PowerPointPrsentation

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Focus on China
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Name Richard Erb Education
Diploma in Biology
minor subject Chemistry Age
55 years Business 2 years
software development experience 14 years
sales and marketing
4 years purchasing
Actual position Managing Director
Fujitsu-Siemens
Taiwan and China
Since 1992 in Asia (Singapore, Tokyo, Beijing,
Hongkong, Taipei, Suzhou)
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• 1. About China

• 2. Fujitsu-Siemens in Greater China

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• 1. About China

• 2. Fujitsu-Siemens in Greater China

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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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Large
Yellow
Underdeveloped ?
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Perception and facts
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Perception and facts

45.800.000 internet users
310.450.000 fixed line phones
320.240.000 mobile phones
410.000.000 TV sets
457.000.000 Radios
170.000.000.000 SMS
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Perception and facts
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Perception and facts
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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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Cultureshock China
Language
400 sounds 4 tones 1.600 sounds
56.000 characters / 1.600 sounds
average 35 meanings per sound
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Cultureshock China
Relationship
Relationship in China is much more important
than in Germany.
People usually know schoolmates from different
classes
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Cultureshock China
Family Relationship
Germany
me
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Cultureshock China
Family Relationship
China
fathers younger brother shu shu
??
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Cultureshock China
Relationship
Relationship in China is much more important than
in Germany Each family relation has its own name
People usually know schoolmates from different
classes
Business in China is done based on
relationship Contracts may support the business,
but are not mandatory Business in Europe is done
based on contracts Relationship may support the
business, but are not mandatory
Mistrust between people without established
relationship is not necessarily impolite
No business without lunch or dinner
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Cultureshock China
Behaviour
Example Negotiations about future business
partnership
In western countries it is not unusual to give a
leap of faith to the future business
partner. This behaviour is based on the
assumption, that the future partner will
follow the agreed contractual terms and conditions
In China it is not unusual to start with a lack
of trust to the future business partner. This
behaviour is based on the fact, that contractual
terms and conditions can not always be enforced
Sleeping in the same bed, but dreaming different
dreams
This can lead to a situation, where the western
partner shows his trust and the chinese partner
shows his mistrust.
The western part is concerned, because the future
partner shows openly a lack of trust. The Chinese
partner is concerned, because the western partner
is so naïve to trust someone he does not yet know.
Both behave different, however, both are right
from their personal point of view
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Cultureshock China
Behaviour
a YES must not necessarily mean YES
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Cultureshock China
Business opportunities
Examples for business difficulties based on
cultural differences
Karaoke systems in Germany
Tanning salon in China
Advertisement
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Cultureshock China
Why cant they behave like us ?
Why should they ?
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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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China the supplier
In 2004, Germany imported products from China at
a value of 25 bln Euro ( 17,3)
If China does not ship, German shops are empty
The majority was represented by products of the
IT industry, clothing (textile as well as leather
goods) and household appliances
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China the supplier
Most probably, all of you here in the audience
have something which was produced in China
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China the supplier
35 of all microwave ovens are produced by Galanz
in Shenzen
35 of all mobile phones are produced in China
40 of all harddisc drives, scanners, and PC
housing are produced in China
(Shanghai, Suzhou, Wujiang, Kunshan, Shunde,
Dongguan)
50 of all shoes are produced in China
55 of all digital cameras are produced in China
60 of all bicycles are produced in China
70 of all notebooks are produced in Taiwanese
factories in China
70 of all toys are produced in China
75 of all photocopiers are produced in Dongguan
80 of all PC motherboards are produced in
Taiwanese factories in China
80 of all DVD players are produced in China
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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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China the customer
In 2004, Germany exported products to China at a
value of 18,2 bln Euro ( 24,9)
The majority was represented by machinery and
complete industrial facilities, specialized
technical equipment and cars.
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China the customer
100 mio people earn more than 5.000 US per year
40 mio people earn more than 25.000 US per year
300K people earn more than 1.000.000 US per
year
Swiss luxury watches 2003 150 mio US revenue (
15)
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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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China the competitor
China is a major competitor in
- Demand for raw materials
- Demand for investment money
- Supply of cheap labor
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China the competitor
Raw material
Stannous Price increase from lt 4 US / kg to 9
US / kg within 2 years (Zinn)
Copper Price increase of 70 within one year
(cabling, electronics) (Kupferl)
Lead Price increase of 65 within one
year (car batteries) (Blei)
Nickel Price increase of 40 within one
year (steel coating)
Coke Price increase of 500 within two
years (steel production) (Koks)
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China the competitor
Raw material
In the first 6 months of 2004, the consumption
of mineral oil and steel grew by 50
In 2004, China consumes
- 50 of worldwide cement production
- 25 of worldwide copper
- 33 of worldwide steel production
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China the competitor
Raw material
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China the competitor
Investment
FDI CI 2003
2004 2003 2002 1 1 1
China 2 2 2 USA 3 6
15 India 4 7 3 Great
Britain 5 5 4 Germany 6
11 5 France 7 19 10
Australia 8 22 18 Hong Kong 9
12 6 Italy 10 15 12
Japan
(Foreign Direct Investment Confidence Index
A.T.Kearney)
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China the competitor
Investment
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China the competitor
Investment
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China the competitor
Labor cost
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China the competitor
Labor cost
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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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• Perception and facts

