Global Smart Phone Revolution China

Agenda Part 1
•
•
•
What are Smart Phones – Converged Devices?
How will Smart phones impact our mobile society?
What are the trends/features expected in future mobile
devices
• What impact has the cell/Smart phone devices market had
on China?
• Conclusion
• Question and Answer session
Presented to: ASU West on 11/12/04 for
International Business Career Day,
Phoenix, Arizona, USA
Karl J. Weaver
Newport Technologies
Web Site: http://home.earthlink.net/~karlweaver/
This Evening’s Agenda
Agenda Part 1
• What are Smart Phones – Converged Devices?
1impact our mobile society?
• How will SmartPart
phones
The
Global
Smart
Phone Revolution
• What
are the
trends/features
expected in future mobile
☯Concept
of converged devices/smart phones
devices
☯Smart• Phone
impact
on cell/Smart
Global Mobile
Society
What impact
has the
phone devices
market had
on China?device trends and features
☯Future mobile
• Conclusion
Part 2
• Question and Answer session
China’s impact on the mobile device revolution
Selling to the Mobile Digital Dragon
☯Mobile Market trends and handset players
☯The Subtle Art of Doing Business with the
Chinese.
Part 3
☯Adopting strategies & tactics for success!
☯Conclusion and Q&A
The mobile device is already changing the
basic way people in the USA and China
communicate. The starting point of mobility
is different in each country. Smart Phones
and converged devices will be demanded
as our global mobile society looks to
integrated tasks, duties and wireless voice
& data communications = The mobile
Internet.
What is a Agenda
wireless Converged
Part 1 Device?
•
•
•
What are Smart Phones – Converged Devices?
How will Smart phones
our
mobile
society?
PDA –impact
Personal
Digital
Assistant
What are the trends/features expected in future mobile
devices
• What impact has the cell/Smart phone devices market had
on China?
• Conclusion
Data messaging device
• Question and Answer session
+
+
Cellular Phone
When is Convergence Successful?
When the functions are more valuable combined than separated
Very often there is a space saving or mobile component
Little or no compromise (usability, size, cost)
Actually makes things simpler, not more complex to do
Converged
Devices are
nothing
new!
Agenda
Part
1
• What are Smart Phones – Converged Devices?
• How will Smart phones impact our mobile society?
Printer/Copier/fax/scanner
• What are the trends/features expected in future mobile devices
• What impact has the cell/Smart phone devices market had on China?
• Conclusion
• Question and Answer session
Swiss Army Knife
TV with VCR + DVD
Why be skeptical about a converged Mobile Device?
☯Many design failures
☯Technology enablers were not appearing
☯Makes for a complex user experience
☯No clear customer need
Mobile device convergence
platform design, features, functions make an exact description of how to
sell each in the channel complex
Cell phone: Small, (typically) Non/Color LCD display, Voice only,
some messaging in text mode, candy bar/flip form factor
Smart phone: Medium-sized Color LCD display, voice and data,
DTMF keypad data entry only, with web surfing and convenient
SMS/MMS messaging functions, typically no touch screen or touch
screen pen, (Symbian, Palm, Microsoft, Linux OS) combines camera,
Bluetooth functionality and Java/Brew middle software applications.
PDA Device, large-size color LCD display, Data and limited voice
functions but capable of surfing web and sending e-mails/SMS
messages (also handles attachments). PDA devices have either full
keypad or touch screen pen for data entry. Can combine camera,
Bluetooth, video and 802.11 (WiFi) features. Uses (Palm, Compaq
&HP, Pocket PC, RIM, others) PDAs are meant to be used with two
hands; cell phone are meant to be used with only one hand
Smart
Smart Phones
Phones combine
combine aa high-resolution
high-resolution screen
screen with
with aa powerful
powerful operating
operating system.
system. Typically,
Typically,
these
these run
run either
either Symbian
Symbian or
or Windows
Windows but
but also
also aa few
few run
run Linux
Linux and
and Palm
Palm operating
operating systems
systems
The need
for smart
Agenda
Part phones
1
• What are Smart Phones – Converged Devices?
Smart Phone Value
• How will Smart phones impact our mobile society?
Personalized ring tones
• What are the trends/features expected in future mobile devices
A key driver to
• What impact has the cell/Smart phone devices
marketmusic
had on China?
