THE LINK

COMPLIMENTARY ISSUE 2005 Winter 2005 Winter Javier Solana DRIVING FORWARDS THE CHINA-EU STRATEGIC PARTNERSHIP

PEOPLE Taking Charge: Journey to becoming an HR GURU

KNOWLEDGE@CEIBS The Paradox of Managing Innovation in China Sunk Cost Fallacy-Will persistence necessarily lead to success?

GLOBAL PERSPECTIVE CHINATHELINK 2005 年冬季刊 FOCUS77 MESSAGE FROM THE EDITOR

In today’s world, innovation is the key word for the growth and success for business organisations. As Prof. Kwaku Atuahene-Gima—the leading expert in innovation in Asia-Pacific—points out, the ability to innovate sharpens a company’s competitive edge and secures its long-term success in the market. However, he argues that big “I” (i.e. innovation in business model) is more crucial than small “i” (i.e. innovation in product or service) for a company’s sustainable growth. To this end, the company should cher- ish innovation as an organisational culture and mindset.

Associated with innovation is China’s booming high-tech market. Dr. Scott Ward, a visiting professor at CEIBS from Wharton, advises that China should not simply become the “workshop of the world”, exporting low cost goods. The next step is for Chinese firms to enter world markets and establish strong global brands. A key need is to complement formida- ble skills in low-cost production with capabilities to innovate and develop next-generation technologies, rather than simply adopting existing technologies and producing them at low cost for the local market.

While financial bottom line remains a key measure of a business’s performance, “Corporate Social Responsibility” (CSR) has become a trendy international business philosophy. Never before have companies been under such critical scrutiny of the way in which they conduct business. There has been a significant in- crease in the expectations of a wide range of stakeholders—consumers, employees, investors, communities, and governments—in regard to their companies’ commitment to socially responsible business practices. At a recent workshop at CEIBS, leading experts, government officials, and business executives from a variety of industries explored how CSR can significantly improve business performance and “soft competitiveness”, how to incorpo- rate it into the company strategy, and how to drive it throughout the organisation.

“Sunk Cost Fallacy”—the propensity to be influenced by what you have already paid—can be found every- where in our life, according to Prof. Christopher Hsee. Through a number of real-life examples, he argues that we should not allow sunk cost to affect our future decision. The amount of time, effort, or money already invested in a project does not justify the investment of yet more time, effort and money in order to complete the project.

International accreditation and ranking is considered as an important measurement of a business school’s commitment to continuous quality improvement. Last March CEIBS became the first business school in Asia to receive EQUIS accreditation, and soon afterward, it began working towards obtaining a second accreditation from AACSB. By obtaining EQUIS and AACSB accreditations, CEIBS will be able to realise its mission and better serve its various stakeholders through improved systems, policies and procedures. The same exciting is the newly released Financial Times EMBA global ranking which has again demonstrated CEIBS’ solid position in the business education market: the school moves up 7 slots to the top 13th place as compared to last year. CEIBS distinguishes itself from other business schools in the world by its alumni’s seniority in the companies, faculty diversity, and China-related research, ensuring the top quality of its EMBA programme.

Christmas and the time before New Year is always warm and pleasant for every family round the globe. Though celebrated differently by the various countries and cultures, it is the most important festival for family reunion and great fun. The new issue of The Link is a Christmas gift for everyone who has a real interest in CEIBS, and we sincerely wish all of you a Merry Christmas and Happy New Year!

Zhang Guohua Editor-in-Chief President of CEIBS

THELINK 2005 Winter 3 CONTENTS 27 Marketing High-Tech Offerings: An Interview with Scott Ward, Pro- 6 fessor of Marketing from Wharton 2005 Winter VOICE FROM ENTREPRENEURS 30 Victory in Business Competi- PEOPLE tion: Learning from “The Art of War” 33 Winners Never Cheat 33 FEATURES Taking Charge ON CAMPUS Journey to becoming an HR GURU 36 CEIBS Jumps to the 13th Place 66 Champion from CEIBS: CEIBS in FT EMBA 2005 Global Ranking MBA Team Wins the First Prize at 38 CEIBS in the Financial Times Confluence 2005 Rankings 68 A Mayor Student 40 Accreditation: What it is and 70 “Ready, Steady, Go!”: My Expe- why it is important? rience of Career Development 72 "Mentorship Programme" Goes PUBLISHER: CEIBS IN FOCUS Ahead Smoothly EDITOR-IN-CHIEF: Zhang Guohua MANAGING EDITOR: Zhou Xuelin 42 Georg Kell: Why the Global 72 Recent MBA Students Activities 24 Compact Hits the Board Room? Senior Editor: Cherry Zhong 73 Greater China Greater Chal- CONTRIBUTING EDITOR: Du Qian, Audrey Wu 44 Wang Zhile: Strengthening Cor- lenge International Competition ART EDITOR: Lin Yun porate Responsibilities and Improv- 74 A Date with Destiny PART-TIME EDITOR: Suzanne Updike ing Companies’ Soft Competitive- CONTACT US: ness Editorial office: 699 Hongfeng Road, Pudong, Shanghai 201206, P.R.C. 46 Benjamin Cashore: Towards ALUMNI ACTIVITIES Tel: 86-21-2890 5501 Fax: 86-21-2890 5273 Non-State Global Governance KNOWLEDGE@CEIBS 75 Ideas Open the Way: The Mar- Email: [email protected] 13 The Paradox of Managing Inno- keting Strategy of “Super Voice Girl” vation in China Contest 2005 BUSINESS PRACTICE 19 Economic and Financial Data 48 Tapping into China Luxury Market 20 Sunk Cost Fallacy: Will persis- WORDS AND THOUGHTS 52 Quality Management: Going tence necessarily lead to success? Beyond the Boundary 79 Drucker and Our Era CEIBS SHANGHAI CAMPUS 699 Hongfeng Road, Pudong, Shanghai 201206, P.R.C. 79 EXECUTIVE FORUM Tel: +86-21-28905890 Fax: +86-21-28905678 SCHOOL UPDATES NEW BOOKS Website: www.ceibs.edu 24 Driving Forwards the China-EU 56 The Musketeers in CEIBS 81 Jack Welch: Winning Strategic Partnership BEIJING REPRESENTATIVE OFFICE 30 58 2005 China Automotive Forum 82 The 100 Most Influential Man- 3/F Raycom InfoTech Park Tower A, 2 Kexueyuan South at CEIBS agement Books Road, Zhongguancun, Beijing 100080, P.R.C. Tel: +86-10-82861688 Fax: +86-10-82861678 60 CEIBS Alumni Programme Going E-mail: [email protected] Overseas 62 News Briefing SHENZHEN REPRESENTATIVE OFFICE 13 Room.2303B, 23/F, Han Tang Building, Overseas Chinese Town, Shenzhen,518053, P.R.C. SUPPORT CEIBS Tel: +86-755-26935750 Fax: +86-755-26935743 E-mail: [email protected] 65 SCHNEIDER ELECTRIC Joins CEIBS Sponsor Partner Network Published quarterly in the last week of March, June, September and December, by CEIBS. The author’s views expressed in this publica- 65 Double Sales and Triple Profits tion do not necessarily reflect the views of our editors or of CEIBS. in 3 Years 20 Copyright 2005 by CEIBS. All rights reserved.

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TAKING CHARGE Journey to becoming an HR GURU

By Audrey Wu

he story began about 30 years ago. A young kid from a poor family in Kowloon of Hong Kong said “No” to his parents in a determined manner, which eventually secured for him an opportunity of further education. Without such a determination, the global Chinese community today would have lost a distinguished scholar in business management, whereas the crowded TKowloon would have one more skilful repairer of watches. Arthur Yeung Philips Chair Professor of Human Resource Management Professor of Management Director, Centre of Organisational and People Excellence Academic Advisor, Executive Development Programmes Professor, University of Michigan Business School

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Major academic achievements by Professor Arthur Yeung

COMPETENCY MODEL OF HUMAN RESOURCE PROFESSIONALS One of the largest empirical study with more than 10, 000 participants which led to the granting of Yoder- Henemann Personnel Research Award by Society of Human Resource Management in the U.S.

TRANSFORMATION OF HUMAN RESOURCE FUNCTION This study led to the granting of Best Research Paper of the Year by Human Resource Planning Society.

ORGANISATIONAL LEARNING CAPABILITY FOR CORPORATE RENEWAL AND TRANSFORMATION This is a world-wide empirical study covered more than 1,000 participants that resulted in several books.

ORGANISATIONAL CAPABILITY FRAMEWORK FOR STRATEGIC EXECUTION This is a proprietary framework developed by Professor Arthur Yeung based on extensive research and consulting experience. The framework is widely recognised and used among senior executives and HR professionals in China/Asia.

STARTING FROM a top student and secured full scholar- cluding Intel, Hewlett-Packard, Oracle, long time he had been watching China’s had actually involved as a consultant in formation, Acer was reengineered and ships, which took away the financial Sun Microsystems, and Apple had signed growth with great interest. When he Acer’s General Manager Development gained new life. It started to grow at the SCRATCH burden his parents could not afford. Such up as founding members. In California, learned that the University of Michigan Programme, helping Acer to develop speed of 50% per year since 2002 and It was six o’clock in the morning, and was the only first step in his long journey where many prestigious universities like Business School was interested to be- 200 general managers for the company. upgraded its ranking again and again Professor Yeung already started pre- to becoming an outstanding scholar. Stanford and UC Berkeley were located, come more active in Asia-Pacific region, During that time, Shih had already been in the computer business world. Now, paring for his class. Thinking through setting up a high-level consortium of this he took the initiative to set up a regional impressed not only by Arthur’s research it ranks No.4 in the world, behind Dell, At the age of twenty-nine, Arthur Yeung the whole lecture in his mind, he had to type had never been proposed by any- office in Hong Kong where he served as and teaching capabilities, but also by his Hewlett-Packard and the new Lenovo received his Ph.D. from the University of assure that it would be flawless. Then one except this young associate profes- the founding Executive Director. It pro- entrepreneurial spirit. Thus, Arthur was which recently merged with IBM. Michigan Business School, and thus ac- sor from Hong Kong. More than that, he off he went. One and a half hours later, vided him with a new platform. In addi- formally appointed President of Aspire complished the goal he set for himself even succeeded. After “building” one initiative af- his distinctive voice was heard in one tion to setting up the operations, he also Academy on January 1, 1999 and em- many years ago. He taught in Michigan launched another brand new Asia Pacific barked on a new milestone in his profes- ter another, Arthur Yeung has solidly of the CEIBS classrooms, accompa- For the following three years, the repu- for two years and went to work as as- HR Partnership comprised of 30 leading sional career. built his reputation among HR pro- nied by laughter and applause from the tation of the California Strategic Human sociate professor in San Francisco State MNCs in the region. Since then, he con- fession in the U.S. and Asia. In 1999, audience. Resource Partnership spread quickly in University in 1992. There, Arthur was ducted collaborative research with mem- The first two years in Acer were Professor Yeung was recognised by the Silicon Valley. Arthur Yeung col- Over the past thirty years, it had been attracted by the booming economy of the ber companies on Asian human resource relatively “relaxed” for Arthur. He Business Horizon magazine in the U.S. lected a great deal of valuable material not unusual for Arthur Yeung to get up Silicon Valley where the University was issues and his reputation spread globally was then the Chief Learning Officer as one of “the next-generation Executive on business management which led to before dawn to prepare his work for the located. Soon, he came up with a novel in the field of business management. of Acer Group as well as President of Development Guru”. In 2002, he was more advanced research. In 1994, he day. Arthur was from a humble family idea. The Silicon Valley is the breeding Aspire Academy. By then, Acer had awarded “HR Executive of the Year”. was granted the Presidential Award on of six children. His father was the sole ground of many world-class high-tech Meanwhile, Stan Shih, the chairman been founded for nearly 25 years. The In 2004, he was awarded “Outstanding Professional Development by the uni- bread winner of the family and made companies. Wouldn’t it be great if he of Acer Group, the leading computer gi- whole organisation and operation start- Achievement Award by Smart Fortune versity which enabled him to take a sab- a living by selling fruits on the street. could form a learning platform where the ant in Taiwan, was searching for a quali- ed to suffer common problems of “ag- magazine and Asia Pacific Human batical leave in Stanford to conduct some Almost all his siblings started to work top HR executives of these companies fied candidate to head his new corporate ing.” In face of turbulent and competi- Resource Research Association. Also, he research. Such arrangement was very after graduating from primary school. could learn and share with each other university -- Aspire Academy. For sev- tive business environment, a crisis was serves as the associate editor of Human unusual as sabbatical leave was only Now it came to the time when he fin- their best practices and rich experience? eral years, he could not find anyone fit imminent. At the end of year 2000, the Resource Management Journal in US, granted to professors only after seven ished primary school. His father had Of course, in the process, Arthur could for the post as President for he explicitly accumulated problems burst out under a member of Editorial Advisory Board years of service in his university. made a plan for Arthur to be trained as also have first hand access to the inno- specified six requirements of the can- the pressures of disappointing business of Harvard Business Review (Chinese vative HR practices of all these great didate: graduated from a world-class results. A radical reform was needed a watch repairer. Instead of being obedi- In 1995, when the California State Edition), and one of the four Regional companies. Arthur took prompt actions university, well recognised in his/her urgently. Shih turned to Arthur Yeung ent as he had always been, Arthur was University was about to grant him a ten- Judges for selecting “Best Employers in academic discipline, strong network again. Arthur was asked to join the 5- determined to say “No”. Though a teen- by visiting various companies. His “au- ured full professorship, Arthur decided Asia” (Hewitt Associates). These are part and resource in executive education, member Transition Management Team ager at the time, he envisioned that with- dacity’ was joked about. Few believed to give up the comfortable life together of the dream dreamt by young Arthur in entrepreneurial, with corporate or con- and served as Acer’s Chief HR Officer to out further education, there would be no that a recently graduated Chinese Ph.D, with abundant sunshine in California. Kowloon many years ago. However, he sulting experience, and finally less than transform the company. He accepted the greater hope for his life. He decided to who was not widely known in the Silicon He was ready to take up yet another will never stop here. A greater vision is 40 years old. To find someone to fulfil take charge since early age and control Valley, would ever be able to bring to- bigger challenge. He moved the fam- appointment, but with some hesitation, there for him to pursue. his own destiny. gether senior executives of these global ily back to the cold Midwest to work as all these requirements seemed a “mis- for he knew what a tough task it would enterprises to join a consortium with one of the three core HRM professors in sion impossible” until Arthur Yeung be to reform this giant corporation. MADE IN CHINA The parents finally compromised an annual membership fee of US$7500. the University of Michigan Executive came into the view. Arthur was invited Since then, Arthur was deeply involved with Arthur’s imperviousness. Arthur However, it was not long before The Education Centre. to meet Shih in his home and within in a battle of revitalising the company Arthur Yeung is a person of strong will. worked very hard and was granted full California Strategic Human Resource one hour both agreed to work together together with other four business lead- Once a goal is set, he will give it 100%. scholarship to go on to secondary school. Partnership was established. Thirty-one After one year in Michigan, Arthur felt to launch Aspire Academy. But it was ers in the Transition Management Team. As early as when he was in secondary During the following years, he had been renowned corporations in California, in- that he could now take a new move. For a no accident. Before the meeting, Arthur After one and a half years’ painful trans- school, he made a ten-year plan for his

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consulting projects for Fortune 500 com- Yeung, reflecting on his personal growth and challenges of the companies, helping panies. This was a rare practice for these journey. Another challenging moment him understand and address those busi- business gurus usually didn’t involve their for him occurred in 1995, when Arthur ness problems in a realistic and prag- students in consulting work. But it was a left California and went to University of matic way. different case for Arthur. He was the one Michigan to work as one of the three core they trusted and it enabled him to learn HRM professors at Michigan. During Ever since “the Centre of Organisation from these gurus how to conduct consult- that time, his other two colleagues were and People Excellence” was founded, ing works. David Ulrich, one of Arthur’s already established gurus in the HR field Arthur Yeung has been focusing on the mentors, kept saying, “I know you will as well as his ex-professors. In face of issue of globalisation of Chinese com- do a great job.” For the same reason, Stan very senior HR executives who expected panies. It is the topic of research for the Shih of Acer entrusted Arthur with the greatly from the programme and over- Centre in 2005. He brought together five critical tasks of transformation. As a pro- shined by his colleagues, Arthur, as a Chinese companies who are pioneers in fessor, Arthur always gets up early in the newcomer in executive education, faced going global, including CIMC, Galanz, morning and rehearses the lecture in his overwhelming pressure. But when look- TCL-Thomson, BenQ and Trend Micro. mind to make sure that nothing may go ing back, he recognised that it had been Together, they formed a Globalisation wrong, even if the course content is not one of the most fruitful years in his life. Research Consortium and detailed com- new to him. For him, he is accountable to pany documents and information of each his students as they entrust their precious Last but not least, it is important to of the five companies were carefully time with him. position yourself right. Arthur often reviewed and studied. In addition, the describes himself as a “man of hybrid.” Centre also conducted first hand inter- It was hard work that enabled him to In the academic world, he is a professor views with more than 30 senior executi- obtain a master degree from Hong Kong with strong corporate experience. In the ves and CEOs in these companies. Based University within the minimal require- business world, he was an executive with on the research above, an interim research ment of 21 months before going to the excellent academic background. While report was prepared to summarise and States for Ph.D. study. His score was out- in the U.S., he was widely recognised for evaluate the globalisation strategy and life and since then has been continuing Later, he was invited to teach in the each other. He also offers advice and re- standing among Ph.D. candidates from his expertise and experience in Asia. In capability in each company. In the near the same practice. Executive Development Programmes sources to enhance the quality of CEIBS all over the world and was admitted by Asia, he was renowned for his cutting- future, a more thorough survey research and the students sang high praise to executive programmes. three prestigious business schools in the edge research in the U.S. Such a distinc- will also be used to assess the “organi- In December 1981, Arthur Yeung vis- his lecture. Then, he started teach- States. He finally chose the University of tive background secures for him a path sational readiness” of these companies ited the Nanjing University as a member “Although we lived in the States for ing MBA and EMBA students. After Michigan Business School which ranks rarely trodden which leads to his excep- to go global. The whole research will of the student exchange programme from many years, we truly feel at home here in working several years in the corporate No. 1 in human resource management in tional success. eventually lead to five case studies, two the University of Hong Kong. For the first China,” Arthur said emotionally. Truly, world, Arthur Yeung formally rejoined the world. book publications with one in Chinese time in his life, he suddenly felt the pride he is “Made in China.” After settling CEIBS as a permanent professor on and one in English, and a new executive of being a Chinese and developed the vi- down in CEIBS, he cannot wait but start Arthur Yeung is a determined person. KNOWLEDGE September 1, 2004. development programme will be offered sion of helping the motherland to mod- launching new initiatives immediately as He said, “I never say ‘I cannot’ without THAT MATTERS next May to senior executives of Chinese ernise. It was this vision that prompted he did elsewhere in the last decade. really trying. How do you know you can’t After coming to CEIBS, Professor As a professor in business management, firms that aspire to globalise. him to go to the States for Ph.D. degree. if you haven’t tried? Many so-called ob- Arthur Yeung founded the Centre of Arthur Yeung lays great emphasis on His purpose was to get better equipped to stacles or difficulties exist in your mind Organisational and People Excellence NO PAIN, NO GAIN making real impact on business world. Talking about the challenges of global contribute to China’s modernisation and rather than reality. I don’t easily believe (COPE) together with Professor As a result, his research is very much competition Chinese companies are fa- growth. When asked about his formula of suc- what other people say as impossible. I Katherine Xin, another renowned application-oriented, helping companies cing, Arthur Yeung thinks it unavoidable cess, Arthur attributes his success to need to give it a try first. What we have to for them to undertake transformation, no Therefore, he had always been inter- Chinese scholar in business manage- understand and overcome the key chal- three critical factors: sense of responsi- break through from time to time is none matter whether they are state-owned or ested in the research on business issues ment. Every year, the Centre identifies lenges they are facing. Starting from his bility, diligence and clear direction. other than our self-imposed limits.” privately-owned companies, and whether in mainland China. When the transfor- one or two business issues of strategic early initiative in setting up California they are going global or not. For many pri- mation of Acer was accomplished, he relevance to firms in China and conducts Arthur jokingly mentions that he is Deeply involved in Acer’s transforma- Strategic Human Resource Partnership vately-owned companies that have grown felt that it was the right time to come to in-depth research around those business neither intelligent, handsome, humorous, tion as Chief HR Officer, Arthur Yeung to work full-time in Acer as corporate in both scale and complexity after 10 or mainland. Up till then, he had been accu- issues. The goal is to generate relevant nor gifted in language (such as English, was having tremendous pressure. He al- executive and subsequently as advisors 20 years of development, it is important mulating a great deal of experience both and practical knowledge that can help Mandarin, etc.). But, he admits that he ways joked about a few grey hairs that to numerous corporations, he always that business owners go beyond traditi- in academic and business world. Now he Chinese firms succeed in global busi- is indeed a responsible and hard work- came out during those days. Although maintains close contact with corporate onal decision making based on intuition could spend some time to organise and re- ness arena. ing person, totally committing to every the transformation was planned and im- world. It is through such interaction with flect all these experiences and then share single task he is entrusted with. plemented very cautiously, no one could corporations that he generates much and management control based on perso- As the Academic Advisor of them with many more business leaders guarantee success. While the company useful insight and knowledge for his re- nal supervision. The companies need to Executive Development Programmes and executives in the motherland. “When you are reliable, people will was yet to be turned around, he could not search and teaching. be more systematically and professionally (EDP) in CEIBS, he strives to upgrade trust you and assign to you more respon- help but persist in the efforts based on run to sustain continued growth. For the the positioning of EDP among MNCs Once the goal was set, the action was sibilities. Then you will get more oppor- the faith that positive results would come Arthur believes that a good case study state-owned companies, many of them taken. CEIBS came on the top of his and firms in China. He launched the tunities for your personal development.” soon if the overall direction was correct. or article cannot be written without deep are under restructuring pressure to deliver list. While he was with University of “CEO Learning Consortium,” bring- Arthur Yeung observed. While pursuing understanding in the internal operations business results and shareholder value un- Michigan , he came across CEIBS, in ing together 15 prominent CEOs from doctoral studies in Michigan, Arthur was “Challenges and setback are my best of the company. As an advisor, he has der a more market-driven business envi- 1997 as a member of Academic Council. multi-national companies to learn from invited to work with his professors in way of fast learning,” commented Arthur immediate access to all real problems ronment. For companies that decide to go

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pating in and contributing to the forma- whole family and gets their approval be- tion of this new wave of theories. fore hand. If the family is not supportive, he will rather wait until the right moment. LIFE-LONG In the last 15 years, the family relocated THE PARADOX STRATEGIC 7 times, shuttling between Michigan, California, Taiwan, Hong Kong, and PARTNER Shanghai. Jenny has been very support- As he became more recognised in his ive of the relocation decisions. In addition OF MANAGING field, Arthur Yeung is often interviewed to overseeing the relocation process, she by the media. The one that he mentions also made real efforts to help the whole frequently during his interviews is his family adjust to the new environment so wife, Jenny Yeung. For Arthur, every that Arthur could put all his energy to INNOVATION crucial decision cannot be made with- the work. To Arthur, family comes first. global, the learning challenges and trans- out consulting Jenny. She, he said, is his He is not willing to separate his family formation will be even greater as many “life-long strategic partner”. Without in different places. Work is work and op- By Kwaku Atuahene-Gima Chinese companies have developed spe- her full support, his journey wouldn’t portunities will come and go. However, IN CHINA cific strategies and management practices have been as smooth as it is. He is able to the integrity of the family needs to be that are well adapted to the particular en- concentrate on work as she provides for maintained at all costs. vironment in China. For example, many him a harmonious family. Chinese firms excel at cutting cost, not Growing from a very humble back- creating value. They are good at fighting Jenny was Arthur’s classmate in the ground to a successful career, Arthur “guerrilla warfare”, not “organised war- University of Hong Kong. When he also tries to develop his children with fare.” However, as they go global, it is cri- paid his first visit tical for these companies to unlearn and to the Mainland, relearn new strategies and management she was with him. practices that are required to succeed in He can never forget different markets. Open-mindedness, the moment when quick learning, ability to attract and reta- Jenny accepted in global talent, etc. are some critical suc- his proposal in the cess factors. The challenge is to develop a Christmas of 1987. business and management approach that During that time he can fully leverage the strength of Chinese was but a second- firms on the one hand while work effec- year Ph.D. student tively on global arena on the other. That and financially hard requires a lot of experimentation and trial pressed. On the and error. other hand, coming from a much better To keep himself relevant and related off family, Jenny to business world, Arthur is currently was already work- serving as a board member of Kingdee ing in a consulting International Software, whose chair- company in Hong man, Xu Shaochun invited him to join Kong after obtain- the board after taking an executive pro- ing her MBA from gramme from CEIBS. He also serves France. But she was still willing to give right character. For example, he gives as advisor for both multinationals like up her bright career and comfortable life, them very little pocket-money so that TSMC, Philips, Mary Kay and ING joining Arthur in the freezing Midwest they become careful in how to use their Antai and leading local firms like TCL- of the United States. Ever since then, she money. “It is very important to develop Thomson, and Lian Hua Supermarkets. followed him everywhere he went, inter- children with right character, especially rupting her career time after time. their sense of responsibility. Whether the In the 1980s, Japan emerged to be a children are intelligent or not is not criti- major player in global economy. As a re- Family comes first for Arthur Yeung. cal. What really matters most is to make sult, theories on Japanese management In his view, even if one earns the whole sure they are diligent and responsible. received a lot of attention in academic world but loses his family, he still fails. The best way to develop the character of world. Arthur Yeung predicts that the Arthur tries his best to pay more atten- children is through the role-modelling of rapid growth of China economy, in the tion to his family even though his work parents,” said Arthur. With the formation same way, will lead to the birth of its own involves frequent travelling. When it of right character, Arthur deeply believes management theories. Based in China at comes to time for any major career move that their children will be on the right the right time, he looks forward to partici- and relocation, he always consults the track to an abundant life.

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hina is a complex and personal relationships, selecting and portive environment for innovation, many petencies. To the extent that new compe- to discover and meet existing customer The world’s most admired company has highly fluid business en- dealing with partners, and developing companies in China, both local and for- tencies are developed they are aimed at needs and to create new business mod- consistently been scared of the Chinese vironment. The changes and implementing business models; and eign, appear to fall short. This is the grand adapting current products to the Chinese els that ensure the success of the new market. In spite of many exploratory vis- paradox of innovation in China. Although that are occurring in innovations in human resources manage- market. The paradox here is that too products. In contrast, companies that in- its by the top brass of GE in the 1980s, recognising that innovation is invaluable technology, markets, and ment, in hiring, rewarding, and retaining much of a focus on adaptive research terpret the Chinese market environment it did not make a major investment here Ccustomer needs and preferences – along key employees. to the survival of their companies, most blinds a firm to the emerging needs of as threatening develop an environmental until sometime in the late 1990s. CEOs pay more attention and put more re- with the very intense competition – are the increasingly sophisticated Chinese risk aversion mentality that places status However, the picture is not completely sources into other elements of the business unprecedented. Underlying this com- consumer, the cultural and behavioural quo efficiency over innovation. The is- gloomy. Some local companies rec- which may actually impede innovation. In CLOSED AND OPEN plex market environment is an emerging nuances that shape consumer choice, sue of courage is clearly revealed here. ognise innovation as a company-wide particular, many CEOs believe that success INNOVATION economic system with nascent laws on and, perhaps most tellingly, the ability A good example of this lack of courage intellectual property rights, consumer competency that involves every func- in China largely depends only on cost effi- to build new competencies for the future is the ambivalent attitude of GE to the A close cousin of the R&D paradox is the rights, R&D, competitive behaviour, and tion and every manager. For example, ciency and productivity gains. These will environment. R&D exploitation needs Chinese market over the years. If you paradox of closed versus open innova- the acquisition and use of human capital. Mr. Baoguo Zhu, the Chairman and certainly remain important parameters for to be balanced by R&D exploration that consider entering an entirely new mar- tion. More often than not, the FUD fac- CEO of Shenzhen Taitai Pharmaceutical business success, but research shows that Professor Haiyang Li of Rice University is geared toward the development of en- ket as an innovation – and you should tor causes companies to develop closed Industry Limited, stated: a company will gain little in the long run and I have argued that the market en- tirely new technological, marketing, and – then you will see what I mean. innovation strategies in which all of the vironment in China is characterised by in this rapidly changing environment if it “Innovation, to me, has two meanings. other competencies for the future. research, design, development, and mar- dysfunctional rather than functional neglects innovation. What is the cause of The first refers to product and technol- keting are done in-house. However, in an competition. However, for the creative this malaise? Not many CEOs will admit My recent research on this issue in ogy innovation, and the second to inno- increasingly global world, not all the person or company this rather gloomy to this, but I think that the major cause is China was published in the world’s lead- vation in management. …. I emphasise smart people will be working for assessment of the Chinese business en- what I call the FUD factor – fear, uncer- ing marketing journal – the U.S. Journal innovation every time we hold a manage- you. Particularly, in China the abil- vironment is actually indicative of the tainty, and doubt: of Marketing. I found that firms in China ment meeting. I tell every manager that ity to access the capabilities of local tremendous opportunities that it has to tend to focus more on exploiting their we need innovation and that they must The fear of the unknown in terms of scientists and engineers, univer- offer. Think of the rapidly developing current competencies in innovation take risks. If a firm does not innovate, national and local government policies, sities, and local companies is a middle class, the sustained growth of the than on developing new competencies. then it will be out of business . . . I ask local dysfunctional competition, piracy, key driver of innovation success. economy, the highly qualified and tal- However, the study also suggests that managers to make progress every year counterfeits and imitations; Forming mutually beneficial relation- ented but relatively inexpensive labour firms that are able to strike a mutually in their strategic plans. For instance, a ships in China will ensure that you are at force in manufacturing, and, perhaps reinforcing balance between exploitation few days ago the sales director submit- The uncertainty about the changing the forefront of developments in local re- more importantly, in science and tech- nature of the Chinese market, customers, and exploration in innovation are more ted sales strategies for 2000. Although search and knowledge, because you gain nology. Your ability to take advantage and technologies; likely to succeed in producing the ap- access to Chinese problem-solving ex- of these opportunities depends on your there were some changes, the strategy propriate new products and services that was very similar to that of last year. I re- pertise and research opportunities. This ability to innovate. The doubt about current and potential Chinese consumers want. Companies explains why Philips has invested around turned it to the director and asked him to partners, in addition to self-doubt about such as Huawei – with its cost-effec- put in some new ideas and new methods. $50 million in the Phillips Innovation the company’s own ability to navigate tive R&D model, Philips – with its open Campus in Shanghai in partnership with WHAT DO I MEAN He asked: ‘Why?’ and I said: ‘Because the turbulent economic and political innovation strategy, and P&G – with the Shanghai Science and Technology BY INNOVATION? the market in 2000 will be different.’” landscape in China. its customer intimacy approach to the Commission and the Shanghai High- Here, I mean innovation with both a study of customer needs - are examples Many CEOs and their companies Tech Park United Development Limited. small “i” and a big “I.” By innovation THE GRAND of emerging best practice in China. Why know that innovation in China is right As with most best-practice open inno- with a small “i”, I mean any new prod- are these companies able to achieve this PARADOX OF for them, but fear doing what is right. vation companies, Philips believes that uct, process, service or business activity while others are not? The reasons are INNOVATION As Confucius said: “To see what is right achieving innovation across the entire that creates a unique and compelling so- many, but my study suggests that the and not to do it is a want of courage.” value chain, not just in products, re- lution valued by customers. By innova- In recognising innovation as the key to most likely answer lies in the differen- Emerging from this FUD epidemic that quires the courage to share knowledge tion with a big “I,” I mean innovation in the success and survival of his company, tial abilities of companies such as these is afflicting corporate China are a few and competencies with universities and management - an organisational culture Mr. Zhu is in good company, because in to understand the Chinese more innovation management paradoxes other industrial partners. This proactive and mindset that promotes the creation of a survey of firms in China, 95% of CEOs customer, their competi- and exploratory approach to innovation which I will briefly describe. Managing new value from customers along the en- agreed that the future success and survival tors, and the complex management is rare in China, where these paradoxes effectively lies at the root tire value chain of a business. Innovation of their companies depended on innova- Chinese environment, there is a constant moaning about for corporate innovation and competitive involves more than just new products tion. Unfortunately, only 15% agreed that and, more importantly, intellectual property being stolen advantage in any industrial economy. and services; it is a culture that values they had a vision and strategy for inno- their ability to interpret the market by local partners. The interesting the creativity of all employees and an vation, processes for the management of information that they obtain as an op- thing is that emerging research organisational competency that sees the generating and managing new ideas, the R&D STRATEGY portunity, rather than a threat. My study in the West is increasingly suggest- possibility of new value creation in all facilities to train managers in cross-func- PARADOX – suggests that best practice companies ing that you safeguard your intellectual stages of the value chain. Unfortunately, tional teambuilding skills, the necessary EXPLOITATIVE AND that tend to interpret customer and com- property more securely by sharing, rath- many foreign and local firms in China formal metrics to assess the creativity and EXPLORATORY petitor information as an opportunity be- er than by putting it in an anti-nuclear tend to view innovation only in terms of innovativeness of employees, performance RESEARCH come more risk-seeking, develop greater bunker, but that is another story. the small “i”. Consequently, they neglect metrics for innovation, and most tellingly, internal political support for new invest- innovations in marketing, manufactur- formal reward and recognition systems For many firms, the Chinese marketplace ments, and therefore invest resources to This is not a new paradox and is by ing, distribution, and customer service; for innovation. In short, in almost each of is ripe for the taking merely through the develop the new internal and external no means symptomatic of the Chinese innovations in building business and the essential elements for building a sup- exploitation of their current R&D com- R&D competencies that are necessary environment. It has been examined

