Multinational companies lost in China: Why the world is not in trouble with China?

■ Wen/Shen Yin, founder of innovation communication agency, is the author of Business Common Sense. Best Buy quit, Yi Bei quit, and DHL couldn't hold on ... Although these top global enterprises collectively suffered various strategic and management mistakes in the China market, they also did so in other countries. Why do they encounter more difficulties in China alone? This is the key to our reflection. Without reflection, China's business environment will sink deeper and deeper in an abyss with no bottom line. China is actually a country with a strong commercial nature. For example, after World War I, during the period when the northern warlords were in melee, although there was only a small gap, the business could still develop rapidly. For another example, in the prosperous times in history, when an emperor is clear or the control is relatively loose, the society will develop rapidly. But this period of history is constantly circulating, constantly being beaten back to its original shape, and never going far again. In other words, China's business has not achieved sustained growth. Before 2008, the development of China made the confidence of the whole society reach an explosive level. During the American financial crisis, we successfully hosted the Olympic Games, which seems to be a great thing. But what happened next? First, many fast-growing enterprises in China have problems, such as Mengniu, Sanlu and Shuanghui. This is debt repayment. In the past, with the rapid growth, enterprises have done something beyond the bottom line. Ming rules have been replaced by hidden rules, and some basic common sense has been sacrificed for speed. Second, China is changing from export-oriented to domestic consumption, but in fact, ordinary people are not willing to spend money. Why not spend money? Because there is no sense of security. Nowadays, the rich in China are considering emigration. Why? The fundamental reason is that confidence in the country is not so sufficient. An example is very illustrative. We have been advocating entrepreneurship and innovation, but the industrial and commercial tax process faced by a new enterprise is still as complicated. What is innovation and what kind of entrepreneurship has a future is not something that entrepreneurs can judge. Now, China has been welcoming foreign giants to break up halfway. We need to find an answer: Why doesn't universal business value work in China? Is it because we don't have the principles of market economy that so many multinational companies encounter difficulties in China? Before answering this question, let's answer another question: What kind of multinational companies are developing well in China? In fact, companies that make products are developing well in China, with both export and domestic demand. For example, Samsung, such as the original Nokia, is relatively easy to succeed in China. However, companies that do technology and software, such as IBM, have not developed as well in China as Indian companies. Why? Because both the service industry and the software industry are related to intellectual property rights, and China has always been a country with poor protection of intellectual property rights, some internationally accepted business standards are not feasible in China. In the United States or anywhere, you have to pay for software, but in China, it is very difficult to do this. So basically, foreign Internet companies are in China, and it is difficult to survive. What is another kind of enterprise that is not doing very well in China? It is a consumer and retail enterprise, because firstly there are many restrictions in China, and secondly, businesses have to deal with the local government and people. Wal-Mart has been in China for so many years. As a production base, China is very successful, with14 products exported from China. But it's hard to say how successful Wal-Mart is in opening a store in China, and Carrefour has more problems. A healthy business environment needs legal constraints, contractual spirit, credit system and many principled things, which are not lacking in China, but beyond that, it depends more on hidden rules. Either you have to get used to the rules of the game in China. For example, many multinational companies, such as telecommunications-related companies, broke out bribery scandals one after another, and all of them were first detected from the United States. You see Carrefour and Wal-Mart have three accidents; Either stick to your own values, then you must face various tests at home. Multinational companies entering China will put special emphasis on "China characteristics" and use the localization of "China characteristics" to fight against the so-called globalization, which is actually about human feelings and relationships. But for enterprise management, if you do this, it may have an effect in the short term, but in the long run, it will be paid back sooner or later. Therefore, behind localization is acclimatization. What is acclimatization? It's that your place has a strong rejection of his place, so that person has obvious discomfort when he comes here, and you can't adapt when you get used to this place and go back there. Best Buy's success depends on services all over the world, not extremely low product prices. It only emphasizes the value of service, and it integrates the value of service into it. However, in China, it is completely low-cost competition, so it is naturally impossible to compete with the second landlord role like Gome and Suning. More importantly, since it is a global company, it naturally hopes to do things with a set of rules and operating principles all over the world, because a common standard can