Cal Poly MBA Trip

Wrap Up Thoughts From June 2011 MBA China Trip

Chris Carr — Fri, 01 Jul 2011 15:05:50 +0000

We have returned to the USA! Three cities, nearly 20 firms, universities, and cultural excursions … all in about 13 days.

This was an excellent student group this year. I appreciated their effort, maturity and professionalism on the trip, including their collective willingness to put self aside for the greater interests of the group. They worked hard, bucked up when the travel or illness bumps appeared, and most were proactive in their learning and the questions they asked. Overall this group was one of the best groups I have taken to China or India, particularly in practicing things like the exchange of business cards, networking, and starting to cultivate relationships with people they met whether they met the person while on the clock or off. This was great to witness, as it was one of the learning goals for the course. The members of this year’s class were also excellent ambassadors for our country, college and university. Cal Poly continues to represent.

Some students found they liked China. Others discovered they did not. Either view is just fine - it was one of the objectives of the course. Some students came to see China more as the factory of the world; others concluded it’s a market and/or both. I think most came to realize that nice roads, airports, ports and trains in the richer coastal region of China do not necessarily make or break a country — it is the people that make the place.

All seemed to walk away understanding that to begin to understand this place, this trip is the first of many they will need to make. Gotta invest, invest, invest. Nothing is easy in China.

Some of the innovators and entrepreneurs in our student group spotted tremendous business opportunities amidst the chaos and fast pace of China; while some of the traditionalists in the group seemed flustered, stressed and/or intimidated by the pace and chaos in a place like China. This trip was a good testing ground for for both subsets.

Sometimes students found that on a trip like this the plane, bus or train is on time and comfortable; other times not. Some tolerated the local food and some even liked it. Some learned taxi drivers in China can sometimes be quite good, or downright surly. Some discovered they could thrive in the difficult physical circumstances that China and international business presents; others found that mountain hard to climb. This too, was part of the trip.

Throughout this trip we saw anecdotal evidence to support Fareed Zakaria’s hypothesis and argument in his excellent book, The Post American World - that it’s not that the USA is in decline so everybody needs to sit back down and stop stressing. It’s just that other countries like China and India are on their way up and we need to learn how to deal with it and partner with them.

The health of most in the group held up, but some did become physically ill due to a cold, fever or the food. Each student who had a sickness spell hit them did a great job of pushing on to try to get the most out of the trip. This effort was much appreciated.

All seemed to develop a deeper understanding and appreciation of the sacrifices that overseas employees and their families make when a firm sends them to make headway into a new market and the unique business opportunities that can be found for a forward leaning business thinker in a place like China (or India) in relation to the West.

Overall, with the exception of some rain here and there, we seemed to catch a a break with the weather, and the pollution was not nearly as bad as usual in Beijing during our stay there. Thank goodness for that.

The students also had the opportunity to observe several best business practices from the Chinese that they can bring back with them to the West (e.g., in China, the guest, client, etc. matter and attention to them is paramount; relationships are often everything in China; and make sure your business plan matches the government’s business plan).

They also caught a good glimpse of the type of people they need to hire who they can send and who can thrive (or not get into trouble) in the markets of China, particularly if/when they conclude getting on said plane ride is personally not for them.

Many students appeared to be humbled and impressed by China and her people and talent; others will return more skeptical. A very small minority may have adopted the common Western belief that they are smarter, better looking/prettier, more talented or superior to the average Chinese national or manager who speaks broken English or comes from a poor province or village. If so we learned that said minority may be in for quite a wake up call in the future.

All seemed to reach a deeper understanding of why China and the US need to work together to solve future geopolitical, business, societal and environmental problems. Should we elect to not partner with places like China and India and their peoples to solve the challenges of today and tomorrow, we do so at our peril.

Some students saw China as needing the USA for some time; while others concluded that China will in time throw down its crutches of needing the US, develop its own domestic market, begin to walk on its own and in time run and be true contenders on the world stage, possibly even surpassing the US in the economic and geopolitical spotlight. Others described what they found in China, a communist country, as being full of pure, raw, unfettered capitalism at its best (and sometimes its worst); while others saw more of a mixture of a system made up of government monopolies that protects certain players and industries. All seemed to develop an appreciation that whether one likes China or not, an educated MBA should better understand how China fits into the world.