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by several people in several countries. can be demonstrated by abundant exam- Chinese prefer suds to be generated and ers. The classic example is Apple, which ated benefits such as economies of scale, Indeed, I completed my doctoral studies ples in China and elsewhere. Research removed at rates that is different from has a habit of pioneering new products efficient delivery systems, lower prices, examining this paradox and its potential carried out some years back in China those of detergents that are sold in the and creating new markets but is usually and the No. 1 spot in the market. In 2002, solutions among engineering firms in showed that the key success factor for U.S.? You get to know the deeper needs unable to appropriate the value that it has Nestlé scrapped its original business Australia. What is new and perhaps sur- new products in China is product qual- of customers through proactive custom- created for itself and for its stakeholders model. Thinking of business model in- prising is that although everyone agrees ity, yet every firm that you talk to will er-oriented techniques, yet few firms – the PC and pen-based computing are novation brings to mind another paradox that internal R&D is vital but is only say that they produce products of the train their R&D and marketing staff in examples that readily come to mind. in innovation management, which I call one piece of the innovation management highest quality that customers want. If the use of market research tools that un- It would seem that Apple has learnt its the paradox of the value at the bottom puzzle, few companies have developed this is true, then product quality should cover the latent and difficult-to-articu- lessons with iPod and iTunes, but don’t and top of the pyramid appropriate strategies on when and how be a neutral driver of new product suc- late needs of customers. hold your breath – the vultures at Wal- to appropriately deploy an open inno- cess in China. The question is: Why is Mart, Sony (despite its current troubles) VALUE OF THE The insight here is one of balancing vation strategy. Again, one core reason product quality a driver of the success of and Microsoft are circling above waiting the approaches, or of taking a middle BOTTOM OF is the fear of patent infringements and a new product both in China and else- for Apple to slip up once again. Why is path. You need to carefully balance your THE PYRAMID other intellectual property rights issues where? The answer is that many compa- it that some companies that create very focus on the articulated needs of your in China. However, I suggest without a nies merely pay lip service to the prod- useful innovations for customers man- The market in China can be viewed as market and paying attention to emerg- portfolio approach to innovation involv- uct quality needs of the customer. age to get frozen out of the markets that a pyramid that reflects the size and pur- ing and unarticulated needs. To do this, ing markets, time, and sources that sees they create? The answer lies in their in- chasing power of segments of the popula- managers need to refine their thinking intellectual property not as a defensive Why? Because listening to the “voice ability to recognise the importance of tion – high income, middle income, and on how to conduct and evaluate their wall but as a currency, a company’s of the customer” involves one of the the difference between value creation low income. Of course, like any emerg- R&D in China. Over-emphasising tech- success in China will be limited. With most intriguing paradoxes in innovation and value appropriation. The paradox ing market economy the bottom of the nical product performance, patents, and an open innovation approach, internal management. Should you respond to the is that it is possible to pursue technical pyramid constitutes the largest potential the key issue here? It is the lack of rec- other measures of internal R&D efforts, R&D is managed in concert with inward needs and desires that are articulated or product innovation at the expense of market. This segment contains aspiring ognition of the value of the bottom of rather than perceived customer value, and outward licensing efforts within by customers, or attempt to be proac- business model innovation that ensures customers who desire the same prod- the pyramid during the innovation proc- is a mistake. When you have a research corporate innovation culture that under- tive in discovering and satisfying needs the lasting success of the business, that ucts and brand experiences as the other ess among companies in China. I submit centre in China, you should emphasise stands that the “voice of the customer” of which customers are as yet unaware? is, new ways and processes of distribu- two segments but has a totally different that until corporate China, in particular performance measures that ensure R&D cannot be heard and responded to by Business research has found that firms tion, marketing, pricing, promotion, and value curve. The experience of profit- foreign firms, recognises the value at the and marketing collaborate effectively one company alone. This leads me on to that balance between being responsive branding that allow the effective ap- able low-cost airlines shows that, given bottom of the pyramid and develops busi- to uncover emerging trends in the cus- the next paradox, which is the paradox and proactive to customers have better propriation of value from technical in- the differences in value curves of airline ness models that successfully provide the tomer’s deepest wants and desires, as of responsive versus proactive customer innovation performance than those that novations. I suggest that in China firms customer, it is possible to make money brand experience to which this group as- they vary across market segments and orientation. lack such a balance. The problem is that that think through their business model by looking after the needs and problems pires at affordable prices, the counterfeit regions. It is the only way that you can the responsive and proactive approaches innovations alongside their technical in- of the bottom of the pyramid. Yet, many problem will persist. In a country such be both responsive and proactive to the to meeting customer needs require dif- novations will reap the greatest benefits companies tend to ignore this market in as China, the bottom of the pyramid has THE PARADOX needs and problems of customers and be ferent organisational processes, and each and profits from the new products and their innovation process and marketing problems, needs, and aspirations that OF RESPONSIVE able to move slowly and quickly at the approach requires different internal and services that they produce. strategy as unprofitable and unwanted. will be satisfied one way or another, and same time in your market access plans in AND PROACTIVE external conditions for successful inno- Because of this neglect, any success- the ingenious company should find inno- this rapidly changing marketplace. Is bottled water an innovation? You bet CUSTOMER vation to take place. It is likely that in ful innovation in China or elsewhere is vative and profitable ways of responding it is! Contrast Nestlé and Danone’s busi- ORIENTATION China the situation may be more compli- Your company’s capacity to move si- likely to be quickly imitated or pirated to this. Remember that not long ago the ness models in the bottled water market, cated still, given the rapid expansion of multaneously slowly and quickly to meet by companies who understand the value music industry was wringing its hands We all know the three key factors for which started around 1997, with the the market and the continuing fluidity of market needs in China requires attention curves of this market segment. If this is over the billions of dollars stolen by users success in real-estate investment: loca- increasing health consciousness of the the economic and institutional environ- to yet another paradox: value creation not the case, then how can you explain through free downloads on the Internet. tion, location, and location. As it hap- growing Chinese middle class. Nestlé set ment. versus value appropriate. the frequent moaning that counterfeits Then Apple came up with iTunes, which pens, innovation has something in com- up its own water-bottling plant in China (illegal) and imitations (legal) drain bil- many observers see as its first foray into mon with real-estate investment: the Again the key to this managerial para- and added a second in 2000. Initially, it lions of sales from branded – mainly for- business model innovation. In essence, success of innovation is also driven by dox is to have processes that allow a PARADOX OF stuck to the high price end of the mar- eign – products in China? iTunes is a novel marketing, distribution, three factors: customer, customer, and firm to stay close to the customer while VALUE CREATION ket and emphasised the same meticulous and pricing arrangement that allows us- customer. Time and again companies at the same time ignoring the customer. AND VALUE approach to quality as it uses for milk. I read in the Bloomberg recently an ers to pay for songs, rather than stealing are advised by academics, the business For example, P&G scientists and cross- APPROPRIATION It sets up a chain of retail shops and de- opinion that China’s capacity to innovate them. This innovation convinced the press, and consultants to start and end functional teams live with customers livered water jugs to homes and offices and its ability to create jobs for millions recording industry to support digital the innovation process with the cus- to understand their unarticulated needs As I have argued earlier, companies that using its own fleet of trucks. However, of people depends on its ability to protect music delivery. I suggest that managing tomer, and CEOs everywhere champion and preferences. They watch people do- put great emphasis on innovation often it is only seventh in the market – why? the ownership of innovative products and innovation in China requires the creative a customer-focused corporate culture. ing their laundry at home or brushing focus on innovation with a small “i” It pursued the wrong business model in associated intellectual property rights. interplay of internal and open R&D. It Even Enron claimed to put the customer their teeth aboard a bus with specially and neglect many aspects of innovation a business in which low costs and an The same article argues that clamping also requires careful development of a first! Businesses conduct numerous cus- designed bathrooms. Did you know that with a big “I.” In doing so, their strate- instant response are crucial to market down on imitations and counterfeits is business model that allows you to ensure tomer satisfaction studies, and it would Chinese customers like different tooth- gies for value creation become discon- dominance. Now let us look at Danone. hard for the authorities because, among appropriate degree of market coverage. appear that the customer really is king. paste flavours? That they want a lot of nected from their strategies for value It tapped into local resources through the other things, the factories that produce This is because your ability to develop But is this really the case? It seems that foam in their mouths, but at the same appropriation. We have all heard stories establishment of joint ventures with two and sell such products provide jobs and a new product with differentiated value when it comes to innovation, customers time want the foam to dissipate quickly? of companies coming up with innovative local companies. It quickly gained con- livelihood for millions of people. You propositions at attractive price points are given less than royal treatment, as That when washing their clothes most products but losing the market to follow- trol of 17 bottling plants, which gener- see the dilemma of the analyst. What is for the different levels of the pyramid is

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your ticket to success in protecting your tion processes. Most managers with that is focused on what lies behind and intellectual property rights. Nothing strong technical capabilities appear to the other on what lies ahead. You must MACROECONOMICS more and nothing less! The marketing lack basic training and knowledge in constantly look backward to attend to National Economy Indicators Range Accumulated function has a crucial role to play here, how to manage cross-functional team the products and processes of the past GDP 2005 Q2 67,422 as indeed it has in the entire innovation processes, how to manage conflicts to ensure efficiency and productivity, (RMB 100 million) 2005 Q3 106,275 process. This process requires a collabo- during product development, and how but at the same time you should gaze Investment in fixed assets 2005 Q2 27,967 rative cross-functional creativity and a to harness a diversity of perspectives forward to build the organisational (RMB 100 million) 2005 Q3 48,742 diversity of perspectives on the market to enhance creativity in innovation. environment and competencies that environment, which leads to the last im- Current account 2005 Q2 398 In China, this is not helped by inad- are necessary for the creation of in- portant paradox: the paradox of human (USD 100 million) 2005 Q3 685 equate control and reward systems for novations that will define the future capital in innovation. Year-on -year R&D teams and for the people who sell of your business in China. National Economy Indicators Range growth new products. For example, we reported Remember also that an innovative 2005 Q2 9.5% THE PARADOX OF in another paper that was published in GDP growth product (the small “i”) can win you HUMAN CAPITAL the Journal of Marketing in July 2002 2005 Q3 9.4% awards but does not generate growth that the control systems, attention and 2005 Q2 27.1% We all know that the success of inno- by itself: only innovation in manage- Fixed assets investment growth help that sales managers use to build a 2005 Q3 27.7% vation and all other activities comes ment (the big “I”) can achieve this. So, Trends of Stock Exchange Indexes trusting relationship with salespeople Price Index Range Average 16000 about through the use of human capi- are the very same factors that led these take a more balanced approach to de- tal. Specifically, innovation relies not 2005 Q2 102.4 14000 salespeople to shirk their responsibilities veloping innovation management skills. CPI only on individual creativity, but also 2005 Q3 101.7 12000 in selling a new product in China. The Technical R&D capabilities are impor- on cross-functional diversity, which 2005 Q2 105.7 10000 key lesson for innovation in China is that tant, but the management of innovations PPI means allowing strategic disagree- 2005 Q3 105 8000 the creativity of R&D, marketing people in marketing, manufacturing, building ment, debate, and creative analysis in and other personnel is harnessed through personal and organisational relation- 6000 interpreting market and technology effective controls. Contrary to conven- ships, and attracting, developing, train- FINANCIAL DATA 4000 developments and customer require- tional wisdom, you get more creativity ing, and retaining human capital are the ments to design and develop new prod- Currency Range Balance 2000 out of your employees when they know generators of the growth potential that ucts. The paradox is that in a culture 2005 Q2 20,849 0 clearly the boundaries within which they is inherent in the end-products of R&D. M0 (RMB 100 million) 14-Jun-2005 12-Jul-2005 9-Aug-2005 6-Sep-2005 4-Oct-2005 1-Nov-2005 that values and places interpersonal 2005 Q3 22,273 CN: Shanghai Stock Exchange... CN: Shen zhen Stock Exchange... are supposed to apply their ingenuity. In other words, pay attention to business HK: HKEX:Ind ex: Hang Seng US: Dow Jones: Index: Indus... harmony and consensus over conflict 2005 Q2 98,601 model innovation and don’t be an Apple M1(RMB 100 million) and open debate, the potential for stra- 2005 Q3 100,964 INNOVATION of yesterday – great at creating techni- tegic disagreement or debate to spiral 2005 Q2 275,786 into personal, emotional, and relation- cal innovations but lousy at value-driven M2 (RMB 100 million) MANAGEMENT: 2005 Q3 287,438 ship conflict is very high. This is ex- business models. THE NEW CEO Stock Market Range Average actly what Haiyang Li and I found in AGENDA IN CHINA Finally, you have to have courage. a study of R&D and marketing teams Shanghai Stock Exchange 2005 Q2 1100 Building an innovative enterprise is in high-technology firms operating in I suggest that China itself, “Zhong Composite Index 2005 Q3 1134 risky, costs a lot of money and is politi- Haidian District in Beijing, which was Guo”, “the middle kingdom” by defi- Shenzhen Stock Exchange 2005 Q2 2906 cally demanding. However, you prob- reported in the November 1999 issue nition is a paradox. Managing innova- Composite Index 2005 Q3 2914 ably haven’t got much choice. As Peter of the Journal of Product Innovation tion is a complex undertaking in any 2005 Q2 772 Management. We found that when business environment requiring the Drucker told us a long time back - inno- SSE 50 2005 Q3 796 there was conflict in the teaming integration of technology, market- vation is the only core competence of any business organisation. If you agree, then 2005 Q2 2094 process, marketing people adopted ing, and management. However, the SSE 180 several strategies to influence their complexities and problems that are you should start your innovation building 2005 Q3 2159 R&D counterparts. Unfortunately, the associated with the management of effort today. There is no time to waste. It least effective of these strategies, such innovation in developed economies will define your ability to lead a work- ENERGY and HOT INDUSTRIES force that is comfortable with managing as appealing for the intervention of in Europe, North America, and else- Dollar/Barrel Oil Range the top boss and persistent pressure, where are multiplied tenfold in para- paradoxes. If you are successful in this (average) were more frequently used than the doxical China. Nevertheless, these endeavour, you and your company will 2005 Q2 47 more effective strategies, such as rec- problems are not insurmountable. To be able to give a positive and persuasive West Texus (WTI�) Trends of China Real Estate Shanghai Composite Index 2005 Q3 62.7 ommendation. This occurred because succeed in China, a CEO must lead answer when the Chinese customer asks 2005 Q2 51.3 2000 although companies spend millions the innovation effort and put political, “What’s new from your company and Brent Crude Oil 2004(1-10) 2005 Q3 60.26 1500 on developing the technical expertise financial, and moral muscle behind why is it good for me?” Shanghai Composite Index of their scientists, designers, product the development of a supportive en- Real Estate range average 1000 2005(1-10) development, and marketing person- vironment for innovation. To ensure Professor Atuahene-Gima is Professor of China Real Estate Shanghai 2005 Q2 1509 500 Shanghai Composite Index nel, they tend to give little thought to a balanced focus on efficiency for to- Marketing and Innovation Management Composite Index 2005 Q3 1448 0 the development of the management day and innovation for tomorrow, you at CEIBS. The article is adapted from his 1 2 3 4 5 6 7 8 9 10 speech delivered for the BENELUX Business skills that are necessary to obtain have to be like the Roman god Janus. Data source: DRCNET, http://www.valuer.org.cn/index.php3, Month the maximum value from the innova- You need two sets of eyes: one pair Association in Shanghai on October 13, 2005. CEIC.Compiled by CEIBS Library.

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what we really mean is that we want to In this case, there is 10% chance of Many companies persist in continuing earn back the sunk cost by “keeping gaining $25 million and 90% of losing the project, in spite of the knowledge the course of action”. But I would like $5 million. Also, no substantial cost is that there is no great prospect. The only to ask, “What is your purpose of buy- made in the project. Should you continue reason for such a persistence is the mere Sunk Cost ing a tie?” If the tie you bought does not or abort? Normally, people will choose fact that they have spent a large sum of fulfil your purpose, what will you gain? to give up, which is quite reasonable. money on it (sunk cost). The ultimate gain is your happiness An error we often tend to make as whereas merely wearing a tie or going But what about the following case? consumers is that we choose to do some- Fallacy to a concert is not a real gain. If wearing thing we are not willing to do just be- an unsuitable tie or going to the concert cause money has been spent on it. The in a blizzard brings negative effects on You are the CEO of a pharmaceutical idea is that money spent on something you, you will not “take back” the cost company and doing a project of can only be compensated for by genu- already sunk. Instead, you will end up developing a new painkiller. Then you ine consumption. But you become even with getting into more troubles and are recently informed that another more irrational by continuing a wrong pharmaceutical company has already wasting more money. RMB500 has been investment. The similar case of “adding developed a similar painkiller. If the wasted in an ugly tie. Yet, we continue more to the wrong investment” can be to wear it simply for the sake of money project keeps going ahead, there will a large chance of losing $5 million, found in business world as well as in our Will Persistence already “sunk”. What a real “waste”! As with a small chance of gaining daily life. to the concert, RMB300 has been paid $25 million. The project has been for the ticket. But if we choose to go, we going on for quite a while and the Nowadays, most parents expect their Necessarily Lead to Success? will have to struggle for a good hour in company already has spent $5 million. kids to have music talents and are able the freezing cold, which might totally To put the product on the market will to play a musical instrument. It is a good By Christopher Hsee spoil the happiness brought by the beau- cost the company another $500,000. way of cultivating the character and de- tiful music and result in catching cold Will you choose to continue or abort ? veloping the intellectual potential. Lily’s and being sick for several days. We are to continue to abort Mum is one of these parents. After con- sulting other people, she decided to buy not against your wearing an unsuitable a keyboard which cost her RMB2, 000. the ticket. Instead, they will choose to to suffer from) and benefits (e.g., the en- tie or going to a concert. The point we Here is a question But despite Mum’s enthusiasm, Lily was go in spite of the cold weather and lack joyment of the concert). Whether or not are trying to make is this: Do not let the for you: Except that you have spent $5 million not keen on it. Lily would rather play of transportation. Your intuition will you are going to the concert, the money sunk cost affect your rational decision. in the project, the second case is exactly outdoors with other kids after school tell you that the ticket given freely by has been spent. It should be counted as a What needs to be taken into account is the same with the first one. Given my ear- till it was time for dinner. After dinner, the company is an “extra gain” , which constant and should be ignored in your the costs and profits of an action itself, Every staff member in your company lier explanation on “Sunk Cost Fallacy”, she had to do homework. Little time was you won’t feel too uncomfortable to decision making. whereas the antecedent cost related to is given a free concert ticket. The you are expected to give the same answer left for her to play keyboard. Although lose. But the ticket which you queued the action should be ignored. seats are all in the middle of the front in line for and spent money on is some- A friend of mine often wears a tie. Its as you do with the first one. for the first few days, playing keyboard row. Each ticket is worth RMB300 thing you “cost” a great deal. That is colour is embarrassingly odd. I could not was a fresh experience for her, soon she but you get it free. Unfortunately, However, both in the States and in why people make different decisions in bear it and eventually told him that the GETTING STUCK lost the interest. She is a sporty girl, but a blizzard comes on the very day, China, when I asked CEOs from various different situations. What I am going to tie was not suitable for him at all. His DEEPER not musical. Now when parents kept nag- causing temporary suspension of companies the above questions, most of analyse further is the reason why people answer was astonishing. “Actually I feel ging her to play keyboard, she tended to transportation. Despite all these, the them chose to abort the project in the are more motivated to go to the concert the same as you do. But I have no choice. What will be your answer? become much more disobedient than concert is going ahead as planned. If first case, and continue the project in the you really want to go for it, you have when they pay the price for it. I spent over RMB500 on it. How can I ever. In the end, the keyboard was cov- second. They deem it worth all efforts to walk for half an hour in this terrible leave it aside lying on the bottom of the ered by a layer of dust. Then one day, a weather. What will be your decision? Such a phenomenon is called “Sunk drawer? What a waste would it be?” You are the CEO of a pharmaceutical to retrieve the cost, which is $5 million colleague of Lily’s Mum told her about a Cost Fallacy” in behavioural decision company and start a project of already cost. They don’t seem to under- piano teacher in the Academy of Music to go not to go theory. In the decision-making process This is quite a common phenomenon. developing a new painkiller. Then stand that for the sake of the sunk cost and recommended him to tutor Lily. Do as to whether or not to take a certain ac- When people are making a decision of you are recently informed that of $5 million, they risk 90% chance of you think it necessary to have a tutor for tion, one does not only take into account purchase, they take into account many another pharmaceutical company wasting yet another $500,000 instead of Lily at this point? Now, suppose that the ticket is not has already developed a similar given free of charge by the company, the costs and benefits one will encoun- other factors than the expected utility taking back the past cost. painkiller. If the project keeps going Lily’s Mum discussed it with her hus- but is bought by yourself for ter, but also the costs one has already value of the product. They might be lured ahead, there will be a large chance Therefore, be careful when you are RMB300, what will be your decision? incurred and cannot recover. The past by the promotion sale or even go for the band. “The keyboard is ready for her. of losing $5 million, with a small making an investment: If you find it Why not make her keep learning? We irretrievable cost is called “Sunk Cost.” simplest reason that they haven’t bought chance of gaining $25 million. It is to go not to go an erroneous decision, you should stop might as well have a tutor to teach her. anything after a whole day’s shopping! in the beginning stage of the project From a rational perspective, sunk right at the point and turn back. Never and the company has not spent much Otherwise, the keyboard will be wast- cost should not play a part in our deci- Behavioural decision research indi- yet. To put the product on the market add more mistakes to the error already ed.” Hence, they made the decision to sion-making, because no matter whether cates that normal people are less than will cost another $500,000. Will you made for the sunk cost. As a matter of invite the tutor and to pay him RMB500 Most people won’t go to the concert you go to the concert or not, the money rational. When we say “Since we’ve continue the project or abort it? fact, there are many cases where more for ten hours per month. Lily’s inter- in the first case, for they don’t count it you paid is gone. As a rational decision bought this tie, we might as well wear investments are made in the hope that est in playing keyboard was gradually to continue to abort as “waste of money”. But in the second maker, you should consider only expect- it”, or “Since we have bought the ticket, the sunk cost could be recovered and killed when she was forced to learn it. case, people will be reluctant to give up ed future costs (e.g., the storm you have we might as well go for the concert”, these decisions only lead to more losses. Leisure or a hobby, as it should be, now

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became an extra burden. Lily was more and from now on, we only choose to do consider is whether or not you can sell SUMMARY cases we discussed earlier, people are reluc- yourself to go to the gym even when you are than reluctant. She made little effort and things benefiting us most. those computers with a price higher tant to give up an action rationally, for there quite reluctant, for you have already paid! took every opportunity to escape the than RMB4, 000. If the answer is “No”, This article mainly discusses “Sunk Cost is “sunk cost” involved. However, there are (Of course, the influence of the sunk cost other cases where people give up something exercise. After half a year, her parents BREAK EVEN then RMB4, 000 is the best price you Fallacy”. People normally want to retrieve will be diluted gradually as time goes by. So had to give up the “training project”. what we call “sunk cost”, which has been irrationally. Then, the sunk cost will help OR SELL? may get. Why not take the offer? you’d better not pay a lump sum of five-year They ended up with wasting the tuition made and is impossible to be undone. And push you to act more rationally and become fee in advance, but rather pay monthly or more purpose driven. Many people made fee of RMB3, 000, for they did not want “Break Even” has always been a funda- I still remember the story during my it leads to irrational behaviours. How can twice a year.) to “waste” the keyboard! mental policy for most businessmen. It we correct such a fallacy? After you happen “sunk cost” purposefully in order to control study in Yale. My parents bought a one- appears so natural and reasonable to say, to make an irrational purchase, you should their own behaviours. In fact, it is a very ef- The following is another interesting ex- bedroom apartment at $72,000. When Many people remain addicted to smok- “At least, we have to break even”. Yet, forget about it together with the “sunk cost” fective way, for “Sunk Cost Fallacy” is in- ample. A girl loves her boyfriend so much ing despite the knowledge that smok- I graduated, the property price of New this is a flawed concept. The idea itself you have made. Take only into account the deed difficult to do away psychologically. that she desires to have him forever. What ing harms their health. In the same way, involves “Sunk Cost Fallacy”. Many re- Haven (where Yale is located) was under- efforts you will have to make thereafter and should she do? One thing, among many most people are addicted to “Sunk Cost Here is a practical example. Many people tailers tend to refer to the wholesale price going a drastic drop and the prospect of the benefits entailed. Then, you can make an others, is asking him to buy her expensive make plans of physical exercise, such as do- Fallacy”. It may mislead you to cost more when setting the base line for the retail the market was bleak. Someone offered estimate as to whether or not some positive ing aerobics three times a week in a gym. gifts frequently. Then, her boyfriend will than you should. In some more serious price. They will not sell with a price effects will be brought about. When making to buy our property at $58,000. I strongly But most of them cannot stick to the original become more and more reluctant to leave cases, it might result in catastrophe and lower than what they have paid. This is an investment, you need to look ahead and advised that we accept the offer. But my schedule, not because they do not put enough her, given the fact that he has already bring about great loss of life and property. not right. Suppose you are a computer evaluate the whole situation. If you find out parents decided that the bottom line of “cost” so much on her. retailer. You purchased 100 Pentium III that it will not earn any profits, you really emphasis on the exercise, but because they Never be controlled by “sunk cost”. at the unit price of RMB8, 000. Now the property price should be $72,000, for should give it up as early as possible. Never have many other commitments including Since it is of past tense and cannot be Professor Christopher Hsee is Theodore O. these Pentium III are outdated. A school they held to the idea of “breaking even”. hold onto the cost already made, such as ef- job, housework and entertaining friends. I undone, we had better leave it aside. A Yntema Professor of Behavioural Sciences offers to buy them at the unit price of They rejected the offer. I obeyed their fort, time and money, etc. suggest that you purposefully make a sunk and Marketing in The University of Chicago helpful parable is that when you waste RMB4000. Will you accept the offer? cost so as to help you hold onto your original decision. But what was the result? We Graduate School of Business, and Director of much time and have no way of getting it Most retailers will not. If you are a “Sunk Cost Fallacy” can be found eve- plan. You choose an expensive gym and pay never found anyone who offered higher back, you had better not keep regretting rational decision-maker, you will not rywhere in our life, exerting negative influ- a hefty non-refundable membership fee. Centre of Behavioural Sciences at CEIBS. This price than the one I mentioned above. it. At the very moment of your regret- take into account the original price of ences, but sometimes functioning as check- Then you have the gym remind you every article is adapted from his book Don’t Be A ting, much more time slips away. Let us RMB8, 000, for it is irrelevant to your We ended up with selling the property at and-balance. If we know how to play with it week how much you have paid and how lit- Normal Fool, originally written in Chinese. The suppose we start from a new beginning present decision. What you should $38,000. smartly, it will be able to serve us. In all the tle you have used. Thus, you will persuade English version is prepared by Cherry Zhong.

