Executive Clan Chat: How Not to Succeed In China

Is a good Chinise brand name going to work internationally?

It seems it's early. Thanks, Mary, for the presentation.

Thanks all!

Thanks Mary!

Thank you Mary.  See everyone later.

Well, I must head back to other tasks. Thank you all, Kim, SMK, Nicole!

The blog I cited talks about failure to understand the local markets and to take the time to do so. Also, trying to grow too fast without taking the time to really get underway.

So different than the situation with Japan; which is not to minimize differences between China and Japan.

Ah, that's a good point, Mary.

@SMK: It sure looks like it. Check out this blog.

There seems to be just as much resistance here to them as there is in China to US firms.

@Mary -- same reasons?

One thing we haven't mentioned: Chinese companies don't usually make it in the US, either.

I suppose you could say a threat to Chinese stability and growth.

In other words, companies doing business in China are under a lot of scrutiny. Wolf says there is a separate set of rules for them. And a misstep can cost dearly by making the state or people view the newcomer as a threat.

One more thing: David Wolf, who wrote recently about "nine things Facebook must do to better its chances in China," said that "Facebook needs to operate in China as if it were in the US and being simultaneously investigated by the FBI, OSHA, and the EPA."

Certainly GM and Philip Morris are about as far from start-ups as you can get.

@Nicole: It seems that moving to China requires so much concerted effort that it shouldn't be undertaken by any startups. At all. Even big ambitious ones.

Right, @Kim. The economy is just not robust enough to sustain these new IPOs. There isn't enough equity investment right now. Is there?

If the IPO had gone as planned, right after LinkedIn and Zynga, GroupOn might have looked very smart.  It's been all problems for them since the postponement.

Mary, that makes sense to me, re: companies establishing themselves in their own markets and elsewhere before trying the China move.

Like many other Internet startups, it's moved too fast to try and become the new Facebook.

Yes, IPO seems to have kind of been a misstep for GroupOn.

Premature for GroupOn too?  Its planned IPO seems to have been too early or too late.

One thought: Perhaps it's not advisable for companies to try and get into China unless they are firmly established elsewhere. Even then, the attempt may prove to be a money waster.

I think we need less Wikpedia. Thankfully, it appears to be losing its editors/contributors.

That's an aside, really, as WP is a nonprofit.

There is a Chinese Wikipedia which has been blocked by the government several times.  It can be edited from anywhere, of course.  Currently it claims to have 29 mainland-based administrators and 270,000 articles.  It's microscopic in comparison with English Wikipedia.

Actually, @Nicole, there seems to have been a major crackdown on a bunch of sites the government accused of rumormongering. This is an example of how we really don't understand what goes on on China's Internet half the time.

Yes, Chinese authorities were regulating the posting of misinformation.  Maybe why Wikipedia is not in China (it probably is, let me check...)

I don't see how Facebook could thrive in a nation where individual speech and free thinking isn't permitted.

I read some interesting news last week about a microblog in China that was under pressure because it was a channel where false rumors were thriving and spreading.

LOL. He's too busy killing his own dinner to worry about China.

Oooh move him, move him!

Chinese firms are notorious for sabotaging outside firms and taking no prisoners when it comes to getting hold of ideas and IP.

I think we are all in favor of moving Zuckerberg somewhere.

Well Facebook should avoid at least some of the problems Mary identified if its filtered through an established Chinese enterprise.

David Wolf is skeptical. He also suggests that moving Zuckerberg to China might help.

But that may not guarantee it success in China.

I think so, Kim.

Does anyone thing Facebook stands a chance in China?

Facebook is working closely with Baidu, yes?

Still, Google seems to periodically get parts of its offerings shut down in China. And it certainly isn't as steady a presence there as elsewhere.

Oddly, that may be the case, Nicole. But it is still tagging behind the Chinese Baidu.

But of the ones that have tried with minimal success, which has done best? Has it been Google, despite the recent struggles?

Is Google still trying to make it work in China.  I have seen so many headlines about it pulling out, I kind of lost track.

@Kim: that's the issue, too. Lack of understanding of the market.

That's just it, @Nicole. There aren't any big Internet success stories in China from Western firms.

If China has an established discount Website market, I just wonder what GroupOn thought it was bringing to the party.

What about an Internet company?

I am just pondering how a company differentiates itself in such a huge market.  Philip Morris had a prestige Western brand, Marlboro, but it had its struggles.

With few suppliers internally.

But much of GM's success has been luck and the fact that it has offered products to the Chinese market that are in demand there.

I am far from a car geek.  I wonder if its succeeding by selling a prestige product; I can't believe its undercutting local manufacturers. 

@Kim: I've heard GM.

What's the biggest western success story in China?

And let's not forget that humor doesn't always translate!

Boy, GroupOn should have asked us first.  If it can only differentiate itself from established competition by importing foreign management and telling offensive jokes, it probably should have stayed out of the territory.