In other words, everybody who made the effort had the opportunity to test their talents, beliefs, values, biases, egos, humility, teamwork skills, individuality, professionalism, stamina, appetites, and other in some way, shape or form. This trip was a microcosm of the real world that no textbook, case study or professor in a classroom can teach. These are some of the very types of issues, questions and items we had hoped students would grapple and struggle with when we started to plan this trip a year ago. I do not believe that one can teach these types of lessons sitting and staying within the confines of comfortable Cal Poly and San Luis Obispo, California or even the United States. You must get on a plane and go see these places, and do so with the intent to study business as the focus of the experience. I have also learned on trips like this that the true power of their learning experience will likely not fully hit them for another year, maybe two or three or four.

We also had the opportunity to develop a deeper understanding of what globalization is all about and some of the challenges that will face the business firms and governments of tomorrow. Each of us was able to confirm and test some of our preconceived notions about business, capitalism, communism, “the Party”, China, and themselves, and debunk others. These students should also now have the ability to understand and analyze, at a more sophisticated and nuanced level, the next front page article they read about China and business that appears in the Wall Street Journal, Financial Times, New York Times, Business Week, The Economist, et al. and be able to understand why it’s a front page story and be able to separate fact from global legend and urban lore. This ability to do so will set these students apart from the average American and businessperson, and even most of our politicians, who blather on about China when they know nothing about it, they have never even been there to see the place for themselves, and/or they could not find Beijing, Shenzhen or Shanghai on the map if their lives depended on it.

Of course, how, when and whether this group of future business leaders leverage the knowledge and experience gained through this trip during the next phase of their lives is up to them. At the Orfalea College of Business, I can represent we have done our best to get them to that starting line. The rest is up to them.

A big shout out and thank you to all who helped us on this trip. THANK YOU! Our firm visits this year were top notch and engaging. We are very grateful to each of our host firms and schools for opening their doors to us.

In closing, as for me, as of this year I will have taken well over 200 MBA students to China and/or India. I am bone tired and jet lagged and being away from my wife and three children seems to gets harder. I don’t know that I have many more of these student trips left in me. I design, plan and lead each trip and this course is much more work than teaching a traditional class on campus. Yet one nice thing about these student trips is that they always make me feel a deeper love for home — meaning the USA, SLO and my house and family — each time I return. Traveling abroad as part of such an intense business study course also, as the saying goes, “helps me remember who I sometimes forget to be”. I am thankful for the reminder.

This was an excellent and talented group of 28 Orfalea College of Business MBA students. They were a lot of fun to travel with. I am confident they will make the best of the opportunities before them.

Eat Drink Man Woman - A Metaphor For One Facet of Business In China

Chris Carr — Fri, 03 Jun 2011 02:51:02 +0000

Eat Drink Man Woman. What a wonderful movie! This Taiwanese movie is about a father who tries to show his love for his family through the food he takes the time to select and prepare for them. He is a poor oral communicator in the traditional sense, he struggles to show feelings and emotion, so he tries make up for this trait by showing love for his family through food. Yet, initially his children are too self absorbed to notice his love for them in this regard; but in time they come around and unite as a family. And, of course, they eat some amazing food along the way.

The opening scene from this movie is the father preparing a meal (click HERE to watch the clip). This opening scene is also a metaphor for part of the business world in China.

How, you say? Notice how many different things and tasks he takes on to prepare the meal. Also notice that during much of the scene he uses the same, big knife, to do the chopping, basic cutting, then the fine cutting and mincing, etc.

When we visit China you may see that many (not all, to be sure) Chinese business people tend to be more generalists and a “jack of all trades” than their counterparts in western firms. In the West, we tend to focus on what we specialize in (e.g., “Go talk to marketing, I only handle finance”, or “Look, I just do _____[fill in the blank], you tech guys needs to fix the problem with the product” or “That’s not my area, I deal with the SEO stuff”).