ensure the operational efficiency of enterprises. But if every country needs a completely localized thing, it will be difficult for gears between different regions to mesh with each other. In addition, enterprises need to hire a large number of people, such as logistics services, to help the network. Then, those who really invest in this cause, those who invest in consumption, operation and technology, have to be reduced accordingly, because the cost is there. For example, the financial system in the United States is different from that in China. Today, all China listed companies in the United States have to make two sets of financial statements, one is domestic and the other is American. Moreover, when Americans audit these things, they only recognize the one in the United States and not the one in China. The expenditure in this area alone is several million yuan. In fact, these are all costs, see if you are willing to pay, or you have to measure them. Localization transformation also needs an appropriate degree. We used to discuss that the CEO of this multinational company in China is a foreigner, but it turns out that it is the same for China people, and China people may not really incite irrational factors in China's business environment. Later, there was a saying that the status of multinational company China District in the global market was too low, so what if we attach great importance to it in another mode? In fact, no matter what changes you make, you may not survive in the China market, because business competition is different from the mature market environment, and it is a more jungle and savage market. It is precisely because our business environment is so special that good foreign business models can come in, but it is difficult to copy the original business model in China, because our business model is built around this special business environment. For example, Baidu lost a lot in Japan, and the Japanese just don't recognize you, because you are a competitive ranking, and whoever gives more money will move forward. This model violates local business principles. Why is everyone willing to copy the American business model? Because the United States is thinking about innovation every day, the market economy is relatively mature, and traditional industries do not have so many opportunities. Only to innovate, to find the combination of traditional and emerging industries, the edge of traditional industries or opportunities for new industrial breakthroughs. However, there are many opportunities for rent-seeking in China, and there are still gaps in various industries. Enterprises can do this without so much effort, or even through some means. If there is one in America, just copy it. This also saves trouble. Anyway, the smart people in America have already done it, so let's make a transformation with it. However, China's road to success is certainly different from other countries. For example, in Weibo, it is hard to imagine that Twitter in the United States has a huge content supervision team of hundreds of people like Sina Weibo, which is incredible for Americans. In fact, the Internet industry is the biggest surprise of China's economy in the past decade, and it is also the cleanest and most dynamic part. Relying only on the sweat and wisdom of local entrepreneurs, the investment of international venture capital and the cultivation of international capital market, the second largest market in the world has been created, and the scale of network economy is close to 654.38+000 billion yuan. Different from other industries dominated by hidden rules, theft and traditional wisdom, China's Internet industry is permeated with an imported "pirate spirit": taking risks, being unrestrained, subverting traditions, breaking existing rules of the game, and grabbing vested interests ... It is this pirate spirit that has made Microsoft, Apple, Amazon, Google, Facebook, Twitter in the United States, Tencent, Alibaba, Baidu and Twitter in China. But now a "visible hand" is about to hold the Internet by the neck. 10 years ago, there was only one Ministry of Information Industry that really managed the Internet. Today, more than n departments have the right to intervene. I don't understand, is this progress or retrogression? The success of Internet in China in the past decade is, in a sense, the success of "anarchism" and the victory of "free market". But what we do is artificially divide a flat Internet world into a "grid world"? You need a pass to enter every box. What is more dangerous is that "every field that restricts private enterprises is a channel through which private enterprises and all citizens are forced to convey benefits to special interest groups." (Wu Jinglian) As long as the pattern of power allocation of resources does not change, simple entrepreneurs will either go out or have to buy out power like Huang Guangyu, gain some asymmetric privileges for themselves, and at the same time transfer benefits to power owners. By that time, China's Internet industry will also start to degenerate like the real estate industry. Today, the Internet has just passed its infancy, and its future growth is limitless. But our attitude towards the Internet can actually reflect our attitude towards innovation. If we really want to be a big country with "independent innovation", then the government should really understand the meaning of "independent innovation": everyone and every institution can become the main body of innovation, innovative ideas can be freely exchanged, and innovative achievements can be disseminated without obstacles. In other words, the premise of innovation is precisely the true liberation of thought. Variation of Good Business Model Since 2008, the health of China's business has been deteriorating, just