Educating China for The World, and the World for China The LINK
CEIBSThe Alumni Magazine 2006 Winter LINK
Liu Ji 2006 An Energetic Winter Intellectual and a Charismatic Leader
Why Change of Growth Model Is Easier Said than Done Corporate Brand Thrust: Is Your Money Well Spent? The Chinese Automotive Industry: Feasible and Sustainable Development? CEIBS EMBA1995 The First EMBAs in China
CEIBSKnowledge: www.ceibs.edu/knowledge MESSAGE FROM THE EDITOR
As the year of 2006 concludes, it makes sense to look back and reflect upon the progress we have made over the year. It is with great care from our alumni that The Link has grown from an infant to a toddler. Innovation is probably the key word that captures our efforts in the past year in revamping the layout, structure and contents of the journal to accommodate the increasing need for knowledge of best business practices. We invited thought leaders to share with us their revolutionary ideas on issues critical to business operation; we created a platform for industry leaders to voice their philoso- phies of business and management; we encouraged in-depth discussion on effective management through real-life cases; and we wrote cover stories to unveil the inside of a man that makes him so successful. Through these efforts, we want to make the journal a real link between the school and the alumni, and between the academics and the business world.
For CEIBS, the year of 2006 is an eventful year. In January, our MBA programme was ranked 21st globally by the Financial Times, a historical high for business schools in Asia-Pacific; and in October, our Executive MBA programme was listed among the world’s top 50 for six consecutive years, repre- senting the school’s sustained high quality teaching and research. In the same year, we received the im- portant visits of Mr. Josep Borrell Fontelles, President of the European Parliament, the Crown Prince of Spain, and Mr. John Thain, CEO of New York Stock Exchange, making our campus a spotlight of public attention; and we hosted the second Healthcare Forum and the fourth Automotive Industry Forum, stimulating discussions on the new developments and insights in the related fields. Equally exciting are our students and alumni: 13 graduates broke into the “Forbes China Rich List”, an EMBA student won the competition of CCTV’s “Win in China” with a seeding capital of RMB10 million, and our first group as well as China’s first group of EMBA graduates celebrated their 10th anniversary graduation on campus. While acclaiming the accomplishments of the school and its graduates, we regretted to lose one of our important leaders permanently - President Zhang Guohua - who had made important contribution to the creation and rapid growth of CEIBS. However, the sad passing-away of Professor Zhang can only make us stronger in our determination to continue his holy cause and to build the school into a global leader of management education in China and for China.
Coming back to this winter issue, we have prepared a number of interesting articles as a special Christmas and New Year gift. In particular, we want to share with you the inside story of Professor Liu Ji, honorary president of CEIBS – how he started his career, what shaped his philosophy of life, what qualities made him so successful, how he developed his unique ideas on management and man- agement education, what made him an eloquent speaker, and what kept him so active even after his retirement. He is an interesting and insightful personality, from whom we can find the answer to the age-old question - how can an individual lead an exciting and a brilliant life?
Along with Professor Liu’s cover story, we’d like to wish all of you a Merry Christmas and a Prosperous New Year!
Dr. Snow Zhou Editor-in-Chief
TheLINK 2006 Winter TheLINK CONTENTS 2006 Winter
Publisher: CEIBS People MANAGEMENT COMMITTEE Professor Pedro Nueno, Executive President Professor Zhu Xiaoming, President Professor Rolf D. Cremer, Dean and Vice President Professor Zhang Weijiong, Vice President and Co-Dean Editor-in-chief: Snow Zhou Managing Editor: Audrey Wu Liu Ji: Contributing Editor: Du Qian Art Editor/ PHOTOGRAPHER: Lin Yun part-time editors: Cherry Zhong, Yimin Liu An Energetic CONTACT US: Editorial office: 699 Hongfeng Road, Intellectual Pudong, Shanghai 201206, P.R.C. Tel: 86-21-2890 5501 Fax: 86-21-2890 5273 and a Email: [email protected] Charismatic Leader 08
CEIBS Shanghai campus 699 Hongfeng Road, Pudong, Shanghai 201206, P.R.C. Tel: +86-21-28905890 Fax: +86-21-28905678 07 Cremer’s Column Website: www.ceibs.edu
Beijing Representative Office KNOWLEDGE@CEIBS 3/F Raycom InfoTech Park Tower A, 16 Why Change of Growth Model 2 Kexueyuan South Road, Is Easier Said than Done Zhongguancun, Beijing 100080, P.R.C. 14 Tel: +86-10-82861688 19 19 Corporate Brand Thrust: Is Your Fax: +86-10-82861678 Money Well Spent? E-mail: [email protected]
Shenzhen Representative Office Thought Leadership Room.2303B, 23/F, Han Tang Building, 22 Turn Transformation into Reality Overseas Chinese Town, Shenzhen,518053, P.R.C. -An interview with leading CEO Tel: +86-755-26935750 Michael Critelli Fax: +86-755-26935743 E-mail: [email protected] Executive Forum Published quarterly in the last week of March, June, 26 Developing in the Chinese Beer September and December, by CEIBS. The author’s views expressed in this publication do not necessarily reflect the Market views of our editors or of CEIBS. - The Perspective of a Global Copyright 2006 © by CEIBS. All rights reserved. 22 Brewer
TheLINK 2006 Winter In Focus 30 The Chinese Automotive Industry: Feasible and Sustainable Development?
33 Policy: Boundary of Sustainable Development
36 China’s Role in the Global Automotive Industry
39 Consolidation in China’s Automotive Industry 26 42 The Future of Automotive Industry: Clean Energy Vehicles?
Business Practice 44 Together We Succeed: Effective 44 Ways for Making Core Employees Grow with the Company
School Updates 50 Prof. Kwaku Atuahene-Gima: How I Get to Manage My Time for Research
52 2006 Teaching Excellence Award
53 News Briefing
CEIBS Foundation 56 “You Are Never Too Old to Go Back to School” 50 - Interview with Mr. Kuno Kohler, Alumni Activity Regional President, North Asia, Ciba 61 CEIBS EMBA1995 Specialty Chemicals -The First EMBAs in China
59 Corporate Sponsors’ Information 66 Hold on to Your Dream - Cai Dabiao’s Kungfu Food
70 Briefings 76 Life Style 73 Pranayama - Breath Control for Life Control
Words & Thoughts 76 Don’t Fire Them, Fire Them Up
TheLINK 2006 Winter CREMER’S COLUMN
In the theoretical world of microeconomics These programs also are signaling a new firms compete with each other. These firms direction of CEIBS. As Chinese companies are are entities that are clearly defined in terms of internationalizing, CEIBS is also becoming ownership and organizational structure. visible and active overseas. Two examples are the EMBA USA Global Module at Wharton, This, of course, is a simplification. Not only and the EMBA Europe Global Module, which 26 do firms take many forms, but in the globalized CEIBS is currently developing with the lead- international and domestic enterprises in market firms work together in transnational ing German Business School, the University China through educating China-focused and supply chains, that often involve dozens of of Mannheim. internationally literate, competitive manag- different firms. Important parts of international ers equipped with the most up-to-date, rel- competition are no longer in the form of one Of course, CEIBS also has more than thirty evant research, case studies, and innovative firm competing with others, but of one supply MBA student exchange agreements with busi- learning methods. chain competing with others. It can, in fact, ness schools all over the world. These benefit be a very dangerous and risky position for an seventy outbound CEIBS MBA students each Meaningful and effective domestic and individual firm to stand alone, and not to be year, and bring the same number of interna- international co-operations are demanding, part of a network, or a supply chain. tional MBA students to the CEIBS campus. but absolutely necessary to serve the needs of Students traveling, living and working together the business community. This is true for business schools as well. and making friends for life is part of modern business education, and future powerful inter- Together with the European Foundation of For this reason, CEIBS cooperates with national friendships and networks. Management Development (EFMD), one of our other leading business schools both inter- founding partners, as well as with our interna- nationally and domestically. There are many A very important, but more recent tional faculty and management, CEIBS is well reasons as to why this makes sense: development is our closer links with lead- placed to meet this challenge. I believe that ing domestic business schools. In addi- arguably no other business school in the world In some cases, a company may locate its tion to the already mentioned cooperation is as clearly positioned, focused and designed Asian regional headquarters to Shanghai. The with Tsinghua School of Economics and for this challenge to succeed. training and development needs of the com- Management, CEIBS has just signed a pany and its strategy involve teams from all partnership agreement with the Zhejiang Finally, throughout 2007, I would like to over Asia. IBM and CIBA are such cases. They University School of Management, focusing invite and encourage you, our alumni and our have approached CEIBS to offer a program on entrepreneurship. CEIBS is also a leading current EMBA students, to participate in this for IBM together with INSEAD. For almost two member of the PCMPCL group of business challenge by supporting CEIBS in establishing years now, CEIBS has worked very success- schools, which involve some sixteen of the more scholarships. With a scholarship named fully with INSEAD. The two schools have not best schools in China (Mainland, Taiwan, after you or your company, or named after only provided superb programs to IBM and Hong Kong) and Singapore. an EMBA Class, you will make a valuable CIBA, but also learn a lot from each other. contribution to attract the very best Chinese These linkages and co-operations with and international students to CEIBS as well In other cases, especially for CEOs and domestic business schools are important as to send CEIBS MBA students abroad, other top executives, a program involving the for China’s economy and business. CEIBS thus further contributing to the further in- best business schools in one single program is a driving force in creating a group of ternationalization of Chinese business. For is a great attraction. The Senior Executive world class business schools in China. Only further information on the CEIBS Scholarship Program China with CEIBS, Harvard, and domestic-based business schools - not Fund, please contact CEIBS Development Tsinghua is an example of such a program. imported foreign MBA programs taught by Department (email: development @ceibs.edu The first joint program of three times two FFF (Frequent-Flyer-Faculty) – can power / Tel: 2890 5120). weeks in Beijing in August, Shanghai in October, and at Harvard in December has just been completed. There are very few, if any schools in the world, who can offer this qual- ity of learning and networking experience. Another program of this kind is the CEIBS- Harvard-IESE CEO Program, which has been Professor Rolf D. Cremer offered for three years already. Dean and Vice-President
TheLINK 2006 Winter People
TheLINK 2006 Winter Liu Ji: An Energetic Intellectual and a Charismatic Leader
By Audrey Wu
n the evening of November 27, 2006, the Petrochemical Auditorium of China Europe International Business School (CEIBS) was fully packed. Even the aisles were crowded with audience. On that evening, Wang Meng, a well-known contemporary writer and the former minister of culture was invited to speak at the Executive Forum of this number one business school in Asia. Even before his speech, the avid audience was applauding vehemently. An elderly gentleman, beaming and buoyant, was giving an Ointroduction to Wang Meng’s biography. Not very tall, he spoke with a loud and clear voice and would wave his arms when getting excited. As usual, the philosophy of life and his time-weathered wisdom could be felt in his words. He introduced Wang Meng as a man “who deserves writing home about. … Wang Meng’s contribution to our era was not that he was the former minister of culture. It was his writing and thinking that was immortal.” During the “Cultural Revolution”, Wang Meng was denounced to be a rightist and suffered a lot. However, even under a big rock, a determined seed could always spout and exhibit vitality. The speaker is Prof. Liu Ji, honorary president of CEIBS. His words are also a portrayal of himself.
Before serving as vice president research. I never take it serious to be ticle entitled “Economists cannot rely on of the Chinese Academy of Social a government official, but neither do opinion polls or laymen’s recognition” Sciences and executive president of I regret.” Just as he said, he had quite on the Talents magazine. The article CEIBS, Liu used to be an outstand- an experience. Starting from the most was written by Prof. Liu Ji. He wrote ing engineer. Later he took on a junior position, he had had his days that “Economics is a serious science. managerial position and became a and sufferings as well, but he never Difference in profession makes one feel brain-truster for the government. He repented the ups and downs in his over worlds apart. Those who don’t under- had held the positions of vice direc- 70 years of life. Now he is retired, but stand economics should show the same tor of the Publicity Department of still active in all kinds of meetings respect to economists as to scientists and Shanghai Municipal Party Committee, and forums. “The nation’s rise and fall writers. That is the scientific attitude.” To and director of the Commission remains the responsibility of every Prof. Liu, the debate was actually a deni- for Economic Restructuring under individual”. This is an unshakeable al of China’s reform and opening-up un- Shanghai Municipal Government. He belief held by Chinese intellectuals. It der the disguise of denying economists. was also a member of the seventh, may also be the source of Prof. Liu As a person who has devoted his whole eighth and ninth national commit- Ji’s vitality and everlasting youth. life to the construction of new China tee of the Chinese People’s Political and who has witnessed its reform and Consultative Conference. “Push the cart along opening up in the recent 30 years, Prof. without stop” Liu gives a fair and equitable remark on He said: “I was just a scholar... It’s At the end of last year, a debate on the Chinese economists: “Chinese econo- history that put me into the managerial economists’ credibility re-emerged on mists contribute significantly to China’s position, but I never give up scientific Internet. The debate was ended by an ar- reform and economic development”. He
TheLINK 2006 Winter People
objectively pointed out that “it is a good do have some selfish ideas and we also grumble, but thing that our media begin to listen to deep in our hearts, we value the national affairs more people’s opinion. And it is also desirable than the family affairs, public affairs more than the to conduct necessary public surveys. personal affairs, others more than ourselves.” “Push But they have to do it in a scientific way. the cart along without stop” is a vivid analogy to his They need to analyze people’s opinion, spirit. leading instead of misleading the pub- lic.” Prof. Liu’s article was a big rock in Although Prof. Liu Ji has been in different positions this white hot debate. His opponents all during dozens of years, he keeps the habit of research. pointed their pens at him and threw hard He won’t sleep on a problem. Be they assignments words at him, but soon the debate began from his superiors, debates among friends, questions to cool down in the media. from the youth, or issues brought forth by newspaper and magazines…he is all interested. Whenever his Prof. Liu Ji, who should be enjoying unique ideas hit, he will “involuntarily put them dwon his retirement at home, doesn’t have to on paper”. He laughs at it as “the bad trait of the intel- stand out and get himself involved in lectuals who always want to show off”. His articles are this debate and trouble. It is his charac- either circulated internally, or published, or delivered ter and the outlook of his generation in a public speech. He receives lots of encourage- of intellectuals that are driving him. ment as well as occasional trouble. Even so, Prof. Liu Ji sticks to his heart, a heart in pursuit of truth. He He once humorously described his said, “I believe my findings are true. My readers can current status as “4 highs” - hyperten- judge. History can judge.” sion, high blood fat, high blood sugar and high emotion. Because of his high From science to science emotion, none of the other “3 highs” for sciences, from drops. Because of his high emo- leadership research tion, he becomes much busier to leader after retirement. He is retained Liu Ji was born in October, by various government and non- 1935 in Anqing city of government organisations and A n h u i p r o v i n c e . H i s social groups. His titles are hard mother exerted the most to enumerate, even by himself. important influence One or two assignments from on him. As his father each of them per year will keep moved to the home him running. In addition, there front in Chongqing are various forums, summits, during the anti-Jap- annual conferences... visits and anese war, he was invitations from the business, brought up by his media, academic, government… mother. As a teacher and from friends, especially from herself, his mother the youth. Sometimes he is far believed in knowl- busier than before retirement. His edge and was strict wife often complains that he works with her children. without any concern for his health. Liu Ji took to read- ing from his child- He said: “The outlooks on the hood and cultivated world and on life of our genera- a wide range of interests. tion have been determined. We He made a balanced study
10 TheLINK 2006 Winter of maths, physics, chemistry, biology, cared for him and let him stealthily read “Leading is a science, involving scien- Chinese, history and geography. in the changeroom. Having no access tific decision-making procedure, intel- to technical books, he could only read lectual structure and leadership quality”, Liu Ji went to Nanjing No.1 the four great books by Chairman Mao. and put forward the idea of scientific Middle School, Hangzhou Junior After he could recite the four books, and democratic decision making. Along Middle School and Hangzhou Senior he started to read Lenin’s Anthology, with the advancement of China’s reform Middle School - all were famous Lenin’s Complete Works and Marx’ and and opening up, he was committed to schools in the Yangtze Delta with ex- Engels’ Anthology. His reading made him the research on economic development cellent teachers and study atmosphere. a Marxist scholar. His scientific proof strategies and economic restructuring. Hangzhou Senior Middle School in thinking and his research on natural dia- particular, with its glorious revolu- lectics began then. When the “Cultural Liu Ji’s research gained wide at- tionary and cultural traditions, played Revolution” was put to an end, Liu Ji re- tention and was recognized by the a crucial role in the shaping of Liu gained his freedom. He made friends with government officials. The officials from Ji’s outlooks on the world and on life. research fellows of natural dialectics and Shanghai municipal government made Up to date, Liu Ji still remembers his began his research on social science. the suggestion that since Liu Ji was a re- teachers and can easily speak out their searcher on leadership science he could names. According to him, “The teach- After the Third Plenary Session of try to be a leader. Hence, Liu Ji became ers will be forever alive in my heart”. the 11th CPC National Congress, the a leader. The positions he held ranged focus of revolution shifted from “class from vice chairmen of Shanghai Science In 1953, the first five-year plan of struggle” to scientific rules. A new dis- and Technology Association up to vice the new China was implemented. At that cipline - science for sciences - was born. director of the Publicity Department of time, priority was given to science. The Liu Ji was among the earliest research- Shanghai Municipal Party Committee, tide of industrialization engulfed Liu ers. He co-authored the first monograph director of the Commission for Ji into Qinghua University. As China on science for sciences in China - Economic Restructuring under Shanghai was unable to manufacture automobiles Fundamentals of Science for Sciences. Municipal Government, and vice presi- then, automobile engineering became His research gained attention of Wang dent of the Chinese Academy of Social one of the hottest majors, and Liu Ji was Daohan, the Shanghai mayor then, and Sciences, etc. one of the lucky students. Five years of Zhou Ke, head of CPC organization engineering study laid a science founda- in Shanghai then. Shanghai Research When he was working in the tion for Liu Ji. Moreover, it fostered his Institute of Science for Sciences was Publicity Department of Shanghai down-to-earth attitude and precise logic founded and Liu Ji was appointed to be Municipality Party Committee, Liu Ji thinking, systematic thinking and team- researcher and vice president. initiated and hosted the famous “bi- work spirit, which benefits him for his monthly seminar” to encourage discus- whole life. Due to the leadership style of that sion on current issues. Intellectuals from time - decide by personal experience, all fields in Shanghai were invited to air In 1958, Liu Ji graduated from encourage with flashy words, and simply their views and share their points with the university and was despatched to go away if it doesn’t work - the schol- the municipal officials. Scientific and Shanghai Internal Combustion Engine ars’ research output or their proposals, democratic decision-making was prac- Research Institute. In 1964, he was however good, would just disappear tised there. One result of this seminar awarded with his engineer title among into mountains of documents after be- was the idea of joint-stock enterprises. In the first batch of engineers nurtured by ing approved. There’s neither scientific the early 1990s, enterprises of this nature new China. Just when he was proud of decision-making nor effective execution. were quite controversial. The differences it and felt living up to the expectation of Liu Ji went on to collaborate with other between the pros and cons were so huge the Party and his country, the “Culture comrades to produce thesis like “On that their debate lasted into midnight Revolution” broke out in 1966. Liu Ji Modern Leadership Art” and founded a and had to be resumed on the next day. was “under control” for 8 years in this new discipline “leadership science” in Based on their debate and sufficient un- 10-year disaster. He was sent to a factory China. In his book titled Fundamentals derstanding of this issue, the Shanghai for labour reform. The workers there of Leadership Science, he wrote municipal government eventually de-
TheLINK 2006 Winter 11 People
a vertical analysis and a horizontal com- parison on “localization”. There exists huge differences between Chinese and western culture. Chinese culture deals with mundane affairs, while western cul- ture focuses on seclusion. Confucianism, which has dominated Chinese culture for thousands of years, is an ethical philosophy. Chinese are good at gen- eralization and integration, while west- erners are good at individual analysis. Thus, modern management should be multi-dimensional. Left: Encomienda de Número del Mérito Civil, presented to Professor Liu Ji by Her Majesty Queen Sofia of Spain on March 9, 2003, the 30th anniversary of the Prof. Liu Ji thinks that the developed establishment of diplomatic relationship between China and Spain. Professor Liu is countries have entered “the post-industri- the first Chinese to receive the honour. Middle: Queen Sofia’s signed photo al society”, or “the information society”, or “the R&D society” in line with his own research, while China remains in the cided to push the experiment of joint Regarding the development of early or middle phase of industrialization. stock system, which has been proved to Chinese enterprises in the context of 62% of China’s population are engaged in be correct and timely. economic globalization, he suggested agriculture, while that percentage is less that Chinese entrepreneurs should em- than 5% in the United States and Western In 1991, Liu Ji took the posi- brace the concept of “Global thinking, Europe. Different phases of development tion of director of the Commission Chinese Kung Fu”. He passionately said: have different demands and require dif- for Economic Restructuring under “The world walks to China and China ferent capabilities to meet the demands. Shanghai Municipal Government. In walks to the world. Only by developing This shall be taken into account in the 1992, a critical period in China’s re- their enterprises from small to big, from operation of an enterprise. form, Liu Ji put forward his thinking vulnerable to competitive, from local to and proposals about economic restruc- national, transnational and global can His interest in globalization and the turing, which attracted wide attention. Chinese entrepreneurs fulfil their histori- development of Chinese enterprises In 1993, he was transferred to the posi- cal mission – to make due contribution to made him become the honorary chair- tion of vice president of the Chinese the renaissance of the Chinese nation in man of China Mergers & Acquisitions Academy of Social Sciences. He was the 21st century.” On one hand, Chinese Association (CMAA), an organisation dedicated to research on one hand enterprises have to think globally so as that promotes Chinese enterprises to and made suggestions to the central to better understand and take advantage go global in a steady way. When asked government on the other hand, which of international game rules and cope why he took the position and his role served as their reference in making with the fierce competition in the global in that association, he modestly replied political or economic decisions. market. On the other hand, as part of the that he was dragged in by Mr. Wang global market, China, with its 1.3 billion Wei, “father of mergers & acquisitions Global Concept, Chinese population, is the largest share. Without in China”. As Wang Wei just started Kung Fu China, there’s no economic globalization his career, he needed support. Liu Prof. Liu Ji rates himself as a person in the complete sense. China’s unique cul- Ji was doing research on economic who progresses with the time. He en- ture renders localization a necessity, both globalization when Wang Wei came joys reading and thinking. He is good the localization of the employees and the to him for the invitation. Inspired by at analysis. His outspoken habits keep localization of business operation. the increasing M&As among trans- him focusing on all hot issues and con- national companies in the 1980s, Liu tributing his enlightening opinions. In this connection, Prof. Liu Ji made Ji readily accepted the invitation.
