What is the best way to approach China’s many markets? How do I effectively identify and build relationships with local distributors to gain access to markets outside of China’s central hubs?
These questions resonate from the offices of the vast majority of foreign executives charged with selling consumer goods in the Greater China region. Multinational companies that have successfully imported their international brand to China’s major metropolises are struggling to understand what it will take to reach the next tier of Chinese consumers. The China Observer has previously written about this topic and has spoken with fellow China consumer insiders such as Oxford’s Karl Gerth and McKinsey’s Vinay Dixit to gain additional perspective into what approach foreign multinational companies should adopt to succeed in China’s next tier.
While there is no standardized approach, the following examples demonstrate how selected domestic firms have been able to achieve success in more remote Chinese markets.
Li Ning – Athletic Apparel
Li Ning, founded in 1990 by a former Chinese Olympic gymnast of the same name, has turned up the competition against top foreign multinationals like Nike and Adidas in higher-end markets. However, much of Li Ning’s success to date can be attributed to its operations outside of tier one cities. Tom Doctoroff explains in this article, that “Li Ning and Anta are not competing directly with Adidas and Nike, but the pie they are eating is growing larger and larger, while Adidas’ and Nike’s pie is not growing at the same rate.” Doctoroff is referring to the fact that Li Ning’s strength in China’s smaller cities is propelling it forward much faster than competitors in tier one cities which are not seeing the same rate of growth which led to their initial success in China.
Lenovo – Consumer Electronics
Lenovo is best known for its expanded international presence after it acquired IBM’s ThinkPad line of notebooks for roughly $1.75 billion in 2005. Lenovo is increasingly focusing on what it defines as China’s ‘emerging markets.’ Since early 2009, desktop sales in the emerging markets cluster has increased from 45 percent to 70 percent of Lenovo’s total desktop sales. Over the same period of time, notebook computer sales in these markets increased from 30 percent to roughly 50 percent of total notebook sales. It has been just 5 years, since Lenovo first began to focus on China’s rural markets, but the company will likely continue to move forward in this direction as China is expected to become the world’s largest PC market in the next year.
CR Snow – Food & Beverage
When outside observers hear that China is the world’s largest beer market, they often assume the top selling beer is Tsingtao. Even those of us in China find it surprising that the top beer in China is Snow beer. The case of Snow beer differs slightly from the two previously discussed here, because CR Snow is a joint venture between China Resources Enterprise Ltd and South Africa’s SABMiller. However, the key to CR Snow’s success has been its focus on lower tiered cities in China’s regionalized beer market. CR Snow implemented a Greenfield expansion program in 2006 through successive acquisitions of breweries in Dongguan, Lanzhou, Harbin, Yanjiao, Nanjing, Anhui, Lioaning and other locations.
As executives at companies like Li Ning, Lenovo, CR Snow and even Haier will tell you, the market opportunity presented by China’s next tier of consumers is too big to pass up. Yet, these markets tend to be quite regionalized with fierce local competition, and there is no set methodology to win. It will be up to each company to come up with their own distinct strategy to expand beyond China’s first and second tier to realize the opportunities presented in this next “frontier.”
For the first time ever, media organisations are asking themselves whether religious extremists deserve space and air time in their newspapers, online portals and television.
IT’S a lesson for media organisations all over the world: Does a pastor of a tiny church who threatens to burn copies of the Quran deserve the kind of coverage that has now provoked so much anger?
The unheard of pastor, who is said to make a living selling furniture online, has achieved international notoriety because he was given the soapbox by the media.
He has cleverly, if not deviously, played the media with his well-crafted statements. He has now decided to call off the burning.
But the damage has been done. Pastor Terry Jones has stoked up enough emotions, especially among radical Muslims in countries like Pakistan and Afghanistan, who have seized the opportunity to stage riots.
Now, some news organisations are saying they would not cover Jones if he decides to proceed with his original plan. Even CNN commentators have said that this rabble-rouser does not deserve media coverage.
