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Parochialism, My Journey of Learning about it, and its Implication for Me

With the publication of my paper Parochialism and its Implications for Chinese Companies’ Globalization at Management and Organization Review, I could now share and reflect on my journey for my research on parochialism.  

Back to six years ago, during the research of my dissertation, my interviewees often discussed a common phenomenon among their Chinese business partners, so called “quality fade”: the Chinese firms often bid a low price in order to get orders. At the beginning, they can fulfill the order to meet quality requirement. However, very soon and on purposely, they start to lower quality standard or substitute interior materials in order to lower their costs. When the business owners were asked why they should think it is ok to change the material without informing their overseas business partner. The responses were often like this: What a big deal is it as long as the products are working? They did not consider following quality standard a big issue. My interviewees asked me: How can Chinese firms think it is ok to lower the quality standard to hurt the business relationship when Chinese culture supposes to value relationship and face? Why are Chinese firms are so short-term oriented when Chinese culture supposes to value long-term relationship? What part of Chinese cultures allows Chinese firms to make such business conduct and think it’s ethical and normal?  Do you think Chinese quality will go through the same quality improvement cycle like Japanese did in 50s?

That is how my research on parochialism started: The phenomenon of either “quality fade” or “poorly-made-in-China” (Midler, 2009) is just the surface of the iceberg which underlining a business culture, or organizational or  managerial practices in China. In a larger scale, some characteristics of Chinese business cultures can become barriers for Chinese companies to become a global player, which are demonstrated prominently through the following business conducts I observed during my dissertation research:

  1. Short-term focus without a strategic global vision
  2. Heavily reliance on government relationship
  3. Pursuit of short-cut solutions for quick return, such as reverse-engineer, bandage repair or lower quality standard for costs savings.
  4. Preference of real-estate property investment, instead of investment on R&D, human capital, or branding.
  5. Emphasis of superficial tasks to maintain “face” without real improvements, such as “Mianzi Project”

Researchers have been strived to use established cultural dimensions to explain the Chinese business cultures, particularly Hofstede and GLOBE dimensions (Philipsen & Littrell, 2011), and China most prominent cultural characteristics of Guanxi (personal connections) and mianzi (face) (Buckley, Clegg, & Tan, 2006; Chen, Chen, & Xin, 2004; Lockett, 1988; Wah, 2001).  However, many Chinese managerial behaviors are not fully explained by the cultural dimensions and even contradictory to the traditional views of Chinese culture, such as long-term orientation and collectivism. A missing link between emic cultural dimensions and etic Chinese traditional culture puzzles researchers and practitioners trying to apprehend cultural sources of Chinese business behaviors.

Through reviewing literature, surprisingly, parochialism (xiao nong yi shi 小农意识), a type of mind-set rooted deeply in the society of China for centuries (Yuan, 2000), has rarely studied in the West. Within China society, parochialism is well known as a mindset developed from the large population of peasants throughout Chinese history, however it exists among every level of society despite of the level of education and wealth. It has been unconsciously and profoundly shaped Chinese cultures, morals and social norms. Chinese social science researchers also recognize it as a psychological barrier for Chinese to achieve modernized society and advanced civilization (Liu, 2008; Yuan, 2000). Yet, parochialism, a unique mode of thinking among Chinese and the product of Chinese history and institution, has not been acknowledged and studied too much outside China. The closest construct established through scientific approach is the Defensiveness (A-Q mentality) scale in Chinese Personality Assessment Inventory (CPAI) (Cheung et al., 1996; Cheung et al., 2001), while only demonstrates one dimension of parochialism.

The journey of interviewing, drafting, and revision for publication took six year. Although the publication focuses on the impact in China’s globalization, the concept of parochialism is not a China only phenomenon. During these years, we have experienced the world challenges of de-globalization and national protectionism. Social and political psychologists have shown that people around the world can become closed-minded when they face threats from outsiders. China may have a very unique institution and social environment, but parochialism exists in other countries and makes us focus on short-term gains and protect self and in-group interests.  The review of literature also frightens me that the human mindset has not changed too much over time. Parochialism is almost a human-nature for decision making to allow history always repeating itself.

I consider the publication as the first major milestone for my research. Yes, it took six years, but it helped me to use perseverance and open-mindedness as an antidote for my own parochialism.   

Reference

Buckley, P. J., Clegg, J., & Tan, H. (2006). Cultural Awareness in Knowledge Transfer to China—The role of Guanxi and Mianzi. JOurnal of World Business, 41, 275-288.