12 TheLINK 2006 Winter During the process, he came up with example. However, When speaking of of excellence. the new concept of “global company” CEIBS construction, he’d first come up and regarded it as the basic feature of with the cultural construction. CEIBS is a business school where economic globalization. students can learn management knowl- He says: “The school culture is an edge and skills, but Prof. Liu thinks it is The Association was first cre- intangible ‘soft strength’. The faculty, not enough. He advocates the idea that ated as “Research Centre on Global curricula and school management CEIBS culture should include humani- Mergers & Acquisitions”, with Prof. can be and must be continuously im- tarian spirit, philosophic thinking, rich Liu Ji as president of the execu- proved, while culture is everlasting knowledge and broad vision. He says: tive council, Yu Yongding, a famous and fundamental. With a good culture, “without proper cultural tutelage, entre- economist, as director, and Wang Wei the school’s development sees no preneurs or senior managers of the 21st as secretary general. Its research and bounds.” Considering the importance century would be merely a vulgar ‘mon- social activities in particular gained he attaches to the school culture and ey-making machine’.” Proposed and much popularity among people. More its significant role, he puts forward supported by Prof. Liu Ji, CEIBS starts and more professionals, especially CEIBS motto--“Conscientiousness, to host cultural seminars. The prelude of those from the business circle, were Innovation, and Excellence”. On their this article is an example. Cultural celeb- attracted. Later, it was expanded to be first day to school, new students are rities are invited frequently. Wang Meng, the association, and Prof. Liu Ji was told about the school motto. Later, it Yu Qiuyu, Xin Lili, Wang Xiaohui, Jing invited to be the honorary chairman. will be engraved in their hearts and Yidan, Shang Changrong … literature, drive them towards excellence. dancing, music, theatre, philosophy…. Today, CMAA is well-known The school where imparts business is home and abroad. In their research on His explanation of the school now resounding with the voices of cul- M&As, Prof. Liu Ji and his fellows motto seems quite simple. tural celebrities and is surrounded in a raised the concern of national econom- “Conscientiousness is not an elegant, cultural atmosphere. All of the seminars ic security, which deserved the serious eye-catching or vanguard word, but I are fully packed with audience, which attention of both Chinese enterprises rank it first. It is the starting point for also reflects, in a way, the cultural aspira- and the government, given the increas- an individual, an enterprise or a school tion of the business elite. ing M&A activities by multinationals. to succeed. Without conscientiousness, Their proposal caught the attention nothing can be achieved.” Prof. Liu Ji advocates comprehen- from the central government. sive and thorough learning. He thinks “Innovation is the soul of national highly of some teaching methods prac- Conscientiousness, progress and the core competence of tised in West Point. An article titled Innovation, and modern enterprises.” It is self-evident. “Which is the best business school in Excellence “If CEIBS wants to achieve something the US” let him ponder. He took it for In 2000, Prof. Liu Ji took the position of and nurture entrepreneurs who are glo- granted that it should be Harvard or executive president of CEIBS. He went bally competitive in the 21st century, Wharton. However, to his surprise, the from science to science for sciences, innovation spirit is critical. ” article awards the laureate to West Point. from leadership research to leader, and The underlying reason is that “Business now to education. The most famous “Excellence” is a trendy and eye- schools give leadership courses, while education theory brought forth by him catching word, but it is by no means West Point teaches you how to lead.” By is the “3 quotients” theory, namely, a merely perfect vision. Otherwise it how to lead, Prof. Liu Ji assumes it to be intelligence quotient; emotion quotient, would appear to be showy and flashy. an all-inclusive culture ranging from the and courage quotient. Entrepreneurs What “Excellence” means is “we way of thinking to habits in daily life. should possess “3 quotients”. Business should always ask ourselves whether From then on, he began to promote the school should not only disseminate we can do better no matter how well West Point way. He thinks that business management knowledge but also de- we have done in the past.” This ques- education in China should not only pay velop students’ “3 quotients”. And tion is a real spur that drives CEIBS attention to high-quality lectures in the he often refers to the West Point as an and its people forward in their pursuit classroom but also stress “action educa-
TheLINK 2006 Winter 13 People
On July 13th 2006, their Royal Highnesses, The Crown Prince and Princess of Spain visited CEIBS on the occasion of the establishment of a new partnership between ICEX (the Spanish Institute of External Commerce) and CEIBS. Left to right: Professor Zhu Xiaoming, President of CEIBS; Their Highness Crown Prince and Princess of Spain; Mrs. and Professor Liu Ji; Professor Pedro Nueno, Executive President of CEIBS
tion” as in West Point. education. His sense of responsibility is zation. MBA education shall adapt to it not reduced because of retirement. He and meet the human resource require- CEIBS is a school that values feels happy and excited for the rapid de- ment of “global companies” through “passing on the experience of how to velopment of MBA education in China, information management education and fish”. Prof. Liu Ji often inquires the as it is the “historical requirement of multi-cultural education, for example. students and alumni about their major China’s economic development”. In The second is the trend of “scientific in- achievements in CEIBS and he will the meantime, he is also worried that dustry revolution”. MBA education shall receive the invariable answer that it is the rapid development would bring put more weight on natural science, so- the conversion of mentality and way of some negative influence, so he suggests cial science and humanities and integrate thinking that makes them different. tightening the rein and focusing on the them with business to meet the need enhancement of teaching quality. of “scientific industrial society”. The In line with his famous “3 quo- third is the West Point methods. MBA tients” theory, he compares students to It only took 10 years for CEIBS education shall stress “action”, nurture seeds and uses the “3 quotients” as the to become the number one business entrepreneurship, and develop execution selection criteria. Besides intelligence school in Asia. During the second five ability. The ability to take “effective ac- quotient and emotion quotient, he in- years, Prof. Liu Ji’s contribution can- tions” is what really matters. vents the concept of courage quotient, not be ignored. Under the guidance of arguing that a student shall also be his “excellence” concept and with the Active and Energetic evaluated by whether he has the nerve relentless efforts of the school man- Standing in front of Prof. Liu Ji, I can to fight in the business world; whether agement, CEIBS, whose degree was hardly link him with his actual age. he has the audacity to seize the oppor- not even officially recognized by the He stands straight, think and act fast, tunity and whether he has the courage China Ministry of Education at its in- which is rarely witnessed even in ordi- to brave adversity. On the business ception, has ascended to the rank of in- nary young people. school side, it shall offer to cultivate ternationally leading business schools students’ innovation ability, adaptabil- in such a short period. Back to two years ago, on ity and PR capability. November 11, 2004, on the CEIBS Looking ahead into the future of 10th anniversary celebration party, Although retired, Prof. Liu Ji, in MBA education, Prof. Liu Ji draws our Prof. Liu Ji and his wife Liao Tongzhu his pursuit of excellence, still cares a attention to three aspects in particular. sang the Kongding love song together. lot about the school and the cause of The first is the tide of economic globali- They both had a nice voice. The audi-
14 TheLINK 2006 Winter ence got excited and applauded ve- them with happiness.” That’s why to realize his profoundness. How can hemently. In CEIBS, we are familiar he names his sanctum “five-pleasure this short article give enough credit to with Prof. Liu’s ready tongue in chat, room”: take pleasure in serving others; Prof. Liu Ji’s colourful life, broad mind passion in speech, and wisdom in take pleasure from what he has; try to and profound thinking? We can gain a writing, but we don’t expect to hear find pleasure amidst suffering; take superficial understanding from it. his fabulous singing and witness his pleasure and be content with one’s lot; emotionality. You just have to admire take pleasure in everything. He col- However, he doesn’t have endless his vitality. lects the statues of Maitreya Buddha: energy. Two years before, when receiv- “The broad-minded buddha finds ing a foreign guest, he suddenly had a He is cheerful and humorous. He nothing unbearable with his big belly; heart attack and was hospitalized. By is conversable and especially takes the benevolent buddha shows a playful the sick bed, his wife spoke to him: pleasure in chatting with young peo- smile at every fortune seeker.” “Liu Ji, please keep in mind that China ple and making friends with them. He will continue to develop and progress says: “when old people get together, Author’s Notes without you, but our family cannot!” they tend to recall the past, or even On the day of interview, when I Her words brought tears to Prof. Liu cry out complaints like Granny Jiujin walked into the office of Prof. Liu, he Ji’s eyes. His dedication to work, his in Lu Xun’s novel that ‘the next gen- was busy with his PDA. He looked up, concern on the economic development eration is even worse. Today’s youth gave a smiling apology and requested and other issues in China and his care are...’. The result is the more you look me to allow him a minute. His secre- for others leave him little time to look back the more you avert from the real- tary came in for his short instructions after his family. However, as soon as ity. With young people, you always on several matters. Another conference he recovered, these “alarms” became look ahead and are full of expectations. invitation. He said he’d always make invalid. He is still the same. ‘The future will be …’. With young his best to attend. He sat down with people, you can feel their vitality and me and spoke in a casual and friendly It’s his sense of responsibility and passion, which remind me of my own manner. After thumbing through my mission that keeps him running with- ‘passionate youth’”. That’s the trick of interview outline, he replied that, be- out stop. He always wants to do more Prof. Liu’s everlasting youth. ing fully occupied for the time being, in the limited time. Let me quote Paul he was unable to give it a good think- Cocking’s golden saying in the book As an experienced person, he has ing. He suggested me to leave the How the Steel Is Tempered to end this abundant tolerance and care for the outline with him and he’d put down the article. This saying is often recited by youth. “We were once young. We can answers whenever he got time. I told Prof. Liu Ji and his contemporaries in share our experience or even mis- him the deadline and he didn’t bargain. their youth. It has inspired generations takes with them.” No wonder he is so of people like him. He also quoted it in popular among the youth. He says “in Afterwards, I often saw him busy his reply. a word, my energy comes from my with various meetings and activities young friends”. That’s also the basic and began to worry. However, he did “Man’s dearest possession is life. It reason for his decision to devote him- let me have the answers on time and a is given to him but once, and he must self to education in his old years and 16-page handwritten one. His answers live it so as to feel no torturing regrets work for CEIBS. are meticulous and his writing is plain for wasted years, never know the burn- and exquisite. I quote a lot from him ing shame of a mean and petty past; so He has an open mind by nature. He to polish my article. It’s a pity that I live that, dying, he might say: all my has a wide range of interests, rich ex- am unable to quote all of them here, life, all my strength were given to the perience and lots of friends. Therefore, especially those academic statements. finest cause in all the world - the fight he can always find exciting people or for the Liberation of Mankind and issues, which get him involved and When I came across him, I only felt Communism.” demonstrate his vitality. “Sometimes, that he’s energetic and gentle. At the I do feel tired and hate to be involved, meetings I witnessed his passion. When The article, originally in Chinese, is translated but I cannot escape. So I have to face I sit down to write about him, I start by Irene Mao.
TheLINK 2006 Winter 15 CEIBSKnowledge
Why Change of Growth Model is Easier Said than Done
By Xu Xiaonian
The transformation of the role of government is essential for eradicating the institutional foundation of traditional growth model. The government should exit from the economy and market, and focus on institutional reform and institutional improvement.
16 TheLINK 2006 Winter n the past decades, China’s mained stable at 30% in recent years. dation remains unchanged, China’s economic growth was solely economy won’t escape from speed- propelled by the high invest- The experience of major countries oriented growth that simply relies ment rate. Now this model shows that economic growth simply on investment and consumption of seems to end. Even if it still fueled by investment is unsustainable. resources. In that sense, the shift of Iworks to some extent, there is little po- Sooner or later, the investment rate growth model will only remain on the tential left. The economic growth rate will drop. The developed economies paper. will inevitably slow down if nothing is have a much lower investment rate changed. than the Asian countries. For example, The central part of the institutional the investment rate in the US is around foundation of traditional growth model Since China’s reform and opening- 15% perennially. Obviously, sustain- is government’s dominance in resource up, the investment rate (fixed asset able growth relies on technology ad- allocation, especially in such produc- investment to GDP) had soared from vancement rather than investment. tion factors as land, human resource and 25% in 1970s to a record high of 40% in capital. As a non-profit organization, 2003. According to the National Bureau To overhaul the traditional growth the government can not and should of Statistics, the GDP for 2004 was model, the Central Economic Working not pursue maximization of profits or RMB13.6 trillion, while the total fixed Conference at the end of 2004 put efficiency in resource allocation, but asset investment reached RMB7 trillion! forward the guideline of “rigorously its inherent motivation mechanism The annual GDP in this period grew improve restructuring and promote the determines its pursuit of scale and around 10% in average. In other words, shift of growth model”. It emphasized speed. Considering the unparalleled China had to base this high growth not that economic growth means growth position of economic performance in only on high investment rate, but also on not only in quantity but also in qual- appraisal system, the government of- ever-escalating investment rate. ity; growth should aim at efficiency ficials at all levels usually put GDP on instead of speed; growth should rely top of the agenda. What’s more, the link But there is a limit to this. on technology advancement instead of between scale and personal benefits Theoretically speaking, the invest- input of resources; and investment in also encourages the officials and SOE ment rate can’t be over 100%. In light production capacity should give way executives to enlarge the scale. Bigger of the experience of China and other to research and development. The key scale means more resources to be al- countries, it seems that the upper limit of the new growth model is higher re- located, therefore higher grey income of investment rate in practice is around source efficiency, not larger quantity. can be expected. Based on exactly these 40%. Some argued that China can still reasons, some economists in foreign maintain its high growth for another The previous government leaders countries have made the conclusion that two decades. Based on historical data, all emphasized a lot on the shift of the private sector maximizes profit, but this implies an investment rate of over growth model. Even under the planned the public sector maximizes budget. In 50%. It’s hard to imagine that any economy, there were debates about other words, public sector prefers to country or economy can sustain that in the models of “extensive growth” and spread out its reach and build as more today’s world. “intensive growth”. But the investment projects as possible. rate kept rising and extensive growth Let’s look at Japan. During the re- remained unchecked. The overheated The decisive influence of govern- construction after the World War II, its development didn’t show any signs of ment on investment is evidenced by the investment rate increased from 20% in cooling down, instead it spread into concurrence of investment cycle and early 1950s to around 35% in 1970s. more sectors. government officials’ term of office. After then, the rate started to wind Allow for inflation, the fixed asset in- down gradually to 25% in 2003 as a The traditional model that suf- vestment in 1993 increased by 35%, the result of the first oil crisis. South Korea focates the new growth model has highest level since reform and opening- was roughly the same. Its investment persisted for many years, attributable up. Another peak occurred in 1998, rate hit 40% during the peak period, to the long lasting institutional founda- registering a real increase of 14%, while slowed down in early 1990s, and re- tion. As long as the institutional foun- the rate for 1997 and 1999 was only 7%
TheLINK 2006 Winter 17 CEIBSKnowledge
dismantle all other forms of admin- istrative approval and market access barriers.
Reform of the financial system should aim to abolish the control of capital price, liberalize interest rate, further increase base interest rate, stop the administrative interference in the stock market and bring an end to the abnormal phenomenon of zero cost of equity capital. Price should be and 6% respectively. Five years later, the especially R&D. The new products and determined by market forces. In this fixed asset investment increased by 26% new technology can be copied immedi- way the price mechanism can really do in 2003. In recent years, almost 40% to ately after introduction and the market its job in containing overinvestment. 45% of fixed asset investment was made is swamped by copycat products. The There’s no doubt the key target of the by the state sector. If project approval, companies are less interested in R&D financial reform is the banking industry. land and credit policies are also taken because they can hardly recover the Banks should become independent into consideration, the government plays cost of it. The weak financial system financial institutions which take profit a much bigger role in investment. only makes the situation worse. The as the top priority. Loans should new product or new technology compa- be made after evaluating the risk Another institutional foundation for nies can’t get the support from venture and profit of the project, instead of investment propelled growth model is capital funds. The reason is that these obeying government orders. So an the price control of production factors. funds don’t have formal legal status up important gate can be established The nominally low costs of land and to now. And the non-floating nature of to rein in overexpansion either by capital encourage over-investment and corporate shares also prevents theses the government or the enterprises. negligence of efficiency. The land and funds from having an important exit Apart from the banks, the legislation capital costs for “development zones”, channel. process for venture capital funds and “governor-head projects” or “face entrepreneurial funds should be sped projects” are manipulated at a very low After the analysis of the institu- up. The corporate shares should be level. Because of limited investment op- tional foundation of traditional growth floated as soon as possible in order to portunities, large chunk of savings flow model, we can better understand build an exit channel. to the state-owned financial institutions. why the Central Economic Working The depositors have no option but to Conference emphasized the guideline The transformation of the role of accept the low official interest rate, the of “rigorously improve restructuring government is essential for eradicating high price and low return on the stock and promote the shift of growth mod- the institutional foundation of tradi- market caused by limited stock supply. el”. To achieve this goal, the govern- tional growth model. The government Reckless expansion of enterprises fueled ment should gradually retreat from the should exit from the economy and mar- by cheap capital already happened in investment and financial sector. The ket and focus on institutional reform Japan, South Korea and other Asian percentage of SOEs in commercial and institutional improvement. That is countries. The negative impact is still projects should go down and govern- the only way to ensure sustainable eco- fresh in the minds of many people. ment should no longer plan, initiate, nomic growth in China. finance or resume responsibility for The weak protection of property, investment projects other than public The author is Professor of Economics and especially intellectual property gives utilities. In the approval of investment Finance at CEIBS. strong impetus for short-term expan- projects, the government should only The article, originally in Chinese and published sion by many Chinese enterprises, focus on the key indicators such as en- in Caijing magazine, Issue 3, 2005, is trans- while neglecting long-term investment, vironmental protection and safety and lated by David Li.
18 TheLINK 2006 Winter Corporate Brand Thrust Is Your Money Well Spent?
By Lars Ohnemus & Per V. Jenster
A powerful brand is generally considered an effective way of generating shareholder wealth, but how is it actually measured and controlled? Lars Ohnemus and Per V. Jenster, after examining 2,158 companies within 11 different industries listed in the US and Europe exchanges, found that companies with a balanced corporate brand thrust, on average bring up to a 3-percentage point higher return to their shareholders. Furthermore, the link between brand thrust and financial return can be described as a W-curve with five distinct strategic phases rather than a linear function.
an shareholders pricing and channel negotiation power. ing its bundle of goods and services, trust that manage- Given that the risks associated with over a defined period of time to its ment decisions in branding investments and their poten- constituency. the area of brand- tial returns are of great magnitude, a ing will lead to more solid understanding of the brand- By introducing a resource based Cenhanced financial performance, or is ing phenomenon and the economic view on branding and by applying the this only a smokescreen? Over the past justification for the enormous amounts brand thrust concept we were able to twenty years, expenditures are becom- of corporate and societal resources postulate a very interesting question ing prodigious, and companies are used in ensuring the sustainability of addressing the economic importance currently using an average of three to brands in the minds of customers and of branding: “Are companies spend- five percent of their turnover on brand- investors becomes an urgent need. ing adequate resources on establishing ing. Furthermore, the estimated cost and maintaining the optimal value of of bringing a new brand to the market- In our view, brand thrust is defined their brands, and can it be measured on place is now over US$100 million with as the total financial resources a com- their financial results?” The answer to over 50 percent of brands introduced pany allocates to develop, build and this question could have a significant being expected to fail. But, on the oth- maintain the values and signals of its influence not only from a financial er side, a well-positioned and powerful brand (s) including marketing activi- perspective, but also as a basis for the brand provides an effective barrier ties and emotional features with its development of new branding strate- against competitors, offers customer products or services and its combined gies, co-branding initiatives (where attraction, and the ability to enhance efforts in representing and distribut- several brands are used in conjunction)
TheLINK 2006 Winter 19 CEIBSKnowledge
and future investment plans. Kerin enhanced consumer perception, and Our initial research showed that com- and Sethuraman (1998) have already ultimately will translate into enhanced panies active in the financial sector are suggested that enhanced branding ef- financial performance. achieving the highest return on their forts appear related to higher market- assets when investing 5-10 percent to-book value, but caution that brand Management of a particular brand or 20-30 percent of their turnover in value growth at the firm level does not should thereby be able to establish branding, whereas branding in the necessarily produce a commensurate an industry given ratio that their firm 0-5 percent, 10 -20 percent or + 30 growth in shareholder value. can be benchmarked against to know percent range is leading to perform- if they are over or under investing in ance destruction. It was interesting to The Effect of a brand compared to key competitors. note that companies with an appropri- Branding on Financial If one isolates and eliminates all other ate strategic branding position would Performance and key variables, the company with the achieve a return of up to 3-percentage Hypothesis highest and most consistent branding points higher than other companies The original hypothesis of this re- intensity would enjoy industry domi- in the same interval. The adjusted R2 search was that there was a reversed U nance over a given time period. was not as high as for the first group, curve function between branding and but was still 0.60. Again, a W pattern financial performance. The assump- HYPOTHESIS 2 (function) could be observed between tion was that there would be an opti- At high levels of branding, additional financial performance and branding. mum level of branding expenditures or expenditures decrease financial activities for each company compared performance. What could be the probable re- to its competitors at any one point in This prediction is in line with the lationship and explanation for the time. If this optimum level were to be law of diminishing marginal returns. observed patterns? After extensive exceeded, at any given point in time, Companies expand their branding activi- discussions and research of the litera- the company would be faced with the ties with the objective of pursuing higher ture, five working assumptions have law of diminishing returns and experi- returns, but consumers are indifferent developed around the W pattern and ence value destruction. Based on the or might even react negatively (over- the concept of corporate brand thrust. findings of Kerin and Sethuranam branding) to those additional branding Briefly explained, the authors believe (1998) showing that “the functional activities. Ultimately it will lead to a that the five observed key phases: (a) form of the relationship is found to reduction of financial performance. Aspiration (b) Brand Focus (c) Stuck be concave with decreasing returns to in the Middle (d) Brand Heaven (e) scale”, this starting point was of par- HYPOTHESIS 3 Over Branding as illustrated in the ticular interest. Over time, however, Branding has no effect on financial simplified graph shown in page 21. the initial hypothesis was modified, performance. and three additional hypotheses were The assumption is that management The background for each phase added as follows: and competitors are expected to make and the financial impact could be ex- rational decisions with regard to plained as follows: HYPOTHESIS 1 branding and they are operating in a Higher branding intensity causes perfect market environment. Any ma- Aspiration better financial performance. jor increases or reductions in branding The company is rather narrow and This hypothesis is based on the assump- activities will be matched by competi- restrictive in its branding activities, tion that branding reduces inefficien- tive moves. Fundamentally, branding and in most cases only has a limited cies caused by asymmetric information might lead to short term competitive number or no foreign subsidiaries. between consumers and firms, thereby and financial gains, but over time these Management has an undefined brand- ultimately leading to higher market will be eliminated. ing strategy driven by some unclear transparency. This prediction assumes brand building aspirations and is there- that more branding will lead to more The Correlation of by achieving a below average return relevant consumer information, product Branding and Financial on its branding activities since they are trials, and repetitive purchase patterns, Performance too limited (0-5 percent). Thereby no
20 TheLINK 2006 Winter impact can be measured, ultimately resulting in a negative financial im- pact. Furthermore, the company has difficulties in achieving scale econo- mies from a branding perspective since the relative investments are too high to achieve an acceptable return. The strategic position is weak and not sustainable in the long run.