They have described him as an idiot and a jerk and that they (the media) should simply switch off the microphones and lighting outside his church. Well said.
Jones’ hysterical plan has placed minority Christians in many countries in a precarious position. Their lives are in danger if the government in their countries remain indifferent to angry Muslims who lump any Christian in the same category as Jones.
President Barack Obama is right in saying that the plan by Jones has been a “recruitment bonanza” for al-Qaeda.
In Malaysia, we have our fair share of extremists who fan racial emotions with their hurtful words and statements.
Obviously, these egomaniacs enjoy reading about themselves in newspapers and online portalsbut the question is whether the media need to encourage these communal champions by giving them the platform.
Some would say that they are entitled to express their views, no matter how much we disagree with them, in the name of freedom of speech. It’s a tough call to make, some leaders admit, when it comes to question of expression.
That was precisely the initial argument forwarded by many on the position of Jones. Even the US president was totally helpless in dealing with the situation since the right to freedom of expression is clearly stipulated in the US Constitution.
The consequences of Jones’ actions were never thought of until angry reactions broke out worldwide. Only then did the Americans realise that their lives could be in danger if there was a backlash from Muslims.
In short, terrible things could happen and the thought of standing up for an idiot’s right of expression no longer seemed so noble and practical.
Suddenly, it dawned on the media that the idea of giving Jones the platform wasn’t so clever after all, no matter how good his sound bites have been, particularly in giving the annual Sept 11 anniversary coverage a fresh spin.
For sure, Jones has made good copy for the media and right-wing politicians have also been quick to jump on the bandwagon. But the point is that extremists, religious fanatics and racial bigots must never be allowed to hijack the platform.
No level-headed Christian would agree with the Florida pastor. It is good that the majority of Christian groups have spoken up clearly and strongly against him.
We must stand together to speak for what we believe in. There is no need to be apologetic even if those that we speak up against could be members of our faith or race. There is only right and wrong.
The extremists in Malaysia are the same. We need to dissociate ourselves unequivocally from those who preach hatred and trample on goodwill instead of building bridges to bring Malaysians together.
It is encouraging to hear top leaders from Umno openly saying “no” to Perkasa on the eve of Hari Raya. It is the strongest ever statement from Umno leaders in distancing themselves from the group that has caused much concern among Malaysians.
Malaysia was built on the politics of moderation and accommodation. It has kept the nation glued even during times that we seem so flawed.
But we have managed race relations reasonably well and Malaysians live amicably together, taking better care of this themselves than politicians and the self-appointed champions of our races.
Similarly, it is good to hear the majority of Christians saying that they would not condone Quran-burning pastors and churches.
And certainly, for the first time ever, media organisations are asking themselves whether religious extremists deserve space and air time in their newspapers, online portals and television. Most of us would agree – don’t encourage them.
Rev. Terry Jones at the Dove World Outreach Center in Gainesville, FlaPhoto: AP
“He’s a jerk for putting his country through this,” Mr Gergen said on television as news broke that the book-burning had been cancelled.
There will have been many agreeing in the corridors of power. The administration watched dismayed as a nobody from a tiny church in Florida threatened to further endanger the lives of US troops and indeed Americans everywhere.
In the flames of a few burning books, the pastor could have extinguished what little progress President Barack Obama had made in building bridges with the Muslim world. Though the sigh of relief in Washington at the pastor’s climb-down was almost audible, he has already caused enough damage to keep American forces and embassies on heightened alert for some time.
To enemies of the United States, it was a gift. In the age of the internet, the fact that it was a gift provided by a pastor who cannot pay his mortgage and had a congregation of only a few dozen was irrelevant. It was a controversy that could only happen in United States. There are few, if any, countries in the world with constitutional protections that allow someone to burn holy books, or the American flag for that matter.
There are few if any countries with sufficient ease of assembly to allow thousands of fire-breathing pastors to preach across the nation. Mr Jones endangered the lives of his countrymen by exploiting the freedoms they are striving to preserve on the battlefield.
