Faculty
Objectives
Managing international business in a transition economy like China presents both opportunities and challenges. For some years China has been in the process of transitioning gradually from a command economy to a market economy. This gradual transition has resulted in a complicated and uncertain business regime. In addition, Chinese culture is different from those in other parts of the world, which can often frustrate foreign managers. Using real-world cases, this course focuses on the experiences of transnational corporations in managing business in the business environment as it actually exists in today’s China.
The aims of the course are:
To introduce students to the opportunities and challenges doing business in China, with a focus on multi-national corporations
To introduce students to practical and tested strategies that create value especially in Sino-Western joint ventures
By the end of the course students will have:
Familiarity with many examples of successful and less successful strategies in China
Knowledge and understanding on organizational behavioral issues in the Chinese context such as managing Chinese employees, handling inter-partner and parent-subsidiary relationships, and maintaining strong government links
Knowledge and understanding on both Western analytic and Chinese intuitive approaches to management
Requirements
Class Preparation
Class sessions are 1½ hours. You are expected to read assigned materials with care, to attend all class sessions, to prepare 6 mini case write-ups before class, to participate actively in class discussions, to contribute to a group report, and to write an individual book report. Some details are as follows:
Preparation and Participation: This course will be heavily case-based, so class participation is essential. You are expected to be fully prepared to answer the discussion questions listed below for each case, and engage in open, thoughtful discussion during class. To enhance preparation,
I require that you submit by e-mail a short write-up (about 1/3 page, single spaced) of one case question, due at 10 P.M. the night before class. Case questions are listed below for each case, and the ones I want you to answer are marked with a *. Please do not use attachments. Paste your memo into the body of the e-mail. Include in the subject line the title of the case. These will not be graded, but will be checked for satisfactory completion. Write-ups count for 1/3 of the class participation grade (that is, 15%). All students are required to do a write-up for the first and second class; after that, you can choose to skip any one write-up.
Group Report: Each student will participate in a group analysis of particular topic, and make a 15 minute presentation to the class about that topic (allowing 5 minutes for Q&A). This report has no “paper” – just the presentation and PowerPoint slides. When presenting, it is recommended that one or – at most – two students make the presentation. See below for details about topics and timing of this report. Make sure to properly reference all materials used to construct this report in the “notes” section of your PowerPoint slides (the reason I do this is that, for facts that are reported, I want to be able to find the information, so I can verify it). Note: The maximum grade for presentations that do not have references is a B. Within groups, peers will evaluate group-member contributions. Within the class, those listening to presentations (meaning all of you) will evaluate the quality of the presentations, in terms of both content of the presentation and the quality of the presentation delivery.
Individual Book Report:
Each student needs to read one book (actually, half of a book) about China and write a 3-4 page (single -spaced) book report, due at 5 P.M., May 12 (Tuesday). I have selected several books that are quite good, but you can suggest others as well. Choose whichever book best fits your interests. For all the books listed below, I identify sections of reading that are about 100 pages, to make the quantity of reading reasonable.
Mr China (2006). Tim Clissold. He was one of the first investors to go into China when it opened up in the 1990’s. The book is quite a good read (much like a good novel) and tells the harrowing stories of setting up joint ventures in China. Some argue that Clissold overstates his case, and that things are much better now. Others say very similar things still occur in China. I think this book does a great job of giving you a deep sense of the complexity of actually making things happen in China, and it provides a nice glimpse into the world of venture capital. Read chapters 4-7 (pages 40-146). (Topic: Finance) Business Republic of China (2008). Jack Leblanc. This is another business memoir, written by a good story teller, a Belgium businessman who has 19 years of brokering deals, all the way from the industrial heartlands of Sichuan to across the Taiwan Strait. This book gives an insider view about the complex dynamics of negotiating with the Chinese, and understanding the Chinese psyche, culture, and business mind. Read chapters 2-5 (pages 31-129) and chapter 9 (pages 193-220).
