Last month, I traveled with 41 students from Kellogg’s MS in Management Studies Program to Greater China, which is constitutionally governed as “one country, two systems”. Our 10-day Global Immersion in Management (GIM) trip began in Hong Kong, passed through Shenzhen and ended in Beijing.
While in Hong Kong, we connected with international students over lunch at Hong Kong University of Science and Technology and attended an animated lecture by Professor David Zweig, the university’s director of the Center on China’s Transnational Relations. Professor Zweig’s lecture focused on Hong Kong-Chinese relations over the last decade, and it was interesting to learn about Hong Kong’s support of mainland China, which has ebbed and flowed over the years, peaking in 2008 during the Beijing Olympics. This lecture perfectly set the stage for our visit to Next Digital Ltd., a leading Chinese language media group.
CEO Cassian Cheung ’78 warmly welcomed our class to the impressive Next Digital offices and printing presses, both of which were housed in a recently renovated building. Next Digital’s presentation included speeches by the chief editor, CFO and the heads of marketing and operations. They gave concrete examples of how Chinese media censorship affects their business, even though they are located in Hong Kong. In addition to being sued by local businessmen, tycoons and politicians who are scrutinized in its publications, the company has seen its delivery trucks torched in an attempt to stop sensitive news from reaching the masses. (One such example occurred in 2014, after Next Digital used drones to capture footage of the Umbrella Revolution.)
From the business perspective, it was interesting that many companies, including American companies, are reluctant to buy ad space in Next Digital’s Apple Daily publication in order to avoid potential friction with mainland China. As we learned, media firms must be willing to play by the rules of the PRC if they hope to build a relationship with the country and break into the biggest consumer market in the world.
Our visit to Huawei Technologies, a Chinese multinational networking and telecommunications company, was impressive because of the company’s sheer size and the complexity of its technology. Many students would argue that Huawei was the highlight of our trip, as we had the unique opportunity to tour its cell phone manufacturing plant. As we shuffled along in antistatic coats, hats and slippers, we observed a large automated assembly line, which produced 2,000 phones per 8-hour shift. Impressively, this specific plant had not produced a defective phone in over 900 days.
Next, we visited Tencent, China’s largest and most-used Internet service portal, which I believe could become Google’s greatest rival. This $175 billion Internet company has built a platform through which they can virtually meet every individual’s needs.
This year’s GIM class strategy project will focus on analyzing Tencent’s competitive landscape, the sources of competitive advantage and the ability of Tencent’s applications to create and capture value. As explained by a member of the internal strategy consulting group, Tencent is aiming for complete vertical integration: take a selfie and scan a picture of your passport to set up a bank account through WeBank, pay for your new dress with WePay, let your friends know about it on Qzone and, while you’re at it, book a trip and pay your utilities using one of Tencent’s numerous apps.
In terms of the cultural portion of our GIM trip, we made visits to the Great Wall of China and the Forbidden City, and even ate a Peking duck dinner. We also had the opportunity to visit the six-story Silk Street Market, which boasted a large assortment of knockoff products and revealed the complex issues that foreign brands face because of outsourcing and China’s manufacturing boom.
We concluded our trip with a visit to China’s Starbucks Corporation, where we learned about the challenges of international expansion. Starbucks was able to adapt its strategy of becoming the “third place” between home and work to the ancient teahouse culture. It also capitalized on the importance that Chinese consumers place on brand names as status symbols. Starbucks’s adapted menu now includes a greater tea selection and snacks such as moon cakes. The stores are also tactically decorated with regional art works.
One of the most noteworthy aspects of our trip was to see and experience how government policies impact daily life. While in mainland China, it was interesting to see consultants from McKinsey-Beijing gracefully sidestep questions regarding government manipulation of stock markets and watch tour leaders at Huawei ignore questions about minimum wage. Thanks to these unique experiences, along with in-class guest lectures from Chinese economy experts, my classmates and I are now better prepared to work with Chinese customers and companies in the future.
Kateryna Gudziak ’16 is a student in Kellogg’s MSMS Program. She completed undergraduate degrees in Spanish and in Fine Art at the University of Wisconsin in Madison.
Photo credit: Nick Mar