Seeking Papers —— The Growth Strategy of Multinational Corporations in China

In recent years, M&A continues to heat up, and more and more enterprises join the ranks of mergers and acquisitions. China enterprises and multinational companies have attracted wide attention from all walks of life. However, in this competition show, we are disappointed to see that compared with multinational companies, China enterprises have experienced more unsuccessful mergers and acquisitions, so it is necessary to make a comprehensive comparison to help China enterprises find the main problems in mergers and acquisitions.

Turn left, turn right

Under the background of economic globalization, foreign multinational companies have stepped up their global layout, accelerated market expansion and allocated resources on a global scale. Because the China market has great advantages, it attracts many multinational companies to enter. Faced with the aggressive offensive of multinational companies, China enterprises have also begun to respond in groups, and have made repeated moves in mergers and acquisitions. However, due to the lack of strength and experience, there is an obvious gap between China enterprises and multinational enterprises in M&A..

Strategic layout

For multinational companies, mergers and acquisitions often do not stay at the business level, but rely on mergers and acquisitions to achieve more goals under the guidance of their strategies. For example, steel giants Mittal and Baosteel compete for Bayi Iron and Steel in order to seize iron ore resources; Schneider and Delixi set up a joint venture company to gain a monopoly position in the domestic electrical appliance market; Unilever bought the Meijiajing toothpaste brand in order to eliminate its competitors.

In contrast, the purpose of China enterprise M&A is much simpler. In many cases, the design of M&A is not from a strategic perspective. For example, Angang acquired Bengang mainly to expand production capacity, but due to the high overlap between products and business, enterprise integration is difficult. TCL's acquisition of Alcatel's mobile phone business resulted in huge losses due to poor integration.

M&A object control

Multinational companies generally require control rights in mergers and acquisitions in order to obtain the actual control rights of M&A objects and make them serve their overall development. Moreover, even if they don't hold shares, multinational companies will make full use of the defects of corporate governance and the control of core technologies, marketing channels and important positions to gain actual control over M&A targets, and at the same time gradually gain a controlling position through equity acquisition, capital increase and share expansion.

China enterprises, however, often only pay attention to the digital victory of equity ratio, but are exploited by the other party in corporate governance until they gradually lose their right to speak. In the overseas subsidiaries of mergers and acquisitions, it is precisely because they lack overseas management experience and do not understand the local situation that they spend money to "make wedding clothes for others".

Management mode output

Multinational companies attach great importance to exporting mature management models to M&A enterprises, not only arranging their own managers in important positions, but also formulating perfect management systems and strengthening control in many aspects, so that M&A enterprises can quickly integrate into the parent company and greatly reduce the difficulty of resource integration.

Due to the lack of international management experience, it is impossible for China enterprises to export management models to overseas companies, and they can only continue to explore in mergers and acquisitions, which will inevitably lead to many management problems; Retaining the original management of overseas companies is also a common method adopted by enterprises in China. Although this method can ensure a smooth transition in management, it will have great obstacles in integration and even lead to out of control.

Merger and reorganization

Multinational companies are very good at restructuring after mergers and acquisitions, which is often the decisive factor for the success or failure of mergers and acquisitions. For example, after Coca-Cola acquired a large number of domestic beverage enterprises, it simplified these enterprises into simple filling plants, firmly grasped the marketing channels, and avoided the repeated construction and self-conflict of channels.

However, China enterprises do little in the post-merger reorganization, which makes the merger a simple superposition in quantity, and even one plus one is less than two because of internal friction. After Lenovo acquired IBM's PC business, because the IBM brand is far superior to Lenovo's own brand, Lenovo adopts two sets of brand systems, domestic and international, and resource integration is in the foreseeable future.

Personnel use

Multinational companies often send managers to occupy important positions after mergers and acquisitions, firmly grasp the right to speak in business management, and effectively prevent the actual control from declining; At the same time, we will retain the original enterprise personnel or hire local personnel in some important positions to ensure the stability of management through an effective incentive system.

Managers trained by China enterprises themselves lack international management experience, and often can't bear the management responsibility after merger and acquisition, which makes enterprises only retain the original management, and there are also running-in problems in recruiting managers from outside, which easily leads to weakening control rights.

Cultural fusion

Multinational companies have high international reputation and are often in a strong position in mergers and acquisitions, so they will have many advantages in cultural promotion, at least they will not be rejected too much; On the other hand, multinational companies have a lot of experience in localization and pay more and more attention to integrating into local culture, paving the way for management.