Chen, C. C., Chen, Y.-R., & Xin, K. (2004). Guanxi Practices and Trust in Management: A Procedural Justice Perspective. Organization Science, 15(2), 200-209.

Cheung, F. M., Leung, K., Fan, R., Song, W.-Z., Zhang, J.-X., & Zhang, J. P. (1996). Development of the Chinese Personality Assessment Inventory (CPAI). Journal of Cross-Cultural Psychology, 27, 181-199.

Cheung, F. M., Leung, K., Zhang, J.-X., Sun, H.-f., Gan, Y.-Q., Song, W.-Z., & Xie, D. (2001). Indigeous Chinese Personality Constructs, Is the Five-Factor Model Complete? Journal of Cross-Cultural Psychology, 32, 407-433.

Liu, Y. (2008). 小农意识－农民个体而非阶级的意识.

Lockett, M. (1988). Culture and the Problems of Chinese Management. Organization Studies, 9(4), 475-496.

Midler, P. (2009). Poorly Made in China: An Insider’s Account of the China Production Game John Wiley & Sons, Inc., Hoboken, New Jersey.

Philipsen, S., & Littrell, R. F. (2011). Manufacturing Quality and Cultural Values in China. Asia Pacific Journal of Business and Management, 2(2), 26-44.

Roberts, D. (2012). China’s Export Machine Goes High-End. Bloomberg Businessweek, April 05, 2012.

Schuman, M. (2011). Can China compete with American manufacturing? Time, March 10, 2011.

Yuan, Y. (2000). 小农意识与中国现代化. 武汉出版社.

Wah, S. S. (2001). Chinese Cultural Values and their Implication to Chinese Management. Singapore Management Review, 23(2), 75-83.

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Use CQ to Combat Cultural Clashes In the Workplace

As part of Asian American Heritage Celebration & relevant Conversation at PSEG Long Island, I had a great honor to participate the panel discussion: Combating Cultural Clashes. Together with other two speakers, Ms. Liz Bell-Carroll and Ms. Carrier Dunican from PSEG, we discussed how to use emotional intelligence (EQ) and intercultural Competence (CQ) as tools to address the intercultural clashes within the organization.

As my research focusing on intercultural management, I introduced the concept of culture and CQ, and explained how CQ can help to minimize culture clashes.

Culture is a very broad concept and is defined as characteristic way of behaving and believing that a group of people have developed over time and share in common (Tarique et al., 2016). There are also different types of cultures, broadly, as visible and invisible. The visible cultures are those you can see, such as food, arts, dresses, musics, communication styles, or even behavior patterns. Another type of culture is invisible, including values, philosophies, believes, and universal truth. It is the invisible culture often causing misunderstanding, miscommunication, and intercultural clashes.

I also emphasize that, very often, people tends to think that culture differences come from ethnicity or different countries. However, the different gender, age, language, occupation, and organization are all sources of culture differences in an organization. Organizations today are formed with peoples with diversified background and different ideas, which make our working environment more culturally diversified than ever.

Related to EQ, CQ emphasizes on the critical professional skill for dealing with ambiguity, stress, frustration, and problem solving in an unfamiliar environment. When employees interact with colleagues from different functions, ages, and organizations, they may observe unfamiliar behaviors, values, and believes causing frustration and clash. CQ can help employees managing the thoughts and emotions in intercultural situations, keep them open-minded and nonjudgmental about new ideas and behaviors. Most importantly, employees with high CQ are more accepting of different behaviors and not resorting to negative stereotypes about other cultures or people. As a result, employees with CQ can establish better interpersonal relationship with their colleagues and achieve higher level of collaboration.

Research has shown CQ an essential ability for effective leadership, collaborative teamworks, and high level of performance in any organization. However, developing CQ is not an easy task and can take a long time and effort for development. In the panel, we discussed the importance of motivation for any employees to develop CQ. Fortunately, PSEG offers a lot of learning resources for motivated employees to explore new knowledge. A dozen of cultural groups in the company provided tremendous opportunities for employees to interact with their familiar or unfamiliar colleagues from all backgrounds. For example, ASPIRE (Asian American group), the sponsor of the event, organized such great social event, to enable interaction and conversation among employees.

