Hay Reports What Global Execs Think of China

Wednesday, February 21, 2007 23:38

Following our post a few weeks ago Why Canadians Don’t Belong in China detailing why Canadian companies have trouble in China comes a report (PDF here) from the Hay Group and the EIU.

According to the website:

Earlier this year, Hay Group worked with the Economist Intelligence Unit to survey world business leaders about the size of the prize in China and the real life barriers they face in doing business there today.

The 40 page report is a quick read, and it is very well written. the data included, and the graphs are particularly interesting and give great insights into the minds of global executives on the China issue.

Their key findings were:

1. Eighty-three percent of global business leaders see China as an overall opportunity rather than a threat to their businesses and 82% of global business leaders expect to be doing business in China within three years.

2. Executives view China as a growing market for their goods and services, not just as a supplier of cheap products and components. They expect China to account for 14% of their total revenue within three years. Business leaders in Western Europe expect China to be worth 12% of the region’s revenue by2009, while North American executives expect sales to China to account for 15% of revenue.

3. According to business leaders, 8% of their home market will be controlled by Chinese domestic companies within three years. North American directors forecast that 6% of their home revenue will be at risk from Chinese competitors every year, while Western European executives predict that 8% of revenue will be under threat.

4. High value manufacturing and outsourced service providers in the West will be under threat as China rapidly climbs the value chain.

5. Fifty-five percent of company directors say the best thing international governments can do to help them succeed in China is to push for open trade.

6. Poor protection of Intellectual Property poses the greatest economic barrier to doing business in China – 55% of directors expect IP infringements will threaten their business within the next five years.

7. Differences in language, culture and communication pose the biggest organizational barrier to doing business in China, according to 46% of executives.

8. China must improve the management and leadership capabilities of its workforce if it is to continue to attract foreign investment and maintain its remarkable economic growth rate.

9. Forty-two percent of executives say their companies need to improve their ability to work across geographic boundaries if they are to succeed in China.

10. More than three-quarters (77%) of global business leaders believe that Western companies will need to develop a whole new way of operating in order to do business successfully in China.

Further to these findings are section heads that go through the findings in great detail, and I highly suggest anyone with an executive committee considering China to read this.

Fear and ignorance of China are not new concepts. however, this report is interesting as it shows that while there is great interest in China, executives are still feel overwhelmed by China, and with many already planning revenue streams in China someone is going to have to help these companies as they are obviously not all prepared.

some of the more interesting statistics were:

  • 53% of respondents expected China will compete for low value outsourced services, and 49% said the same about high-value outsourced services
  • 25% of respondents say they have no China strategy
  • Greatest organizational barriers to entry were culture/ language (46%); understanding of market (32%); business model was not China adaptable (29%)
  • Greatest economic barriers were poor IP protection (39%); corruption (36%); Bureaucracy (35%)
  • 55% of leaders thought their gov’t should push for more open China market, and 35% wanted gov’t to push on RMB.

One stat that really caught my eye was that not a single U.K. based executive viewed China as a threat. Is that because the U.K. is gutted of manufacturing already, or did they only survey service firms?

Overall, this report is probably one of the best I have seen detailing the thoughts of foreign executives about China. there are a lot of misconceptions about China (top 3 economic barriers are most reported in media.. not necessarily reality for all firms).

No doubt, this will result in another good year for the service providers assisting companies entering China (I personally cannot remember a more active February).

to read the full report, right click/ save here

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One Response to “Hay Reports What Global Execs Think of China”

  1. Peter Magurean says:

    June 8th, 2007 at 9:07 pm

    Hi, RIchard,

    I am reading your blog more closely. You certainly have valuable information posted, and for certain anyone who interested in China whether in China or abroad will find you blog immensely useful. Thanks for the fine work, sir!

    Best wishes,