22 THELINK 2005 Winter THELINK 2005 Winter 23 EXECUTIVEFORUM

The last time I was in China for an sults are worth it. The outcomes are al- Regrettably, these proposals were reject- EU Summit was two years ago. Then, ways better than what we could achieve ed. Since then Iran has also recommenced the EU and China launched a strategic through unilateral action. the process of uranium conversion. The partnership. The way our meetings went Board of Governors of the International yesterday proved that we really do have Multilateralism and respect for inter- Atomic Energy Agency will address the a partnership, which is growing both national law are fundamental tenets of the issue in the next couple of weeks. wider and deeper. EU's foreign policy. And I know the same is true for China. Together we need to Yesterday, we also discussed North Our goals are converging across a convince our other partners to put these Korea. I know that China has similar wide range of international subjects. principles at the centre of their foreign frustrations there. Again, the issue of That is why it makes sense to intensify policy too. Reform of the United Nations trust is paramount. So too is our shared our co-operation. Of course, we do also is an important part of this process. I very determination not to put international have some differences. But there is a lot much hope that agreement can be reached security and stability at risk. The EU more that unites us than divides us. on the issue of the reform of the Security will continue to follow closely the devel- Council. But, important as it is, it is opment of the Six Party Talks. We very My aim today is to give you a progress only one part of the wider reform pack- much hope the talks can reconvene soon. report on the state of our bilateral rela- age proposed by the Secretary General The EU also remains willing to support tionship. But before I do that, perhaps it Mr. Kofi Annan. That package also in- the talk process in whatever way that its is worth reminding ourselves why we call cluded good ideas for a Peace Building participants feel would be most helpful. this relationship a strategic partnership. Commission, a reformed Human Rights Proliferation is not a one-way DRIVING I see two reasons. First, the issues which Council, an agreed definition of terrorism street. Nuclear and Weapons of Mass we discuss together and on which we push and a renewed impetus for reaching the Destruction (WMD) programmes can action forward are global strategic issues. Millennium Development Goals. be stopped and even reversed. The path To give some examples, there are issues Let me move away from principles chosen by Libya in surrendering its nu- such as the proliferation of weapons of mass and turn to concrete action. What are clear technology, in exchange for reinte- destruction and international terrorism. FORWARDS the EU and China doing to promote our gration into the international communi- And also there are questions related with common objective? ty, proves that there is an alternative and global security of energy supply, regional beneficial way ahead. We need to con- crises and the environment. The proliferation of nuclear technol- tinue to encourage Iran and North Korea ogy and the accompanying risk of the Second, we are partners with signifi- to go down that same path. proliferation of weapons of mass de- cant global strengths, capabilities and re- struction is a key threat to our peoples Terrorism is another key mutual con- sponsibilities. China is rapidly emerging THECHINA-EU and to the international security in gen- cern for China and the EU. The attacks as a world leader and a positive actor on eral. China and the EU have both taken in London on 7 July and those in Madrid the global stage. We in the EU warmly a lead on this issue. We are engaged in last year underlined for the EU the need welcome that. difficult and lengthy negotiations, with to be continually on our guard. These at- STRATEGIC The rationale for partnership is easy North Korea and Iran respectively, to tacks, and those in Bali and New York to state: when we work together, we can limit the risks that each country poses before that, were attacks against the achieve big results. And if we also in- to the non-proliferation regime. And whole international community, our cul- volve other international players, includ- the EU and China have both expended tures, our structures of society and our ing the US, Canada, India and Japan, we considerable diplomatic effort to support way of life. Those who died came from could achieve even more. what the other is doing in this field. This countries all around the world. PARTNERSHIP has strengthened both our hands. This is The same is true for some other re- a strategic partnership in action. Terrorism is now a global phenomenon, By Javier Solana gional organisations such as Association hitting both the developed and develop- of South East Asian Nations (ASEAN), But we are still a long way from reso- ing world. It knows no boundaries and the African Union and MERCOSUR. lution in both situations. respects no rules. It has to be defeated, Today's problems are far too great and using all means at our disposal: diplo- very time I visit China, I am impressed by the pace of change and by the far too complex for any country to solve We have had a difficult summer on matic, socio-economic, intelligence and dynamism and determination of China's political and business leaders. I alone. International partnerships are es- Iran. In early August, the European states co-operation. am especially pleased to make my first visit to China Europe International sential. This is not a nice sounding diplo- presented Iran with proposals for the Business School. I have closely followed its development as an interna- matic slogan, but a statement of fact. most substantial development in bilateral Similarly, we must forge and maintain the tional centre of excellence. relations since the Islamic Revolution in widest possible international co-operative E Of course, working with other coun- 1979. This package also included measures alliance. And while we seek to arrest and Tony Blair, José Manuel Barroso and I had excellent meetings yesterday with President tries and organisations to achieve shared to assist Iran with the development of civil disrupt terrorist groups and individuals, Hu Jintao and Premier Wen Jiabao. It would be too much perhaps to say that we saw eye objectives is not always easy. It takes nuclear technology, provided that Iran we should also shrink the “recruitment to eye on every issue. But even on the few issues where we disagreed, we had an open, time and entails compromises. It always gave us objective guarantees on the ci- base”. That means tackling the underly- frank exchange of view. This is exactly as it should be among close partners. requires considerable efforts. But the re- vilian nature of its nuclear programme. ing factors that drive people to adopt the

24 THELINK 2005 Winter THELINK 2005 Winter 25 EXECUTIVEFORUM

terrorist discourse and their agenda of es to increase their operational effective- If we co-ordinate our efforts even more, violence, extremism and hatred. ness. And with a large support package, we could achieve even greater results. we are also helping the African Union in We have already begun to consult more I very much welcome that China, the Sudan. Last, we have now also begun to closely on our policies and programmes. EU and others want to intensify the dia- help deliver peace in Aceh in Indonesia. I very much hope that this co-ordination logue between cultures, religions and can continue and intensify. civilisations, to promote better mutual Perhaps this demonstrates, far better understanding. Through our aid and de- than any declaration could, that the EU Let me conclude. Clearly, the key chal- velopment efforts we must continue to is committed to promoting peace and lenges which we both face are largely the address the issues of education, social stability around the world, not just in same. What is more, China and the EU exclusion and poverty. Some terrorists our backyard. We do have a long-lasting have the same broad agenda in seeking to An Interview are well-educated, others are not; some commitment to stability in the Balkans, address them. We are natural partners in are poor, others are not. But by working and the integration of these countries many ways. We both prize international to eliminate their base of support, we can into the EU. But we also have a real inter- stability and order. We are both strong with Scott Ward, hope to undermine their activities. est in Asian security and stability, going supporters of multilateralism and inter- beyond our involvement in the ASEAN national law as the best means to achieve Professor of Let me also briefly mention capabili- Regional Forum (ARF) and Asia Europe this. Consultation with each other, and ties. With those we turn our aspirations Meeting (ASEM) processes. Of course, other partners, is the rule for us, not the into action. China and the EU both promoting stability requires more than exception. We know that this brings us Marketing from know that sometimes we need to put our just boots on the ground. In Aceh, the strength. We are also both willing to take troops and civilian personnel into arms EU is also financing significant develop- the lead in trying to tackle international Wharton way, to ensure international stability ment projects to help create the condi- problems, including through the deploy- and development. China now has more tions for a lasting peace. Development, ment of our military and civilian person- personnel deployed on UN operations security and good governance are all nel. We are also consulting more on our than ever before. I applaud this. inter-linked. That is why our aid and de- regional policies and programmes. To my velopment budgets are an integral part mind, this is what a strategic partnership In only a few years and starting from of our wider policy mix. This is true for is all about. scratch, the EU has developed a good our work in Indonesia, but also in many record of military and civilian opera- other countries around the world. There is a lot that the EU and China tions in the crisis management. We play have already achieved together. But there a leading role in maintaining stability in I believe that there is great poten- is ever more work to be done. the Balkans. We are active in the Congo, tial for China and the EU to work more in the areas of police and security sector closely in this area too. China has been Thank you very much. reform. We are helping to build up the Marketing High- supporting many worthwhile projects, in structures of law and order in Iraq. We Africa, Central Asia, Latin America and are also assisting Palestinian police forc- the Pacific. So has the EU. Tech Offerings

Javier Solana is EU High Representative for the Common Foreign and Security Policy. This article is based on the speech given by Mr Javier Solana during his visit to CEIBS on September 6, 2005.

By Audrey Wu

hina’s booming high-tech market gives rise to a huge demand for im- proving skills of high-tech marketing. To meet this demand, CEIBS be- gan to offer “Marketing High Technology Offerings” in its 2005 EMBA programme. During the course break, The Link interviewed Professor CScott Ward, who was happy to share his insights with the readers.

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THE LINK: The recent years have may market two products—a premium is Samsung in South Korea. They are cannot guarantee it. The question is: “Is be based on quantitative as well as quali- tech firms in China show annual growth building a global brand on the basis of the marketer capable of several years witnessed a rapid growth of high “ThinkPad” brand, and a low-cost but tative analysis, and specify quantitative rates in the thousands. For several years technology worldwide. What trend trendy Lenovo brand. That could be a innovated products. They may not be of market development with substantial outcomes in order to demonstrate mar- to come, many high-tech companies in do you observe in China’s and glo- very wise move, since it reflects market revolutionary innovations, but they are expenses, even as competitors enter the keting’s “return on investment.” It’s no China can prosper merely by responding bal high-tech market? What op- segmentation and leverages the consid- next-generation such as high-tech TV market?” That is a major issue. In many longer acceptable to propose marketing to local demand. Far-sighted firms will portunities will emerge from this erable brand equity in the “ThinkPad” and cell phones. It is a good lesson for cases, it is foresight and diligence that expenditures without sound quantitative sector? sub-brand name. The Lenovo brand Chinese high-tech firms as well. matter. For example, Chester F. Carlson, metrics to measure marketing’s effec- invest in innovation, improving quality, would leverage the firm’s advantages in the man who invented Xerox, was told tiveness. choosing world markets to serve, and SCOTT WARD: Firms have long mar- THE LINK: What are the charac- low-cost manufacturing. not to make the machine, because initial carefully crafting effective global mar- keted “high technology” products, going teristics of the high-tech market, THE LINK: Could you please give research came back saying that people keting plans. back to the early days of phonographs, ra- What I advocate is that Chinese firms products and services? What do didn’t want it. They were satisfied with an example of how “the funnel dios, televisions, and electro-mechanical you think are the critical factors strive to grow their own brand equity. A current technologies like mimeograph theory” works? THE LINK: We found in your teach- calculating machines. In recent decades, for successfully marketing high- good example, though not in high-tech machines. But he persisted and it proved ing outline that you use some the pace and nature of technological in- tech offerings? Could you give us Scott Ward: First, we have “market fun- sector, is Haier. It is becoming a global to be a successful technology. Another nel”. Suppose there are 0.3 billion people cases of Chinese companies. I novation has dramatically increased, an example? example is James Dyson, the inventor brand. They were very wise. They came also know you have very rich ex- so specific interest in marketing high of vacuum cleaner. He had thousands of in the United States. Of them, 20 million in the US market with a wine cooler. SCOTT WARD: High degrees of market technology offerings has emerged, espe- failures. But he stuck with it and invent- are joggers and runners. Of them, 15 mil- periences in Executive Education. High income, high education people buy and product uncertainty, and rapid prod- cially in China, which is a “hotbed” of ed a better technology. Dyson is selling lion are affluent. In this way, you pick a How do you manage to cater to their product. Therefore, they are build- uct life cycles are distinguishing char- high technology production. In the past, very well at high premium prices. High- target market segment, funnelling down the needs of the local students? ing their brand in an affluent and well acteristics of high-tech markets. Also, developing economies typically emerged tech markets are filled with the stories of from the overall market. The other fun- educated market segment, which is very in contrast to consumer goods, consum- from exporting raw agricultural products, people with wisdom, foresight and per- nel is the consumer funnel. If my target SCOTT WARD: I have not taught in smart. So, Haier is not becoming known ers often don’t know and can’t verbalise to growth through direct foreign invest- sistence. market segment is 4 million affluent and China before, although I have taught in as a low-cost, low-price brand, but as a what their future needs are. Traditional serious joggers for my running shoes. ment, transferring that knowledge to other countries in Asia and Europe for developing home-grown industries. The premium brand. Another good example market and consumer research is of lim- THE LINK: In your class, you will Of them 80% I want to make aware of many years. It is always risky to use “lo- process took many years. In China, the ited usefulness. The most successful teach how to use the framework it. 40% I want to become interested in it. cal” cases because students may know pace of this typical route to economic de- high-tech marketers anticipate customer of 5Cs-4Ps to market high-tech 50% go to the stores. Of them 20% buy velopment has been dramatically speed- SCOTT WARD needs, even before customers know they offerings. Could you give us some it. You size the market in this way and (or believe they know) something about ed up. From being the “workshop of the Scott Ward is Professor of have them. Consumer marketing is the ideas here? make your marketing programme. Then, the company which contradicts informa- world”, exporting low cost goods, China Marketing at the Wharton School process of determining customer needs you set objectives, hire marketing and tion in the case study. This can sabotage SCOTT WARD: The 5Cs-4Ps frame- has attracted foreign investment from (University of Pennsylvania) where and developing products to satisfy those sales people to achieve these objectives. a case discussion, but the two Chinese needs. In other words, demand drives work is an elaboration of typical market- many kinds of businesses, including he teaches courses in Marketing You can measure how your marketing cases I taught worked quite well. It is high-tech firms, and has formed many Management. He designed and supply. In high-tech markets, markets ing planning frameworks. It is important programme is doing by those objectives to define the marketing problem, and important for Chinese students to be home-grown high-tech firms. Foreign directed the 5-day seminar, are often unknown and unknowable, and make changes accordingly. It is all the context, markets and customers, able to relate to local examples. Foreign high-tech firms that hope to profit from “Marketing High Technology especially for “new to the world” tech- part of a global trend that marketing is Offerings” in Wharton’s Executive competitors, company strengths and faculty can bring a broad perspective to marketing in China are rapidly matched nologies. The result is that technology becoming transparent, accountable and Education programme. He is weaknesses, and collaborators as a way by Chinese firms that invest in competi- offerings can drive customer demand, quantitative. Marketing must show its a class in a different national environ- consistently among the top- of sizing up the current situation. In tive high technology products. The next but a danger is assuming that a new return on the investment. ment, but it is important for the faculty rated instructors in Wharton’s many marketing plans, this is called the step is for Chinese firms to enter world Executive Education programmes. technology is a sufficient condition for member to do some “homework” on a “situation analysis.” Based on the 5Cs THE LINK: If Chinese high-tech markets. A key need is to complement market success. It can take many years foreign market in order to understand formidable skills in low-cost production Before coming to Wharton for new technologies to gain acceptance, analysis, marketers then turn to strate- companies want to sell their prod- in 1980, Ward taught at the the context and issues, and to have cred- with capabilities to innovate and develop much less market success. Since many gic alternatives and objectives to carry ucts and services to the US and Harvard Business School. He ibility in the classroom. high-tech offerings are based on the in- out strategies. Finally, a “4Ps” market- Europe markets, what should they next-generation technologies, rather than received his Ph.D. from the simply adopting existing technologies trinsic value of technologies more than ing plan—product, price, promotion and do to secure their success? University of Wisconsin in 1968, place (distribution) is specified to carry THE LINK: What is your impres- and producing them at low cost for the after working for an advertising expressed consumer needs, high-tech out the strategy and achieve objectives. SCOTT WARD: In my opinion, the most sion of Shanghai and CEIBS? local market. It is also critically impor- agency in his hometown of marketers may be deluded into thinking important skills for Chinese firms as tant for Chinese firms to establish strong Pittsburgh, PA, and in New that high-tech products are “so good” My framework stresses the concept and they move to world markets are to build SCOTT WARD: I find Shanghai to be global brands. York. In his advertising career, they will sell themselves, and that tra- tool I call “funnel logic,” to define, size as I expected—huge, vibrant, and fast Ward worked on both consumer ditional market analysis and planning is and value markets, identify target mar- skills at developing innovative products, paced. My EMBA students have been The acquisition of IBM’s PC business and industrial accounts. not applicable. It is more difficult to craft ket segments, and then set objectives to and in market analysis and brand man- by Lenovo is a case in point. I say that move target customers from unaware- agement. Chinese markets are so large a pleasure to work with. They are pre- Ward has been among the marketing plans for high-tech products ness to various cognitive and behav- that it’s amazing to me that I had so it is Lenovo that is to lose. They bought most-cited authors in Marketing. than for typical B2C products and serv- pared, eager to learn and open to ideas, a very high equity brand. In five years He is recently completing a book, ices, but high-tech marketers proceed at ioural stages leading to purchase, and many students in my course, “market- concepts and tools. I especially appreci- when they are no longer using the IBM post-purchase states (such as customer ing high technology offerings.” The key Making Marketing Decisions, great peril if they fail to engage in in- ated their level of preparation for case brand name, the question is: “Will people satisfaction and loyalty). By setting ob- needs for high-tech firms in China now which he hopes to help students sightful market and customer analysis studies, and their willingness to engage be ready to buy and have the same trust in and managers understand how and do not craft marketing plans. jectives in the “consumer funnel” mar- are obtaining capital and having suf- the Lenovo name?” The major challenge to craft effective marketing keters can monitor success in achieving ficient production capacity to respond in dialogue. CEIBS is a wonderful idea. for Lenovo is to build a brand as strong plans combining qualitative That is a unique challenge for high- revenue and profit objectives and make to demand—Chinese markets are very Business is becoming more global, and as IBM on the world wide basis. That is and quantitative analyses. tech companies. A high technology does changes to the marketing programme as large and growing very rapidly. The truly global business schools like CEIBS no simple task. I understand that Lenovo have the potential to drive demand, but needed. Today, marketing planning must Deloitte analysis of the “fast 50” high- are at the cutting edge.

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previous contribution. Deprived of the what has generated those loopholes, the latter indicating their further de- sense of achievement, the subordinates for the futures were not something velopments. end up with leaving the company. This novel in 1995. The top executives is the example of wrong attitudes, while were either unaware of the problem, Expounding the Diagrams in some other cases, leaders feel threat- or turned a deaf ear to it. Both are the We can divide among three types of ened by the capabilities of their subordi- characteristics of bureaucracy. success pattern: nates, and consequently try to play poli- tics against them. Such is the example DEMO DIAGRAMS Type I: “Aging” Model VICTORY of intolerance. OF PATTERNS Collapse of foundation OF SUCCESS Implement Scientific management in Business Competition What is the very foundation of success Sun-Tzu said in “Calculations” of “The Use qualified personnel in a war or a business competition? The Art of War”, “There are five factors de- first factor is the team, and the second termining a nation’s survival or destruc- Follow the natural and social laws one is the people you fight for or the cus- tion: the first is “Way”; the second is tomers you serve. “Heaven”; it is then followed by “Earth”, Serve customers “General”, and “Law”. At the entrepreneurial stage, a business leader can often work closely with his In modern language, these factors can In Diagram 1, all four levels of the team and put the customer’s needs in the be interpreted as follows: “hill” are in dotted lines, indicating that foremost place to secure success. When success is like an aging man who has the business grows, however, the leader The “way” to success is to serve the burned all his energy or like a shooting tends to overstate his own competence, public. star which is short-lived. and ignore others’ contributions and cus- “Heaven” and “Earth” suggest that we tomer’s needs. By doing so, he complete- Type II: “Preserving” Model do everything according to natural and ly upsets his relationship with his team social laws. Implement Scientific and his customers and damages the very Management foundation of business success, with de- “General” suggests the importance of Use Qualified Personnel struction as the only consequence. human resource. We shall recruit quali- LEARNING FROM fied personnel. Follow the natural Self-complacency and social laws “Law” means good management Some leaders become self-complacent Serve the customers and organisation, including efficient and conservative after initial progress. “THE ART OF WAR” institutions with hierarchy of respon- They are buried in past, refusing to ac- sibilities and carefully structured cept new ideas and adapt to new changes. In Diagram 2, four levels of the “suc- systems. In a word, “law” is scientific By Zhang Tianfu Consequently, they have been ruthlessly cess hill” are in solid lines, implying that management. ruled out by history. the team of success preserves its vital- ity and has a solid foundation for further Loss of Control In order to fully understand the pat- tern of success in business competition, development. Bureaucracy tends to corrupt a team we now demonstrate it using the follow- Type III: “Advancing” Model with a long record of achievements ing diagrams. same effort must be made, as they did petition. Part of the division can be at- and a great reputation. The British- THE PATTERN before the battle, to strengthen the foun- tributed to the lack of ethics of the indi- based Barings Bank is a case in ques- Setting up the Diagrams OF VICTORY dation, and build capabilities for fur- vidual, but more often to the problematic Implement Scientific tion. In 1995, it went bankrupt because AND DEFEAT ther development. If they fail to do so, leadership. Here are some basic assumptions Management of a single trader of 28-year-old, Nick achievements will be “wasted” and dis- behind the diagrams: Use qualified Personnel In the chapter of “Fire Attacks” in “The Some business leaders, for exam- Leeson, who took unauthorised spec- aster is sure to follow. The same is true in Art of War”, Sun-Tzu said, “When one ple, can fight side by side with their ulative positions in Nikkei futures. The success achieved by a team is Follow natural and business world, as we find that much of subordinates, supporting each other to When the Japanese stock market went like a hill. There are altogether four social laws gains victory in battle and is success- the failure stems from the following fac- go through hard times. But when the down, Barings Bank was struck by levels from the bottom to the top of ful in attacks, but does not exploit those tors which should have been detected and Serve the customers business grows, profits increase and a huge loss and went bankrupt with- the hill - “to serve the customer”, “to achievements, it is disastrous. This is prevented in the due diligence. called waste and delay. Therefore, I say financial situation improves, those lead- in a month. Given the fact that Nick follow the natural and social laws”, the wise general thinks about it, and the Loss of human resource ers start to isolate themselves from the Leesson kept unauthorised trading “to use qualified personnel” and “to In Diagram 3, all four levels of the hill good general executes it.” subordinates by becoming boastful and without being questioned by and in- implement scientific management”. A major team member rebels and sets self-complacent. They attribute the suc- terfered with from the headquarters, The contour and the levels of the hill keep moving forward, showing that the Sun-Tzu seems to warn leaders that up his own team after victory of a great cess to their own competences or capital people might conclude that Barings can be in dotted lines or solid lines, succeeding team not only retains the vi- they need to watch out for the potential battle. This is not unusual in Chinese investments, and their subordinates are management has many loopholes. with the former implying the weaken- tality, preserves the fruit of success, but defeat following a glorious victory. The history, even in modern business com- rewarded merely with money for their However, we can go further to ask ing process of those four levels and also continues to expand in size.

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A complacent person is too proud to model for other team members by lead- PRINCIPLES OF make any progress. Instead of focusing ing and sharing. He treats every team SUSTAINING on further progress, he begins to offend member equally and encourages them SUCCESS AND others and hence sow the seeds of disas- to speak out their mind. Additionally, he PREVENTING ter. A successful man should keep him- depends on collective wisdom for deci- FAILURE self away from this path of destruction. sion-making. However, when the busi- ness is successful, the leader tends to be- Principle A: Adjusting KEEPING THE come bossy, dictating commands, while Attitudes CUSTOMERS IN MIND the subordinates tend to rely more on the leader’s dictation and stick to the old There is always a motive behind what- KEEPING LOOKING AHEAD ways of doing things. If this continues, ever people do. Two different persons the chance of failure increases. It is destructive for a leader of a team might start the same business motivated to become boastful of the success by different purposes. One might do it Different teams, especially businesses already achieved. People with great for the sake of money, while the other for with different asset structures should accomplishments, without any excep- the sake of serving people. The dispar- have different decision-making mecha- tion, never feel complacent with what ity in motives determines the success or nisms. But in spite of these differences, they have achieved, or rely solely on failure of an enterprise. an efficient decision making process past experience for future decisions. should be in place for any organisation. They strongly believe that all factors The following two ways can help im- contributing to success keep changing prove the process: and that success rests upon continu- Winners Never ous efforts. DEMOCRACY OF DECISION-MAKING As Sun-Tzu commented in his “Art of War”, “one should always sustain the care- It is of vital importance to listen to dif- Cheat fulness like at the beginning of the battle ferent voices and opinions. The same even after a great victory.” Likewise, a important is to try to integrate expert business leader should maintain the same advice with popular ideas. Usually, ex- By Jon M. Huntsman attitude and cautiousness at any time pert advice is more profound but less when he leads his team forward. comprehensive, while popular ideas have more varieties but lacks depth. Lastly, it REMAINING INNOVATIVE is worth encouraging and protecting ri- valry arguments. Reasonable arguments When one starts up, he is ready to take oday, I might surprise hours, or make a lot of money, but lose lead to right knowledge. MUST BE FAIR.” risks; but when he achieves something, To put the people or customer first, one many of you suggesting the battle of life. he becomes more conservative and tends pursues customers’ satisfaction with the that money may not be the In your business life, there will be many DECENTRALISATION OF Guard carefully your character and to avoid risks and challenges. Such a service. When customers’ needs are sat- times when events and transactions are STRATEGY AND TACTICS most important thing in integrity. You can never replace them. mentality often affects the whole team isfied, the reward is sure to follow. More not fair to you. But it does not mean that your life. There are many Once you have made mistakes, have and hinders innovation. people get satisfied, more rewards will To distinguish macro strategy from micro T you must be unfair and play by the rule other aspects of your life that are more cheated somebody and used bad ethics, entail. As a result, more achievements will tactics is necessary. The leader is respon- that others play. When you get frustrated important than money. then you will be regarded as a person Success is often associated with risks. be made. To put money first, one pursues sible for the former and the line staff is re- and emotional with people, and use your of dishonesty. Each of us has inside our Without risk-taking or failure, there will be sponsible for the latter. The leader needs to maximum reward with minimum cost. He I was asked to write a book on ethics to energy, the only one you will hurt is your- heart what is called moral compass. Each no final success. A winning team encour- communicate clearly with his subordinates, tries to get as much as possible, while the help people understand how important to self. I would rather suggest you think of us knows what is wrong and what is ages innovation and tolerates mistakes and customers often have to pay more for less. making his intentions well understood. be ethical in our business relationships. In through the problem, use your mind to right. In the United States, several multi- failure. The strength of a capable leader He should leave his hands away when the In the end, all customers leave, and the tackle it and try to be fair at it. Then you billion-dollar companies fell apart and lies in his courage of taking risks. subordinates exercise their power and re- my opinion, the most important quality of business collapses. will be more at peace with yourself. went bankrupt because the leaders were sponsibilities. A Western strategist once a person going into business is to be hon- REMAINING HUMBLE not honest and ethical. All those people It is a common symptom of many busi- observed that a good army commander est and ethical in their dealings. The per- Winston Churchill is my hero. During AND PRUDENT who brought down those giant compa- ness leaders to be generous at the begin- should be intelligent and “lazy”, whereas a son who is not so will not stay in business the World War II in 1940s, the country nies knew exactly what they were doing. ning and to get greedy after success. A qualified chief of staff should be intelligent Zeng Guofan, a great general in Qing very long. People will not do business with of Great Britain was almost demolished. There were plans thought through care- person with real ambition has to watch and “diligent”. Dynasty, observed, “A gentleman is wiser them. Their reputations will spread fast, if Churchill rallied the people and moti- fully as to how to cheat the system and out for such a “disease”. vated them. Even though the odds were than others in that he is more humble.” The author is CEIBS EMBA01 participant they do not adhere to certain guidelines or how to make millions and millions of slim that they could win, Churchill kept Simple as it is, he concluded it from the Principle B: Improving and served as former Vice Commander of principles that are essential. I will mention dollars illegally and dishonestly. These persevering. One day, he made a great reflection of his own experiences. If one Decision-making Process Zhejiang Military District. some of the points I discussed in my book. were no mistakes made. As human be- desires to move forward and continue to statement. “If there is no character, then ings, we all made mistakes. We stum- achieve something, he has to remain hum- In the early stage of development, a This article is extracted and adapted from “LIFE IS NOT no other human trait matters.” If you lose ble and get up again, learning from the ble. Why? It is just because a humble per- leader is often a decision maker and a his book entitled Learning to Be More personal character and integrity, you can mistakes. Yet, that is very different from son is ready to accept and to be accepted. team player as well. He serves as a role Competitive from Sun-Tzu. FAIR, BUT WE still work hard, get good grades, put long planning to hurt somebody else or to take

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something that does not belong to you. Our company has been growing rapidly, FAMILY MATTERS for we bought many other companies over In 1984, I had to sell part of our business the years. People asked me about the stories Most important aspect of our life is our fam- to Great Lake Chemical Company. I wanted behind all those successful acquisitions. ily. Money does count. But if you made all to sell 40 percent for 54 million dollars. It In every acquisition we have had, I went the money of the world and lost your family, took six and a half months for the attorneys to the employer and gave a talk, telling you might not have had the right priority. to complete the contract. However, our prof- people about our philosophy. It’s amazing I have seen many people who have earned it margin had gone up substantially by then, how big companies don’t want you to get lots of money but are not happy, because that because the cost had gone down. The value their people laid off. They want someone is all they focused on. I told my employees of 40 percent of our business was now 250 to look after the people. So, we will con- that their No.1 concern is their family, not million. The President of the GLCC came vince them, during the negotiation, that the company. If they ever put their company to me, suggesting that he pay 125 million we might not pay as much money as they ahead of their family, the priority is wrong. to buy 40 percent of our business, for noth- want, but we will take good care of the When the married staffs learn to love their ing legal had been signed yet. But I said, “I people, build the site, make their company family, they will become excellent staffs, have a better idea. Why don’t I charge you environment-friendly, and that we will be 54 million dollars, because that is the price for they have peace and stability. honest in keeping all the promises. As a re- I shook your hand and said it was a deal.” sult, we did unusually good deals, despite These may sound simple principles. I would rather be known as a man who higher bids others might have offered. All But to make decisions to live correct kept the words, even though I knew it was 35 acquisitions were done because employ- principles are the most difficult assign- worth 250 million dollars. We shook hands ers like to deal with us and people like to ment. You have to decide what type of and that means more to me than money. work for us. I call employees associates. I man or woman you would like to be, how People in the chemical industry all said Mr. you would like to conduct your life, how Huntsman was out of his mind. I was one like to get letters from them, their children you want to be regarded, what type of of the two people who were invited to give and grandchildren. I always bring a piece character you want to have and what type a speech at the man’s funeral. His wife told of paper and a pen with me, writing thank of respect you should be given. me that he had always regarded me as the you letter to tell people that I love them and thank them. Without them, I am nothing. fairest man he had ever met. There is a creed which we are try- Therefore, I set apart packets of money ing to live by: “No man is an island/ no for them, making good employment pro- man stands alone/ each man’s joy is joy GRACIOUSNESS grammes, good medical programmes and to me/ each man’s grief is my own/ We IS NEXT TO good retirement programmes. Also, our need one another/ so I will defend each GODLINESS. family has given away all the money to set man as my brother/ each man as my up charities to help others. Many people might earn a lot of money, friend.” but are not gracious to others. It is a simple Mr. Jon M. Huntsman is the chairman and and wonderful trait to be kind, charitable LOYALTY FIRST, founder of Huntsman Corporation. and thoughtful. People want to deal with COMPETENCE honest and gracious people. I learned it not SECOND. Founded in 1970, Huntsman Corporation only from my faith background, but also has more than US$12 billion in revenues per In my book, I also listed four bullet points from the experience I had in leading the annum, going public in early 2005. During with which I evaluate people working for funerals. I already led 200 funerals in my Nixon's reign, Huntsman served as a special me: Adherence to the proper values, loy- church. When a person dies, he cannot give assistant to the president in the White House. alty to the CEO, loyalty to the company, his own version of his story. Rather, other He is the first American to own a controlling people will do it for him. I noticed that and competence. This personal opinion interest of a business in the former Soviet no one, at the funeral, would say that this of mine has been challenged quite of- Union, and is the chairman of the Board of person made a lot of money, or belonged ten. There are high points as well as low Overseers for the Wharton School at the to many organisations. People only dis- points in your business life. Without loy- University of Pennsylvania, his alma mater. cussed that this person was kind, gracious, alty, your team will leave you and go to a Mr. Huntsman has also served on the boards having character and integrity. For those company in its high point. I keep telling of numerous major public corporations and who are not kind, thoughtful, gracious, my people that I will take care of them at organisations, including the U.S. Chamber or honest, they have short funerals, for no low points, but also ask them to take care of Commerce and the American Red Cross. one had anything good to say about them. of me in those times. I would rather have The Huntsman Cancer Institute was founded Therefore, I suggest we start planning our a loyal person who has average intelli- under his name, and is the leader in the funerals when we are young. When we get gence and maybe only 3 years of college, prevention of, early diagnosis, and humane older, we have already established the type but is absolutely loyal to me. I will train treatment of cancer. of personality we will be known by in the him or her to be competent. I can’t train business world. Start planning for a good them to be loyal. That comes from within This article is based on the speech given by funeral by being gracious, by smiling and a heart. Therefore, for me, loyalty is in a Mr. Jon M. Huntsman at the CEIBS Executive by being kind to and thinking of others. unique position. Forum on September 12, 2005.