Brand Focus The company starts focusing on Over branding be a positive correlation between brand- branding, and is placing substantial Once the company has achieved a given ing and financial performance, in reality resources (5-10 percent) behind those size by international standards, it starts this can also lead to value destruction. new activities. Sales are increasing and spreading out into different and new ac- This implies that the branding position of it is gaining a critical size in the market tivities, thereby adding additional brand- a company must be regularly and closely place. The result is a dramatic increase ing expenditures and ultimately decreas- monitored and managed from a strategic of its financial performance leading to ing its financial performance. Frequently, perspective. To be applied successfully, value creation. Frequently, the com- one can also observe the phenomenon of this would require cross-departmental pany is becoming a segment leader and over branding in this segment. (Marketing, Finance and Sales) working has a sustainable competitive position. groups analyzing all relevant internal The branding position of a company and external factors, and ultimately Stuck in the Middle should by no means remain static over reporting back to senior management. The company again has a weak time. Some companies maintain a status Conceptually, this could be achieved by strategic position, frequently due to quo over time, but there are also examples applying the corporate brand thrust con- lack of focus and is stuck in the mid- in our research database where companies cept presented in this article, whereby dle. (Porter, 1990). It is expanding move downwards or upwards. Hence, it those findings would ultimately be pre- and attacking many new markets or is absolutely vital that branding is ana- sented to, and reviewed by, the board of segments. Ultimately, branding ex- lyzed in a dynamic perspective, and that directors of each corporation, and not penditure is now approaching 10 – 20 academics and practitioners acquire a left to be justified by the marketing team, percent of their turnover. This high performance and time driven reference as is seen in many corporations. The investment, combined with their weak model for branding. The brand thrust con- final, and in many ways, the most critical strategic situation is leading to a de- cept should be seen as a first step in this element, is that each company must be crease in financial performance. direction. The underlying data from other aware of its strategic branding position studies also confirmed that a company’s’ vis-à-vis its competitors, having a con- Brand Heaven involvement in several or more industries ceptual understanding of its current situ- As the company is reaching scale econo- would lower financial performance. ation and acting accordingly. mies with its branding activities in the different markets or segments, it is gain- Managerial implications Lars Ohnemus has held senior executive posi- ing international synergy (as observed in This research indicates that for most tions in a range of multinational companies many U.S. multinationals) with its brand- companies a correlation between fi- and is currently a Visiting Associate Professor ing activities. The company achieves a nancial performance and branding is at the Copenhagen Business School and Baltic stronger strategic position and their return present, and can be established. As Management Institute. is again increasing. (This was also con- a minimum, it has five different and Per V. Jenster is Professor of Management at the firmed by Buzzel and Gale (1987) … “in unique phases that cannot be perceived China Europe International Business School. stable markets, market leaders on average to be a linear function. Another impor- The article is an adaptation of the original reap 25 % percentage points more ROI tant conclusion for management teams one published in International Studies of than small businesses “). and shareholders is that while there can Management and Organization (October, 2006).
TheLINK 2006 Winter 21 ThoughtLeadership
Turn Transformation into Reality
An interview with leading CEO Michael Critelli
By Stuart Crainer
or a man in charge of able industry into a market leader in the Bowes has carved out a lucrative low more than 33,000 people hyper-competitive digital age. profile niche in mail and document worldwide, operations in management. more than 130 countries, Critelli´s brand of thoughtful and a turnover in excess of subtly inspiring leadership in reshap- Transformation Critelli-style is F$4 billion, two million customers, and ing the company is gaining increas- intense and planned. And it is working. over 3,500 active patents, Pitney Bowes ing media attention and plaudits. Yet, The spin-off of the company´s office chairman and CEO Michael Critelli is neither he nor Pitney Bowes is classic systems business, a series of acquisi- calmness personified. But, Critelli faces headline material. Critelli joined the tions and the company´s first integrat- a classic CEO challenge: how to trans- company in 1979 and became CEO ed marketing campaign have raised form an unsung giant in an unfashion- in 1996. Founded in 1920, Pitney eyebrows in the corporate world.
22 TheLINK 2006 Winter Michael Critelli talks to Stuart The other attribute which has General Electric then 20 years may Crainer about the CEO´s job and how served us well is that we have always be optimal. You keep the succes- to turn transformation into a reality. valued the opinion of our employees. sion pipeline fresh. One of the risks We have always tried to create a work of staying in the job for 20 years is You lead a company in a relatively environment in which employees of that talented people who are a little unfashionable industry and in a different genders, origins, ages and younger and aspire to my job would mature market. What challenges points of view can be successful and leave. If they can have a reasonable does that provide? can tell senior leadership what it needs tenure, I can keep them engaged and I would take issue with us being in a to hear. have a stronger team behind me. mature market. We were in a mature There is a benefit to having an or- market and had we not set out to re- The third is a sense of mission be- derly succession process and not shape the market that would still have yond making money. People need to staying until the board of directors been a very accurate characterisation. believe they are doing well by doing forces you to leave. Beyond a certain The communications marketplaces good. I think that employees need to length of time you get to believe that that we participate in, both mail and feel proud of the quality of their work you can’t be replaced? so it is best to document management, are very large and the mission to which their work leave when you are still on top and markets. We believe that the parts we is contributing. We are also known, still fresh. can address with our competencies justifiably I think, as a company which would be about $250 billion – and gives value back to the community. A friend of mine told me that dur- are going through massive change Our community activity is integral to ing the first three years on the job -- regulatory, technological and com- the company’s brand. you’re basically trying to get accli- petitive change. Wherever there is matised. During the next 5 or 6 years massive change there is an opportu- You emphasise R&D and innova- you are a change agent, you put in nity for growth. Customers want help tion but that is something normally place your programs and vision for trying to navigate their way through associated with Silicon Valley and the company and in the last 4 years change. high technology. you are focused on succession plan- There are different ways to be inven- ning ensuring the talent is there for You are known for emphasising the tive. You can invent a physical product the next generation. It has worked out role of values in your organisation. which is completely new, but you can that way for me. Between 2001 and Most major companies have a list also invent a new market, or find inno- probably 2005 or 2006 is my sweet of values. Are they still meaningful vative ways for technologies to work spot to be a change agent. Partially and practical, or just another form together which permit activities to be overlapping that, even today I am of PR? done in new ways. actively working on the succession Certain values are extremely critical process. to our brand and our success in the So our innovation comes from marketplace. One of our brand at- studying problems and figuring out How do you create a talent pool? tributes is that we rank very highly where there are opportunities as op- The most important thing to do in on being trustworthy and reliable. posed to becoming enamored with the any succession process is to figure We handle worldwide well over technology itself. If you think about out what the world might look like in $15 billion, probably closer to $20 Silicon Valley, a lot of those people five to ten years. The second thing is billion, of other people’s money. are inventing tools rather than applica- what kind of skills and competencies We even own a bank in the United tions. We are an applications inventor that world will require. From there States, so having the attribute that for a specific set of marketplaces. you use a variety of tools and tech- we are honest, trustworthy and reli- niques to make people ready and to able is not only a nice thing to have How long can you be effective as test out whether they will have those from a standpoint of commercial CEO over a sustained period? skills and competencies. success but it is critical to our value Ten to 13 years for our size com- proposition. pany is optimal. If I was running Obviously at this senior level, it
TheLINK 2006 Winter 23 ThoughtLeadership
is most important that executives get with the board of directors. I also what the experts would tell me. I exposure to areas outside their direct work in partnership with the board in learned not to be intimidated by ex- responsibilities. They need external them assessing me and assessing the perts and specialists. I tell them that experiences to develop skills and talent which reports to me. I need to be able to understand what competencies. We have changed peo- they are saying in simple language. If ple’s job accountabilities and given What do you think are your key I can’t understand them they are prob- them more scope and wherever I can competencies as a CEO? ably not thinking clearly. As a trial I work with them to give them coach- I am a change agent. Why I am the way lawyer I had very limited windows ing and advice. We provide them with I am I don’t know, but I have always of time to get the attention of judges 360 degree feedback supplemented been a person who comes at prob- with very limited patience. They with coaches. We have very frequent lems in a different way. Then I ask would make us do quick pitches. I interaction with the board of direc- why isn’t it this way? learned how to do that and I learned tors. What is different today from how to force people to think clearly, the process by which I was selected I have a knack of seeing the world simply and explain things that way. is that boards of directors are much differently and then I try to relent- more active in the selection proc- lessly move toward the things which The other thing I bring to business ess. They want to get to know the make that world a reality. I started is a sense of thinking about it in terms candidates much earlier. We create a out as a trial lawyer and I did a wide of economics rather than accounting. variety of mechanisms so that the next range of cases. I had to learn complex I know accounting but a lot of people generation of executives can interact subject areas quickly and to master confuse accounting profits with eco-
24 TheLINK 2006 Winter nomic profits. I tend to look at what How do you measure your per- has the strength in depth of talent. makes economic sense. sonal performance as CEO? There are certain things I want to ac- Implicit across all this are values. There are two other characteristics complish over time at Pitney Bowes. We have always been a company which have helped me. One is I have a But my own measure of success is that people are proud to work for. very good understanding of the value probably whether I have reshaped the Obviously I want to make sure that of time and speed. Having charged for culture and direction of the company. that doesn’t change. In that respect I my time as an attorney, I intuitively There are a handful of ways I would am not a change agent. I want to pre- convert time to money and make eco- measure that. One is whether I have serve the traditions and values we are nomic decisions which take into ac- leveraged the full power of the compa- known for. count the money value of time. ny behind a single unified brand. When I took over this was a very de-central- You can’t be a dictator or, at the The other attribute is that I tend ised company which didn’t really have other extreme, someone who listens to be very driven by getting results as everyone working together. So my first to everyone. You have to balance opposed to worrying which budget measure of success is whether we are stakeholders and make independent or cost centre is affected. Tom Peters behaving as one company. judgements. People put you in the job talks about a professional services to represent the collective will of the mindset where you assemble a team Second, are we behaving with con- organisation not to respond to every to get a job done and then they move fidence and competence in shaping the fad and fashion of the moment. on. He uses the example of the film in- world we live in rather than reacting dustry. I have always thought that way. to it? As a person I am highly driven People often bemoan the dearth Some people tend to get too fixated by the desire for security. But the only of leaders in the business world. Is on their status in the organisation and way you can be secure in the world is this a fair observation? the way the organisation is currently to be at the table when the decisions To an extent, but there are many more structured. are made about the rules of engage- leaders of good quality than people ment. If you shape the rules you have a realise. But the expectations of what How do you divide your time? lot more security. You can’t be secure leaders can do are wildly unrealistic. Probably 5% of my time is spent on by escaping conflict. The politicians and regulators keep board and corporate governance mat- imposing more and more obligations ters. The next 25-30% is spent on The third measure of my success is on leaders without regard to the other meetings -- individually with people making us a global company. I am very things they already have to do. Having who work with me, staff meetings and excited that we are in many markets been in the job for many years, I have a lot of one-on-ones. I have around 150 today where English is not the only the capacity to absorb some of the of those a year with people who don’t language spoken. I want us to be con- additional things the new laws and work directly for me from all levels of fident and comfortable dealing across regulations require, but I think we are the organisation. I like to get directly the globe. slowly creating a situation where it to the source of information. I spend will become impossible for leaders to another 5 to 10% of my time meeting Fourth, are we being very solu- balance all of the different responsi- with postal officials, politicians and tions and customer-driven rather than bilities they have. other regulators. The next 10-15% of simply providing tools and assuming my time I spend in some form of in- customers will know best how to use The articles in this column are kindly provided teraction with customers. Then there those tools. by EFMD (www.efmd.org) and Suntop Media are maybe a few days a year talking to (www.suntopmedia.com). shareholders, analysts and the rating There are a couple of other things agencies – probably five days a year. obviously. Every leader has to have The remaining time is spent on a varie- a financially strong company that is ty of outside activities which somehow stronger than the one he or she inherit- relate to my job. ed. The other thing is that the company
TheLINK 2006 Winter 25 ExecutiveForum
Developing in the Chinese Beer Market - The Perspective of a Global Brewer
By Jesper B. Madsen
arlsberg has a long history in China. I have a poster hung in my office which is an advertisement from 1902 or 1903 of Carlsberg in China. In the 1980s, the business environment was very small and complicated - people could only find C imported Carlsberg beers in five-star hotels.
26 TheLINK 2006 Winter It was not until China opened its Such co-operation was established As our business continued to grow, door in 1978 that Carlsberg decided in 1991 and went very well. Our ap- so did our desire for more market to do more in this interesting market. petite started to grow when we realised share. For the obvious reasons we With its low per capita consumption the beer market in China was actually chose Shanghai as our next destina- of beer in the early 1990s, the growth very strong and the economic develop- tion. Although consumption was still potential for Carlsberg in China was ment was sound, so in 1994 Carlsberg low, we figured with strong economic huge. But in the 90s Carlsberg took a established a joint venture with Swire growth the market for premium beer cautious approach to the Chinese mar- Pacific, a Hong Kong-based company would increase significantly. At the ket and we didn’t want to invest too with a lot of experience in China. Our time the biggest brand in Shanghai was much initially. The best solution for us first step was the acquisition of our li- Reeb, a mainstream brand that was was to find a qualified partner who was cense partner in Huizhou, Guangdong strong, but not strong enough to domi- prepared to produce, sell and market Province, thus enabling us to control nate the market. Our analysis of the our products under a licensing agree- our own destiny for the Carlsberg beer market in Shanghai, and China as ment, while we provided our know- brand in China. a whole appeared to be fantastic. We how, our brand, etc. decided it would be worth our while to take a calculated risk and make a significant investment importing ex- pensive western equipment, etc.
TheLINK 2006 Winter 27 ExecutiveForum
It turns our calculations were 1/4, even 1/5 the price of the premium course there will be competition, and wrong. Unfortunately, while we brands. competition will increase, and we are were building our brewery, the mar- prepared for that. ket changed. The Japanese brewer, In 2004, with many lessons Suntory, entered the mainstream mar- learned, we decided to once again Another reason for choosing west- ket with a product that was attractive in invest aggressively. We invested a lot ern China is its current low per capita every way, from packaging, to quality, putting a new Carlsberg product on the beer consumption. We think that we to price, and it was all backed by an market. If you want to be a big player can establish and obtain dominance on excellent marketing strategy. Suntory in China, you must be in the main- a provincial and even regional level. wiped out the main competitor, Reeb, stream segmentation as well. We did Dominance is relevant in a beer market and started to dominate the market. a lot of research in the Chinese beer like China, because it is not ONE mar- As a result the premium sector didn’t market, and found that Western China ket but many. grow as expected. In fact, it stagnated. was a good place to invest. With a new Our first important investment in strategy in place, Carlsberg set forth The variance in markets regionally China somehow fell apart. with a new vision: not only to become makes it impossible to compare one the leading brewery group in Western province with another. Each market Our second setback in the China, but also to become a major has its own spending habits, consump- Shanghai market was the way in which brewery group and a leading interna- tion habits and brand loyalties. For premium beers were bottled. It turns tional premium brand in China. Today, example, in Beijing, the consumption out big bottles had big problems. our vision is becoming reality. is 93 litres per capita, which is the Not only did the big bottles not have European standard; in Yunnan, it’s the same margins as the smaller bot- Why did we choose to go west? only 6 litres per capita. In coastal tles, but they were not an attractive First of all, it is often beneficial to fol- cities the beer consumption is high business, as you had to give a lot of low the strategy of the government. due to stronger purchasing power and discounts. Suntory was such a strong And the fact is that a government western influence. Northern China, by brand at the time that even the local policy also means that the government far, consumes the most beer with the brand we introduced as part of our will provide a lot of support. We as- northern cities of Beijing, Shenyang, investment was not successful. We had sume that a lot of money will continue Dalian and Harbin, drinking around to sell 75% of our shares to Tsingtao. to move to the west of China, thus half of the total beer consumed in I remained the director of the com- helping close the gap in purchasing China. pany because we still kept 25% of the power that exists between the East shares. Also Tsingtao initially faced a and the West. Additionally, the people Being an active player in the tough time but is now doing better. of Western China are clever and will premium sector, Carlsberg is also catch up over time when they get the looking at the size of the premium Actually throughout China the right support from the government in sectors in the various regions. Market premium market was not as strong as Beijing. share in the premium beer sector is we had expected. It turns out we had directly related to purchasing power. underestimated local brands. They had The second reason for choosing In Beijing, premium beer consumption more brand equity than we’d thought. Western China is, relatively speaking, is 2.1 percent, Shanghai 13.2 percent Because Carlsberg and other premium the market in the West is less com- and in Shenzhen it is the highest. But brands were able to sell despite the petitive. If you are operating with a compared with other places in the high price in the early 1990s, we as- market share of 50%, the competitor world, the consumption of premium sumed the local brands were low qual- has to be pretty brave to move into the beer in China is still low. South China ity and thus had a low brand loyalty. market, because they know that you is obviously very attractive, having However, the Chinese brewers caught have the muscles, the strong brand, the 40 percent of the premium market; on very fast and learned from premium connections, the distribution network, East China, 15 percent; North China beers so that all of a sudden, there were and that you can respond very aggres- and West China, both only 6 percent, very good local brands selling at 1/3, sively to any competitive threat. But of which is consistent with the purchas-
28 TheLINK 2006 Winter ing power. So the premium market is Yanjing. Carlsberg would also like to China because of the difference in pro- East and South China. But by far the expand out of the province level to re- moting a premium brand and a local biggest part of the market is the main- gional level, but for the time being we brand. We want the local sales teams stream market. are happy with the current situation. to be more familiar with our working style before we integrate Carlsberg Due to fragmentation amongst the The local companies we have ac- into local operations. But the combina- top ten brewery groups and the fact quired have different working styles tion of premium brand and local brand the top brewery only has 30 % of the from ours. But doing things differently can surely be a winning strategy. total market share, there is no clear na- doesn’t mean it is wrong; it can actu- tional brand in China. Even Tsingtao, ally be better. Not all of our formulas We came to realise that the Chinese a widely recognised beer outside of work in China and we’ve learned a lot consumers are not yet ready for the China, is not truly a national brand. It about China from our local partners full flavoured, more bitter beer like is said that Snow beer from Shenyang, and our local management team. On Carlsberg Green Label. The Chinese and Yanjing from the north, consumers want some- are also two contenders for thing more like Budweiser, the title. which can partly explain Budweiser’s success in As for a future national China. So we launched brand, will the Chinese Carlsberg Chill. When you beer market be like the have two brands with the US market in ten years, same name, how do you where there is almost only position them against each Budweiser and Miller other without confusing the that dominate the whole consumer? This is quite a market? My answer is that challenge and is partly why we believe local Chinese many companies are reluctant brands will continue to to do line extensions. They be strong. These are great are afraid that consumers brands and the Chinese will get confused. We solved consumers love them. this problem by positioning Carlsberg has three of them quite differently. Green the six most famous beer Label is a bit more seri- brands in China, with which we be- the other hand, they have also learned ous, authentic tasting beer. Chill is the lieve we can maintain a strong position a lot from us because we have a lot of smaller brother of Green Label and is against the local brands, using our experience in Europe and some of the more for young, fun loving people. Our experience from Europe as a guide. practices are universally applicable. It advertising reflects this point of view. In Europe, even though there are no creates an interesting dynamic when One interesting fact is that the launch trade barriers and beer can freely float you are transferring know-how both of Chill has actually also increased the across borders, the beer markets are ways. Of course there is always room sales of Green Label, something we had completely local. Fundamentally the for improvement and that is a good not predicted. beer business is a local business. There thing. Transcribed by Lene M. Holsen, MBA06 ex- is nothing indicating that the Chinese change student market would be different. Budweiser is the biggest competi- tor to Carlsberg in the premium seg- The author is Senior Vice President, Carlsberg But of course we are paying close ment. The premium segment is very Breweries. attention to our competitors. Snow small and very competitive. We have The article is based on Mr. Jesper B. Madsen’s wants to be national, Kirin wants to not yet considered taking the Carlsberg speech delivered at CEIBS Executive Forum on be national, and so do Tsingtao and brand into our portfolio in western Oct. 23, presided by Prof. Per V. Jenster.
TheLINK 2006 Winter 29 InFocus
The Chinese Automotive Industry: Feasible and Sustainable Development?
he Fourth Annual China Automotive Industry Forum successfully concluded on Oct. 31, 2006 on the Shanghai campus of the China Europe International Business School (CEIBS). Established as one of the premier events to gain new insights into China’s evolving automo- tive industry, this year’s forum was attended by more than 250 gov- Ternment officials, business leaders and senior executives from the automotive industry, and attracted more than 50 members of the local and international media.
30 TheLINK 2006 Winter TheLINK 2006 Winter 31 InFocus
Opened with a warm welcome tomobile industry is functioning well, Degussa AG, stated that cars being speech from the Executive President it will be facing difficulties in certain produced today are mostly (50%) of CEIBS, Professor Pedro Nueno, areas. Not surprisingly, over the last made of steel and iron. The additional this year’s forum explored the decade China’s automobile industry use of polymers in the future has the question, “China’s Automotive has become a backbone industry in potential to greatly reduce the weight Industry: Feasible and Sustainable the Chinese economy and a very im- of automobiles, thereby reducing the Development?” Automotive in- portant part in the world market. energy used. dustry experts such as Mr. Chen Qingtai, Research Fellow with the The automotive component indus- CEIBS has successfully conducted Development Research Centre of the try continues to grow and, as Mr. Shen the “China Automotive Industry State Council of the PRC, Dr. Sergio Ningwu, Deputy Secretary General Forum” for four consecutive years, Marchionne, President of ACEA and of China Association of Automobile attracting the most outstanding schol- CEO of Fiat, Mr.Xu Heyi, Chairman Manufacturers, pointed out, in 2005 ars, entrepreneurs and government of Beijing Automotive Industry the domestic automotive component officials. Professor Zhang Weijiong, Holding Co., Ltd., and others gath- industry realised a gross value of Vice President & Co-Dean of CEIBS, ered together to share their views RMB383.8 billion, accounting for stated: “We are delighted to bring on many important issues, including 35% of the automobile industry’s together leading policy makers and cooperation and consolidation, ex- total output. In addition, automotive stakeholders from government and pansion of the automotive component component exports in the past five industry for the forum. CEIBS, as a industry, and development of envi- years have also grown rapidly, with the neutral academic institution, will con- ronmental regulations. 2005 gross exports totalling US$8.5 tinue to play an important role to help billion. Referring to the present devel- address issues faced by the country’s Speaking on the future of the opment of the domestic automotive other important growing industries in structure of China’s automotive in- component industry, Mr. Shen said the future by organising relative indus- dustry Mr. Zhang Xiaoyu, Chairman that while China has basically formed try forums”. Based on the success of of the Society of Automotive a complete system for the domestic the annual auto and health care forums Engineers of China, disclosed that automobile, it still lacks the core hosted by the School in recent years, the production and sales of domestic technology. according to Dr. Snow Zhou, Director automobiles in the first part of this of Marketing and Communications, year had increased by 28%, and it is Regarding energy consumption CEIBS will host a “Financial Industry expected that this year’s production and the environment, Dr. Joachim Forum” in the near future, utilizing will reach 7 million. He indicated Leluschko, Head of the Business the School’s superior resources in eco- that, although the current Chinese au- Unit High Performance Polymers of nomics and finance.
