Key issues for jointventure manufacturing in China

1
Key issues for joint-venture manufacturing in
China

• Some notes for operations in mainland China

2
Phased strategies for Manufacturing in China
Engineering/ Design Capability
JV Start
Outsider
Sourcing/ Localization
Rep Office
Manufacturing
Assembly Limited Mfg.
JV Development
License/Export into China
Insider
Shanghai Volkswagen
Xerox
Johnson Johnson
Polaroid, Motorola
IBM
Babcock and Wilcox (Boilers)
Ericsson
Beijing Jeep
3
General Strategic Trends

• Why?
• Comfort with Environment
• Learning
• Decision Speed
• Management Control
• Diminished Value Added
• Growth/Investment Roadblocks
• Legal Changes

100
JJ
Motorola
Shanghai JJ
Polaroid
Xerox
Equity
IBM
BW
Jeep
0
Take over Facility
Greenfield Site
4
Manufacturing in China Key Issues

• Sourcing
• Everyone wishes they had worked on it sooner
• Shanghai Volkswagen Need to expand capacity from
  150k -gt 300k -gt 600k
• qualified suppliers are the primary constraint
• increasing regulation demanding local content
• Local Management
• Critical need for good local managers
• Shortage of managerial talent is a key barrier to
  growth

5
Manufacturing in China Key Issues

• Managing Ex-Patriates
• Still essential for key skills
• Burn-out a problem for everyone
• Best Practice Give them everything they need to
  be comfortable - its a sound investment long-term
• Picking the right people....

6
Manufacturing in China Key Issues

• Workforce
• Expose to Western Practices through video and
  visits
• Only model many workers have is the
  Marxist/Maoist model
• they pretend to pay us - and we pretend to work
• Training - especially in quality - critical and
  worthwhile
• Housing/Social cost remains the long-term
  problem
• Joint-ventures must legally take on the same
  responsibilities as the state, if people are no
  longer employed by the state
• Keeping good people becoming more difficult
• Scarcity and value means that good people
  disappear after getting you on their resume
• Use local Chinese for Human Resource management

7
What to watch for...

• Partnerships
• Start off being critical
• Value-added diminishes quickly - becomes a
  constraint
• Poor access to capital
• Difficult to expand as a 50-50 partnership
• Role of local government
• Importance seems to be inversely proportional to
  distance from Beijing
• look for new models (Suzhou) modeled on
  Singapore over (expensive) Shanghai and Guangdong