During the interactive discussion, the challenge of intercultural communication was raised. Very true, verbal and non-verbal communication styles can be very different among cultures. Intercultural miscommunication is one of main sources to result in ambiguity and misunderstanding. A higher level of CQ can help individual to feel less stressful during intercultural communication, however, it also requires additional learning for anyone to enhance their intercultural communication skills.

One hour of discussion was over quickly. I feel grateful to be offered such opportunity to share my passion of intercultural interaction research with partitioners. It is always my goal being an engaged scholar to bridge the knowledge gap between the research and practice.  I wish I brought some insights for my audience to cope with cultural clashes and motivated them to explore further.

P.S. Thanks for the invitation from PSEGLI ASPIRE President Linda Zhang to engage me in such great conversation!

 

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CUIBE Award for Best Paper on “Teaching International Business”

Best Paper Award

As a scholar, the best recognition is to receive Best Paper award. It is always my goal to receive such award so you can imagine how I jumped up and down when my pedagogical paper received the inaugural CUIBE award for Best Paper on “Teaching International Business” at 2016 annual conference of Academy of International Business (AIB2016). As an educator, I also feel proud that my instructional approach is recognized as innovative and valuable for the education of international business.

The conference paper has been improved and published at Journal of Teaching in International Business, titled Improving Intercultural Competence in the Classroom: A Reflective Development Model. In this paper, I propose a four-stage reflective development model to enhance intercultural competence for undergraduate students and implemented in my class of International Management. The model provides a pedagogical approach for motivating students to engage in intercultural interactions, for helping them learn to make sense of their environment, and for advancing their learning about intercultural interactions.

Last, thanks to the funding from the Students First Grant at Farmingdale State College in 2015 to support me conducting this pedagogical research successfully.

 

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Does your Company Fit well in your Foreign Markets? -Organizational Cross-Cultural Adaptation Survey

Here is my invitation for your company to participate this research: Organizational Cross-Cultural Adaptation.

We are conducting the survey to study the best practices of organizational cross-cultural adaptation of firms operating in foreign markets as part of our vision to reach out and service the business community. The project will provide a tremendous managerial implication to multinational firms who are facing challenges in their overseas operations and ultimately help to enhance their competency in the global market.

The project will be conducted through on-line survey. The company employees will fill out the survey and it will take them about 30 minutes to complete. As our appreciation for your support of the study, we will provide an aggregate report to assess the strength and weakness of the cross-cultural adaptation of your company, and our recommendation for the areas of improvement. The study would be used for publication in academic outlets. The publication will ensure anonymity of all participants and your companies.

Click above presentation for additional information about this project or contact me for more!

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Learning from my Doctoral Experience

Memorial Moment of my Hooding Ceremony

After the exciting and cheerful PhD hooding ceremony, I am now officially titled as a Doctor of Philosophy. I am delightful to achieve such a milestone in my life after four years of studying in the doctoral program in Georgia State University. I would not say that it has been easy for me to get here. I am yet to be a successful researcher in my field as I am still struggling with to get my first academia journal publication. However I would say that I had an enjoyable experience during these years pursuing my doctorate, while being a first-time mom to raise my son from a crying infant to a happy little man, and assisting my husband growing his photography business. I have been extreme fortunate in my path to achieve such milestone: I am fortunate to meet Dr. Tamer Cavusgil as an undergraduate student in Michigan State University, who is a distinguished scholar in the field of International business and led me to the path of PhD over a decade; I am fortunate to meet Dr. Leigh Ann Liu, my faculty mentor and advisor, who opened the door to the intriguing subject of cross-cultural management and inspired me in many ways as a researcher; I am  very fortunate to have my supporting and hard-working spouse, Zac, who helps me getting through these years without complaining; and I am  very fortunate to be in a doctoral program which allowed me balancing my life and study. Very soon, I will begin my new life as an assistant professor and face other new set of challenges. It is time for me to reflect what I have learned from my PhD program and hope I can apply them again in my future career and life. In particular, what are the most important factors to make my doctoral experience as a cheerful and memorable journey?

With Dr. Liu and Dr. Cavusgil during my Hooding Ceremony

Spirit of Entrepreneur

Majority of doctoral program in the United State is very well structured with seminars. We learn various research methods and literature before we start our dissertations. However, we often have to deal with ambiguity and confusion during our study. At the beginning of my program, I had very vague idea about research and did not know what I would be interested in. Unless some advisors would like their students to carry on researches based on their agenda, it is often up to us to identify our own research subjects which interest and inspire us to explore and discover. Like entrepreneurs, we will identify opportunities and challenges, develop an actionable attack plan, grow “thick-skin” from rejections, seek for supporting resources, and learn the right way from many trials and errors. With such spirit, we can get away from all those frustrations from rejections and failures, and keep us going in high spirits.

