"Inside a Chinese Gadget Factory"

[cross-posted from our WFU MBA China Trip 2009 blog]

This is an interesting perspective on the Chinese manufacturing industry from a worker at Foxcomm, a electronics company that makes products like the iPhone.

It's sometimes difficult for Americans to reader these and not cry "slave labor" or "sweat shops", but it's probably more important to step back on consider a few additional concepts:

1. As this person states, there are literally thousands (or millions) of people moving from the farms to the urban areas, and these jobs offer the opportunity for more pay than they have on the farm. So while the working conditions aren't ideal (whatever "ideal" means), they offer the potential to make financial progress for themselves and their families.
2. While there has been discussion about wage inflation in China in knowledge-worker sectors, there are still waves of workers moving from farms to cities that will allow Chinese companies to retain their cost advantages for potentially a generation. This is why you see the emphasis on the systems for new-hire training.

I highlight this not because I'm trying to justify the actions of Foxcomm, but rather to bring light to the environment in China for anyone that will be doing business over there (your company) or dealing with competition. As our visit with VF highlighted, it's important to disconnect from our Western biases and experiences when doing business in Asia. It's not the same, and the sooner we can adapt to their culture the sooner we will start to understand why they have taking their actions in that manner.

"The Last Inch" (maybe only in America)

A recent post from SAMBA about trying to close sales. I highlight this post not because I disagree with the concept or the emphasis. It's like the old Glengarry Glen Ross scene with Alex Baldwin about ABC (Always Be Closing). I highlight this post because of a comment made by one of our guest speakers this weekend. I won't disclose their name (due to the nature of their work), but the speaker is a WFU MBA graduate that runs a successful International business with a focus on US-China opportunities.

Our speaker's company often acts an intermediary for US (or Western European) companies attempting to do business in China, often for the first time. He said one of their client's biggest mistakes is often believing that a signed contract is the end of the negotiations. That it actually means something. He cautioned us that this is often not the case. In fact, it often should be considered the first step in the real negotiations. In China, there is a concept called "a chop". A chop is a physical stamp (from a device called a "chop") that is much closer to a valid/legal signature than the one signed on the dotted line on the contract.

It's also worth noting that many deals require more than one chop, just like many projects in the US require more than one license. The bigger the project, the more chops you may need. For example, our visit in Beijing with United Family Hospitals (Chindex) shared a story about starting a second hospital in Shanghai that required 186 chops.

So I agree with the gang over at SAMBA, make sure you're finding ways to get the deal closed. But also make sure you know the context of your environment, so that signature (or chop) actually means something.

Follow-Up: Failure & Growth in China

In previous posts, I've written about growth and failure in China and the role that both of them play in their economy and culture. One of the things that Americans tend to do when confronted with the thought that China or India will potentially (or eventually) overtake them as an economic power is to point to their lack of innovation. Mike Lord referenced this during our International Business course this past weekend, but then reminded us that many of the early American settlers made copies of everything they knew from their homeland in Europe. The easiest way to gain expertise in a new area is to copy what others have done. What you do with it from there really determines if you will create a culture of innovation, and hence a culture that can create sustainable value over the long-term.

Maybe another data point to consider is the Israeli technology markets and their level of innovation. He is a highly-educated population, that has expertise in various areas of technology, and considerable need to solve economic and cultural challenges. Put they haven't been nearly as successful as their American counterparts in creating sustainable new businesses. One proposed reason for this is their "failure is not an option" mentality in the Israeli culture. I bring this up not as a way to highlight American success, but to highlight another culture that punishes (or discourages) failure, similar to what has been discussed in the past with China.

The US still has challenges to overcome in their education systems to remain competitive in the global economy, and we should not rest on our past success. But I believe innovation and the culture we have that encourages success, failure and resulting innovation is the strength that we need to enhance. The foundation still needs to be there via math and science and creative thinking, but the culture also needs to be encouraged. It is the strength that we have which gives us the ability to overcome the population numbers that are in India and China's favor (at least in some aspects).

2 Million Minutes

I had not heard of the 2 Million Minutes project before, but coincidentally for many of the Executive MBA students on the China trip, this was the topic of conversation during many of our bus rides and meals. Seeing the pace of growth in China, it was hard not to envision how much this would effect our young children. Several of the exPats told us stories about how their children spoke multiple languages and how they embraced traveling to various countries in the region, learning about their cultures and differences. That's something that we don't expose our children to enough here in the US.

I plan to watch this documentary soon. I don't know if I'll have much of an opportunity to change the education system presented to our children, but I do have the opportunity to educate them on the world and give them additional opportunities to expand their views of the world.

The Chinese Assimilation begins tomorrow AM

Well, not in the cool Dollhouse sense of assimilation, but as close as I'm going to get in 2 months in preparation for the International trip in May.

My Rosetta Stone Level 1 Mandarin showed up this weekend, and I've blocked off 30 minutes a morning from now until May 9th to learn as much as possible. I'm actually 2 months behind on my New Year's Resolution, but life's been a little bit hectic lately. I'm not expecting miracles, but it's a starting point in a longer journey. At a minimum, I need to get a little bit fluent (whatever that means), because as soon as my 4 year old gets a hold of this, I suspect that she'll be fluent in 6 months.