Wireless
downloads
convergence
is
• Conclusion
(MP3)
portability
and and
user
• Question
Answer session
•
•
mobility; Here’s what
you need when
mobile:
☯Size (and weight) matter
☯Data integration
address book
e-mailing
surfing the web
☯Power management &
third party peripherals
☯Enhanced usability basics
☯Battery capacity
•Interactive Games
•Streaming video for news/
music/sports in (MPEG4)
•Ease-of-use for rich SMS and
MMS experience
•Interchangeable applications
on the fly wirelessly
• Voice command software
There is no one size-fits-all solution
for users. People will choose the
device they are most comfortable
with, as everyone is different
Convergent Lifestyles influence
Agenda Part
1
convergence
of devices!
•
•
•
•
•
•
What are Smart Phones – Converged Devices?
How will Smart phones impact our mobile society?
Lifestyles are
What are the trends/features
in future mobile devices
LIFE expected
WORK
converging
What impact has the cell/Smart phone devices market had on China?
between work
Conclusion
and play
Question and Answer session
PLAY
because of
mobility
☯People work at home (telecommuting)
SOHO (small office/Home office)
☯People do personal things at work (pay bills)
☯Social impact of convergent life – no boundaries between
work/home – Is it right or wrong? What is the impact?
☯Next generation of mobile society workers are early adopter
of this new lifestyle.
Converged Devices attract youth
(consumer)
markets Part 1
Agenda
•
•
•
What are Smart Phones – Converged
Devices?
Young
Adults between the
ages of society?
11-24 are extremely
How will Smart phones impact our mobile
technology savvy and want
What are the trends/features expected in future mobile
advanced services.
devices
Wireless
carriers
looking
• What impact has the cell/Smart phone
devices
market
hadto
generate interest in
on China?
advanced services will
• Conclusion
continue to focus on youth
market.
• Question and Answer session
The consumer market and
the enterprise markets are
two different animals.
Enterprise Mobility with converged
devices/smart phones
Mobile applications:
Personal Information (PIM)
address book,
contacts list,
e-mail (SMS, MMS)
calendar,
scheduler
Vertical industry applications:
Insurance field,
retail,
distribution,
GPS (location based services),
healthcare
Horizontal applications:
Sales & field force automation,
Enterprise resource planning,
Customer business
Revenues in the business market will be driven
by higher usage, while higher volumes will drive
revenues in the consumer market.”
Mobile Enterprise: 2002 Addressable Market
Real Estate
6%
Utilities
9%
Healthcare
30%
Transportation
15%
Public Sector
18%
Frost & Sullivan, 2002
Healthcare
Financial
FrostServices
& SullivanPublic Sector
Financial Services
22%
Transportation
Utilities
Real Estate
Voice activation and security will be killer Apps for
the mobile business professional!
Newer Designed Smart Phones
Sierra
Sierra Wireless
Wireless
Voq
Voq Professional
Professional
Samsung
Samsung i530
i530
(SGH-i530)
(SGH-i530)
SonyEricsson
P900
Sendo X-Factor
RIM
RIM Blackberry
Blackberry 7100t
7100t
Motorola A920 3G &
MPx-220 Smart Phones
Samsung
Samsung
Motorola
Motorola A840
A840
SCH
a790
SCH a790
World
World Phone
Phone
Global
Phone
Global Phone
First
First two
two phones
phones with
with CDMA
CDMA ++ GSM
GSM
PalmOne Treo 600 (CDMA)
Panasonic
Panasonic
X700
X700
Ch
in
a
Messaging Services to grow rapidly with
new web-enabled handsets
SMS is a proven revenue generator in Asia
and Europe, however, the USA lags behind.
MMS is expected to pick up as content
arrives. User patterns are very different in
each country fueling this growth.
China is expected to
outstrip other world
markets for mobile data
services, just as it has in
other areas.
Typical content?
Icons
Ring tones
Jokes
Photos
SMS E-Mail Service
On-Line Gaming
Dating service
Pornography (in
China)
Camera phones drive revenue and are
outpacing digital camera sales
Camera-Phone Market Set To Double
ARC Group 2003
Not only are 1Megapixel Camera
Phones hitting the
market, Casio has
announced 2Megapixel Camera
Phone resolutions
Camcorder phones will
be strongly associated
with 3G technologies in
2004; all camera
phones in South Korea
will be required to
feature a "shutter
noise", alerting people
that they have just
been photographed
As mobile phones integrate digital
camera features, there will be a
higher usage of picture sending
with Multimedia messaging
services
By the end of 2003, more
than 55 million consumers
worldwide will own cameraphone handsets
Bluetooth Applications
Enables simple & robust wireless connectivity for
personal devices, replaces wires, short distance
usage
Headset/Hands-free
(Automotive Applications)
Personal Computers
Mobile
Expect many
Phones
cell/smart phone
and PDA mobile
devices to
PDAs &
integrate
Handheld
Bluetooth
Devices
functionality into
the design in year
2004
Consumer
(Notebook, Desktop, Tablet PC)
PC Accessories
(PC Dongles, Printers,
Serial Cable, Keyboard,
Mouse)
Modems
Devices
PAN Access Points
Wireless Trends In China
☯ Fastest growing mobile subscriber market in the World.