Curiosity of New Knowledge

In my past education, I had various trainings in the subjects of management and business administration, from accounting, to finance, to process improvement, and to strategy management. However, I felt what I had been lacking is the knowledge of how people, individuals, or groups, or companies, make their decisions and behave in organizational settings.  I expand my readings from management to sociology and psychology, which lead me to another world of knowledge about the software of the mind. It can be a curse for me as a researcher because I have a wide range of research interests instead of focusing on developing myself as subject expertise. However,  I could not only enjoy conversing with scholars from other fields, but also apply the learning from other disciplines into my field. The continuous learning from broad (although lacking of breath) subjects enlightens me with the power of knowledge and keeps me pondering and seeking answers for my questions.

Passion of Discovery

It is more important to choose research subjects that we are passionate about. There are roadblocks and challenges in the path of researching. Many tasks are tedious and repetitive. The paper revising process is frustrating and endless. I have to confess: I have projects sitting in my file-drawer and feel reluctant to revisit. However, for the projects I am truly interested in, I could stay motivated and excited with the small new findings and progress. It is the passion of discovery keep me going to overcome the challenges and to stay focused.

Relax Whenever Necessary

We have very limited time, while we have so many things to do with our family, teaching, researching, and socializing. We barely have time to take a break. But I would suggest anyone feeling burnout to take a break once a while. If we feel that we are stalled and going nowhere, why not stop reading, writing, cleaning, and anything we are planning to do, but watch some comedies or take a long night sleep. Yes, we need to work hard because we have pressure of publication and tenure, but we should also enjoy our life as a spouse, a parent, a child, and a friend, and spend time with people important to our life. We should treat ourselves fair, if not nice. Taking a break from what we are stressed about can often give us a new look later on.

The list can go on, but those learning is the most important for me to help me through my doctoral program. I believe those thoughts will continue to help me enjoy my future career as a scholar. But most important of all, quote from Dr. Cavusgil’s key-note speech during the hooding ceremony, “Take what life gives you. Don’t hesitate to embrace chance.”

Update: News from GSU CIBER: Jing Betty Feng Receives PhD, April 28, 2014

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Organizational Cross-Cultural Adaptation through Social Networks: A Multiple-Case Study of Chinese Firms Operating in the United States

Abstract

In the era of globalization, Foreign Direct Investment (FDI) has become the prevalent internationalization strategy for multinational enterprises (MNE). As cultural distance remaining a barrier for firms to achieve desired performance in their foreign operations, it is less informative as to how firms can reduce the problems caused by cultural distance from the host environment. Using the context of Chinese firms operating in the USA, this study is designed as a multiple-case study oriented toward theory development. Through the examination of the structure of the organizational social networks in the host country, I aim to arrive at a conceptual synthesis to define cross-cultural adaptation to an organization, establish its process and demonstrate its crucial role for firms to successful develop and maintain a stable, reciprocal and functional relationship with the new cultural and institutional environment. The framework contributes to the body of global management knowledge. It also provides a tremendous managerial implication to firms who are coping with the issues brought by cultural distance with the host environment and ultimately helps to enhance their competency in the global market.

Keywords: Cross-cultural Adaptation, Cultural Distance, Social Network Theory, Local Adaptation

Please read more from the link

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The Cases of Best Buy and Home Depot in China

After operating in China for less than six years, in 2011, both Home Depot and Best Buy, two major big-box retailers from the U.S. announced the close of their stores in spite of the increasing size of the Chinese middle class. Based on this backdrop, I wrote a teaching case study “What Is Up With The U.S. Big-Box Retailers In China? The cases of Home Depot and Best Buy“, which was published at China Research Center.

Both cases illustrate the typical challenges facing western retailers  success in China. The big-box retailers not only need to face the challenges from their local competitors and the different practices in Chinese retail industry, but also to adapt to Chinese consumption culture. Facing the complex operating environment, both companies need a long-term vision and commitment to strengthen their brand image and create values for their customers.

Check out the link for the whole article!

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Preface: A Flat but Complicated World

First of all, I am so sorry for not being available to write the business blog for a while. So what have I being doing recently?

