlets, some-

times operating on 7 days per week (for

retail banking). This makes them unique

due to their sheer volume.

As a result, a frequent challenge faced by

advisory services organizations is con-vincing their Chinese clients, since their

extensive proven international advisory

experiences are often not comparable in

scale.

“In fact, top Chinese banks have a big-

ger market capitalization and cost ef-

ciency ratios than their global counter-

parts. With top Chinese organizations, it

is not about merely ‘copying’, but rather,

it is about selecting what serves them

well. The Chinese are more interested

in knowledge about innovative productsand global expansion strategies rather

than about globally homogenous stan-

dard offerings.” adds Mr. Chin Wei Min.

Recognizing and addressing their

“uniqueness” is a key business require-

ment in China. The ability to skillfully “mix

and match” the existing knowledge base

of proven international models and to

carefully localize it with the massive scale

required for the Chinese market is a po-

tent recipe for success. Additionally, asthe whole country is focused to “move up

the value chain”, client engagements that

promise accelerated knowledge transfer

to build local capability and shortened

time to value will be highly appreciated.

Another observed difference of the Chi-nese is their preference of delivery de-

tail by advisory services organizations.

“Chinese clients are prepared to pay sig-

nicant investment for premium advisory

services. There is however a difference

in the level of details required. Strategy

work is much more operational in China,”

shares Mr. Steve Bingham.

“Chinese clients are rightly looking for a

‘practical approach’ and are less drawn

to ‘study’ type of engagements. They

want to know exactly ’how it will work’

in detail, from a business, process, and

capabilities angle. This is one reason for

the success that many Chinese enter-

prises have in executing rapidly,” states

Mr. Nigel Knight. This is a trait prevalent

in growing economies, where manage-

ment focus and investments are targeted

at strengthening in-house expertise to

establish a sustainable knowledge man-

agement system, especially innovation-

building capabilities in anticipation of po-tential rising production costs.

Where Chinese organizations need to

grow rapidly and at the same time need

to innovate in order to stay ahead of com-

petitors, Pareto’s (20:80) Rule serves as

a good principle for decision making –

when faced with the choice between

customization and standardization (to

avoid “reinventing the wheel”).

“In the SAP space, IBM has built a lot of

localized industry models suited to the

Chinese market. We have a demo cen-ter in Beijing which showcases a fully

localized manufacturing solution which

runs on SAP. It is developed based on

the accumulated experiences gained by

working with our Chinese clients in man-

ufacturing space in the last 10 years and

adopting what has proven useful,” says

Mr. Steve Bingham.

War for Talent

China’s economic growth has intensi-ed competition for talent among MNCs

and local companies. Attracting and re-

“Chinese clients are rightly looking

for a ‘practical approach’ and are

less drawn to ‘study’ type of engage-ments. They want to know exactly

’how it will work’ in detail, from a

business, process and capabilities

angle.” Nigel Knight, Managing Partner,

Advisory Services, Ernst & Young Greater China



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taining the right talent are amongst the

top challenges of business managers in

China. All ve executives indicated that

talent management is a key priority oftheir organizations, along with a local

talent hire policy. “We believe in attract-

ing and developing local talent both in

sales and delivery. 95% of our staff in

China are locals,” says Mr. Girija Pande.

IBM hires over 1,000 graduates annual-

ly and has established partnerships with

over 60 universities in the elds of tal-

ent development and research projects.

They also sponsor over 100 Shared Uni-

versity Research programs, covering

domains that are critical to China’s sus-

tainable growth – including technology,

services, smarter planet and Internet of

Things under IBM’s “Cultivate Talent for

China” theme.

“These are important initiatives to show

our long term commitment and support

for China, and they help to continue

building and maintaining the attractive-

ness of the brand IBM as an employer of

choice to the Chinese. Complementary

to local hiring strategies, there is a realthoughtful human resource (HR) man-

agement program in place to optimize

the value out of international assignee

and also to ensure that they culturally

t,” explains Mr. Steve Bingham.

All ve of the interviewed organiza-

tions have established graduate hire

programs with elite local universities.

In addition to leveraging their global

brand value, initiatives such as setting

up Centers of Excellence, Research

and Development facilities in SpecialEconomic Zones, and Contributing

Back to China through their Corporate

Social Responsibility initiatives across

the country have further enhanced their

local presence as “Employer of Choice”.

These initiatives demonstrate their or-

ganizations’ long term commitment in

China where “giving back to society” is

highly valued.