☯ Explosive usage of wireless/mobile Internet
☯ Increasing competition within 2.5G, 3G technologies
(GSM, CDMA, GPRS, W-CDMA,TD-SCDMA),
☯ Wireless LAN(WiFi/802.11) & Bluetooth for handset
☯ SMS, MMS value-added data services
☯ Emergence of camera/camcorder phones
World’s largest Mobile phone market
500
400
300
China
Brazil
Germany
US
UK
Source:
Source:IEK,
IEK,compiled
compiledby
byDigiTimes,
DigiTimes,June
June2004.
2004.
Number of phone subscribers in China (million users)
Segment
Number of subscribers
Mobile phone
370
Fixed-line phone
350
Little Smart (Xiaolingtong) phone
70
ina
h
C
200
100
0
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
Subscribers (millions)
Japan
Pyramid Group 2002
As China’s wireless infrastructure (and WLAN) build out increases
for 2.5G & 3G so will their need for advanced GSM/GPRS, CDMA
networks and software for mobile & smart phone devices
employing rich handset-based Java/BREW multimedia solutions
and content. Mobile Phone Users now more than Fixed Line Phone Users
China’s Internet Portals are profiting
from e - commerce and SMS messaging
Voice: RMB 0.40 per minute
SMS: RMB 0.10 Per SMS sent
Mobile data tariff comparison
SMS Fuels
growth in non-ad
revenues for
China’s 3 major
portals
Successful Market Adoption of SMS
• 79.3 billion SMS have been sent in 2002
• AGR: 800%.
• 1 Billion SMS sent Every Day during
Chinese New Year from 2/1/03 to 2/7/03
• Features: Fast, low cost, efficient and
entertaining exchange channels between
Real People !
a
n
i
Ch
Greater China integration strategy
“Greater China” is leading in
technology for the mobile device
market.
•Taiwan - source for R&D and
finances.
• China – assembly & distribution
•1/3 of all cell phones assembled in
China
•50% of all cell phones designed in
Taiwan
China’s mobile handset diversity
Chinese
Chinese people
people also
also buy
buy quality
quality
cell
cell phones
phones as
as aa sign
sign of
of status
status ––
even
even ifif they
they never
never use
use most
most of
of the
the
advanced
advanced features!
features!
Many handsets are designed and sold for the China market only; China, as
a market, experiences one of the fastest replacement rates, demand for
advanced features.
Worldwide smartphone production forecast (thousand units)
Year
Smartphones
2003
2004
2005
2006
2007
2008
10,937
27,360
47,795
73,986
90,072
108,800
China’s Handset Manufacturing Hub in
Yangtze River Delta Region
Finest resources for handset
manufacturing environment
•Efficient logistics to sea/air
links
•Rich water supply
•Skilled Univ.-educated
engineering/professional
labor
•Magnet for multinational
handset R&D, Production and
assembly
Nokia=
Nokia= R&D,
R&D, Motorola=production,
Motorola=production,
UTStarcom
UTStarcom =HQ,
=HQ,Toshiba
Toshiba
(Manufac.)
(Manufac.)Foxconn,
Foxconn, BenQ,
BenQ, Arima,
Arima,
Compal,
Eastcom,
Ningbo
Bird,
Compal, Eastcom, Ningbo Bird,
CM=
CM= Flextronics,
Flextronics, Solectron
Solectron
Chinese handset vendors shift focus
to Smart Phones
Microsoft successful
to influence handset
manufacturers in
Taiwan and China to
adopt Smart Phone
OS platform. Nokia
using Symbian OS
Microsoft Smart phone
OS, improved Chinese
language support for
Dopod 515 Smart
Phone priced @ RMB
4,500 or US$543 from
Dopod Communications
Chinese
,
r
e
v
e
w
Ho
rs want
consume
ne form
a flip pho
factor!