• Cultureshock China

• China the supplier

• China the customer

• China the competitor

• China the partner

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Partner China
Part of the deal was the involvement of chinese
companies and a reasonable know how transfer
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Partner China
The Yangtse River Dam Project
saves annually 2 million tons of sulfur dioxide
100 million tons of carbon dioxide
Power generation equivalent to 14 nuclear power
stations or 22 coal-fired power stations.
Compared to power generation with conventional
coal-fired power stations, the Yangtse river
power generation saves annually 40 million tons
of coal for China
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Partner China
Part of the deal was the involvement of chinese
companies and a reasonable know how transfer to
enable them to built the other 16 generators.
In the late nineties, China was able to offer
large power generators to a project in Iran.
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Partner China
What does China need ?
- know how in managent and controlling
- know how in marketing

• technical know how in special areas
• (ex. server computer)

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Investments into our future
Germany is Chinas largest European investor,
between 1990 and 2003 German companies have done
direct investments in an amount of 9 billion
Euro (German president Koehler in
Wirtschaftswoche Special Edition Nr. 1,
30.09.2004)
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Investments into our future
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Investments into our future
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?
Investments into our future
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• 1. About China

• 2. Fujitsu-Siemens in Greater China

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• 1. About China

• 2. Fujitsu-Siemens in Greater China

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Fujitsu-Siemens in Greater China
In 1999, Siemens Germany and Fujitsu Japan
decided to join their European it
activities. Fujitsu became responsible for
Americas and Asia Pacific and Fujitsu Siemens
Computers took the sales region EMEA.
EMEA
Asia / Pacific
Americas
SCENIC
Deskpower
CELSIUS
LIFEBOOK
PRIMERGY
PRIMEPOWER
Millennium
GS8000
BS2000
FSC Ownership
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Fujitsu-Siemens in Greater China
Purchase Volume per Region
ROA Rest of Asia e.g. China / Taiwan, Korea
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Fujitsu-Siemens in Greater China
With the growing importance of China and Taiwan
as a supplier of high quality IT products, it
became necessary to establish an organization in
the region.
In 2001, a purchasing office was established in
Taiwan. Until 2004, this office became the hub
for 36 employees from purchasing, engineering,
product marketing and service.
In 2004, a logistics office was established in
Suzhou. In the future, additional engineering and
purchasing staff will be added to the existing
logistics employees.
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Fujitsu-Siemens in Greater China
Major Tasks

• Supplier selection

select the best available supplier in terms of
total cost of ownership

• Contract negotiation

negotiate and sign master purchase agreement

• Product sourcing

provide information about new opportunities and
future products

• Joint development

Develop products in cooperation with local
engineering teams

• Quality assurance

Qualification and test of products

• Purchasing Logistics

Buy products and ensure on-time delivery

• Risc management

Manage riscs which may endanger product
availability

• Relationship management

Establish excellent relationship in order to
secure product availability
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Fujitsu-Siemens in Greater China
Joint development

• Supplier selection

select the best available supplier in terms of
total cost of ownership

• Contract negotiation

negotiate and sign master purchase agreement

• Product sourcing

provide information about new opportunities and
future products

• Joint development

Develop products in cooperation with local
engineering teams

• Quality assurance

Qualification and test of products

• Purchasing Logistics

Buy products and ensure on-time delivery

• Risc management

Manage riscs which may endanger product
availability

• Relationship management

Establish excellent relationship in order to
secure product availability
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Fujitsu-Siemens in Greater China
PC value chain
1980s
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Fujitsu-Siemens in Greater China
Joint development
China Moving up the value chain
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Fujitsu-Siemens in Greater China
Joint development
How to prevent to get caught?
Team up
Find a win-win proposition
If you cant beat them, join them !
Discover your strenght and weaknesses
Maintain a technology headstart
Invest in RD
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Fujitsu-Siemens in Greater China
Joint development

• Supplier selection

select the best available supplier in terms of
total cost of ownership

• Contract negotiation

negotiate and sign master purchase agreement

• Product sourcing

provide information about new opportunities and
future products

• Joint development

Develop products in cooperation with local
engineering teams

• Quality assurance

Qualification and test of products

• Purchasing Logistics

Buy products and ensure on-time delivery

• Risc management

Manage riscs which may endanger product
availability

• Relationship management

Establish excellent relationship in order to
secure product availability
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Fujitsu-Siemens in Greater China
Quality assurance