Your thoughts and experiences on this issue? The same? Different? What have you seen and experienced out there?

Henry Kissinger on China

Chris Carr — Mon, 23 May 2011 18:14:14 +0000

I am looking forward to reading the book Henry Kissinger just came out with, “On China“.

Click HERE for the Wall Street Journal book review of the book.

Click HERE for The China Challenge excerpt by Kissinger that appeared in the Wall Street Journal

And click HERE for the Wall Street Journal interview of Kissinger about China and his new book (”Henry Kissinger on China. Or Not.”). It appears the interview did not go so well and that Henry was less than forthcoming. But to be fair, a dummy, Kissinger is not, and he is not a fellow that is easily led into potential journalistic traps.

Zakaria Is A Girlie-Man

Chris Carr — Fri, 08 Apr 2011 22:35:17 +0000

Not really. Just kidding. I think Zakaria is a bright, thoughtful fellow, he is much more knowledgeable about many things than I am, and I am one of his biggest fans.

I just needed a controversial post title to grab your attention.

Per the assigned book review for this quarter, I generally see that students like, in general agree with and find comfort in the overall theme and premise of his book, The Post American World. No problem there.

I am sometimes surprised by how his arguments also sometimes seem to be given a free pass and the benefit of the doubt. On this note, see, for example, this WSJ article, Multilateralism Cuts Both Ways.

Said article, in my view, highlights one of the main weaknesses with the Zakaria and his argument for us “all to just get along.” This article is right to point out, and it is perfectly fair to highlight, that now that Bush and Cheney are gone, the rest of the world don’t have their softball easy targets and big bad bogeymen to attack and use to criticize America for their own unwillingness to “man-up” on difficult geopolitical problems and challenges, and they will now have to get in the game and put their money and own budgets where their mouth is.

Your thoughts?

Relatedly, see this WSJ article, Auction Bidder Protests Looting by Refusing to Pay, about a Chinese art collector who was the successful bidder on some Chinese art at a Christie’s art sale in France, but then refused to pay because he wanted to kill the buy-sell process as an act of political protest. While some would say this is admirable, for me, it highlights a facet of China’s growing (understandable) patriotism and confidence (this also relates to some of our other predepature readings). But more importantly for the purposes of this post, it also highlights China’s ongoing national schizophrenia and paranoia. To wit, one day the CCP and a percentage of its Chinese citizens may claim to be victims of past historical and colonial injustices (for those familiar with recent Chinese history you know the various historical events to which I refer) and they want some form of payback or recognition for those past wrongs, and then the next day they want respect but don’t want to be held to the same international and rule of law standards that the rest of us big boys have to play by (e.g., China had its day in court on the pieces of art at issue and lost).

The argument being that if one wants to be a true global power that is given respect and accolades, said country can’t have it both ways. This too, in my view, is where Zakaria’s books falls short — it does not take this flip flopping by other countries into account (e.g., France, anyone?). He only focuses on the flip-flopping of the USA.

Your thoughts?

And again, for the record, I really am a Zakaria fan. He is a very sharp dude and from what I hear, an even nicer person.

Charlie Rose Talks About China To Morgan Stanley Chairman John Mack

Chris Carr — Mon, 28 Mar 2011 21:37:20 +0000

Click HERE to read this short Businessweek article and interview.

The money quote:

Charlie Rose Question: ”You urge people to go to China. And then you ask them how many books they’ve read [before they go]?”

John Mack Answer: ”I don’t ask them about the books. I just want them to go….”

What is your takeaway from this short article and interview (not just the above quote)?

What A Trip Alumni Reports He Is Seeing On-The-Ground In (Southern) China

Chris Carr — Tue, 01 Mar 2011 22:53:12 +0000

This post seeks to provide you with a possible context in which to view and better understand our trip to China.

I recently touched based with one of our graduates working for a US firm that manufactures its product in China and exports the product back to the US and Europe. His firm is finding that establishing and managing the supply chain in an emerging market like China can be a challenge. I asked him, “What are you now seeing happening on the ground in China? And its pros and cons?” and he noted the below:

>Dear Professor Carr,

Good to hear from you. I hope the school year is going well and the students are preparing themselves for the incredible experience that is China. I am still loving the hustle and bustle of China. There is so just much more energy here compared to the US, and opportunities are in abundance.

