Localization & Performance: A Tale of Two JVs
Author: Lub Bun Chong
Publisher: C Consultancy Limited
A solid localization strategy backed by the requisite competencies and resources is an indispensable component of a foreign company’s China strategy. This logic is simple to understand, and few, if any, foreign executives will argue against it.
On ground, it is not uncommon for foreign executives to intuitively channel their localization efforts on driving the corporate performance of the joint venture. This is a necessary first step, and it is a very important one too since this is where the legal rights and economic interests of the foreign company reside. However, there is a second step, and this is where some foreign executives are found wanting – insufficient localization competencies and resources are channelled towards managing the issues relating to Chinese partner and culture. Many foreign executives are aware of this, but not many will, and can, step up to the task in this regard.
The book will put forth a case in this regard through the actual case studies of two investment holding companies, which are Camelot and Merlin over a period of 7 years from 1998 to 2004 (collectively the “Players”). The Players' actual names are witheld for confidentiality reasons.
Firstly, the Players are analysed to ascertain (a) the attractiveness of the advertising segments that they were in; (b) the strategic position that each of the Player adopted to deliver competitive advantage; and (c) how well both Players executed their strategic positions as measured by their corporate performances in delivering Advertiser Value and Shareholder Value.
Secondly, the Players’ competitive advantage in value chain is analysed through (a) their competencies in managing government relations; (b) experience of their boards of directors; (c) quality of their media platforms; (d) corporate resources provided by their shareholders; (e) extent that they were able to access local expertise and relations; (f) level of human resources allocated for serving Advertisers and government agencies; and (g) extent of focus (or “stick to the knitting”) versus diversification.
Thirdly, the motivation levels of the Players’ respective Chinese partners for driving competitive edge across their respective value chains are analysed. Also, the cultural backgrounds of the Players’ management and employees are analysed for impact on management approach and potential for cultural flashpoints.
Finally, this book concludes by proposing a framework for foreign companies for a more effective localization strategy that gives due consideration, and allocate adequate competencies resources to manage issues relating to Chinese partner and culture.