The China Strategy: How to Win the New Game of Global Enterprise

Citation

Qin, F. (2012), "The China Strategy: How to Win the New Game of Global Enterprise", Critical Perspectives on International Business, Vol. 8 No. 1, pp. 96-98. https://doi.org/10.1108/17422041211197594

As the fastest growing major economy over the last two decades, no developing country has aroused more attention and coverage from the business world than China. This makes China both an important location for business opportunities and a key component in any global business plan. Hence, setting up a successful Chinese presence to exploit the world's largest consumer market can transform a company's business performance worldwide. In addition to the richly diversified culture and the great complexities in China, “the intensity and scale of change” also implies all foreign businesses, even those that are currently successful, “will find themselves inadequately prepared for the turmoil and dynamism to come” (p. 3). The China Strategy authored by Edward Tse offers a roadmap for making sense of the Chinese business environment.

Tse is a recognised thought leader on China's business environment. Drawing on more than 20 years management consulting and senior corporate management experience, Tse presents a high‐level strategic guide geared toward informing corporate leaders who are seeking a holistic and incisive analysis of the Chinese business environment and its implications for worldwide business. Although practitioner oriented, this book is informative and of value to any international business scholar who wishes to go below the mere superficialities of the China phenomenon. Moreover, the well‐structured chapters, and a cohesive framework makes reading this book easygoing: the first half of the book, chapter 2 to 5, explores each of the four main drivers of change in China and the ways they interact; whilst the second half, chapter 6 to 8, looks more closely at the strategies, core capabilities and types of leadership that will propel the most successful companies of the next few decades.

The book presents a compelling rationale for the shift towards a new China strategy. The essential argument rings true regarding the potential global economic development and new identity of China in the near future. Indeed, Tse goes so far as to claim that those who fail to take account of China in the shaping of their global strategy will not only “lose out in markets around the world, but they will also face the prospect of underperforming within China” (p. 22). Going beyond the classic approach to business strategy and a static long‐term planning approach, Tse highlights the necessity of looking into and negotiating the Chinese “context”. This book is the first that lays out a framework that puts together the different and seemingly contradictory trajectories of China's business future: potential openness and dynamic of the market (“Open China”) (p. 27), types of companies operating in China and the nature of competition and challenges (“Entrepreneurial China”) (p. 55), shifting direction and role of the government in shaping the business context (“Official China”) (p. 89), and China's increasingly complex relationship with the rest of the world and the business implications in “two‐way globalization” (“One World”) (p. 113). Building on these accounts, Tse convincingly states that these four drivers of change will transform the ways in which businesses operate everywhere in China. Only by putting them together, can foreign investors and observers have a panoramic vision of the complex business environment, through which an engaged and integrated global strategies can be formulated and executed.

Nevertheless, the total supremacy of the Communist Party in the society and the state ownership among industry sectors implies Official China, with its “socialist market economy” rather than “market capitalism”, decides all methods of macro‐economic regulation. Thus, no equivalence of scale exists across the trajectories discussed in the book. Indeed, rather than the non‐linear manner in which the book presents the future trajectories with each of them overlapping and complementing one another, it can be argued that the four drivers are hierarchical‐structured with Official China at the top and instrumental in influencing the scale and intensity of the others. Although, we agree that “it is a mistake to let the authoritarian side of China's political system block engagement with the Chinese government” (p. 112), we caution against getting too optimistic about the government's moves in the next decade as there is no obvious guarantee that China's continued economic development will bring with it “a new form of government entirely: an omnipresent, benign, free‐market‐supporting, outward‐looking, business‐enabling authoritarian regime” (p. 112).

In contrast to the traditional thinking, the book makes a number of broad claims about the unavoidable and daunting changes that may disappoint foreign companies: “The greatest era of foreign investment's impact is at an end. Foreign companies arriving now (or looking to expand their existing investments) will do so in a crowded, competitive environment, where they can expect fewer incentives than they previously received” (p. 41). Also, the inequalities of income and power, regional disparities as well as the intensity and scale of evolution have made China a far more challenging consumer market that is diverse and complicated in multiple dimensions. Therefore, for foreign companies under enormous pressure to have ambitious short‐term growth targets, it is best practice to “build slowly and fit practices to China's conditions than to try to work on too many fronts at once” (p. 52). For most multinationals, as Tse argues, the crucial question is “where and at what rate other concentrations are being formed beyond the ‘big three regions’, and when these new markets will become sizable enough to merit attention” (p. 47). In this conjuncture, the sharply honed sense of timing and the ability to anticipate and capture the consumers of the emerging middle class and 140 cities with population of 1 to 2 million will determine how successful a company can be in China over the next decade. Though based in reason and statistical analysis, the effects of the “prescription” issued in the book and its applicability are still questionable regarding the ever‐changing dimensions of openness and the heterogeneity within each industry sector. This may have been intentional, as this book strives for a high level of readability and one of the most important messages conveyed is Chinese strategists should respond flexibly to the rapidly changing business environment (“Versatility”) (p. 165) and keep in pace with the key trends that all business will have to negotiate (“Vigilance”) (p. 193). Still, we wish for more precise statements on the nature of the sociological and economic impacts.

Clearly, there is no quick fix and no one solution for the myriad of issues in the Chinese business context, but the books seems to suggest that a successful China strategy can be primarily guaranteed if a multinational is “entrepreneurial in drawing on the resources China offers” (p. 88) and is capable of negotiating “the multilevel intricacies of relationships with officials, value‐chain partners, and customers”, then integrating “these elements into a global framework” (p. 135). Yet, we are left feeling unconvinced by this claim about the prerequisite conditions that favour the success of foreign businesses. First of all, despite the fact that the case studies presented are both impressive and supportive, we still wonder whether these examples, mainly drawing on the experience of successful and durable foreign companies, are cogent enough to generate causal inference. Second, it is doubtful whether the business success in China is a case of gradualism as opposed to “big bang” transition. Even if the foreign companies could bring in the complexities addressed into coherent focus whilst adopting a strategic China mindset (“Vision”) (p. 137), none of them, even the currently successful ones, could possibly be audacious enough to claim that success in China is all in their hands in the coming decade when no new model of “market socialism” or “market capitalism” will emerge in China, and when high rates of economic growth, industrialisation and urbanisation are putting increasing pressure on the sustainability of economic growth and social development.

This book beyond doubt presents valuable insights into the strategic issues that lie right at the heart of running businesses in China, with China or in competition against China. However, it provides little advice on how different sectoral context will influence the investment approach and shape business strategy in practice. Also, there is little coverage on environmental damages, role of science, technology and innovation as well as recruitment, training and labour supply changes – issues that are critical at all stages of economic development. Nevertheless, the main theme and associated reasoning in the book are intact and compelling. What it lacks in formalization and precise statement it makes up for in the convincing richness of its case studies and its intriguing claims. Hopefully, it will inspire more management practitioners and scholars to develop a deeper understanding of the challenges and opportunities of putting a China strategy into practice.