I haven't gotten online and posted a blog for a week. I apologize for this. Things got a little busy for me from Suzhou through the rest of the time in Shanghai, as I was trying to get as many of my contacts in line as possible and figure out my trip to Chongqing.
Suzhou was amazing. The growth that they have experienced there in the last eight years since I lived in Shanghai and regularly traveled to that city for business is astounding. I didn't recognize a single building as we came into the city until we hit the Nokia factory, when I realized why. Eight years ago the Nokia building was on the edge of the city. We had already been driving in Suzhou for about two or three miles at that point, maybe more. For a city to expand outwards that much in such a short period of time is just indescribable. If you were watching the city from a satellite I believe you could almost see the city expanding slowly in real time.
We had the weekend in Suzhou and the Monday after that was a national holiday for the mid-autumn moon festival. Everyone kind of did their own thing and had a good time. I took a group out to La Ma hot pot so they could try it out, and some of them enjoyed it so much they went back the second night for more. Hot pot is kind of the Chinese version of fondue. They bring out a boiling pot of very spicy liquid and you cook fresh meats and vegetables (I use the term "meat" loosely here) in the broth. In Chongqing, the center of this style of hot pot, you have to dip whatever you remove from the pot into a bowl of sesame oil and crushed garlic before you can eat it, because the broth is so spicy it would be foolhardy to do otherwise. The sesame oil soaks up a bit of the spices so they are not quite so harsh. Lao Ma hot pot in Suzhou, however, did not have as many spices in it because the Suzhou palate does not like ridiculously spicy food. I was very impressed with everyone who came for trying something so different. Especially those who tried the duck's intestine, and particularly Paul, who really liked it and helped me finish it off.
Our company visits in Suzhou were interesting as well. We went to the Black and Decker assembly plant, visited the Suzhou Industrial Park, and met with expatriates from Andrew Telecommunications.
The Black and Decker plant was interesting because we got to see how a large western company operates in China, and how they have been finding ways to cut costs by improving processes as the RMB appreciates in value against the dollar and labor costs in China, along with shipping costs due to increases in gas and metal prices. Black and Decker had a lot of management level employees who stayed with the company rather than leaving for other opportunities because they regularly train people up to 6 sigma level in that program, which teaches MBA graduates how to better manage processes to create what they refer to as a "lean" process system. This type of management style is used in factories and financial institutions alike, and I was impressed that a western company was investing in it's China management at such a high level.
We toured the factory floor and learned about how the process went from beginning to end. We also found out how management had made changes to the system so that employees were using more of their time assembling rather than hunting around for parts or moving around the factory. It was a slightly less insightful visit than some of our others because we weren't getting a lot of information on how business is different in China than in the states, but the whole tour was put on by two local managers and I thought that alone was a useful experience. They ran the tour well and explained the process very in-depth.
After the Black and Decker visit, we went to the Suzhou Industrial Park (SIP). The SIP idea was first mentioned back in 1978 or 79, when Deng Xiao Ping mentioned that he thought Singapore managed its island very well, and that China would benefit from doing business with that country by learning the way things are run there. The SIP is actually a cooperative attempt at creating a state-of-the art technical and industrial park that will be suitable of all types of foreign IT and assembly operations in China. The park itself is huge, offering both local housing and housing suitable for American and European comforts, it has a large financial district that is still under construction, a golf course, a moorage (It is around a very large lake, I believe called the Jingji lake) and tunnels under the lake to alleve transportation. It's built like a large, modern, western city, with most of the infrastructural components (electric lines, cables, etc.) run through tunnels beneath the area. This type of cooperative drive towards creating a high-tech park where companies can set up more sophisticated operations shows very definitively that China wants to broaden the range of services it can provide to the rest of the world, and not remain as simply everyone else's manufacturing source.
In the afternoon we met with two expatriates and one local manager from Andrew Telecommunications. This meeting was very informative because both Jim and Tom had been in China for a number of years, and had a lot of experience dealing with the Chinese in a business and personal environment. Although they did not speak Chinese extremely well, they seemed to understand the need for a higher level of "customer service" that exists in China when doing business here. The Chinese like to get to know they people they are dealing with, and it is the same in management. The best thing a new manager can do when coming to a company or factory, especially if he or she is from the US and moving to China, is to take each department out to dinner and talk very little about business. Just sitting down with a local manager or the head of the accounting department (and all of the accountants) will go a long long ways towards gaining some respect and showing the employees that you know at least a little about how things work over here and are trying to learn more.
On Wednesday morning we headed to Shanghai. The trip was uneventful, but I noticed as we entered the city that there were a lot of faces plastered to the bus window (I didn't mention that the bus had seat-covers with the playboy bunny logo plastered all over them...copyright infringement, as I don't believe playboy makes seat covers in China). Entering Shanghai was a lot like entering a huge western city. We traveled into the heart of the town on one of the raised highways that connect different districts of the metropolis above ground. This gave us a better view of all of the buildings. The thing that really struck me was that Shanghai has not expanded nearly as much as any of the other cities we visited. It was already expanded significantly more eight years ago than the rest of the country and right now the rest of the country is catching up. The one thing that really did get built up however was the PuDong district. PuDong sits on the other side of the Huangpu river, across from the bund, a section of the city built up in the early 20th century by western interests. Eight years ago the tallest building was the JinMao tower, at about 420 meters high. The JinMao tower was visible from much of the city, and rose above everything else much like the world trade center did in New York. It, along with the PuDong TV tower, defined Shanghai's skyline. But now the World Financial Center, a Japanese-developed building, stands across the street from the JinMao tower and rises to 492 meters. To enter the city and see that structure rising above the JinMao tower really nailed for me just how much the whole country has grown in the past eight years. an average of 10% GDP growth for the last five years shows up everywhere you go in these four large cities we visited.