Nokia, Sony Ericsson, CEC Telecom, Samsung, Konka and
Ningpo Bird have introduced Smart Phones to Chinese
market, 20 models expected by end of 2003
China’s 3G Migration Landscape
3G Frequencies: 2010 MHz - 2025
MHz in China (WLL 1900 MHz 1920 MHz)
World War 3G – “One
Country; three systems?”
EDGE
GSM
`
WCDMA
GPRS
Nokia, Ericsson, Motorola, Siemens,
China Mobile, Netcom, Unicom
`
CDMA
Qualcomm
China Unicom
1X EVDO
1XRTT
CDMA2000
1X EVDV
China
Chinawill
willnow
now
allocate
allocate
800MHz
800MHzband
band
to
toTD-SCDMA
TD-SCDMA
TD-SCDMA
Datang
Siemens Mobile Philips
Huawei
Samsung
Expected deployment in
year 2005 – allocation of
two blocks, totaling
155Mhz
Chinese New Year of the 3G
The global players add on; the plot
thickens, reality sets in.
What technology will be used for 3G in China?
WCDMA: China Mobile’s first choice
CDMA 2000 1X, 1X EV DO, 1X EV DV:
China Unicom’s first choice
TD-SCDMA: Excellent Technology with strong government
support and domestically owned IP rights. New
operators ?Ch.Mob. or Ch. Uni. ?
•Siemens (with new Huawei alliance) and Datang will lead in
development efforts for TD-SCDMA
What 3G Wireless Offers:
1) Greater data speeds
2) Increased capacity for voice and data
3)The advent of packet data networks versus today’s switched networks.
New Chinese Technology Standards
3rd Generation Mobile Communications
☯3rd Generation Partnership Project 3GPP in March 2001(UMTS)
☯Developed jointly by Siemens/Datang, now many players joining
☯Expected deployment-China in Q1, 2004 by 1-2 carriers
(pending 3G license release)
Enhanced Versatile Disc
(EVD)
☯EVDs regarded as challenge to "Blue Ray," next-generation disc technology,
☯Able to compress high definition (HD) movies to fit on single disc, 110 minutes.
☯China already World’s largest DVD player producer, EVD players avail. Q1 ‘04
☯Courting Hollywood video & movie industry to accept standard for future HD TV.
Chinese WLAN standard GB15629.11-2003
☯WAPI (Wired Authentication and Privacy Infrastructure) Security Protocol
☯Dec. 1st ’03, SAC issued GB15629.11-2003 standard, codes only released to
11 Chinese firms, ruling all WiFi equipment sold in China must apply to use this
standard. The ruling compromises foreign firms wishing to develop competitive
products by making their costs higher and reveals up their equipment IP secrets.
New Powerful 3G Cell Phones
3G NEC e808
DoCoMo’s FOMA 900i series Handsets:
2004 will see an increased
demand for pocket-sized
gadgets which will play video,
and more handset makers will
be joining the video phone
market. Again, the Taiwanese
are designing a large % of these
devices behind the scenes,
China and assembling them.
3G Motorola A920
3G Motorola A835
Year 2003 mobile handset
market Share
Domestic handset vendors used
the power of price to break the
leading average brands.
Ministry of Information Industry, Year 2003 mobile handset
market report
Samsung
+ others
Chinese 7.2%
brands
39%
(top
vendors
are ,
Ningbo
Bird,
TCL,
Konka)
Total phone sales =
US$130.20 Million
Export: US$59.8 Million
Domestic US$70.3 Million
Motorola
26%
Nokia
18%
Siemens
4.7%
Sony
Ericsson
2.1%
However, domestic handset firms
exported only 530K or 1% in year 2002
Year 2004 Mobile Handset
Year 2004 mobile handset
Market Share
market Share
China's 2004 GSM/GPRS Handset Market
China's 2004 CDMA Handset Market
ZTE, 2.1
Eastcom,
2.8
Soutec,
3.6
Hisense,
3.8
Sanyo,
2.1
Other, 5.5
Motorola,
40.8
Langchao
, 12.4
Samsung,
26.9
Notes: Percentage is based on CDMA handset sales in China
(excluding exports). Other major brands include Daxian, Haier,
TCL, Konka, Eastcom and Ningbo Bird.