My PhD study in Marketing and International Business has started in August so I have been adjusted myself to get used to this challenging while intriguing student life. Very different from the learning in my MBA, which is quite practical for a business professional, the PhD learning is quite theoretical while beneficial for my future research. I am also glad for my choice of moving my concentration from supply chain management to international marketing and business. With my interest in international trading and global cultural, this transition provides me a broader platform to fulfill my career goal to comprehend international conflicts and to promote global conversation and fair trading.

As a Chinese origin, I of course will pay more attention to the growth of Chinese economy and its relationship with other nations. Recent frictions between Chinese and U.S. over Chinese currency appreciation and penalty tariffs against each other draw my attention. As an advocate of fair trading, I hate to see this kind of political game between nations which only hurt businesses and consumers as a result, especially between two important trading partners. However, there are too many misconceptions and misleading information regarding the root causes of job loss in American manufacturing, China obviously became an easy target to blame and be used as a scheme for political goals.

There are also much focus on the growth of China and many articles have discussed this new challenge to China. After decades of leapfrog growth, China is facing significant challenge to remain its double-digit annual GDP growth. A very recent HBR blog Will China’s Growth Slow Over the Next Decade by Liu Shengjun points out there are four dividends behind the growth miracle: population, reform, opening and resource. Facing the diminishing return of those dividends, Mr. Liu recommends the following consideration for China to create new dividends:

  • Eliminate discrimination against private enterprises.
  • Further reform state-operated enterprises
  • Promote innovation

Those recommendations are well analyzed and right to the point. However they may not be easy for the Chinese government to make such huge turnaround in the near future. Corruption at all levels of central and local governments will not allow such reform to be easy because many people in power will lose their advantage of authorization and grey income. To encourage innovation, China needs to first fight against the challenge or habit of plagiarism and copyright infringement, and establish a stronger IP protection law. Otherwise, the innovations by the enterprises are not able to be protected thus discouraging their investment in R&D. Overall, China needs a political reform in order to create those dividends. Right now, I do not see such push from the central government.

What will happen among nations and how will China and the U.S. can grow together? I do not know yet. We are now living in a flat but quite complicated world. I hope my future studies will soon bring me more knowledge to solve those puzzles regarding global trade issues and challenges. And of course, I wish to see my future research contributing to a “flatter world”.  I will keep everyone posted!

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Apple’s Global Smartphone strategy

Image Source: Kevin Van Aelst, Apple Globe, 2009

I am reading the article by Dr. Dan Steinbock, Apple iPhone4 Success Masks Global Strategic Challenges, posted on Harvard Business Review blog.  Dr. Steinblock compares Apple and Nokia in their global presence, and states that although Apple enjoys a huge  success  in the United States for the smartphone market, Nokia has advanced in l strategical development toward a global market, especially in emerging markets. The article concludes that “Apple needs to adopt a dual business model, one for the advanced economies which enjoy high living standards but relatively slow growth, and another model for emerging economies which have relatively low living standards but enjoy high growth”, and that “global leadership requires success in the advanced economies and the emerging world.”

While I can fully respect Dr Steinbock as the Research Director of International Business at India, China and American Institute (USA) and Senior Fellow at the Shanghai Institutes for International Studies (China),as a highly respected expert in the field of international business and global strategy, I pause to wonder if Dr. Steinbock is an iPhone user, or is familiar with it. I am not a big fan of Apple, but I happen to use an iPhone and know about this product; I believe that I may be able to present some valid arguments to justify why a dual business model is not necessary for Apple.

First,let us conduct a side by Side comparison for Apple and Nokia according to their 2009 annual report.

It is not necessary to discuss the gap of the market capital and the stock price between Apple and Nokia. Our comparison will rather review each company’s operational key performance indicators. Apple reports two billion more in revenue than Nokia, but to clarify, the Apple data includes products beyond  Smartphones such as iPods and Mac Computers. The iPhone accounts for 30% of the total revenue. Apple’s gross profit margin for 2009 is 41% with an income before tax of 28%.  According to the analysis from iSuppli Corp, iPhone has a profit margin of almost 52% for the cheaper model. Comparatively, Nokia, a manufacturer of mobile devices, has 32% of gross profit, with only a 2.3% income before tax. Nokia’s R&D cost is high at 13% vs. only 3.1% for Apple.

