Doing business in China relies on more than an optimistic message in a fortune cookie. A few weeks back I was talking to the CEO of a British company which has had a very successful operation in China for several years, but which recently almost ran into serious trouble. The problem stemmed from the appointment of a new local manager, who, despite ticking all the boxes in terms of experience and capabilities, rapidly ran the business into the ground. My contact and his fellow directors flew back and forth between China and the UK in an effort to turn things around, but could not get a clear understanding of what was going wrong. In the end a Chinese friend took the CEO to one side and explained the problem – the manager had a brother. In the land of the ‘one child’ policy, the father had been a senior government official who had used his connections to get round the system. The resentment this caused led to many staff covertly withdrawing their support and co-operation resulting in commercial chaos. The CEO had no choice but to replace the individual and within a few months the business was back on track.
Talk to any Western business executive with experienced of working in China and the chances are that they’ll come up with their own story about how difficult it can be to operate there. China is different. But then so are all the other rapidly growing markets that Western companies are so keen to trade with. And if you don’t have an appreciation of the cultural, political, regulatory and geographical factors that affect the business of doing business in them you are gearing up for a big, fat failure.
The business school community has been quick to acknowledge the importance of grasping the crucial difference. MBA programs are now replete with case studies based on experiences in developing markets. In the past 10 years, research at the six international research centers of the Harvard Business School have grown ten-fold, and the new dean, Indian-born Nitin Nohria, intends to increase the number of international research centers in the years to come. And many schools have dramatically increased the national diversity of their student bodies in a bid to foster cultural awareness by a form of classroom osmosis. But is this enough for the modern MBA student, or do you need, as the military puts it, to get out there and get your boots on the ground?
The mighty Harvard seems to think that this isn’t necessary and has taken the stance that there will never be Harvard campuses anywhere else but Boston, Massachusetts and that’s where you’ll learn everything you’ll ever need to know about the commercial arena. But at the risk of questioning one of the world’s foremost business schools, isn’t this a rather old-fashioned view?
A growing number of schools are taking the view that there is no substitute for front-line experience of some of the economies that are really going to count over the next few years. The OneMBA, for example, a global executive MBA program run by a partnership of five schools – CUHK in Hong Kong, EGADE in Mexico, RSM in the Netherlands, UNC Kenan-Flagler in the US and FGV in Brazil – aims to cover perspectives and business practices from all the participating countries. Students also take part in what it describes as ‘global residencies’ on the four continents, which are hosted by local faculty and students to give an insider’s view of the local business environment. As Professor Marina Heck, the program’s associate dean at FGV in Sao Paulo puts it, “There’s a lot of talk about how difficult it is to understand the cultural impact on business in key markets such as China, but there seems to be a perception that western nations, particularly the US, somehow understand Latin America. However, this is a potentially dangerous misconception, and to operate effectively in high performing markets such as Brazil and Mexico calls for as much in-depth understanding as those on the Pacific Rim.”
Whether my friend the British CEO would have found the answer to his particlaular problem on a distant campus in Massachussets rather than in the local environment is open to debate. The immersion in markets that Prof. Heck and her colleagues advocate may be the only way to really understand the context your business seeks to operate in.