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China Daily Website

Go global by 'thinking local'

Updated: 2012-07-31 10:00
By Lan Lan ( China Daily)

Small steps lead to giant strides in overseas markets, experts say

When asked how he feels about working for a Chinese company, Jeffrey Shafer, vice-president of global communications at Lenovo, responded quicker than a mouse click: "It's a global company."

Even a cursory glance at the company's executive list confirms the truth of that statement.

There are six nationalities among Lenovo's top 10 executives and 17 nationalities are represented in the company's top 100. The company has a presence in more than 60 countries and regions.

Chinese companies operating in ever-increasing numbers overseas have contributed significantly to the host countries.

According to a report released by the World Economic Forum and the Boston Consulting Group, in 2010, Chinese companies employed nearly 1 million people overseas, and of these about 71 percent were part of the local workforce.

Local hiring has helped Lenovo, the world's second-largest personal computer maker, to gain local acceptance.

The company maintained local jobs after it purchased IBM in 2004. It has more than 2,500 people in the US and created 300 jobs at its US headquarters near Raleigh, North Carolina in 2011.

"If your executives and employees are from various backgrounds, it demonstrates the company has a cultural diversity," Shafer told China Daily.

Chairman and CEO Yang Yuanqing moved his family to the US to better understand its culture after the purchase, though he didn't speak English fluently then.

Lenovo's market share is about 8 percent in the US and it is the fourth-largest PC company in the US, according to the company.

The company, built by former chairman Liu Chuanzhi 28 years ago with a few engineers in a hut, has put down roots in the US.

"When Lenovo purchased IBM most people expected it to fail. After seven years, we have become the world's second-largest PC maker," Shafer said.

The US market is obviously of strategic importance for any Chinese company looking overseas.

Despite the fact that only about 1 percent of US foreign direct investment came from China in 2011, more and more Chinese companies are set to enter the US market.

But the basic question remains the same: How do you gain acceptance and achieve sustainable success?

Peter Verrengia, president and senior partner of Communications Consulting Worldwide, said it is important to build a positive stakeholder relationship.

"It's hard to convince people in any area by telling them you are here to help them. They will question what you can bring and what you will take."

He suggested Chinese investors spend more time building bridges to local communities.

Chinese companies have to overcome certain obstacles, including mistrust, caused in part by the increasingly harsh rhetoric of the US presidential campaign.

Some people think that the US is economically limp while China is economically strong, and they then believe China's growth represents a threat, Bill Black, senior vice-president of Fleishman-Hillard, said.

Though Washington encourages foreign investment, Chinese investment in telecommunications and information technology has confronted obstacles.

"But at the local and state levels, companies are welcomed by officials who see the economic benefits. Chinese companies seeking to invest in the US should start as locally as possible and work outward to create a widening network of strong stakeholder relationships," Black said.

Stakeholders mean customers, employees and investors, government officials at the local, regional and national level, community and union leaders, and environmental groups.

"If stakeholders come to see the new business as being a good potential partner that will bring benefits, such as more jobs and economic activity, then they will welcome the foreign investment, and even actively work to smooth its path of entry," he said.

Haier is another pioneer of Chinese companies "going global" and its strategy was through green-field investments (building new facilities).

Li Pan, president of Haier Electrical Appliances, said the company is in talks to expand its investment in South Carolina on the basis of a good local network.

The appliance and electronics giant started with $30 million investments in the US in 1999. The initial investment brought more than 200 jobs and another 600 jobs indirectly, and it also stimulated a number of projects in the area.

Apart from creating jobs, operations in the US have strengthened Haier's cooperation with US companies in joint research and getting supplies of raw materials.

Haier sources more than $520 million annually from US companies, such as Honeywell and Dow per year, a sum greater than Haier's annual exports in terms of value, Li said at a recent forum in Beijing.

Haier started by sponsoring the NBA, after that a US national park and charity organizations to help it gain brand visibility.

"Without partners, local governments and consumers, you cannot generate a win-win result," Li said, adding that Haier regards itself as a corporate citizen with social responsibilities when investing overseas.

Media practices

Chinese companies are developing a greater awareness of the importance of communication in the US and to tell their story to their customers and stakeholders in a more effective way.

"Even as recently as three years ago, most of the few Chinese companies operating in the US thought that the best way to achieve their business goals was to stay quiet, is to stay out of the media. I think that has changed in recent years and is still changing," Black said.

Chinese companies are considered opaque, as the Americans value openness and transparency, so it's important for them to be open and transparent, Black said.