Entrepreneurship in Entrepreneurship in China: Stimulus for China: Stimulus for DiscussionDiscussion
Jim Cook
Cook-Hauptman Associates, Inc.
Sponsored by : The Kauffman Foundation
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Can America Do Better?Can America Do Better?
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ContentsContents
Qualifying for the China Challenge Chinese Society/Culture Basics China’s “Chinese Characteristics” Meet the People, Generation by Generation Opportunity Segmentation of China Sourcing/Selling Opportunity Templates “On the Ground Nitty-Gritty” Tips OK, let’s open up China (to discussion)!
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Yes, America can do Better!Yes, America can do Better!
How’s our chances (as Americans) in China? Decision must come from deep inside you, not infatuation Get a native partner who has bonded to you and your goals Understand, respect , and exploit the cultural differences Be ready to substitute “trust” for contracts and recourse Use “Chinese Characteristics” to build competitive advantage Flow with the government policies and serve ignored markets Be prepared for setbacks, delays, and disappointments
Getting Started Sourcing or selling, you must understand your market Acquaint yourself with the legal/administrative landscape Raise value adding investment capital, not just cash
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Chinese Society/Culture BasicsChinese Society/Culture Basics
Every Chinese difference has an implicit advantage potential
It’s an empirical, not theoretical, society (toss aside tedious projections)
Politics trumps economics, so read policy signals and shifts
Social instability will not be tolerated at any price (e.g., 1989)
Business is relationship activated, not contract activated
Communication is not what it seems, it’s richer than that
If you’re not an “insider,” what you receive is show
Image is important; Face is crucial; Ignoring this is fatal
Generational differences are marked with opportunity indicators
Your intellectual property (IP) is only as safe as you make it
The regulatory environment has its own “Chinese Characteristics”
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““Chinese Characteristics”Chinese Characteristics”
Central policies pick favorites; currently it’s the Emerging West (and “green”)
Land, buildings, capital, accommodation, and taxes are cheap for policy favorites
State Owned Enterprises (SOEs) are a 1/3 of GDP (and all have a “Party Secretary”)
Infrastructure (e.g., power, plastics, steel) is world class and usually economical
Technological universities are a hub of connections and can be used as such
Today, there’s a surplus of college graduates; China isn’t yet a Symbol Economy
China doubled Japan’s economic miracle and could land a family on Mars first
Returning Chinese (who have succeeded in the West) are welcome (“turtles”)
Chinese institutions and SOEs don’t find, direct, nor motivate talent well
Productivity figures are sometimes shockingly low, often despite very hard workers
Trust through “guanxi” does the work of contracts, credibility, and character
Chinese save over 30% of their gross salary and have large reserves as a result
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Generational DemographicsGenerational Demographics
DOB Age Defining Event Consequence + Characteristics - Characteristic
1948- 60 50
Cultural Revolution
No/low university education
Ethical, pragmatic Unsophisticated
1959- 49 39
Open Door Policy
Experienced struggle
Tough, hard working
Not international
1970- 38 28
Spectacular Rise of China
Expects automatic success
Educated, bi-lingual, global
Cocky
1981- 27 17
One Child Policy
Spoiled, focus of family pressure
Career focused, globally astute
Weak social skills
1992-2002
16 6
2008 Olympics Electronics/Media/ Material addicted
Wide open to the whole world
Overwhelmed (by expectations)
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Opportunity Benefits SummaryOpportunity Benefits Summary
Gov’t favorite #1: Emerging West (Sichuan, ChongQing, NE, …) Gov’t favorite #2: “Green” power, conservation, substitution Ignored markets: 2nd tier of over 100 cities > 1 million people Sell to the SOE’s (e.g., training – ISO, Deming, Finance, Law …) Manage “trust” for speed and risk-capital benefits Use “trust” instead of plans, projections, and contracts Make universities a connections hub (copy Obama) Tap the frustrated unemployed, talented, college graduates Convert the enormous savings into something very secure Alleviate the pressures or shortcomings of the Generations Sell future success of the kids, each has 6 parents to buy/pay Sell productivity enhancements that increase employment
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China - Five Distinct Opportunity SegmentsChina - Five Distinct Opportunity Segments
Affluent Coastal regions: e.g., JiangSu, FuJian, GuangDong, … Second Tier Cities: e.g., LuoYang, WeiFeng, ZiGong, … Emerging “Western” provinces: e.g., SiChuan, ChongQing, JiLin, HLJ, … Undeveloped provinces: e.g., GuiZhou, YuNan, GanSu, …
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China Sourcing TemplateChina Sourcing Template
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China Selling TemplateChina Selling Template
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Sourcing/Selling SummarySourcing/Selling Summary
Emerging West for skill intensive production and selling infrastructure and second wave of upscaling (repeat of Affluent coastals of the past twenty years)
2nd Tier Cities for labor intensive sourcing and selling American product access/franchises (below the Western radar)
Gov’t favors: Emerging West (central gov’t), green technology (central gov’t), and centers of excellence (local) [Note: this “West” includes North East and Central China, too]
You can count on:
High receptivity to locating in government industrial/technology parks
Every consumer having a cell phone, credit card, and access to the internet
Typically, college graduates having had over 8 years of English schooling
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““On the Ground Nitty-Gritty” TipsOn the Ground Nitty-Gritty” Tips Commerce is conducted by “trust”; 30% down/70% on delivery T/T
Checks never, I’ve only see Wire Transfers, Credit cards, and Cash used
Employment law requires insurance (Retirement, Unemployment, Hospital, Maternity,
Work injury, and Union dues) costing employers 40% and employees 10%
Employers must pay severance of a month’s salary for each year served
Customs is a mixed bag with some egregious gouging and delaying
Contracts should be rare, bi-lingual, and specifying remedy by arbitration
Corporate Structure Options: Cooperative Joint Venture (Chinese Partner +
$1,000 fees), Wholly Foreign-Owned Enterprise (minimum of $15,000 + $5,000 fees)
Registration can require proof of suitability, resume, business summary, references/agent, by-laws, directors, translated into Chinese (see: http://www.jljgroup.com/index.php?id=75&lang=en#section2
IP protection suggestions: log access to databases, withhold key process parameters, design “black boxes” in, disburse suppliers and key people, imbed logo holograms and the like into products, and assemble offshore
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Finally China’s Open (for discussion)!Finally China’s Open (for discussion)!
Questions and Comments
Thank you, again.
On the Internet (roughly 460 KB) at:
http://cha4mot.com/entrepreneurship-in-china.ppt
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Jim Cook’s JourneysJim Cook’s Journeys President, CEO of NASDAQ Listed Company (Software Tools) and on the board of
two publicly held and numerous private companies, all high technology
President, CEO of Exxon-Mobil financed venture (Electronics)
President, CEO of Globatech, Inc. in Beijing (Japanese financial portal)
Vice President (Technology) Computervision, Fortune 500 Company (CAD/CAM)
Taught MBA courses at UCSD (Economics of Mfg.), Worcester Polytechnic Institute (Advanced Mfg.), and U. of Melbourne (Entrepreneuring)
Lectured on management at: MIT, NU, People’s University, and Chinese Academy of Sciences; BS math RPI, graduate math MIT, on CCTV news with Jiang ZeMin
Consulted on management to: DuPont, Motorola, Bell Labs, D & B, …
Interviewed 6 times on FNN (now, CNBC Financial) about High Tech investing.