Going local

Sipping a cup of Starbucks iced coffee in his Beijing office, Jack Perkowski recalls that his earliest days of doing business in China were filled with traveling and eating. He went to obscure villages with no highways and ate foods that he had never eaten before - rabbit ear and deer penis, to name a couple - and of course, he drank a lot of baijiu, the traditional Chinese liquor.

But thanks to his understanding of China's automotive market - learned from visiting factories throughout the country - the Wall Street veteran built Asimco into a leading car component maker in China within 15 years. Asimco now has 17 joint venture factories nationwide and its sales reached $500 million last year.

Perkowski turned his China adventure into a book, Managing the Dragon, in which he concludes that the key to doing business in China is to build a management team by hiring qualified locals.

Before starting up the business, he spent nine months visiting China's auto parts companies. During these visits, Perkowski says, he did things the way the Chinese did and ate whatever was put in his plate. The most memorable dinner, he recalls, was in Jilin, the Northeast province famous for heavy industry and strong liquor.

Typically, he talked of capital management and technology over dinners, having spent his days mostly listening. But when this particular dinner started, Perkowski - with a glass of baijiu in hand - was about to start talking when someone tapped his shoulder.

He looked back and saw a beautiful woman with a glass of baijiu in hand. He could not refuse. He took the baijiu and drank the whole cup. He thought he could continue his speech on management and technology, but another woman tapped his shoulder. He wanted to refuse, but that would have meant that he thought this woman was not as pretty as the first one. So he drank the second cup. Then he saw that there was a long line of pretty women.

Perkowski remembers that he finished all the drinks and managed to resume his talk about management, but much more slowly.

Such experiences gave him the opportunity to learn local business culture and interact with local people. The interaction, he says, helped build trust, a necessity for doing business in a strange country.

In addition to the cultural touch, the visits also taught him something fundamental about doing business in China. Even though this investment banker was accustomed to deals worth billions of dollars, he learned that a million dollars was huge amount of money in China. He also learned that although Western stereotypes depict the central government as extremely powerful, local businesses also are powerful.

At the culmination of these trips, he set up the headquarters of his company in Beijing, then established joint ventures - in cooperation with existing local car component manufacturers - in areas outside the capital city. The combination of a strong leadership in Beijing together with manufacturing bases all around China positioned him to compete in the domestic market.

Thanks to China's booming automotive industry, his business did well for the first several years, sometimes experiencing a 40-percent annual growth. But a major challenge came in 1997, when sales dipped as the government tightened economic controls.

In addition, Perkowski discovered problems within his management team. "That is the year when my hair turned from blond to gray," he says. "And it was the one time in all my years in China where I thought that maybe the whole thing had been a big mistake."

A Harvard Business School graduate, Perkowski says he first planned to search outside China for management staff. But outsiders often failed because of their lack of knowledge and understanding of how to do business in China. His next idea was to hire Chinese, but they often lacked the management skills required to function in a market environment.

Filling the management gap therefore became one of the key issues in doing business in China, and he ultimately decided to choose something in the middle. He hired Chinese, but those with English skills and experiences in multinational companies. Those people are good managers, and they understand the Chinese market, according to Perkowski.

Managing the joint ventures was no easy work either. Many of the local managers were rebellious, and sometimes they simply wanted to take advantage of the capital that Perkowski was able to offer. Some took the money then refused to do business with him.

Building loyal local management and a trusting relationship with the Chinese partners are the keys, Perkowski says. He tried to extricate himself from some difficult situations by coordinating with local government officials who had business acumen, and he even organized an election for a joint venture head in Hunan province to replace an old management team there.

Perkowski's own life experience is a typical American dream. The son of Polish immigrants, he enrolled at Yale University on a football scholarship then later got in to Harvard and ultimately landed a job as an investment banker on Wall Street.

But his dream had been to identify a trend and build a business with that trend. The dream finally brought him to China in 1992. Finding a county bigger than the United States but decades behind in terms of development, he soon sensed opportunities in the automotive business.

After reading that a highway network was being planned in China, it struck him that this is what occurred in the United States 50 years ago. Soon after the roadwork is complete, there would be automobiles and heavy trucks on these roads.

There still are barriers for foreigners doing business in China, but joint ventures have begun. Shanghai Automotive has started to cooperate with Volkswagen to make cars. And the government has relaxed policies to encourage the car parts industry, which made it possible for Perkowski to build his business.

His company now is well-positioned, as China's automotive industry keeps growing. And his strategy for further development is to be as close to customers as possible. His dream is to build a billion-dollar business, and he is well on the way.

"I had expected that China could play a dominant role in global economy," Perkowski says. And it happened even sooner than he thought it would.

(China Daily 08/04/2008 page12)