32 TheLINK 2006 Winter Policy: Boundary of Sustainable Development
By Chen Qingtai
TheLINK 2006 Winter 33 InFocus
China needs to formulate mid- and long-term strategies regarding energy consumption, environmental protection, and policy environment for the sustainable development of the automobile industry. Such strategies should include objectives for energy and environment policies, choice of technology path, and complementary measures and incentives to lead the resident consumption and R&D and investment of the energy sector and automobile manufacturers. Without a systematic policy framework and a coordinated effort by the government, neither manufacturers nor consumers will necessarily follow the line of environmental protection and energy saving.
he production and investment projects, than on the com- the sustainable energy strategy. To this consumption of auto- plicated social problems. There lacks end, the Outline proposes the adoption mobiles have strong in-depth research on strategies for of new pricing and taxation policies in externalities. The sustainable transportation, energy and favor of energy saving. All these ideas voluntary actions of environment. of sustainable development can only Tmanufacturers and consumers alone work through a series of governmental can neither ensure the sustainable At a last year’s meeting Premier policies. What matters is to formulate growth of the industry nor guarantee Wen Jiabao pointed out that any un- mid- and long-term strategies regard- the formation of a wholesome automo- reasonable restrictions or limitations ing energy consumption, environmen- tive society for the benefit of social placed on low-fuel-consumption, tal protection, and policy environment progress. Therefore, it is necessary for small-engine and low-emission ve- for sustainable development, including the government to regulate and guide hicles must be removed. This put the objectives for energy and environment the industry through a combination issue of how to guide the automotive policies, choice of technology path, of regulatory means (i.e. legislation), consumption on the top of the policy complementary measures and incen- technological means (i.e. obligatory agenda. In fact, manufacturers are sen- tives, to lead the resident consumption standards), and economic means sitive to the consumer propensity and and R&D and investment of the energy (i.e. fiscal measures and taxation). will respond promptly. In this sense, sector and automobile manufacturers. However, the government interfer- the consumer propensity is like a “cow Without a systematic policy frame- ence in the industry should stay on the nose”; it is not difficult for the govern- work and a coordinated effort by the level of policy making and focus on ment to materialize its policy objective government, neither manufacturers externalities and sustainable factors as long as it catches the “cow nose” nor consumers will necessarily follow involving public interest and resource with policy tools. the line of environmental protection environment. and energy saving. In March this year, the 11th Five- The realization of sustainable de- Year Plan was adopted at the National For example, the government velopment of an automotive society People’s Congress, which defines en- should develop a well-defined energy depends on two important aspects: ergy saving as a fundamental national strategy to encourage energy saving market research and automobile-re- policy, calling for efforts to reduce the through the use of clean and alternative lated policies. The market determines pollution at its very sources and to pro- energy; implement new automobile the room for growth, while the poli- tect the ecological system through the consumption policies for sustainable cies set the boundary for sustainable production and use of energy-saving development, including policies on fuel development. and environment-friendly vehicles. cleaning, oil pricing, and fuel taxation The Outline requires a significant de- to encourage the purchase and use of During the rapid growth of auto- crease of energy consumption per cap- energy-saving and environment-friend- mobile investment, the government ita by 20% within the next five years, ly vehicles; and create an effective reg- has focused more on the supply side, demonstrating the determination of ulatory system through more rigorous such as the control and approval of the Chinese government to promote regulations on pollution emission. Oil
34 TheLINK 2006 Winter is a non-renewable resource; it will be is a system project, requiring a quali- leading investment and scale growth used up some day. However, it does not fied and stable fuel supply chain, an to promoting the harmony between the necessarily mean the end of energy, or extensive infrastructure and a set of cor- development of automotive society the end of the automotive society. The responding policies. The government and environmental protection. The ad- sharp rise of oil price in the recent years can adopt an inclusive attitude during justment of these policies will produce signals the end of the era of cheap oil. the experimental stage to test all pos- an impact on consumer propensity; Nevertheless, soaring oil price offers an sibilities, but needs to make a choice however, there are still uncertainties opportunity for development of alterna- during the application stage to adapt to with the timing, force and contents of tive energies and energy-saving tech- China’s realities. For example, Europe policies. In this sense, China is still an nologies, where major breakthrough has adopted different powertrain tech- immature market. In the absence of has been and will be seen. nology from that of Japan, Brazil, and policies or certainty, the automotive the United States. Indeed, each govern- consumption in China shows a random As a latecomer of automotive con- ment will develop different fuel and pattern. Manufacturers need to closely sumption and production, China is fac- economic policies to materialize their follow consumer propensity on one ing more challenges than the developed policy objective. hand and to keep updated with the gov- countries. However, if we can leverage ernment’s policy direction on the other our “second mover advantage”, there If the central theme of China’s hand so that they will have the capabili- will be great potential in energy saving automotive industry was the fast ex- ty to develop technologies and products and environmental protection technolo- pansion of production facilities and the necessary for the sustainable growth of gies, and ample room for the choice market during the 10th Five-Year Plan, the automobile industry. of technology path. A variety of alter- then the focus of the 11th Five-Year native energy is available, including Plan will be shifted to such external The author is the Research Fellow with the hybrid fuel, natural gas, electricity and factors as energy, environment and Development Research Centre of the State hydrogen. The same is true with pow- safety that determine the sustainable Council of PRC. ertrain technology; we have access to a growth of the industry. Accordingly, The article is based on the speech of Mr. number of energy-saving technologies, the focus of governmental policies Chen Qingtai on the CEIBS 4th Annual China including hybrid powertrain, electrici- should be shifted from the manage- Automotive Industry Forum, originally in ty-driven and fuel battery. However, the ment of production side to the motiva- Chinese and translated by Cherry Zhong and application of any of these technologies tion of consumption side, and from Snow Zhou.
TheLINK 2006 Winter 35 InFocus
China’s Role in the Global Automotive Industry
By Sergio Marchionne
36 TheLINK 2006 Winter o other developing people generating an annual turnover of currently exports to 207 countries and market has China’s roughly a billion US dollars. Virtually regions and in just 5 years from 2000 to growth potential. The every global manufacturer has now es- 2005 averaged 40% export growth year recent figures from tablished a presence in China via one or on year. However to put this impressive the Economists il- more joint ventures. growth into perspective China’s mar- Nlustrate this quite clearly. China’s ket share in world automobile and auto industrial production is up 15.7% on And Chinese vehicle manufacturers component exports is less than 1 percent. last year with foreign reserves standing are preparing to become increasingly As the example of the automotive sector nearly at a trillion US dollars. And no active in foreign markets including the shows China is developing comparative other market offers as many opportu- European Union. In fact at this year’s industries dealing with high technology nities and challenges to the global au- major European car shows, Chinese products, embracing everything from tomotive industry. This year total light brands have now made their debut. consumer electronics to biology and vehicles sales in China are expected And what I find especially illustrative chemicals. They are the foundations for to hit the new water mark of 6 million for many challenges and opportunities increasing and sustaining the prosperity vehicles and within this sales of pas- ahead is the strong focus that is now of the country and of its people. senger cars have grown from 1.3 mil- being given to innovative technologies lion in 2002 to an expected 3.5 million by Chinese vehicle manufacturers and China’s key role in the world econo- by the end of 2006, a rise of 25% on suppliers. This focus seems to be both my has been recognized through multi- last year. Chinese commercial vehicle encouraged and reflected by a growing lateral and bilateral agreements and coop- market is growing quite quickly, with and demanding Chinese customer base eration with partners all over the world, sales of roughly 200,000 heavy trucks for cars. Fiat’s experience in this area is but more importantly through China’s in 2005 and a substantial increase ex- exemplary, and the cars that we initially WTO accession five years ago. Indicative pected this year. started producing here in China were of China’s seriousness on the world stage soon seen by consumers to be too basic is the implementation of most of its WTO And we at Fiat are preparing our- and we have reacted in last month with accession commitments and some of selves for this increase. NAVECO, the the launch of the Fiat Perla designed and them have been accomplished earlier than commercial vehicle arm of Fiat group developed in China for the ever more de- scheduled. However, further cooperation recently signed joint venture agree- manding requirements of the local mar- on this issue with the European Union ments within our group and SAIC, ket. But this is just a first step of our new member states, other main trading part- which will see our presence expand strategy for the Fiat car brand in China ners and business representatives remains dramatically in the Chinese market for and in a short time we will expand our absolutely essential. While China’s WTO light, medium, and heavy commercial offering to provide a complete range of accession protocol has been a hugely im- vehicles. Additionally, we have signed models in order to satisfy the changing portant first step, it is hoped that this will a memorandum of understanding with demands of the market. This of course lead to further steps toward free market SAIC for the production in China of without diluting the core values of the reform, a more transparent corporate leg- three ranges of our diesel engines for Fiat brand which are style, practicality islation and a subsequent implementation commercial vehicle installation. But and value for money. At the other end of these rules is an essential foundation NAVECO’s or indeed Fiat’s presence of the spectrum, our super car brands for cementing long term relationships. I here is not of recent origins. NAVECO Mazeratti and Ferrari are experiencing must stress though, the membership in the started activities here in China in the strong demand from Chinese enthusiasts WTO has improved the business climate mid 1980’s with the local manufacturer indicating the rapid sophistication of this in China through greater predictability of the Daily vehicle through a joint ven- market. stability and transparency. ture company. NAVECO was partnered in Nanjing. Today NAVECO produces Just last month the Chinese Ministry At the 9th EU China summit in 200,000 vehicles a year and the Daily of Commerce stated that the country aims Helsinki, Chinese and European lead- success here shows no signs of slow- to increase exports of automobiles and ers agreed on the conditions of a new ing. Our group in China now comprises auto components to 70 billion US dollars framework partnership agreement. This some 18 companies employing 8,000 by the end of 2010. China’s auto industry will replace the Trade and Economic
TheLINK 2006 Winter 37 InFocus
Cooperation Agreement in place since operations of companies in a global ment of vehicle efficiency standards 1985 and the European car industry world, it goes without saying that the would mean less oil usage for China, welcomes these positive developments. regulatory is of essential importance. thus reducing the strain on the global oil They are to the benefit of Chinese eco- China has been enormously successful market and obviously an improvement nomic growth and exports and to the in attracting foreign direct investment on China’s greenhouse gas emissions. benefit of the activities for the European but we are convinced there is potential car manufacturers. It goes without say- for more within a progressively pre- ACEA is an overseas member of ing that China is an important market dictable and open investment regime. the Chinese national automotive stand- for Europe. Our region is China’s third And the European automotive indus- ardisation technical committee. This largest trading partner after Japan and the try welcomes China’s commitment committee recently decided to review US and we believe we do have a lot to to effectively enforce the protection and upgrade technical standards for offer too, regarding sustainable mobility, of intellectual property rights as con- commercial vehicles. Furthermore there safety, and environmental standards and firmed recently by your prime minister is substantial cooperation agreement be- technology, as in many of these areas at the Helsinki summit. We know that tween the China Automotive Technical Europe is the world leader. Chinese companies do increasingly ex- and Research Centre in Tianjin and press a demand for effective protection ACEA. Needless to say we likewise sup- Transformation is equally important of intellectual property as they move port the ongoing efforts by the European where market forces are concerned. The up the technology ladder. In my view, Union and China to increase regulatory enhancement of competition forces will industry cannot often enough stress cooperation both bilateral and within the help to ensure that the establishment the worldwide need for internationally context of the relevant global reforms. I of a fully functioning market economy compatible technical regulation and would also stress the upmost importance in China does happen. This will foster standards. Internationally compatible of China signing the UNECE agreement China’s economic model and China’s standards for safety, for environment, in 1958 and taking an active role in the position on the global stage. From our for accounting are key to the automo- work of the WP29 in Geneva. European and international experience tive industry, an industry which is we know that enabling sound competi- global and has a clear interest in global So to summarize our views, it is fair tion is crucial for economic develop- standards. Given the huge financial and to believe that China is very much on the ment. And crucial for achieving these human resources devoted each year in way to ensure the sustainability of eco- circumstances is the existence of a level order to meet the myriad of national nomic growth. Essential to the success of playing field, in other words, the full and regional requirements, consen- this process and in addition to the current implementation of fair economic and sus would at the very least reduce export oriented growth is the strengthen- trade rules. We see China having become the squandering of resources. We are ing of China’s domestic market of more the global force that it today now faces therefore encouraged to see that active than a billion consumers. And within this the challenging responsibility that comes cooperation is now underway between process European car manufacturers are with its prime position on the interna- ACEA and Chinese lawmakers. committed to make the contribution. We tional stage. China is in our view very advocate an operating environment that much an example for other emerging As a result of this explosive growth is as business friendly as possible for countries and they expect leadership. I and rapid change, the Chinese auto both China and the European Union and strongly believe that China could further industry is accelerating its attempts to we’re looking forward to not only seeing strengthen a multilateral trading system catch up with European, American, and it happen, but of being an integral part of through a strong engagement in the Japanese automotive environmental, it. WTO negotiation process and subse- and safety standards. The benefits of quent market liberalisation. China’s en- partnership however go far beyond any The author is President of ACEA and CEO of Fiat gagement is key to supporting the further one country’s borders, for example oil S.p.A. opening of markets and in applying trade consumption and emissions are global The article is based on the speech of Mr. Sergio and investment rules worldwide. concerns. Now that China is becoming a Marchionne on the CEIBS 4th Annual China major oil importer, the world oil market Automotive Industry Forum, transcribed by From the day to day business faces additional strain and the develop- Mark Reed, CEIBS MBA06 student.
38 TheLINK 2006 Winter Consolidation in China’s Automotive Industry
By Xu Heyi
China’s automobile industry is located in the very centre of the world’s emerging economic zone. In its ambitious endeavour to become the fourth global centre after the United States, Japan and the Western Europe, it needs to participate actively in the globalization process, and create a few world-class automobile manufacturers with their own competitive edges. Among other possible paths, “consolidation” is a viable option. To realize expansion of industrial scale and to adjust industrial structure, it is important to establish an automobile industrial economic zone and to concentrate the industry.
TheLINK 2006 Winter 39 InFocus
Advantages and Challenges of China’s Auto Industry China has set an ambitious goal for its automobile industry: it will develop two or three large auto enterprise groups who can compete with the global giants in scale and strength such that the existing layout of 6+3 will be augmented by these Chinese automobile giants. In 20 years, China will be likely to emerge as a new global centre of auto industry after the United States, Japan and the Western Europe. What makes a global automobile industrial centre? There are four qualities involved: the first is the size; the second is the synchronized growth of the auto industry with the development of raw materials and components industries; the economy. However, we need to bear need to go outside as well. The globali- third is the capacity to satisfy the global in mind that, despite the huge output, zation requires that we create favourable demand for products, technology and China’s auto industry still has structural conditions to absorb as much capital, services; and the fourth is R&D abilities. problems. For example, joint-venture technology and managerial experience car manufacturers dominated by the as possible from multinationals by Against these requirements, China multinationals take almost 80% of the means of international cooperation. For has five favourable conditions. The first is domestic market share, yet their export is China to emerge as a new world centre a good geographic location - China sits in merely 6% of their sales volume. In most of auto industry, it is necessary to allow the East Asia and the centre of a delta area cases, these enterprises still rely on their foreign manufacturers to come in. In consisting of many developing countries. foreign partners for manufacturing and theory, industrial transfer is a natural law This area has a population over half of assembling technologies. In the area of of economic development throughout the world, and in the next few decades key components and assembling work, the world and a must for multinationals. it will remain the most dynamic region there is obviously a higher proportion Joint venture is a way to combine the of the world economy. Second, China’s of foreign-investment. Meanwhile, the capital and advantages of the partners economy maintains a great momentum, growth of China’s auto industry is chal- to create a synergy. The problem with and its total size will be doubled over lenged by a whole array of issues like China is that the foreign shareholders are 2000 in 2020. By then, the annual vehicle energy and environment. Therefore, it complaining about excessive interfer- demand in China will exceed 20 million, is a must for China’s auto industry to be ence from their Chinese partners, which making China the world’s largest emerg- consolidated on the current basis in order prevents synergy from arising, while ing auto market. Third, China will main- to become a new global centre. the Chinese partners are concerned that tain its comparative advantage in labour their legal interests are not protected. resource for a long period. Fourth, China Strategies for These complaints and concerns can be has a more balanced and comprehensive Consolidation solved through communication. It is a industrial system than many other devel- “Go Global”. Since we aim to become crucial understanding that forming joint- oping countries. Last but not the least, a new global centre of auto industry by ventures is not a transient measure for China’s automobile industry has a solid cooperating with multinationals, there is China; it is a long-term strategic need. foundation. no other choice but to “go global” and Joint-venture should be taken as an im- to cooperate with international capital. portant business model for China’s auto To conclude, China is facing more Apart from inviting foreign investment industry and as a major way to realize opportunities than any other developing into China, we Chinese manufacturers industrial globalization. It provides a
40 TheLINK 2006 Winter guarantee for China to become a new two comparative advantages: cost and the reform of the state-owned assets global centre of auto industry. quality. Thanks to the open policy, management system has broken the almost all the international players of barriers between different industries. Create core enterprises. China has whole-vehicle and key components The fundamental framework for stra- over 20 car manufacturers and most of have entered China. Hence, China tegic alliance should take products as them are joint-ventures. It can be ex- has become a stage of global compe- the theme, capitals and contracts as pected that, by the end of the 11th Five- tition and also a learning platform, the bond, and economy of scale as the Year Plan or by the year 2010, some from which China’s auto industry will goal, allowing genuine resource shar- will grow and some will disappear as a greatly benefit. ing in R&D, components procurement, result of fierce global competition. By manufacturing technologies and sales then, Chinese giants will emerge with an Three Paths of network. annual output of 1 million, or 2 million, Consolidation or even 3 million vehicles. If this comes Create core enterprises, develop core Establish an auto industrial eco- true, China will have world-class auto competence and establish new alli- nomic zone. China has 31 provinces enterprises that can compete with multi- ances between core enterprises and and 27 whole-vehicle auto manufactur- nationals in both output and in scale. multinationals. A good example is the ers; in contrast, the United States has alliance between Renault and Nissan, 51 states but only 20 auto assembling Core enterprises refer to car manu- which makes Nissan their joint-venture. plants. Obviously, the U.S. auto indus- facturers with a variety of product lines Such an alliance is called strategic alli- try has formed a hub while China’s auto and an array of new models each year. ance. Although China doesn’t have an industry lacks such a centre. If China Obviously, the R&D of multinationals auto manufacturer as large as Nissan wants to become a new centre of the cannot satisfy all the overseas demand, and cannot form an alliance of the same world’s auto industry, it has to change which provides for local manufacturers scale, it has a huge potential market, the existing structure and geographic an opportunity to develop their own R&D a booming economy, abundant labour layout to allow one region to increase capability. Local companies are not likely resources and an open policy environ- its annual auto output to over 10 mil- to compete with international players in ment. These intangible resources will lion vehicles. The establishment of an technological competence for fairly a promote the rapid growth of core enter- auto industrial economic has four goals: long time, but they better understand the prises and allow them to establish new to become the biggest manufacturing market need and form their own competi- types of joint-ventures with multina- base, the largest export base, the centre tive edges. Additionally, core enterprises tionals. . of auto financing and trading, and the should have a huge size that allows them centre of auto technologies and R&D in to lower the cost and to enhance the Develop strategic alliance be- a long run. quality. They develop brand strength in tween domestic auto manufacturers. international markets by building over- It is a natural choice for China’s auto To conclude, the layout of seas facilities and by large exports. They industry to develop new strategic al- China’s auto industry will look like cannot be any of the existing auto groups, liance. First, the multinationals have this: the core enterprises are the points, but rather their subordinate manufactur- occupied the Chinese market and the strategic alliances are the lines, ers with independent legal person status. formed various strategic alliances and the industrial economic zones are Without core enterprises, Chinese auto through joint-venture and technol- the planes; they together constitute a groups will find it hard to survive in fu- ogy transfer, forcing Chinese partners promising picture of a new global cen- ture global competition. Therefore, the to fight for new models and product tre of auto industry. creation of core enterprises is of critical variety in partnership, which further significance for China’s auto industry. weakens and isolates Chinese auto The author is Chairman of Beijing Auto Industry manufacturers. Second, the new na- Holding Co., Ltd. Leverage our comparative ad- tional policy encourages the creation The article is based on the speech of Mr. Xu vantages in an open market. From of conglomerates and strategic alli- Heyi on the CEIBS 4th Annual China Automotive the perspective of competitive strate- ances to increase economy of scale Industry Forum, originally in Chinese and gies of the auto industry, China enjoys and industrial concentration. Third, translated by Cherry Zhong and Snow Zhou.
TheLINK 2006 Winter 41 InFocus
The Future of Automotive Industry: Clean Energy Vehicles?
By Wan Gang
Where will be the breakthrough in energy bottleneck for the sustainable development of China’s automotive industry? The answer can be hybrid-electric vehicles and new energy vehicles. In the near future, we might be able to drive our cars without refilling the fuel; what we need is just to recharge the power. The question is: where is the environment-friendly and sustainable clean energy from and what is its prospect?
short of the actual demand of consumers and manufacturers. The second option is to develop the gasoline substitutes as a supplement to the first option, such as gas and coal-base fuels, which can meet the fuel need of 100 million vehicles. Yet it is still a short-term measure, for the environment will not afford it in the long run. The last choice is to develop energy-saving hybrid vehicles and new energy vehicles, such as hydrogen and electric vehicles, to complement the two measures previously listed. And only by this means can we afford a total of 130 million vehicles demanded by China’s annual growth rate of 7%-8%.