Motorola
Samsung
Langchao
Hisense
Soutec
Eastcom
ZTE
Sanyo
Other
Samsung
6%
Ericsson
PTIC
6%
Ningbo
Bird
7%
Siemens
8%
TCL
4%
Motorola
19%
Nokia
20%
Motorola
Nokia
Other
Siemens
Ningbo Bird
Ericsson PT
Samsung
TCL
Other
30%
Notes: Percentage is based on
GSM/GPRS handset sales in China
(excluding exports). Other major brands
include Konka, Haier, DBTel, AMoi,
Soutec,Panasonic, Panda, Eastcom and
Lenovo Source: Ministry for Information
Industry, Company Reports, CHinaNex
Septemer 2004
Market Shares of GSM vs. CDMA
mobile handset users
• GSM Users：223 Million
GSM 93.5%
CDMA 6.5%
• 27% of the total GSM users in
the world
• CDMA Users：12 Million
• 8 % of the total CDMA users
in the world (As of 6/2003)
In China
70% of Chinese mobile phone owners
fall into the mid-price or low-price
category of phones costing less than
2,500Yuan (US$1=CNY8.28)
A Crowded Handset Market
Currently 31 licensed GSM/GPRS
handset manufacturers, many
diversified with CDMA handset
production as well
%
Chinese
Motorola
Nokia
50
40
30
20
10
0
1999
2000
2001
Years
Major Players; Ningbo Bird
Haier, TCL, Legend, Kejian,
2002
Ningbo Bird largest
domestic handset
manufacturer
Domestic Handset Market
• 20 licensed for CDMA handsets
– 2 foreign (Motorola. Nokia**)
– 18 Chinese
•
•
•
•
•
•
•
•
•
•
LG
Ningbo Bird
Samsung
Kejian
Hitachi
Shenzhen ZTE
Capital (Beijing PTT equipment)
TCL Group
Qingdao Haier Group
Hangzhou Eastcom
Shenzhen Konka
Hyundai
Guangzhou Soutec
CEC (China Elec. Corp.)
Sonus
** license for Nokia was actually transferred from
joint-venture partner Putian Report 8/29/03
•
•
•
•
•
•
•
•
Datang Telecom
Zhenhua (Guizhou)
Shandong Langchao
Qingdao Hisense
Dalian Daxian
Nanjing PTIC
PTIC Tianjin
Xoceco (Xiamen
Oversea Chinese
Electronics)
Foreign Cooperator
China’s Mobile Phone Vendors
Company
Alcatel
Amoisonic
Capital Group
Chabridge
CEC
Dalian Daxian
Datang Telecom
DBTel
Eastcom
Ericsson Beijing
Haier
Hisense
Kejian
Konka
LangChao
Legend/Xoceco
Mitsubishi Beijing
Motorola China
NEC Wuhan
Ningbo Bird
Standard
GSM
GSM/GPRS
GSM/CDMA
GSM
GSM/GPRS, CDMA
CDMA
CDMA
GSM
GSM/GPRS, CDMA
GSM
GSM, CDMA
GSM, CDMA
GSM, CDMA
GSM/GPRS, CDMA
CDMA
GSM/GPRS, CDMA
GSM
GSM, CDMA
GSM
GSM/GPRS, CDMA
Company
Nokia Beijing
Nokia Dongguan
Panasonic Beijing
Panda Elec
Philips
Putian
Samsung Elec.
Sanyo
Shenzhen SED
Siemens
Sony Beijing
Soutec
TCL
Telsda
Top Group
Zhenhua
ZTE
Standard
GSM
i to
GSM
Huawee CDMA
c
produes in year
GSM
phon
GSM
2004
GSM
GSM, CDMA
GSM, CDMA
CDMA
GSM
GSM
GSM
GSM
GSM/GPRS, CDMA
GSM
GSM
CDMA
GSM/GPRS, CDMA,
PCS
Currently, there are 37 mobile phone manufacturers in China (foreign included)
which produced 200 million phones by the end of 2002. However, there will be a
shake-out in the handset industry with unprofitable players (domestic and foreign)
being driven out of the market soon! Many players are already in the Red!
Evolution of the Handset
Industry
Major cell phone
manufacturers around
the World
Most Taiwanese
Top Taiwan R&D teams for
manufacturers Mass
OEM,ODM, OBM of cell phone,
Produce in China
smart phone, PDA mobile devices
Evolution of today’s multimedia handset: Designed in Taiwan, mass produced in
China (also Taiwan)– Distributed with handset vendor’s brand name/logo or with
carrier’s logo (dual branding) printed on handset, sold into to global distribution
channel markets. By 2008, domestic Chinese vendors could own 80% of the
market, leaving the Western handset vendors with no choice but to invest in local
firms.
