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Learning from China(Manila Standard Via Thomson Dialog NewsEdge) Our businessmen come to Nanning looking for products as candidates for integrative trade with China," President Gloria Macapagal Arroyo said at the opening ceremonies of the 3rd China-Asean Expo and the 3rd China-Asean Business and Investment Summit on Oct. 31, in Nanning, China. She said Filipino businessmen participated in the expo "looking not only for products to bring home, but for industries where Chinese and Asean manufacturing can collaborate to produce for our own domestic markets and for the rest of the world." This was an opportune time for Filipino businessmen and executives, who will be part of the strengthening of "integrative trade" within the East Asian region to reduce dependence on exports to Western markets. Managing in an unpredictable environment But perhaps what is more important for the Filipino participants to learn from this exhibition in particular, and from China in general, is how Chinese entrepreneurs and businessmen managed to grow their business empires within a short time and in a highly volatile and unpredictable environment. Succeeding in China is tougher than usual. "Chinese companies face extremely high levels of uncertainty across multiple dimensions," said Donald Sull in his book, Made in China: What Western Managers Can Learn from Trailblazing Chinese Entrepreneurs, where he analyzed the success secrets of leading Chinese firms that have thrived in the country's volatile market. The highly volatile macro-environment in China is characterized by unpredictable regulation and industrial policy, uncertainty about integration into the global market with the onslaught of deep-pocket multinationals into China, poor access to global technology markets, uncertain access to and cost of capital, macroeconomic jolts (e.g., depreciation of the renminbi), and unclear and shifting intellectual property rights. But despite these obstacles, "an elite group of Chinese companies, [with examples from Legend, now known as Lenovo with its merger with IBM PC division, to UTStarcom, an emerging global telecommunications vendor] managed not only to survive, but to thrive amidst the unpredictability that characterized China's move to a market economy and integration into the global economy," avers Sull. No difference from China The Philippine macro-environment is no different from that of China, with perhaps less volatility and unpredictability. We face the same issues but with less intensity. Notwithstanding this, we hear many businessmen and entrepreneurs complain about the same set of factors--the devaluation or appreciation of the peso that affects exporters and importers, the unpredictable regulatory environment, especially with every change in the administration, the entry of multinational firms that compete with local companies, and intellectual property issues. This is probably the reason why, unlike in China, we have not witnessed the growth and ascension of new Philippine firms in a regional scale in the last 15 to 20 years. The fragile and sometimes volatile environment in the Philippines has the potential to destabilize the strategic frameworks and undermine growth efforts of Philippine firms. Chinese management skills So what can Philippine businessmen and entrepreneurs learn from their Chinese counterparts? Sull's findings reveal that Chinese firms possess a variety of valuable management skills, including the ability to decide and act rapidly based on information and facts on hand and on the ground, rather than on their long-term plans. Chinese entrepreneurs have also mastered "active-waiting," a skill that consists of anticipating and preparing for opportunities and threats that a manager can neither anticipate nor control in a highly unpredictable market. Instead of the usual "wait-and-see" attitude that we often see among local entrepreneurs when confronted with uncertainties, Chinese managers focus on "timing-based competition" that is grounded on three windows of opportunity--customers, competitors, and context (including external factors other than buyers and competition)--and that consistently matter in evaluating the right time to pursue an opportunity. This "active-waiting" approach helps them react quickly to a constantly changing environment; however, this is not to assume that being fast beats the slow. For example, a Chinese firm, Wahaha, pioneered the children's nutritional drink segment. However, in some cases, Wahaha followed early players that educated consumers on the benefits of packaged milk, carbonated drinks, and bottled water. Right opportunity Success, therefore, depends on mustering up much of the company's resources for the right opportunity at the right time. But deciding and acting quickly at the right time depends, to a large extent, on whether the three factors--customers, competitors, and context--are aligned. Internal factors, of course, influence a manager's ability to act quickly, but much of timing depends on factors principally outside the control of the entrepreneur or businessman. Perhaps, more than just products or services to sell to and from China, our business leaders and entrepreneurs can learn from their Chinese counterparts on how they manage effectively in turbulent markets, in spite of the unpredictable external forces that beset them. Reynaldo C. Lugtu Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools Graduate School of Business. He may be e-mailed at [email protected] or visit his blog at http://rlugtu.blogspot.com Copyright 2006 Manila Standard. Source: Financial Times Information Limited. |