T-minus 2 months to International Trips

Our international trips are starting to get more and more real. This weekend was the final date to get in all paperwork for visas (and whatever else we signed off on). It's now just two months away. It's still a long time before the WFU MBA classes (all programs) head off to China, Japan or South America (Brazil/Argentina/Chile), but the level of discussion and anticipation is definitely starting to rise. (NOTE: The India trip was cancelled due to lack of interest. Unfortunately, the "final choice" date happened just a few weeks after the Mumbai bombings, so I suspect the uncertainly doomed the trip. It's too bad, it sounded like a very interesting adventure.)

Personally, I'll be heading to China. We're going to Beijing, Xian, Shenghai, and Hong Kong, and the trip lasts roughly 14 days. I'm already starting to make some plans with friends in Shenghai (from high-school and previous jobs), but I'm woefully behind my New Year's resolution to learn some basic Mandarin. Note to self - get on the stick and order that Level 1 Rosetta Stone Chinese this week!!

It should be a great trip for everyone. The China trip has about 45 students, and only 6-7 from the EXFT class, so it'll be a great chance to meet about 40 new people from our Full-Time, Evening and Charlotte programs. And to have an experience like this with all these new people is exactly why this was one of the top reasons I decided to go back and get my MBA after all these years.

1st Semester Summary - BGE (Part I)

It's getting close to 2009, so I need to start moving this blog from flashback mode into real-time mode fairly soon, so I suppose I'll just need to summarize aspects of the courses from the 1st Semester. These will by no means be complete, but rather hit on some interesting highlights and augment my notes from class.

To start with, I may as well start with the first course we had in August, which was Business in the Global Economy (BGE). Seems like a simple enough topic, just Economics for the Entire World, including all the nuances of Interest Rates, Foreign Exchange Rates, Balance of Payments, Trade Deficits, International Joint Ventures, Global Trade Agreements, etc.. Come on kids, the deep end is over here and the water is warm, jump on in!!

The first thing that excited me about this course was the experience of Dr.Chuck Kennedy, who had previously taught at UVA Darden School and has mentors back at Harvard Business School, so he's well versed in effectively using the Case-Study method of teaching. The next thing I looked forward to was a lack of a textbook. This class was going to evolve out of case study and current events. It wasn't without structure, but it was going to be focused on the realities of the world, rather than primarily based on research.

In the first couple of classes, we covered several historical events that now seem extremely relevant given our current financial crisis. We started with Bretton Woods and how the Global Economy evolved after WWII up through the 1960s. We looked at how fixed-rate currencies affected interests rates, balance of payments and fiscal and monetary policies worldwide. We then watched at the oil and inflationary crisis of the 1970s forced the move to floating rate currencies, affected inflation and interest rates and subsequently led to the recessionary challenges of the 1970s.

After a couple weeks of BGE, and comparing the course to others such as Quant or Accounting, I explained to Dr.Kennedy that I was struggling to a certain extent to get my head around the myriad of levers that could affect change in the Global Economy, and wondered if there were some primers that I could reference to get a bigger picture of the interactions. With a very stern look, he simply told me, "I don't think you're trying hard enough. Connect the dots. Follow the flows of money. It's all there right in front of you. The case study method does not spoon feed answers to you, it expects you to explore and find them. Force yourself to ask questions of yourself and the class." This was a lightbulb moment for me not only about the depths of the course, but about the expectations of the overall program. I appreciated the gentle slap in the face (figuratively), as the method of teaching/learning had not yet completely sunken in for me, and this put things in a much better perspective. This was truly going to be a challenge, and one that I needed to step up for.

As the class progressed, we investigated the Debt Crisis in Zaire, the Debt/Currency Crisis in Mexico, an International Joint Venture in formerly communist Poland, and the breadth of economic impact that China is having on the world and many other topics that may be many years old but are finding ways to repeat their mistakes or lessons in other parts of the world.

I learned a great deal from this class, with this list being a small summary:

• The Wall Street Journal, The Economist, The New York Times and several other global business publications are a completely different read now that I know which lens to focus with.
  
• We talk a great deal about living in a global society, and how the world is much smaller now due to technology. But we've lived in a globally connected economy for a long time. It's just that now, the US is become less and less the center of that connectedness.
• History continues to repeat itself, led by greed and short-sighted decision-making by countries and leaders looking to take advantage of a short-term situation (abundant natural resource, low interest rates, etc.).
  
• Allowing your country to get significantly out of balance with your neighbors, trading partners and the rest of the global economy typically involves longer difficult times when the rebalancing occurs....and it always has to occur.
• Economics does have a set of fundamentals, like other disciplines, but the results of influencing those fundamentals often have less than expected results. The science of economics is often clouded by human emotions of fear, greed, uncertainty and protectionism.
• "Following the money" and "asking following questions" are the best ways to gain perspective on the global environment we live in today.

2009 is going to be an extremely interesting year to see how the US and the world address the global financial challenges we share. I'm looking forward to my trip to China in May to better understand their culture and economy. And I'm looking forward to viewing the world's interconnectedness through a completely different set of eyes.