34 THELINK 2005 Winter THELINK 2005 Winter 35 FEATURES

16 criteria are adopted in the FT intensive competition. Professor Zhang Angela Watkins, Financial Time’s EMBA ranking, among which CEIBS Guohua, President of CEIBS, pointed Marketing Director in Asia, commented has remarkable performance in three out, “There are many excellent EMBA at the school’s press conference, “The aspects, including Salary Today, Work programmes in China. But most of them Financial Times released its first global Experience, International Faculty and lay their strength on the established pro- ranking in 2001 and it has been the 5th Research. According to the FT survey, grammes of century-old universities consecutive year. As early as in 2001, the actual salary and salary increase of overseas, or rely on the degrees issued CEIBS was ranked among the top 50 CEIBS EMBA alumni three years after by the partner school of the joint pro- business schools in the world. During graduation ranks 6th and 4th respec- grammes. What CEIBS feels proud of is these 5 years, CEIBS EMBA programme tively. The salary of those in financial the fact that we build our international has been continuing to move upwards in and consulting sectors ranks 5th and fame and programme strength on our the rankings and now enters into the top 3rd globally. Standardised by conver- own ground and earn the rank of 13th in tier of world-class EMBA programmes. sion to US dollars with PPP(Purchasing FT rankings with world-class teaching It does prove to be the best place to study Power Parity Exchange Rate) published quality. for entrepreneurs and executives in Asia- by the World Bank, the average salary of Pacific area.” CEIBS EMBA alumni three years after CEIBS Vice President Zhang Weijiong graduation reaches $191,000, of which offered three factors of the great progress CEIBS EMBA programme is of the CEIBS EMBA made in FT rankings. the real figure is 515,000 RMB. CEIBS biggest scale in the world. Its interna- “First, we shall thank to the booming also distinguishes itself from other busi- tional-oriented curriculum, profound economy of mainland China, which cre- ness schools in the world by its alumni’s understanding in Chinese market, first- ates a huge market demand for manage- seniority in the companies, for most of class teaching quality, first-class stu- them are very successful in various pro- ment education. Many European and dents and extensive alumni networks fessions. With regard to the diversity American top tier schools don’t have all benefit its students in long-term. It is of the faculty, CEIBS EMBA ranks 8th that. Secondly, we benefit from a high clearly shown by career development and with the percentage of its “International level of autonomy in operations, which salary increase of the graduates from the Faculty” as high as 63%. 93% of the fac- distinguishes us from other business Programme. As a matter of fact, EMBA ulty hold doctorate degrees from pres- schools run by domestic universities. As students of CEIBS have been growing in tigious universities in the world. CEIBS’ an independent business school, we enjoy their management knowledge and skills rank in FT Research Rating goes up by many preferential policies offered by the 21 places to a historical high. All these government. It enables us to go beyond ever since they came to CEIBS. Many demonstrate the strength of CEIBS the limit of traditional educational institu- of them apply what they learn from the EMBA programme in the aspects of fac- tions and operate in full accordance with class to practice in their own jobs. In this ulty and research. the innate law of management education respect, CEIBS makes direct and lifelong and market demand. Good policies and impact on them. Jin Zhiguo, President CEIBS Jumps to In the newly released FT rating, CEIBS mechanism secure plenty of room for us of Tsing-tao Beer Ltd, who graduated EMBA overtakes many prestigious busi- in the market. Thirdly, the achievement from CEIBS EMBA 2002 programme ness schools who have established joint today results from the efforts made by all observed, “What CEIBS delivers is more programmes in China, such as Marshall our staff. CEIBS has always been focusing than knowledge. It offers wisdom. The School of Business of the University of the 13th Place in on building up the strength of faculty. We knowledge it provides is very practical, Southern California’s (ranked 23rd) and recruited 7 professors within a year and combining international theories and Olin School of Business of Washington will continue to recruit more next year. At China context. The wisdom it generates University in St. Louis (ranked 28th). the same time, we keep reinforcing the re- is the advanced concepts and methodol- Moreover, CEIBS EMBA programme FT EMBA 2005 search work and increasing our research ogy, which continues to guide our work surpasses some top-level business schools capacities. Though in the past we focused and lead to great innovations.” in Europe and America, including IMD more on teaching, we now aim to balance (ranked 18th) and UCLA Anderson teaching and research. To date, the school The Financial Times Ranking is rec- School of Management( ranked 32nd). Global Ranking has established a permanent faculty of 35, ognised as one of the most authoritative rankings in international business man- Five years ago when CEIBS EMBA among which more than 50% have pub- agement education. Its EMBA ranking was ranked for the first time among lications in the 40 Journals listed by the the world’s top 50 EMBA programmes Financial Times. Over 80 China-related started in 2001. Based on question- naires filled by the schools and their n October 18, 2005, the British-based Financial Times, released EMBA by the Financial Times, there were few cases have been produced and are being alumni, the FT ranking is produced 2005 global ranking. CEIBS moves up 7 slots to the 13th place as com- EMBA programmes in China. Today, exchanged round the globe through the pared to last year. This also marks a fifth consecutive year that CEIBS however, EMBA programmes in China European Case Clearing House. CEIBS’ with 16 indexes, including the alumni’s EMBA programme has made it to the world top 50, demonstrating the have amounted to 40, among which there faculty are both excellent teachers and career prospect, diversity, international school’s solid position in the global business education market. are quite a number of joint programmes capable researchers with sound academic experience and the school’s research O supported by internationally prestig- background. The advance of CEIBS in FT achievements, etc. All qualified busi- ious business schools. It is a miracle rankings this year proves the effectiveness ness schools in the world participate in for CEIBS to make such a leap in the of the measures we take in this respect.” the competition.

36 THELINK 2005 Winter THELINK 2005 Winter 37 FEATURES

DATA FOR THIS The school’s strength in the FT MBA own ground. CEIBS’ strength comes rankings lies in four areas, namely, from three aspects: salary today RANKING ARE salary percentage increase of the earned by the alumni three years COMPILED FROM alumni three years after graduation after graduation (ranked 6th), salary CEIBS in the (ranked 2nd), placement success TWO MAIN SOURCES increase of the alumni three years af- rate of the graduates three months ter graduation (4th), and international • The school survey completed by after graduation (1st), international faculty of the school (8th ). each participant business school. experience of the students (4th), and Financial Times To ensure the validity of the school international faculty of the school Finally let’s talk about the FT survey data, every year FT will se- (13th ). Executive-Education ranking. The lect about 25 business schools for Financial Times ranks international auditing conducted by KPMG, which Next let’s move on to the FT EMBA non-degree executive education Rankings By Julia Zheng will report on the results of obtain- ranking. The methodology is almost in open and custom programmes. ing evidence and applying specified the same as the one used in the A combined rank is produced for audit procedures relating to selected MBA ranking: barriers of entry is the schools which run both types of data provided for the FT MBA sur- same, i.e. AACSB/EQUIS accred- programmes. The open and custom vey ranking of the year. Early this ited, 5 years of programme history, programme ranking is based on two November, CEIBS has passed the and at least 30 graduate per class. audit conducted by the KPMG as This year the Financial Times ranks surveys: the school survey and the client survey. 17 criteria are used to ankings play a critical engaged by the Financial Times. 75 EMBA programmes out of a total measure the programme. The first r o l e i n b u i l d i n g u p of 95 worldwide. • The alumni survey completed in- 11 criteria look into the customer a b u s i n e s s s c h o o l ’s dependently by the alumni who grad- The ranking table is also compiled satisfaction and take up 80% of the international reputation. uate three years ago. Each alumnus from the responses to two surveys: total weighting. The rest 6 criteria Nowadays few business is assigned a unique password by the school survey completed by s c h o o l s c a n i g n o r e examine the school diversity and the Financial Times via email to ac- each school, and the alumni survey Rthe impact of rankings: their value in account for 20 per cent of the total completed by each school’s alumni cess the online alumni. For a school weight. For the final ranking, all data the eyes of the public fluctuates with who graduated three years ago. A to be ranked, the FT needs at least points are converted to z-scores. where they stand in rankings by various minimum of 20% of response rate 20 per cent of the alumni to respond. The sum of the weighted z-scores publications. The newly released Otherwise, the school would be dis- is also required for each business across all criteria determines the fi- Financial Times EMBA 2005 global qualified from the rankings. school in the alumni survey. ranking has again demonstrated CEIBS’ nal rank position. solid position in the business education A total of 20 criteria are adopted 16 criteria are adopted in the CEIBS’ open programme is ranked market: it moves up 7 slots to the top to determine the final MBA rankings, ranking to measure each business 37th worldwide, 1st in Asia by the 13th place as compared to last year. among which the first eight relate to school’s EMBA programme in three Financial Times. It is required that, CEIBS’ outstanding performance in the the area of the alumni’s career devel- categories: the career success of to join in this ranking, schools must Financial Times ranking has also aroused opment and purchasing power, and alumni (5 criteria with a total weight- have at least $2m of business in the public’s interest in getting to know carry 55% of the total weighting. The ing of 55%), the diversity of the each category. Restricted by this more about the school in the Financial second nine fields account for 25% school in its students, faculty and board members (8 criteria weigh- threshold of entry, the number of Times rankings, for example, how the of the weight and measure the diver- ing 25% together), and the school’s eligible schools for the FT Executive schools get ranked, what is CEIBS’ sity of the school and its programme. performance in research (3 criteria Education ranking is much lower strength in the rankings, which is also The last three factors evaluate the carrying 20% of the total weighting). than that for MBA ranking (147 par- the topic of this article. school’s research capabilities and take up the rest 20% of weight. Finally data in all the 16 criteria are ticipants in 2005) and for EMBA (95 Let’s start from the Financial Times converted into z-scores. The sum of participants in 2005): it is only 48 for Data collected over the 20 crite- the weighted z-scores across all cri- MBA ranking. To be considered for the open programme (46 participated in ria are converted to z-scores, which teria determines the final rank posi- ranking, a business school must be the ranking, the rest two, Harvard consider the difference between tion of each school. EQUIS or AACSB accredited, have a and Wharton, decided to withdraw each business school and the spread full time MBA/EMBA at least 5 years from any kind of ranking in 2004.), of scores between the top and bot- CEIBS’ EMBA programme is old with at least 30 graduates. This year and 60 for custom (58 participated, tom school in a single criterion. ranked 13th worldwide, 2nd in Asia the Financial Times ranks 100 business Harvard and Wharton, didn’t partici- Finally, weights for the 20 criteria are Pacific by the Financial Times. schools, out of a total of 147. pate for the same reason as above). multiplied with the z-scores for each Different from HKUST’s joint EMBA So it is a great achievement already school. The sum of the weighted z- programme with the Kellogg, which for CEIBS to get short-listed for par- scores across all criteria determines is at the top 2nd place worldwide, ticipation. The school is competitive the final rank position. CEIBS does not rely on external aid from other established programmes, in three areas: faculty diversity (1st), CEIBS’ MBA programme is rated but rather builds the international repeat business & growth (3rd), and 22nd worldwide, 1st in Asia Pacific. fame and programme strength on its partner schools (13th).

38 THELINK 2005 Winter THELINK 2005 Winter 39 FEATURES

bodies (indeed, many countries have conditions. Once given, EQUIS ac- overall resourcing. Second, those re- national accreditation bodies), arguably creditation must be renewed every 5 lated to faculty and students including among the most influential international years. More information about EQUIS such matters as admission policy, fac- accreditations are those given by the accreditation can be obtained at the ulty qualifications and student support European Foundation for Management EFMD website (www.efmd.org) services. Third, those related to the Development and the Association learning process including the learning of Advanced Collegiate Schools of AACSB (Association of goals, curricula, specialised degrees Business. Advanced Collegiate and pedagogy. Schools of Business) EQUIS (European Quality The accreditation process begins with Improvement System) membership in AACSB and the sub- mission of an “Eligibility Application”. ACCREDITATION Since its founding 7 years ago, 86 in- A “Pre-Accreditation Committee” will stitutions in 28 countries have received then review the application and assign EQUIS accreditation. EQUIS’ accredi- a mentor to provide guidance in pre- tation criteria include such matters as paring an “Accreditation Plan” which a school’s national standing, mission, is self-assessment against the require- governance structures, the scope of What it is & why it is important? ments with a list of actions which the programmes, strategy, resources, fac- school commits to undertaking for fur- ulty, students, student services, and ther improvement. research. EQUIS focuses on degree By Rolf D. Cremer & Claudia Schäfer programmes only and does consider If the Accreditation Plan is ap- executive education. Compared to oth- proved by the Initial Accreditation er accreditation programmes EQUIS Committee, the school may begin im- puts special emphasis on “internation- plementing it. When ready, a “Peer alisation” and its “connections with Review Team” visits the school, pro- the corporate world”. Here “interna- vides assistance and prepares a recom- ast March CEIBS became tionalisation” refers primarily to the mendation for the Initial Accreditation creditation does require a school to adopt expected to make further improvements in the first business school mix of nationalities among faculty and Committee and then it is passed on to a particular or prescribed model of busi- the spirit of continual improvement. in Asia to receive EQUIS students, but also to curricula content Founded in 1916, AACSB was the ness education. This is especially impor- the AACSB Board for final approval. accreditation. Soon after- and pedagogy. “Connections with the first organisation to accredit business More information about AACSB ac- tant for us at CEIBS because we operate While accreditation will provide such ward, we began working corporate world”, on the other hand, schools. Over the years their approach creditation can be obtained via the in the unique and dynamic environment benefits to CEIBS as an institution, it will Ltowards obtaining a second accredita- refers to having a strong customer to accreditation has substantially AACSB website (www.aacsb.edu) also provide clear benefits for our key stake- of China where, in fact, modern business evolved. Most recently, in 2003 the tion from AACSB. Because the accredi- holders by signalling to the market that we orientation, substantial contacts with schools did not meaningfully exist when Association’s membership approved a tation processes requires substantial have been examined by an outside organi- both leading national and international the school was founded in 1994. Thus, revised set of standards “relevant and SUMMARY investments of both human and finan- sation and found to be capable of fulfilling companies and a sufficient degree of the aim of these accreditation bodies is applicable to business programmes cial resources, it is important that the our mission. Obviously, the value attached recruiter satisfaction with the quality By obtaining EQUIS and AACSB ac- fundamentally helping us do what we globally which support and encour- Management Committee explain what to any particular accreditation depends of graduates. creditations, CEIBS will be able to aim to do better and not to impose spe- age excellence in management world- accreditation is and why it is important on the reputation of the accrediting body. realise our mission and better serve cific objectives, curricula or perform- Once the eligibility of a school is wide”. These new standards substan- that we obtain them. Those from particularly respected bodies, our various stakeholders through im- ance outcomes on us. established, a candidate school must tially internationalised the body from such as EQUIS and AACSB provide a val- proved systems, policies and proce- prepare a “self-assessment report” un- its previous focus on North America. As just one example, in order “to pre- uable “seal of approval” such that students dures. Accreditation provides a potent ACCREDITATION der the guidance of an EQUIS Advisor. AACSB accreditation applies to both pare highly competent, internationally- and employers have greater confidence signal to the market place that we can Once this report is finalised, a Peer undergraduate and graduate business The purpose of accreditation is to ensure oriented managers …”, CEIBS must take that their investments of time and money deliver on our promises. This serves Review Team will come in and meet administration and accounting pro- that a business school has the systems, to enhance our reputation and foster great care to select the very best students are worthwhile. Governmental bodies and with the management of the institu- grammes. As of today, 509 business meaningful collaborations. Thus, the policies, procedures and resources nec- from among a large pool of applicants agencies will also have greater confidence tion and determine the likelihood of schools world-wide have received attainment of accreditation is both essary to carry out its mission. Obtaining accreditation will help us ensure in the value that we bring to the commu- obtaining accreditation. Should this AACSB accreditation. confirmation of the high standards of that our MBA and EMBA programmes nity and we will be the favoured partner seem likely, the school will implement Our mission is: CEIBS and a commitment to continu- have clearly defined, transparent, objective for collaboration in the region. Indeed, the an “action plan” which specifies how it Similar to EQUIS, AACSB stand- ous improvement. “To prepare highly competent, interna- and well-documented selection procedures benefits of being accredited may be very will upgrade its systems, policies, pro- ards are also “mission driven” which that accomplish this. The accreditation tangible. For example, students will gener- tionally-oriented managers who are ca- cedures and documentation. When the permits substantial variation among I can also say that so far these ac- process will help us improve such systems ally find that it is easier to obtain loans to pable of adapting to the driving forces of school is deemed ready, a peer review business schools. Applicants are sub- creditation processes have been and attend an accredited school. business globalisation, international com- by facilitating self assessment, but also by team will conduct an on site audit and ject to a rigorous and comprehensive continue to be an extremely positive petition and international cooperation”. permitting schools to learn about, and then make recommendations. A decision for peer review of 21 aspects of their experience. benchmark against, the best practices of ACCREDITATION or against accrediting the school will operations that fall into three broad An important point to emphasise other leading business schools. Moreover, BODIES subsequently be made by the EQUIS categories: First, those related to the Dr. Rolf D. Cremer is Dean and Vice President here is that because these accreditation the process does not stop there. In order to Board Members. Accreditation may strategic management of the school of CEIBS. Ms. Claudia Schäfer is Deputy systems are mission-based, obtaining ac- maintain these accreditations we will be Although there are many accreditation also be granted subject to specified which include the school’s mission and Director of Dean’s Office at CEIBS.

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as we observe from a privileged global The first is that voluntary initiatives, public and private sectors. Within the position. such as the UN Global Compact, can Global Compact, we are proud and be very significant complementary ap- happy that in many countries, this First, voluntary initiatives do make a proaches. But they are not the absolute kind of dialogue is leading to innova- Georg Kell difference. They are important compli- answer at the end of the day. The hope tive solutions, it is building into more mentary tools to do what governments is always that through the corporate competitiveness and it is strengthening do or don’t do. But they cannot be a sub- performance, a global social change harmonious developments stitute to what governments do; they can agenda can be introduced. The no- Why the Global make the case for, but can never be the tion of business as a part of the social Looking into the future, I dare to solution to everything. They give busi- change process plays a key role. How predict that so long as economic lib- Compact Hits the ness a position of experimenting and can business performances reinforce show the way forward. eralisation and technological changes, and support what the public sector which are the foundations of perform- wants to do? Where are the overlaps? Board Room? Secondly, we are now in the phase ance and improvement of business, can How are the boundaries working out in where the “why” is no longer a question. work hand in hand harmoniously, there the daily practices? Business as a part The question is increasingly “how”. We will be growing need and growing pre- of the solutions is increasingly impor- need to know which of the initiatives has mium for environmental, social and the highest impact, which is on the key tant for many governments around the governance issues. The world is becom- level, which can be replicated, and which world. Public institutions are looking ing more transparent. Being more com- can be brought up to a higher impact. to business to show the way forward and to implement. Governments are petitive at the world stage increasingly Thirdly, business understands today increasingly the frame providers. But means mastery of these issues. There that once they get into wrong, the cost business is also looking to the govern- are already strong indications that long can be tremendously high. Yesterday, ments to provide the right framework, term investors, such as pension funds I got the news that one of our partici- to provide incentives and to be com- and financial institutions, recognise the pants was accused of corruption charges. petitive themselves. In many countries material dimension of environmental, Immediately, the share price has dropped around the world, we are told by busi- social and governance issues. It will by 15%. In today’s transparent world, it ness leaders how we can be more com- help to develop a principle-based ap- is important to open to talk and to show petitive, if the public sector institu- proach to look for harmonious relations that the actions are implemented. By Georg Kell tions are not competitive. So, with the between public and private sectors. growing exposure to the outside world, On the other hand, getting into right there is a growing trend, pressure and can be rewarded. It is increasingly seen All these presume that, growing into incentive, on both sides to recognise its as a strategic tool to be at grip with en- interdependence, the world economy respective roles. vironmental, social and governmen- will continue to advance in a harmoni- ous way. You cannot take it for granted. tal issues. With growing exposure and Secondly, from a public sector per- growing interdependence, comes the spective, it is also important to see that The history tells us again and again, that challenge that environmental and social the corporate responsibility(or corpo- economic openness needs to be embed- issues are no longer the sort of the issues rate citizenship) is a way to connect to ded in some sort of social and environ- which can exclusively be dealt with by mental understanding to earn the legiti- would like to share with you the the global market. It is a way of gradu- to be proactive on the environmental, forming their employees, empowering communications people. They are strate- experiences we have made so far ally engaging and integrating in. It al- macy of people everywhere, but also to social and increasingly, governance is- them and taking actions throughout gic to long-term value creation with the United Nations’ Global sues, to internalise the universal princi- the organisational changes, are often lows us, on a voluntary experimental be strong and robust. Economic and so- basis, to engage in the issues which are Compact. There are some les- ples which long have been recognised by major partners in initiatives and ap- Another lesson is also important. This cial issues, indeed, go hand in hand. If debated on the major consumer market, sons and observations which, I governments everywhere, but whose im- proaches. In all 80 countries where the is not a static undertaking. Striving to initiatives such as the Global Compact where transparent measures and criti- Ihope, will be useful and relevant. We are plementation is always lagging behind Global Compact is taking root, uni- improve the performance is an ongo- are taking root, then there is greater cal consumer voices always are ready going to have, on 30th of November and around the world, and to show a commit- versal principles are taken as source ing process. You can hardly say, “I have chance of robust expansion, which ulti- to criticise. The mutual recognition of 1st of December, a major UN conference ment that principles can be introduced of actions and inspirations to drive or- achieved it”. If you have achieved it, the mately is the only way to help people all public and private sectors that both need in Shanghai, “the UN-China Summit into organisational changes and then ganisational changes. Business in to- quest goes along. How we can improve around the world. each other is at the fundamental heart Meeting on the Global Compact”. We articulated in approaches, initiatives and day’s world has a responsibility which the environmental, social and govern- ance performances is never a bench mark of such initiatives. Business can only expect a large number of foreign and support measures. is more than what many conceived 20 or 30 years ago, because business has that says “Now I am No.1. Next year, I grow if societies succeed. Business Chinese executives to meet and embrace When we start the Global Compact in the leverage, the know-how, the tech- will automatically be No.1”. Continued will fail if societies fail. Business ex- Mr. Georg Kell is Head of Global Compact the corporate citizenship as a broad- 2000, there were 47 corporations who nology and the means, and because, efforts are required. So it is an ongoing pects a strong government to provide Initiative of UN. based effort to achieve a more harmoni- stepped forward. DaimlerChrysler increasingly, business realises if the change process. the incentive structure to reward the ous development, where business is part This article is based on his speech delivered and Deutsche Bank are two of the societies are strong, business can performances and vice versa, the pub- of the solution. The UN Global Compact at the Joint Forum of “New Partnership founding participants. Today, more grow. Now I am going to make some obser- lic sector increasingly expects business is initiated by the UN Secretary-General, than 2400 corporations from over 80 vations from a more public sector level, to be explicitly part of the solution. It is between Politics and Economics– Corporate Kofi Annan. It is based on an assump- countries have joined the initiative. There are some lessons we have as the UN is a public institution. Here, about a search for striking a harmoni- Responsibility and Sustainable Development” tion that it is in the interests of business CEOs, by taking a public stand, in- learned from a corporate perspective, two lessons stand out. ous and balanced relationship between on October 14, 2005, at CEIBS.

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We found in our research that the following The above are some setbacks, which was mainly caused by chaotic manage- opinions particularly affected the develop- prevented the wide adoption of CSR in ment, negligence of social responsibility ment of CSR in China one year ago. China despite the efforts made by MNCs and disregard of human life. When MNCs in recent years. are importing advanced ideas into China, First, state asset management depart- Chinese companies are exporting outdated ments are concerned that emphasising To promote CSR in China, one key is ideas overseas. If failing to transform their CSR will exert negative influence on the to indigenise it, making it more Chinese, concepts, how could these Chinese compa- effort of reinforcing corporate responsi- i.e., more tailored to China context. nies truly go global? How could they com- bility for the stakeholders. Companies How do we achieve it? One thing we pete with rival companies in the intensely in China have made great progress over should do is to integrate different concepts, competitive global market? Therefore, it is the last 20 years in that they are striv- including social responsibility, sustainable a must for Chinese companies to change ing to fulfil their responsibilities for the development and corporate citizenship, etc, their concept. stakeholders. But many people have mis- and make them into one concept, which is Wang Zhile taken it as merely a responsibility for the In respect with the government, we can “Corporate Social Responsibility” (CSR). company. One reason for it is that most proactively involve the government by What distinguishes CSR from social re- textbooks of business management are integrating CSR with new development sponsibility? The former integrates into introduced from the United States. What strategy produced by the central govern- one concept three aspects including the Strengthening Corporate one can find in these textbooks are most- ment, which is “putting people first, bal- responsibility for stakeholders, social and ly American business models, whereas ancing the interests of all parties and em- environment responsibilities. And all these European models are quite different. The phasising sustainable development”. As a Responsibilities and three responsibilities have to be taken by result is that many European companies matter of fact, these two concepts innately the company. This is a right direction to in China have to face the dilemma of coincide. But the newly made strategy head for. In our research, we found that Improving Companies’ how to balance between their responsi- of the central government has not been three globally known MNCs adopt this bilities for the stake holders and that for elaborated, especially on the issue of sus- concept. They are Siemens, GM and IBM. the society. Also, MNCs strengthen CSR tainable development of corporations. If Chinese companies have to combine these Soft Competitiveness on the basis that they have already solved CSR is contextualised appropriately, the three responsibilities. By doing so, they the problem in stakeholder responsibil- government will be ready to play a part will come to understand that social respon- ity. Domestic companies in China, how- in it. Another piece of good news is that sibilities are not extra burdens but obliga- ever, start from a very different point. the State Council has approved to entrust tions, such as the responsibility they have the Ministry of Commerce with the task oncerning “Corporate organisations by nature. Why, then, did to China products. The EC Directive on Secondly, state asset management to take for their staff. of bringing together seven ministries and Social Responsibility” they do that? Their foremost purpose, as WEEE (Waste Electrical and Electronic departments are also concerned that Secondly, we need to emphasise that commissions to produce a standard rule of (CSR), it is essential we were told, is to improve the corporate Equipment) demanded that companies strengthening corporate social and en- the purpose of strengthening CSR is not CSR for Chinese corporations. The exact to set a role model for competitiveness and to overtake other ri- exporting electrical appliances to Europe vironmental responsibilities might in- to promote charities, but to enhance the time of completion is not yet forecasted, Chinese companies by val companies. offer take-back service. Ministry of crease the cost of Chinese products and competitiveness of the company. The but the project is already launched and can observing those lead- Commerce of China has been negotiat- weaken their competitiveness. The second phenomenon we came to company will be the beneficiaries. Over be seen as a positive posture by the gov- Cing multinational corporations. We need ing with EC, trying to lower the standard ernment to show its change of attitude on notice is that such a trend has already the last 20 years, China underwent three to know what they are doing, how they for Chinese products. But the chance of Another obstacle in the progress of CSR expanded to China. The concept and the stages of development. In 1980s and 1990s, the issue, and more over, to demonstrate its are doing it and why they are doing it. EC’s compromise is indeed minimal, for development in China is set by business practice of CSR have been introduced by a great quantity of equipments were intro- determination to promote CSR in China. the tack-back service is an obligation. themselves. They suspect that strength- MNCs in the following four ways. First, duced from abroad and therefore helped In recent research on CSR, we take a Fourthly, there are various laws regulat- ening corporate social and environmental The above views are expounded in my they improve CSR management within to upgrade the “hard wares” of Chinese group of Chinese companies to visit the ing the behaviour of Chinese companies responsibilities will increase burden to recent book entitled Soft Competitiveness: their branches in China by applying more companies. After 1993, by going into the headquarters of over 30 MNCs located in who are listed abroad. There is a new bill the companies. It resulted especially from on the Concept of CSR Adopted by MNCs. strict rules of social and environmen- stock market, Chinese companies estab- Japan, South Korea, Europe and the United passed in the United States in 2002. It has some promotion campaigns improperly In this book, I included case studies on 15 tal responsibilities. Secondly, they raise lished management infrastructures and States. We found that these MNCs have all been, for the last three years, harnessing conducted by MNCs and some mislead- giant corporations, reviewing their opera- the threshold to Chinese vendors. In the especially the governance systems, which reinforced their CSR practices over the last the American companies. The same bill ing media exposure. They also led to the tions globally and locally in China, and case of Wal-Mart, it bought commodi- could be seen as an institutional upgrad- two to three years. It has become a new applies to Chinese companies listed in the misconception that CSR is nothing but their perceptions of CSR. I also gave a de- ties worth 18 billion dollars directly from ing. Now, they are facing the third stage of trend among them. During our visit, apart States. According to this law, President, donating money to charities. tailed explanation of the advantage of in- 6000 Chinese vendors. But since 2002, development. It requires a change of per- from the annual report, these multina- CEO or CFO will be sentenced as many as tegrating different concepts into the idea Wal-Mart has rejected 40% of them, for Then, when is the appropriate time for ceptions and recognition of responsibili- tional companies provided us with an ad- 20 years in jail, if he is found to have com- of CSR. the reason that those vendors did not ad- a company to develop its CSR? Should it ties. Without a shift in this aspect, Chinese ditional report, which they entitled “Social mitted fraud deliberately. It is through all here to CSR rules properly. Wal-Mart wait till getting stronger? Surely not. It is companies will not be able to compete with Mr. Wang Zhile is Director of Multinational Responsibility Report”, “Corporate the above practices that the trend of CSR established a team of over 100 people, because the first and foremost aspect of those most developed MNCs. Ministry of Company Research Centre of China's Citizenship Report” or “Sustainable has been expanded to China by MNCs . Development Report”. Though with differ- whose job was none other than investigate CSR is its responsibility for its staff, not Commerce of China is now changing its Ministry of Commerce. This article is ent titles, they all involve three aspects: the the CSR practice of individual vendor. If However, there are many obstacles in donating money to charitable organisa- attitude. An explosion hit a dynamite plant adapted from his presentation at the Joint responsibility for stakeholders, the social a vendor was found to fail to comply with this process. tions. For example, in DaimlerChrysler’s run by a Chinese company in Zambia and Forum of “New Partnership between Politics and environmental responsibility. the rules, it would be deleted from the list CSR report, half of the content is about its led to death of 51 local workers. Ministry and Economics - Corporate Responsibility or demanded to reform. Thirdly, MNCs One obstacle lies in the fact that our gov- responsibility for the staff. From this per- of Commerce went to Zambia to sort out and Sustainable Development” on October None of these MNCs are charitable in China apply stricter import standard ernment holds a different view on the issue. spective, a company is born with CSR. the case and discovered that the accident 14, 2005, at CEIBS.