For our company visits in Shanghai we went to PMI (Pacific Marketing International), Shanghai Goss, and the US Commerce office.
PMI was a great visit. We met with Mr. Chen, the director of the Shanghai branch, and participated in a presentation with many of their managers, after which we had lunch with members of the PMI Shanghai branch. We also met with TJ, who came along on the China Study Tour in 2004. All of the PMI people gave great presentations and insights into what it's like doing business in China. The company itself spends a lot of time together going on leadership trips, celebrating birthdays, and throwing parties for Chinese and American holidays. There is a higher level of inter-departmental communication evident at the company, which strengthens everyone's dedication to their work and passion for their responsibilities. It was also a company where it quickly became evident that the expatriate employees were working diligently to understand Chinese culture in order to work together better and enjoy their time in Shanghai more. I don't think there was another company we visited that paid as much detail to our visit (they made a presentation customized for us, and gave us coffee mugs with the logo they designed specifically for our trip). PMI designs and markets the Stanley and Alladin brands of coffee cups, as well as all of the mugs you buy at Starbucks. I can't say enough about their level of professionalism and their attentiveness to our questions about how they do business in China. They touched on a lot of different issues, including how they value their products, how they target markets in different parts of the world, the ways in which they research markets before entering them, and what solid promotion and successful sales margins entails. By the time they finished lunching with us, I think half the tour wanted to come back there to work.
We also paid a visit to Shanghai Goss, a company that manufactures printing presses. (I apologize for my lack of complete names, I'm typing this blog from a huge Chongqing internet bar full of young men playing video games online, and I didn't bring my business cards out). Their manager, Johnny Yang, and the director of the company gave us a presentation on what the company does and then a tour of the plant, followed by a Q&A session. Since none of us plan to get into the printing press manufacturing industry, I think the overview of the company was a bit dry for us, but when we got into the factory everything changed.
I don't think we fully comprehended the size and scope of the work they were doing. They received very large components from other parts of China and assembled huge presses at this site. I was able to ask a lot of questions, as were other students, as we went from building to building. A few things we discovered (also mentioned at Alibaba and Andrew Telecommunications) were that there is a fair level of turnover for young business school graduates, but like Alibaba and Andrew, Goss tries to make sure they aren't across the street from a competing organization that will simply steal their employees after they train them. One thing I noticed during the trip was that a lot of the manufacturing employees were in their 40's or 50's. We were informed that Goss was looking for a new site to build a more modern plant (their current assembly plant was built in 1948 or 49) but they wanted to make sure their employees would not be too far away, because they placed an extremely high value of retaining all 600 or so people, many of whom had been with the company for years. The employee following us around the plant taking photos had been with the company for 28 years. Another interesting fact we learned was that a lot of Chinese cranes are operated by women, as it requires multi-tasking and attention to detail on simultaneously performed actions, while requireing little heavy physical labor. The Director told us that throughout China most cranes are operated by women because the Chinese believe women are much more capable in multi-tasking. They also try harder to not hit people with massive swinging chunks of steel.
The US department of Commerce is a branch of the government that tries to assist and promote exports from the US to China. Chip Peters, one of the agents there, gave a great presentation on the Things they do to promote American products in China. It was obvious that he could have gone to a much higher level than what we heard, but the work they do is very complex and involves a lot of positioning similar to lobbying. The type of guanxi that Chip mentioned seemed more like the type that Brian Li from Alibaba referred to on our visit to their office. One of the biggest parts of their work there is to meet with government officials to continually promote the important role the US plays in China's development and ask for reciprocal assistance in strengthening our local presence there.
After Chip's presentation, we met with Thompson Marketing Systems, which helps large western firms combat Intellectual Property and trademark violations. A large part of their work involves finding factories around China that are making counterfeit products and bringing them into court. It was a very interesting presentation. We learned a lot about the process and how they get into the factories.
A small group of us went to PACCAR on our last day in Shanghai and met with Richard Yin, a former SU MBA student and 2006 study tour participant. Daryl, their director, and Paul Heffernan, their purchasing director, discussed what PACCAR does in China and how they do it. They talked a lot about how PACCAR approves new manufacturing plants to build parts they install in trucks worldwide, and what they're doing in China as they move forwards expanding their presence in the country.
PACCAR is very conservative in its approach to business in this country, and at the moment they primarily ship parts abroad from China to other parts of the world. They are currently selling their engines to selected bus companies in China, but are very careful about who they sell to because they don't want a PACCAR engine installed in a bus or coach that isn't otherwise well-built. We learned about how their careful and patient approach to business has made them profitable over the years. It was an extremely interesting and in-depth presentation that left all of us very impressed.
Richard came out after work and hung out with us on a boat tour of the Huangpu river. He gave us some insights on the history of PuDong and what it is like living in Shanghai from the perspective of an Seattle U MBA grad who was about the same age as the rest of us (a few years younger than me, I believe).
After the boat trip many of us went out to a nightclub that Richard recommended. For many of us the trip ended the next morning, but for about a quarter of us it is still not over. I can't write a wrap-up section of my blog when I'm now much deeper in China than our group went, and I have typed my fingers out. I will write more tomorrow morning about my foot injury, my experiences in a Chongqing hospital, finding my friends from Chongqing, and eating real hot pot for the first time in eight years.