Saturday, September 28, 2013

Why Big American Businesses Fail in China

By Benjamin Carlson September 27, 2013
HONG KONG - If Tolstoy had written a history of foreign corporations in China, it might have started something like this: "Companies that succeed in China do so for similar reasons; every company that fails, fails in its own way."
Since China opened up to foreign investment in the late 1970s, some of America's most powerful corporations have gone confidently into the People's Republic, only to stagger out a few years later, battered, confused, and defeated.
It's not because the businesses were incompetent. Many of the biggest failures belong to the Fortune 500: Mattel, eBay, Google, Home Depot. All of these have thrived in markets around the world, but not in China.
Some suffered from a lack of flexibility, or a failure to localize. Others fell because of bad timing, or a superior local competitor. While the causes are as varied as the industries themselves, a pattern can be discerned among the biggest failures in China: an inability to grasp just how different - and cutthroat - the Chinese market can be.....To Read More....
My Take - The author is right as far as he goes, but the real problem is a problem of arrogance and "bean counters". Bean counters can tell you the bottom line on everything; as a result they actually believe they understand everything. It's the Robert McNamara and Lee Iococca story. McNamara was one of the post WWII Harvard business School whiz kids who knew the bottom line. Iococca was a car man who knew the automobile industry and American's love of cars. Both worked at Ford. McNamara's contribution to the automotive world was the Falcon. Iococca's was the Mustang. The only difference between them was the style. Everything else that went into them was the same. No one remembers the Falcon, but the Mustang is still being made. 
These people didn't bother to learn about the culture and failed to realize what it was the people actually wanted to buy.  I find this pattern repeats in the U.S. also.  Ford stopped making a very successful small truck, the Ranger, presumable because they want everyone to buy the higher priced F-150.  Ranger owners bought Rangers because that's what they wanted and are not buying the more expensive and larger F-150.  They're now buying Nissans and Toyotas.  Don't blame the public when they buy foreign vehicles; blame American auto makers.  

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