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Entrepreneurship in China: Stimulus for Discussion Jim Cook Cook-Hauptman Associates, Inc. Sponsored by : The Kauffman FoundationThe Kauffman Foundation.

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Presentation on theme: "Entrepreneurship in China: Stimulus for Discussion Jim Cook Cook-Hauptman Associates, Inc. Sponsored by : The Kauffman FoundationThe Kauffman Foundation."— Presentation transcript:

1 Entrepreneurship in China: Stimulus for Discussion Jim Cook Cook-Hauptman Associates, Inc. Sponsored by : The Kauffman FoundationThe Kauffman Foundation

2 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 2 of 14 November 19, 2008 Can America Do Better?

3 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 3 of 14 November 19, 2008 Contents  Qualifying for the China Challenge  Chinese Society/Culture Basics  China’s “Chinese Characteristics”  Meet the People, Generation by Generation  Opportunity Segmentation of China  Sourcing/Selling Opportunity Templates  “On the Ground Nitty-Gritty” Tips  OK, let’s open up China (to discussion)!

4 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 4 of 14 November 19, 2008 Yes, America can do Better!  How’s our chances (as Americans) in China?  Decision must come from deep inside you, not infatuation  Get a native partner who has bonded to you and your goals  Understand, respect, and exploit the cultural differences  Be ready to substitute “trust” for contracts and recourse  Use “Chinese Characteristics” to build competitive advantage  Flow with the government policies and serve ignored markets  Be prepared for setbacks, delays, and disappointments  Getting Started  Sourcing or selling, you must understand your market  Acquaint yourself with the legal/administrative landscape  Raise value adding investment capital, not just cash

5 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 5 of 14 November 19, 2008 Chinese Society/Culture Basics  Every Chinese difference has an implicit advantage potential  It’s an empirical, not theoretical, society (toss aside tedious projections)  Politics trumps economics, so read policy signals and shifts  Social instability will not be tolerated at any price (e.g., 1989)  Business is relationship activated, not contract activated  Communication is not what it seems, it’s richer than that  If you’re not an “insider,” what you receive is show  Image is important; Face is crucial; Ignoring this is fatal  Generational differences are marked with opportunity indicators  Your intellectual property (IP) is only as safe as you make it  The regulatory environment has its own “Chinese Characteristics”

6 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 6 of 14 November 19, 2008 “Chinese Characteristics”  Central policies pick favorites; currently it’s the Emerging West (and “green”)  Land, buildings, capital, accommodation, and taxes are cheap for policy favorites  State Owned Enterprises (SOEs) are a 1/3 of GDP (and all have a “Party Secretary”)  Infrastructure (e.g., power, plastics, steel) is world class and usually economical  Technological universities are a hub of connections and can be used as such  Today, there’s a surplus of college graduates; China isn’t yet a Symbol Economy  China doubled Japan’s economic miracle and could land a family on Mars first  Returning Chinese (who have succeeded in the West) are welcome (“turtles”)  Chinese institutions and SOEs don’t find, direct, nor motivate talent well  Productivity figures are sometimes shockingly low, often despite very hard workers  Trust through “guanxi” does the work of contracts, credibility, and character  Chinese save over 30% of their gross salary and have large reserves as a result

7 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 7 of 14 November 19, 2008 Generational Demographics DOBAgeDefining EventConsequence+ Characteristics- Characteristic 1948- 60 50 Cultural Revolution No/low university education Ethical, pragmaticUnsophisticated 1959- 49 39 Open Door Policy Experienced struggle Tough, hard working Not international 1970- 38 28 Spectacular Rise of China Expects automatic success Educated, bi- lingual, global Cocky 1981- 27 17 One Child Policy Spoiled, focus of family pressure Career focused, globally astute Weak social skills 1992- 2002 16 6 2008 OlympicsElectronics/Media/ Material addicted Wide open to the whole world Overwhelmed (by expectations)