It is widely acknowledged that the automotive industry is critical for China’s economic development. A pressing issue is what kind of vehicles we should de- Hybrid-electric vehicles to vehicle quantity in China? According velop to comply with the national energy and new energy vehicles to a recent study by China Academy of conservation goal and our expectation in China Engineering, there will be three possibil- for a better environment. To this end, If the traditional mode of energy con- ities for China’s automotive sector, given the Ministry of Science and Technology sumption continues at an annual increase the maximum supply of 150 million tons launched two key projects during the 10th of 5%, China will be facing a serious of petrol in 2020. The first is to retain the Five-Year Plan period. One is electric energy shortage and have to import 250 traditional gas engine technology with vehicles and the other is clean energy million tons of petrol by the year 2020. some improvements, and the maximum vehicles. The main issue in developing Yet, our goal is to save 100 million tons number of vehicles the petrol can sup- clean energy vehicles is to find suitable of petrol by the time, which means we ply is 80 million. But considering the gas substitutes. During the years between will have only 150 million tons for use current statistics of 35 million vehicles 1998 and 2005, much of our R&D work before 2020. But how does this relate already in China, this number will fall had been focusing on the development
42 TheLINK 2006 Winter of LPG (Liquefied Petroleum Gas) cars platform. The new R&D approach that core technology. To achieve these goals, and CNC (Compressed Natural Gas) leverages the comparative advantages universities, enterprises and research buses. The project of developing electric of enterprises, universities and research institutes should join hands in R&D to de- vehicles was launched in 2001, which institutes can be applied nationwide. velop key technologies for various whole- includes the development of pure electric vehicle manufacturers, and at the same vehicles, hybrid-electric vehicles and fu- Where is the new energy time industrial bases and key component el-cell vehicles. Testing was organised for from? production facilities should be created. final approval at the end of the 10th Five- The first practical question is where Different components can be integrated Year Plan. The result was that a dozen of the new energy is from or where we can on the powertrain technology platform domestic manufacturers had successfully get sufficient hydrogen? In fact, hydro- to support various R&D efforts. The sec- developed their own products, includ- gen is only an industrial by-product. ond question that should be asked is the ing FAW, Dong Feng Motor, Chang An When the coal is transformed into coke, quality of China’s proprietary fuel-cell and Chery. Now we have a number of coke-oven gas will be released which vehicles. It is hard to judge at this stage products in fuel-cell buses, fuel-cell cars, contains 55% hydrogen. If this part of when they have not been put in the mar- and hybrid-electric cars and buses. The hydrogen is purified and collected, we ket. However, there is a large international endeavours to promote LPG vehicles will be able to produce energy as many contest for all clean energy vehicles held by the government started even earlier. as over 34,000 tons in Shanghai every in Paris this year. All contestants were rig- Currently, there are 3,000 LPG buses year. The hydrogen-powered vehicle orously tested in 7 items. Under the same in Beijing and over 30,000 LPG cars in needs 1-kilogram hydrogen for every operation conditions, the Chinese vehicles Shanghai. Throughout China, there are 100 kilometres, which costs RMB35 proved to have the cleanest energy, but per- altogether 300,000 urban buses and taxis yuan. But the oil-powered vehicle like formed less well in braking and accelera- using alternative fuel in lieu of three mil- Santana 3000 would need 11-litre oil for tion due to the weight of the vehicles. All lion tons of gasoline. At the same time, every 100 kilometres, costing RMB55 contestant vehicles were graded by A, B, R&D centres of key components are also yuan at the rate of RMB5/litre. The first C, and D. Our vehicles got 4 As, 1 B, and established over the country. hydrogen station was started in Shanghai 2Cs, nearly playing even with Benz which before the National Day and is expect to got 4As and 3Cs. The rest of the contest- A new R&D model complete by the end of the year. ants didn’t perform as well as we did. combining forces of enterprises, universities, The government should promote It should not be a dream for every and research institutes different vehicles in different cities to Chinese household to own a car, but clean Due to the limited size of domestic manu- accommodate different needs. Hybrid- energy and environmental protection facturers, we choose an R&D model electric, fuel-cell and pure-electric seem to be the only way. Power train is that combines the forces of enterprises, vehicles are all possible options to only one facet, yet the most critical one, universities and research institutes. Take replace the traditional gas engine ve- for the sustainability of China’s auto- for instance the fuel-cell vehicles in hicles. The development of China’s mobile industry. It is the first important Shanghai. They were developed by the automotive industry will have to fol- step to solve the energy and environ- driving system platform of Shanghai low the clean energy path for the sake ment problems. On this basis, we should Fuel Cell Vehicle Powertrain System of environmental protection. continue to promote the industrialization Inc., jointly funded by Tongji University through enhancing manufacturing tech- and SAIC Motor in cooperation with a In the 11th Five-Year Plan, a new nology and vehicle design to meet the di- few other R&D teams with expertise in project on energy saving and new energy versified needs of consumers. components development. This power- vehicles was approved, encouraging train platform serves as a support base for technology integration and demonstra- The author is President of Tongji University. developing fuel-cell vehicles by various tion operation for fuel-cell battery. The article is based on the speech of Mr. manufacturers. The best illustration is Breakthrough is expected to be made in Wan Gang on the CEIBS 4th Annual China Shanghai Volkswagen’s Santana 3000 the industrialization of hybrid-electric Automotive Industry Forum, originally in and Chery’s Oriental Son, both of which vehicles, and electric-fuel vehicles will be Chinese and translated by Cherry Zhong and were developed simultaneously on this further promoted through the spread of Snow Zhou.
TheLINK 2006 Winter 43 BusinessPractice
Together We Succeed: Effective Ways for Making Core Employees Grow with the Company
By Audrey Wu
hile the rapid development of China’s economy is a bless- ing for most enterprises, it also leads to war for talents. How to attract, develop and retain the Wcore employees has become headache for many CEOs. Common instruments, such as decent salaries and benefits, promotion, and well-designed training pro- grammes, seem not sufficient for talent retention. Lured by abundant job opportunities in the booming market, talented people seem always ready to jump to the next destination. Is there a way out for nowadays CEOs tor- tured by endless talent war? A panel comprised of eight business executives from CEIBS EMBA classes shared their experience and insights on the topic on Sep. 15 at a CEIBS EMBA forum.
44 TheLINK 2006 Winter TheLINK 2006 Winter 45 BusinessPractice
Topic How to attract, develop and retain core employees
Moderator Gary Liu Assistant Director of the Case Development Centre, CEIBS
Name Title Type of company Topic
Managing Director of Ningbo Tech- Zhang Banghui Start-up Where to find talents? Bank Co., Ltd.
GM of Shanghai Huaihai Commercial Three elements for core Yang Chuanyua State-owned (Group) Co., Ltd. employees
Cross-culture Wang Xingshan VP of Inspur Group Co., Ltd. IT management
VP, HR & Admin of Adidas (China) Co., How to avoid paving way Yu Hua Foreign-owned Ltd. for others? Speakers HR Director of Getronics Information “Marriage” depends on Huang Jiwei IT Technology (Great China) effective communication
Director, Principle Consultant of “Using both hard and soft Yuan Lingzi Watson Wyatt Consultancy (Shanghai) Consulting hands” Co. Ltd.
Associate Director of Shun Tak Gu Qing Foreign-owned CEO’s role as a bridge Holdings Ltd.
VP of Longcheer Technology Regard talent as Deng Hua IT (Shanghai) Co., Ltd. comrade-in-arms
Talent Management: talented people, but how to attract Yang Chuanhua, the General Manager Different Company, Same them. A set of incentives, such as nice of Shanghai Huaihai Commercial, Problem? salary, dividends, or even stocks to which owns many brands and outlets According to a survey on 200 fastest talents (the company is preparing for along the famous Huaihai Road, one growing companies in the US several an IPO), work very well in retaining of the major commercial streets in years ago, most CEOs were worried core employees. His company is com- Shanghai, shared his three problems: about two questions: how to find posed of researchers who especially the top management always complain talents to serve their companies and value processes and long-term goals, for the lack of talented people, em- how to retain them. Leo Tolstoy, the but such people are rare in today’s ployees always regard themselves as famous Russian writer, once said, “All job market. So it has been difficult to talents without the recognition of the happy families resemble one another, find more talents who share the same top management, and the company each unhappy family is unhappy in its values. With the expansion of the com- has failed to keep talents despite long- own way.” Then, do different types of pany, it is also facing the bottleneck time investment in them. For example, companies have different problems in of management capability. Since the Huaihai once hired a young man with people management? company has already established eight overseas master’s degree, designed a subsidiaries, Mr. Zhang is now hungry way for him to the top management. Start-up: Easy to retain, hard to for talents experienced in managing Unexpectedly, he decided to resign attract large corporations. without knowing that a higher posi- For Zhang Banghui, who started his tion is waiting for him just two steps own company several years ago, the State-owned enterprises: ahead, because he felt his growth was real challenge is not how to retain problem of communication too slow and he needed more money to
46 TheLINK 2006 Winter realize his personal value. According When the company opened a subsidi- could not offer something special to to Mr. Yang, many core employees ary in Tokyo, it encountered more dif- retain them. say goodbye to the company because ficulties in managing local staff. they can not fully understand the com- Brainstorming on pany’s strategy, culture and the CEO’s According to Mr. Wang, the head countermeasures thoughts, and purely pursue short-term of a subsidiary must be a local person Corporate culture and training & benefits such as money, cars, apart- while the technical supports can be development are effective means for ment and quick promotion. sent from the headquarters. Since it is employee retention and the growth of so hard to manage cultural difference, companies, although different compa- IT industry: challenge of cross- it is more appropriate to emphasise de- nies may face different challenges in cultural management veloping internal talents than counting retaining talents. The CEOs attending “People are the most precious on professional managers from outside the forum shared their own experi- resource to the company” is best re- the company. ences in addressing the problems men- flected in the talent-intensive software tioned above. industry. The management of core Multinationals: How to avoid employee in IT industry is full of chal- paving way for others? Yang’s theory for core employee lenge because of the strong character Yu Hua from Adidas pointed out Yang Chuanhua elaborated his theory of IT people and the fierce competition that sports product and retailing are for core employee management. In his for IT talents. Wang Xingshan used the among industries most hungry for opinion, core employees should have phrase “the most uneasy” to describe talents. It is hard to find experienced three elements: loyalty, value to the the feature of talented people in this people who can start working imme- company, and high potential. Three el- industry. According to his experience, diately. If recruiting from other indus- ements will be useful for making core when the company is small, career tries, the employees will need lots of employees grow with the company: growth, benefits and interpersonal training. The challenge in China’s tal- common incentives such as stocks, relationships are the three most im- ent war is to find experienced people bonus and welfares, career opportuni- portant factors for retaining talented who fit into the company, recognise ties including skill improvement and people: With the company’s expansion the values and culture of the company promotion, and necessary competition and internationalisation, family feel- and have team working sprit. Another to keep core employees with a sense of ing weakens while cultural difference challenge is that the growth of the crisis to make progress. emerges as a new challenge. His com- company is faster than that of core pany’s experiences shows that cultural employees. Therefore, companies In addition, Mr. Yang also suggest- difference exists not only in different should find ways to develop its peo- ed three stages of the growth of core countries, but also in different regions ple fast enough to catch up with the employees. In the first stage, a core in the same country. Headquartered growth pace of the company. Many employee will be gradually promoted in Jinan city of Shangdong Province, companies may feel that they’ve to the top management. In the second the company benefited from the employed so many people but capa- stage, a core employee will leave the Shangdongness’ preference for stabili- ble people seem to be always only a company for other opportunities if ty in its early years. Shangdongness do few. Companies must realise that it they feel unsatisfied with their current not change their jobs frequently. This takes time to train and develop core employers. A core employee will have is very important for a software com- employees. to retire in the third stage which means pany because the knowledge can be the end of his/her career life cycle. easily accumulated if employee turno- Another headache for multination- ver is low. As the company expanded als is that the talented people they The “marriage” between the to Shanghai and Guangdong, the trained will soon become the targets of company and talents characteristics of the local employees head hunters in the market. As these Huang Jiwei from Getronics men- changed accordingly. The Shandong people often have high self-expecta- tioned that though there are a variety culture doesn’t work for managing tion, they are more likely to change of management tools available, few Shanghainess and Guangdongness. their jobs if their current employers companies could use them effectively
TheLINK 2006 Winter 47 BusinessPractice
due to the inappropriateness. Many Use both hard and soft hands to invest one million in HR project. implementers don’t fully understand Yuan Lingzi from Watson Wyatt For many Chinese companies, in the function, performance, and usage Consulting gave a prescription for fact, there is still a long way to go to of these tools, and use inappropriate companies troubled in “HR illness”, reach the stage of being really “people tools in inappropriate time. Therefore, i.e. “well aware of the reality and use oriented”. companies should not blindly believe both hard and soft hands”. in the effectiveness of various tools. In the light of the reality of One feature of the current Chinese China’s talent market, Ms. Yuan as- As to the case mentioned by Mr. talent market is the frequent flow of sumes that the right solution is to use Yang in failing to retain a talent, Ms. talented people. According to Watson “both hard and soft hands”. Huang described the relationship Wyatt’s survey, China’s employee between the company and the young turnover rate has been the highest in First, a company should establish a man as “marriage”. Failure of a “mar- Asia-Pacific region during the past clear “employer brand”. It is difficult riage” could be caused by the lack of three to four years. China’s economic for companies, especially small and enough understanding before getting development has brought lots of op- medium-sized companies, to attract married, other after-marriage prob- portunities not only for companies but talents. Capital strength alone is not lems that make employees change for talents. Under such circumstance, it enough, since talents often consider their minds, or the appearance of a is no surprise that talents seem disloyal multiple factors when they decide third party who lures the employees to their employers, which may be the which company to join. Companies for another job. The HR structure of major reason for all the problems in should establish “employer brand” and Huaihai seems to be pretty sound and talent management. a good image in the job market just as mature. But why are there still con- what they do with their product brand. flicts between the top management Another feature is that demand for and core employees? And why did the talents exceeds supply. China’s current Second, a clear talents identifica- master change his mind? Ms. Huang education system and environment are tion system is indispensable. Some suggested that it is true that environ- still unable to produce a large number companies can’t find the right talents mental changes could be part of the of talents who meet the needs of cor- because they don’t have a clear defini- reason, but the key lies in whether the porations, not to mention experienced tion of what kind of people they are company keeps emphasising and in- people who can start working without looking for. stilling corporate culture, and whether training. In general, the capabilities of it has the right measures to test that Chinese talents are lower than those of Third, use both hard and soft hands the corporate culture has been ef- the Indian, including language ability, to maximise the value of talents. Hard fectively accepted by all employees. working skills, etc. On the other hand, hands include proper incentive system Lack of effective communication will lack of transparency in talent market and favourable working environment. often lead to “having different dreams and asymmetric information make it A well-designed incentive system will in the same bed”. There would be a harder for employers and employees to be very helpful for motivating and different ending, should the company find the right target for “marriage”. retaining talents. A healthy working have told the leaving master earlier environment includes not only sound about his career plan. When it comes to “people ori- benefits, but also well-established ented”, we should be aware of the gap working procedures, which allow According to Ms. Huang, HR between slogans and realities. Owing employees work more smoothly and should act as the “wife at work” or to the lack of clear messages from flexibly and then obtain more sense working partner for the CEO. However, CEOs, HR department often find it of achievement. On the other hand, many CEOs are usually too busy to difficult to set criteria for selection, re- negative environmental factors such communicate their thoughts with HR tention and incentive of talents. Many as bureaucracy and corporate politics, department effectively. It is not good CEOs are talking about the importance should be driven away. Soft hands re- for creating a culture of effective com- of people, but would spend millions of fer to managerial abilities. Companies munication in the company. dollars in advertisements while refuse should invest more in training manag-
48 TheLINK 2006 Winter tunity to assess the core employees’ potential but give them more psycho- might not bring revenues in short term logical satisfaction and sense of being but will surely benefit the company recognised. ers because many employees resigned itself in the long run. Therefore, CEOs, due to the incompetence of their su- who control resources, should pay Regard talent as periors. To sum up, a company should more attention to the investment in comrade-in-arms pay attention to hard hands--incentives HR, which is of great significance for Deng Hua shared his experience from and environment--and soft hands- breaking through the bottleneck of tal- Longcheer, a high-tech company. The -managerial abilities. ent shortage. mission of the company is to become a respected company in the industry Fourth, companies should, in the CEO’s role as a bridge through ten to twenty years’ efforts. final sense, retain people with corpo- Gu Qing, leader of Shun Tak’s China In line with this mission, Longcheer rate values. In order to retain talents, business, described the role of CEO in regards core employees as comrades- most companies keep optimising talent retaining in three phrases: serving in-arms fighting together and thus estab- their salary system again and again. as a link between the upper and the lower lishes strong cohesion in the company. However, according to Ms. Yuan’s levels, horizontal integration and “pull- Its staff work hard when the company experience, what keeps people stay in ing up seedlings to assist their growth”. is in good situation, and will not change the long run is corporate values. Given their minds in difficult days. Mr. Deng the fierce competition for talents in The first phrase means that a CEO agreed that corporate values are very im- China, companies should not place a should convey and implement the de- portant to retain talented people. When high expectation on talents retaining. cision from shareholder meeting and a person wants to start his own business, A survey from Watson Wyatt shows board of directors to subordinates, and he should think over the mission of the that it is good enough for an employee “fight” against the shareholder meet- company; when a person joins a com- to work for a company for three years. ing and board of directors on behalf of pany, he should find out the exact values People who choose to stay may not be staff when necessary. Mr. Gu defines of that company. Though there are many the best in terms of capacity but they himself as a coach whose respon- methods for talent management, it is the recognise the corporate values and will sibility is to train his managers and CEO who makes difference in HRM, grow with the company. establish a favourable environment for because HR department is only an in- them. “Horizontal integration” refers strument. When recruiting, Longcheer Last but not the least, developing to the coordination with headquarters puts great emphasis on the match of people inside the company is more and other departments/divisions and values between the company and the important than smart recruitments, integrating various resources to fa- candidate. The company sends senior given the shortage of experienced cilitate employees’ work. “Pulling up executives to EMBA programmes and talents. After all, god helps those who seedlings to assist their growth” means has established comprehensive training help themselves. In fact, large corpo- to think in others’ shoes. Asking core system. rations such as Motorola and HP all employees to make decisions from the have long-term training programmes. perspective of top management level The article, originally in Chinese, is translated Training means investment, which will not only serve as a good oppor- by Wang Jiahui, Audrey Wu and Gary Liu.
TheLINK 2006 Winter 49 SchoolUpdates
Prof. Kwaku Atuahene-Gima: How I Get to Manage My Time for Research
By Audrey Wu
r o f . K w a k u only about 10%. Most authoritative can judge your quality as a reviewer. Atuahene-Gima was journals have the same acceptance Before becoming a member of the recently appointed rate. Members of the editorial board board, I had been an ad hoc reviewer to the editorial board are sort of the gatekeepers for quality. for the Journal of Marketing for may of the Journal of They are the people required to look be five years. PMarketing, the leading scholarly pub- at the work of other academics to help lication in the marketing field. He’s the editor decide whether such work is You are a productive researcher. been ranked among prolific research- something that makes a new and im- What is the drive behind this? ers worldwide, while sitting on the edi- portant contribution to knowledge in Smart and hard work; and an ability to torial boards of four prestigious schol- marketing, and thus worth publishing. ask creative theoretical and practical arly journals. How does he manage to The board is composed of academics questions. However, the most important use the limited time efficiently? Here, from top universities with good theo- thing is interest. Everybody has some Prof. Atuahene-Gima shares his “se- retical and empirical knowledge and aim in his or her life. I don’t want to get cret” with The Link editor. “Interest”, contributions in the field. To be the tons of money. What I want to do in my as he said, is what lies behind his member of the board, you must firstly life is to make a significant contribu- research achievements, which sounds show your competence by publishing tion to marketing knowledge. If, after I quite simple logic. And let’s see how in the Journal consistently; and also am dead, people continue cite and use he turns this “interest” into research publishing in other top tier academic my work, ideas and research results productivity. journals. I have over the years pub- for their own research – that to me is lished several articles reporting results more satisfying. I will be dead but my Could you give a brief introduction of my research on innovation and new tongue will never be rotten. That is what of the Journal of Marketing and its product development in China in this pushes me on. I like to ask interesting editorial board? Journal, and in several top tier jour- and important questions in the field and The Journal of Marketing is the lead- nals like the Academy of Management be recognized by my academic peers ing academic journal in marketing Journal, the Strategic Management as making significant contributions to in the world. Articles qualified to Journal, the Management Science knowledge in the field. For example, be published in the journal need to and Organization Science. Second, I have won the best paper awards at have both theoretical and empirical you have to review articles for the the American Marketing Association contributions. The acceptance rate is journal for a long time so that editors Educators’ Conference. I have been
50 TheLINK 2006 Winter invited by many universities and by the Academy of Management to present my ideas on “How to Publish in Top Tier Journals” to other academics. In a paper I published in the October 2005 issue of the Journal of Marketing, I used the data from Chinese companies to resolve a paradox in the management of product innovation that has been baffling marketing scholars for many years. A summary of this article was featured in the American Marketing Association “Marketing Thought Leaders Newsletter” April 2006. This newsletter publishes only Insights from Leading Experts in Marketing Today and features only “the cutting-edge is- sues and concepts in marketing today- -and tomorrow.” When you think of important questions, theoretical or practical, you have the urge to solve them. When I have an interesting idea, I don’t want to lay it down. I have to work on it. tions, so I enjoy it. China is an inter- this moment, I have some 12 research How long do you work every day? esting environment to explore new articles and projects underway. It’s Usually about 12 or so hours. I tend theoretical and practical questions and very risky if you don’t have multiple to start work early in the morning, to resolve some vexing issue in the projects, because some of the papers because few people are around and marketing literature. are going to be rejected. Maybe you it’s quiet. I can think very clearly are good at what you are doing, but during the time. Research demands Time is limited. But you’ve al- that doesn’t mean that every one of significant concentration. Of course, I ready been on the editorial boards them will be successful. So I try as also have time to play, to enjoy my life of 4 scholarly journals. What is much as possible to have co-authors, and with my family. But it’s still hard your “secret” to use your time so students and research assistants. and long work. Sometimes, when I go efficiently? That’s why I am able to be produc- home, I still work, particularly when I People talk about time management. tive. To have multiple projects, you have articles to review for journals like But I don’t think I have a schedule to are also able to ask very creative and these on my table now. manage my time. What I do is plan my interesting questions that are important works with deadlines. To me, one of for academics and managers. Different Are you always such a hard-worker? the important things is that if you are projects have different questions, and I’ve always been a hard-worker but able to meet deadlines, you get a lot different questions help and feed on perhaps more like a smart worker. of things done. When I get a research each other – and with the interactions Most of us have to work hard to get project, for example, I set a deadline with my co-authors, students and as- where we are. I just like to do things for myself. Within this period of time, sistants - I am able to always come up that I am interested in. I like to study, I try as much as possible to finish it. with very interesting and important so I went to school and came here. I contributions. But of course, you must like academic work, so I do it. I like I also have multiple projects going manage this complexity. And I think I research and ask very interesting ques- on at the same time. For example, for am pretty good at that.
TheLINK 2006 Winter 51 SchoolUpdates
Professor Xu Xiaonian Professor Lydia Price Professor Arthur Yeung
2006 Teaching Excellence Award
h e C E I B S 2 0 0 6 about…It is known that teaching is a Prof. Kalun Tse, Prof. Xu Dingbo and Teaching Excellence weighty task here. But your (students’) Prof. Xu Xiaonian have all received Award was announced diligent learning encourages me to be the award for two consecutive years. T a t t h e E M B A 2 0 0 4 more diligent and earnest in preparing Graduation Ceremony on September and teaching the course.” Since its establishment in 1994, 23. This year's three winners are Xu CEIBS has been investing heavily in Xiaonian, Professor of Economics The announcement of the annual faculty development and has built a and Finance, Arthur Yeung, Professor CEIBS Teaching Excellence Award strong faculty team. Starting from a of Management and Lydia Price, is one of the most important occa- very small group of full time faculty, the Professor of Marketing. sions of the school. Since its launch in number of full-time professors has now 2001, ten professors have received the exceeded 30. CEIBS not only focuses On behalf of the award winners, award, including Prof. Wu Jinglian, on teaching, but also lays great impor- Prof. Yeung gave a short speech to the Prof. Keith Goodall, Prof. Jiang Ping, tance on research and knowledge crea- graduates to express his pride of being Prof. Kalun Tse, Prof. Katherine Xin, tion. Currently the school has 9 chairs the teacher to the excellent group of stu- Prof. Xu Dingbo, Prof. Ding Yuan, and 9 research centres. The annual dents. He said: “To receive the degree Prof. Xu Xiaonian, Prof. Lydia Price Teaching Excellence Award signals the of EMBA from CEIBS through two and Prof. Arthur Yeung. Among them, school’s efforts in providing the best years’ arduous study is worth boasting Prof. Wu Jinglian, Prof. Keith Goodall, management knowledge.