Made in China: Secrets of China’s Dynamic Entrepreneurs (2009). Winter Nie and Katherine Xin. I highly recommend this book if you want to gain a deep understanding of local Chinese entrepreneurs and their success formulas (knowledge of the domestic market, quick adaption to market changes, etc.), and how you can compete, or work with them. It is very likely that the toughest competition you are facing is not from other multinational corporations, but from China’s own homegrown businesses. Read chapters 3,4, 7, 10, 11. (Topic: Strategy).
Billions: Selling to the New Chinese Consumer (2005). Tom Doctoroff. This is a really fantastic book on the Chinese psyche, and how it affects consumer behavior in China. It is very nuanced and realistic. It has great examples. Specifically, Parts II and III (pages 115-217). (Topic: Marketing).
Billions of Entrepreneurs: How China and India are Reshaping Their Futures – and Yours (2008). Tarun Khanna. If you wish to get a comparison between China and India, this is the book. This book covers a broad range of cultural, social, historical and economic issues contrasting the two countries. Read chapters 2-5 (pages 31-91) and chapters 8 -9 (page 167-212) (Topic: Entrepreneurship)
Governing China. Kenneth Lieberthal. This book is written by Kenneth Lieberthal, an influential political scientist who advises Clinton on his China policy, this is an excellent pick if you are looking to gain a deep understanding of Chinese politics, and its political economy. (Topic: Politics). Read chapters 6-10 (pages 171-314).
Encountering the Chinese: A Guide for Americans, second edition. Hu Wenzhong and Cornelius Grove. A nicely-written book on Chinese culture and business practices, along with some guidance for business etiquette. (Topic: Chinese Culture). Read chapters 2-7 (pages 13-75) and 9-10 (pages 95-131).
What to write about in your Report:
Briefly summarize the reading (about half a page) (20%)
What are the key lessons you take from reading this book? (30%)
What implications do you see for business in China? Connect this material to any of the cases covered in the class. Identify one or several business interactions covered in our cases that might be affected by the lessons you took from this book. (50%)
There is no final examination.
Materials
Course Materials
We will use the textbook Managing International Business in China (2007) by Xiaowen Tian, published by Cambridge University Press.
The remaining course materials are in the course pack.
Tuck Honor Code
The Academic Honor Principle has clear policies in this regards:
You may not redistribute class slides, notes, or handouts to anyone not enrolled in this course without prior permission of the instructor.
Most importantly, you should recognize that the principal ingredient in the successful operation of the Tuck Honor Principle is good faith among all parties. From time to time, situations are bound to arise in which the application of the Honor Principle is unclear. In such cases, it is important to contact me for clarification.
Group presentations: Only those who contributed approximately equally to the preparation of the group presentations may take full credit for it. If you put your name on the presentation, you are certifying that you have contributed approximately equally to it.
Laptop Policy
Laptops may be used during the class period only to consult your previously prepared notes on the day’s material or to take notes on class discussion. Consulting your email and surfing the Internet or Tuck Intranet during class is strictly prohibited. If you have email or your web browser open during class, I reserve the option to ask you to leave the class session for the day. Using your laptop other than to consult your notes or take notes will result in a substantial penalty to your class participation grade.
Office Hours
My office hours are Wednesdays from 2-3:30 pm, or by appointment.
Grading
Grades will be determined as follows:
-
Class Participation (45%) (15% based on write ups)
-
Group Reports (30%)
-
Individual Book Report (25%)
Schedule
Session 1 - April 21
Cultural Context: working with Business Partners in Joint Ventures
Business in China is heavily affected by fundamental cultural patterns in Chinese society. The rest of the cases in this course will make more sense if you have a basic understanding of Chinese culture. We will also cover the qualities and skills required in forming and running successful joint venture or business partnerships in this section.
Class Preparation Questions:
Describe some common differences between Western and Eastern approaches to negotiating, as seen in the Wyoff and China-LuQuan case?