Similar to the West, money is only one

factor. According to all ve executives,career and “interesting work” are cited as

the top drivers for attracting, motivating

and retaining Chinese employees, espe-

cially in high value added jobs. “Great

clients, great people, great rewards, and

great environment are four elements thatneed to be right in any great advisory

business. People are generally willing to

take on a lot more and give their best if

they enjoy what they do – it’s as simple

as that,” advises Mr. Nigel Knight.

A formal support and feedback mecha-

nism is also critical as a structured meth-

od for managers to “listen” to the voices

of their employees in order to ensure

that proactive and remedial actions are

taken efciently as part of a continuous

improvement process. “Work ethic is ex-

ceptionally high among the Chinese pro-

fessionals. Once you’ve built trust with

your people, they will open up and have

strong loyalty. It also helps to speak a

bit of Putonghua to add a ‘connection’,”

adds Mr. Steve Bingham.

China’s one-child policy has created a

gender imbalance. By 2020, there willbe 13 million more men than women be-

tween the ages of 25 and 34. Women are

playing an increasing role in the econo-

my. Their participation in the workforce

is already high – 67 percent in 2009.

Assuming the working participation rate

among females continues, McKinsey

expects that more than half of working

women will have an ofce job by 2020.14

The changed workforce proles and

a higher share of female employeesworking in MNCs calls for more com-

prehensive diversity and inclusiveness

“Work ethic is exceptionally high

among the Chinese professionals.

Once you’ve built trust withyour people, they will open up and

have strong loyalty. It also helps to

speak a bit of Putonghua to add a

‘connection’.”Steve Bingham, Consulting Services Leader,

Growth Markets, IBM Global Business Services





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sought after especially in China, the abil-

ity to identify and develop raw talent is

of strategic signicance. After all, people

are the main asset of any successful or-ganization.

Chinese Leaders Have Other Priorities

Leaders of State Owned Enterprises

(SOEs) have different priorities. Besides

having general commercial success as

their corporate objective, their business

decisions are also driven by initiatives

and outcomes that help to drive the larg-

er national agenda.

According to Mr. Chin Wei Min, “There

is nothing radically different about doing

business in China. 95% is the same as in

the West. To do business in China, one

needs to have the appreciation of the

Chinese environment and understand

the psyche of Chinese executives and

how it drives their decisions”. Develop-

ing that understanding and knowledge

is vital to help organizations differentiate

themselves when planning and strategiz-

ing on how best to maneuver within the

Chinese market.“As the CEOs of SOEs are centrally

elected by the Government and then ro-

tate across top SOEs, they are naturally

inclined to consider the bigger picture in

their business decisions,” explains Mr.

Chin Wei Min. This makes the Chinese

market more harmonious compared to

traditional capitalist economies. MNCs

need to be aware how this impacts the

priorities and decision psyche of Chinese

leaders when building the “value propo-

sition” for them. Typical business priori-ties, such as cost cutting, headcount re-

duction, or increasing market share, may

be less important when the larger state

agenda schedules for moving 450 mil-

lion Chinese out of poverty by creating

employment opportunities. Nonetheless,

the degree of impact of these goals de-

pends on the organization’s nature, ma-

turity and the industry it is operating in.

“The Chinese are more driven by growth

imperatives and are concerned with set-ting up world class governance structures

and processes. They are more inclined

“The Chinese are more driven by

growth imperatives and are con-

cerned with setting up world class

governance structures and

processes. They are more inclined to

efforts that drive consolidation,

integration and standardizationoutcomes.”

Egidio Zarrella, Clients and Innovation Partner,

Management Consulting, KPMG

to efforts that drive consolidation, inte-

gration and standardization outcomes.

The Chinese Government is interested

to provide better public services offer-ings to her citizens. They have the same

usage of technology like the West, but

for a different effect (or purpose) and in a

massive scale. While many are drawn to

the Cloud technology due to its cost sav-

ings potential, the Chinese government’s

predominant adoption driver is to provide

infrastructure access to China’s citizens

as part of China’s Urbanization Program

to virtualize its nation,” shares Mr. Egidio

Zarrella.

Given China’s size and desired vision,

innovation and technology will undoubt-

edly serve as key enablers to achieve the

reach and speed China requires hence

should be carefully considered as partof MNCs’ business strategies when do-

ing business in China and when advising

their clients.