@Kim, you're probably right, but I see that as a problem not an asset. I don't think GroupOn can get by on its silliness alone.

Apparently, GroupOn was asleep at the switch while Tencent was taking furious notes. Now, if the joint venture fails, it could be the opportunity for Tencent to launch its own China-based alternative.

And GroupOn is doing that, I think. What's more, they seem to have been sold into a kind of Trojan Horse deal with Tencent.

I think you also have to have something to sell that folk can't get anywhere else. David Wolf says you cannot work against Chinese competitors and expect to win if you're a Western firm in China.

There is a distinctive local culture here that is tough to penetrate for businesses.

Even up here in a rural hinterland, it's easy to fail in business if you don't understand certain basics.

There are always subtleties in every locale.

@SMK; Yes, you can't move in anywhere like gangbusters and expect to succeed.

@Mary -- Not defending the ad, this is just some counter-points I heard.

@Nicole.  I agree, but other than its personality, what makes GroupOn more appealing than the next deal site.  I think its overriding problem is that it offers nothing unique.  Except that it employs teams of comedy writers to do the jokes.

And I'm talking from the Tibetan perspective. It trivialized the Tibetan situation.

@Mary -- I've heard that the different management doesn't just apply to the Chinese either.  One would think that adapting a company to the environment it will live it would be a no-brainer though.

SMK: But GroupOn had already been planning to move into China. And the ad was in poor taste. I mean, it really was strange and oddly horrible.

It's okay to have some foreign managers, but Chinese feet on the street are key to success.

@Kim regardless of Groupon's typical humor, that Super Bowl ad was completely out of line.

@Mary -- the marketers that defended it weren't thinking in the Chinese direction, they were focusing on the NA impact.  They had no idea Groupon would try to move to China.

@Kim, yes, apparently Chinese management is a prerequisite for doing business in China.

SMK: Oh please. Re: The Super Bowl ad, I'd be amazed if China's media watchers forget that one anytime soon.

Have other internet companies recruited Chinese management?

Apparently, once a foreign company has spoiled its initial entry into China by insulting people or going awry of state practices, it's pretty much curtains.

In regards to the Superbowl Ad -- I've heard various counter-arguments from marketing to its effectiveness.  Some feel it was truly bone-headed, while others feel that the gamble of the short-memory of the Internet allows it to work.

Then, GroupOn further offended people in China with layoffs and closings done in a reportedly harsh way. At least in a non-Chinese manner.

@Mary -- yeah, I think foreign management was probably the dumbest move.

The Tibet ad was really a horrendous misstep as well.

For one thing, GroupON seems to have hired foreign management. That is apparently the kiss of death. Perhaps because dealing in the Chinese economy requires such a detailed understanding of things like group buying.

Well, as Bishop points out, the mistakes were numerous, and many really had to do with GroupOn simply not understanding how foreign businesses operate in China.

One of GroupOn's main attractions as I understand it is irreverance and humor in describing its deals.  Censor that and what does it have going for it?

Actually, never mind on the CEO mouthing off. That wasn't Groupon.

There are lots of obvious things that Groupon did wrong that were simply insensitive. The Super Bowl ad was atrocious, for one. But other things -- like adhering to censorship demands -- present western companies with ethical conundrums.

@Mary -- do you think it was a factor at all, or were Groupon's mistakes the major issue?

SMK: I didn't get into group buying in my blog. But it's a huge part of the Internet there.

Questionable accounting methods, expenditure way outstripping revenues, a postponed IPO and apparently no means of differentiating itself from growing competition.  No wonder it's having problems in China is its in this kind of shape at home.

@Kim: Yes, indeed. GroupOn is after all the company just chastened by the SEC for tricky bookkeeping. And didn't its CEO mouth off during the quiet period?

Hi Mary.  I thought there'd be mention about other, longer-established group buying programs in China already.

The China issue is complex. Google made concessions in order to operate there, but it's been criticized for them.

And instead of harkening to the collective wisdom -- which is out there with lots of clear explanations -- GroupOn charged forward and hit a brick wall, it seems.

The reason I raised it is that I have big questions about GroupOn's ability to do business period.

Maybe Groupon's CEO uses AskJeeves...

@Nicole: Yes, and in a way I don't get it. Anybody with Google can figure out that doing business in China is complicated for Western firms, especially tech ones.

Hi SMK!

@Kim: Yes, my goal was to use Groupon's problems in China as a lead-in to discussing the issue of why Western Internet firms have done so poorly there as a whole.

Groupon has certainly served as a great example of how to make a really bad impression in China.

Hello smk!

Hi colleagues!

Ping!

Yes, thanks Mary.  How much is this about doing business in China and how much about GroupOn's competence?  A bit of both, yes?

Thanks for the jazzy intro Mary.

Not to forget Philip Morris.  I think they're done well in China.

haha

lol

Hello early. I'm Nicole! HAHAHAHA.

I am early.