From this comparison, we may conclude Apple has a business strategy of “Differentiation”. Apple enjoys a high profit margin from the well-designed high-end Smartphone. Apparently, Nokia is heading toward a different strategy to become a “cost leader” to focus on more low end products with lower margin. My speculation is further articulated by the article, Nokia to Halve Smartphone Production in 2010, Official Suicide Watch Starts Now. Nokia announced it would halve production of its Smartphones in 2010, to gear itself toward a concentration on ‘dumbphones’, or “mid to low end Smartphones.” Nokia Smartphones’ R&D also “cut down unnecessary differentiation”. While I choose not to comment on  whether Nokia is choosing the right business strategy, it seems a fair assumption that their focus on low-end Smartphones is directed toward a global focus met to face an increasing demand in emerging economies.

On the other hand, Apple, having a singular iPhone product in their Smartphone portfolio, was able to increase their market share to 16.1% in 2010 Q1, a 131.6% leap from a year ago. (Source: Apple boosts global smartphone market share big-time, holds on to No. 3 position) With the introduction of iPhone 4, I would expect to see increased market share for Apple.

It seems paramount that we should ask this question: Why is the Apple R&D cost is so low in comparison to Nokia? I believe that the answer lies hidden within Dr Steinbock’s article.  Nokia is a device manufacturer however Apple uses OEM (Original Equipment Manufacturer) Foxconn to produce their Smartphones. Although I do not have inside information, I believe Apple collaborates with Foxconn for product development. Utilizing the supplier’s technology and production expertise, Apple is able to focus on their core competency of product design and software program development and achieve such low R&D cost. Apple has only one model of iPhone with some variation of memory size, which is naturally easier for mass production, and allows the achievement and maintenance of lean inventory management. This results in a lower COGS (Cost of Goods Sold) and a higher gross profit margin. Nokia, on the other hand, released 13 Smartphone models in 2009, which increased not only their R&D cost, but added a level of complexity to its supply chain and increased the capital investment required to manage the vast array of models.

So when iPhone is considered a luxury product in the Smartphone market, why would they require different pricing strategies for different markets? It is my belief that it is not required.  Just as Louis Vuitton for purses or Rolex for watches, premium brands do not require different prices for different markets. This is especially true for the Chinese market, where premium brands are considered to be an indicator of personal social status. I cannot speak for the Indian market without further research, but Chinese consumers are willing to pay for premium and trendy products. Before Apple settled an exclusive sales agreement with China Unicom for the exclusive right of iPhone sales, iPhone had been sold throughout China on the black market at a premium price. Many Chinese consumers asked their friends or family in U.S. to buy unsubsidized iPhones for them to use in China. The iPhone initially failed in China, not because of the cost barrier but because of GSM (Global System for Mobile Communications) compliance, thus forcing Apple to redesign the iPhone for China to meet the Chinese wireless network requirements. Even after prices were cut to 3,000 yuan ($439.46) in April by the carrier China Unicom, Chinese consumers are still paying significantly more than U.S. consumers for an iPhone without subsidy from the wireless network carrier. However, contrary to what Dr Steinbock claims in his article that Apple flopped in the Chinese market, Apple’s Chinese iPhone sales exploded and largely contributed to the growth of Apple last quarter sales, with estimated 2.1 million iPhone sold in China within 6 months.

A lot has been said, I believe I have answered the questions:

Does Apple need a global strategy? Absolutely, yes. Apple should establish and expand the distribution channels in different nations, with possible redesign to meet local market requirements. It is also crucial for Apple to work with its suppliers to meet its increased demand.

Does Apple need a dual business model for the advanced economies and emerging economies? I do not believe so. iPhone sales are disappointing in India or other emerging markets due to different consumer behavior, so be it. There is still much room for growth in the global high-end Smartphone market. Smartphone users typically replace their phones every two years as contracts expire. Apple enjoys such high profit margin from a single Smartphone model, so it is not necessary for Apple to add additional resources to develop a low-end model for those markets and dilute its premium brand image, just like we can not imagine Louis Vuittonor or Rolex producing a low end product for low-income consumers. Being a global leader does not necessitate becoming the leader of market share in quantity while struggling with profit margin. Apple is definitely a leader in the Smartphone market with their product design mission to “be sweet to customers and vicious to rivals”. I foresee that we will continue to see the growth of Apple in the Smartphone market.

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Intellectual Property Challenge in China

It wasn’t for the project which I am currently working on for a China plant tissue culture (TC) company, I would never have experienced the challenge from the weakness of Intellectual Property (IP) protection in the Chinese market.

