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Consultant on the Coke-Huiyuan deal and global M&A

(chinadaily.com.cn)
Updated: 2008-09-16 17:11

Q: What do you think Chinese companies could do to be more successful in global acquisitions?

A: Because Chinese companies are not operating outside China as much and people in other countries may not understand them well, one of the challenges for them is that the brand may not be recognized well.

Brand is very important. When you think of brand, sometimes you think of it in terms of how you sell products, but brand also has significance in terms of employment. For example, what does it mean to work for Lenovo? What are the main things that make Lenovo a good company to work for? Take the US Technology employees can choose to work for HP or Dell; why would they want to work for Lenovo?

That concept – which helps employees to understand why you are a good employer -- is a very important one, particularly if your company is not well known. It's not to say it's not a good company to work for. It might be a great company to work for, but nobody knows. It's important for Chinese companies to think about how they want employees to think about them.

For example, companies like GE are very well known for a strong leadership and development program. That's an attractive aspect and that's an important part of their brand. So someone who chooses to work for GE may do so because they know they will get good training in leadership development.

Other companies may be known for good pay and good benefits, or they may be known for giving lots of growing opportunities to their staff. At the same time, the brand you show to employees has to be consistent with the brand you show to customers.

For example, the low-price airline Southwest Airlines in the US. In their ads on TV, they talk about freedom, the freedom to travel, for very low cost. They use that same concept of freedom with employees. If you come to work for Southwest Airlines, you will have a lot of freedom, you will be able to choose different benefits, you will be able to travel.... So the brand is consistent.

Or you may have a company which has a very strong brand in one country, but not strong in another country. So you have to think about how you build up that brand. Do we do it through advertisements, or cultural programs, or do we do it through product ads. In conclusion, the brand is very important.

One of the mistakes we see when a company makes acquisitions overseas, in terms of compensation, is that they say we don't pay our own executives that much, so we are not going to pay the local employees (often US or UK) that way. Some companies resolve the issue by saying, "We need to have a global strategy, but we need to execute locally."

It means we need to have a common mission, a common set of values that embody wherever we are in the world, but (we also need to) execute locally, (which) means we have to respect what the local practices are. Make sure you understand and respect those local markets and have the flexibility to adjust your practice to meet the needs of those markets.

Q: Compared with the US, China is a country with a huge population and a huge pool of labor supply. Do you think HR issues are still so important here?

A: If you look at the history of the US, I think one of the lessons you learn is the importance of resources, particularly employees, in your business. At the end of the day, it's your employees who are meeting the needs of your customers, who are developing new technology, who are creating and selling products.

I honestly believe it's the people within your company making you unique. I think your ability to support these people determines whether you will be successful or not.

If you look at acquisitions, the biggest reason cited for their success or failure is the ability to integrate cultural issues, ie, how do I get people from two different companies to work together well, and the ability to get people excited to work. If you look at the history of M&A ... it shows that.

It's not so much about having the right number of people; it's about having the people with the right characteristics and qualifications and the right set of skills. That's the real challenge.

Reproduced with permission from Knowledge@Wharton, http://knowledgeatwharton.com.cn. Trustees of the University of Pennsylvania. All rights reserved.

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