Executive Interviews: Interview with Fang Lee Cooke on The China Factor
November 2007 - By Dr. Nagendra V Chowdary

Dr. Fang Lee Cooke
Full Professor of HRM and Chinese Studies at Manchester Business School
University of Manchester.

Such a strategy enables firms to capitalize on the localization of their brand names that aremoremeaningful, reflectmore positive connotations, reflect more product benefits or characteristics, and possess more desirable linguistic characteristics than the original names. Moreover, leading MNCs in China are beginning to recognize the need to take a more responsive approach to managing their corporate relationship with the Chinese government and its associated political bodies. For example, Wal- Mart had been resisting for years China's request to establish a trade union for its workforce, claiming that itwas its global corporateHR policy to have a non-unionized workforce. It recognizes the trade union in China now and has expressed willingness to develop a good relationship with the All-China Federation of Trade Unions (ACFTU) that will be beneficial to both workers and the corporation.

• How do you thinkMNCs should go about as regards sourcing of talent? Should they hire Chinesemanagers or expatriates? What should be talent management strategy of theMNCs?
  I think the global staffing trend is now moving towards localization, although a small number of expatriates are deemed necessary. MNCs are in an advantageous position in attracting and retaining talent in China. They are the 'most desired' employers for Chinese graduates because they believe these MNCs offer more opportunities for them to utilize their talent and realize their own value. High income is also an important reason. However, there is a 'War for Talent' in China and the retention of talent is often a problem. Well-educated young Chinese workers are ambitious and are eager to reach to the top of their career. They not only expect lucrative financial packages, but also demand early promotion and (overseas) career development opportunities fromtheir employers. Where these demands are not met or where there are better offers elsewhere, they are ready to switch employers. Some Western MNCs are considering deploying Western HR initiatives such as diversity management and work-life balance to retain talented employees. However, these may not be the right HR initiatives for the Chinese context. MNCs need to analyze their human resource environment in China, and design a set of HR policies that is relevant and effective in the Chinese context that may be different from what they have in other countries.

• There is an increasing trend of Chinese companies going global, either through FDI or M&A (Haier, Lenovo, Huawei, ZTE, SAIC's 50.6% acquisition of Korea's Ssangyong, China PetroleumCorporation's US$42 bn acquisition of PetroKazakhstan, etc.) Two key issueswhile going global are: having real knowledge of the foreign market and the best preparation possible. How do you evaluate Chinese companies on these two parameters?
  I have to say that Chinese companies could do better on both parameters, although they are learning from their lessons. Management autonomy and management competence are two related dimensions that are often notably absent in Chinese State- Owned Enterprises (SOEs). Since SOEs make up a large proportion of the Chinese FDI, these deficiencies may have serious implications for the performance of Chinese FDI. It has been reported that Chinese managers have no obvious expertise to help them make sensible investment decisions abroad. Many Chinese companies reach their decisions on overseas investment without a clear idea about why they are investing overseas, where they should locate their subsidiaries, and how they can develop overseas markets. In particular, the Chinese government's policy of developing variousmediumsize and large state-owned enterprises into business groups and its insistence that the groups should establish themselves to be amongst the world's largest enterprises within a specified period of time has led some companies to rush into overseas investment. There is a shortage of skills among the Chinese management in handlingMergers and Acquisitions (M&As) negotiations and post-M&A integration in China. Embarking on overseas acquisition, post-acquisition integration and managing overseas subsidiaries present even greater difficulties for Chinese managers because of their lack of knowledge of the business environment of the host countries and international standards.

• Which Chinese industries and companies, according to you, hold the best prospects for becoming global players?
  This is like a fortune-telling exercise. It is difficult to say as world business is changing so fast, and some changes are very unpredictable. In the near future, I think the Chinese ICT industry and leading firms operating in this industry will become major global competitors. There are already signs of their global success or, at least, market occupation.

• What do you think are the advantages and disadvantages of Chinese companies? Do you think Chinese companies are well-prepared to establish 'Made in China' or 'China' brand globally, with all the negative publicity attracted in recent times (recall of toys and cribs and food safety concerns, etc.)?
  In Western countries, where competition is hinged on quality, innovation, brand and corporate reputation, integrated distribution network and market domination, Chinese firms in general do not have much competitive advantage. In other developing countries, Chinese firms will have more advantages comparatively speaking and in similar ways to that of foreign MNCs in China. For example, possessing a higher level of technological competence, more financial resources, better management knowhow andmore sophisticated products at affordable prices to the locals. Whilst Chinese brands in the West may be associated with poor quality and cheap price, it may be an attractive brand in other developing countries. Certain Chinese products are gradually gaining a good brand reputation in the West, although this is only a small handful, e.g., Haier's refrigerator products. Many Western brand do carry the label 'Made in China' and these products are of a very high quality. So, China does have the capacity to produce high quality products.

1. Google's Problems in China Case Study
2. ICMR Case Collection
3. Case Study Volumes