It must be puzzling for the people of Iraq and Afghanistan. Perhaps in the bazaars of Kabul and Kandahar his actions may start a debate on the limits of free speech. We can only hope.
I WISH to commend Datuk Seri Wong Chun Wai and The Star for the enlightening article, “ Why bother with bigots?” (Sunday Star, Sept 12) which argues that rabble rousers do not deserve media coverage.
True Malaysians and indeed all right thinking people all over the world will support a new global mindset that will discourage the mass media from highlighting radical and inflammatory views of bigots such as non-entities like Pastor Terry Jones.
Indeed, our mass media should not put our own racists and religious bigots on a soap box. They should not be seen to glorify bigots. The mass media should instead condemn and the public should castigate them for posing serious threats to national security and national unity.
Such people are dangerous and governments all over the world should not condone their extremist views by remaining silent and not taking punitive action to protect the rights of the majority of the people.
Fortunately for Malaysia, our Government’s main political party Umno has courageously, although somewhat belatedly, disassociated itself from a disruptive rightist group in our country. Similarly, it is hoped that the mass media will adopt or include in a code of ethics, a new principle of disdain and non coverage, in regard to individuals and groups that preach racism and religious bigotry.
And, Malaysians should similarly isolate these extremists who spread hatred and disunity by boycotting the news media that sensationalise these extremist views that can destroy our well-being and national unity, security and stability.
The Christian Church in Malaysia has taken an inspiring lead in condemning the likes of ugly American Terry Jones. It is hoped that more religious and civic groups will unite in isolating this callous behaviour of extremists even at home.
It is hoped that all true Malaysians will reject these extremists and identify them as ugly Malaysians, who must be regarded as enemies of and detrimental to, a united 1Malaysia. And only then can Malaysia prosper and progress to benefit all its citizens.
TAN SRI RAMON NAVARATNAM, Chairman, Asli Centre of Public Policy Studies.
WASHINGTON (Reuters) - Nine years after the September 11 attacks, the United States faces a growing threat from home-grown insurgents and an "Americanization" of al Qaeda leadership, according to a report released on Friday.
Former heads of the 9/11 Commission that studied the 2001 attacks on New York and Washington presented the 43-page study, describing it as a wake-up call about the radicalization of Muslims in the United States and the changing strategy of al Qaeda and its allies.
"The threat that the U.S. is facing is different than it was nine years ago," said the report, released by the Washington-based Bipartisan Policy Center.
"The U.S. is arguably now little different from Europe in terms of having a domestic terrorist problem involving immigrant and indigenous Muslims as well as converts to Islam."
The report comes at a sensitive time for the United States.
President Barack Obama made a plea for religious tolerance on Friday as passions simmered over a Florida Christian preacher's threat to burn copies of the Koran, Islam's holy book, and plans to build an Islamic cultural center and mosque near the so-called Ground Zero site in New York City.
U.S. officials warn such cases could lead to a recruiting bonanza for al Qaeda.
The report said al Qaeda and its affiliates in Pakistan, Somalia and Yemen had minimally established an "embryonic" recruitment infrastructure in the United States.
It pointed to convictions last year of at least 43 American citizens or residents aligned with militant ideology, and high-profile cases of recruits who went abroad for training.
"In the past year alone the United States has seen affluent suburban Americans and the progeny of hard-working immigrants gravitate to terrorism," the report said. "There seems no longer any clear profile of a terrorist."
Americans were also increasingly forming part of the leadership of al Qaeda and its allies. It cited the cases of: * U.S.-born Muslim cleric Anwar al-Awlaki, who is now one of the top figures in al Qaeda in the Arabian Peninsula. He is linked to the failed attempt to blow up a passenger plane over Detroit on Christmas Day 2009 as well as a deadly shooting spree at Fort Hood military base in Texas a month earlier.
* Adnan al-Shukrijumah, a Saudi-born operative who grew up in Brooklyn and Florida, who is considered to be a senior leader of al Qaeda's external operations.