There are some major changes on the ground here that I have seen in recent months.

One change is the shortage of raw materials, not just in our [XX] industry but in the [YY] industry as well. These are the two industries I have direct contact with but I suspect this change is across the board.

[One of my Orfalea College classmates also in China] has also been telling me how there was a massive shortage of parts for the OEM electronics business and only the big companies who have the buying power were getting what they needed. The smaller firms had to sit and wait for parts. (His company at the time was having one of their bigger customers place the parts orders that other smaller companies needed.) In my industry costs have gone up due to demand, and finding specific lesser-used materials has become difficult. Unless you are a big company and can meet the high order requirements of most factories to run a specific material, you can sometimes be out of luck.

Also, when the downturn in the economy started a year or two back, raw material vendors cut back production in all industries, as they were scared that they would be sitting on piles of stock. But it turns out global production didn’t dip a much as expected thereby causing shortages all over.

Also, the banking crisis and the troubles that small to medium size companies were having in accessing capital, caused many of those factories to go out of business. And China’s growing domestic consumption helped add to this shortage. It is unbelievable how fast this place is growing and changing.

Some companies are moving their manufacturing from the coastal cities to the more central provinces of China. One example I am sure you are aware of is Fox Conn, one of the world largest OEM electronic manufacturers. It has started moving its Shenzhen offices more inland to save on labor costs and to take advantage of some of the tax breaks the local governments are offering there to attract business. Many other companies are doing the same, or at the least opening second facilities in more remote areas of China, and moving what they can to those areas.

Both at the national and local level (Shenzhen and other already developed cities) the minimum wage has been raised. I have seen the minimum wage increase three times in the two years I have been here, between the national and local increases. This, along with the shortages of raw materials, has caused prices to significantly increase in manufacturing.

The Yuan (RMB) is also going up in value against the US dollar. This, of course, gives us less bang for our buck. This in and of itself is very interesting, as a change in currency value either way will have huge effect on the economy here and abroad. The Chinese don’t want to move the value of the RMB much. However, inflation in China is a huge issue and fear, and keeping the RMB pegged doesn’t help deal with that. But moving it can force many foreign companies to start looking elsewhere for cheaper manufacturing. So this is a catch-22 situation we all face.

Further, I believe, along with other Chinese I know and work with, that China’s real estate is over priced and in danger of a crash. The central government is doing all it can to try and prevent this at the national level, but local governments continue to ignore Beijing’s mandate on this and fund huge development projects, hoping to cash in on what have been super lucrative opportunities so far. This issue continues to have a down stream impact on firms like mine, and our supply chains.

Chinese companies are also now giving preference to domestic consumption and charging many export-based companies premium prices for their goods. As touched on above the buying power of the middle and even lower class is rapidly growing. The Chinese government wants to make sure that this growth continues and will give priority to domestic growth over the other issues it faces (and there are many).

In this changing environment, some firms will pull some of their manufacturing back to the States or Europe. Others will stay and move a second facility inland. Others will focus less on export and now that they have their China legs under them turn their attention to manufacturing in China and selling mainly to the Chinese domestic market — if you are manufacturing in China you MUST look at China as a market to sell to as well. But challenges will come with focusing on the domestic market as well. Any foreign product that is designed and used as an export product by foreign companies, if sold to the local market, will still be taxed as an import product. This gives Chinese companies the advantage as they can under price the competition. For example, Sony TVs are more expensive to buy in China than in the US, even though they are made there. That goes for computers, clothes, accessories, and everything else.

Having said all of the above, I still think any established brand that is not focusing on selling IN China or getting into the game here is really missing out and needs to find a way to get their foot in the door. However, if they don’t partner with a Chinese partner when they do so this will be extremely difficult and the more their brand grows in popularity the more it will be counterfeited and sold on the black markets. But that is just a cost of doing business in China. I feel that in time this situation will improve as China continues to develop and modernize.