China's enterprises are not well-known internationally, and the level of economic development in China, a developed country, is not recognized, even hostile to China's economic development. Negative cultural and political influences have created many obstacles for China's overseas mergers and acquisitions. For example, SAIC's acquisition of South Korea's Ssangyong Motor was unexpectedly strongly resisted by the other trade union, which seriously interfered with the M&A process.

There are three major problems in the integration of management and control

Through the above comparison, we can clearly see the huge gap between China enterprises and multinational companies in mergers and acquisitions. Although the gap is reflected in many aspects, it boils down to one point, that is, management and integration after mergers and acquisitions. It is this deficiency that makes it difficult for China enterprises to play a synergistic advantage after merger and acquisition, which greatly reduces the effect of merger and acquisition. Specifically, China enterprises have encountered three major problems in management and integration.

Cross-regional management output

Cross-regional problems are the problems that enterprises must face in the rapid expansion. Although the information transmission is no longer restricted by geographical area, there is still information asymmetry between the parent company and the subsidiary company, which has caused many obstacles for the parent company to control its subsidiaries. The simplest and most effective way for a parent company to strengthen its control over its subsidiaries is to establish a simplified control system, which can be easily copied and realize the management output of its subsidiaries.

There are two main reasons why China enterprises lack effective control over M&A enterprises. First, their own management level is not high, especially the management level suitable for internationalization is even lower, which is related to the development stage and internationalization experience of China enterprises. Second, they are not good at export management mode, and often start a new business in overseas companies, which makes the management of parent and subsidiary companies vary widely and increases the difficulty of management and control. On the whole, overseas mergers and acquisitions also pose a challenge to the management of the parent company, and the parent company needs to make corresponding internationalization adjustments. Therefore, subsidiaries are not just as simple as managing replication, and enterprises must establish a complete set of management and control systems from a strategic and systematic perspective.

Management personnel deployment

Personnel deployment is an important factor for the success of multinational companies' mergers and acquisitions, and it is also the main reason for the repeated failures of China enterprises' overseas mergers and acquisitions. In the management system, it is important to design a scientific organizational structure and perfect management system, but personnel are always the biggest variable, and out of control of personnel will make the management system invalid, so how to strengthen the control of management personnel, especially the top management of subsidiaries, is an important problem that the parent company must solve.

Chinese enterprises have suffered big losses in mergers and acquisitions. For example, Cao's Singapore branch is firmly controlled by Chen Jiulin. Although Chen Jiulin is also the vice president of Cao, he is more interested in the interests of the branch. Many systems of CAO exist in name only, and Singapore branch has long been out of the control of the headquarters. TCL, on the other hand, retained the management of the original Alcatel mobile phone and paid a high salary for it, which made the operating cost high and it was difficult for French enterprises to achieve effective control.

For China enterprises, the staffing after the merger seems to be a dilemma. If you send your own managers from the parent company, it will be difficult because of the lack of cross-regional management experience. If the original management is retained, it will face the problem of incentive adjustment, and it is difficult to strike a balance between operating costs and management efficiency. In fact, there is a good solution, that is, enterprises should step up the training of international management talents in order to export their own management team after mergers and acquisitions, and at the same time design more scientific corporate governance and high-level incentive system for subsidiaries to minimize the personal influence on management.

Resource integration

No matter what the purpose of M&A is, in the final analysis, it is to obtain the superior resources of M&A and realize the complementary advantages of both parties, so the integration after M&A is very important for enterprises. Only by strengthening the management and control of M&A enterprises on the basis of resource integration can we exert the great effect of strategic synergy.

The gap between China enterprises in M&A integration is reflected in many aspects. First, the choice of M&A goals and the underestimation of their own strengths, weaknesses and complementarities have directly left obstacles for the subsequent integration. For example, Haier's acquisition of home appliance enterprises in developed countries in Europe and America has neither production cost advantages nor marketing advantages in overseas markets. As a result, these acquired overseas enterprises are in an awkward position and have not played their due role in overseas layout, let alone integrated resources with Haier headquarters and other subsidiaries.

Find a way out in control

In the current international economic environment, M&A will become an important business activity for China enterprises in the future. If we want to do better in M&A, we must establish a perfect control system and strengthen control after M&A. The management and control system of parent and subsidiary companies is a complex system, mainly from the aspects of business and functional management and control.