Little Smart = XiaoLingTong
Wireless Local Loop from UTStarCom
Rolled out by
two fixed line
operators, China
Netcom, China
Telecom; it
offers wireless
local loop (WLL)
service called
XiaoLingTong =
Little Smart
(standard is
called PAS)
Only pay for
outgoing calls
(CPP = calling
party pays)
No connection fee
Lower fees than
China Mobile &
China Unicom
Estimated at 54 million subscribers as
of Q2 2004; Much on the technology
hardware from UTStarcom
(UTStarcom recently announced a
migration path to 3G based on TDSCDMA).
Classified as
“fixed line”, it isn’t
covered by a
mobile operator’s
license
requirements.
Part 2
The Subtle Art of Doing
Business with the Chinese
☯
☯
☯
☯
☯
☯
☯
☯
Shaping the Chinese Business Personality
Modern Influences on China Today
The Chinese Circle of Influence
Confucianism – How it applies to business in China
Face: Preserving individual dignity
Guanxi: - Closed System Relationships
Understanding China’s legal environment and contract usage
Navigating China’s Socialist System of “Red Tape”
Modern Influences on China today
lis
m
Mobile
Communications
+ the Internet &
Television media
l ry
a
o
t
n
ti io /His
d s
a
Tr alue
V
Overseas
Chinese
(Hong Kong,
Taiwan,
Singapore)
So
cia
n
r
te re
s
e tu
W ul
C
Fr
E c ee
on Ma
om r k
y et
The Chinese Circle of Influence
Family
Friends
Strangers
The Chinese view things as having continuity. Their
approach to relationships is not direct and their strategies
for obtaining information tend to use circular methodology
to reach the bull’s eye.
Confucianism – How it applies to
business in China
Taking note of the importance of “face” and “Guanxi”
(Relationships)
Consultations on issues among the group in Chinese society
maintain a protocol and hierarchy structure for harmony, and
personal expression is not encouraged in public
surroundings. (“If the nail sticks out too much, it gets pounded back
into to the wood very quickly in China”).
Relationship
Relationship vs.
vs. Goal
Goal Oriented
Oriented comparison
comparison
Relationships are
emphasized over laws
And contracts.
Western Mind
Task
Eastern Mind
Understanding
Understanding
Relationship
Relationship
Task
Face: Preserving individual dignity
☯It’s mighty critical to keep and save the face of the
individual you are dealing with in the group.
☯In Chinese society, Face is such a delicate component
of one's status that once you have caused someone to
lose face, particularly in public, prospects of business
might be seriously jeopardized.
☯As a foreign company in China, how you
treat customers and how Chinese view your
company involves preservation of face.
☯The Chinese will do business with you if
you give them face but they will definitely
not do business with you if you do not give
them face.
Guanxi: – Closed System Relationships
☯The Chinese word that we translate as “Guan”
+ “Xi” ,
or “relationships” literally means Guan “closed” and “system”.
Guanxi actually involves a closed system, and learning how
to unlock a closed system will result in successful Guanxi for
each endeavor .
☯Guanxi is the network of relationships among various
parties that cooperate together and support one another. The
Chinese businessmen mentality is very much one of "You
scratch my back, I’ll scratch yours." In essence, this boils
down to exchanging favors, which are expected to be done
regularly and voluntarily.
☯Build continuous Guanxi in China; this is the primary
means of gathering information and “pull” in Chinese society
– it can be thought of as “currency”.
Understanding China’s legal
environment and contract usage
☯Contracts and Laws are flexible in Chinese society; in
many instances “it doesn’t matter kind of cheese is used to
the mousetrap, just so long as it catches the mouse”.
☯When the Chinese sign contracts; in many cases they
are simply agreeing to work together but it is subject to
change and hence the need for flexibility in the wording.
☯A written contract is a roadmap for cooperation and the
spirit of the contract is generally observed. A contract in
the West is clear as night & day; however, it may appear
uncomfortable to the Chinese who may not view it that
clearly. Contracts in the Chinese mind are subject to
constant re-negotiation because of the impersonal nature
of Law. Rules are thus flexible and also subject to chance.
Navigating China’s Socialist System
of “Red Tape”
☯ China invented bureaucracy
☯ Socialist bureaucracy – many divisions or
responsibility and requirements for government
approvals
☯ Difficult for individuals to make commitments
without extensive group consultation (Face /
Guanxi)
☯ Provides an excuse of commitments not
met (Face)
☯ WTO accession will help increase access for
Western firms to huge market opportunities in
China and reduce Red Tape.