• Supplier selection

select the best available supplier in terms of
total cost of ownership

• Contract negotiation

negotiate and sign master purchase agreement

• Product sourcing

provide information about new opportunities and
future products

• Joint development

Develop products in cooperation with local
engineering teams

• Quality assurance

Qualification and test of products

• Purchasing Logistics

Buy products and ensure on-time delivery

• Risc management

Manage riscs which may endanger product
availability

• Relationship management

Establish excellent relationship in order to
secure product availability
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Fujitsu-Siemens in Greater China
Quality assurance
HP replaces defect notebook memory (27.
06.2004)
Call-back for MSI Pentium-4-boards with defect
southbridge (01.07. 2004)
Call-back for batteries of Apple 15 PowerBook
G4 (19.08 .2004)
Call-back for IBM notebook charger because of
fire hazard (03.09 .2004)
Call-back for Dell notebook charger (08.10
.2004)
On 27.02.2004, the company 4MBO declared
insolvency
Broad media coverage about radiation issues with
the Volks-PC sold in Q4 2002 hurt the companies
reputation severely
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Fujitsu-Siemens in Greater China
Quality assurance
Quality is built in !
Therefore, FSC is involved in the design phase of
products.
Foodchain products are often bought
off-the-shelve without involvement of the
distributor during design.
FSC is involved in qualification and testing of
all products to avoid later call backs and
customer complaints which lead to financial loss
and customer dissatisfaction
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Fujitsu-Siemens in Greater China
Quality assurance
Qualification and testing
- abrasion test for paint and keyboard
- EMI test (radiation test)
- CD and DVD Media tests
- I/O interface test
- safety test (power supply and charger)
- mechanical tests
- drop test for transportation
Source assessment
following international standards
Field return information loop
weekly feedback of field return rates to
production
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Fujitsu-Siemens in Greater China
Quality assurance
Quality will still be remembered when the price
has been long forgotten
(Aldo Gucci )
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Fujitsu-Siemens in Greater China
Quality assurance

• Supplier selection

select the best available supplier in terms of
total cost of ownership

• Contract negotiation

negotiate and sign master purchase agreement

• Product sourcing

provide information about new opportunities and
future products

• Joint development

Develop products in cooperation with local
engineering teams

• Quality assurance

Qualification and test of products

• Purchasing Logistics

Buy products and ensure on-time delivery

• Risc management

Manage riscs which may endanger product
availability

• Relationship management

Establish excellent relationship in order to
secure product availability
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Fujitsu-Siemens in Greater China
Risc management

• Supplier selection

select the best available supplier in terms of
total cost of ownership

• Contract negotiation

negotiate and sign master purchase agreement

• Product sourcing

provide information about new opportunities and
future products

• Joint development

Develop products in cooperation with local
engineering teams

• Quality assurance

Qualification and test of products

• Purchasing Logistics

Buy products and ensure on-time delivery

• Risc management

Manage riscs which may endanger product
availability

• Relationship management

Establish excellent relationship in order to
secure product availability
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Fujitsu-Siemens in Greater China
Risc management
Together with its partners, Fujitsu Siemens
Computers does a Risc assessment on a regular
basis.
Generic steps of risk management
Identify
Evaluate
Manage
Monitor
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Fujitsu-Siemens in Greater China
Risc management
Identified risks which may impact our relationship

• Acts of God - earthquakes - weather -
  epidemics (e.g. chicken flue)
• Government induced risks - termination of
  business / export / import licenses - regional
  power shortage / cuts - changes in tax or duty
  structure
• Management induced risk - loss of key
  personnel - growth management - acquisition
• Purchasing procurement risk - single source
  parts / suppliers - wrong forecasting / planning
• Economic risks - slow down / up turn (resulting
  in shortage / oversupply) - price erosion (e.g.
  due to technology changes) - exchange rate

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Fujitsu-Siemens in Greater China
Risc management
Generic risk management measures
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Fujitsu-Siemens in Greater China
Risc management

• Supplier selection

select the best available supplier in terms of
total cost of ownership

• Contract negotiation

negotiate and sign master purchase agreement

• Product sourcing

provide information about new opportunities and
future products

• Joint development

Develop products in cooperation with local
engineering teams

• Quality assurance

Qualification and test of products

• Purchasing Logistics

Buy products and ensure on-time delivery

• Risc management

Manage riscs which may endanger product
availability

• Relationship management

Establish excellent relationship in order to
secure product availability
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Fujitsu-Siemens in Greater China
?
?
?
?
Crisis
Wei ji
?
?
Opportunity
Danger
Wei xiao
Ji hui
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Thank you for your attention
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