Don’t Tame the Dragon, but Learn To

Dance With Her

China is here to stay. She is a country

with a rich history, and she is experienc-

ing a dynamic rate of change that is un-

precedented.

Put in simpler terms, China is like ahuge conglomerate that is growing at

an amazing speed, with a highly varied



CASE STUDY

market, know your strengths, focus

on a few things first, and expand from

there.

–Recognize that you need a long termview when doing business in China.

Have realistic expectations on time-

line and business results, and adopt

a pragmatic approach.

– Embrace China: Stay close to your

clients. Keep an open mind and con-

versations alive with your top local

clients to understand what they want

and need.

– Guanxi is part of China’s social fab-

ric. Endeavor to establish trusted and

long term relationships with your lo-

cal clients.

– Accept that China has her unique

characteristics and preferences:

Adapt and localize accordingly.

– Right talent mix is pivotal to business

success in China. Having a compre-

hensive talent management program

should be management’s top priority.

As China consciously transforms from

merely “Made in China” to “Innovation inChina”, efforts to optimize her potential

and compensate her weaknesses will

be enormous. It is likely she will require

specic expertise and external support,

hence representing business opportuni-

ties for MNCs investing in China. As Chi-

na continues on her incredible journey

to become the world’s largest economy

before 2030 (which is twice the size of

the United States if measured in terms

of purchasing power parity (PPP))16, she

will remain a massive market that cannotbe neglected. Where some of her unique

characteristics will remain a permanent

xture of whom she is, business manag-

ers will need to be prepared to anticipate

and handle the perpetual changes that

she will undergo and display. While it is

not an easy task, it is denitely one that

is exciting and potentially very rewarding

for those who persevere. After all, we are

talking about a nation of 1.3billion people

(which is one fth of the world’s popu-lation), all embracing change and trans-

forming at the same time.

and diverse base of business subsidiar-

ies all maturing at different rates, and a

talent pool with tremendous potential. To

achieve her aspirations China will requirea strong centralized function to drive her

over-arching corporate vision with clear

plans that outline her priorities and ex-

pected outcomes. A robust centralized

governance model is essential to provide

a guidance (with sufcient control and

autonomy embedded) to ensure achieve-

ment of an end state that is balanced and

sustainable across her subsidiaries. The

intent is to unleash the most optimized

potential of her respective subsidiaries

based on their specialization and geo-

graphic competitive advantage while not

forgetting the overarching corporate vi-

sion.

Those attempting to be successful in

this nation will need to understand this

fundamental principle: Don’t “tame” the

Dragon, but learn to dance with her. As

China continues to focus on developing

a knowledge-based economy and creat-

ing sustainable in-country capabilities to

reduce disparities across the nation, herdemand and appreciation will reside with

those able to demonstrate their contribu-

tion in supporting her pursuit of modern-

ization.

There is no “one size ts all” model that

will work for the whole of China. MNCs

should continue adopting a “GLOCAL

– Think Global, Act Local” approach to

leverage on the synergies of their estab-

lished global brand name, products, and

services, while ensuring best t to the lo-

cal needs and customize it accordinglyas seen t.

When entering the Chinese Ballroom it

will be essential for MNCs to be aware

of the following:

– China is still a regulated market. The

Chinese Government’s national poli-

cies and Five-Year Plans have sig-

nificant bearing over business out-

looks. Understand them and align

your business strategies accordingly. – Opportunities are plentiful, but frag-

mented. Have a clear idea of the



6767

CASE STUDY

Service

AUTHOR

Susan Heng is a business strategy and change management specialist with close to10 years of consulting experience advising and working with Global and Asian MNCs.

Susan is a SAP Global Business Transformation Manager, SAP Associate Business

Process Expert, a Certied Information Systems Auditor (CISA), Member of the IS

Audit & Control Association (ISACA) and a Lifetime Member of the Golden Key Honour

Society (Australian Chapter). Prior to SAP, Susan worked in a leading global Business

& IT Advisory Consulting rm and supported their top international clients in ERP & Ap -

plication Assessments, IT Risk Management, Sarbanes-Oxley Compliance and Busi-

ness Process Advisory engagements. Susan holds a Master of Commerce from the

University of Sydney and a Bachelor of Business & Commerce from Monash University.

susan.heng[at]sap.com

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Available from: http://www.grant-thornton.co.uk/pdf/Tax_preferential_treatment_in_China.pdf

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able from: http://usa.chinadaily.com.cn/business/2011-03/24/content_12220043.htm



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