8 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 8 of 14 November 19, 2008 Opportunity Benefits Summary  Gov’t favorite #1: Emerging West (Sichuan, ChongQing, NE, …)  Gov’t favorite #2: “Green” power, conservation, substitution  Ignored markets: 2 nd tier of over 100 cities > 1 million people  Sell to the SOE’s (e.g., training – ISO, Deming, Finance, Law …)  Manage “trust” for speed and risk-capital benefits  Use “trust” instead of plans, projections, and contracts  Make universities a connections hub (copy Obama)  Tap the frustrated unemployed, talented, college graduates  Convert the enormous savings into something very secure  Alleviate the pressures or shortcomings of the Generations  Sell future success of the kids, each has 6 parents to buy/pay  Sell productivity enhancements that increase employment

9 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 9 of 14 November 19, 2008 China - Five Distinct Opportunity Segments  Affluent Coastal regions: e.g., JiangSu, FuJian, GuangDong, …  Second Tier Cities: e.g., LuoYang, WeiFeng, ZiGong, …  Emerging “Western” provinces: e.g., SiChuan, ChongQing, JiLin, HLJ, …  Undeveloped provinces: e.g., GuiZhou, YuNan, GanSu, …

10 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 10 of 14 November 19, 2008 China Sourcing Template

11 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 11 of 14 November 19, 2008 China Selling Template

12 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 12 of 14 November 19, 2008 Sourcing/Selling Summary  Emerging West for skill intensive production and selling infrastructure and second wave of upscaling (repeat of Affluent coastals of the past twenty years)  2 nd Tier Cities for labor intensive sourcing and selling American product access/franchises (below the Western radar)  Gov’t favors: Emerging West (central gov’t), green technology (central gov’t), and centers of excellence (local) [Note: this “West” includes North East and Central China, too] You can count on:  High receptivity to locating in government industrial/technology parks  Every consumer having a cell phone, credit card, and access to the internet  Typically, college graduates having had over 8 years of English schooling

13 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 13 of 14 November 19, 2008 “On the Ground Nitty-Gritty” Tips  Commerce is conducted by “trust”; 30% down/70% on delivery T/T  Checks never, I’ve only see Wire Transfers, Credit cards, and Cash used  Employment law requires insurance (Retirement, Unemployment, Hospital, Maternity, Work injury, and Union dues) costing employers 40% and employees 10%  Employers must pay severance of a month’s salary for each year served  Customs is a mixed bag with some egregious gouging and delaying  Contracts should be rare, bi-lingual, and specifying remedy by arbitration  Corporate Structure Options: Cooperative Joint Venture (Chinese Partner + $1,000 fees), Wholly Foreign-Owned Enterprise (minimum of $15,000 + $5,000 fees)  Registration can require proof of suitability, resume, business summary, references/agent, by-laws, directors, translated into Chinese (see: http://www.jljgroup.com/index.php?id=75&lang=en#section2 http://www.jljgroup.com/index.php?id=75&lang=en#section2  IP protection suggestions: log access to databases, withhold key process parameters, design “black boxes” in, disburse suppliers and key people, imbed logo holograms and the like into products, and assemble offshore

14 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 14 of 14 November 19, 2008 Finally China’s Open (for discussion)!  Questions and Comments  Thank you, again. On the Internet (roughly 460 KB) at: http://cha4mot.com/entrepreneurship-in-china.ppt

15 Entrepreneurship in the International Community NU School of Technological Entrepreneurship Slide 15 of 14 November 19, 2008 Jim Cook’s Journeys  President, CEO of NASDAQ Listed Company (Software Tools) and on the board of two publicly held and numerous private companies, all high technology  President, CEO of Exxon-Mobil financed venture (Electronics)  President, CEO of Globatech, Inc. in Beijing (Japanese financial portal)  Vice President (Technology) Computervision, Fortune 500 Company (CAD/CAM)  Taught MBA courses at UCSD (Economics of Mfg.), Worcester Polytechnic Institute (Advanced Mfg.), and U. of Melbourne (Entrepreneuring)  Lectured on management at: MIT, NU, People’s University, and Chinese Academy of Sciences; BS math RPI, graduate math MIT, on CCTV news with Jiang ZeMin  Consulted on management to: DuPont, Motorola, Bell Labs, D & B, …  Interviewed 6 times on FNN (now, CNBC Financial) about High Tech investing.


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