How ATTRACTIVE IS CHINA from a total strategic view?
Is CHINA an attractive market?
Google is threatening to exit CHINA, this may be only words, but it does raise the issue of how attractive and critical is the Chinese market... take a look at an article we wrote for Chief Executive in 2008. Who's Going the Wrong Way? The article covers all of the costs and risks of doing business in China and compares it with doing business in the United States. Many companies argue they have no choice since China is one of the biggest current and future markets. But the real issue is what you are losing and whether you can really be profitable. I compare United States companies who are going to China with Korean, Japanese, and others who are leaving and focusing on the United States.
Security is one of the major issues.
This is an excerpt from the article: (you can read the entire article by visiting my site: www.strategyleader.com.
Lack of Security
The cost of doing business in China is not just restricted to the ordinary cost of labor, materials and taxes, it must also include the violation of patents, copyrights and other intellectual properties. This is a major issue with the Chinese. China has never signed the International Copyright and Patents agreements, and does not protect copyrights or patents. A 2005 Time article called “The Idea-Stealing Factory” reported that “in a country where government-controlled companies comprise the industrial base, piracy is not derived from commercial callowness, it appears to be official policy.”
The music/entertainment/publishing industries have lost billions because their protected materials are stolen and sold at a fraction of the list price, of which they get nothing. In fact, my own last two books were translated and sold illegally in China. The CIA asserts that China has an elaborate spy system in the U.S. to steal commercial and military technologies. And a quick Goggle scan of articles about industrial espionage yields more than 15 incidences of companies either suing the Chinese for pirating or companies leaving China because of their inability to protect their patents and copyrights.
For example, Cisco Systems filed a suit against Hawaii Technology of China, accusing the company of copying software and infringing patents. And former Lucent Technology scientists Hai-Lin, Kai-Xu and Young-Oing were indicted by a federal grand jury for allegedly conspiring to steal trade secrets from Lucent Technologies.
The Wall Street Journal summarizes the current situation this way: “Though China is working hard to repair its reputation as a place where theft of intellectual property is rampant… the truth is that counterfeiting and piracy remain common.”
What’s more, since foreign companies must train their Chinese managers, professionals and workforce, they are, in essence, developing their own new competition. There have been reports of companies who built factories in China and within a few years the employees left to build a competing factory across the street. In all of the major Chinese growth areas, such as wind power, electrical systems, transportation and water purification, new Chinese companies are being formed not only to serve the Chinese markets, but to sell offshore, especially in developing nations. In fact, in March 2008 China reportedly announced that it was creating a new company to design, produce and sell jetliners big enough to carry more than 150 passengers, which could eventually pose a threat to Boeing and Airbus.
Security issues extend beyond just the loss of intellectual properties. The travel of senior management and professionals as they visit and interact with their employees in China also presents huge security issues and requires an expensive infrastructure.
Google is threatening to exit CHINA, this may be only words, but it does raise the issue of how attractive and critical is the Chinese market... take a look at an article we wrote for Chief Executive in 2008. Who's Going the Wrong Way? The article covers all of the costs and risks of doing business in China and compares it with doing business in the United States. Many companies argue they have no choice since China is one of the biggest current and future markets. But the real issue is what you are losing and whether you can really be profitable. I compare United States companies who are going to China with Korean, Japanese, and others who are leaving and focusing on the United States.
Security is one of the major issues.
This is an excerpt from the article: (you can read the entire article by visiting my site: www.strategyleader.com.
Lack of Security
The cost of doing business in China is not just restricted to the ordinary cost of labor, materials and taxes, it must also include the violation of patents, copyrights and other intellectual properties. This is a major issue with the Chinese. China has never signed the International Copyright and Patents agreements, and does not protect copyrights or patents. A 2005 Time article called “The Idea-Stealing Factory” reported that “in a country where government-controlled companies comprise the industrial base, piracy is not derived from commercial callowness, it appears to be official policy.”
The music/entertainment/publishing industries have lost billions because their protected materials are stolen and sold at a fraction of the list price, of which they get nothing. In fact, my own last two books were translated and sold illegally in China. The CIA asserts that China has an elaborate spy system in the U.S. to steal commercial and military technologies. And a quick Goggle scan of articles about industrial espionage yields more than 15 incidences of companies either suing the Chinese for pirating or companies leaving China because of their inability to protect their patents and copyrights.
For example, Cisco Systems filed a suit against Hawaii Technology of China, accusing the company of copying software and infringing patents. And former Lucent Technology scientists Hai-Lin, Kai-Xu and Young-Oing were indicted by a federal grand jury for allegedly conspiring to steal trade secrets from Lucent Technologies.
The Wall Street Journal summarizes the current situation this way: “Though China is working hard to repair its reputation as a place where theft of intellectual property is rampant… the truth is that counterfeiting and piracy remain common.”
What’s more, since foreign companies must train their Chinese managers, professionals and workforce, they are, in essence, developing their own new competition. There have been reports of companies who built factories in China and within a few years the employees left to build a competing factory across the street. In all of the major Chinese growth areas, such as wind power, electrical systems, transportation and water purification, new Chinese companies are being formed not only to serve the Chinese markets, but to sell offshore, especially in developing nations. In fact, in March 2008 China reportedly announced that it was creating a new company to design, produce and sell jetliners big enough to carry more than 150 passengers, which could eventually pose a threat to Boeing and Airbus.
Security issues extend beyond just the loss of intellectual properties. The travel of senior management and professionals as they visit and interact with their employees in China also presents huge security issues and requires an expensive infrastructure.
Bill Rothschild author of THE SECRET TO GE's SUCCESS, now in paperback, KINDLE and six languages.
posted by TheStrategist @ 12:23 PM
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