The above, of course, doesn’t even take into consideration the vast cultural differences that still exist between Western and Chinese ways of thinking and doing business. The reality is that in doing business in China you are still a foreigner and the locals will always have an advantage over you. Everyday I am in China I am reminded that I am a foreigner, which presents difficulties in some areas but also some opportunities in others.

In summary, there is a lot going on here and in the ever-complex world of China. The opportunities are just huge here and the buying power is too great to ignore this market. I am thrilled to hear you continue to bring students to China. The place continues to blow me away.

I hope to make it back to SLO in the future so we can talk some more and catch up.

XXXX

Question: Your thoughts to this alumni’s view, experience and touch base?

And to build off this post and alumni feedback re: this shift now taking place in China as China continues to develop and ‘modernize’, see these two interesting related posts and perspectives from Dan Harris over at the always good China Law Blog, China Manufacturing: ‘We’re Bringing It Back Home’ and Where To Locate Your Business In China. This Download Will Tell You.

May 5, 2011 addendum: Today’s Wall Street Journal had two excellent article that echo and build on this blog post and alumni observation, Will Costs Abroad Drive Firms Home? and Candle Maker Feels Burned: Compamy, With Plants in Asia, Struggles to Open in U.S.

The Revolution That Wasn’t (Source: ChinaGeeks Blog)

Chris Carr — Tue, 22 Feb 2011 03:40:50 +0000

China the next Tunisia or Egypt? Bet on the likes of Libya, Saudi Arabia, Yemen, Venezuela, Bahrain, Cuba, Myanmar, Yemen, etc. Forget China. E.g., interesting on-the-ground post on the topic and how this is percolating in China by the ChinaGeeks blog (click HERE).

Hard Choices: Evergreen Solar’s China Move

Chris Carr — Mon, 14 Feb 2011 01:37:26 +0000

Fascinating one page article and story in Businessweek (click HERE) from Evergreen Solar CEO, Michael El-Hillow that touches on some differences between the US and China re: fiscal policies, tax breaks, regulatory environments and approaches, and industrial policy. I know very little about this firm, it’s product or the industry. What are you seeing out there on this topic? And your thoughts and feedback on this article? Is this his problem? Your problem? My problem? Other? If you don’t like what you are seeing here, what is your solution and does it stand a chance politically of being successfully implemented?

TEDx — Understanding the Rise of China

Chris Carr — Thu, 27 Jan 2011 18:12:32 +0000

I received this email from a China trip alumni who does business in and with China:

>Hi Chris,

I was just watching this TEDx video about the rise of China. From my experiences 99% of what is being said is what I see and what people in the US need to start being aware of. This speaker (Martin Jacques, author of When China Rules the World) is talking to people in the United Kingdom and addresses their ignorance towards what is going on, and I fear that in the the US it may be worse the the UK. I hope your students will watch the video (hopefully a few times) before they visit China and use this knowledge when they are seeing things first hand. Some of the things they see they may never fully understand from a week or two trip to China, but still it’s important to go there and get a feel for what is going on. The thing I only disagreed with was how today people view the state in China. What he says hold true for I would say up to 20 years ago, but I think the today’s youth (in the cities) view the state a bit more ‘Westernly’. Anyway, I hope the students get something out of this. All the best, - XXX

Prof. Carr Addendum: And in the interest of balance, here is a counterpoint to the above TEDx video …

See this nice blog post by Dan Harris at the always excellent China Law Blog (click HERE to read the post) where he discusses some of the pros and cons of the soon to be released book by Troy Parfitt, Why China Will Never Rule the World. Be sure to read and check out the comments to Dan’s post.

WSJ — Chinese Netizens React: Giffords Shooting

Chris Carr — Sun, 16 Jan 2011 04:03:19 +0000

Consistent with my prior blog post re: Kaiser Kuo’s speech noting China’s active internet/netizen community, click HERE for a Wall Street Journal piece with the same title as this blog post. It’s interesting to see the range of reactions in China. I bet some of you get asked about this event and your take on it from local Chinese when we visit English Corner. What will you say and how will you spin it if someone there (verbally) comes at you hard (but it would be done politely!) on this one?