Strategy Session

We’re all familiar with the business adage, “think global, but act local.” Now it seems that if multinational companies want to succeed in China, they need to turn that saying upside down.

The MIT Sloan Management Review published an article today that says although multinational companies need to master the art of local operation, their behavior must match their global standards, as expected by the Chinese.

Authors Seung Ho Park and Wilfried R. Vanhonacker (“The Challenge for Multinational Corporations in China: Think Local, Act Global”) take the reader through a historical perspective of how the view of multinational companies (MNCs) has changed during the past four decades, from the love fest of the 70s and 80s of corporate tax rates half of those imposed on local companies to 2001, when China joined the World Trade Organization. The authors remind that the Chinese government and consumers have changed their perceptions of MNCs drastically, and their projects are highly scrutinized for their fit with national interests. The Chinese consumers’ buying habits have also changed, and many now don’t see the difference in buying something from an MNC compared to a local company. So their advice to companies is to "think local," and “fit business models and approaches to the local reality with respect for the local culture and norms, with a sensitivity to the local political context and with appreciation for the roles that the Chinese government expects MNCs to play.” But they also need to act global. Want to know what the eight most common behavioral mistakes companies make in China? The authors give them along with examples.

Another interesting article on this topic can be found on Forbes.com. Shaun Rein, founder and managing director of the China Market Research Group, a market research firm headquartered in Shanghai, wrote a commentary on “How multinationals err in China.” He writes that the “companies that implement the right HR strategies and focus on three key areas will be able to attract and keep the right executives needed to turn their China operations into humming profit centers.”

Can this trend apply to any company doing business in China? Absolutely. And in case you missed it, Electronic Business ran a series on China recently, which included an article on rules to live by when deploying in China to how to select a local intermediary. David Dan, president and founder of D Square Transformation Consulting, has also written several articles for us on doing business in China, including “How to develop, manage, and lead a talent team in China.”

If you have some advice or an experience you’d like to share concerning China, please help us start a dialogue.