HOW TO DEVELOP A SUCCESSFUL JOINT-VENTURE IN CHINA
WHAT IS A JOINT-VENTURE Joint-Venture in China SIMPLY PUT, A JOINT VENTURE (JV) IS NOTHING MORE THAN AN ECONOMIC COOPERATION, OR BUSINESS COMBINATION, OF TWO OR MORE PEOPLE, COMPANIES OR ASSOCIATIONS WITH A COMMON ECONOMIC GOAL A SHARING OF RISKS AND PROFITS IN A SPECIFIC PROPORTION, COUPLED WITH A CONTRIBUTION OF EXPERTISE AND ASSETS TO THE JV, WHETHER THOSE ASSETS BE HUMAN CAPITAL OR MONETARY CAPITAL UNDER CERTAIN DEFINED CIRCUMSTANCES THE JV MAY BE LIMITED IN TIME, OR MAY HAVE NO TIME LIMITATION, ALTHOUGH MOST JV ARE LIMITED IN SCOPE, LIMITED TO THE EXPERTISE OF THE JV PARTNERS IT IS QUITE COMMON FOR A JV TO HAVE SOME FORM OF TIME LIMITATION SUCH AS A PRELIMINARY PHASE, WITH PRESCRIBED TIME LIMIT WITHIN WHICH THE JV MUST ACCOMPLISH MINIMUM GOALS UNDER CERTAIN DEFINED CIRCUMSTANCES IF THOSE TARGETS ARE MET, THEN THE JV AUTOMATICALLY PROCEEDS TO ANOTHER PHASE OR A PERMANENT PHASE, SUBJECT TO EARLY TERMINATION UNDER CERTAIN DEFINED CIRCUMSTANCES
JOINT-VENTURE: A STRATEGIC MODE OF ENTRY FOR DEVELOPING NEW BUSINESS IN CHINA Joint-Venture in China MARKET RESEARCH MARKET INTELLIGENCE MARKET ENTRY STRATEGY MARKETING STRATEGY DISTRIBUTION CHANNELS AGENTS & DISTRIBUTORS REPRESENTATIVE OFFICE 1 2 3 INVESTING IN FOREIGN MARKET SELECTING POTENTIAL LOCAL PARTNERS JOINT VENTURE WHOLLY FOREIGN- OWNED ENTERPRISE NEGOTIATING TERMS AND CONDITIONS SCHEDULING VISIT TO FOREIGN MARKET IT S A GO! OK TO PROCEED AND COMMERCIAL OPERATIONS START IN SELECTED MARKETS IN CHINA
4 STRATEGIC REQUIREMENTS FOR SUCCESS WHEN DEVELOPING A JOINT-VENTURE IN CHINA Joint-Venture in China 1 2 HIRE A GOOD CONSULTANT, AND GOOD LOCAL MANAGERS! START BY HIRING A GOOD INTERNATIONAL BUSINESS CONSULTANT TO DESIGN AND DEVELOP A FOREIGN MARKET ENTRY PLAN STARTING WITH MARKET RESEARCH, MARKET ANALYSIS, MARKET INTELLIGENCE. HE WILL BE YOUR RELIABLE CONTACT REPRESENTING YOUR INTERESTS IN THE JV IN CHINA AND MONITORING YOUR LOCAL PARTNER WILL COMPLY WITH THE JV AGREEMENT. THEN HIRE AND TRAIN GOOD LOCAL MANAGERS, INSTILLING A SENSE OF LONG-TERM INVOLVEMENT. YOU NEED THEM TO BE LOYAL! THIS IS A MUST CONDITION FOR SUCCESS! PLAN TO INVEST IN THE LONG TERM! DO NOT EXPECT QUICK PICKS. SUCCESS DOES NOT HAPPEN OVERNIGHT, AND YOU WILL NEED TO INTEGRATE YOUR CULTURE INTO THE LOCAL CULTURE AND BUSINESS ENVIRONMENT
4 STRATEGIC REQUIREMENTS FOR SUCCESS WHEN DEVELOPING A JOINT-VENTURE IN CHINA Joint-Venture in China 3 4 CREATE AN EFFECTIVE MARKETING PLAN! ACKNOWLEDGE, ACCEPT, RECOGNIZE THAT CHINA IS A DIVERSE COUNTRY, AND NOT A SINGLE NATIONAL MARKET ADAPT TO THE UNIQUE LOCAL VALUES AND CULTURAL DIFFERENCES BY DEVELOPING DISTRIBUTION, AND DESIGNING MARKETING STRATEGY AND ADVERTISING MESSAGES ACCORDING TO THE NEEDS OF LOCAL MARKETS ADJUST THE MIX AND ATTRIBUTES OF YOUR PRODUCTS TO THE NEEDS OF THE LOCAL MARKETS, AND TAKE INTO ACCOUNT ALL DIFFERENCES WHEN DESIGNING YOUR MARKETING STRATEGY FOCUS ON YOUR CORE COMPETENCES! SIMPLY ASK YOURSELF THE FOLLOWING QUESTIONS: WHAT DO WE OFFER CUSTOMERS THAT WILL ATTRACT THEM? HOW ARE WE DIFFERENT FROM POTENTIAL COMPETITORS? WHAT CAN WE DO WELL IN CHINA, AND WHAT CAN CHINESE COMPANIES DO BETTER?
