The Chinese dream of "going out"

Talking about their "Chinese Dream", entrepreneurs invariably hope that their companies "go global" and "go well".

Liu Chuanzhi said: "My Chinese dream is to make Lenovo a better global company." Li Dongsheng said that TCL's Chinese dream is to be a competitive multinational company. Ma Huateng said: "My dream is that Chinese Internet companies can 'go out' and cultivate a group of well-known Chinese Internet companies and brands with world influence." Ren Zhengfei was called by the media as "a man who has devoted his life to chasing The pioneer of the Chinese dream."

Since the central government formally proposed the "going out" strategy in 2000, Chinese enterprises have set off a wave of going abroad, expanding overseas markets and conducting international operations. However, the success of international operation depends on whether Chinese enterprises have corresponding key capabilities.

If you hadn't learned the art from Patriarch Bodhi, learned the seventy-two transformations and somersaults, if you hadn't refined your eyes in the alchemy furnace of Taishang Laojun, and snatched the wishful golden hoop from the Dragon Palace in the East China Sea, Sun Wukong would not have been able to break through. Ninety-nine-eighty-one calamities, realizing the dream of retrieving the true scriptures.

Looking at the past ten years, it can be seen that on the journey to the international stage, whether it is Lenovo, Huawei and other "old powerhouses", or Antaihe, Huashengchang, Yifang Digital, Jinma Communication, Fengrun Computer, Bo "New Brands" such as Qi Caiying, or "OEM experts" such as Chuangrongfa and Chengda Shoes, have repeatedly witnessed the basic business logic of international expansion: build your capabilities and deliver cherished products to target customers. value, and dynamically match the market and capabilities with the internationalization process. Only in this way, the dream of Chinese companies standing in the forest of the world's enterprises can get closer and closer.

The latest authoritative research on this business logic in the world comes from Amitava Chattopadhyay, a professor at INSEAD. He conducted in-depth research on 39 multinational companies from emerging markets, including 4 from mainland China and 2 from Taiwan. He found that the reason why these companies have risen so fast is that they have adopted effective strategies. The business logic behind these strategies is to build strategic capabilities for target markets to achieve international breakthroughs.

Combining the research results of Prof. Chamida, we set our sights on more Chinese enterprises, and strive to reveal more laws in target market selection, strategic capability building, and dynamic matching between markets and capabilities, so as to help them achieve their goals as soon as possible. dream.

Choosing the target market

Professor Chamida believes that in which country to serve what customer is one of the most important strategic decisions for companies in emerging market countries when expanding internationally, because all other business decisions follow this strategic decision.

In this strategic decision, many multinational companies from developed countries, such as IBM, Procter & Gamble, etc., follow the principle of "select target customers first, then target countries". If you choose which country to enter first, and then choose the target customers in this country, you are very likely to miss some countries that seem to be unattractive, but are highly attractive when measured directly by target customers.

The good news is that according to the results of the "Chinese Enterprise Internationalization Strategy Survey" conducted by "CEConline" in April this year, nearly 55% of the respondents said that their company first selected the target customer group, and then Only 37% of companies choose the target country, and the target country is selected first, and then the target customer group is selected.

Professor Chamida found that when companies in emerging market countries expand internationally, their target customers often include: people of their own nationalities living abroad, price-sensitive customers, and customers who pursue practical and reliable product brands , a niche customer base, and a customer base that is open-minded and more receptive to new brands.

The survey results of "CEConline" in April also showed that in the past ten years, the target customers chosen by Chinese enterprises in their international expansion ranked the top five among the 16 types of target customers: from developed countries , customers who are open-minded and more willing to accept new brands (44% of the votes); customers from developed countries who pursue practical and reliable product brands (41.3%); niche customers in developed countries, thus avoiding Competing with multinational giants (34.7%); customers from BRICS and other emerging economies who pursue practical and reliable product brands (36%); price-sensitive customers from BRICS and other emerging economies group (33.3%).

It can be seen that building an international brand is the dream of many Chinese companies. Among the eight companies we interviewed, six have launched their own brands in international target markets, including Antaihe (see "Antaihe: Benchmarking the European Market with a High Starting Point" for details), Huashengchang (see "Antaihe: Benchmarking the European Market with a High Starting Point" for details) Huashengchang's international expansion "Friends" article), Yifang Digital (for details, see the article "Yifang Digital: Achieving Brand Through Acquisition of Overseas Core Technologies"), Golden Horse Communications, Fengrun Computer, and Boqi Color Printing.

In the next five years, the target customers chosen by Chinese companies will be in the top five, which is roughly the same as in the past ten years. The only change is that the target customer at No. 5 has changed from "price-sensitive customers from BRICS and other emerging economies" to "interested customers from BRICS and other emerging economies". This shows that in the next few years, Chinese companies in emerging economies will encounter more and more competitive pressure from multinational companies from developed countries, and targeting niche customer groups may well be A proactive approach.

From the top five target customer groups, it can be seen that whether in the past ten years or the next five years, the target countries chosen by Chinese companies are basically developed countries and emerging economies including the BRICS countries. category. Among the eight factors considered when choosing a target country, the top three in the past ten years and the next five years are: the growth rate of the country's market, the size of the country's market, and the country's private relations with China, business Relationships and government relations are positive and robust.