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businesses part of the process? In the case responsible sources? If they are, they be- CSR in China Addressing of Forestry Stewardship Council, which is gin to see the institutionalisation of these one of the leading forest certification sys- systems in the market place. tems globally, there is a three-chamber format of environmental groups, social The sixth category is the enforcement groups and businesses, each of which by capacity to these systems. Is there an itself cannot dominate the policy process. outside group monitoring the firms’ be- They must develop consensus, one of the haviour and deciding that they are truly appropriate ways in which forestry opera- practising the adherence to the rules? tions are to be conducted. If all those six features exist, we can It leads to the third category. What are the have a very special kind of Corporate rules about? In these cases, all the rules are Social Responsibility that I call “Non-State governing social and environmental prob- Market Driven Governance” or NSMD. lems, for which businesses otherwise would What does it mean today? You will find the not act. Then, why does a business act to answers by asking the following questions: develop a regulation that limits its own eco- How can you get a governance system out nomic interest? Why would self-interested of the self-interest evaluation on the part of profit maximizing companies support rules firms? How can they move from self-inter- that would increase their costs? est to governance? How can a pragmatic evaluation move to intersect with a moral The answer lies in the fourth category. evaluation? So, over time, you can move That is the role of the market. In these cases, from those short-term aspects into “cogni- you can assess whether or not those profit tive legitimacy”, in which the very idea that Benjamin Cashore On October 14, 2005, a forum was held maximizing firms are receiving some kind you embed in the market these practices on "New Partnership between Politics and of economic benefit in obeying the rules, becomes engraved in our cultures globally. Economy-Corporate Responsibility and however abstract it might be. In the case of It is otherwise unthinkable. When that oc- Sustainable Development", co-organised Towards Non-State Global Governance forest certification, the effort was to provide curs, we have a true “Non-State Market by Daimler Chrysler, the Alfred Herrhausen a market advantage to firms that promote Driven Global Governance”. Society of Deutsche Bank, and CEIBS. With the responsible forestry. Instead of placard- the increased awareness and necessity for ing the firm, you ask it to do the job and then Benjamin Cashore is Associate Professor, corporate responsibility and sustainable give it a label and say, “Now you can ac- Environmental Policy and Governance, development in China, the forum marked cess to the world market”. In theories, such specialising in Sustainable Forest Policy, hank you for the opportu- will help us to understand what is go- to have corporations to develop a rule and an important step forward in this area. , mechanisms work in a way that the need to at Yale University’s School of Forestry and nity for me to come here ing on, and help firms, governments to move everything ahead towards envi- be environmentally and socially responsible Environmental Studies. He is Director of the today to speak about my and NGOs to be able to assess better not ronmental and social responsibility. But it Attending this event were over 150 is embedded in the market itself. Yale Programme on Forest Certification. participants from the corporate, govern- research on “Non-State just the present but also the future. We turns out that in many of these CSR initia- ment, and research sectors. Senior ex- Market Driven Global do know that what CSR looks like today tives, the state is not there, either directly or Are social and environmental groups This article is based on the speech Professor ecutives from Daimler-Chrysler and Alfred TGovernance” and its relevance to this will not be what it looks like in ten years indirectly. For example, in the case of forest actively promoting and demanding the Cashore delivered at the Joint Forum of certification, in environmental groups and Herrhausen Society of Deutsche Bank ex- conference. We do have a challenge from now. All the empirical studies in companies to act according to their “New Partnership between Politics and in defining what is “Corporate Social social groups, there are no governments in- pressed how they were delighted with the the world will not help us figure out rules? Are the companies being target- Economics– Corporate Responsibility and Responsibility (CSR)”. I don’t think there volved, because they were upset in the way event and the quality of local and interna- what might be going on in ten years. So, ed? Are the firms along the supply chain Sustainable Development” on October 14, is only one definition. There are many the governments were acting internation- tional media coverage to raise awareness I would like to review with you these six being asked to demand products from 2005, at CEIBS. examples, from the Global Compact to ally or domestically. They decided that they of the issues of CSR in China. categories in my limited time. the Equator Principles, to many coded would create their own governing authority. The forum was broken into two ses- conducts that industries have themselves This practice has been emulated and en- The first feature is the word of “the state”. sions, "Corporate Social Responsibility: The developed in different sectors, to ecola- tered other sectors, from coffee production State authority, in the last 400 years, has de- Bottom Line", and "Instruments and Tools beling programmes, to environmental to agriculture, to sustainable tourism, now fined most of the binding and durable policy for a New Partnership between Business groups campaigns where they target in- even to sweat shop campaigns. choices. Governments have that authority. and Society". Each of the sessions was fol- dividual companies like Nike about what You can look at those organisations and ask lowed by a very enthusiastic questions and they permit to occur in other countries in It leads to the second feature. There are yourself a question: Is the state involved, answers period. terms of labour standards and the con- developments of institutionalised govern- either directly or indirectly using the sover- ance mechanisms. When looking at those ditions in factories. Recently, political The event also marks an opportunity eign authority? This is important, because if CSR initiatives, you may ask the ques- sciences have become very serious about for local Chinese companies to understand the state is involved, either directly or indi- tions: Do they have governance mecha- these initiatives. Many books have pro- what CSR really means, as well as for MNCs rectly, there is a certain compliance aspect nisms? Are the procedures involving duced on these issues. located and investing in China to practise to it. The state might say to the corporations stake-holders in the policy deliberations? responsible behaviours for sustainable de- I want to argue that we can categorise that if they don’t act or behave properly, Are E-NGOs (environmental groups), so- velopment. all these topics into six groups, which they will be regulated. It is a centred effort cial and labour groups, governments and

46 THELINK 2005 Winter THELINK 2005 Winter 47 By Benjamin Cashore BUSINESSPRACTICE

The per capita income of Chinese has She is one of the baby boomers in A SNAPSHOT OF gone beyond US$1,000, whereas the the 1970’s and narrowly escaped the CHINA “LUXURY” mainland market of luxury goods has one-child policy. She was brought up MARKET already exceeded $2 billion, comprising strictly by her parents to study hard for Tapping into more than 3% of the global market. More her own good. She succeeded in get- The “opening up and reform” policies in stunningly, its annual growth rate is the ting into Fudan University and majoring the 1980’s and gradual privatisation over fastest now, falling somewhere between in English & American Literature. She the decades have helped foster a group of 20%-30%. According to some statistical felt a bit hesitant to work as a secretary people who got rich quite quickly. This China Luxury prediction, the luxury population size in with a sweet English name in a foreign group consists of entrepreneurs from real China could reach approximately 250 marketing research firm. But soon she estate and manufacturing industries; pri- million by the year 2010. If this predic- got excited about the bonuses and pro- vate bosses, owners of township facto- tion is fulfilled, China will be ranked the fessional skills she acquired in the job. Market ries; movie stars, actors, celebrities and 2nd in terms of market size and the 1st She decided to run her own research social elites. Those mysterious “rich” are with regard to customer base. company, bridging the information gap keen on purchasing luxury goods. between multinational clients and local Or to put it simply, if a huge luxury contexts. By Matthew Wang The aspiration to wealth trickles down market is created when everybody in to common people and the “suddenly af- Hong Kong, Taiwan, and Japan pos- He was born in the 1950’s and was fluent” further creates a psychological sesses at least one or two luxury goods, proud to grow up under the “red flag”. hunger for showing off financial success what will be the market potential for the But then he got disillusioned dur- as well as social achievement through neighbouring China, which is among the ing the campaign of “Re-education in here are quite luxury goods. most populated countries in the world? Countryside” in the 1970’s. He struggled to climb up to the position of General a n u m b e r These newly emerging people of for- Manager in a state-owned enterprise in tunes have transformed the stereotype CUSTOMER o f s t o r i e s Xi’an. He was prompted by various mo- of Chinese, giving the China “rich mar- ANALYSIS OF CHINA r e c o r d e d tives when deciding to have further edu- kets” some peculiar local characteristics. LUXURY MARKET i n C h i n e s e cation in a business school. He carries The group is of younger age than ever, Chinese consumers of luxury goods hold around a PDA, which updates him about h i s t o r y generally between 30-45 years old. They a somewhat contradicting feeling. On one news of MBO (Management Buy Out). describing how people come from diverse backgrounds, includ- T hand, they enjoy the pride brought by lux- ing so-called middle-class people such of fortunes competed ury goods. But one the other hand, they as marketing directors, general manag- AN EXPANSION to be the wealthiest. experience a sense of “guilt” over luxury ers, CEO/CFO/CIO, intellectuals, ads STRATEGY expenses. There is a deep-rooted desire However, during the last freelancers, overseas returnees, even lo- of self-fulfilment that can be gratified It is observed that China luxury mar- 50 years, Chinese people cal white-collar members in JVs. by having luxury goods. “Glorifying the ket demonstrates some unique charac- have been stereotyped The growing middle-class further face”, as it is put in Chinese expression, teristics: as economically diligent, expands the “rich markets” and already is what drives them to break the bondages The current China luxury consump- socially introverted, and shows significantly strong purchasing of traditional social codes and decide to tion is still at an early stage of evolution, power. This group are called “mass- spend on fancy goodies. psychologically modest. despite the fact that Chinese consum- tige (vs. prestige)” people with monthly Nowadays, Chinese are Here are a few real examples, offer- ers are keen on identifying themselves income ranging from RMB10,000 to dramatically reinventing ing us a better understanding of various with those well-recognised international RMB100,000, and the majority of them types of consumers in China market of brands, even the top grades within that themselves again both possess private cars, and high-class luxury goods. brand, sometimes at the cost of using up apartments or villas. They also know externally and internally. several-month’s salary. how to take good care of themselves by He came from Wenzhou, Zhejiang seeking premium lifestyles. Contrary to Province, and started up a small businesses However, luxury purchase is only oc- the traditional image of social introver- back to early 80’s. When his business in casional, partial, and gradual in China. sion, these people are actively involved real estate development suddenly boomed Local consumers learn to sample and in diverse social or commercial events. in Shanghai, the whole family moved there. taste those luxury goods, far from a full He was further encouraged by the consti- adoption. Luxury goods tap into people’s life tutional amendment at the 16th People’s in various forms, including fine wine & Congress that all private properties will be It is interesting to note that there is an liquor, tobacco, top-class cars, fashion legally protected. Already buying himself a increasing demand for services, commu- clothing, jewellery & watches, perfume Bentley (which was purchased without any nications, socialisation and other forms & cosmetics, overseas trips, high-execu- kind of loan arrangement), he is now con- of enjoyment such as value experiences, tive education, golf playing, club houses, sidering getting a BMW 5 for his wife and emotional fulfilment and cultural appre- boating parties, and even private jets and a sports Benz for his daughter who will go ciation, which all go far beyond physical antique auctions. abroad for higher education. properties of luxury products.

48 THELINK 2005 Winter THELINK 2005 Winter 49 BUSINESSPRACTICE

These characteristics of China luxury Foreign luxury brands, especially those market trends, usage tips, product func- home for those who ciation” into “luxury fashion”. wine, watches and other tangible posses- market determines that we shall make with European, American origins, are the tionalities, brand history and competi- desire to be identified sions. To modify the image of “shallow, a comprehensive marketing initiative, essential building blocks of their upscale tive situation; Service personnel needs with “luxury” brands! HOW TO DO simplistic and showing off” of luxury con- which we name as “China Expansion lifestyle. However, we shall not neglect to demonstrate a genuine passion for the sumption, we can design series of “cultural” Window shopping is insufficient. Those programmes or sponsor premium social Strategy”. The table below (Table 1) il- the intensifying sense of Chinese identi- brand. They feel proud about introducing WHAT TO MAKE entry level products of luxury brands are events. For instance, we may organise car fication. When expanding foreign luxury this brand to customers and are cheerful lustrates the idea: necessary to retain customers’ interest. exhibitions, concerts in Shanghai Grand about customers’ decision of choosing the To recruit core customers, enhance Service Privilege E-Touch brand loyalty and then develop into Otherwise, they will get frustrated very Theatre, factory visits, company tours, over- brand. They are to convince customers seas Luxury One-week Trips and Deluxe Lifestyle Symbol China Expansion Strategy Chinese Flavours brand advocators; to create more occa- soon. An alternative way they often choose that buying the products of this brand is visits to Monaco Show of Luxury Brands & Club Bond Mass-tige sions and deeper needs for consuming to take is to find “participating pleasure” an emotionally rewarding process. Products & Services. luxury goods. in chatting “luxury stories” exposed by the brands, we should be able to manoeuvre Table 1: China Expansion Strategy E-Touch media reports. We can make use of mass Chinese Flavours harmoniously and swiftly along this cul- = E-Touch is a lot more HOW TO DO media, either TVC or portal website, to en- As we can see, there are many dimen- = Chinese luxury products tural spectrum! than “luxury website”! hance brand visibility. BMW is already a might serve to sions in the marketing mix shown above. Club Houses can be built or sponsored with household name in China, even a child has I will spend the following pages elaborat- complement their These dimensions can work either inde- WHAT TO MAKE a holistic approach. For instance, we can the knowledge that BMW stands for ulti- ing on these marketing mix dimensions. western counterparts! pendently of or collaboratively with each have a brand gallery, product zone, taste mate status and success. To add modern touch into “classically sample, and/or a business centre. The cus- other. The following diagram (Diagram Service Privilege WHAT TO MAKE isolated” image of luxury brands; to tomers may find a kind of tangible evidence Those who cannot afford to buy “set” 1) shows the inter-relationship among the = Service personnel strengthen constant communications for emotional belonging and enjoy within a should adopt the roles of products of luxury brands are usually To show respect towards local culture marketing mix. I will give further expla- with customers in addition to their “pleas- personal space the sense of being rewarded, keen on seasonal discounts, on-sales pro- “both media and and values; to have a local touch in addi- nation of how they work. ant yet transient in-store experiences”; to full release from work or life stresses and motion of tiny luxury accessories such as tion to exotic appeals. personalise your messages to unique cus- temporary escapism. Furthermore, Club neckties and purse. We should offer more Service Privilege E-Touch tomer needs as well as their preferences; Houses can be used as socialisation catalyst HOW TO DO (More Niche) (More Mass) products signifying social status. Some Lifestyle Symbol Chinese Flavors to keep track of the exact purchase pat- to entertain clients, to build business net- young girls are obsessed with buying EXPAND Though foreign brands snatch more than (More International) (More Local) terns of your loyal customers. working, to produce commercial opportu- luxury handbags for the simple reason Club Bond Mass-tige 80% of total sales in the China luxury (More Exclusive) (More Inclusive) nities, or to just have fun. Of course, club that those goods are much more visible HOW TO DO market, Chinese luxury products, brands annual membership fees should be imposed and therefore earns some sort of social and services have already emerged. For to raise threshold. Or we may alternatively recognition for them. Some Chinese Diagram 1: The Inter-Relationship among We can make a full e-profile of custom- example, Chinese liquor manufacturers message” of the brand charge on event basis. Parties are the high- households have small wine bureau to the Marketing Mix ers, including demographic distribution, progressively put into the market products and make this dimension lighted part in customers’ club experiences. store and display imported spirits in their contact details, lifestyles, and current in deluxe gift packaging or business pack- as an essential part of Party themes centre around brand mes- meeting rooms for the same purpose. The inner circle of expansion is based on states of consumption of luxury products aging, which are saturated with Chinese “luxury consumption”! sages, enabling members to feel a lively a matrix growth further comprised of four or brands. Furthermore, we can put into traditional aspirations to wealth, fortune, atmosphere and a vivid brand world. Clubs Lifestyle Symbol quadrants: Service Privilege is a more niche our database those information of when, status, and power. For instance, “Maotai WHAT TO MAKE can serve as educational platforms. In clubs, = Fit “luxury” into the approach for those heavy purchasers, while where, what, how and why customers King” is sold above RMB 1,000 while customers may share brand stories such as world of brands! E-Touch is more for the masses and is able To capture your customers right on the make their purchases of our brand. “National Well-1573” ranges from RMB country of origin, historical heritage, inter- to cater to those diverse segmentations; Club spot via effective sales & service forces; WHAT TO MAKE 1,700 to RMB 2,000. Spiritual consump- We can send e-greetings on their esting events, special craftsmanship, and Bond has a more exclusive nature, tailored to project brand image and transmit prod- tion can be a luxury too. A Psychological birthdays, send thank-you letters, de- consumption manner. The transmission of for social elites, while Mass-tige offers a uct knowledge via personal experiences; To leverage the synergy of luxury Clinic Centre in affiliation with Beijing liver invitations to exhibitions, among product knowledge can be done via a kind more inclusive approach for the ready-to-be to enhance customers’ loyalty, encourag- brands; to develop “luxury culture” into University charges RMB 1,200 each hour many other communication means such of mild contest. We may also invite domes- population; On the left side of the diagram, ing more frequent patronage by perva- a way of life. for consultancy therapy. Therefore, asso- as posting wrapped gifts, making phone tic or international celebrities to the club. customers relate to luxury brands more phys- sive consultancy; to nurture a discernible ciation with Chinese luxury brands is no follow-ups, offering store visits, provid- By showing up at the party, those celebri- HOW TO DO ically and more personally. Nevertheless, on brand differentiation from competitors longer producing negative impacts. On ing warm receptions, etc. ties will lend full support to the brand. We the right side, customers relate to luxury through “just feel good”. Chinese buyers use luxury brands to mar- the contrary, we can benefit from the rich- should give full attention to critical details brands more virtually and more collectively; ket themselves. Some executives or com- ness of Chinese culture. It will be much We can keep an electronic record of such as coffee shops, Deluxe rooms, formal Of course, there should be an optimal bal- HOW TO DO pany owners capitalise on luxury products appreciated by Chinese customers if west- cumulative consumption mileage based written invitations plus phone confirma- ance between different dimensions! to promote themselves. But their educa- ern luxury brands are more sensitive to Service personnel are of symbolic values on the individual customer’s regional or tions, car parking arrangement and premi- tional backgrounds in general and product ”big events” in Chinese society, such as of brand in the eyes of customers in addi- even international purchase. um refreshments. The outer circle of expansion pulls the knowledge in particular are far from being traditional Spring Festival, 2008 Beijing tion to clean, bright and elegant retailing inner ones into two opposite yet comple- We can inform customers of the latest Mass-tige adequate. In the past, they were simply sat- Olympic Games & 2010 Shanghai World environment. Therefore, their physical isfied with possessing luxury goods. Now mentary directions. articles, seasonal discounts and unique = Mass-tige can make Expo. appearance, work uniform, disposition, they seek a luxury lifestyle, for achieving it collection items. We can also recom- “luxury” more prestigiously! It is a common phenomenon that the attitudes, words & deeds all have an im- requires investment of both time and mate- mend to our customers related BBS or Matthew Wang is EMBA04 student at CEIBS. more western or Occidental means being pact upon customer perceptions, and con- rial. We shall design individual marketing This article is adapted from an essay he other e-communities so that they can be WHAT TO MAKE kit tailored to their personal features. It will more international, while, the more east- sequently, customer behaviours. Service authors which wins “Special Commendation” actively involved in sharing experiences, help to win the trust of their business part- ern or Oriental means being more local. personnel should also function as a smart To guide those newly emerging consum- in the 2005 Financial Times/ Moët Hennessy comments, and suggestions. ners. It is called “image investment”. Nowadays, Chinese people are willing to adviser. They are good at identifying ers through an authentic brand journey; Essay Prize. He works as Qualitative associate themselves more with foreign customers’ needs accurately and clearly. Club Bond = Club is to cater to the desires of massive middle- At present, luxury consumption is mainly Research Director in MAP (Marketing brands rather than local Chinese brands. They are quite knowledgeable about expected to be a social class population; to turn “luxury appre- based on “individual” clothing, perfume, Analysis Partner).

50 THELINK 2005 Winter THELINK 2005 Winter 51 BUSINESSPRACTICE

a simple and precise way. According to There are many quality management between paying lip service to “custom- Crosby, quality is all about customers. tools, helping companies to focus on cus- ers first” and setting it as principle and Quality is “conformance to (customer) tomer requirements. Quite a number of guideline. requirement”. companies are using these tools, which we should applaud. But it is people who Focusing on customers doesn’t mean One might ask: man all tools. Without a corporate cul- meeting all requirements of all custom- ers. Any product of any company has its ture that puts customers first, a desir- • What is the problem with focusing on own target customers. When a company able and long-term success can never be product? Isn’t it product that customers targets its customers, what follows is to achieved. Crosby once gave an illustra- pay for? make effort to realise and increase cus- tion. You provide a driver with the best tomer values. When a company does fo- • Is it practical to meet “all” customer possible training in driving skills and in cus on its customers, it will come to un- traffic rules, and also equip the vehicle requirements? derstand their thoughts and detect their QUALITY with the most advanced technologies. requirement changes. However, if prod- When customers are the priority of However, whether or not he will make uct is the focus, the company will not be the concern, the company will take into drunk driving or speed does not depend even aware of the loss of customers. account the potential impact on current on the training or equipment. Rather, MANAGEMENT customers and target customers when it is determined by his consciousness, making any customer-related decisions, i.e., whether or not he always puts other THE BOUNDARY Going Beyond the Boundary By Luo Liming including developing new products, im- people’s life in the foremost place. In OF QUALITY proving current products, handling cus- the same way, “putting customers first” MANAGEMENT tomer complaints and reducing cost, etc. needs to be rooted in the company’s con- By doing so, the company is able to make sciousness and to become its culture, Changing the focus of quality from plans that benefit both customers and the which cannot be actualised by simply a products to customers, we then need company. On the contrary, if product is few tools, campaigns or teams. It has to to redefine the boundary of Quality the biggest concern, only lip service will become a daily guideline for all actions Management. be paid to so-call “putting customers taken by top executives and all staff Figure 1 illustrates the origin and the first” and the company’s profit becomes members, and a criterion to measure all flow of quality. If every staff member have done quality evaluation and The key to the solution lies in a correct we get here? The focus of quality is noth- the sole concern. Even when customers decisions of the company. If adhering to and every department in the company consulting for nearly 100 com- understanding of the essence of quality. It ing more than product. are involved in this case, it is merely this principle, the company will eventu- strive to meet customer requirements, a panies. Talking about quality involves the following questions: What does out of practical consideration of doing ally develop a culture in which customers quality chain will be developed to con- management with company own- Most companies have been accred- a better promotion. That is the reason quality originate from? What does quality are the real focus. According to Toyota’s nect every link. ers, VPs in charge of production, focus on? Who finally judges quality? ited by ISO9001. It is their common why many companies attach much im- Long-term Operation Philosophy, the Iquality managers and chief engineers, I knowledge that an essential principle of portance to marketing but fail to deliver company grows by increasing customer When the focus of quality is on product, found that they quite often came across Simple as these questions may appear, ISO9001 is to focus on customers. The products with real values, i.e., quality value, even at the expense of short-term quality management is limited within the the following puzzles: the perception of them determines qual- definition of quality set by ISO9001 is and service. financial goals. Such is the difference company (yellow circle), and customers ity strategy, product strategy and even concise, containing profound implica- are ignored (blue circle). Although many • The quality of our product is up to the fate of a company. tion. But if it is literally interpreted, companies do leave some room chan- the national/industrial standard, but cus- people tend to transfer, in practice, the F i g u r e 1: Q u a l i t y C h a i n nelling customer complaints, it merely tomers keep asking for more. focus from customers to product. Table 1 serves as a passive response. When the WHAT DOES QUALITY PR O D U C T I O N below shows the point. LOG I S T I C S focus of quality is on customers, quality • Quality controls ensure that every FOCUS ON? management system is completed (yel- batch of products complies with the tech- Various gurus hold various defini- The answer to the question of what qual- Q p r o d u c t low circle and blue circle). nical standard. But customers continue tions of quality. But they all agree on one ity is usually refers to the compliance of to complain that the products fall short point that quality is all about customers, Let’s come back to a basic question: the product with the technical standard of quality in use. for customers finally judge the quality of Q c u s t o m e r r e q u i r e m e n t s=q u a l i t y r e q u i r e d why do customers buy our product? It is and prescribed requirement. As to the b y c u s t o m e r s a product. because they think or believe that the prod- • It is impossible to satisfy some re- evaluation of quality, the indexes usu- R& D Q d e s i g n=Q u a l i t y d e s i g n e d SALE uct or service we provide will meet their quirements made by customers, for they ally involved are percent of good yield, p r o d u c t =Q u a l i t y p o s s e s s e d b y t h e p r o d u c t I personally commend the definition Q d e s i g n Q requirements (which realise customer val- remain technically unsolvable in the defects rate and complaint rate. What do set by Crosby, which tells the truth in Q p r o d u c t i n u s e=Q u a l i t y d e m o n s t r a t e d w h e n ues). How does quality work? A customer whole industry. t h e p r o d u c t i s u s e d b y c u s t o m e r s Definition Provider Definition Focus puts forward a quality requirement, which might be in written form (such as the stand- • The improvement of product quality Crosby(Quality Quality is “conform- always lags behind the rival company or customers ard stated in the purchase contract), or in Management Guru) ance to requirement”. C U S TOM E R S C U S TOM E R S other forms, such as the case where an or- customer requirements. A set of characteristics that R EQ UIR EMEN TS ISO9000:2000 customers U S I N G T H E PR O D U C T meet customer requirements. dinary consumer is purchasing the goods. • The effort we make in keeping up Q c u s to m e r r e q u i r e m e n t s Q p r o d u c t i n u s e Only until after he uses the product, does People puzzled by com- Conformity with tech- with current trend of quality manage- products he know whether or not his requirements mon conceptions of quality nical standards ment turns out exhausting and we end up $ are met. In Table 2 below are different con- with losing more customers. Table 1: Various Definitions of Quality sumer responses to product quality.