STEPS FOR DEVELOPING A JOINT-VENTURE Joint-Venture in China NEGOTIATION WITH THE SELECTED JOINT-VENTURE PARTNER LEGAL PROCEDURES FOR JOINT-VENTURE JOINT-VENTURE COMPANY MARKET RESEARCH IDENTIFICATION OF J/V PARTNER(S) STUDYING AND EVALUATING OPTION(S) NEGOTIATION DUE DILIGENCE & BUSINESS VALUATION MEMORANDUM OF UNDERSTANDING JOINT-VENTURE AGREEMENT ANCILLARY AGREEMENTS REGULATORY APPROVALS DEFINITION MANAGEMENT OPERATIONS BUSINESS PLAN
STEPS FOR THE SUCCESS OF A JOINT-VENTURE Joint-Venture in China IN BRIEF, HERE S THE PATH TO SUCCESS: AGREE ON THE STRATEGY AND, ADAPT THE STRATEGY TO: EVOLVING EXTERNAL CONDITIONS AS WELL AS TO NEWLY CREATED INTERNAL CAPABILITIES DESIGN THE METRICS TO DETERMINE HOW WELL THE STRATEGY IS BEING IMPLEMENTED COMMUNICATE A COMMON VISION OFFER INCENTIVES TO MOTIVATE EMPLOYEES TO IMPROVE COLLABORATION AND DELIVER RESULTS TALK OPENLY ABOUT DIFFICULTIES, AND RESOLVE POSSIBLE DISPUTES SHARE INFORMATION WORK COLLABORATIVELY AND PRODUCTIVELY TO ACHIEVE BENEFITS OTHERWISE NOT ACCOMPLISHABLE
THE COMPETITIVE ADVANTAGE OF THE JOINT-VENTURE Joint-Venture in China TANGIBLE INTELLECTUAL PROPERTY RIGHTS COMPETITIVE ADVANTAGE INTANGIBLE STRONG BRAND EXCLUSIVE LICENSE(S) LEADERSHIP KNOWLEDGE & SKILLS TEAMWORK ORGANIZATIONAL CULTURE TEAMWORK ORGANIZATIONAL CULTURE INTERNATIONAL COMPANY LOCAL PARTNER COMPANY IN CHINA THIS SET OF DISTINCTIVE CAPABILITIES CANNOT BE IMITATED BY COMPETITORS
BALANCED SCORECARD Joint-Venture in China OPERATIONAL EFFECTIVENESS REVENUE MAXIMIZATION LOYALTY OPERATIONS LEARNING AND GROWTH EARNINGS GROWTH LOYALTY VALUE CREATION HUMAN CAPITAL EXCEED EARNINGS EXPECTATIONS PRODUCTIVITY IMPROVE COST STRUCTURE CAPTURE MARKET SHARE VIA LOCAL DISTRIBUTION, RETAIL, INTERNATIONAL, AND INTERNET SALES INCREASE PROFITABILITY REVENUE MANAGEMENT DEVELOP AND KEEP LOYAL CUSTOMERS IMAGE CONSISTENCY DELIVER PRODUCT BRAND PROMISES INTERNAL BUSINESS PROCESS VALUE CHAIN INNOVATION R&D OPERATIONS SERVICE CHINA DOMESTIC SALES INTERNATIONAL SALES INTERNET SALES ATTRACT AND RETAIN TOP TALENTS AS CONSULTANTS, MANAGERS, LOCAL & INTERNATIONAL AGENTS AND DISTRIBUTORS DEVELOP STRATEGIC SKILLS: TRAINING FOSTER A DIVERSE WORKFORCE
平衡计分卡 : 统一公司职能 Joint-Venture in China 运营效力收益最大化忠诚度运作学习和成长 利润 发展 忠诚度 价值创造 人力资本 超越盈利预期 通过区域批发, 零售和国际 网络销售取得市场份额 寻找和保持忠诚客户 生产率增加利润率形象一致性 内部商业进程价值链 创新研发运作服务 中国国内销售 吸引和保留高级人才担任经理, 国内国际代理人和经销商 培养关键技术 : 培训 优化成本结构 收益管理 传递品牌承诺 国际销售 网络销售 培养有多面能力的员工队伍
CHINA: NO LONGER AN EMERGING MARKET
