At home in the global village
Chinese market presents great potential, challenge and
rapid change for Kellogg School alums
By Ed Finkel
School graduates who pursue the international side of the
business world enjoy a panoply of opportunities
in today's global age, but they also face an array of hurdles,
including differences in language and culture, complex laws
and regulations and rapidly emerging markets.
business in markets outside the U.S. requires very
different approaches for many
reasons, such as market
maturity, different customer's needs, and different
regulations and legal systems."
world's largest and perhaps fastest-growing market, with
an average of 7 percent during the last
15 years, China is arguably the poster child for the potential,
challenges and change of early 21st century international
business. Kellogg School graduates of the Executive
Master's Program (EMP) now working in China say doors
are continuing to open — and that what they're learning
is transferable to other emerging markets such as India,
South America and
"Doing business in markets outside the U.S. requires
very different approaches for many reasons, such as market
maturity, different customers' needs, and different regulations
and legal systems. It is even more complex and challenging
in China," says David He EMP-51, Shanghai-based general
manager for GE Advanced Materials' Asia Pacific elastomer
"Although China has enormous
potential, it is still far less open and poorly regulated
compared to more developed countries," He says. "To
be successful commercially, one has to be patient yet dynamic
enough to adapt to the constant changes, both in the market
environments and in policies."
Global efficiencies married
to local demand
Smith EMP-51, manager of worldwide hay and forage equipment
engineering for John Deere, says companies must look for
commonalities among China and other emerging countries in
order to achieve efficiencies and success.
"You can have the scale and efficiency of a global
platform with the effectiveness of meeting local needs," Smith
says, adding that one low-specification model might fit needs
in several different markets, such as China, India and Mexico. "By
being common on parts and components where it makes business
sense, you have resources to focus on areas that must be
different due to regulations or customer needs."
factor for Deere in producing different lines of components
for agricultural and industrial vehicles
has been varying emissions regulations, says Larry Bryce
EMP-45, manager of worldwide sales for the company's power
|"Governments are driving the platform strategies world-wide.
This poses an interesting problem for all manufacturers
because they have to build for all the different markets."
—Larry Bryce EMP-45
"The governments are driving the platform strategies
worldwide," he says, with Europe, North America and
Japan providing the strictest regulations, while Africa and
South America are mostly nonregulated. "This poses an
interesting problem for all manufacturers because they have
to build for all the different markets," he says.
China's Open Door policies of the 1980s sparked rapid change,
creating challenges for companies that do business there,
David He says. Twenty years ago,
more than 90 percent of the country's businesses were state-owned,
the economy was centrally planned, and laws to protect the
interests of private ownership were nonexistent.
Since then, private enterprise has evolved domestically
but protectionist policies have limited multinational firms.
For example, He says, when GE Medical Systems first entered
China 10 years ago, government policy was especially complex
and tightly regulated imports of medical diagnostic equipment. In
a move typical of multinationals seeking to crack the Chinese
market, GE formed a joint venture with a state-owned company
to produce locally assembled CAT scanners, used to form images
of soft tissue, bone and blood vessels.
"If you need to buy a scanner imported from abroad,
you have to apply for quota approval," He says. "You
have to go through a very long and tedious process. If the
machine is manufactured in China, you don't have to go through
During the past decade, GE Medical Systems, where He worked
for eight years before transferring to his current position
with GE's advanced materials division,
has built its Chinese operation into a full-scale research,
development and manufacturing operation for diagnostic equipment,
with more than $500 million in annual revenue, he says.
Constant change, constant adaptation
China's 2002 acceptance into the World Trade Organization,
the country is becoming more accepting of foreign investment,
which requires it to open its markets and ease import quotas
while allowing more foreign investment in the service sector,
David He says. "You have to constantly modify and adapt
yourself to the new environment," he says. "The
whole change in regulations and policies and legal protections,
and importing-exporting requirements, that's all moving in
a more positive direction. But it is a change, and the changes
are very dynamic and very rapid."
He hopes those changes will prove beneficial for the advanced
materials division, which, among
other products, manufactures structural sealant used as an
adhesive in mounting windows onto the frames of high-rise
buildings. "They have strong regulations in place to
protect the domestic industry," he says. "In order
to really grow your business, you have to find partners domestically — or
leverage their products and the channels they have — to
expand your market presence."
hay and forage equipment operation in China is looking
and parts manufacturing as its biggest
market opportunity in the near term, Smith says. "In
addition to the business we're generating over there, to
make product for the local market, we're using that infrastructure
to be a base to source components for our other operations
in Europe and North America," he says. Furthermore,
in the case of India, Deere is "sourcing not just products
and components but also IT work, design work, that sort of
Smith says Deere's long-term goal is to create common product platforms and processes across developing
countries. "If you have a common design, you can have
common manufacturing processes and common product support," he
says. "You can make common repair parts available. That's
a big deal in our business. We call it, 'design anywhere,
"If you have a common design, you can have common manufacturing
processes and common product support. That's a big deal
in our business."
—Larry Smith EMP-51
power systems division, which markets tractor engines,
and transmissions, sees more opportunity on the construction
side than the agricultural side is China, says Bryce. "Part
of the issue with the agricultural side are these big state-owned
farms are now becoming privatized," he says. "They
end up breaking into small plots for the local farmers.
This will reduce some of the larger-tractor sales and increase
the smaller- tractor sales made with smaller engines."
trend toward urbanization presents an opportunity on the
side, though, Bryce says. "People are
moving to cities, which is requiring huge infrastructure
build-up of roads, schools, hospitals and housing, as well
as the industrial base," he says. "Additionally,
developing countries like China, when they're having this
kind of rapid growth, they're having increases in power generation
needs, which means generator sales. Everyone needs reliable
He, Smith and Bryce say the Kellogg School's EMP experience
them to build careers in international
business. David He cites the program's curriculum in strategy
development, management knowledge and financial tools, along
with such global aspects as "International Live-In Week," Global
Initiatives in Management field study, seminars by international
business leaders and interactions with classmates who have
cross-cultural backgrounds. "I have also been able to
quickly build up a business network here in the Pacific using
my Kellogg connections," He says.
points to the program's many discussions about the value
of diversity — "that obviously is very important
when you're in the global arena" — as well as
a general understanding that "what may work here may
not work there. The broadening that you get from EMP is something
that pays off when you get into an area where all the best
practices you had in one place don't necessarily carry over
into another place."
For Bryce, the academic rigor of the Kellogg School EMP
curriculum was a source of inspiration.
"It provided an absolute injection of motivation and
knowledge, and different ways to apply processes to understand
and evaluate business opportunities," says Bryce. "We
had small classes taught by great professors and, in addition,
we were surrounded by very motivated classmates.
people already had professional experience, and nobody
was there to waste anyone's time—their own,
their families' or their companies' It was a very challenging
and stimulating environment."