U.S. companies are using technology to overcome barriers to doing business in the world's hottest market
Since China's entrance into the World Trade Organization three years ago, U.S. businesses and multinationals from other countries have accelerated their efforts to enter the world's hottest market. With good reason: It's where the growth is.
The nearly 1 billion consumers between the ages of 15 and 65 in China have more disposable income than at any other time in the country's history. That's changing what they buy--and how they buy it. "For the first time, we see people in Beijing and Shanghai using credit lines to manage their finances and improve the quality of their lives," says Willie Fung, general manager of China operations for MasterCard International Inc.
Beyond favorable demographics, import growth is virtually assured. As a WTO member, China must cut tariffs on imports gradually, from an average of 23% when it joined WTO to 12%.
To tap this market, U.S. multinationals rely heavily on business technology to make their Chinese operations efficient and profitable. The software and infrastructure available are remarkably similar to what's used in the West. Chinese-language enterprise applications from Oracle, SAP, and Siebel Systems, for instance, are available, as are leased high-speed telecom lines.
So what distinguishes the business-technology strategies multinationals are putting to work in China from those used in more-developed markets? Western companies are discovering that education and collaboration are the most vital components of a successful in-country technology strategy. The tools are at hand but haven't been widely used and haven't been applied to specific business goals. That's particularly true given that most Western companies in China must cooperate closely with joint-venture partners and merchants that may not have much experience with business technology.
It was a lesson that General Motors Corp. learned the hard way. Two years ago, the company rolled out Siebel customer-relationship-management software at its operational centers in Shanghai. The automaker sold 386,710 vehicles in China in 2003, and year-over-year sales have jumped 49% for the first two months of 2004. GM, which sells most of its vehicles in China through joint-venture partner Shanghai Automotive Industry Corp., was looking to develop a more-sophisticated view of Chinese car buyers. However, local dealers had never heard of CRM and had little incentive to provide GM with the sales data it needed to make the project work.
GM built a Web portal for dealers to easily order cars, as long as they provide sales data GM needs, says Wu, CIO for GM China.
Photo of Addons Wu by Mark Leong/Redux Pictures
"They were reluctant because it's something they never had to do before, and they just weren't used to it," says Addons Wu, CIO for GM China. To encourage broader participation, GM built a Web portal that makes it easier for dealers to order vehicles. To use it, however, they must provide the customer information GM wants. "Now, by default, when we get a vehicle order, we get the customer data at the same time," Wu says.
Getting Chinese partners to embrace technology is crucial for companies that want to capture market share as efficiently as possible. Because of generally poor logistics and infrastructure, Chinese companies' expense-to-sales ratios greatly exceed those of Western companies. Logistics costs can be up to 50% higher than in the United States, according to a recent study by Accenture. In other words, it's easy to go broke trying to make a buck in China.
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