* Chicagoan David Headley, who played a role in scoping out targets for the 2008 Mumbai attacks on behalf of Pakistan-based Lashkar-e-Taiba.
"There is little precedent for the high-level operational roles that Americans are currently playing in al Qaeda and affiliated groups," the report said.
SMALLER SCALE ATTACKS
Much of the report highlights fears that U.S. intelligence officials have been flagging for years, including the rising prominence of al-Awlaki and other American recruits.
The Obama administration has authorized operations to kill or capture Awlaki and a secret CIA memo, leaked to the media last month, spoke extensively about how U.S. citizens were of great value to terrorist groups.
American intelligence officials also have agreed with another key point in the report that sees an increased risk of small-scale attacks on hard-to-protect U.S. targets.
In the wake of the September 11 attacks, which killed nearly 3,000 people, the report said the intelligence community had wrongly believed that al Qaeda was intent on "matching or besting the loss of life and destruction" it had caused.
It is now clear that militants see operational value in conducting more frequent and less sophisticated attacks, which are harder to detect and require less high level coordination.
"American officials and the wider public should realize that, by the law of averages, al Qaeda or an affiliate will succeed in getting some kind of attack through in the next years," said the report.
Even the Pakistani-born American Faisal Shahzad's failed attempt to set off a car bomb in Times Square in May was extremely effective from a propaganda standpoint, given the enormous amount of media coverage it received.
"The best response (to an attack) would be to demonstrate that we as a society are resilient and are not being intimidated by such actions," the report said.
Yes. We will show them that we will not be intimidated. We will continue immigrating muslims by the thousands, and we will leave them alone until they blow us up, and then we will get them. After that, we will wait until they blow us up again ad infinitum. See how unintimidated we are? We will even smile while our heads are being sawn off. It is the American Way!
Don’t they understand that the US thrives on violence and war, each attack emboldens the warhawks. We make more bombs kill more people, create more terrorists. The only way to stop our war machine is to quit fueling it.
The study said many academies were "performing impressively"
The rapid expansion of England's academies programme risks being poor value for money, the spending watchdog has warned.
With one in four existing academies needing extra financial help, the National Audit Office said much tighter monitoring was needed.
It also found poorer pupils did less well in academies than in regular state schools. The government said academies performed well and that it was reducing risks.
The NAO said these state-funded, privately-run schools begun in disadvantaged areas by Labour had performed impressively in their efforts on improving attainment.
But since coming to power, the coalition government has encouraged schools rated outstanding by Ofsted to apply for academy status, saying they would be fast-tracked.
'Bailouts'
Many have been tempted to express an interest by the promise of more money and greater freedoms.
Academies operate outside of local authority control, often with business-based sponsors, and have greater financial freedom than regular state schools, which are audited by their local council partners.
The NAO report found academies were not only spending significantly more per head of pupil, but that one in four were likely to require extra financial support.
And the agency that now monitors them, the Young People's Learning Agency, is expecting to pay £8.5m to bail 10 of them out of financial difficulties.
Meanwhile, one in 20 of open academies are forecasting deficits. The NAO also pointed out that in 2007-8 and 2008-9, there were half as many senior academy staff on salaries of more than £80,000.
The department had already recovered £4.1m in overpayments from academies because of an over-estimation of pupil numbers.
The NAO said: "The expansion of the programme increases the scale of risks to value for money - particularly in the areas of financial stability, governance and management capacity.
"With greater numbers of academies opening in recent years, the department's capacity to administer and monitor the programme has been stretched particularly, as funding is administered on an individual basis." It also found potential conflicts of interests over academy sponsors providing services to the school they sponsor.
A quarter of academies surveyed said their sponsor was providing paid services. The study warned that academies' performance to date was not an "accurate predictor" of how the model would perform when generalised over a wider range of schools.
Amyas Morse, head of the National Audit Office, said: "Existing academies have been primarily about school improvement in deprived areas, while new academies will often be operating in very different educational and social settings."