Shaping the Chinese Business Personality
Chinese business culture is complex;
this section attempts to explain and identify some
major cultural behaviors, which tend to confront
and confuse Western business people.
It is critical to be prepared with
the tools to deal with unexpected
situations in China, because the
“unexpected” is to be expected,
and insight into how to manage
your relations with the Chinese
will provide for a better business
environment.
The Chinese Perspective:
Reaching Glass Ceilings in Corporate America
☯ Chinese engineers are struggling to adopt to two cultural traits –
American Corporate Business culture (like the military) and American
individualistic culture (Independent, creative, interpersonal ).
☯ Chinese perceptions of how to deal with their American counterparts
in the work environment appears to be very different than anticipated.
☯ Using Chinese thought processes to judge relationships between
American counterparts in the workplace will only lead to further
struggles with biculturalism.
☯ Many Chinese high-tech workers have reached their glass ceiling
because they fail to reinvent themselves into Director/V.P. level
product and project leaders in Corporate America. Politics also plays
a part. There are exceptions!
☯ Over the past five years, many Chinese entrepreneurs have returned
to China and found better opportunity, more cultural identity, and
stronger relationships with the government.
Part 3
Adopting proven tactics &
strategies for success in China
☯Developing an Action Plan for Asia/China
☯Problems to be solved by Western companies
☯Defining Market and Blockers
☯Adopting Strategies and Tactics
☯Timing for Market development
☯Guanxi Building events
☯Asian Corporate Identification
☯Multi-Channel Selling Strategy
☯Roadmaps : Short Term & Long Term
☯Rules for improving profitability, challenges
☯The Value of WOFE ventures
Problems to be Solved by
Western Companies
☯Weak at developing long-term
relationships due to lack of social
contact, inexperience in dealing
with Asian cross-cultures.
☯Not strong at promoting image to local market and
no Asian Corporate Identity.
☯No local language product literature (Chinese,
Korean, Japanese) support.
☯Lack of stable, reputable local representation.
☯No product feature localization strategies
☯Pricing is fixed with U.S. standard list
Roadmap for Action
☯ Locate Asia specialists to manage Asia-Pacific
& Greater China channel markets.
☯ Create China market assessment of market
opportunities and tactics (short term) and
strategies (long term) for longevity of this market.
☯ Explore muti-regional partnering
opportunities in China and AsiaPacific with multi-national
companies, especially those
experienced in the region.
Defining Market and Blockers
☯Strong need to identify Asian market size,
sales potential, local/foreign competitors,
and long term strategies
☯Need to identify potential Market blockers:
I) Regulatory Issues
1) RF and software regulations, testing compliance
Operating environment requirements
China may impose the world's toughest mobile phone radiation
standards due to fears of health risks
China EME (electromagnetic energy) Standard Working Group, June 2002
“Foreign software makers must guarantee in writing that their
products do not contain hidden programs that would allow spying or
hacking into Chinese computers” –
Ministry of Information Industry January 2002
Defining Market and Blockers
2)Politics of gaining acceptances from agencies
3)Standardization of client/server device software in China
II) Intellectual Property Protection
☯
Need for trade mark and logo registration, WIPO rules
☯
Don’t go into China unless you’ve registered your logo, trademark, and
patent – due diligence is essential at ground zero – before going to China.
III) Product Localization requirements
☯
☯
Feature identification, before design completion allows for path
correction.
Language issues – menu localization is critical for Asian client
acceptance
VI)
Currency exchange and market segmentation issues
☯
☯
Getting money out of China is still a challenge.
if your channel is not built up over a long period it may not be
sustainable without strong, continuous development work.
Don’t expect strategies that work in one province to work universally
in China – it’s doesn’t work that way – build province by province.
☯
Q:Why develop a China marketing strategy?
A:Timing is critical right now!
☯Your networking strategy is to build
Guanxi with distributor’s, complimentary
companies, partners, and systems
integrators - Be proactive - start now.
☯Early identification of key handset and
infrastructure players is critical for your
soft/hardware applications and services.
☯For companies providing faster, accurate
wireless information solutions, field trials
are a way to get product recognized.
Cost Effective Guanxi opportunities
Gain valuable contacts at two exhibitions in Asia:
I)CommunicAsia 2004 - Singapore
June 17th~20th, 2004
II)PT ExpoComm China 2004 - Beijing
Oct. 29th~Nov. 2nd
4
“You could travel to Asia on many trips and still not establish as
much “Guanxi” by accessing the right people as you can during these
two critical exhibitions/conferences for wireless markets. Many key
movers and shakers will be there.