Building Strategic Capabilities

In order to succeed in target markets, companies need to have the ability to compete in those markets. Professor Chamida's research found that multinational companies in emerging market countries that have successfully emerged have different key capabilities, but a total of twelve.

The April survey data of "CEConline" shows that in the past ten years, China has focused on building five strategic capabilities in order to penetrate overseas emerging markets: integrating high-tech into production processes, and The ability to integrate with lower labor costs; the ability to gain insight into customer needs to achieve localization goals; the ability to learn and discover markets with similar needs; to achieve customization through lower R&D and manufacturing costs and flexible manufacturing systems The ability to customize; the ability to create a corresponding organizational culture.

In the next five years, three of the five capabilities that will be focused on building are the same as in the past ten years; The ability to customize" and "the ability to create an appropriate organizational culture" became "the ability to keep raw material and supply chain costs lower" and "the ability to master a sophisticated, but scalable application of technology" (see Figure "Five Capabilities of Chinese Enterprises 'Going Global'" (left half). This shows that in the face of competition from neighboring countries with lower cost advantages in the future, Chinese companies have prepared a two-handed strategy. Cost potential; on the other hand, improve the sophistication and application breadth of the technology to create a competitive advantage of the technology.

The survey data also revealed five strategic capabilities that China has focused on building over the past decade in order to penetrate developed markets. The difference from the five strategic capabilities for breaking into overseas emerging markets is that "the ability to master a sophisticated, but scalable technology" is added; "the ability to create a corresponding organizational culture" is removed.

Of the five capabilities that will be focused on building in the next five years, similar to breaking into emerging markets, four are the same as in the past ten years; Manufacturing system, the ability to realize customization” becomes “the ability to maintain lower raw material and supply chain costs” (see the right half of the figure “Five Capabilities of Chinese Enterprises 'Going Global'”).

Dynamic matching of market and capabilities

Ren Zhengfei's dream of "going out" of Huawei has now developed into "global take-all". However, Huawei's start was based on Mao Zedong's idea of "surrounding cities from the countryside", starting from emerging markets and gradually expanding to developed countries.

More than ten years ago, Huawei's first "going out" contract was obtained in Russia, with a meager $16. But now, Huawei can achieve sales revenue of about $2 billion in Russia every year. . In 2012, Huawei achieved sales revenue of 220.1 billion yuan, of which the sales revenue in the Chinese market accounted for only 33.4%, and the remaining 66.6% was obtained from overseas markets (among which, sales revenue from Europe, Middle East and Africa, Asia Pacific, and America accounted for the total sales revenue respectively. , 35.1%, 17%, 14.5%).

Currently, Huawei's products and solutions have been used in more than 140 countries, serving 1/3 of the world's population. Among Huawei's nearly 150,000 employees, tens of thousands of them work overseas, and 70% of overseas employees are local employees.

Strong R&D and technical capabilities are the key to Huawei's globalization goals. In 2012, Huawei's R&D expenditure accounted for 13.7% of total sales revenue, and the R&D expenditure invested in the past ten years exceeded 130 billion yuan.

Huawei started to develop wireless technology and products in 1998, and has been investing in it for ten years. The scale of its wireless product line eventually reached 20,000. The wireless product line has not made a penny for Huawei in this decade, but now it has become Huawei's No. 1 source of revenue and profit.

Huawei's investment in research and development is beyond the reach of most Chinese companies. The survey data of "CEConline" in April also showed that "large investment in R&D and technological capabilities", whether in the past ten years or the next five years, whether for emerging markets or developed markets, ranks 12th the last column of the ability. However, Huawei has proved a business "truth": R&D and technological innovation will always be the "magic weapon" of international market competition. From this perspective, in terms of matching capabilities with market dynamics, Huawei's R&D investment is "resilient to changes".

Across the eight companies we interviewed, the discipline of matching capabilities to market dynamics also drives their success. For example, Chuangrongfa has created corresponding key capabilities for the upgrade of customer value in the European and American markets (see the article "Chuangrongfa: Improving Customer Value Trilogy" for details).

Headphone manufacturer Shenzhen Jinma Communication Co., Ltd. has designed a variety of fashionable earphones that customers love, such as waterproof earphones for swimming Headphones are favored by the European market.

Fujian Quanzhou Chengda Shoes Co., Ltd. is a benchmark enterprise in the international beach slippers industry. As the target market expands from Southeast Asian countries in the early stage of internationalization to North and South America and Europe in the later stage, the company continues to strengthen its R&D and design capabilities while focusing on improving its customer service capabilities.

Dongguan Boqi Color Printing Technology Co., Ltd. is the first batch of Chinese printing companies to enter the Brazilian market. In order to establish a factory in Brazil, which contributes half of the company's sales, it earnestly studied the local laws and regulations of Brazil, and at the same time asked to be stationed in Brazil. of Chinese employees are eager to learn the local language. As one of the largest professional manufacturers and brands of computer peripheral products in China, Dongguan Fengrun Computer Co., Ltd. has made a long-term accumulation in technology, production, design, customer resources, etc. at different stages of internationalization. Welcome to the explosion of mouse brands "E Element" and "ET".

In the process of realizing the dream of "going out", Chinese enterprises will inevitably encounter difficulties and setbacks. As long as they are good at summing up experience and improving their internationalization capabilities, their dreams will eventually come true.