Real power
There was a need to re-state the aims of the new-style academies programme so that its performance could be measured against them.
The report also found that children from disadvantaged homes were doing slightly less well in academies than those in regular state schools.
The report suggested it was pupils from more advantaged backgrounds who were driving the fast-improving results at academies.
But Education Secretary Michael Gove said the report underlined the fact that academies programme was working well.
"We have already taken prompt action on the NAO recommendations, as we strive to strengthen the programme even further.
"The academies programme is helping children from all backgrounds to get a better education, that is why we are allowing more schools to become academies, and giving real power and autonomy back to schools and teachers."
Outstanding sponsorship
Chair of the Public Accounts Committee Margaret Hodge said: "Where schools are given more freedom, we need to know they are using it well.
"We will want to be assured that, as the programme is expanded, the controls to provide sound financial management and good governance are firmly in place.
"The department faces major challenges as it takes over from local government the responsibility for directly funding many more schools.
"We will want to know that it has the capacity to meet these challenges. She added that it was is telling that some of the substantial sums of money originally promised by academy sponsors were yet to be collected.
Shadow education secretary Ed Balls said the new government's programme was a "complete distortion" of Labour's successful policy to turn around struggling schools.
"Michael Gove's rush to turn schools with more advantaged intakes and which are already thriving into academies, rather than under-performing schools in more deprived areas, is not only a perversion of a successful policy but risks becoming an expensive failure."
“Start Quote
Where schools are given more freedom, we need to know they are using it well”
End QuoteMargaret HodgeChair of public accounts committee
The NAO said: "The expansion of the programme increases the scale of risks to value for money - particularly in the areas of financial stability, governance and management capacity.
"With greater numbers of academies opening in recent years, the department's capacity to administer and monitor the programme has been stretched particularly, as funding is administered on an individual basis." It also found potential conflicts of interests over academy sponsors providing services to the school they sponsor.
A quarter of academies surveyed said their sponsor was providing paid services. The study warned that academies' performance to date was not an "accurate predictor" of how the model would perform when generalised over a wider range of schools.
Amyas Morse, head of the National Audit Office, said: "Existing academies have been primarily about school improvement in deprived areas, while new academies will often be operating in very different educational and social settings."
Real power There was a need to re-state the aims of the new-style academies programme so that its performance could be measured against them.
The report also found that children from disadvantaged homes were doing slightly less well in academies than those in regular state schools.
The report suggested it was pupils from more advantaged backgrounds who were driving the fast-improving results at academies.
But Education Secretary Michael Gove said the report underlined the fact that academies programme was working well.
"We have already taken prompt action on the NAO recommendations, as we strive to strengthen the programme even further.
"The academies programme is helping children from all backgrounds to get a better education, that is why we are allowing more schools to become academies, and giving real power and autonomy back to schools and teachers."
Outstanding sponsorship Chair of the Public Accounts Committee Margaret Hodge said: "Where schools are given more freedom, we need to know they are using it well.
"We will want to be assured that, as the programme is expanded, the controls to provide sound financial management and good governance are firmly in place.
"The department faces major challenges as it takes over from local government the responsibility for directly funding many more schools.
"We will want to know that it has the capacity to meet these challenges. She added that it was is telling that some of the substantial sums of money originally promised by academy sponsors were yet to be collected.
Shadow education secretary Ed Balls said the new government's programme was a "complete distortion" of Labour's successful policy to turn around struggling schools.
"Michael Gove's rush to turn schools with more advantaged intakes and which are already thriving into academies, rather than under-performing schools in more deprived areas, is not only a perversion of a successful policy but risks becoming an expensive failure."
Commentary: To know China, see the world through its eyes
By Andrew Leckey
PHOENIX, Ariz. (MarketWatch) -- Will the heavy national debt load of the U.S. turn it into another Greece? Could the U.S. cope if it was surpassed by China as the world's largest economy? Is the U.S. increasingly becoming a protectionist country?