52 THELINK 2005 Winter THELINK 2005 Winter 53 BUSINESSPRACTICE EXECUTIVE EDUCATION PROGRAMMES too much, it is you who fail to understand Programme Location Version Dates Fee (USD) For further programme Product Performance in Use Customer Response your customers. COUNTRY INTRODUCTION information, please Shanghai English Apr. 13-15 4,150 China Expatriate Programme contact: Product in use Always>= customer requirements J Loyal and good customers 2. In 2002, I went to a conference of qual- Shanghai English Sep. 14-16 4,150 Q Q http://www.ceibs.edu/execed/index.shtml at us visit to welcomed You are RMB. equivalent in paid be could fees Tuition interpretation. Chinese sequential with English in delivered are * courses Chinese are always generated from here. ity management in the United States. The TOP MANAGEMENT 5183 2890 21 +86 Fax: [email protected] Email: 5197 2890 21 +86 Tel: P.R.China 201206 Shanghai, Pudong, Road, Hongfeng 699 CEIBS Programmes Education Executive Board and Corporate Governance Programme Beijing Chinese TBD 2,950 man who sat next to me was a professor in product in use Almost= customer requirements K Customers will choose a Mergers and Acquisitions Shanghai Chinese * May 26-28 2,250 Q Q a university in the States. When he learned better one when given the options. SENIOR MANAGEMENT that I worked in Pepsi, he was pleased to tell Advanced Management Programme (Modular) Shanghai Chinese * June 10,800 Customers leave. Or L me that his favourite drink was Pepsi. He CFO Programme (Modular) Shanghai Chinese July 9,800 product in use Always< customer requirements Q Q it is more appealing to those added that Pepsi tasted good in any place Diploma in Hospital Management Programme (Modular) Shanghai Chinese * July 17,000 who care more about price. and in any time in the world. I was very GENERAL MANAGEMENT Table 2: Consumer Response to Product Quality proud to disclose the “secrecy” behind it. Diploma in Management Programme (Modular) Shanghai English May 17,000 In order to protect its own brand, Pepsi has Family Business Programme (Modular)new Shanghai Chinese * TBD TBD In order to meet customer requirements, • The product is used as a whole by a third-party company to conduct a regular JOINT PROGRAMME every link in the quality chain is of vital customers. They don’t use technical in- CEIBS-Columbia Business School Joint Advanced Marketing random sample survey. They would send Shanghai English Jul. 27-30 2,850 importance: To thoroughly understand the dexes. Management Programme requirements of target customers, includ- the sample to a testing centre appointed CEIBS-Harvard Business School-IESE Business School Joint Shanghai/Bo- Chinese * February RMB 350,000 ing those clearly stated or buried under- • The reason why customers have by Pepsi to be tested. Apart from physical Global CEO Programme (Modular) new ston/Barcelona and chemical indexes and microbiological CEIBS-Harvard Business School-TSEM Joint Senior Executive Shanghai/ neath (Q customer requirements); To ef- various requirements can be found in the Chinese * August 36,000 fectively actualise customer requirements way they use the products. index, the test also included sensory index Programme (Modular) new Beijing/Boston through product designing (Q design); To (testing the flavour customers might feel). CEIBS-INSEAD Joint Managing Multinationals Programme new Shanghai English TBD TBD CEIBS-McKinsey & Company Joint Telecom Industry Leadership manufacture in full accordance with the • Customers themselves are under in- Pepsi already developed, many years ago, Shanghai Chinese * TBD TBD creasing pressures. a system to test the drink flavour. This sys- Programme (Modular)new requirements, ensuring that the product 1678 10 8286 +86 Fax: [email protected] Email: 1677 10 8286 +86 Tel: P.R.China 100080 Beijing, Zhongguancun, Road, South 2 Kexueyuan Tower InfoTech A Park Raycom 3/F Office Representative Beijing CEIBS CEIBS-Michigan Ross School of Business Joint Diploma in quality conforms with the designing re- tem continues to be improved. What lies Beijing English July 17,000 • Not every customer is willing to Management Programme (Modular) quirements (Q product); To find out, after behind this practice is that customers drink spend time complaining when he is not STRATEGY & LEADERSHIP they use the products (Q product in use), Pepsi as a holistic product. Neither physi- satisfied. Shanghai Chinese TBD 2,250 if customers are satisfied with the product cal or chemical or microbiological index Building Organisational Capability for Strategic Implementation Beijing Chinese TBD 2,250 can ever replace the flavour that customers TEAM SERVICE CUSTOMER and if their expectant requirements are met • Not every customer will let you know Shenzhen Chinese TBD 2,250 might sense. Hence, the sensory index is Competitive Strategy Shenzhen Chinese * Aug. 23-26 2,850 (Q customer requirements). before he is ready to leave, nor will he essential and indispensable. Such a prac- Going Global: Strategy and Implementation new Shanghai Chinese May 31-Jun.3 4,150 give the reason for his leaving. Shenzhen Chinese May 24-27 2,850 There are many issues in the links tice does not demand advanced technolo- Leadership and Change Management Shanghai Chinese Nov. 1-4 2,850 related to customers that tend to be ne- • Customers are not obliged to tell you gy. What it needs is the idea that customers Management for Managers - Becoming a Master Managernew Shanghai English TBD 2,250 glected: about his new requirements. are the most important. It means that the Management of Negotiation and Decision-Making new Shanghai Chinese Jun. 19-22 2,850 boundary of quality management should Beijing Chinese * Jun. 15-18 2,850 • Customers’ expectation is dynamic, • … Strategic Leadership be extended to customers. In addition to Shanghai English Nov. 30-Dec. 3 2,850 not static; the technical index, customer requirements Lastly, let’s look into two cases which ORGANISATION & MANAGEMENT have to be taken into account. Shanghai English Apr. 20-23 2,850 • Not all expectations can be put to demonstrate the significance and func- Human Resources Management Beijing Chinese * Jul. 20-23 2,850 words; tions of the quality management which When customers come into the fo- Shenzhen Chinese * Dec. 8-11 2,850 put customers in the foremost place. cus, quality management will, then, • Most of the time, customers do not MARKETING & SALES breaks through the boundary of product Advanced Industrial Marketing Strategy Programme new Shanghai English Jun. 22-26 3,450 fully understand what they want, or are 1. When I worked in Pepsi (China), we by completing a quality chain, where Building and Managing Brands Shanghai Chinese * Jun. 11-13 2,250 not able to put their expectations into invited some quality managers of our ven- Integrated Marketing Communication new Shanghai Chinese * Oct. 20-22 2,250

customers’ need is well looked after in 5743 2693 755 +86 Fax: [email protected] Email: 5750 2693 755 +86 Tel: P.R.China 518053 Town, Shenzhen Chinese Overseas Tang Building Han 23/F. Rm.2303B, Office Representative Shenzhen CEIBS technical terms; dors and trained them in the factory. Part of every link. By achieving this, a company Key Account Management Shanghai Chinese * Jul. 21-23 2,250 the training programme was to help them Managing Marketing ROI Shanghai English Aug. 24-26 2,250 • The R&D people in the observing will no longer be troubled by custom- understand how our products were manu- Management of Innovation and New Product Development new Shanghai Chinese * Jul. 7-10 2,850 position will never understand the feel- ers’ “novel” and “undue” requirements. factured, how materials they provided were Shenzhen Chinese * TBD 2,850 ing of customers, but they always think Moreover, it will be able to offer to its Marketing Strategy and Planning used in the products and also what impact Beijing Chinese * TBD 2,850 they do. customers “surprises” one after another Beijing Chinese * Jun. 7-9 2,250 they would make upon our customers. By Strategic Sales Forces Management even before their “novel” and “undue” Shanghai Chinese * Aug. 21-23 2,250 doing so, we hoped to extend our quality • … requirements emerges. Hence, the prod- FINANCE management to the level of vendors. After uct will not get “outdated” and will not Shanghai Chinese * Jun. 21-24 2,850 A key to solutions is to experience, to Finance for Non-Financial Executives the training, these quality managers came lose to your competitors’. When a com- Beijing Chinese * Nov. 17-20 2,850 understand (instead of merely observing to realise why Pepsi had various require- pany succeed in “understanding custom- Managerial Accounting for Decision Makers new Shanghai Chinese May 26-29 2,850 and asking questions) how customers are Strategic Cost Management and Control Shanghai Chinese * Jun. 16-18 2,250 ments, for example, the requirements of ers more than they do themselves”, it is using the products, and to take initiatives, PRODUCTION-OPERATIONS improving the materials. All these require- sure to win many more loyal customers finding out what customers feel after us- ments, they now learned, originated from Management of Supply Chain, Purchasing and Outsourcing Shenzhen Chinese * TBD 2,850 and keep them. Project Management Shanghai Chinese * Sep. 1-4 2,850 ing the products (instead of waiting pas- customers. The training programme also Winning the Manufacturing Race Shanghai Chinese * Jul. 13-16 2,850 sively for their complaints). The following helped them to understand that customers The author is DIMP05 student at CEIBS. She conceptions are of great help in gaining did not raise issues without good reasons. works as an independent quality trainer and CEIBS Executive Education�No. 37 in the world Source: 2005 World Executive Education Programme Ranking released by British newspaper Financial Times better understanding of customers: When you complain that customers ask for consultant.

54 THELINK 2005 Winter THELINK 2005 Winter 55 SCHOOLUPDATES to reality, for they are all taken from an- from the textbook. He watches closely from ordinary Macroeconomics lectures. nual reports of various companies and are the moves of companies and conducts a In his class, detailed analysis and scientific edited in a way that everything irrelevant is great deal of research and preparation methodology are the two focuses, for he removed. It makes them distinct from case for his class. It is not unusual for him to recognises that a good methodology bene- studies in the Harvard style. work until late at night or even stay up fits the students in the long-term. He gives concrete evidence and data, probing deep until dawn. A case he offers to the class Professor Ding works painstakingly in into the issue. There is never an over-com- might cost him a whole month’s study. his class. He first differentiates Chinese plicated model beyond the students’ grasp. Accounting Standards from American His approach in the class results in ef- The accurate data and simple format makes and International ones, and then presents fective learning. When he is analysing the it accessible to the students. His profound a case against these various backgrounds. practical cases, the students are engaged by knowledge of Chinese economy makes his It helps students to have a comprehensive the immediate applicability of the lesson to research penetrating. understanding. Also, he conducts exten- their real-life business challenges, including sive research into Chinese cases, creat- their own mistakes in budgeting and invest- His class lasts four days and includes ing profound analyses of the operations ment. That is why the Professor is often topics such as traditional theories, finan- of Chinese companies. seen encircled by his students after class. cial policies, monetary policies, exchange rate, inflation, etc. His presentation in the Professor Ding’s commitment to work is Easy-going and open-minded, Professor class is clear, precise and well-knit. His well known. Consistently, when financial Xu wins popularity among the students. theory is succinct, combining various the- news emerges, he takes prompt action by ories with empirical experiences. Several searching on the web to collect information classic works are usually recommended PROFESSOR XU regarding the company’s financial state- for further reference relating to every sin- XIAONIAN ments and data. He is a meticulous scholar, gle topic. They can amount to a long list of looking into every detail in preparation of classic economic works after every class. Without a long-winded introduction, his teaching materials. In every case he of- The Professor Xu Xiaonian always begins his fers, he produces an Excel spreadsheet to fa- To executives from various compa- class with simple words, “Let’s now start”. nies, Professor Xu’s class is particu- cilitate the analysing work of the students. larly appealing. Many of them took the Widely known in CEIBS, Professor For most students, what is remembered Macroeconomics course when they were Xu Xiaonian has attracted more and about university level Financial Statement studying in universities but they have not Musketeers more class participants. Those who miss Analysis is nothing but loads of formulas, fully grasped the strength of the method- the opportunities lobby for extra lectures ratios and calculations. But the professor ology and theories of Macroeconomics. to make up for their loss. reverses the whole process by introducing Neither have they learned to put them concepts and methodology first, explain- No vehement speech is given in into empirical context or to conduct ing through case studies the practical ba- in CEIBS Professor Xu’s class. He is a man of policy analysis. They feel enlightened sis and problems of financial operations gentle manners. His tone remains even, by Professor Xu’s rich experiences, com- By Audrey Wu & Helen Wang of companies and in the end brings in fi- without much rise and fall. But every prehensive knowledge, unique insights nancial ratios. In his view, financial ratios word he utters strikes home the root of and appropriate answers. are based on financial analyses and what the problem. The students are complete- is more important is to thoroughly under- ly convinced. His presentation might not PROFESSOR stand financial statements and to grasp the be exciting, but is truly inspiring. In every class, students are contaminat- marvel at it. He expounds the complicated DING YUAN economic implications behind them. PROFESSOR ed by the professor’s vigorousness. The financial concepts with practical cases and Being a genuine scholar, the professor Professor Ding Yuan is a gentleman of Gary Biddle, Professor of Accounting XU DINGBO class usually lasts several hours, with only designs the framework of his course in a very emphasises the importance of “bold hy- French style with a well-known beaming in Hong Kong University of Science a few short intervals, yet students remain orderly and reasonable way. Even a student pothesis and prudent verification”. The Walking into the classroom with vigor- smile. He is also famous for his shrewd and Technology and visiting profes- enthusiastic and engaged throughout. It is without any financial background is able to first and foremost requirement in econom- ous steps, Professor Xu Dingbo is ready analysis of financial statements. sor of CEIBS, often comments that very unusual. How does the professor de- absorb everything he teaches with his logic ic research is to clarify the definition and to teach students who have been waiting “Accounting is an art”. Professor Ding liver such a vivid, practical and in-depth and precise presentation. Before the class, the hypothesis. This lays a firm founda- A characteristic of Professor Ding’s class is able to help his students to appreciate in anticipation. lecture in a subject as monotonous as fi- tion on which a model can be established. he asks about the students’ backgrounds so is the quantity of cases he offers. During “the art of accounting”. nancial accounting? Any models have to be verified by empiri- the EMBA programme’s four-day course Accounting is boring and hard to di- as to cater to their varying needs. By the end of the class he is able to call students by their cal evidence. Once failing to be verified, there are over 25 case studies in Financial These are the stories of our three skilful gest for many students, particularly for The magic behind it is the fact that names. Another feature of his class resides the old hypothesis has to be abandoned Statement Analysis. Strangely, the students “swordsmen” in CEIBS. With their skills as those without a financial background. Professor Xu updates the content of his lec- in his humorous style. The students burst and a new one has to be set up. One has never feel overwhelmed or disorientated, for well as characters, they cultivate the fields One might suspect that he would absorb tures frequently. He has a profound under- into laughter while simultaneously catching to be very prudent in the research. The the professor keeps a reasonable rhythm in of CEIBS, where their students are re-edu- nothing after a few hours of lecture. But standing of the operations of companies and the instructive message he delivers. A joke professor also pays a great deal of attention his presentation. Some cases are mentioned cated, enlightened and inspired. All three such worry dissolves after only five min- makes a thorough analysis of them. Based is usually a practical example and helps to to methodology. The content of four-day briefly, and others are studied more closely. professors won “The CEIBS 2005 Teaching utes in Professor Xu’s class. The profes- on his own theory and research, his predic- inspire the students. lecturing might be easily forgotten. That There are usually 3 or 4 cases on which he Excellence Awards”. But you are bound to sor has the magic to capture everyone’s tions about the development of companies is why he talks about Macroeconomics expounds. The case studies represent dif- be surprised at how many excellent teacher attention within a few minutes. are quite often verified and the students Professor Xu never teaches doctrines and Policy Analysis, which differs greatly ferent types of situations and relate closely you may find here in CEIBS.

56 THELINK 2005 Winter THELINK 2005 Winter 57 SCHOOLUPDATES China’s Automotive Industry: WHO WILL BE THE

a political initiative. Mr. Zhang Xiaoyu, Chairman of the Society of WINNERS? Automotive Engineers of China, talked about the auto industry's contribution to the construction of a harmonious society.

Dr. Christian Mohrdieck, Director of Fuel Cell Drive System Development at the DaimlerChrysler Research and Development Automotive Industry Leaders Technology Division, who spoke about environmental and energy consumption regulations and their implications on the industry Gather at CEIBS for the Third said, “This is the right point in time to talk about new technology, especially in this country where I see huge opportunity for co- Consecutive Automotive Forum operation.” Mr. Nobuo Okubo, Chief Technology Officer of Nissan Motor Co., discussed the process of tech- nology transfer in the development of the Chinese automotive industry and n November 28 and 29, the emphasised that the long process of top-ranked China Europe localisation is not unique to China. International Business School (CEIBS) is hosting its third Mr. Zhao Jie, Vice President of consecutive China Automotive Geely Holdings and President of Geely OIndustry Forum at its campus in Shanghai. International Company, one of China's most successful privately owned car companies, shared his experience of being the first Building on the success of the last two fo- Chinese car company at the 61st annual Frankfurt Auto Show as rums, this year's forum is addressing the question: In a market of stagnant sales, well as the challenges Geely faces in exporting their vehicles. decreasing prices, and increasing competition, who will be the winners? Professor Bernd Schmitt, Professor of Business at Columbia This forum has been established as the most important and influential automo- University in New York, emphasised the importance of under- tive conference in China, bringing together industry leaders, senior government standing the experiential world of the Chinese Consumer, while officials and top ranking academics to discuss issues and make decisions Dr. Chirstoph Stark, President and CEO of BMW Group Region that impact the Chinese automotive industry. China, gave detailed insight on building a premium brand in the Chinese auto market. 300 people are gathering to hear over 20 industry experts discuss strategies for operating in an increasingly challenging market. Eight The final presentation was given by Mr. Paolo Monferino, sessions spanning two days cover all aspects of China's automo- Chief Executive Officer of IVECO, who spoke about China's role tive industry. Topics of discussions include: Macroeconomic and in the global commercial vehicle industry. "China is a fast grow- automotive industry policies, global harmonisation, automotive in- ing large-scale market and is a platform for global operations as dustry structures, China's auto consumers, future developments in well as Asia Pacific markets. China is a good quality, low cost China's automotive market, developing trends in China's commercial suppliers' base, as well as an innovation driver that will make vehicle sector, and movement towards a competitive auto compo- strong impacts on world competition," said Mr. Monferino. nent industry. The closing session positions China on the global stage, both as one of the most important domestic markets and as a This was the first year that the Forum included in discussions potential source of low cost exports to the rest of the world. the commercial vehicle sector. Many agreed the inclusion was timely. "The commercial vehicle sector will keep growing at a rate Through this forum CEIBS serves as a bridge and platform for repre- slightly higher than GDP growth rate for a relatively long time in the sentatives of different segments of the automotive industry to exchange future, in which the heavy truck segment has the largest growth ideas, communicate needs, offer predictions and express opinions on doing potential," said speaker Xu Changming, Senior Economist and business in the world's third largest automotive market. Director of the Information Resource Development Department of the State Information Centre. In addition to speeches on macroeconomic and automotive industry poli- cies from Bao Steel Chair Professor of Economics at CEIBS, Wu Jinglian, and CIEBS, recently ranked as the world's top 13th business school by the Mr. Chen Qingtai, both of whom are Research Fellows of the Development London-based Financial Times EMBA rankings, was praised by several Research Centre of the State Council of PRC, Mr. Malcolm Harbour, a member of speakers for providing the opportunity to discuss some of the most timely the European Parliament, spoke on the political opportunities of global harmonisa- and important topics of today's automotive industry, topics relevant to both tion and expressed his hope that the forum could be the start of a process to create China and the rest of the world.

58 THELINK 2005 Winter THELINK 2005 Winter 59 SCHOOLUPDATES

CEIBS Alumni

Programme Going tion-driven, the growth rate might be much larger size than the buyer. Mr. Blanco pleased to attend this alumni programme. moderated from 9.5% to less than 7.5%. explained every detail of this international It is very compact in structure. It is a worth- He also suggested a steady revaluation of transaction which involved more than 10 while tour where my time is well spent. the RMB about 3-5% per year. Following jurisdictions, covering all procedures from I really feel sorry for my classmates who that was the excellent presentations about preliminary negotiation, acquisition prepa- couldn’t spare the time to come here.” Overseas global acquisition given by Mr. Louis ration, efforts to organise financing to the Walter, Senior Partner from KPMG and finalisation of the deal. Developed in 2003 jointly by Executive his team. Also, Prof. John Quelch, Senior Education Department and Alumni Associate Dean of Harvard Business This case was very illuminating to our Relations Office of CEIBS, the alumni School, delivered a concise but insight- alumni. Mr. Xu Qiang said: “This case is programme has hosted more than 100 very practical and helpful to my job right n the 4th of December, framework, role of the government, mar- Solow also gave suggestions on how to ex- ful lecture on global branding, which alumni from programmes in Shanghai now.” Our alumni wished if only they could CEIBS Executive ket size, labour market, capital market, tend the welfare system and the insurance benefited the alumni a great deal. and Beijing. The purpose of the alumni have more time to communicate with the Education Department regulations, ethical standards, education, system in a bid to prevent or reduce the programme is to provide a life-learning executives and lawyers of the company. and Alumni Relations social recognition and economic climate, economic cost of natural disasters. LEARNING HOW TO opportunity for our alumni, strengthen Office kicked off the etc. Based on his profound knowledge, Prof. Charles Waldman, Professor of their management skills, help them trans- Prof. Solow is a leading mainstream DO A LEVERAGED- Oschool’s first overseas alumni programme Prof. Nueno shared with the alumni his late cutting-edge management ideas into Marketing from INSEAD, designed an economist in the US. He depicted both the BUY-OUT (LBO) co-designed and led by Prof. Pedro view that “to be a champion today one experiential session for the alumni. The core competency for their companies positive and the negative scenarios of the ON THE SITE Nueno, CEIBS’ Executive President, has to be a global champion.” class began from a shopping tour in the and provide them a platform to get to mid- and long-term prospects of the US and Prof. Arthur Yeung, CEIBS’ Philips On the morning of December 7, the alum- most unique shopping mall in Boston, the know each other. Eligible candidates for Prof. Arthur Yeung updated the alumni economy. He pointed out that the main Chair Professor of Human Resource Prudential Centre. With Prof. Waldman’s the alumni programmes are exclusively with the latest research on Chinese en- potential problem of the American econo- ni went to the suburb of Boston to visit Management and a widely popular pro- analytical framework in mind, the alumni terprises going global. He then provided my is how long the combination of budget American Instrumentation Laboratory CEIBS alumni, including all participants fessor among the alumni. some guidance and organised detailed deficit, negative savings and foreign debt Company, a high-tech company special- went shopping to gain the first-hand expe- of MBA, EMBA, DIMP, CEO, AMP, ised in the production and distribution of rience of ordinary American consumers. Fourteen CEIBS alumni from the discussions on the cases of Trend Micro could sustain. He also devoted some time CFO and exchange programmes, as to explaining issues of common interests medical equipment, and a global leader well as those from CEMI (China Europe CEO, EMBA and DIMP programmes Enterprise and TTE. He also analysed var- Back in the classroom, Prof. Waldman ious ways of going global such as organic to the alumni in a simple and easy-to-un- in critical care and haemostasis prod- Management Institute, the CEIBS’ pred- from Beijing, Shanghai, Wuxi, Zhejiang, discussed with the students the American growth, strategic partnership, merger and derstand way. Commenting on the prob- ucts. This company represents a classical ecessor). Guizhou, Qingdao and Hong Kong, at- retailing market and customers from dif- acquisition, etc. The alumni had extensive lem that consumption accounts for less leveraged-buy-out in the US. Professor tended the three-day programme of ferent aspects, including purchase modes, discussions about the role played by the than 45% of China’s GDP, Prof. Solow Nueno invited Mr. José Blanco, the law- “Globalisation of Chinese Firms: customer types, the ways to translate re- “hybrid team” at Trend Micro Enterprise suggested that it might be caused partially yer from Cuatrecasas Lawyers, who par- Opportunities and Challenges” at tail positioning into action variables, and in running trans-national operations and by people’s uncertainty about healthcare, ticipated in the whole process of acquir- Harvard University. retail orientations. In this session, our in decision-making. pensions and education. ing Instrumentation Laboratory 15 years alumni succeeded in getting perceptions, ago, and Mr. José Rubiralta, the CEO of which went far beyond mere knowledge. INSIGHTS FROM On December 6, Prof. Robert Solow, the In the afternoon, Mr. Stephen Roach, Instrumentation Laboratory, to share with WORLD-RENOWNED Nobel Prize laureate from MIT presented Chief Economist from Morgan Stanley, the alumni the whole case of this trans- SCHOLARS the concept of the economic cost of natu- delivered an excellent speech to the national acquisition. ACCOLADES FROM ral disasters he recently focused on. He alumni. He believed Chinese economy THE ALUMNI On the first day, Prof. Nueno pointed out used the examples of Hurricane Katrina, should be transformed into a consump- Before the acquisition, Instrumentation that in order to become a global cham- 911 and SARS to suggest that the govern- tion-driven growth. In the transition Laboratory was a financial conglomerate Ms. Shi Xiaoyan from Class 2 of the pion, attention must be given to legal ment should take more responsibility. Prof. from investment-driven to consump- in the New York Stock Exchange and had a CEO Programme commented: “I am very

60 THELINK 2005 Winter THELINK 2005 Winter 61 SCHOOLUPDATES HEADLINENEWS INSEAD Dean visits CEIBS On October 27, Professor Gabriel Hawawini, President Hu Talks with Prof. Nueno Dean of INSEAD Europe Campus and Mr. Claude Janssen, Chairman of the International Council n the evening of November and Honorary Chairman of the Board both visited gratulated CEIBS on its success and that was CEIBS. 14th, Chinese President CEIBS. They were received by Professor Zhang and encouraged CEIBS to continue OHu Jintao had a talk with President Hu arrived in Madrid Weijiong, Vice President and Co-Dean of CEIBS. to develop at the same speed. Prof. Prof. Pedro Nueno, Executive on November 13 to for a 2-day Nueno gave him the best regards on Dean Hawawini had visited the campus before but President of CEIBS, on the side- state visit to Spain. behalf of all colleagues of CEIBS, was very impressed by the development since he line of the grand welcome din- last had seen it which was before the completion of and President Hu asked Prof. Nueno ner hosted by Spanish King Juan Around 100 guests including phase two. Carlos in Madrid. to return his best regards to all staff Chinese accompanying officials, and faculty at CEIBS. members of the Spanish royal CEIBS recently has been hosting a group of President Hu told Prof. Nueno family, ministers of the Spanish MBA students from INSEAD Singapore campus that the influence of CEIBS in In addition, in the speech of King government and personnel from who ran a workshop of case analysis togeth- management education in China Carlos during the dinner, he made all circles of the Spanish society er with CEIBS MBA students. Besides, CEIBS Executive Education has jointly organised a pro- has been very important. He con- reference only to one project in China were present at the dinner. gramme with INSEAD for IBM in Singapore. Mr. Laslzo Kovacs, visits CEIBS NEWSBRIEFING ecuted by McKinsey in Start in 1998. to take part in a practical and immediately appli- pursuing cooperation with China in Fourth Euro-China Forum cable business programme rather than full-time customs matters. Agreements made On December 12 and 13, the Fourth Euro-China Participants consisted of students from diverse programmes for MBA degree. earlier this year in April between the Forum took place in Barcelona, Spain. It is a process functions, mainly sales and marketing, and com- EU and China aim to improve customs initiated by Academia Sinica Europæa in 2002 and panies including local companies such as Haier To meet this market need, CEIBS launched co-operation in order to facilitate trade aims to create conditions for a comprehensive dia- and MNCs such as Microsoft and IBM. Most par- the AMP this June. The AMP is just like a con- and to increase security. It also consti- logue between the two edges of Eurasia in Europe. ticipants showed a keen interest in marketing and densed edition of the EMBA programme, cover- tutes a strong incentive to promote the In cooperation with the Casa Asia and the CIDOB provided plenty of food for thought. Their active ing core business modules including Introduction participation and contribution made the workshop to Management, Management Accounting and most advanced customs standards Foundation, this year's forum researched and de- fruitful and interesting as well. Corporate Finance, Organisation and Leadership and, more generally, customs co- bated 1) the EU/China relationship in a changing world 2) EU and China on a "cooperative Eurasia" Development, Operations and Supply Chain operation between the EU and other The workshop was initiated by the new core and 3) the triangulation between the EU/US/China Management, Marketing Management, as Asian countries. team of the Marketing Club. Yolanda Zhang, presi- and its dynamics. well as Strategic Management and Execution. dent of the Marketing Club, mentioned that there International principles including Mintzberg's Under this agreement, the EU- Mr Liu Ji, Honorary President of CEIBS and would be more club activities for MBA students in "practical management education" are adopted China Joint Customs Cooperation former vice president of the Chinese Academy of the days to come. as guidelines for conducting courses so as to Committee had its first meeting in Social Sciences, Mr Laurent Fabius, former PM of Passionate help participants immediately apply what they Beijing on 14th with encouraging sig- France and Mr Narcis Serra, former vice president are learning to reality. The whole programme is nals for readiness of further cooper- of the Spanish government opened the Fourth Entrepreneurs Gather arranged with a series of practice-oriented ac- ation. Madam Wu Yi, Vice Premier of Euro-China Forum by keynote speeches. Together: CEIBS tivities, which are compromised of reviewing the China, worked with Mr. Kovacs and Opened Its Second past for the future, learning lessons from others to his delegation, agreeing on the im- MBA Marketing Club Class of Advanced avoid the same mistake, practicing what is being portance of working closely together Activity - Workshop on Management Programme learnt, and combining theory with practice. IT Product Marketing in the protection of IPR and particu- On November 2, CEIBS opened its second Professor Zhang Weijiong, Vice President larly in the fight against counterfeit- Advanced Management Programme (AMP). On November 16, Mr. Láslzó Kovács, eration between the EU and China The first workshop organised by the Marketing and Co-dean of CEIBS, spoke out what the par- ing through customs action. Club MBA 2005 was held on November 9. Harvey Mainly coming from newly established start-ups, ticipants were thinking at his welcome speech, EU Commissioner for Taxation and to forge a strong strategic partner- Lin, the former senior product manager of Start participants in the positions of General Manager/ "Every entrepreneur will at some time feel a mo- ship between the two as the smooth Customs Union visited the China Mr. Kovacs finally made the com- (which is a leading listed IT company in China), President or Deputy GM/Vice President from ment of crisis once they have fulfilled their goal of working of customs administrations Europe International Business ment that his visit to CEIBS helped was invited as a key speaker while 41 MBA stu- mainland China, Hong Kong, Taiwan, and Korea initial development. They may be puzzled by how across borders is essential for the School's main campus in Shanghai him to realise that this prestigious dents joined the workshop and shared their per- attended the class. to formulate the next strategy, how to manage the healthy functioning of the global and gave a speech. institution will contribute to the strat- spectives. differences among team members, or perhaps economy. Last year, the enlarged EU The AMP is a comprehensive management pro- egy between the EU and China, with how to retain their key customers? In reality many became the biggest trade partner of Harvey delivered an insightful speech covering gramme specially designed for fast growing local He explained to the audience how the diversity of the CEIBS MBA and start-ups fail to cross this barrier after their first China, and for the EU, China is their 1) what is a typical marketing job; 2) how is mar- enterprises. The programme was developed after he was happy to have this opportuni- EMBA programmes of local and in- move. So I hope the AMP can help you find new second biggest trading partner. keting activity done in an IT organisation; 3) what research of about 20 fast growing enterprises. approaches to these issues and in turn become a ty to come to CEIBS and speak to fu- ternational students, which will allow are the critical factors for a successful marketing Executives that took part in this study expressed turning point for you and your company." ture business leaders of China about As a strategic partner of the EU, each other to know one another bet- job, specifically, for a product manager. He also their interest in a systematic business education. the importance of customs coop- the European Commission is actively ter for now and in the future. shared his experience of a consulting project ex- Due to their full working schedules, they wanted Mr. Liao Jiangnan, General Manager of the

62 THELINK 2005 Winter THELINK 2005 Winter 63 SCHOOLUPDATES SUPPORTCEIBS

Shanghai Hengyuanxiang Knitting Wool Company, sponsored by the Italian Chamber of Commerce. also a participant of the school's AMP 2005, shared Participants of this event discussed the trends and his experiences with his fellow participants, "The challenges of Chinese companies making acquisi- AMP has changed my mind-set, broadened my tions overseas. perspective, and equipped me with a brand new way of problem-solving. I have attended numerous Invited speakers including Wang Qunbin, training programmes, but the most beneficial ones President and CEO of Fosun Pharma; Hermes are offered by CEIBS." Pazzaglini, solicitor, Barlow Lyde & Gilbert; Katherine Lui, Managing Partner China, BKR Lew Mr. Hobbs Liu, Executive Director of CEIBS & Barr Ltd.; Ruggero Jenna, Managing Partner Executive Education, revealed some know-hows of Value Partners; and Maurizio Forte, Director, for successfully completing the learning journey Italian Trade Commission, discussed their views at CEIBS, including preparation of case studies and experiences on the latest development in before class, involvement in class discussions, Chinese M&A abroad with the objective of help- sharing knowledge and practice with peers, and ing participants understand how both Chinese and rethinking what is taught after class. foreign companies can profit from this trend.