52 TheLINK 2006 Winter news briefing
Spotlightsspotlights based Financial Times, released on October EMBA alumnus Mr. Song Wenming won 23, 2006. The school’s EMBA has been the championship for the first season. As CEIBS Launches Week-long Online successfully ranked among global top 50 for a result, he also won RMB10 million from Programme on FT.com six consecutive years, which certificates its venture capital to start up his own business. In partnership with the FT.com, CEIBS has consistent quality in providing the best man- recently developed an innovative online agement education in China and worldwide. In the last round of the game, the com- programme “Growing Business in China - petition between Song and Mr. Zhou Yu who New Opportunities”. The week-long online The rapid development of China’s won the 2nd price was very fierce. Mr. Liu programme was launched on the FT.com economy was clearly reflected in this year’s Chuanzhi and Zhang Ruimin, assigned as website on Monday Nov. 20th. FT EMBA ranking, with four out of the top 20 the judges of the competition, both voted listed programmes located in the emerging for Song without any hesitation due to his Throughout the week, CEIBS distin- country. “This is a clear indication that the excellent performance. During the live show, guished professors shared their knowledge overall quality of management education in Song talked about CEIBS and expressed with a worldwide online audience: China has risen to a new height”, according his gratitude to the school for many times. to Prof. Pedro Nueno, Executive President of CEIBS is also proud of Song. * Professor Willem Burgers: “Market CEIBS. Development and Marketing in China” Song Wenming comes from Hefei, Anhui * Professor Arthur Yeung: “Talent According to this year’s FT survey, province. He joined CEIBS EMBA program Management in China - Challenges and CEIBS was listed No. 2 in Asia in Aims in 2003 and received his master degree in Opportunities” Achieved Rank, No. 1 in Asia in Salary 2005. Presently he is a senior manager in a * Professor Henri Claude de Bettignies: Increase Rank. Among the four leagues of private company. “Cross Cultural Awareness and B-schools divided by the FT, CEIBS EMBA is Dilemmas for Doing Business in China” in the second league which includes schools 2007 "CEIBS Evening" New Year * Professor Juan Antonio Fernandez: listed from No. 7 to No. 18. Concert Held in Beijing “Leadership for Success in China” * Professor Xu Xiaonian: “Success and CEIBS EMBA programme is the largest Risks of China’s Economy” (online Q&A EMBA programme in the world with an an- with FT.com audience) nual admission of 630 students. Over the past 12 years, it has produced numerous Commenting on the launch of the pro- business leaders, senior executives, senior gramme, Dean and Vice President of CEIBS, government officials, entrepreneurs, etc., Professor Rolf D. Cremer said, “CEIBS is one who have been playing important roles in of just three business schools in the world boosting China’s economic development. and is the only business school in Asia to be invited by FT to develop this type of pro- CEIBS Alumnus Song Wenming The cheerful rhythm of “Fagro’s Wedding gramme (the others are Columbia and LBS). Wins the Championship on CCTV Sinfonia” unveiled the curtain of the 2007 It is a great honour for CEIBS.” Program - "Win in China" “CEIBS Evening” New Year Concert in the T h e f a m o u s Music Hall of Zhongshan Park, Beijing, on To view the programme click: business pro- December 9th, 2006. www.ft.com/businesseducation/ceibs. gram on CCTV e c o n o m i c Together with its alumni, customers, CEIBS EMBA Ranked Global Top 50 channel “Win in and other stakeholders, the school took for Six Consecutive Years China” closed the opportunity to welcome the arrival of The China Europe International Business its curtain on the New Year and to celebrate the 20th School was listed No. 17 in the 2006 December 9, Anniversary of the First CEMI (China-EC Global EMBA ranking by the London- 2 0 0 6 . C E I B S Management Institute, the predecessor of
TheLINK 2006 Winter 53 SchoolUpdates
news briefing
CEIBS) MBA Graduation. Renowned con- consolidation and globalisation of stock Copenhagen Business School of Business, ductor Mr. Tan Lihua, famous pianist Mr. exchanges. The speech was chaired Cheung Kong Graduate School of Business Kong Xiangdong, and the musicians from by Professor Pedro Nueno, Executive and China Europe International Business the Beijing Symphony Orchestra jointly pre- President of CEIBS, followed by a Q&A School. sented a marvellous night of music to the session with the audience. audience. The theme of this year's meeting was Mr. Thain’s visit to China underlines "Information Literacy and Lifelong Learning: Founded in 1984, CEMI was a pioneer China’s growing importance in the global Identifying and Meeting Needs in the Digital in the business education in China and the capital markets and as the source of stock Environment". During the four-day meet- cradle of the early MBAs of the country. exchange listings. The NYSE trades the ing, members introduced the information The first batch of 35 MBA students of CEMI shares of 31 companies from Greater China literacy programs in their schools. They was graduated in 1986; since then they currently. Chinese private companies have shared experiences for success as well had been actively involved in the economic been among the NYSE’s hottest IPOs this as problems and challenges were faced. development of China. year. Information Literacy has become a very important concept especially in the business As a leading international business Professor Zhang Weijiong, Vice- environment. In the ocean of information, school, CEIBS has successfully sponsored President and Co-Dean of CEIBS said: “in getting the needed information in a timely high-level concerts in the capital for con- addition to the SOEs already listed there, manner required sophisticated, but not secutive 5 years since 2002, which displays the private companies are starting to target basic, search skills. In order to let the busi- the school’s efforts to build a cultural envi- the NYSE.” Mindray Medical International ness students be aware of this, librarians ronment. Such events also serve as an ex- Limited, a private company founded by should take a proactive route. It is librarians' cellent platform for reunion and networking. CEIBS alumnus Mr. Xu Hang, was just listed responsibility to guide the students to be on the NYSE a few weeks ago. information literate and eliminate their infor- Forums forums mation barrier for success. 5th Annual Meeting of the NYSE CEO Visits CEIBS Asia-Pacific Business School ProgramProgrammes Librarians' Group Held at CEIBS China Europe International Business School The Fourth AMP Class Opens (CEIBS) held the 5th annual meeting of the On the afternoon of November 2, 2006, the Asia-Pacific Business School Librarians' Opening Ceremony of the fourth Advanced Group (APBSLG) on the Shanghai Campus Management Programme (AMP) class was from September 19th to 22nd. held on CEIBS Shanghai campus. Over 50 participants from more than 10 industries Fifteen library directors and busi- throughout China attended the ceremony. ness librarians from business schools or Most of them are senior executives from fast universities in Asia-Pacific attended the growing enterprises like those of the previ- meeting. These schools included Nanyang ous three AMP classes. Technological University, Singapore Management University, Singapore Institute Based on CEIBS’ meticulous scholar- On November 28, 2006, Mr. John A. of Management, National University of ship, advantages in the combination of Thain, Chief Executive Officer of NYSE Singapore, Sasin Graduate School of Chinese and Western style of teaching, Group Inc. visited the China Europe Business Administration, Melbourne and internationalized schooling concept, International Business School, where he Business School, Macquarie University, the AMP Programme has become one of delivered a speech to an audience of over Australian Graduate School of Management, the best choices for executives of China’s 300 on the growth of the Chinese capital Indian School of Business, INSEAD, KDI fast growing enterprises to improve their markets and the NYSE’s leadership in the School of Public Policy and Management, general management capabilities. The pro-
54 TheLINK 2006 Winter news briefing gramme has very good reputation among its Red Wine” aroused keen interest among ered a warm speech. Beginning from Mr. Liu participants, which is reflected by the fact some alumni. Atmosphere of merriness and Deshu, President of Sinochem and the chair- that most applicants choose CEIBS at the peacefulness filled up every corner of the man of the Class Committee, the EMBA’96 recommendation of previous participants. school, and everybody enjoyed the heart-felt participants in turn talked about their careers As the seats available for the programme is pleasure of getting reunited at CEIBS. and lives over the past 10 years. The two- limited, some applicants who have passed year spent at CEIBS is the most unforgettable, interviews have to be scheduled for the fifth Climax of the whole-day activity came where they built up friendship, linking every- AMP Class in 2007. In addition, CEIBS rose when all families gave their artistic talent one closely from then. to 35th from last year’s 37th in the world- performance and participated in the child- wide Executive Education open programme ishly delightful “Joyful Jumping”. Gradually A short meeting witnessed long-lasting ranking released in this May by Financial the curtain of “Family Day” dropped, ending and profound friendship. In the song of Times. Up to now, CEIBS EDP programme with a “Happy Birthday” song sang together “Unforgettable Tonight”, the classmates (open programme) has been listed among by all the kids and adults for those little reluctantly bid farewell to one another and global top 50 for 5 consecutive years. friends who happened to celebrate their looked forward to another happy reunion in birthdays. When bidding reluctant farewell the future. The new open programmes launched to each other, both the classmates and their this year have also been widely recognised families expressed a high expectation on the CEIBS Establishes New by the business community and applicants reunion at the next 3rd Family Day. Partnership with US University have to wait for vacancies for almost all the At end November, CEIBS MBA established a open programmes. CEIBS EMBA96 Beijing Class Holds new exchange partnership with the Fletcher "Over the Past Decade" Class School of Law and Diplomacy at Tufts Link of list of open programmes: Meeting University, USA. From year 2007, two stu- http://www.ceibs.edu/execed_c/programmes/ dents from each institution may spend the open/index.shtml fall semester/term of their second year at the other institution as full-time MBA/MALD EMBA Celebrates "The 2nd EMBA students. Family Day" The 2nd EMBA Family Day was held on Founded in 1933, the Fletcher School the afternoon of November 18th, 2006 on has been committed to nurturing business CEIBS campus. leaders who can steer their firms in the constantly changing global market. As the Allured by the rich and colorful activities oldest graduate school for international re- sponsored by the school, more than 300 On Oct. 14, 2006, CEIBS EMBA96 lations in the US, the Fletcher School ranked alumni and their family members came to Beijing Class enjoyed an exciting reunion 4th by the Princeton Review in 2005 in celebrate the Family Day. Children were to celebrate their 10th anniversary of Masters in International Affairs Programme. deeply indulged in various activities on cam- admission. The attendance rate at near pus, while the lecture on “How to Appreciate 90% ensured the meeting an enthusias- Fletcher School’s strengths in law and tic atmosphere. diplomacy combined with CEIBS MBA pro- gramme with China focus will supplement Vice President and Co-dean Prof. Zhang each other and undoubtedly enrich the in- Weijiong, attended the meeting on behalf of ternational experience sharing and broaden the school. Prof. Zhang introduced CEIBS’ the global view for students from both sides. recent development and the construction of the Beijing campus, and affirmed the The university has been ranked 27th achievements made by the alumni. Mr. Jan among all America’s Best Colleges 2007 by Borgonjon, CEIBS Board Director, also deliv- U.S. News and World Report.
TheLINK 2006 Winter 55 CEIBSfoundation
“You Are Never Too Old to Go Back to School” Interview with Mr. Kuno Kohler, Regional President, North Asia, Ciba Specialty Chemicals
By Seánie Comerford
Name: Kuno Kohler Nationality: Swiss Education: Certified Accountant (Switzerland), Masters Degree, University of Leeds, (UK) Current Position: Regional President, Asia North, Ciba Specialty Chemicals
ith its presence in China dating back to 1886, Ciba Specialty Chemicals established its first representative office in Shanghai in 1935. It has now developed a network composed of a holding company, 3 trading companies, 3W branch offices, as well as 12 Production Sites across China. In 2005 Ciba also launched a global R&D centre in Shanghai. In this interview, Mr. Kuno Kohler, regional President, North Asia of Ciba Specialty Chemicals, reflects on their challenges, achievements and what lies ahead for Ciba in China; he also shares his 21 years experi- ence of working and living in Asia Pacific.
56 TheLINK 2006 Winter Ciba has a long history in China fect, allow us to develop products suit- proposition to our customers. Local (dating back to 1886) currently able for the domestic market with the companies, particularly the private operating 12 production sites, 3 ultimate intention of marketing them enterprises, are growing rapidly every trading companies and an R&D globally thereafter. We also realized year, their flexibility and agility to Centre. What is your ownership that the need for technical services adapt to changes are certainly impres- structure in China and what is your given by Mandarin-speaking techni- sive, their production costs are low, strategy behind this? cians and scientists is becoming more their expectations for profitability are We are open to different possible own- important for our many local custom- more modest and often cash rather ership structures in China; fully owned ers. Furthermore, the number of quali- than EBIT-related. On the other hand, WOFE’s, majority JV’s, 50/50 JV’s fied chemists and chemical engineers these companies still find it difficult to and minority JV’s. Generally, the pref- in China is on the rise although we do expand into regional or global markets erence is to have control ownership but need to further train them to operate in because their business model is often we are also prepared to enter into joint- an international network of scientists. opportunistic rather than sustainable, ventures if we find a dynamic but reli- I believe we are seeing a new trend in their brands are weak and their inter- able local entrepreneur. So far we have R&D investments in China; even more national distribution network insuffi- had good experiences with partners so once the perception of inadequate ciently established. from state-owned enterprises; new IPR protection is altered. joint-ventures are also always consid- How does Ciba attract manage- ered as an alternative to fully owned What is your best advice for man- ment talent to an arguably “un- companies on a case-by-case basis. aging a JV in Asia and in China sexy” industry? specifically? In China, the chemical industry is What are the main challenges Get to know the partner quite well be- still seen as a growth industry and emerging from the Ciba production fore entering into a partnership, that’s an industry that will develop further, sites? Any surprises? the first step. More often than not, it particularly the so called “downstream We know that many local competitors is helpful to first enter into a sourcing sector” which is closer to the end-users in China are able to produce similar or tolling beforehand. Also, the strate- in the value chain. This segment of the products for a fraction of the costs gic intention for both parties must be chemical industry depends a lot on in- of our plants in Europe or North clear and very openly discussed before novation and good marketing; all these America. Over the years we have signing an agreement. This sounds disciplines attract young talents. gained a lot of experience to reduce obvious but in reality many joint-ven- our capital investment in our plants tures are set-up all too prematurely and One of Ciba’s HR values is to give in China through sourcing equipment more driven by short-term business your people “the chance to show locally and using local engineering considerations. For a chemical com- initiative and take responsibility”. services. However, we are not pre- pany, it is in the interest of the part- How does this work in China com- pared to take any risks of bringing our nership to clarify what (operational) pared with other countries in the investment costs to a level we often standards need to be followed. region? see with local private entrepreneurs The workforce in China is on the aver- outside of the major chemical indus- How is Ciba positioned to com- age much younger than in most other try parks, nor to jeopardize our strin- pete with local Chinese players in Asian countries. These young people gent global safety and environmental the specialty chemicals industry? who have grown up during boom years standards. The key is innovation with a constant of China are much more confident drive for new products, improvement in their own abilities than elsewhere. In 2005, Ciba established an R&D of processes, the offering of competent They are used to competing in a com- site in Shanghai. What was the technical services and the maintenance petitive environment, be it in their strategy behind this and how is it of a global brand. To differentiate formative years in school or in a tough working? purely on costs will be tough for a market once they enter the workforce. The objective is to really bring R&D global company like us and we must They are eager to impress and advance closer to the China market and in ef- therefore have a convincing value in their careers even though they still
TheLINK 2006 Winter 57 CEIBSfoundation
have relatively little experience. One light industry). I had been looking ther specialize in the finance field as I thing I noticed which could be due to for a company with an international wanted to broaden my scope and when cultural reasons is that the responsibil- presence which would give me the op- I was given relatively early in my ity part is still “delegated” upwards to portunity to pursue a career outside of career the opportunity to run a Group their superior. Switzerland. This is one of the main Company in Taiwan, I started to find it reason why I joined Ciba-Geigy. I have fulfilling to work with people from dif- What was the driving force behind never regretted this decision as the ferent backgrounds. As a non-chemist Ciba’s investment in developing company gave me the opportunity to in a chemical company it is always a a joint management develop- move around the continent for the last challenge to understand how the in- ment programme with CEIBS and 20 years. dustry operates, life-long learning is INSEAD? Where was the biggest therefore the only way to keep up with skill gap? the ever changing business world. We need to groom more senior managers coming from Asia as our What motivates you most about business exposure in this continent living and working in China now? increases continuously. Close to 30% No doubt, China is presently the most of our global business is now gener- dynamic market in the world. Despite ated from Asia but Asian managers the growth rates and the many chal- are still underrepresented in the lenges the country faces, I believe senior management. We therefore the opportunities still outweigh the decided on an initiative to accelerate challenges and that it is just a mat- the development of our Asian talent ter of who can best take advantage and set out to do this programme of the opportunities. I see it as my with the two of the most famous In your 21 years’ experience in most important task to influence business schools in Asia, INSEAD Asia, where was the most chal- our HQ decision-makers to give us in Singapore and CEIBS in Shanghai lenging country for you to work the resources to further expand and – the reason being to have a bal- and why? strengthen our position in China over anced exposure to the Northern and The most challenging assignment is the coming years. In addition, I do Southern hemispheres of the region. always the first one because no matter like to contribute to our efforts to de- The biggest gap with our talent pool where this is, this is when you have to velop our workforce in China and to is the leadership skills to operate in a first integrate with the whole family groom home-grown talents as future difficult cross-cultural environment into a new society and adjust to a new leaders for our company. in Asia-Pacific. We realize that their culture. Once one has successfully technical skills, result orientation mastered this transition it becomes What is the best advice you would and communication are excellent but much easier each time. Now that our give to an MBA student in China that there is still room for improve- kids have left for college, I could im- today? ment in strategic thinking and the agine living and working in almost any My advice would be to always remain all important management skill to country in Asia. open, tolerant and adaptable. An MBA develop people. is an important milestone in one’s ca- What or who influenced you most reer but not a substitute for work expe- You have held Senior Executive to go from a career in finance to a rience. Experiment and try out differ- positions in Asia since 1984. What general management leadership ent fields when you are still young but motivated you to leave your native role? once you have found your preferred Switzerland back then? A financial education is always a discipline or industry; building up a I always wanted to live abroad and very good base for a general manage- logical track record is more important. with my finance background, I had ment role because it teaches you the And finally never give up the quest to the opportunity to work in all sorts essentials to make sound economic learn more, you are never too old to go of industries (banking, trading, hotel, decisions. I was never too keen to fur- back to school.
58 TheLINK 2006 Winter news briefing
Telefónica Joins CEIBS Banco Sabadell Corporate Sponsor supports CEIBS Centre Partnership Network for global Management
Dr. Joerg Ostertag, President of Lilly China
Lilly continues Strong Banco Sabadell, the fourth largest bank Partnership with CEIBS in Spain, has enjoyed a close associa- Eli Lilly has been a corporate spon- tion with CEIBS since 1999. In 2002, sor partner and executive development the Banco Sabadell Scholarship was programme (EDP) client of CEIBS since Telefónica, one of the world’s leading awarded to CEIBS MBA students and from 2000. In addition to co-developing what providers of telecommunications, has 2003-2006 the bank has contributed is now one of the most successful execu- confirmed its support to assist funding the to the CEIBS Development Fund. Under tive programmes at CEIBS, the Diploma activities of the CEIBS Centre for Global the new partnership from 2007-2010, in Hospital Management Programme Management, for a three year period to Banco Sabadell will support the activi- (DIHMP), Lilly is one of the school’s most 2009. ties of the new CEIBS Centre for Global active company specific programme(CSP) Management. Activities in the pipeline clients having already developed over 600 As part of collaboration with the Centre, include an international seminar in of their executives through programmes Telefónica will assist bridging relations and Brazil scheduled to take place in early at the school. Lilly was also a premium greater understanding between business 2007. Mr. Guillermo Diaz Sevilla, Chief partner of the 2nd Annual CEIBS Health interests in China, Europe and in Latin Representative of Banco Sabadell in Care Forum on Sept 15, 2006 during America where it is the number one investor Shanghai said: “Banco Sabadell and which Dr. Ostertag, President of Lilly in the region. CEIBS share the same spirit and views in China delivered an engaging speech on China; a long standing project based on the subject of “Pharmaceutical Industry- In China, Telefónica is currently the talent and innovation.” Innovation & build-up of R&D Capability”. strategic partner of China Netcom with a 5% Commenting on the relationship with investment. Telefónica and China Netcom CEIBS, Dr. Ostertag said: “The most are working together to develop business important assets of Eli Lilly & Co. are its alliances. people. Therefore we are very pleased and proud to be closely associated with Commenting on the new corporate CEIBS, as this school is an excellent sponsor partnership with CEIBS, Mr. source of highly qualified and very talent- Sartorius, Chief Representative of Telefónica ed individuals, who have and always will, in Asia said, “Telefónica has a very good re- For further information on CEIBS Corporate play important roles in our organisation.” lationship with the best business schools in Sponsorship Projects and Progrmmes, all the countries we operate. We see CEIBS please contact Ms. Seanie Comerford, as a platform which will allow us, among Development Director : other things, to get the best trained human resources, to reach out to our partners and Tel: +86-21-28905120 suppliers in the sector. We are looking for- Email:[email protected] ward to this collaboration.” Fax:+86-21-28905126
TheLINK 2006 Winter 59 CEIBSfoundation
news briefing
Corporate Advisory Board Meeting at CEIBS, Oct 12 2006
CEIBS Corporate Advisory Board Meeting On Oct 12th, the CEIBS Corporate Advisory Board (CAB) met on campus for the third time this year. The focus of the meeting was to review the development of CEIBS global perspective and China focus in the MBA programme and to discuss CEIBS interna- tional and domestic visibility. The CAB is a platform for Senior Executives of CEIBS cor- porate sponsor partners to meet regularly with the Dean and some faculty and direc- tors to discuss topics relevant to their talent management needs and expectations, as Mr. Linus Goh, Executive Vice President, OCBC (L) and Professor Rolf D. Cremer, well as to discuss the activities and develop- Dean and Vice President, CEIBS (R) at the OCBC Sponsor Signing Ceremony on ments at the school. CEIBS campus, Nov 9th, 2006, at which OCBC pledged two MBA scholarships per year 2007-1010.