Those sound like loaded questions, yet they're fair game for an American interviewed on Chinese television, as I have been more than a dozen times in the past couple of years. You are responding on Chinese soil, after all, where the U.S. is a subject of intense analysis and criticism -- just as China is in the U.S.
Investors are bulllish about Brazil elections
Both candidates in Brazil's presidential election in October are regarded as safe bets for investors, according to Joe Harper of Explorador Capital, who says the markets are expecting continuity in the change in leadership. Claudia Assis reports.
Topics such as the value of the yuan and trade relations ignite intense feelings because economic growth, investment potential and national pride are at stake. Such issues are more politically demanding than when a question is asked about something less China-U.S.-centric, such as Russia's economy or BP's management.
It seems strange to label as emerging a nation with so many centuries of dynasties behind it, but global economic power is relatively new in this nation where ancient structures coexist with skyscrapers. As China chooses its own course, developed nations are suspected of conspiring to hold it back, whether through organizations such as the G20 or the policies of individual nations.
Volatility of Chinese markets is sure to continue, impacting the world just as it is affected by other markets. China's hot economy and real estate market have likely come too far, too fast, and cycles are unavoidable. Nonetheless, the transition of China from a low-cost assembler of exports to the West to a major consumer of products and services and a seller of products to the rising middle class throughout Asia is ahead.
This likely will depend less on developed markets and more on emerging economies that need consumer staples, information technology and automobiles. There will be dramatic growth, despite the ongoing ideological, trade, currency, political and environmental differences between China and the U.S.
What China wants
Whether it involves investing, business dealings or debate, dealing with China requires mutual respect: • Many Chinese take personally the criticism of government policy. While we are often loudly critical of our government, they consider China one entity that includes them. Outsiders criticizing it are, in effect, disrespecting the Chinese people and heritage. Harmony is important. Stick to facts when discussing issues of conflict and make sure your points stand on their own merit, which is not a bad idea no matter what the country.
• They know more about us than we know about them. Our clothes and technology were made in China, but our information is limited to news reports. They see our movies, follow the NBA, dine at KFC and Starbucks, buy Buicks and display posters of American actors and athletes in stores. They celebrate Christmas big-time, though not the religious part. Yet that's hardly a clear picture of America or Americans.
• Negative quotes about China from U.S. politicians are taken seriously by the Chinese, much as U.S. sports coaches tack negative quotes from rivals on locker room bulletin boards. The fact that many in Congress intentionally make statements to appeal to constituents is not always evident to the Chinese.
• When significant issues are brought up, Chinese of all ages point out that we should realize they've come a long way in a short period of time, even if where they're headed isn't totally mapped out. Bridging the gap between wealthiest and poorest will be one of the biggest economic tasks.
• Young Chinese are under pressure from country and parents to succeed, far more than U.S. young people. Chinese parents who grew up under a different economic system tell children to study and work harder. The one-child rule put added pressure on the young to succeed. Shopping malls throughout China are crowded primarily with those under age 30, indication of the younger generation's financial empowerment.
• And yes, the Chinese generally do prefer to deal with people they've gotten to know well. This isn't such a rare concept in any country, but friendships definitely build bonds that turn to business and shared information in China. Drive-by meetings won't accomplish much, while repeat visits are valued.
Americans these days study China much as they studied Japan 20 years ago -- with fear and a sense of urgency that we are about to be overtaken economically. I leave you with one last non-economic question posed to me by the Chinese host on a special talk show honoring legendary television news anchor Walter Cronkite:
Why was there no journalist of Walter Cronkite's stature in the U.S. who was able to draw to an end the war in Iraq as Cronkite did in Vietnam?
Sounds like a loaded question. But for an American interviewed in China, turnabout is fair play. After all, I always have my own set of loaded questions to ask the Chinese.
Andrew Leckey is president of the Donald W. Reynolds National Center for Business Journalism in Phoenix, and has been a frequent guest on China Central Television (CCTV) interview programs in Beijing.
