Focus on China

China is Coming with Quality – Hermann Simon, author of Hidden Champions of the 21st Century, just returned from a visit to China last week.  He brought news that Chinese firms are focused on building competing quality products that will challenge even Germany’s lead in many export areas – and that they are building factories in Germany and the U.S. and other parts of the world. They want to get “in our backyards” before we get in theirs! With over $2 trillion in surplus cash (vs. the U.S. $9 trillion deficit), they have the financial muscle to do it.

China Moving Up the Value Chain – a recent Fortune article entitled “It’s China’s World. (We just live in it)” describes how China is now focused on moving up the value chain, not satisfied with just being the world’s factories. In areas of real estate, oil production, banking etc. this article is worth taking a few minutes to scan. My message to you, since most of you are in service businesses: it may be too late for our manufacturing friends, but we need to get our service models and brands into China before they get in our markets. China will continue to move up the value chain rapidly and they have our business models to copy (but difficult to copy our customer service cultures!)
http://money.cnn.com/2009/10/07/news/international/china_natural_resources.fortune/index.htm

China’s Top 10 Companies -- to continue with this mini China lesson, take a few more minutes and scan this list of the top 10 companies in China – as business owners we should be aware of what’s happening around us and be familiar with the rising business landscape.
http://money.cnn.com/galleries/2009/fortune/0910/gallery.china_top_companies.fortune/index.html

Buffett Invests in Chinese Auto Manufacturer – and while we’re on the subject of China, just a reminder that Warren Buffett invested $230 million earlier this year for a 10% stake in a Chinese electric car and battery manufacturer called BYD. As this Fortune article notes, this was a real departure for Buffett since he tends to only invest in companies in which he understands the technology. Again, worth a few minutes of reading to see Buffett’s take on China.
http://money.cnn.com/2009/04/13/technology/gunther_electric.fortune/index.htm

Keep Your Brand in China – I’ve asked one of our best customers, who has been doing substantial business in China since the late 80s (one of the first U.S. firms to do so), to advise Gazelles on setting up operations in China. His first advice is “not to split the brand.” And Hermann Simon’s research shows that the Hidden Champions set up wholly owned subsidiaries in China (almost all the Hidden Champions are there) with their own people on the ground vs. simple licensing or JV arrangements.

Verne Harnish and Hermann Simon will be speaking at the National Growth Summit'10 in February 2010.