Delegation of Government of Cantabria visit to CEIBS on Nov 17, 2006
60 TheLINK 2006 Winter AlumniActivity CEIBS EMBA1995 The First EMBAs in China
By Ding Wei
n May, 1995, forty-two people The First to Try Tomato When Rong walked into the Pei began their EMBA study, then F1, tennis, and golf. These Cobb Freed & Partners designed cam- a novelty in China, at the newly aren’t the typical hobbies of 50 year- pus, the celebration was at its climax. established China Europe old Chinese like Rong Guangdao, who People were laughing and applauding International Business School is, however, a frequent visitor to F1 for the presentation of all kinds of dif- I(“CEIBS”). Since then, their careers China and the Tennis Master Cup. As ferent humorous awards: Li Jianping, and lives have been re-routed. Within the chairman of Sinopec Shanghai, Chairman of Unsiky received the ten years of their graduation, each of the premium sponsor of these events, Most Warm-Hearted Award. The Best them has made great achievements. Rong must appear to show support for Blend of Chinese and Western Award Among them are government leaders, the events and the company. On the went to Zhang Weihua, the first man business executives, and entrepre- afternoon of November 11, there was to be appointed overseas in China’s neurs. The CEIBS EMBA’95 class is another event for him to support. This telecom industry. Han Shenyao got of great significance and symbolizes time it was a much more personally the Most Flexibile Award because he the beginning of China’s modern busi- important one. He hurried to Hongfeng successfully turned himself from a ness education. The following stories Road, Pudong, where CEIBS is lo- government official into an IT entre- of the 42 alumni are not simply about cated, right after the closing ceremony preneur. Rong was presented the Most themselves, but more the reflection of of the Master Cup. There, the 10th Royal Award because since he joined a new generation of business leaders Anniversary of CEIBS EMBA95 Sinopec Shanghai, he’d been commit- in the booming Chinese economy and graduation was being held and ting himself to the company, going up how these people have driven the pros- Rong is one of those first 42 EMBA from team leader to general manager. perity of this country. participants. With or without an award, every body was exhilarated.
Han Shenyao, President & CEO of Shanghai Chai Meng, Managing Director of Huateng Software Systems Co., Ltd. Horton International China
Zhang Weihua, Chairman of Rong Guangdao, Chairman Shanghai Telecom of Sinopec Shanghai
TheLINK 2006 Winter 61 AlumniActivity
CEIBS EMBA’95 students with Professor Willem Burgers, 1995
CEIBS EMBA’95 graduation ceremony, 1996
Since May 8, 1995, 42 young The year 1995 was not only a Established on November 11, people with different working back- breakthrough for these people, but also 1994, CEIBS began its daily opera- grounds, but the same dream to be more for China. The city and the country tion in a corner leased from Shanghai actively involved in the country’s were also experiencing significant Jiaotong University on its Minhang development, came to CEIBS. Their changes. From 1995, the reform and campus. In 1991 to 1993, the Chinese fateful decision was commented on by opening-up were intensified and China government gave permission to 26 Zhang Weijiong, Vice President and accelerated its economic development, universities to start pilot MBA pro- Co-Dean of CEIBS, “The first group of and along with that, so was business grams. CEIBS, the 27th, was excep- EMBA and MBA students are the first education. tional because it was named as the to try tomato. They have driven China’s “special zone of China’s business edu- economic development over the past 10 In Lu Xiaoming’s memory, the first cation,” presenting its own certificates years”. These people have made a more staff of L’Oreal China, the headline in and adopting the teaching methods critical impact on the development of Shanghai that year was the construc- in line with international standards, the Chinese economy than any other tion of the Yan’an highway, a symbol which were very different from what B-school’s EMBA class. It is not only of the municipality’s decision to re- was going on at state-owned universi- the glory of one class or one school, but construct and expand its transportation ties. CEIBS offered MBA and EMBA highlights the achievements and inno- infrastructure in preparation for a new programs at the same time. It wasn’t vation of one country. round of economic expansion. until seven years later that other busi-
62 TheLINK 2006 Winter mit himself to his alma mater said, “Actually I got the award ten years ago, because I was the only one from Beijing in my class and was nick- named by my classmates the ‘Northern Master.’ I say, the next graduation an- niversary celebration will be held on the Beijing campus. If any one disa- grees, I’ll tell them I am from the first group of EMBAs.”
“No one is unsuccessful in our class,” said Qi Xiaofeng, HR Director of Michelin China, proudly.
However, the EMBA95 class is CEIBS EMBA’95 10th anniversary of graduation, 2006 only a small part of the 5,300 MBA and EMBA graduates since the school’s establishment 12 years ago. ness schools began to provide EMBA mates, an admission advertisement of Like all CEIBS members, they not program. CEIBS placed in one of the most in- only bear the gene of China’s reform fluential local newspapers, Liberation and opening up but also the brand of All the EMBA95 students can Daily, aroused his attention. What the school. clearly recall the old days - entering he didn’t know was that at the same the campus gate, turning right, passing time, CEIBS advertisements were “Few people knew about EMBA the office building and post office, and also appearing in influential foreign programs at the time, not to mention then there was the “home” of CEIBS newspapers and even on TV. His plan the understanding of modern corpo- in the academic exchange centre. The was declined by his supervisor. This rate management. We only wanted to classrooms were two rooms in the changed, however, when Lu’s client, thoroughly learn about business. Every fifth floor of the library. Initially, it the president of Maybelline® Asia- one was hard working and no one was a period of hard times. The cam- Pacific heard about this. The multina- came just to kill time. If they wanted to pus was far away from downtown tional was battling for a firm foothold kill time, they would not have come,” and transportation was inconvenient. in the Chinese market and eager for Lu Xiaoming said. The pressure of Everything was built from scratch. local talent. Lu, young and aggressive, assignments turned out to be their Zhang Guohua, then the Vice President became the target of the cosmetics motivation. in charge of daily operations, had to manufacturer. He was invited to join look into things like desks and chairs the company, which promised him tui- In their memory, everything was while think of the developing strate- tion (US$15,000) and time (4 days per still as fresh as it is today: Prof. Wu gies for the school. month) to attend the EMBA. Rarely a Jinglian’s Chinese Economics, Prof. visitor to department stores before, Lu Willem Burgers’ Corporate Strategy, For Lu Xiaoming personally, 1995 was Xiaoming took the offer and joined the Prof. Keith Goodall’s Leadership, also a year full of dramatic changes. international cosmetics company. and the European study tour. “After Lu was Director of the Foreign training at CEIBS, we made our roles Investment Centre in the Suzhou New “No One is Unsuccessful” in business as a course, not just a District. Feeling the shortage of man- When the Most Influential Award was job. We also began to understand the agement knowledge and hungry for presented to Ma Yusheng, the Assistant importance of people-oriented man- improvement, he applied to the CEIBS President of CEIBS in charge of the agement,” said Xiao Yongji, CEO of EMBA program. Like all his class- Beijing office and who chose to com- Shanghai Belling Co., Ltd.
TheLINK 2006 Winter 63 AlumniActivity
It is said that over the past 10 Life Has Been Changed by mind. Now, he runs his own computer years, 1/3 of the top management in EMBA company. SOEs and nearly half of the senior The graduates of EMBA95 have executives in foreign companies are changed a great deal. The biggest benefit from the graduates of CEIBS. From this, CEIBS EMBA program, according to Lu can be regarded as the foundation of Over the past years, CEIBS has pro- Xiaoming, is the change of mindset. China’s modern management culture. duced many alumni that are the pride of “I now have the proper knowledge. However, the school has also paid the country. There are important gov- The perspectives of the international heavy costs. Two presidents, Prof. Li ernment officials, like Xu Kaicheng, faculty make them like good doctors Jiahao and Prof. Zhang Guohua passed Chairman of Nam Kwong Group, and who diagnose your problems and give away while working for their dreams Zhou Bo, Director of the Shanghai you prescriptions to help solve them.” at CEIBS. To realize their dream, Foreign Economic Relations & Trade Lu has learned greatly through busi- boosting business education in this Commission; business leaders, like ness experience and knowledge from country, they spared no effort in the Rong Daoguang, Chairman of Sinopec the school. The man who rarely visited development of CEIBS. Shanghai, Zhang Weihua, Chairman department stores before now feels of Shanghai Telecom, and Li Jianping, free and easy in the cosmetics industry. Professor Wu Jinglian, the famous Chairman of Unisky; senior executives, Chinese economist and the Baosteel like Fei Ming, CEO of Saint-Gobain In Chen Yu’s memory, the most Chair Professor of CEIBS said, “The China and Lu Xiaoming, VP of L’oreal impressive words on the opening day success of China’s economic devel- China; entrepreneurs, like Chen Yu, in of EMBA study came from President opment and the improvement of the the home improvement industry, and Frohn: “You come to CEIBS bare- country’s management level can be Guo Yiting, the designer. handed. When you leave the school, partly contributed to the China Europe your pocket will be filled with vari- International Business School.” “The CEIBS EMBA is a boost to ous tools and solutions offered by the one’s career. It teaches modern busi- school. You will become another one.” With the increasing demand for ness knowledge. Almost as important, He understands this personally. He management talent in China, the the EMBA program provides a valu- made CEIBS his very first client. The CEIBS EMBA intake has been en- able platform for networking, helping school’s water-proof roof cover was larged more than 10-fold from the you grow faster and avoid mistakes,” constructed by his company. initial small group of 50 participants. Qi Xiaofeng said. She changed her job It is the largest EMBA program glo- from Saint-Gobain to Delphi and later As to Shen Fuqiang, the former bally with an annual intake of 630 became HR director at CEIBS. The Deputy General Manager of Shanghai professionals, double the size of the CEIBS community seems to be an at- Machinery Company, the CEIBS second runner, Columbia Business tractive workplace. There are altogether Alumni Association is the only or- School. In the 2006 Financial Times four EMBA95 graduates that have ganization in which he participates, Global EMBA ranking, the school is worked or are working for the school. not including the communist party. ranked No. 17 (MBA No. 21) and has He started as an entry level worker, been among the global top 50 for 6 Han Shengyao has left the im- working his way to middle level and consecutive years. It has 68% interna- pression of being a warm-hearted, finally top management. Each phase tional faculty, ranked No. 7 globally. vigorous, and quick thinking man to took him 10 years. Then after doing a The salary of its graduates is ranked his classmates. He was a government SWOT analysis, he felt the necessity No. 7, exceeding Columbia Business official before taking his EMBA. The of change and hopped to Siemens as a School, Chicago Business School, attraction of the CEIBS EMBA is that vice president. Several years later, he and London Business School. After “The government is the rule maker. encountered career bottleneck again. 10 years of arduous effort, CEIBS Studying for an EMBA helps you The problem was resolved after he has grown to be one of the leading understand the rules and how these took the CEIBS alumni program “Self- international business schools in the rules affect the development of com- Management.” Now, he is a consultant world. panies.” EMBA study broadened his to private companies.
64 TheLINK 2006 Winter No other is as keen on studying as a copper bull wearing a pair of glasses, The country tends to plan its de- Zhang Weihua. After graduation from the symbol of knowledge, hard-work, velopment in a 5 year phases. What is the CEIBS EMBA program, he pursued progress, and commitment in China to CEIBS’ next 5 year plan? According to his Ph. D. in management at Fudan the Alma Mater after graduation. Zhang Weijiong, the Shanghai campus University. During the time, he received would be enlarged to double its current an award, which offered him the oppor- Four years ago, Lu Xiaoming came size and the construction of the Beijing tunity to study information technology across his classmate Fei Ming and campus will be completed within 5 and communication in the US for half a Presidents Liu Ji and Zhang Guohua, years. Within the next 10 years, the year. When the Chinese telecom industry who were heading to an EU confer- faculty team would grow to be 80 to began to go global in 2002, Zhang, with ence on the same plane in the first class 100 professors and the school will make a strong background in management cabinet. Lu was flying to Paris for his critical innovations in modern manage- education and overseas study was natu- vacation and never had his vacations ment theories. rally selected as the first general man- started so surprisingly and happily. ager of China Telecom’s US subsidiary. “The two presidents were proud. That Dr. Zhu Xiaoming, the current “It is CEIBS who led me to management occasion was really memorable.” president, said: “The CEIBS brand knowledge and skills. Here I was en- will be a lifelong benefit to the gradu- lightened. Without CEIBS, I would not On the same day of November ates.” have made these steps,” Zhang said. 11, 2006, when the EMBA95 gradua- tion anniversary celebration was held, The article was published in Chinese in Every EMBA95 alumni is instilled CEIBS began a new round of entrance Chinese Entrepreneurs, December 5, 2006 and with the CEIBS spirit. The class donated examinations for the EMBA2007 class. adapted and translated by Audrey Wu.
TheLINK 2006 Winter 65 AlumniActivity
Hold on to Your Dream Cai Dabiao’s Kungfu Food
By Qin Yanling
The image of the Kung Fu movie star Bruce Lee represents the Chinese fast food chain’s determination to provide the best and genuine steamed foods originated from South China.
66 TheLINK 2006 Winter h e n t a l k i n g team of only four members, including result, Kungfu’s practices help estab- about fast food, Cai himself. The four worked during lish its unique competitive edge. w h a t ’ s t h e the daytime and self-trained at night. first thing that Over the past decade, Kungfu has comes to mind? Then, they grew. In 1999, they built a powerful R&D team and a WMcDonald’s® or KFC®?Perhaps your stepped out of Dongguan and into oth- group of national-level nutrition ex- mental picture right now also includes er places like Guangzhou, Shenzhen, perts. They have embraced innovation their logos which are ever-present in and then Beijing and Shanghai. Before from day one. nearly every corner of the city. Kungfu 2005, their chain stores had spread Food might be a strange name for over the whole country and climbed up Steaming methods at Kungfu origi- all of you. If I were not in the same to 40 locations. Now, this number has nally adopted the traditional steam- class with Cai Dabiao, the founder soared to 142. Their ambitious plan is ing method, which demands a good of the rapidly growing Chinese fast to have 400 chain stores in 2008. control of temperature. This made the food chain, I wouldn’t have known kitchen in those days was quite hot anything about it unless I was over- What has Kungfu done in these and made it physically uncomfortable whelmed one day by the fresh and twelve years to grow from an obscure for the workers. Hence, Cai Dabiao dynamic Kungfu logo with its special rest-stop restaurant to China’s No. 1 explored various ways to improve and offer of steamed rice. Yet, now hav- Chinese fast food chain? finally developed Kungfu’s unique ing learned about it, I am confident steaming facilities. Even now, Kungfu to predict that it will not be very long A Good Cuisine Starts is still making efforts to further im- before Kungfu Food becomes another From the Beginning. prove those facilities. prominent logo in the Chinese fast Good cuisine can’t be created without food market. quality ingredients. Kungfu has strict Concerning product quality, requirements in selecting its suppliers Kungfu positions itself as the “nutri- Not long ago, the China Cuisine and builds a close strategic partnership tious and healthy” Chinese fast food. Association and the China Fast Food with them. The result is a whole supply Having inherited the essence of tradi- Network released “The Top 20 Fast chain that is smooth and stable. tional Ling Nan (the Guangdong and Food Companies in China,” among Guangxi area) steamed cuisine and which Kungfu was ranked the 6th, Kungfu owns the land where the combined it with modern ideas and thus ranking as the No.1 Chinese Fast vegetables are grown. There, pesticide technologies; Kungfu now produces Food. use is tightly controlled to guarantee unique products like steamed rice, the safety, nutrition, and health of the steamed dishes and steamed soup. It People might describe the rapid plants. The taste of all products is also has a great variety of over 30 kinds of growth of Kungfu as “emerging out overseen from the very origin of the products, made from exclusive reci- of the blue”. But those who know the supply chain. For instance, in order to pes, careful processing, rigorous qual- story behind Kungfu’s success un- develop steamed chicken in a particu- ity control, and specialized R&D. derstand quite well that Cai has been lar market, Kungfu applied rigorous laboring in his enterprise for as long as control to the selection of the species, That is how Kungfu maintains its twelve years. It is this kind of persist- feeding days, type of feed, light, etc., first-class quality. ence that sets the stage for Kungfu’s so that the taste achieved the quality steady pace today. level expected. Standardization Secures the Consistence of In 1994, Cai Dabiao opened the These procedures inevitably in- Tastes. first “168 Steamed Food Restaurant” crease the cost, but Kungfu insists on Standardization is the key to success in the small town of Chang’an in the corporate value of making products in the fast food industry. Yet Chinese Dongguan, Guangdong province. It with leading quality. In contrast, most food is different from its Western was located along a national highway, Chinese restaurants purchase their counterparts in that every chef has his with a small location and a meager materials from the local markets. As a own style. It follows then the most
TheLINK 2006 Winter 67 AlumniActivity
innovation. Ever since the first day when Kungfu was started, the learn- ing process started despite the fact that it had as few as four staff mem- bers. When asked, “What did you learn when you had only four peo- ple working in the restaurant?” Cai Dabiao answered, “We were learning everything we could, from studying the individual product and analyzing customers to improving the service. Learning has helped us to enhance difficult problem facing the Chinese manuals in Kungfu to regulate the our personal intellectual abilities and fast food industry is the inconsistency management of every step within the presentation skills. By learning to of tastes. To solve the problem, the whole procedure, ranging from select- communicate, we set up our common working procedures of the staff and ing materials and producing recipes in goals and can develop common ideas the operation of the facilities have to the distribution centers, to the quality – these laid the foundation of our sus- be standardized. Kungfu has taken a control of the products in restaurants. tainable growth.” series of standardizing measures that Not a single detail is ever missed from lay a firm foundation for future growth the operation standards. Every staff This devotion to learning has in the fast food industry. member is required to comply with the marked the development of Kungfu manuals. The standardization has per- and has been instilled in every staff For many years, Kungfu has meated into all levels of management, member. On this foundation, Kungfu been doing in-depth research into service, and processing. developed great vision which keeps the domestic catering industry. At driving all staff to make strenuous ef- the same time it borrows from rich Innovation Begins From forts in innovation and improvement experience from abroad of advanced the First Day of Business. in each staff’s individual position. management. As its products and Due to its insistence on producing services get more mature, Kungfu quality products, Kungfu keeps grow- A Closer Look at Cai has steadily established a set of easy- ing. On the basis of offering quality When opening the first restaurant, to-copy models in industrialized and products, Kungfu goes further by con- did you have a clear vision of the standardized Chinese food produc- stantly adjusting its operation system. future growth? Or rather you just tion. It has also set up three large For example, before a new product tried to survive in the market? distribution centers in south China, is introduced into the market, during Cai: Yes, we did have a vision, to north China, and east China. R&D it will go through careful mar- create a Chinese fast food restau- ket testing, thorough discussions, and rant with a similar scale to that of In these distribution centers, i.e. moreover, extensive evaluations of McDonald’s ®. The first restaurant the central kitchens, food processing the impact it might make on existing was our first attempt and we never is completed and from there the prod- procedures. For instance, which equip- gave up driving our company towards ucts are distributed to every restaurant ment or procedures might need to be that goal. through a smooth logistics system. revised and to what extent the revision How the food is prepared it gets to has to be done. The new product What do you think are the strength those restaurants is nothing more than won’t be finally launched until all and weakness of Kungfu, com- defrosting, distributing, steaming, and these aspects are fully considered. pared with the over fifty year-old selling. Hence, the taste is kept con- McDonald’s® or KFC®? sistent among different restaurants. Kungfu has been persistent on Cai: Our strength lies in the values, maintaining innovation. Continuous to make products of leading quality. There are ten thick operation learning is the very basis of genuine Also, the persistent pursuit of nutri-
68 TheLINK 2006 Winter tious and healthy food is where we find Chinese fast food. We focus on differ- tions to change the company’s previ- our core competence. ent market segments. While we can ous functional organization structure learn a lot from McDonald’s®, we pay to the current matrix structure tailored Compared with Western-style more attention to developing our own for our company. It is operating quite fast food, Chinese fast food is sure growth pattern. smoothly now. to be more promising, given its cur- rent market share, which is as high as Having been in the business for so Recently, I did Production 80%. This is closely related to social many years, you must have gone Management, which taught us many development and industrial growth. through many experiences. What new things, as well. For example, When people’s living standard in- do you think is the most vital per- we are constantly troubled by order creases and the pace of life accelerates, sonal qualities or characteristics problems. Originally, we did orders their demand for fast food goes up. that keep you going? in each restaurant; every order was Additionally, the resources required Cai: Perseverance. Catering services confirmed two day in advance, based by the industry are becoming more is a laborious industry and you’ve got on various factors like historical data, abundant, which provides a firm foun- to hold onto your dream. I have many weather, and other contingent ele- dation for the growth of the Chinese friends who once joined in this indus- ments. Then, the orders were sent fast food industry. Take, for example, try but later had to withdraw. We also to the three distribution centers for advanced IT technologies that facili- underwent tough times but persever- processing. But what happened was tate our business with communication ance has taken us through those times that minor data mistakes in each res- platforms that offer instant and exact successfully. taurant would cause major problems information; or the industrialization of in the central data processing at the sales strategies that helps us to make Is studying at CEIBS of any help to distribution centers, which is exactly better decisions; or improved financial your business? In what ways? what the professor called the Bullwhip services that provide us with a more Cai: In many ways indeed. I once Effect. Now, we are going to transfer powerful support base. Such a friendly told my classmates that right af- all ordering work to the distribution business environment means that the ter the completion of the first centers so that all data can be shared Chinese fast food industry will emerge course – Quantitative Methods for in our central information system and and mature quickly. But what our Management, what I had invested in the extra work of making revision can enterprises need to learn is the proper the CEIBS EMBA program has al- be saved. What it finally brings to us is way of integrating and optimizing all ready paid for itself. After this course, this: by avoiding the Bullwhip Effect the resources available and using them I went back to lecture to the top and we reduce human resource and storage to our advantage within our unique mid-level executives in my company costs in each restaurant and also cut the core competence. for three days. We found many practi- training costs incurred by personnel cal ways to address the problems of transfer and position changes. With regards to our weakness, our company from my experience we have been learning and making at CEIBS. In reality, we often face The study of Operation Process efforts to improve our manage- the challenges of effective decision- and Value Stream Mapping also ben- ment and operation skills, whereas making in various situations, like site efits us by enhancing our process McDonald’s® can rely on having more selection of a new restaurant or R&D management, which is something we mature systems and rich experience of a new product. We actually have have long been striving for. It makes us that they have accumulated during its received much more than we have aware that by saving 5 seconds in one long history. spent for the tuition fee, if you realize working position, we can save as much how much cost we have saved and how as RMB250,000. From there, we set Many people might regard us as a much benefit we have earned through up an Excellence Committee in charge rival against McDonald’s®, which is making better informed decisions. of straightening up and formulating a true but only in some senses. In fact, process and then optimizing it. we are positioned in two distinctively When I did the foundation course different areas, i.e., Western-style vs. on management theory, we took ac- Apart from the curriculum itself, the
TheLINK 2006 Winter 69 AlumniActivity
briefings
Clubs Clubs
Auto Industry Club: Exploring the Development Path of the National Auto Industry - Southwestern Trip
On September 20th, the CEIBS Alumni Auto Industry Club set out on their three-day trip to the southwest, visiting important automobile manufacturers including Chongqing Hongyan Motor Co., Ltd., Chang’an Auto (Group) Co., Ltd, Chongqin Lifan Co., Ltd, and Qinglin Auto (Group) Co., Ltd.