As one of CEIBS' flagship programmes, the Mario Dimitri, 35 years old, Italian, MBA stu- AMP holds two classes per year. The next AMP dent graduating at CEIBS in December 2005 and will be offered in June 2006. President of the CEIBS MBA Entrepreneurship Club says: "I'm proud to see the enormous interest this SCHNEIDER ELECTRIC Mr. Juan Arena initiative is attracting and I hope it will bridge real Tells Know-how for JOINS CEIBS SPONSOR business opportunities for Chinese and foreign PARTNER NETWORK Being Different companies and challenging job opportunities for August, 2005. A new executive committee and my fellow MBA participants". On October 31, Mr. Juan Arena, Chairman of Chairman were elected. Wu Jinglian became the Schneider Electric, one of the world’s leaders in power distribu- Bankinter, delivered a wonderful speech titled CEIBS EMBA03 Beijing member of the new committee, the first Chinese to tion and industrial control, has just signed a three-year sponsorship "Being Different" at the CEIBS Executive Forum. enter IEA executive committee since its establish- agreement with CEIBS. Through their support to the school’s de- DOUBLE SALES AND TRIPLE Class's European ment 55 years ago. He discussed the case of Bankinter developing Learning Tour velopment fund, Schneider Electric joins an elite network of com- from a small bank into one of five leading banks in PROFITS IN 3 YEARS Wu Jinglian currently serves as Baosteel Chair panies who work closely with the school through membership on Spain based on its differentiation strategy. The eleven-day course of European Culture and Professor of Economics at China-Europe International CEIBS Corporate Advisory Board; priority access to CEIBS’ stu- On November 15, Mr. John Hoerner, Chief Executive of TESCO Management for CEIBS EMBA03 Beijing Class was Thanks to its transition from a traditional bank Business School (CEIBS) and Senior Research Fellow dents for recruitment, group consulting projects and internships; Central European Clothing shared with a large audience of over completed in October. The goal of this course is into an integrated e-bank, Bankinter was able to at Development Research Centre of the State Council close association with CEIBS’ faculty for the development of case 150 of CEIBS’ MBA students, Alumni and corporate partners, to help EMBA participants learn politics, economy, differentiate itself from numerous competitors of China. studies and company specific management education programmes how he led the TESCO UK clothing team to double sales and society and culture of main European countries by turning itself into an e-banking business. Mr. as well as on-going access to the campus facilities. triple profits in 3 years, 2001-2004. through vis-à-vis exchanges with European poli- Arena pointed out that Bankinter focused huge CEIBS Welcomes ticians, business people and academics. It is not efforts on IT application to customer service, and Another Group of Schneider Electric has been a business partner of CEIBS Mr. Hoerner noted that the success was due to a combination only aimed at broadening the participants' per- paid much attention to the IT systems' integra- since 1995 through CEIBS’ Executive Education Department. of smaller wins, including gaining commitment from the board spective, but also making them understand the Exchange Students tion. He stressed that the key success factors of Since 2003, the school has designed and delivered the Schneider for resources and support; creating a culture of change man- thoughts, systems, histories and cultures behind Bankinter were product and service innovation. In In October, CEIBS welcomed yet another group of Electric Diploma in Management programme and this success- agement as an ongoing process amongst management and em- the emerging and developing of European busi- his view, what differentiated Bankinter with others MBA exchange students. They came from various ful collaboration will continue into 2006. ployees; and the ability to influence other department managers ness, so as to challenge and even break the exist- is its unique way to organise and combine together business schools overseas, including LBS, INSEAD, within TESCO to adapt their own working processes. ing thinking modes and devise management ap- various complicated activities. A bank will succeed IESE, SDA Bocconi, Rotman School of Management proaches addressing their own business reality. if all resources such as manpower, information, at University of Toronto and Desautels Faculty of technology and all conditions such as compensa- The delegation, comprised of 37 EMBA par- Management at McGill University. tion system, challenges and opportunities, are lev- ticipants from various industries and different eraged to release enormous energy from the small The exchange programme lasted for over 8 areas of the country, was led by Mr. Ma Yusheng, cosmos of the bank. weeks. Apart from the CEIBS MBA programme, Assistant President of CEIBS. The delegation visit- the exchange students were provided a course Professionals from banks and financial institu- ed University of Geneva, INSEAD, and IMD, where Commenting on the new Sponsor Partnership, Mr. Guy During the lively speech and questions and answers session, specifically designed for them, “Chinese Specific tions in Shanghai, and MBA students from some they listened to lectures given by the professors Dufraisse, President of Schneider Electric (China) Investment Mr. Hoerner also commented that TESCO had been slowed Programme”, which is expected to help them local business schools attended today's forum. from those prestigious institutions. The lecture Co. Ltd. said: down by the EU textile quotas and that TESCO’s clothing busi- better understand Chinese culture and Chinese Most of the audience believe that Bankinter's de- topics included "Napoleon: Leadership and Justice ness would continue to grow but not necessarily at the same rate business world. All exchange students anticipate velopment experience shared by Mr. Arena could Procedures", "Cross Cultural Management", ''Schneider Electric, as a world leader in Electrical Distribution as in previous years. developing a genuine global perspective through be a good model for small and medium sized and "Switzerland and Swiss Businesses". They and Automation, we believe that the best investment we are do- the programme. banks in China. also visited three long history industry leaders, ing in China is to develop our people, especially our managers. TESCO is the largest retailer in the UK and has a 50% stake Peugeot-Citroen, ABB and Novartis. CEIBS has always been attaching importance to In the last 3 years, many of our Chinese managers have been in Taiwan based Tsing Hsin International Group’s Hymall busi- Students Organise ness in mainland China which currently operates over 35 stores "Chinese M&A Abroad" Wu Jinglian is elected enhancing its own international diversity by more trained in the CEIBS executive programmes, some of which are member of Executive communications with overseas business schools. specially designed for us. Nowadays, CEIBS is one of the best and plans to open 150 stores by 2008. TESCO Hymall is a Corporate Sponsor of CEIBS contributing to the school’s devel- On October 13, "Chinese M&A Abroad" seminar Committee of IEA There are currently over 30 international business business schools in Asia and has been one of our partners for was held in CEIBS. This event was co-organised schools running exchange programmes jointly with developing our key resources in China. We are proud to be part opment fund. Earlier in 2005, CEIBS’ MBA students completed by the CEIBS MBA Entrepreneurship Club and INTERTNATIONAL ECONOMIC ASSOCIATIONS CEIBS. Among them, 20 schools are ranked top 50 of this great institute in China and to support its expansion of a successful group consulting project for TESCO in the area of the INSEAD Alumni Entrepreneurship Club, and (IEA) held its 14th World Congress in Morocco in by the Financial Times MBA Global Ranking. the new campus in Beijing.'' Sustainable Paper Sourcing.

64 THELINK 2005 Winter THELINK 2005 Winter 65 ONCAMPUS Champion from

In the Game of “Marketing – Today CEIBS MBA Team and Tomorrow”, the teams were required CEIBS to complete 30 multiple choices within 20 minutes, covering all sorts of market- Wins the First Prize at performance in the case contests. ing knowledge. Those teams who sur- By William Wu vived entered the next round, in which Jenny Jing’s strength lies in her inno- Confluence 2005 they were asked to persuade a bald man vativeness and skilful hands. She often played by a judge to buy the hair brush came up with novel ideas to improvise they were selling. If they were lucky when needed. A case in point is that enough to succeed, what lied ahead was within 15 minutes, she made everything the task to develop, within 20 minutes, ready for the advertisement with only pa- a strategy of entering India market for per and pen, including a hat, costumes someone who wanted to start up fast and coupons, etc. food business. The last 5 teams emerg- ing from this round had to design an Eduardo’s engineering background advertisement within 15 minutes and to made him a real star in a game of model fter four days of intensive competition, development of Ahmedabad, the local perform it in front of the panel of judges. designing. His advice saved resources the CEIBS MBA team won the media commented that “the presentation The last mission for the surviving team for the whole team and helped to win the (of CEIBS team) threw up a comprehen- championship at Confluence 2005 hosted was to hold a mock press conference top place. This model was also reported sive formula for making Ahmedabad a to address a crisis caused by a negative extensively by the local media, cited as a by the Indian Institute of Management world-class city like Shanghai”. William report on certain food material causing classical example of innovation. in Ahmedabad (IIM-A), the top business Wu and Jenny Jing in CEIBS team start- disease. The whole contest, from begin- school in India. With the overall ranking ed with SWOT analysis of Ahmedabad ning to end, lasted no more than 3 hours. Thorsten has consulting background, city and then moved on to give their sug- with high intelligence and powerful per- high on the top, the CEIBS team stood first among a It was an ultimate challenge to all con- A gestions on education, infrastructure, testants’ efficiency, quick response and suasion skills. His negotiation helped the total of 76 teams from IIM-A, Stanford, Harvard, transportation and other areas. Their team work. team to buy rare resource at lower price Purdue, MIT’s Sloan, UC Berkeley, UCLA, major concern was on mass transporta- in an international trade game. UMICH, Haas, Tuck, Ivey, Esade, etc. tion system that the city lacked. They CEIBS team won the 5th place in this suggested that western part of the city Game, the 7th place in “Innovations on Siddhartha is a native Indian. He should be developed into a commercial the Horizon”, and the 6th place in the is good at numerical analysis and has hub and eastern part into a research and Management Stimulation Game, which first-hand understanding in local situa- education centre. To respond to the fund- eventually led to their final success. tion. His unique insights benefited from In the final round, every team was CASE CONTESTS: ing problem raised by the judges, the an Indian perspective were of great sig- asked to give a presentation and then team produced various solutions includ- nificance. CHALLENGES to take questions from the judges. A TALENT SHOW ing issuing government bond. OF REALITIES Interestingly, those who were involved The CEIBS MBA team consisted of one in the cases were assigned judges, and MBA2004 student (William Wu) and The Competition was made up of two most of them were company executives INTERACTIVE four MBA2005 students (Eduardo Julio CEIBS IN THE parts. The first part is “case contests”, and government officials, who had come MANAGEMENT Casado, Jenny Jing, Siddhartha Sarkar, SPOTLIGHT which began in earlier October. The cas- with practical problems in their work. GAMES: MISSION and Thorsten Seeger). They represented es and regarding rules were put on the Therefore, any constructive and feasible IMPOSSIBLE a real international and professional vari- Excellent performance of CEIBS team web to all participating teams to access. advice contributed by the contestants ety and diversity: five team members of put in the spotlight the strength of the Marketing & Promotion, general man- would be adopted to help with the real The Games were designed to test if the four different nationalities from differ- school’s management education. All five participants in the team agree that what agement and investment venture were situations. teams had innovativeness, team spirit ent professional backgrounds. and capabilities to solve practical prob- they have learned in the school proved the topics covered by the cases. Only It is worth noting that CEIBS team lems. Prior to the final, four rounds of William Wu is the only one from to be well matched with the spirit of en- one week was allowed for every team to was ranked 1st in both case contests: competition were held to kick out half MBA2004 Programme. Having worked trepreneurship and practical application prepare the material before sending the “Management Beyond the Obvious” and of the contestants. In every round, in an MNC for seven years, he is experi- of management concepts emphasised by final report to the panel of judges. After “Growth – the Eternal Paradox”. Their minimum of 15 to 20 minutes were enced in marketing and financial areas. the Confluence. The event did serve as a examining hundreds of reports, the judg- impressive performance won extensive given to the team, who had to read the His sound theoretical background, strong best platform, where CEIBS succeeded es selected six teams in each case for the media exposure. For example, in report- question and come up with an answer analytic ability and gift in presentation in earning even wider recognition and final round of competition. ing the first contest, which focused on the or a solution. all contributed to the team’s outstanding respect internationally.

66 THELINK 2005 Winter THELINK 2005 Winter 67 ONCAMPUS

he persistently represents Huai’an to his transfer of the labour intensive industries to CEIBS. He never hesitates to tell peo- classmates. He believes it to be the most from the Yangtze River Delta. He recog- ple that he believes a government official urgent task to attract investments and to nises that in the following ten years, the needs to learn the concept of business stimulate the local economic develop- labour intensive industries are bound to management to better administer the ment. As a mayor, the biggest challenge be relocated to new areas such as North government. he has to face is none other than taking Jiangsu, Anhui, the Middle and West of the initiative to boost the economy. China, due to lack of land and resources He gives a simple example. In a mar- in the Yangtze River Delta. For this rea- ket economy, every local government Ni told us that these 30 projects pre- son, Fan puts the labour intensive indus- is facing competition between different sented to CEIBS alumni had been care- tries on the top of the list of investments- areas and different cities. Such a fierce fully selected and that all of them were inviting projects. competitive environment demands that of great importance to the strategic a government official should be sensi- goal of “industrialisation and urbanisa- “If we describe the cycle of economic tive to the demand of domestic or even tion” of Huai’an’s development. Among development of an area as a parabola global markets. “A crucial issue is that key projects listed by the Merchants with the starting, the ascending and the the government has to understand what Bureau of Huai’an Government, there descending curves, then we can say that the businessmen are thinking in order were four main categories: the salt Huai’an is in a stage of rapid ascending,” to develop the local economy more ef- chemical industry’s exploitation of the said Fan. “The biggest advantage we fectively. During the process of inviting local resources; the reconstruction and have to attract the domestic and overseas the investments, if what the government reformation of the remnant assets of investments is wide scope, low cost and is talking about is totally different from state-owned corporations; the refining high efficiency.” of agricultural and sideline products what the businessmen are thinking about, and resources, and the construction of Wenwu, President of Shanghai Non- then it is bound to end up with nothing,” infrastructural facilities for the city. ferrous Metals Company, also one of the Fan observes. classmates of Fan’s, was “persuaded” by “That’s why the Mayor has always em- This list was put on the internal web Fan to pay a visit to Huai’an and eventu- phasised the importance of understand- of the CEIBS before alumni registered ally decided to make an investment. For ing the thoughts of businessmen,” Ni for the event. Therefore, of those who Wenwu, the reason for him to choose added. “In order to help us do the job in took part in the event, some had already Huai’an is not only because Fan is his MAYOR shown interest in investing in over ten classmate, but more because as a la- a more professional way, the Mayor took projects and were ready to visit Huai’an bour intensive industry, the aluminium the initiative to divide the Merchants for further talks. “Actually, we didn’t product and furniture plant he is to open Bureau into 10 sub-branches so that we set any specific target for this event,” requires cheap land, low cost labour, could learn to research the thoughts of student said Fan. “I think it is more important to ‘target customers’ and the type of mar- convenient transportation and easily ac- make initial contacts, get some under- cessible industrial chain to facilitate the ket environment that appeals to them.” standing and invite the potential inves- manufacturing. Huai’an is able to meet The careful study of “customers” leads tors among our alumni to come and have all these basic requirements. to a thorough understanding of their a look around Huai’an.” thoughts. In addition to embracing the relocation THE ADVANTAGE of labour intensive industries, Mayor Fan This autumn the joy of the harvest is re- LYING IN THE also defines the current economic devel- alised from Huai’an’s investments-inviting BACKWARDNESS opment strategy of Huai’an as “export- events. The following are some statistics nly half an hour ago, he dishes of Huaiyang Cuisine, one could the business projects capitalising on oriented and investment-driven”. He from the Merchants Bureau of Huai’an. was one of the EMBA04 also find on the banquet menu a list of 30 his alumni network, the chance of suc- The northern area of Jiangsu Province goes on to explain that, because of the Among all projects successfully securing students at CEIBS, tak- business projects for the CEIBS alumni cess will be great. has been developing relatively slowly. innate deficiency of local development, investments from January to September ing notes in the class. to have a view. Agriculture dominates the economy and the industrial progress of Huai’an has 2005, there are 800 projects whose capital Now he “resumes” his “The planning and preparation for this hence limits the progress. Huai’an is fac- to start from scratch. During this stage, assets in each individual case is more than Oposition as a mayor, talking with his investments-inviting has been going on ing the same problem. While the situa- securing the investments from outside is RMB5 million. The gross investment on INVESTMENTS for almost three months. We came to alumni about the investment-inviting “INVITED” BY tion generates huge pressure on Fan, it the most important link. the contracts reaches RMB23 billion, of projects of Huai’an . Shanghai to hold a similar event several also presents a different perspective. “If which 12 billion Yuan is already in place. CUISINE times before. But this is the first time measured by absolute data, the economic Fan tells us that the gross investment of This is Fan Jinlong, Mayor and Vice GOVERNMENT that we brought chefs with us and swept aggregates of Huai’an are probably less “Inviting investments on campus by ADMINISTRATION 2005, according to the contract, is over Secretary of CCP of Huai’an Government. into a campus.” said Ni Jianhua, the Vice than that of a county in south Jiangsu. way of Huai’yang Cuisine” is a new RMB30 billion. It is increased by 50% On the night of October 23, he brought Director of the Merchants Bureau of However, Huai’an’s advantage lies in its BY THE CONCEPT idea which dawned on Fan Jinlong dur- compared to 2004. into CEIBS a special group to host an Huai’an Government. backwardness, which will create a new OF BUSINESS ing his stay at CEIBS. In Fan’s view, unusual banquet. The group consisted opportunity for development.” MANAGEMENT of 20 famous Huanyang Cuisine chefs the school is a huge resource reser- Ever since he was appointed Mayor of and an investment-inviting team of over voir, for most alumni of CEIBS are re- Huai’an, Fan has been busy with inviting For Fan, this new opportunity was As a government official studying at (The article is based on a report in China ten people. Apart from those traditional nowned entrepreneurs. If he introduces investments. During his study in CEIBS, none other than embracing the gradual CEIBS, Fan is often asked why he came Business News.)

68 THELINK 2005 Winter THELINK 2005 Winter 69 ONCAMPUS

Getting a good job is of great importance its graduates are sure to be more competi- the second job in my desired profession. to ordinary people. But what is a “good” tive in China job market. I once commented job? A job with high income and high posi- on a well-known BBS for MBA candidates This time, it was a totally different tion, of course, could prove the social rec- that an MBA graduate from CEIBS will case. The firm I worked for was the big- “Ready, gest private equity and venture capital ognition of your value. Yet, is it necessarily probably have larger chance of entering a job suitable for you? Will it help you to McKinsey that his counterpart from HBS. investment firm funded by overseas achieve the ultimate goal of your career sponsors. Although the firm was newly development? In my opinion, this might be When studying at CEIBS, I spent much established, its boss and executives were of my spare time learning about private eq- a more essential and fundamental way of all experienced bankers from Goldman Steady, uity and venture capital investment. I read Sachs, CSFB (Credit Suisse First Boston) defining a “good” job, especially for those many books related to the topic. I also joined who want to change their careers. and J.P. Morgan. I was quickly adjusted CEIBS MBA Financial Club and CEIBS to my new job. My conscientiousness and I am one of them. Alumni Financial Club, and consulted the efficiency were greatly appreciated by my advisors in CEIBS Career Development bosses. After one month, I was offered a Go!” My previous job was in an investment Centre. They provided me with various position in this firm. But I hesitated, for I bank, which is seen as an ideal starting platforms where I became acquainted with was not sure whether or not I was quali- point of one’s career development. However, professionals and learned about their jobs fied enough to do the job. In the business I came to realise that this was not a job fit and lifestyles. The most helpful was the ex- of private equity investment, it is a normal for me. There were two reasons. First, I pre- change programme jointly run by CEIBS practice that one or two people work as a My Experience of ferred a lifestyle that is balanced between and LBS (London Business School). In project team. They are responsible for tar- work and family. Secondly, an investment LBS, I selected the course of “Private geting a project, conducting investigations Career Development bank is more on the side of providing finan- Equity Investment”. During the course, the and having negotiations in the early stage. cial support to a company whereas I hoped professor shared with us his first-hand expe- There will be little training and few in- By Victor Zhang to have a more comprehensive knowledge riences and many well-qualified profession- structions. Then, among other things, they of core content and procedure of business als gave us lectures. It helped me to develop have to make further plans independently, operation. My long-term career goal is to an overall understanding of private equity deliberating on how to compete or co-op- become a professor in a business school or a investment. All these knowledge and expe- erate with other firms and what negotiation t is my belief that no single event in our life is iso- trainer of business operation. riences secured for me a successful access strategies to take. My previous job in the lated, but rather it is connected with other events to my desired profession. But what counted investment bank mainly involved execut- Before I went to CEIBS, I set an objec- in a way of cause-and-effect. Therefore, every more is my own first-hand experience. ing tasks and therefore I personally had lit- tive that my new profession would be in time before taking up a new task, I spend a great tle experience in project targeting and ne- private equity investment or in managerial In February 2005 when I was still in deal of time making preparation and estimation. I gotiations. I thought seriously about going consulting. My final choice was the latter, London for the exchange programme, I be- Idid the same with job-hunting. back to the investment bank to get more because the life style of a managerial con- gan to make phone calls to my friends back training before transferring to another sultant would be quite similar to my previ- home, asking them to update me with any profession. I discussed the issue for over 2 ous one in the investment bank. However, internship opportunities. At the same time, hours with my former partner, who is now a job in private equity investment would I sent my CV to the professionals I got to on VP level. Finally, he said that one had to not only earn enough to meet my life re- know at CEIBS. Soon, I got an internship take a decisive step to overcome the barrier quirements, but also enable me to have an placement in a private equity investment in his career development. It was better to in-depth understanding of the enterprises and venture capital firm in Shanghai spon- do it earlier, he added, because I was still we invest in and to conduct further analy- sored by AIG. The boss of the firm hap- young and could afford mistakes. He also sis of their operations. Besides, this profes- pened to be invited by CEIBS MBA Club suggested that since it was a job I liked, I sion would require a knowledge structure to give a speech in 2004. Although this should grasp the opportunity. I eventually firm was of a small size and newly opened, similar with that in the investment bank. followed his advice and accepted the job. Hence, my previous work experience and with many aspects under developed, I took knowledge structure could be capitalised the job readily, for it meant that I practi- It has been 5 months since I took up my on as fully as possible. It could save me cally stepped into the profession. I was new job. Though it was hard to work and much time of learning. quite happy with the job, making full use study at the same time, my confidence of knowledge and skills I acquired in my in this job is being built up gradually. 2 Once the goal was set, I started to work previous job. I helped to make a number years passed since I thought of a career for it. Taking CEIBS MBA programme of project plans and financial models. The change. It is careful preparations during was an important step. I learned that both boss was so satisfied that he provided me these years that secured for me a suc- private equity investment companies and an offer by the end of my internship. But I cessful shift in my career development. managerial consulting companies preferred discovered that there were many problems In order to achieve my long-term goal, MBA graduates. Both sectors will be de- in its business orientation and personnel I will make further preparations on new veloping with a drastic speed in China, and make-up and that its prospect didn’t look foundation, because, as I said earlier, no the localisation of human resources will be very promising. It happened that another single event is ever isolated. a general trend. CEIBS is one of the top friend of mind recommended to me anoth- business schools in Asia-Pacific area and er internship placement. In June, I started The author is CEIBS MBA2004 graduate.

70 THELINK 2005 Winter THELINK 2005 Winter 71 ONCAMPUS

RECENT MBA "Mentorship Programme" STUDENT ACTIVITIES Greater China Greater Challenge Goes Ahead Smoothly Student Ambassador Programme International Competition can find good talents and save a lot of of June. At the moment, the GCGC Launched by MBA Office for the first cost related with using head hunters. Of team consists of 15 CEIBS MBA time at CEIBS in September, 2006, this course, there is another driving force students and has accomplished the programme aims at utilising student re- fundamental work of preparation, behind the mentorship programme: the sources to help prospective applicants including: EMBA and MBA programmes want to gain insight into the CEIBS experience work hand in hand to help the further • Setting up teams of various - from the students' perspective. Student development of CEIBS. "We hope the functions such as financial planning, responsibilities include: talk with pro- EMBA programme can enter the world's marketing, sponsorship, media and On November 18, the second spective applicants about their MBA IT support. top 10, and the MBA programme can Greater China Greater Challenge "Mentorship Programme" was initi- programme experience, support CEIBS GCGC will be the only China based leap forward greatly as well." The words (GCGC) is a student initiative event • Designing the advert of the ated by the MBA and EMBA offices. Info Sessions and Week-end Campus business simulation competition in the of Sheng Yimei showed the hope and that is supported by the school, competition and getting it printed Successful "matches" could be seen eve- Visit, pre-confirmation counselling, re- world. Not only that but it will make confidence of many students. which will put CEIBS MBA on the rywhere in the Student Centre. MBA ceive applicant visitors, and other CEIBS us the first and only MBA school in • Making the budget map internationally. If successful, Academic Director Prof. Wang Jianmao, According to the plan, every EMBA MBA programme related activities. the world facilitating online business this event will greatly enhance • Designing the related website MBA Operations Director Ms. Yvonne student will voluntarily form a group game simulation. It will also be quite CEIBS exposure among students You are all welcome to join us in the Li, EMBA Course Director Prof. Liang with one or more MBA students accord- Over 60 students volunteered to par- unique in that it will have both Chinese of international business schools. competition! Neng, and students from both MBA and ing to similar career backgrounds and ticipate in this programme. Till now, and English versions. This will increase our reputation EMBA programmes were all excited to interests. Both will participate in school we have already over 10 students sup- and brand awareness all across the It is tentatively to be launched early in For more information, please go to be in one room, providing a good start organised or student organised events. ported MBA Info Sessions in nearby world. 2006 and will be completed by the end www.GreaterChallenge.com for this programme. For example, an MBA student may work cities, Weed-end Campus Visits and part-time for the company of the EMBA our promotions at New Oriental School. Prof. Liang pointed out the key to the student, or the EMBA student would One Korean student even volunteered to mentorship programme: "Learning is not provide an opportunity for the MBA organise an informal CEIBS 2006 ap- September. This will be the first book in club committees to brief 05 students alumni coming back and over 50 05 stu- just taking courses, learning areas are student to access his/her social network. plicant workshop at Seoul in December China to address students’ life and study what they do in each club and to attract dents and faculties attending. It turned not just in classes, and our teachers are By participating in the mentorship pro- when she goes back home. at CEIBS. Articles have been written by new club members. Clubs were handed out to be a great success. not just the professors". Although there gramme, not only can one expand his/ MBA 04 students and alumni and also over from 2004 students to 2005 stu- are many MBA and EMBA programme Our students (and alumni) are quite “KISS” her social network, but also the EMBA there are interviews of them. Contents dents in November. s in China, CEIBS is the first and only popular on our Info Sessions. A lot of students can improve their abilities to will cover: academic studies as well as school that has been able to establish an questions at Q&A session were ad- Fair for International This Student quarterly newsletter was lead the new generation of professional their social life and placement experi- dressed directly to them inquiring about Exchange resumed in December after ceasing for 2 active communication channel between managers, and the MBA students can ences. There are also stories about their the two programmes. The purpose of the why they chose CEIBS, what their life quarters due to 04 students’ international use this opportunity to train him/herself life and career development after MBA. MBA Office organised an Exchange Fair mentorship programme is to provide an and study at CEIBS are like, their evalu- exchange, GCP and following busy place- to collaborate with someone with more All articles and interviews are to be com- on November 11 in two classrooms sup- effective networking platform, promot- ation of the programme quality and their ment season. The KISS Editing Team business experience. This is indeed a pleted by December 20 and editing done ported by both exchange students from ing mutually beneficial relationships be- advice to future applicants. Our students was formed even before Media Club’s job game of double win. by January. It is planned to be printed partner schools and CEIBS students who tween the MBA and EMBA students. played a very positive role in our promo- transfer and the December Issue will be and published before February followed were exchanged out. Each school has At the banquet of the opening cer- tion activities and gave a high recogni- by formal news release and sales/distri- available in late November. There are news As early as in November 2004, one representative providing detailed emony, EMBA and MBA students ex- tion of the school, the programme and bution in March 2006. about GCGC International Competition, CEIBS held the first mentorship activ- information about that school and ad- changed business cards, and the atmos- faculties which they say “are beyond 04 students’ placement activities, Faculty ity. Many MBA and EMBA students dressing inquiries and concerns from phere was cordial. The director for First their expectation”. Student volunteers at interview, and new Student Committee were eager to participate. This year, 2005 students. The fair lasted for about Financial Media Hu Xiaolin set a goal for Case Writing introduction etc. the scope of this programme continues her new friends on the spot: to help her 2004 Student Book to be 2 hours, attracting over 100 05 students to be expanded. There are altogether plan and produce the famous TV series published next March MBA office and Case Centre has organ- and got very positive feedback from stu- Sun Cup MBA Student 156 MBA students and 200 EMBA "Brainstorm". Other EMBA students ised EU Scholarship winners to volunteer dents. The fair works as a prelude to the Sports Meeting Purpose of the book is to promote students who asked to participate. showed great interest in their matched-up for Case Writing at CEIBS. Case Centre exchange bidding in January. CEIBS MBA programme, enhance 2006 MBA students, hoping they could send has now 5 volunteers from 05 MBA stu- This October, both 04 and 05 students As everyone knows, the course load Admission as well as genuinely reflect Reunion with 2002 MBA in resumes. So is this an indication of a dents working on 3 cases led by Prof. formed a team representing CEIBS for CEIBS students is very heavy, so students’ versatile life and study at this alumni valuable internship opportunity? Amy Shuen, a visiting professor from and participated in the Sun Cup MBA why do they still want to spend time school and serve as a memoir for those Haas Business School of UC Berkeley. There is a 2 year graduation reunion Student Sports Meeting held at Dong Hua to participate in the mentorship pro- A week after the kicking-off, 67 who have lived and studied. party for 2002 MBA students organ- University. They competed with students gramme? Sheng Yimei, IBM China's EMBA students and 120MBA students Club Activities MBA Office, MBA 2004 stu- ised by 02 and 05 students together from 7 other business schools in basket- Software Management Consulting matched successfully. The 3rd and 4th dents and MarCom (Marketing and Four new clubs added to the original 22 and supported by MBA Office and ball, soccer, badminton and table tennis General Manager, jokingly indicated, groupings of mentoring programme Communications) together have been existing ones, making a total of 26 now. Alumni Office. The activity was held and won the 2nd in badminton and the 3rd by participating in this programme one will be held shortly in 2006. planning a book and working on it since A Club Fair was held in October by 2004 on November 28 , with more than 40 02 in basketball, soccer and table tennis.

72 THELINK 2005 Winter THELINK 2005 Winter 73 ONCAMPUS ALUMNIACTIVITY

A DATE WITH DESTINY By Siddartha Sikkar

On Saturday the 5th of November, twenty eight MBA singletons took part in a matchmaking event, “the Dating Game”, organised by the International Club of CEIBS. Sid, an 05 MBA student, was one of the lucky ones struck by Cupid’s arrows.