CHINA: NO LONGER AN EMERGING MARKET China FOR THE FIRST TIME IN 2010, ASIA DID GENERATE MORE NEW DEMAND THAN THE U.S.A. THE GLOBAL ECONOMY WILL INCREASINGLY BE DRIVEN BY ASIAN NATIONS, ESPECIALLY CHINA, WHICH MUST DELIVER MORE GOODS AND SERVICES TO ITS OWN MIDDLE CLASS Consumers account for nations GDP: Savings as % of household income: CHINA 35% 37.5% U.S.A. 70% 3.6% 271 1,110,000 300,000,000 170,000,000 billionaires (China ranks #2 behind USA with >400) millionaires (China ranks #3 behind USA and Japan) middle class purchase top luxury brands CHINA S EXPORT-FOCUSED ECONOMY IS GIVING WAY TO A CONSUMER-DRIVEN MARKET MORE QUICKLY THAN MOST COMPANIES THINK
CHINA: NO LONGER AN EMERGING MARKET China CHINA IS TODAY THE WORLD S LARGEST OR SECOND-LARGEST CONSUMER OF A VARIETY OF PRODUCTS: GLOBAL RANKING #1 GLOBAL RANKING #2 AUTOMOBILES 22% INTERNET USE 63% MOBILE PHONES 22% CONSUMER ELECTRONICS 15% LUXURY GOODS 19% JEWELRY 13% SHOES 12% HOME APPLIANCES 12% BIKES & MOTORCYCLES 7%
CHINA: AN EXPORT-FOCUSED ECONOMY A CONSUMER-DRIVEN MARKET China: an Export-Focused Economy INTRA-NORTH AMERICA 1.4 INTRA-EUROPE 7 INTRA-ASIA 6.5 NORTH AMERICA-ASIA ASIA-NORTH AMERICA 11.5 ASIA-EUROPE 11.5 5.4 EUROPE-ASIA 4.9 44 INTRA-SOUTH AMERICA 1.4 2.9 ASIA-SOUTH AMERICA ASIA-MIDDLE EAST ASIA IS MOVING BEYOND EXPORTING TO THE WEST. TODAY ITS PORTS MAINLY HANDLE CARGO MOVING WITHIN THE REGION. 3.4 ASIA-AUSTRALIA 8 Numbers represent millions of 20-foot (6 m.) shipping containers Source:: Harvard Business School, HBR, June 2011 What the West Doesn t Get About China
CHINA HOSPITALITY: NEW HOTEL DEVELOPMENT IN THE 3-YEAR FROM 2010 TO 2012 Hotel Development in China Year 2005 2006 2007 2008 2009 2010 2011 2012 Number of hotels Increase in % Number of rooms 2.156 14% 524.733 2.457 14% 591.926 2.186 15% 672.198 3.165 12% 756.498 3.428 3.799 8% 837.748 3.662 7% 913.399 4% 957.175 3.877 2% 984.655 Increase in % 12% 13% 14% 13% 11% 9% 5% 3% Hotel development in the 3-year from 2010 to 2012 449 new hotels 2*, 3*, 4*, and 146.907 new hotel rooms 5* hotels
HEALTH FOOD IN CHINA: 2001-2010 RETAIL SALES REVENUE & GROWTH RATE Natural Health Products in China 1200 50% 1000 38.2% 40% 30.1% 100 800 600 13.3% 11.1% 74 91.1 400 28.5-29.8% 30 34 47 45-4.3% -4.3% 50 9.8% 9.8% 200 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1000 Sales Revenue (RMB billion) 30.1% Growth Rate %
TREND IN IMPORTED WINE AND DOMESTICALLY PRODUCED WINE IN CHINA The Wine Market in China RISING TREND IN IMPORTED WINE IN CHINA RISING TREND OF CHINESE WINE (DOMESTICALLY PRODUCED)
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