The activity was strongly supported by the leaders of the auto makers teaching method of CEIBS proves very learning process. Almost every time and research centers in the area, who inspiring as well. One of my fellow when I finished a course, I would share discussed with the club members students once commented, “Test before what I had learned with my colleagues, topics such as the current business you teach – that is the CEIBS success telling them what I thought I could environment, corporate methods, cur- formula”. Indeed, the three parts of apply to our company and also listen- rent problems and uncertainties, the study at CEIBS are very demanding: ing to their ideas. This last step helps outlook for the industry, and how to first, one has to do a “pre-course warm- to produce for us a great number of build up a proprietary brand. up” (in order to produce the maximum applicable action plans which all have effect within the class, we are required been effectively implemented. As far Later, the Chongqing Chapter to read a great deal of reading material as I know, many others in my class did members shared their ideas with the to get fully prepared). Then, there are the same. club members at a welcome banquet. in-class discussions (it provides an op- portunity for intellectual confrontations The author is CEIBS EMBA06 participant, now Entrepreneur Club: Trip to so as to help us develop an in-depth working as Sales Director of Shenzhen SDG Southern Jiangsu Province understanding of the subject and, ad- Information Co., Ltd. She graduated from On November 17th and 18th, 30 ditionally, the communication between Electronic Engineering Department of Harbin members from the Entrepreneur Club different people teaches us a lot). Last, Shipbuilding Engineering Institute and has visited the southern Jiangsu Province, we can’t miss after-class homework, been working in various industries including including Zhao Nin, vice president of which is designed to review the les- Electricity and Information. Carlyle Group, Mao Xun, vice president sons learned. Personally, sharing with The article, originally in Chinese, is translated of Haitong-Fortis Private Equity Fund colleagues is another vital link in the by Cherry Zhong. Management Co. Ltd., Liu Zehui, in-
70 TheLINK 2006 Winter briefings
invitation of the Health Club, Dr. Chen Greater China, Mr. Chen Chaoyi was in Bing from the well known Renji Hospital charge of business expansion in Taiwan, gave a speech titled “Amassing Wealth or Hong Kong, and the Mainland and suc- Disease?” Dr. Chen is an expert on male ceeded in setting up new business diseases and experienced both in practice platforms and methods. Familiar with and research. the electronics and telecommunications market, he had a wide range of connec- During the speech, Dr. Chen utilized tions as well as valuable local resources. vestment manager of Legend Capital, Ma illustrations and used humorous language When referring to the challenges China is Zhaohui, senior manager of Zhangjiang to simplify difficult medical terminology facing, he advised the audience to clarify Investment Co., and Hu Xiaoling, producer of and help foster audience understanding of their career direction and hone their the TV program “Brainstorm” on CBN. the topic. The speech was especially tai- competitive edge so that their personal lored for the business elite, who are usually values can be achieved. He also touched During this trip, members vis- preoccupied by work and typically ignore upon the 6C concepts on individual career ited Suntech Power Holdings Co. Ltd., their health. development. Changzhou Xingyu Automotive Lighting Systems Limited, a company established by The speech covered five major aspects: Anhui Chapter Established alumna Zhou Xiaoping, and Wiscom System how to care for one’s health, the prevention co., Ltd. founded by alumnus Ge Ning. of common diseases in young and middle -aged men (i.e. prostatitis), BPH, and the Mr. Zhang, Vice President of Suntech symptoms and treatment of male meno- Power Holding Co. Ltd. said that listing in pause, etc. the US is a double-edged sword. This would help the improvement of the Chinese com- Chapters: chapters panies’ management, while on the other hand, costs caused by the different kinds Taiwan Chapter: Former GM of The CEIBS Anhui Chapter was officially of strict inspections by the US’s SEC are Intel, Greater China Talks about launched on October 10th. The establish- also very high. He suggested entrepreneurs Individual Career Development ment of the chapter is the result of the look for suitable investing destinations. At joint efforts of alumni in the Anhui Province Xinyu, they found another “double-edged and the surrounding area, the preparatory sword,” the introduction of foreign invest- committee members, and the CEIBS alumni ment, which usually leads to management relationship department. After the Anhui conflicts between the different owners, and Chapter establishment, the total number of sometimes, even to the failure of the com- CEIBS alumni chapters is 21. pany. As to the high turnover rate in high-tech enterprises, Ge Ning advised that the com- More than 40 CEIBS alumni and stu- panies should be innovative and keep ahead dents gathered in Hefei, the provincial capi- in the industry in order to retain talented On the evening of September 22th, Mr. tal of Anhui. Prof. Wu Jinglian, famous econ- employees. He laid special importance on an Chen Chaoyi, former General Manager omist and CEIBS Baosteel Chair Professor effective management team to maintain the of Intel, Greater China, at the invitation attended on behalf of CEIBS and Mr. Wu governance structure of the company, espe- of the Taiwan Chapter of CEIBS Alumni Cunrong, Mayor of Hefei attended on behalf cially after the company’s listing. Association, delivered a speech on cam- of the municipality, showed their support for pus to share his career development the chapter at the founding ceremony. At the Health Club: Amassing Wealth or experiences. event, members from the Nanjing, Wuxi, and Disease? Guangzhou chapters also expressed their On the evening of October 20th, at the During his tenure as GM of Intel, congratulations.
TheLINK 2006 Winter 71 AlumniActivity
briefings
Members of the chapter committee were proposed by the preparatory commit- tee. Yu Nenghong was selected as chair- man. Liaoyuan and Huang Jianfeng (also secretary general) were selected as vice chairmen.
Alumni from Wuxi and Changzhou Chapters Get Together
shared her views and experiences on how in-depth research into Buffett’s Investment companies should cooperate with the media Theory for nearly twenty years, has elevated with over 300 CEIBS alumni and students. the investment concept to the level of in- vestment study. Following the footsteps of In the two-hour speech, Ms. Jing pro- the master’s investment concept, he carried vided her suggestions on several aspects, out research and practice in China’s unique On October 22th, a total of 33 alumni from among them that the relationship between capital markets. the Wuxi and Changzhou chapters held a companies and the media is not as close get-together on the beach of Taihu Lake. relatives or enemies, but should be as co- Prof. Zhu Xiaoming, President of CEIBS, operators. Through better connections, a made it all the way there to exchange opin- win-win relationship can be formed together ions with alumni. with effective communication and mutual understanding. Yidan was asked, how best President Zhu made a brief introduction to present oneself before the camera? Relax on the current and future development and as in daily life, but inject some excitement the progress of the school. Alumni put forth and be expressive. She was also asked how their suggestions regarding the teaching to speak appropriately before the camera? methods and growth model of the alma The language should be accurate and lively. mater in the future. Non-verbal communications and body lan- guage, such as eye contact, posture, dress, Alumni Zhang Tianfu and Fan Yanqing environment, etc., are also important in carried out a discussion titled “The Current creating the best impression. International Military Environment and China’s Position” and “Macroeconomics and The “Chinese Warren Buffett” Development for Enterprise,” respectively. Talks about Application of the Buffett Theory in China In his speech, Mr.Zhao Bingxian, in a Forums forums On the evening of September 21st, Mr. penetrating fashion, categorized the invest- Bingxian Zhao, alumnus of the Global CEO ment approaches into four theories. Before Famous CCTV Anchorwoman’s View Programme delivered a speech on the topic the end of the speech, he recommended on How to Cooperate with the “Warren Buffett’s Investment Theory and two practical reference books to the CEIBS Media How to Apply it in China,” during which he alumni and students, The Essays of Warren Ms. Jing Yidan, the famous anchorwoman shared his two decades of investment expe- Buffett: Lessons for Corporate America on the national TV network CCTV, gave a rience with 300 CEIBS alumni and students. and Warren Buffett Wealth: Principles and speech at the CEIBS Alumni Culture Forum Practical Methods Used by the World’s on the evening of October 26th. Ms. Jing Mr. Zhao Bingxian, who has conducted greatest Investor.
72 TheLINK 2006 Winter LifeStyle
Pranayama Breath Control for Life Control
By Raghuram KS
TheLINK 2006 Winter 73 LifeStyle
ranayama is an im- be achieved. Its essence lies in the modification portant, yet little of our normal process of breathing. Breathing is known part of Yoga. an act in which we take air from the atmosphere Its techniques have into our lungs, absorb the oxygen from it into our been practiced for blood, and expel the air again into the atmosphere Pcenturies by ardent students of Yoga in together with carbon-dioxide end water vapour. remote ashrams (secluded places for This act of inhalation and exhalation is repeated meditation), and have been preserved every four to five seconds. Thus normally we for us through many generations both breathe about fifteen times every minute, each in practice and in handwritten books. time taking about 500 ml. of air into the lungs. Until recently, this art and science So we inhale and exhale approximately seven of Yogic breathing was almost com- litres of air per minute. Every modification of pletely unknown to the common man this normal breathing process would not count as like many other ancient Indian arts. pranayama. The normal breathing pattern shows Those who knew it used to be very marked changes under various conditions. For reluctant to share their knowledge instance, while we are lifting or carrying loads, and experience with anyone, unless walking uphill, running, or doing any physical a student proved by tests that he was exercise we breathe more rapidly and more ready to receive it. During the last forcefully. At high altitudes, in a rarefied at- three decades, however, this situation mosphere our breathing becomes heavy. Its has changed; and subjects such as pattern changes with emotional excitement Yoga, pranayama and meditation are and in the case of disorders such as asthma, being discussed all over the world, not tuberculosis, bronchitis and other lung affec- only by Yoga teachers, but also by the tions. Modification of breathing under these general public and by scientists. More conditions is brought about involuntarily recently, various techniques of Yoga and perhaps without awareness of it unless have begun to attract the attention of there is difficulty in breathing. In fact we physicians, therapists, and medical are hardly ever aware of the fact that we are consultants. It is common to find both breathing. patients and doctors who can narrate their own experiences about the cure Lot depends on the otherwise seem- of various diseases by using Yoga ingly simple breath. Do a small experi- techniques. It has been proved beyond ment: When you are angry, tensed or anx- doubt that Pranayama is a very impor- ious, consciously watch your breathing tant means for preventing and curing pattern. You will notice that your breaths many ailments. are shallow and fast. Once you realize that your breathing is fast, make an ef- In simple terms pranayama may fort and slow it down. Inhale slowly and be called the control of the breath. exhale gently. Instantly you will cool The word Pranayama consists of down. two parts: Prana and Ayama. Prana means universal life force and Ayama The ideal breath rate suggested is means stretch, extension and control. three to four breaths in a minute as Thus Pranayama can be described as against 15 or more breaths we take in stretching, extending and controlling a minute. When you are angry or anx- this universal life force within the ious, your breath rate increases to 50 - body. By practicing the techniques of 60. This directly affects the heart and Pranayama, mastery over breath can so the result.
74 TheLINK 2006 Winter Pranayama consists of ing the lungs. Actually, kumbhaka can modifications of the breathing be practiced in two ways. We can hold process which we bring about the breath in after a puraka, or we can deliberately and consciously. hold the breath out after a rechaka. We can modify breathing in three different ways: Our ancients first came to see 1. By inhaling and exhaling that for the preservation of life we rapidly, taking shallow breaths. must preserve breath, and preserving 2. By inhaling and exhal- breath entails two things, i.e., breath- ing slowly, taking long or deep ing slowly, and then not breathing breaths. (for a short time) at all. This idea was 3. By stopping the act of further strengthened by the belief that breathing altogether. the length of one’s life is to be meas- The first way of modifying ured not in terms of days or years, but breathing is not usually included in terms of how many times one is in pranayama proper, although it destined to breathe. From the fact that is sometimes closely associated the stoppage of breath and the end of with it. The second and third ways one’s life coincide, our ancients prob- mentioned above do belong to ably conceived the idea that when the the domain of pranayama. In fact, number of breaths one was destined to pranayama practice may very well take was exhausted, one could not live be summarized in these two ways. any longer. This idea is conveyed even today in phrases like ‘breathing one’s Pranayama is usually practiced last,’ for indicating death. in a sitting posture. There are about half a dozen postures available The idea that the breaths of every for this purpose. They are called one of us are numbered, that our life- meditation postures, because they span is dependent on how many times are very suitable for meditation. we shall breathe in a given life, and The most renowned among them that, as a consequence of this fact, we is Siddhasana. The simplest and must reduce the number of breaths so most comfortable and less strenuous as to live longer— this idea was re- is Swastikasana. Padmasana is the sponsible for the origin of pranayama. one which is most recommended traditionally for pranayama. Thus Pranayama also finds application pranayama is a complex act in which in today’s corporate life where we after assuming a suitable posture the need to exercise emotional control person inhales and exhales slowly, in many tricky situations. By prac- deeply and completely, and also stops ticing Pranayama, we can bring a the breath. Inhalation in pranayama sense of calm in our everyday life is called parka, which literally means and I think we can even reduce the ‘the act of filling’; Exhalation is number of sleeping hours as this called recheck, meaning ‘the act of helps to sleep more effectively and emptying’. Retention of breath is peacefully. called kumbhaka. Kumbha means a References: Pathanjali’s Yoga Sutras water pot. Just as a water pot holds www.pranayama.org water when it is filled with it, so in kumbhaka the breath is held after fill- The author is CEIBS MBA06 student.
TheLINK 2006 Winter 75 Words&Thoughts
Don’t Fire Them, Fire Them Up
By Echo Lau
Cooperation is not jailed for one year due to insuffi- Mission Impossible in the cient evidence. In most occasions, the Prisoners’ Dilemma result is that both players confess and The recent merger of Gome and get jail times of eight years. Yongle, the two largest Chinese local electronic appliance retailers, reminds The Prisoners’ Dilemma tells that there me of the Prisoners’ Dilemma and the is a contradiction between individual and book Don’t Fire Them, FireThem Up. collective rationality. The dilemma’s solu- tion concept is Nash Equilibrium, or Non- In order to become the flagship Cooperative Equilibrium, when both crimi- brand in the Chinese home appliance nals confess and end up in cell for eight years. market, Gome, after acquisition of No winners exist in the Prisoners’ Dilemma. If Yongle, ushered in a new era of dual each betrays the other for his own benefit, both branding with its new partner. All of will be in jail for longer time; on the reverse, a sudden, the two companies changed if the two consider for each other and cooper- their role from rivals to allies within ate, they will get the best result. Therefore, just a few days. What is the driver cooperation is possible in every Prisoners’ behind this surprising cooperation: Dilemma. The difference depends on whether attracting capital, the demands of the the prisoner is willing to cooperate. And it’s marketplace, or simply survival pres- the same in the business world. sures from foreign retailers closing in? It is certain that the CEOs of the two The Prisoners’ Dilemma, a classic companies, Huang Guangyu and Chen Xiao, example in game theory, can be ap- are fully aware of their environment. With plied to explain the case. Two crimi- China’s market opening to the world and nals are arrested under the suspicion foreign players rushing in, grabbing market of having committed a crime together. share from their Chinese counterparts, if the The two prisoners are isolated from local players, instead of cooperating, utilize each other and offered a deal sepa- all their resources to compete against each rately. If they both confess, both will other, they will be kicked out of the market- spend eight years in prison. If one pro- place under the siege of foreign retailers. The vides evidence against the other while best way out is to join hands and compete the other doesn’t cooperate, the former with the much more experienced foreign will be freed while the latter will be retailers. given ten years of imprisonment. If none of them confess, both will be According to the reports following the
76 TheLINK 2006 Winter merger, Huang Guangyu will hold a American-based Xerox®. As the myself in sales. I was burdened with 51.2% of the stake in the new compa- largest copier manufacturer in the the task of helping revive the company. ny, while Chen Xiao will hold 12.5%. world, Xerox dominated the market A mission, indeed! Blind yet bold, ig- In Chen’s words, the merger will benefit for dozens of years but began to norant yet innocent, I began to find my the whole home appliance retailing in- decline in the mid-1970s, with its way across the river. dustry, and help to build core compe- market share sliding from 80% to tencies in Chinese companies. Chen, 13%. Then the author, the legendary The book taught me how to boost undoubtedly, deserves applause for Frank Pacetta, led his sales team to the morale of a frustrated team. I fol- his compromise, for it is not easy to re-dominate the market with a united lowed its guidance and almost copied break with the traditional mindset that team work approach, bringing Xerox the author to lead my team, a group it is shameful to play second fiddle. back to its feet. of people who were as inspired as I was by the same mission. We built up After the merger, the annual rev- At that time, I was in a technical confidence gradually while learning enue of the combined company will firm specializing in developing and everything step by step. I learned to exceed RMB70 billion, much more producing large electromechanical care about the team members’ feelings than the combined China revenue of equipment. Although hailed as a na- and battled with them side by side. the other two big players in the mar- tional pillar of the industry and an in- Three months later, we made a great ket, Sunning and Best Buy. novative pioneer, the company failed break-through, which would normally to make the “marvelous jump;” indus- take 18 months. We laughed with tears The “survive of the fittest” law trialization of its research results due when we got a contract worth RMB12 in business can be cruel. Yongle has to the shortage of capital (the company million for selling our very first set of specialized in sub-optimization, while made the mistake of investing short- equipment. Later, we celebrated when Gome has controlled the best chan- term loans into a long-term project) we sold our products with values of nels. What will Huang’s next move and the fact that newly-developed RMB100 million per set many times be? We are highly anxious to find out. products proved unmarketable. Inside over. I, joined by my team, lived out the company, rumors flew around and what had been told to me in the book I will, hereby, give my blessing to people were uneasy that the company and I came to realize one is as big as all those who cherish cooperation and was having difficulty selling its prod- one feels. Before that hard period, make compromises! ucts, repaying loans, paying employ- none of us had ever taken so many ees’ salaries and retaining the manage- flights, made so many visits, held so Fire Them Up and Turn it ment team. The sales department, the many meetings, and never been so Around hope of hundreds of employees, failed excited. We had never realized that we A friend of mine gave me the book to make sales for several months and could be so STRONG. Don’t Fire Them, Fire Them Up as en- naturally became the target of finger- couragement in 1997. The book has pointing. The vice president in charge From then on, experiencing the indeed become a valuable source of of the sales department came and left happiness of a break-through has be- inspiration for me. Under its guid- one by one. It was said that whoever come a frequent part of my life. Even ance, I took the task of building took over the sales department would today, I am still very grateful to my up and leading a sales team at soon get sacked. friend for the vital encouragement and a difficult time. Today, while particularly to this book for the inspi- we are exploring new fron- When I was transferred to be the ration along my way. tiers in the market, I still new sales manager from doing admin- refer to it from time to istration work, I had never believed I The author is CEIBS EMBA05 student, Vice time. could make it because I never thought President of GammaStar Medical Group, that I was a born sales person. My task Great China & General Manager of Ocean The book tells was to breathe fresh air into the sales International Finance Leasing Co., Ltd. the story of the department and turn it around by lead- The article, originally in Chinese, is translated turnaround at ing a team no more experienced than by Audrey Wu.
TheLINK 2006 Winter 77 CEIBS MANAGEMENT COMMITTEE Professor Pedro Nueno, Executive President Professor Zhu Xiaoming, President Professor Rolf D. Cremer, Dean and Vice President Professor Zhang Weijiong, Vice President and Co-Dean
CEIBS BOARD OF DIRECTORS CEIBS FACULTY MEMBERS Linda G. Sprague, Ph. D., Xie Shengwu Kwaku Atuahene-Gima, Ph. D. Manufacturing and Operations Management Chairman of the Board Marketing and Innovation Management Wang Jianmao, Ph. D. Former President, Shanghai Jiao Tong Willem P. Burgers, Ph. D. Economics University Marketing and Strategy Wu Jinglian, Ph. D. Gerard Van Schaik Bayer HealthCare Chair in Strategy and Economics Vice Chairman of the Board Marketing Baosteel Chair Professor of Economics President, EFMD Thomas E. Callarman, Ph. D. Xiao Zhixing, Ph. D. François Bayrou Operations Management Management President, Union for French Chang Chun, Ph. D. Katherine R. Xin, Ph. D. Democracy (UDF) Finance Management Jan Borgonjon ABN AMRO Chair Professor of Risk Michelin Chair in Leadership and Human President, InterChina Consulting Management Resource Management Federico Castellanos Professor of Finance, Carlson School of Xu Bin, Ph. D. Vice President of Human Resources, Management, University of Minnesota Economics and Finance IBM Europe Middle East Africa Rolf D. Cremer, Ph. D. Xu Dingbo, Ph. D. Gabriel Hawawini Economics Accounting Former Dean, INSEAD Henri-Claude De Bettignies Xu Xiaonian, Ph. D. Jing Shuping Management Economics and Finance Former Chairman, China Minsheng AVIVA Chair Professor of Leadership and Arthur Yeung, Ph. D. Banking Co., Ltd. Responsibility, INSEAD Management Wang Qi Ding Yuan, Ph. D. Philips Chair Professor of Human Resource Deputy Director, Shanghai Accounting Management Municipal Education Commission Associate Professor of Accounting and Professor of Business Administration, Yang Dinghua Management Control, HEC University of Michigan Business School Vice Mayor, Juan A. Fernandez, Ph. D. Zhang Weijiong, Ph. D. Shanghai Municipal Government Management Management Zhu Xiaoming Gerald E. Fryxell, Ph. D. Zhang Yimin, Ph. D. Deputy Director, Standing Committee, Management Finance Shanghai Municipal People's Congress Gao Yan, Ph. D. Zhao Xinge, Ph. D. Finance Finance GE Dingkun, Ph. D. Zhou Dongsheng, Ph. D. CEIBS ACADEMIC COUNCIL Strategy and Entrepreneurship Marketing Professor Alfredo Pastor, Per V. Jenster, Ph. D. Zhu Tian, Ph. D. Chairman, IESE, Spain Management Economics Professor Chang Chun, CEIBS, PRC Jean S K LEE, Ph. D. Zhu Xiaoming, Ph. D. Professor Rolf D. Cremer, CEIBS, PRC Management Management Professor Arnoud De Meyer, INSEAD, Liang Neng, Ph. D. Zhu Yu, Ph. D. France Management Finance Professor David C. Schmittlein, William H. Mobley, Ph. D. Wharton School, USA Management RESEARCH CENTRES: Professor Luigi Vittorio Tava, SDA Pedro Nueno, Ph. D. Centre of Chinese Private Enterprises Bocconi, Italy Entrepreneurship Director: Professor ZHANG Weijiong Professor Dominique Turpin, IMD, Seung Ho "Sam" Park, Ph. D. Centre of Entrepreneurship Switzerland Strategy Director: Professor Per V. Jenster Professor Juergen Weigand, WHU, British American Tobacco Chair Professor Centre of Organisational and People Germany of Marketing Excellence Professor Katherine Xin, CEIBS, PRC William C. PARR, Ph. D. Director: Professor Arthur Yeung Professor Zhang Weijiong, CEIBS, PRC Decision Sciences Co-Director: Professor Katherine Xin Alfredo Pastor , Ph. D. Centre for Emerging Market Strategy Economics Director: Professor Seung Ho "Sam" Park Spanish Chair Professor of Economics China Centre for Financial Research Professor of Economics, IESE Director: Professor Chang Chun Lydia J. Price, Ph. D. Case Development Centre Marketing Director: Professor WANG Jianmao Bala Ramasamy, Ph. D. Economics Jaume Ribera, Ph. D. Production and Operations Management Port of Barcelona Chair in Logistics Professor of Production and Operations Management, IESE
78 TheLINK 2006 Winter