* What were some of the underlying dynamics that may have contributed to the breakdown in negotiations in the case?
What would you recommend Wyoff and China-LuQuan to do to break the stalemate?
Case: Wyoff and China-LuQuan: Negotiating a Joint Venture (A), HBS case, 2008
Reading: The Chinese Negotiation. HBR article, 2003
Optional: Managing International Business in China (2007) by Tian, Ch.5 and 6
Session 2 - April 27
Institutional Context (Economic Policies)
In this section, we will discuss Chinese history and the current economic system in China.
Case Preparation Questions:
* Why did reforms such as dual prices (one when selling to the sate, another for the open market) and the household responsibility system work in the agricultural sector but similar reforms did not work for SOEs? (Note that “industry” in China includes both SOEs and TVEs).
Do you see China’s approach to change as dramatic or incremental? Why does the government take this approach?
How important was FDI and exports to China’s economic performance?
Case: China: Building “Capitalism with Socialist Characteristics” (HBS #9-706-041).
Reading: From Wall Street to the Great Wall by Burton Malkiel (2008), Ch. 1 & 2, China's past and present
Web - Optional: Chinese society and its new emerging Culture by Guy Olivier Faure (2008), Journal of Contemporary China, 469-491
Session 3 - April 28
Leadership in China
This section introduces the management context in China and discusses whether international manager should adapt one’s management style to China. We will also invite a current Tuck student who once worked in the Beijing office of P&G and share her experience with us.
Class Preparation Questions:
* How would you have handled the situation with Li?
Do you believe the incident with Li was indicative of broader internal communication difficulties, and, if so, what could Tang do about it?
Tang largely ignores his rank or his experience in the U.S., and hopes that by making it a non-issue, it perpetuates a feeling that he is “one of a bunch of Intel employees, working hard to avoid dissonance in relationships.” How realistic do you consider this attitude to be in dealing with the potential for cross-cultural conflict?
Case: Intel in China, Ivey Case, 2002
Reading: Raising Haier, HBR (Feb 2007): 141-146
Reading: The China Executive (2006) by Wei Wang, Ch. 7
Optional: Leadership success in China: An expatriate’s guide (2008) by Yue-er Luo, Erik Duerring, William C. Byham, Ch. 3 -4, 12
Session 4 - May 4
Facing competitors
MNCs face their toughest competition not from other multinationals, but from China’s own homegrown businesses. This section discusses how one should prepare to fight China’s rising domestic competitors.
Class Preparation Questions:
Who are the emerging domestic opponents?
* What are some of the strategies used by Taobao to increase its market share?
* How should I prepare to fight China’s rising domestic competitors in my field?
Case: Alibaba vs. eBay: Competing in the Chinese C2C Market, IMD Cases (A) and (B) 2007
Reading: The Hidden Dragons, HBR article, 2003
Web - Reading: How corporate China is evolving (2008) by Andrew Grant, The McKinsey Quarterly, 2008 Number 3, pp. 43-50
Optional: Made in China: Secrets of China’s Dynamic Entrepreneurs (2009) by Nie and Xin with Zhang, Ch. 10
Session 5 - May 5
Battling Intellectual Property Rights Infringers
This section discusses some strategies for safeguarding intellectual property rights.
Class Preparation Questions:
* How should GM China act with regard to IPR disputes?
What should GM China’s real concern be?
Case: GM China versus Chery, disputes over intellectual property rights, CEIBS Case, 2005
Reading: Managing International Business in China (2007) by Tian, The protection of intellectual property rights, Ch.10
Web - Optional: Selling China’s cars to the world: An interview with Chery’s CEO (2008) by Andrew Grant, The McKinsey Quarterly, 2008 Number 3, pp. 43-50
Session 6 - May 11
Chinese consumers
China is a mosaic of distinct cultures and languages. This section discusses how MNCs may adapt their offerings and marketing strategies to the diversity they face.