It is the first time that I am working so closely on IP issues in China. The plant Tissue Culture company, Jin Bei (aka, JBSbio), based in Shanghai, China, has been focused in the Chinese domestic market for the past two decades. They have been very successful as a market leader in the region with a reputation of reliable high quality. Last year, with a new investment of $4.5 million into world class new equipment, the company was ready to expand into the overseas market. Through a friend’s connection, they asked me to help them break into the U.S. market.

I have been traveling for the company to meet the potential clients, not only to promote the propagation service that the company can provide with its’ Tissue Culture technology, but also to connect with the U.S companies who are interested in getting their products into the Chinese market. With the booming economy in China, needs for gardening and landscape are booming as well, in parallel with the rising market of housing and public construction.

So anyone would think that selling into China will be an easy task once we have good products. The answer is no, absolutely not, because of the weak protection of intellectual property in China. Piracy in China is not something new. It’s sad for me to say this as a Chinese, but China has a reputation of counterfeiting design or content of patented products. We are all familiar with those knock-off products such as luxury handbags, watches, electronics, and clothing. The knock-offs are sold at a much lower price, so consumers can choose to pay much less for fake premium products if quality is not a concern to them.  There are even some tragedies that people consumed counterfeit food and were poisoned! Many foreign companies come to China and have been fully challenged by the culture of deficient IP awareness. So, China, a country of invention only in ancient times, becomes a well-known country of “stealing” IP. Even though more regulations and laws are created after China entered the WTO, the IP control has not become easier for many investors.

I am facing a huge obstacle to introduce new horticultural products into the Chinese market.  Breeders normally spend thousands upon thousands of dollars in developing a new plant variety through years of experiments and growing. That is why we can see more and more beautiful, colorful plants around us. In the past 30 years, the IP regulation has been well developed in U.S. so most businesses are playing the game by the rules. However, the Chinese market is like the Wild West, which can be easily out of control for horticulture products. Think about it, any plant grower can take a branch of a plant and duplicate it through cutting technology. Learning from the painful experience of losing IP in the Chinese market, some companies choose to give up on China altogether, or only bring to market the second tier quality products, which in result make my objective of introducing new products to the Chinese market more challenging! When I see those beautiful new flowers and plants which can be easily duplicated, I can’t help to feel regret about the fact that Chinese consumers may not have much chance to enjoy those nice and beautiful flowers in the near future.

However, the existence of risk does not mean one should not take any risk at all. Actually it is a good thing the Intellectual Property issue is not a hidden risk so we all know it is out there and we just need to take more cautious approach when we go to the market. The following are my suggestions on how to deal with the IP issues in China:

First, choose a reliable partner with a good reputation. It may not be an easy thing sometimes because Chinese hardly says “No” to opportunities. So, if a company tells you “No” for some reason, it is actually a good sign that this company is doing business honestly. At the same time, spend time to research the background of the potential partner, to visit their facility, and to observe how the owner or manager works and treats their employees. A company that treats their employees well will also respect their business partners, which is potentially a long-term trustworthy business partner. Don’t feel frustrated if you have a bad experience in the Chinese market. There are plenty of honest businesses out there looking for a long term partnership.

Second, utilize key technology to prevent easy counterfeiting especially when R&D is a big part of the product development. Intel is a great example for this approach. No one can counterfeit their CPU due to their technology.  A company can develop complex products unique characters from which core technology cannot be duplicated.

The third approach is to use the trade mark and a branding strategy. Believe it or not, China has a culture of brand awareness and will pay a premium for a brand which is associated with high quality and a high social status. Not to mention those well-know consumer goods, JBSbio, the Chinese Tissue Culture company, uses the branding strategy for their own breeds and has been successful to protect their products in their homeland. The foreign company going into the Chinese market should definitely use a branding strategy at the beginning of entering the new market to establish their name and increase brand awareness.

The last strategy will be entering the market with a second tier product or with products which are going to be out of patent if an IP violation is inevitable.  Charge premium prices at the beginning of market introduction and then lower the price when the market is flooded with knock offs. Meanwhile, introduce the market quickly with new products to sustain its market leader status..

As a conclusion, it can take another decade for China market to have Intellectual Property regulation well enforced. However this obstacle should not become a barrier for any international business to wait for a safer environment and miss the growth opportunity. Understanding the market risk and taking the appropriate approach to go with the flow and capture the opportunity in a new market can be highly rewarding and profitable.