I was well- late, as usual. But what was un- done, in this case a rose well- usual was that I had this sensation of having delivered, I attended to the cup of wine. A a fluttering butterfly in my stomach. The fluttering few refills later, and after a blitzkrieg introduction was still rampant as I walked in to the Student Centre with by all men and women, it was time to vote. I voted for the Ben, about ten past seven, a good half-an-hour late. lovely Jocelyn, the goddess on the far left in possession of my red rose. I consulted with Ben who was seated to my right and The prospect of facing a dozen and a half women and being found out that we converged on our pick of ladies. Ben had voted watched by scores of people as I struggle for words and try to figure for J too! Being great friends, Ben and I, we agreed that the best man out why I had so many limbs is never appealing. It was only the sight should win – Ben called ‘Heads’ and it was ‘Tails’ and I won! Ben, of the bottles of red wine and the meaningful we-are-on-the-same-boat a man of his words, continued voting some other damsels all through look on the face of my fellow male contenders that I was to a certain the evening. extent reassured! As the evening set in, contestants put their talents on display - some IDEAS OPEN I took a seat at the far end of the room, away from the women only sang, some danced and I did push-ups! Inappropriate, as this may seem to find, on my return from the mini-bar with a cup of wine, that my to you, to the occasion, which demanded a more tender display of tal- seat was taken by contestant number 5, or maybe 6 – this is really not ents, a dearth of visible talent in me prompted this drastic measure. of essence here – and that I was to sit right in front of the row of girls. Dash it, I wished I could melt into the furniture, but alas the alchemy “Do you cook?” - A barrage of soul-searching questions from the or- the WAY was not possible. ganisers, the audience and the contestants held back the grand dénoue- ment for a while. I wanted to answer all the questions – even the one for Cornered! My last hope was my cup of wine – that it would act the ladies regarding their culinary expertise. Someone ought to have fast and disentangle my highly convoluted state of mental degra- reminded me that there were no extra points for class participation! The Marketing Strategy of dation. The finale – Hector walks to a girl and gives her a red rose. Luckily, the wine worked wonders! The Dating game began. Again! He gets photographed with her this time around. They "Super Voice Girl" Contest 2005 Men were asked to offer red roses to ladies with the same are declared matched. A round of applause! Well done, boy! numbers on their placards seated opposite to them. A cup down, another in hand, I wasn’t in a mood for numbers – I Next, I am asked to give a red rose to the girl! And I had By Sun Jun thought the girl on the far left looked simultaneously fa- no idea which girl!! I mean, I knew that I had voted for miliar and gorgeous, and deserved this rose of mine! my princess three times in the running, but I wasn’t I gave her the rose, exchanged a few pleasantries quite sure that I had received as many votes from n the summer of 2005, a super mass entertainment and would have continued exchanging further her! Mustering my failing senses, I walked up to show in China seized the hearts of all the pleasantries had Paul, as part of his organis- Jocelyn, again, to offer her the rose! She ac- audience. Men and women, from young to old, ing responsibilities, not reminded us that cepted!!! Phew, for a minute, I thought it were fascinated by it. But it is more than a super after the due delivery of the roses, men was a close shave! were recommended to saunter back entertainment show. It is indeed a successful case to their original positions. Curtains – an evening of expec- of marketing and promotion. tations, fulfilled and crushed, I Back to my seat again, drew to an end. Kudos gloating over the to the International satisfaction Club. of a job

74 THELINK 2005 Winter THELINK 2005 Winter 75 ALUMNIACTIVITY

“SUPER VOICE GIRL” that it had strong executive power to im- the show were all individualistic. They plished and the astronauts hit the ground, MENGNIU STRATEGY but after I had explained the situation and plement the strategy. In addition, I my- despised traditions and authorities, and all shops were filled with MENGNIU convinced him that the chance of success IS “SQUEEZED” OUT self saw the opportunities in China’s soft they got very excited to have an opportu- products in new packaging the next day. In the early stage of “Super Voice Girl”, was big, he agreed to go to Changsha with drink market. For some products, like me to negotiate with the producer of the “Super Voice Girl” came out by ac- nity to show their uniqueness. In the same way, the show of “Super MENGNIU launched a large number milk, it is impossible to double or tri- show. We reached an agreement right af- cident. It was “squeezed” out of me by Voice Girl” was closely connected with of public campaigns throughout its dis- ple the sales within a year. But for some I was convinced that the show was ex- ter the talk. So, decision-making is indeed my former boss in MENGNIU. I was the the product. Through the performances tribution network in the whole country. other products, like soft drinks, such actly the one we needed. It occurred to vital. Of course, to make this decision re- sales manager in MENGNIU at that time. of those girls in the live shows and the Then, we started the first round of con- chances are much bigger. A soft drink me that the show and our target product quired more than audacity. There were When I first joined the company, the replays, the target product continued to test in Guangzhou in March, because it could become something of fashion, and were indeed associated innately. Yogy many careful and detailed preparations sales amount was RMB6.3 billion. I was be interpreted and its cultural connota- was getting warmer much earlier than when it does, it will thrive in an explo- Milky drink was sour and sweet, with involved, for it was the first time for the given the task the next year to increase tion reinforced. Therefore, the best way other areas and soft drink market was sive way. But how could we achieve it? the former taste representing failure, or therefore boosted first. In April and May, show of “Super Voice Girl” to be put in a the sales to RMB10 billion. Given the to promote is to utilise big events instead The only way was to make those teenage a defeat, while the latter standing for the Chengdu and Hangzhou saw the launch- market as big as China. I always empha- fact that the potential growth of the sales of initiating them. girls recognise that the very act of drink- joy of success. The show was all about sise that marketing is based on accurate of ordinary milk was quite limited and ing of another two rounds. The last one ing our Yogy Milky drink was a fashion, these feelings of sour and sweet. When numbers, I mean, on careful evaluations that its profit margin would only contin- The biggest strength of “Super Voice was in Zhengzhou, where there was a a lifestyle and a must. They would drink one was voted out, she felt the sourness and analyses. You can’t rely on your ue to decrease in the foreseeable future, Girl” lies in the idea of “three nets in huge market. And with its convenient nothing else but our Yogy Milky drink of defeat. But at the same time, she cer- location, Zhengzhou attracted a large intuition and do without all those we targeted two products as the potential one”. There are three network systems in the summer of 2005. Only by this tainly felt proud of herself for she suc- number of contestants. In order to give analyses. It was after careful areas of growth, which were Yogy Milky in China, including television network, means, we could rise up in the market in ceeds in proving herself. In that sense, full support to the show, MENGNIU preparation and packaging drink and breakfast milk. Yogy Milky Internet, and the tele-communication a short period of time. How, then, could none of the participants ever failed. It created a website and also displayed the design that we became drink was the most difficult to deal with, network, i.e., the mobile phone network. we make it possible? The only way was entailed a sweetness. In this way, the advertisements on lamp boxes and on au- confident of the success. for its sales only amounted to RMB0.7 TV network is the most entertaining one to find something they like, and associ- flavour of Yogy Milky drink could be tomotive bodies. to 0.8 billion, while Yogy Milky drink ate it naturally with our product. Once a extended to become a unique feature of at the moment. Internet, although serv- Another reason for of Yili, our rival company, reached the new lifestyle was molded out of such an the show. Flavours were then associated ing as a communication platform, can- On our own website, we put on our choosing “Super Voice sales of RMB2.5 billion. These two association, doors would open for us. with emotions inherently. not determine the fate of the contestant. web various links, colour rings, games Girl” is that the year 2005 Yogy Milky drinks were actually quite Mobile phones can help one to express and reports. Of course, the product itself began with a piece of identical. They both targeted the same In those days, I kept thinking about the We can promote a product from func- his opinion and to vote for or against a was improved as well. blank paper, with neither big sports events, nor sen- consumer group, which consists mainly kind of TV shows that would help us to tional perspective or emotional perspec- contestant. In this show, no individual of teenage girls, primary school students achieve the goal. The show itself had to We were directly involved in the pro- sational political news, nor tive. Many advertisements of Nike fall group could ever dictate the destiny of a and people in the secondary and third tier be in full accordance with the product duction of the show, working together disasters. It was an oppor- into the second category. Nothing is contestant. The audience judges, the pro- markets. More interestingly, the packag- in spirit so as to be able to stand for it. said about the good quality of the train- with the team to deliver the best perform- tunity to create a focus for fessional judges, and mobile phone votes ings of these products were exactly the We specified several basic requirements: ers. But once you wear them, you feel ance. The advertisement of MENGNIU a vacant platform and to at- added together to make the final deci- same. In the case of MENGNIU ’s Yogy First, it could be anything but a CCTV like walking faster and jumping higher. Yogy Milky drink was not put up explic- tract the attentions of as big sion. Why did Li Yuchun win in the end? Milky drink, its profit rate was about show, since CCTV shows do not appeal Actually, you are not jumping any higher itly in the show, for the consumers dis- audience as possible. It was The simplest reason was that she was 30% at that time and continued to drop. to teenage girls of 14-18 years old. CCTV than usual. Something emotional makes like adverts. The more adverts put in the really unusual for a show like “the champion of text messages”. All her Apart from many similarities with its stands for authority. It is usually dressed you feel different. In the case of Yogy show, the smaller audience would have “Super Voice Girl” to catch fans are teenage girls. On the contrary, rivalry product, MENGNIU ’s distribu- in formal with males in suit and females Milky drink, the taste became an emo- watched the show. Both parties involved such a huge audience, given tion network was far less sophisticated. in night dress. They are not tailored to tion when a girl said to herself, “I love those who like Ji Minjia are much older in the show, namely, MENGNIU and the the fact that the show was As a result, many stores were not keen the taste of young girls. Secondly, those ‘Super Voice Girl’ and all ‘Super Voice and that is why she did not win. TV show team, reached a tacit agree- open to anyone who can sing. ment on it. on MENGNIU products, for they had born in 1980s are individualistic and Girls’ love Yogy Milky drink.” “I Am Lastly, I would like to talk about inter- “Super Voice Girl” was not made already had Yili, whose taste and pack- highly self-esteemed. The show had to Sour and Sweet”, the product slogan active marketing. Now we have entered Besides, without a strong executive by me alone. There was a great team aging were identical with MENGNIU, demonstrate all these characteristics. said. It was what the girls were thinking a multi-media age. Various media come power, it is impossible to do the market- behind it. MENGNIU made it possible and whose popularity was quite good. when they drank our Yogy Milky drink I had been reading various newspapers closer to the consumers to engage more ing in China. The boss of MENGNIU by investing the money. Hunan Satellite Why, then, did they need MENGNIU? and watched the show. and magazines. One of my favourites was keeps saying that the change of one staff TV did the production, for MENGNIU However, our boss set the goal for us to interactions. “Super Voice Girl” is an ex- “News Week”. It mentioned, in one issue, member will double the efficiency of the is not an expert in doing a show, although uplift the sales to RMB2.5 billion, be- periment and a very good starting point. the most innovative TV show in China in UTILISING EVENTS whole business; the change of the work it knows how to make milk products. The cause that was what Yili had achieved. Modern business patterns shift very 2004 called “Super Voice Girl”. I went process, ten times; and the change of the goal of RMB2 billion sales drove me for- Such a goal was not unrealistic, for it AND NETWORKS quickly. The great Microsoft was easily back to collect more information and culture, a hundred times. The executive ward and forced me to come up with some is always believed, in MENGNIU, that overtaken by Google, the new business found that it might be what we wanted. To do a good promotion, you can utilise competence is indeed a key to a consum- ideas. Also, the show itself was already ideas open the way. Giant. In this times of changes, consum- The show was not paid much attention big events. Pepsi made many eye catch- er goods company. there for us to use. So many people were in- ers’ behaviour changes quickly as well. to and ranked only seventh or eighth in ing advertisements. But the cost of an ad- volved, from the top executives to the front If we keep doing marketing in traditional SOUR AND SWEET: Hunan Satellite TV when I first visited vertisement is as high as RMB30,000 for MORE SECRETS line staffs, as well as media and designers. I ways, we probably will fail to hit the tar- WHEN TASTES it. I had a talk with Wang Ping, the direc- 15 seconds. To launch big events costs OF THE SUCCESS was only a team member. What I could do BECOME EMOTIONS tor of the show. He commented that there huge efforts. To make good use of big get. If I could do “Super Voice Girl” for a is limited. You had better pool together all was much more room for the show to de- events is MENGNIU ’s preference. The second time, I would do it better. I might The success of “Super Voice Girl” can also the resources and listen to different advices. When I accepted the mission, I was not velop. A characteristic of the show was most recent example is the space shut- create a game, a super PK. We might be be attributed to the efficient procedure For example, the slogan, “I Am Sour and worried, because my understanding in that it was a mass entertainment, where- tle, SHENZHOU 6. The new packaging able to earn much more profits through of decision-making. When I told Yang Sweet”, was made up by a vendor. MENGNIU told me that its decision- as most entertainment shows at that time was ready before SHENZHOU 6 landed. the game than we could through the ad- Wenjun, who was in charge of the project, making was not based on intuition and featured stars. Those girls appearing in Once the space journey was accom- vertisement. about the show, he was uninterested in it, But it is true that “Super Voice Girl”

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is a milestone. It brings about in- able for him to live 24 hours without his try many moves in the summer. They put e t e r D r u c k e r ’ s spirations for those who do mar- mobile. Mobile phones bring tremendous up adverts in Hunan Satellite TV. In fact, profound influence keting and those who produce TV opportunities including new media, new most adverts in the show were Yili’s. But programmes. It makes them think entertainment and new business models. then they found that it did not help. So o n m o d e r n about how to industrialise the en- they went to Anhui Satellite TV instead m a n a g e m e n t tertainment and to utilise all re- Q: Quite a few companies were and planned to make a show as well, but unequivocally proves sources in the industry. involved in “Super Voice Girl”. Did ended up with nothing. If I were Pan Gang, that thoughts of a you have competition with oth- I would focus on basic and fundamental The biggest advantage of “Super ers? You said you were “forced” jobs and do them better. By doing so, I Pgreat thinker can be enduring Voice Girl” is that it can benefit by MENGNIU to come up with the might not be able to overtake MENGNIU forever in history. Zhang Ruimin, everyone. Entertainment is an in- idea. If nobody pushes us, how for the moment. But as long as I strength- dustry. Perhaps just because it is an CEO of Haier, refers to Drucker’ shall we keep digging out the po- ened my distribution network and kept all industry poorly developed in China, works as a beacon, and he tential of this huge market? the vendors, I could fight back next year, we were able to emerge as a huge for it is impossible to create a show like even innovated, on the basis of success. Looking back at the im- A: Our life is like a PK game. I will never “Super Voice Girl”. If I could not come up Drucker’s “MBO (Management pact made by the show and the way leave this platform where I play a real PK with a novel thing, I had better consoli- various media worked, there are a lot every day. by Objectives)”, a management date what I have already gained. It does more we can learn. Now I entered system known as “OEC (Overall, turn out that Yili took such a policy lead- new media industry and discovered In some aspects regarding “Super Voice ing to the sales of RMB2.8 billion, while Every & Clear)”. As a matter of many new ways of doing business. Girl”, we did a great job. But in some other MENGNIU earned RMB2.5 billion. fact, what really matters is not For example, when people were vot- aspects, we did not do well enough. There are some lessons we can learn. Even if how many Chinese entrepreneurs ing for Li Yuchun, they surely would Q: You mentioned earlier that you you have a wonderful strategy and plan, be happy to pay two Yuan for down- have had experience of over 10 have read Drucker’s works but loading one of her songs if given the you will not succeed when you fail to do years in marketing. What about the fact that no one could have chance. In the future, many mobile any of the following jobs, such as putting your study at CEIBS? Apart from phones will be simultaneously MP3. together all resources, fully understanding built up an excellent organisation practical experience, did the There are at least 0.8 billion TV audi- the media operation, paying enough atten- without following Drucker’s knowledge you learned here help ence in China, among whom 0.4 or 0.5 tion to every detail, spotting a good timing, in “Super Voice Girl”,? management laws. Jim Collins, materialising the concept of the project, billion people have seen or listened to one of the authors of Built to Last: the show and 0.2 billion of them might and having the ability to carry out the A: I worked in Kodak for nine years and Successful Habits of Visionary be the fans. Selling them those songs plan. There are numerous opportunities in opened my own business twice: one was of “Super Voice Girl” will be easy. China’s market today, and will be more in an advert company, the other was a vendor. Companies, puts into simple the future. Also, the emerging of Internet, Then I stayed in MENGNIU for one year. words the greatness of Drucker Q&A mobile phones and 3G will all bring about Now I started to do Internet business. Up that everything in Drucker’s business opportunities. “Super Voice Girl” till now, I have tried most business areas Q: Could you tell us more about works is fundamentally true. It is nothing but a starting point. emerging over the last 20 years after China your jobs in MENGNIU and opened the door. These experiences help me is not an exaggeration that all Linktone? Q: Pan Gang, the president of to see things from different perspectives. If I Yili is now a student at CEIBS. rise and fall of enterprises are never ran a business or never failed before, I A: I am actually a passer-by in Suppose you were Pan Gang this within the explanation of Drucker’ would surely be kicked out by MENGNIU. MENGNIU. I can’t identify myself summer when “Super Voice Girl” s theories. When many Chinese They would have decided that I was crazy with its culture. I prefer more innova- saw the unprecedented popular- spending RMB100 million in the project! entrepreneurs are crazily quoting tive work. Before I left MENGNIU, ity, what would you do to respond Mr. Yang, the VP of MENGNIU, said Jack Welch, they might not know to the challenge? Certainly, my study at CEIBS helps a to me, “It is a shame that you leave. But that Welch is a keen follower lot. I studied for two years and made many Drucker you don’t belong to us. You are not the A: Up till now, Yili’s Yogy Milky drink friends during that time. CEIBS is a best of Drucker and a practitioner of type of person MENGNIU would have still sells more than MENGNIU does, platform of communication. In those days, produced, for you have divergent think- for they have laid a firm foundation. For his theories. Many people are I learned many things even when chatting ing, and our system cannot handle it.” example, distribution is still an essential familiar with GE strategy of “No.1 with friends at CEIBS. and Our Era factor. Though MENGNIU ’s products or No.2”, without knowing how As to Linktone, it is a listed compa- sell quickly, but its distribution is not as The author is an alumnus of EMBA97. He it progressed to “Redefining ny, although it is small. We do Internet good as Yili’s. There are some places that By Gary Liu and mobile phones. Mobile phones will now serves as VP of Linktone Ltd. based in Yili reached but MENGNIU didn’t. One Market” and further to “Providing be a strong product. Human beings Shanghai. thing I admire them is that you can find Solutions to Consumers”, let created many things, of which I think Yili’s products even on the top of Yellow Sun Jun was invited in November by the alone the fact that Drucker’s “The mobile phone is among the top three. Mountain. Pan Gang is originally from Marketing Club of CEIBS to share with his A modern person might be OK without Theory of The Business” is the Coke Cola and is very good at setting up alumni his experience in planning “Super surfing the Internet or watching TV for a good distribution network. He is excel- Voice Girl”. This article is based on his very theoretical foundation of GE’s a few days. But it is bound to be unbear- lent. He is even younger than I. Yili did speech. strategic evolution.

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China’s opening & reform released re- mine what a company is like. A varied or feel sorry for Chinese toil? Just because Jack Welch has become one of lentless energy for the emerging of a large version given by Ren Zhengfei, CEO of of lacking knowledge of management and the most quoted author in busi- group of excellent enterprises, including Huawei, says that the sole reason for the business operation, Chinese companies ness world. After the success of Haier, Huawei and Lenovo. However, existence of Huawei is to serve its custom- pay more attention to external factors, and Winning two memoirs, Jack: Straight from their successes largely rely on the gor- ers. Haier gave another version by produc- take “guanxi”, M&A and marketing tactics the Gut and Jack Welch & The geous market opportunities created by ing washing machines specially designed as major sources of competence. The result G.E. Way, he is back at the writing the opening & reform rather than strong for farmers in Chengdu to wash vegetables. is the short-lived stars such as D-long, table and produced a book enti- organisation capabilities. In other words, Lenovo manufactures PCs affordable for Sanzhu and TCL Mobile. In fact, competi- tled Winning, co-authored by Suzy these companies succeeded not because tion in business world is an enduring war, ordinary households, while Galanz’s mi- Welch. The Massachusetts native they have done excellent jobs but because crowaves make way to thousands of house- and the company which owns the most who fought his way to the top of all others have done too lousy jobs. It is holds with very low price. Nonetheless, powerful organisation capabilities will be the world's most valuable company no wonder, then, when these companies only a few aspects in Drucker’s system are final champion. was in many ways the embodiment went to the global stage only to find out put to practice by Chinese companies, may of Winning. In this latest book, he that what they have is nothing more than it be Lenovo’s “management selection, Taking a closer look, we will find that strives to show why. cost advantage. The Business Week was strategy development and team building”, every single idea of Drucker is stinging the outspoken in commenting on the deal of nerves of Chinese managers. We Chinese or Huawei’s “Basic Law” or Haier’s OEC. Winning describes the manage- Lenovo buying IBM’s PC arm. It says do no lack intelligence. What we are short More worrying is the fact that leading ment wisdom that Welch built up that the whole deal is more like Lenovo Chinese companies are still in the visible of is the profound understanding of organi- through four and a half decades of outsourcing its management to IBM or invisible hands of first-generation lead- sations and business operation. If holding work at GE. He starts with a foun- while IBM outsourcing its manufactur- ers (founders), with no exception of Haier, onto the old ways, which might have led dational section on motivation and ing to Lenovo. When a foreign student Huawei, Lenovo or Galanz. It is high time to earlier success luckily, Chinese compa- philosophy, giving an overview of asks, “If MNCs become more localised for Chinese entrepreneurs to find a way nies are to lose sadly when competing with cultural values such as candor, dif- and fully capitalise on China’s low cost of setting free the organisations from the MNCs. It is a must for Chinese companies ferentiation among employees, and resources, will there be any advantages shadow of the founder’s ego, and building to seriously follow Drucker’s instructions, left for Chinese domestic companies?” up sustainable and innovative organisation to grasp his works, such as The Practice inclusion of all voices in decision- I find it hard to comfort Chinese entre- capabilities. The solutions can be found in of Management and Management: Tasks, making. In the second section he preneurs. Drucker’s works. Responsibilities, Practices, and to build up covers issues around one's own strong managerial capabilities. We should company or organisation: the im- From a historic perspective, of course, Chinese companies will come to have a put aside our oriental pride, have less vain portance of hiring, firing, the people it is not difficult to understand this embar- sense of inferiority when looking into the talking and ask more practical questions: management in between, and a few rassing situation of Chinese companies. mirror of Drucker’s thoughts. Drucker ob- What does our company exist for? What other juicy topics like crisis man- Both the turbulence caused by “Cultural served that a great enterprise must have a shall we do and not do? Do we have core Revolution” and setbacks generated by agement. From there, Welch moves unique mission to guide its business and on competence? What is our strategy? Is our ideologies in education prevented China into a discussion of competition, this basis go on to establish its core com- corporation a good corporate citizen? If from accessing to modern management and the external factors that can in- petence. But Chinese companies are more a Chinese company is fortunate enough science for a considerable period of time. fluence a company's success: strat- devoted to increasing their sales revenue so to thoroughly grasp Drucker’s theories But now, China is transitioning from egy, budgeting, and mergers and as to enter the list of top 500 companies. and put them into practice, then it is not a the stage of “factor-driven” and “invest- acquisitions. Welch takes a more Drucker pointed out that social respon- dream to surpass GE and Jack Welch. ment-driven” to the stage of “innova- personal turn later with a focus on sibility is one of the three tasks of a cor- tion-driven”, with MNCs like Dell are individual career issues--how to poration, while many Chinese companies Drucker is an internationalist, dissem- swarming in to compete with domestic inating his theories on the global stage find the right job, get promoted, and are busy claiming to be “clean” in making Here's a passage from Chapter 5, companies. Chinese entrepreneurs have with every effort and encouraging peo- fortunes, which few people ever believe. deal with a bad boss. He spent the no choice but to face up to the utmost ple everywhere to adapt those theories to Leadership: It's Not Just About You. Drucker identified “five habits” that an ef- final section on what he calls "Tying importance of management. The mush- local realities and to make innovations. fective manager should have, while more 'One day, you become a leader. Up Loose Ends." Those interested rooming of domestic business schools Japan is a good example for applying in the human side of great leaders Chinese executives equal busyness to high On Monday, you're doing what comes naturally, enjoying reflects the desire of Chinese managers Drucker’s theories, where executives efficiency. Drucker said that a core qual- your job, running a project, talking and laughing with will find this last section especially to have more management knowledge. greatly worship Drucker. As for China, ity of any company is innovativeness while colleagues about life and work, and gossiping about appealing. Welch's optimistic, no Fortunately, we have Drucker. Drucker’s Drucker gave the insightful observation more Chinese companies are sophisticated how stupid management can be. Then on Tuesday, you excuses, get-it-done mind-set is thoughts are like a huge mirror, helping that the central challenge for China’s de- at copying and waging price wars. Drucker are management. You're a boss. riveting. Packed with personal an- us to spot our weaknesses and guiding us velopment is to have a pool of effective points out that a company has only one true Suddenly, everything feels different - because it is ecdotes and written in Jack's dis- to enhance our organisation. executives. resource: people, while Chinese govern- different. Leadership requires distinct behaviors and tinctive no b.s. voice, Winning offers The three tasks, five jobs and eight areas ment is afflicted by the task of obliging We have enough reasons to feel lucky attitudes, and for many people, they debut with the job. deep insights, original thinking, and Drucker identified for managers demon- irresponsible companies to pay the over- to live in Drucker’s times. Although Before you are a leader, success is all about growing solutions to nuts-and-bolts prob- strates how comprehensive, fundamental due wages of migrant labours. When Yu the guru is now gone, he will never be yourself. When you become a leader, success is all lems that will change the way peo- and pragmatic his theories are. Numerous Yaochang, the vice president of Galanz, alone. about growing others.' ple think about work. Chinese companies practice these theories, commented that French workers work 24 whether consciously or unconsciously. hours a week, but we do 24 hours a day, The author is Assistant Director of the Case Adapted and revised from the Editorial Drucker points out that customers deter- shall we feel proud of Chinese diligence Development Centre at CEIBS. Review at Amazon.com

80 THELINK 2005 Winter THELINK 2005 Winter 81 The 100 Most Influential Management Books

ACTION LEARNING THE FUNCTIONS OF THE MANAGING ACROSS BORDERS THE PETER PRINCIPLE Reg Revans EXECUTIVE Christopher Bartlett and Sumantra Laurence Peter ADMINISTRATIVE BEHAVIOR Chester Barnard Ghoshal PLANNING FOR QUALITY Herbert Simon GENERAL AND INDUSTRIAL MANAGING ON THE EDGE Joseph M. Juran THE AGE OF DISCONTINUITY MANAGEMENT Richard Pascale THE PRACTICE OF Henri Fayol Peter F. Drucker MANAGING TRANSITIONS MANAGEMENT THE AGE OF UNREASON GENERAL THEORY OF William Bridges Peter F. Drucker Charles Handy EMPLOYMENT MARKETING MANAGEMENT THE PRINCE John Maynard Keynes THE ART OF JAPANESE Philip Kotler Niccolò Machinavelli MANAGEMENT GETTING TO YES MEGATRENDS PRINCIPLES OF POLITICAL Richard Pascale and Anthony Athos Roger Fisher and William Ury John Naisbitt ECONOMY John Stuart Mill THE ART OF THE LONG VIEW THE GOAL THE MIND OF THE STRATEGIST Peter Schwartz Eliyahu Goldratt and Jeff Cox Kenichi Ohmae PRINCIPLES OF POLITICAL HOW TO WIN FRIENDS AND ECONOMY THE ART OF WAR MOMENTS OF TRUTH INFLUENCE PEOPLE David Ricardo Sun Tzu Jan Carlzon Dale Carnegie THE PRINCIPLES OF SCIENTIFIC A BEHAVIORAL THEORY OF THE MOTION STUDY: A METHOD FOR THE HP WAY MANAGEMENT FIRM INCREASING THE EFFICIENCY OF David Packard Frederick Winslow Taylor Richard Cyert and James March THE WORKMAN BEING DIGITAL THE HUMAN PROBLEMS OF AN Frank Gilbreth THE QUEST FOR PROSPERITY Nicholas Negroponte INDUSTRIAL CIVILIZATION Konosuke Matsushita Elton Mayo MOTIVATION AND PERSONALITY BLUR Abraham Maslow REENGINEERING THE Stan Davis and Christopher Meyer THE HUMAN SIDE OF ENTERPRISE CORPORATION Douglas McGregor THE MOTIVATION TO WORK James Champy and Michael THE BORDERLESS WORLD Frederick Herzberg, Bernard Hammer Kenichi Ohmae IN SEARCH OF EXCELLENCE Mausner, and Barbara Bloch Tom Peters and Robert Waterman RELATIONSHIP MARKETING BUILT TO LAST Snyderman INFORMATION RULES Regis McKenna James Collins and Jerry Porras MY LIFE AND WORK Carl Shapiro and Hal R. Varian RIDING THE WAVES OF A BUSINESS AND ITS BELIEFS Henry Ford CULTURE Thomas Watson, Jr. INNOVATION IN MARKETING Theodore Levitt MY YEARS WITH GENERAL Fons Trompenaars and Charles CAPITAL MOTORS Hampden-Turner Karl Marx THE INNOVATOR'S DILEMMA Alfred P. Sloan, Jr. Clayton M. Christensen THE RISE AND FALL OF THE CHANGE MASTERS NATURAL CAPITALISM STRATEGIC PLANNING Rosabeth Moss Kanter INTELLECTUAL CAPITAL Paul Hawken, Amory B. Lovins, and Henry Mintzberg Thomas Stewart L. Hunter Lovins THE CHANGING CULTURE OF A SMALL IS BEAUTIFUL FACTORY THE KNOWLEDGE-CREATING THE NATURE OF MANAGERIAL E. F. Schumacher Elliot Jaques COMPANY WORK IKUJIRO NONAKA AND HIROTAKA STRATEGY AND STRUCTURE COMPETING FOR THE FUTURE Henry Mintzberg Alfred Chandler Gary Hamel and C. K. Prahalad TAKEUCHI THE NEW CORPORATE CULTURES THEORY OF ECONOMIC THE COMPETITIVE ADVANTAGE OF LEADERS: STRATEGIES FOR Terrence Deal and Allan Kennedy TAKING CHARGE DEVELOPMENT NATIONS NEW PATTERNS IN MANAGEMENT Joseph A. Schumpeter Michael Porter WARREN BENNIS AND BURT NANUS Rensis Likert THE THEORY OF SOCIAL AND COMPETITIVE STRATEGY LEADERSHIP ON BECOMING A LEADER ECONOMIC ORGANIZATION Michael Porter JAMES MACGREGOR BURNS Warren Bennis Max Weber COMPLEXITY LEADING CHANGE THEORY Z M. Mitchell Waldrop John P. Kotter ON THE ECONOMY OF MACHINERY AND MANUFACTURES William Ouchi CO-OPETITION THE LIVING COMPANY: HABITS Charles Babbage Barry J. Nalebuff and Adam M. FOR SURVIVAL IN A TURBULENT THE THIRD WAVES Brandenburger BUSINESS ENVIRONMENT ON WAR Alvin Toffler Arile de Geus Carl von Clausewitz CORPORATE STRATEGY TOYOTA PRODUCTION SYSTEM Igor Ansoff THE MACHINE THAT CHANGED ONWARD INDUSTRY Taiichi Ohno James Mooney and Alan Reiley CORPORATE-LEVEL STRATEGY THE WORLD UP THE ORGANIZATION Michael Goold, Marcus Alexander James P. Womack, Daniel T. Jones, THE ORGANIZATION MAN Robert Townsend and Daniel Ross William Whyte and Andrew Campbell VALUATION THE DISCIPLINE OF MARKET MADE IN JAPAN ORGANIZATIONAL CULTURE AND Tom Copeland, Jack Murrin, and LEADERS Akio Morita LEADERSHIP Tom Koller Edgar H. Schein Michael Treacy and Fred Wiersema MANAGEMENT TEAMS: WHY THEY THE VISUAL DISPLAY OF DYNAMIC ADMINISTRATION SUCCEED OR FAIL ORGANIZATIONAL LEARNING QUANTITATIVE INFORMATION Mary Parker Follett R. Meredith Belbin Chris Argyris and Donald Schön Edward R. Tufte EMOTIONAL INTELLIGENCE THE MANAGERIAL GRID OUT OF THE CRISIS THE WEALTH OF NATIONS Daniel Goleman Robert Blake and Jane Mouton W. Edwards Deming Adams Smith THE FIFTH DISCIPLINE MANAGING PARKINSON'S LAW THE WILL TO MANAGE Peter Senge Harold Geneen C. Northcote Parkinson Marvin Bower

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