Strategic control

The biggest competitive advantage of group enterprises lies in actively planning and implementing strategic coordination on the basis of resource integration, so that each business unit can create more value than when it exists as a single company. Strategic management and control is a means of management and control from the perspective of business strategy, and the group company is controlled through the guidance of strategic planning and implementation within the group.

The strategic control of group companies needs to effectively control different businesses. From a static point of view, business portfolio can be divided into strategic industry, quasi-strategic industry, financial industry, venture capital industry and exit industry. From the perspective of dynamic business layout, the strategic management and control of group companies need to reasonably match core industries, growth industries and future industries to lay a business foundation for the sustainable development of enterprises.

After the formation of the strategy, the parent company should also bear corresponding responsibilities for the formulation and control of the annual business plan during the implementation of the strategy. In order to improve the core competitiveness, the strategic management and control of group enterprises must also be committed to the following improvements and changes: (1) standardization of business; Integration of process, organization and information; Sharing resources, services and knowledge; Collaboration between business and strategy; Quick adaptability; Enterprise performance management. At the same time, in order to effectively implement strategic management and control, the group company also needs to establish and improve the corresponding strategic management organization system and strategic management business system.

Human resource management and control

In the human resource management system of enterprise group, besides the daily human resource function module similar to that of a single company, the more important value is embodied in human resource management and control. From the perspective of enterprise groups, the focus of human resource management is reflected in the manpower control of subordinate enterprises by the group headquarters.

The management and control of human resources in parent and subsidiary companies focus on solving the following problems: first, based on the talent combination and planning of industrial portfolio, the supply and demand of human resources in enterprises are predicted under the strategic objectives of the group, and employees and positions are matched through reasonable policies and measures; Secondly, based on the talent cultivation mechanism of management and control interface, aiming at the problems existing in the existing personnel allocation, an elite talent pool is established through external recruitment and internal training; Third, career development management based on mixed operation, in order to let employees take more important positions in the future, it is necessary to cultivate employees' professional hobbies and abilities; Fourthly, the human capital management based on multi-level entrustment needs to design a reasonable incentive and restraint mechanism in order to prevent the moral hazard brought by the multi-level and multi-corporate governance structure of the group.

financial control

Under the multi-level corporate structure, financial management should be centralized through process improvement and IT means, so as to balance and utilize resources to the maximum extent and provide sufficient information for decision-making. Financial control is an extremely important means in the management and control implementation system of group companies, and it is also an important method for the headquarters of group companies to control member enterprises.

The specific ways of financial control include unified allocation of financial resources, centralized allocation of funds, budget and final accounts management, control and management of investment scale, subsidiary products and operating costs, and company profit rate, as well as financial arrangements for related party transactions, transfer pricing and reasonable tax avoidance. The functions of financial control include: standard control, financing control, investment control, asset control, capital operation control, capital control, expense control and income control.

marketing control

For group enterprises, marketing is one of the core competitiveness, which is directly related to the market share of enterprises, so the formulation of access is king. Many multinational companies absorb and integrate M&A enterprises around their own channel advantages, thus forming a complete industrial chain. However, China enterprises do not have marketing advantages overseas, and it is often difficult to effectively control their subsidiaries from the market level, thus affecting the management decision of the parent company.

Strengthening marketing control needs to start from the following aspects: constructing marketing strategy; Design marketing policies, annual plans and budgets; Integrate marketing organizations, channels and distributors; Constructing marketing management system; Integrate marketing management process, post management, salary and performance system; Construct process management with customer relationship management and bidding management as the core; Form support for marketing activities of marketing organizations; Form a marketing process centered on the monitoring and management of the marketing department; Form a management mechanism that regularly summarizes and adjusts.

Supply chain control

Compared with a single enterprise, the advantage of a group enterprise is that it can exert the great effect of resource integration and promote the coordinated development of its subsidiaries through internal transactions. They can also give full play to the advantages of centralized procurement and channels through the integration of supply chain, and fully reflect the role of the parent company as a value creator in supply chain control.

Supply chain management includes the management and control of subsidiaries distributed in upstream and downstream nodes of the supply chain; It also includes the control of enterprises outside the group. In this case, the group acts as the main supplier of the supply chain, and enterprises outside the group in the supply chain become "non-joint-stock factories"; It can be seen that supply chain management sometimes crosses the boundaries of group enterprises and realizes resource integration in a larger scope.