The Chinese say “Chang Cheng Bu Shi Yi Tien Zao Chung
(Translation: The Great Wall wasn’t built in a day); building Guanxi
with Chinese people is a gradual process over time not in a one week
business trip to China.
Strategic planning for Market
Entry and Growth
☯Creation of cost-effective, proven go-tostrategies for Asia and Greater China.
☯Cost-effective marketing to enter and
manage Asian/Chinese markets:
Marketing and selling expenses
Overhead to support these efforts
Localization costs, testing/verification
Branding in China: Bilingual
Product Recognition
A new global cross-branding strategy for cell phones has emerged between
handset producers & multinational companies; expect to see more virtual
“funky” alliances – like the Harley Davidson or Nike cell phone brands. In
China, you can see Chinese, Korean and Taiwanese Pop/Movie/Sports endorsing
handsets.
Multiple channel Business
strategy
Foreign & Local Handset and
Infrastructure vendors
China’s
mobile
user
market
Western hardware/software
technology seller
Companies can employ two
methods to approach China’s
mobile user markets: Direct to the
carriers and ISPs or through
complimentary channels
Roadmap: Immediate steps
• Near term
Create Asian character-based
Corporate Identity
Immediate Asian sales, support desk
Company name and trademark registration in
China first, and other countries later.
Asian language web page creation
Asian Trade show, conference attendance
Identification of Asian Market Requirements
Provide product feedback to Engineers
Roadmap: The next steps!
• Long term:
Establishment of commissioned sales agents, then
development of solid distributor network.
Creation of regionally distributed China market Sales
Representative agreements and policies.
Marketing promotions program for motivational
support of sales agents and representatives.
Set up your Own WOFE (Wholly
Owned Foreign Enterprise) in China.
to better control your destiny.
Develop essential relationships with (local)
government organizations and industry
associations.
Improving Profitability in
China
There are five factors that underlie the
challenge of achieving profitability targets in
China.
1. Market growth becomes slower than anticipated
2. Competition from other multinationals and – in some sectors –
domestic firms, is growing. Chinese companies are getting better at
producing “premium local products” that are priced lower than
foreign brands, are of high quality, and often better fit the needs of
the Chinese user.
3. Expatriate and other investment costs are substantial
4. Foreign firms frequently fail to understand the Chinese market and
its behavior.
5. Most industries are exhibiting significant over capacity
Improving Profitability in China
Objectives to help achieve profitability in China
1. Set a clear and comprehensive strategy.
2. Maintain Control, register as WOFE, protect your Intellectual
property by registering brand, trademark, patent.
3. Realistically estimate market potential.
4. Don’t underestimate the local competition.
5. Have the right product – and price.
6. Pay attention to distribution.
7. Commit to developing the right human resource talent.
8. Plan before you enter the China market.
9. Re-Plan and expect the unexpected.
10. Stay flexible, with China being the largest market in the World for
many products these days, there shouldn’t have to be an exit
strategy.
11. Set clear terms and conditions for business and only extend
standby or irrevocable Letters of Credit (no NET terms).
WOFEs (Wholly Owned Foreign Enterprises) Perform Better
WOFEs (Wholly Owned Foreign
Enrterprises)
Profitable
Joint Ventures
Unprofitable
Profitable
Unprofitable
38%
58%
62%
Source 1998 A.T. Kearney China
Profitability Survey
Shorter
42%
2.3 years
2.6 years
G
G
Time to break even H
3.2 years
Original ExpectationsH
2.9 years
Longer
Source 1998 A.T. Kearney China Profitability Survey
Consolidated China Operations
Wholly Owned Foreign Enterprises
Total
Profitable
Percent
Joint-Ventures
Total
Profitable
Percent
Profitable
2.6
2.0
77%
3.2
2.3
71%
Break even
2.0
0.8
38%
2.3
0.8
33%
Unprofitable
1.3
0.5
38%
3.6
0.8
21%
Manufacturing Companies
1.6
0.9
54%
2.8
1.2
45%
Service Companies
3.6
2.6
72%
5.1
1.7
33%
Conclusion
Let’s bridge
the Pacific
RIM!
☯China is now the World’s largest mobile subscriber market.
☯Chinese mobile handset players are gaining in technology and International marketing
expertise.
☯The Smart Phone Revolution will integrate Greater China’s mobile society.
☯The mobile device is already changing the basic way people in China communicate;
however, the starting point of mobility is different in each country.
☯Technical advances of Smart Phone platforms will drive 3G adoption.