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Business Mini Presentation, Article Review Example

Pages: 1

Words: 941

Article Review

Authors George Stalk and David Michael discuss the common misconceptions about China among American corporations as well as the lessons from the winning western companies. The authors claim that most westerners underestimate the market opportunities available in China. In addition, they also underestimate the pace at which Chinese consumers are adopting new technologies and embracing consumption lifestyles. China is usually seen as a manufacturing-driven economy but such a perception masks the fact that China has also become a leading center of innovation and research & development. The authors accuse western managers of being out of touch with China and continue to have a prejudiced view of the country. The western managers are being guided by ethnocentric beliefs on their China visits that the country will become more like the west over time and as such donot make serious efforts to learn about the country’s unique culture and its people(Stalk and Michael).

The authors are concerned the western corporations are turning out a blind eye to Chinese domestic corporations and will be left out in the long run. Western companies should move in quickly because Chinese companies have already become major players in various high growth industries. In addition, western companies should go for nation-wide expansion instead of choosing few selected areas and pursuing controlled growth. In addition, western companies should move to China with huge resources at their disposal otherwise the market growth may be too much to handle. Western companies should also keep in mind that Chinese markets are not like the western markets and thus, have different characteristics. The key to winning the competition is to understand the needs of the local customers that could be vastly different from those in the west. Moreover, the competition with Chinese companies will only grow in the future as Chinese companies expand overseas after exhausting local opportunities(Stalk and Michael).

The authors do not fail to note that political risks remain because China’s economic rise also translates to weakening western political influence on the country. Fortunately, there are few western corporations such as Volkswagen, Yum Brands, P&G, Nokia, and GE that have effectively executed their China strategy. These corporations are succeeding in China because they were early in the country, pursued aggressive expansion, and took the efforts to understand local markets and culture (Stalk and Michael).

I have chosen this article because most western economies are relatively matured as compared to growing economies like India and China, thus, the obvious next frontier for many westerncompanies will be developing economies like China. The article states that most western companies have been slow in moving to China which came as a huge surprise to me. This is because western corporations have a long history ofoverseas operations and western brands such as Coca Cola are sold in more than 200 countries (The Coca-Cola Company). One would imagine that western companies would have mastered the art of identifying overseas opportunities and acting on them in a timely manner by now but the article gives an entirely different picture. In addition, west is the birthplace of most modern management philosophies including Think Global, Act Local(Lyndsey) and yet, western corporations are making these very basic mistakes of not trying to understand local Chinese customers and markets.

The article does make some good points but it also takes a simplistic view of the challenges of entering China. The suggestion that the companies should expand aggressively from the very beginning is not entirely feasible. This is because China is quite different from the west in terms of culture and, thus, some mistakes in the beginning will be inevitable as companies learn and try different strategies. Mistakes on a small scale are less costly than on a larger scale which could threaten the very existence of an overseas operation. Wal-Mart’s experience in Germany is a great example as the world’s largest retailer was forced to exit the country few years back due to a billion dollar pre-tax loss (Hall).

The article is right in terms of first mover advantages but fails to take into account the fact that western corporations also face some artificial barriers to entry. Chinese government has taken steps to restrict foreign investment in certain industries while in others, western companies are required to take a local partner. The article recommends western companies to go for excess capacities due to profit opportunities. A better advice may be to study the specific industries before deciding on a production capacity because profit opportunities always attract more competitors who soon drive down the profit margins, resulting in excess capacities and lower asset utilization. Maybe industries with high levels of barriers to entry will make better candidates for large production capacities as compared to those with low levels of entry barriers.

The article does serve a purpose in that it emphasizes the need to enter Chinese markets on an urgent basis as well as make efforts to understand Chinese culture and customers. The suggestions are not entirely inaccurate but the authors try to present one-size-fits-all recommendations which may not be practical for certain companies. Moreover, the inability of western corporations to make strong inroads into China is not entirely their own fault. China is certainly one of the developing economies with the greatest market potential and one way to minimize the risk may be hiring Chinese and international consulting companies who could guide the new comers through the tricky Chinese competitive landscape.

References

Hall, Allan. http://business.timesonline.co.uk/tol/business/industry_sectors/retailing/article694345.ece. 29 July 2006. 20 September 2011 <https://www.google.com/search?rlz=1C1SNNT_enUS392US392&gcx=c&sourceid=chrome&ie=UTF-8&q=walmart+pulled+back+from+japan#sclient=psy-ab&hl=en&rlz=1C1SNNT_enUS392US392&source=hp&q=walmart+pulled+back+from+germany&pbx=1&oq=walmart+pulled+back+from+germany&aq=>.

Lyndsey, Morgan. Think Global, Act Local: Grassroots Environmental Guide. 20 September 2011 <http://www.localpages.com/content/think-global-act-local-grassroots-environmental-guide.html>.

Stalk, George and David Michael. “What the West Doesn’t Get About China.” Harvard Business Review June 2011: 25-27.

The Coca-Cola Company. How We Operate. 20 September 2011 <http://www.thecoca-colacompany.com/careers/how_we_operate.html>.

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