Class Preparation Questions:
What are the challenges in reaching Chinese consumers?
How can I win them over?
* How should Mercedes-Benz handle this PR crisis?
Case: Mercedes-Benz and Wuhan Wild Animal Park, CEIBS Case, 2004
Reading: Managing International Business in China (2007) by Tian, Marketing management, Ch.8
Web - Optional: What’s new with the Chinese consumer. The McKinsey Quarterly, September, 2008
Session 7 - May 12
Negotiating with the Chinese government
This section discusses public relation strategies that have been used by MNCs to maintain good relations with the Chinese government.
Class Preparation Questions:
*What are the two parties’ issues, positions, and interests? How would you resolve some of the parties’ conflicting objectives?
What does it mean to be ethical in a for-profit business environment? Are there creative ways to deal with ethical situations?
What does “government” mean? Are there different levels of government?
Case: Google and the Government of China, HBSCase, 2006
Reading: Managing International Business in China (2007) by Tian, Manage Guanxi strategically, Ch. 3
Optional: Government-oriented Corporate Public Relation Strategies in Transitional China (Nov 2008) by Yuanqiong He and Zhilong Tian, Management and Organization Review, Volume 4, Issue 3, p. 367-391
Session 8 - May 18
Guest lecture by a Chinese CEO
The Chinese CEO will use his company as a case and discuss his first-hand experience of doing business in China.
Raymond Wong, CEO of Raymond Industrial Ltd
Winner of the Best 200 Asia companies under 1 billion award given by Forbes Asia
P.S. In case of cancellation of guest lecture, this section will be replaced with “Expatriate living in China”, case and readings to be confirmed.
Team Presentation Topic #1:
Equity Markets in China--An Investor Perspective. Study the equity markets in China (which also includes the Hong Kong exchange). How do they work? How does a company get to be listed? Can you trust evaluations? Should Chinese people invest in the Chinese market? If you were advising an American client with money to invest, would you suggest he or she invest in China? If so, what is the appropriate vehicle for non-Chinese?
Team Presentation Topic #2. Capital Availability in China – A Chinese Business Owner Perspective. If you are a small, medium, or large private company in China, what are your potential sources of capital? Compare availability from family, banks, equity investors, and venture capital.
Session 9 - May 19
Group presentations
Today has four presentations, allowing about 20 minutes for each presentation.
Team Presentation Topic #3. Product Quality and Recalls. This last year was a difficult time for the “China” brand, due to tainted products and product recalls. What is the reason for these quality problems? What has China done to address these problems? Are those solutions likely to work? What effect (if any) have these problems had on the China “brand”? What does this say about how to source products from China?
Team Presentation Topic #4. Who to Hire? Expats vs. Locals. As Western the presence of western companies grows in China, one of the key problems is how to staff managerial positions. The basic choice is between bringing in expats who know the company culture and can communicate easily with the main office, and hiring locals. How should companies staff operations in China? What are the costs of hiring locals versus expats? What is the supply of managerial talent like in China now? What kinds of systems are needed to support expats? If companies do hire expats, what skills do they need? What are the main challenges of hiring locals?
Team Presentation Topic #5. China and the U.S. As China has developed economically, it has become a growing regional power. There have been some concerns expressed about China’s economic and (potentially) military leverage in the world, constraining U.S. actions. What is the current state of relations between U.S. and China? Should China be considered an ally or foe? How should the U.S. manage this relationship? What are some possible directions for U.S.-China relations?
Team Presentation Topic #6. Taiwan and China. Much of the economic boom in China has been driven by overseas Chinese businesspeople investing in and managing businesses in China. Yet tensions between China and Taiwan are very high, and could threaten stability in international trade. What is the basis of China-Taiwan tensions? What economic roles do Taiwanese have in China? What impact might this relationship have on political tensions between Taiwan and China (or, what impact might these political tensions have on the economic relationship between Taiwan and China)?
