Successfully Setting Up Factories in China -A Systematic Approach

Executive Summary

"What is the best process for setting up a factory in China ?" This is one of the most frequently asked questions we receive from the executives of Western multinational corporations (MNC's). Establishing a modern manufacturing facility is not easy anywhere, let alone China, a country with so many economic fundamentals still so drastically different from those in the home countries of Western MNC's.

Obviously, we do not have a cookie-cutter answer. But we do believe that developing and adopting a systematic approach can help a Western MNC to significantly reduce the chance of making costly errors and "detours" during the process of launching a factory in China .

This is a 4-step process:

1. Organize your company's discrete ideas and activities of the China factory project into three separate processes :
   • The process of making a business case for setting up manufacturing facilities in China
   • The process of understanding and completing the business approval procedures in China
   • The process of setting up the physical factory/factories and initiating operations in China
     
2. Identify, describe, and sequence all the key steps within each of the three processes.
   
3. Examine key activities from all three processes and merge them into an overall factory development time table. This is arguably the most important step. This is where the MNC needs to put everything back together.
   
4. Assign the responsibility of each key activity to the appropriate managers and departments of the MNC. This step turns the preliminary time table developed in step 3 into a fully functional China factory development roadmap.

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Locate the Knowledge Gap and Fill It with The Right Training Programs

A China based senior partner of an international management consulting firm once expressed his bewilderment as to why a Chinese consultant hired from a top US MBA program seemed unable to manage projects during the young man's short tenure with the firm. "He was very motivated and did wonderful modeling work. But for some reason, he was unable to manage projects, a task we expect all our post-MBA consultants to become completely comfortable with. He was very good when a manager gave him clear instructions." lamented the consulting veteran.

A vice president of an international telecom equipment manufacturer described the meetings with a senior Chinese engineer from a joint venture as "never easy". "The performance of his team was OK. But whenever he met with his international colleagues, he always seemed to communicate his thoughts at a slightly different frequency. His English was adequate. But we sometimes wondered whether he truly understood us."

"The thing I hate the most is to write progress reports for my American boss," complained a middle-aged Chinese manager working at a joint venture based in Shanghai. "Writing in English is always tough, but my biggest problem is that I just don't know how to make my report, which are mostly a bunch of numbers, punchy and more useful to tee up my boss's report for the entire Shanghai division. But this is what my boss has repeatedly asked me to do. Maybe, I do not truly understand the meaning of 'punchy' and' tee up'. But I did look up both words in the dictionary. So I don't know what to do."

There is no doubt that many Chinese managers working in international companies need to further improve their management skills. To achieve this goal, international companies have tried just about everything, from sponsoring a two-year full-time MBA program to assigning Chinese managers to temporary positions outside China. But so far most of these efforts have yielded, at best, mixed results.

So what is the most effective way to improve the effectiveness of Chinese managers? To answer this question, we believe that, one needs to first break down the managing process and then assesses a Chinese manager's current capabilities to carry out each main step of the managing process.

Experts in management science have long held the belief that the managing process involves at least three steps. Step One is about mission, vision, and innovation. Step Two involves problem-solving, i.e. critical thinking and quantitative analyses. Step Three is about implementing; thus, this step demands a manager's capability to act, to change, and to get things done. Each of the three steps is indispensable to the overall success of managing.

China has a long tradition in entrepreneurship and mercantilism that pre-dated any of the major political systems the country has seen in its recent history. Unlike many other developing countries (but similar to many former East Bloc countries), China has long enjoyed a robust educational system. Additionally, Western-styled MBA programs have mushroomed in the country over recent years. As a result, it is not difficult to find Chinese business managers who are motivated, entrepreneurial, and analytical. But what these managers often lack are the knowledge and skills needed to effectively implement complex company tasks in a modern corporate environment. In the West, implementation or execution related knowledge and skills are often passed from one generation of managers to another. But China's market-oriented economy has simply not been around long enough to produce a generation of seasoned executives who know how to effectively "get things done" in an international company.

It is clear to us that the biggest knowledge deficiency many Chinese managers are forced to wrestle with during their day-to-day activities is in the area of execution and implementation. We do, however, feel relatively optimistic as to how fast this knowledge gap can be filled once international employers colledctively recognize the issue and start developing training programs specifically aimed at filling the gap. It was just about 15 years ago when very few people in China understood basic business concepts such as competition and advertising. But now some MBA programs in China have been ranked at top positions in Asia. If a Chinese manager can be motivated and intelligent enough to graduate from a rigorous MBA program, why can't she learn the effective approach to manage a project? Naturally, a Chinese college or an American-styled MBA program (in China or esle where) would not typically teach the skills on how to manage real-world business projects. But this certainly does not mean that this kind of skills can not be taught. We believe it is high time to start addressing a serious problem with a fresh approach!.