like riding a roller coaster, after climbing a peak, it began to rush to the bottom. The "melamine incident" between Mengniu and Sanlu is not the first or the last time, but it is a very representative event. So, how did a good business model evolve into a bad business model? Group buying is another typical example. Now more than 5000 group buying websites are losing money to do business. It is difficult to predict what will happen in the future. Looking back, in fact, the "melamine incident" has set the whole dairy industry back for at least five years. Tian Wenhua, Niu Gensheng and others are the founders of the mainstream model of domestic dairy industry. In 1980s, Sanlu, the state-owned enterprise where Tian is located, took the lead in cutting down the self-built pasture, handing over dairy farming to farmers, and controlling the milk source through self-built milk stations. 1999, Mengniu, a completely private company, was born. From the beginning, it revitalized social resources and completed the leverage strategy of "light asset strategy". On the one hand, they buy raw milk from free-range farmers at high prices and lease small dairy factories with losses for processing and production; On the other hand, we will devote ourselves to CCTV advertising marketing, develop low-priced and large quantities of Tetra Pak normal temperature milk, and promote upstream production through market sales. Practically speaking, the rise of Mengniu promoted the development of the whole dairy industry in Inner Mongolia. Before Mengniu's accident, the milk price in Hohhot was the lowest in the country, and there was a so-called "limited purchase card". The extra part is either not sold or sold at a low price. A dairy farmer once said excitedly to the media, "If Mengniu didn't suddenly appear, it would really sell and kill cattle." In the following six years, Mengniu drove more than 800,000 new cows in Inner Mongolia and surrounding areas, and the dairy chain radiated about 2 million dairy farmers. It is said that there is a local folk song: "One cow in a household, and the wife and children are hot on the kang;" There are two cows in a family, so you don't have to worry about food and clothing; A family with three cows will build a foreign building in three or five years; A cow is more cattle than Mengniu's old cow. " Mengniu first invented "social cooperation to build a milk station". Enterprises first obtain milk from cooperative milk stations, and local milk stations collect management fees from them. At the peak, there were more than 3,000 such cooperative milk stations. Niu Gensheng is well versed in the operational logic of grassroots society. He once explained: "Every natural village and cattle-raising area always has money and power. Together, money and power can be used as this milk station. " At first, this business model showed great advancement. Mengniu started from scratch, and became the second largest dairy giant in China within five years, becoming the object of emulation by the whole industry, just like Wal-Mart in retail and Dell in PC industry. Yili and Sanlu successively abandoned the mode of self-built milk stations, and Guangming also stripped off its self-built pasture before listing. Brand, marketing and price war have become the key to the competition of dairy listed companies, but the upstream investment is seriously insufficient. However, new problems have emerged: dairy farmers in the free-range mode have neither extra land nor financial strength to expand reproduction, and they have no money to cultivate better high-yield varieties, which can't keep up with the needs of the ultra-high-speed development of dairy enterprises. In order to compete for the milk source, the personnel of Yili and Mengniu even had a bloody conflict, and private milk stations lacking supervision and even unlicensed "milk tyrants" also appeared in large numbers. The gap between backward agricultural production and developed commercial retail is growing. Since 2006, the price of raw materials has risen all over the world, which makes the dairy farmers at the lowest end of the industrial chain fall into the situation of being caught between Scylla and Charybdis. In order to control inflation, the government imposes price limits on dairy products, forcing enterprises that play a leading role in the industrial chain to shift their pressure to the upstream, while rich and powerful milk stations further put the burden on scattered and unorganized dairy farmers. As a result, dairy farmers went to the milk station, and then to the dairy enterprises to "cheat at different levels", forming a "prisoner's dilemma" that no one can change. According to Qian Guixia, a professor at the School of Economics and Management of Inner Mongolia University, in the whole vertical dairy industry chain, the investment ratio of dairy farming production, dairy processing and dairy sales is usually 7.5: 1.5: 1, and the profit ratio is 1: 3.5: 5.5. Among them, raw milk has the highest production cost, the lowest profit and the greatest risk. It is precisely because of the huge disparity between the input and output of dairy farmers at present that it is dairy farmers who suffer the most from problems every time. Public opinion pointed the finger at unscrupulous milk stations, the loss of the bottom line of enterprises and the inaction of government supervision. But in the final analysis, whether a business model can run healthily for a long time depends on whether it can continuously create positive value for all stakeholders in the trading chain. Otherwise, the maximization of one party's value will inevitably be at the expense of the other party's value being squeezed, and the final result will be a loss, and everyone will die together. The tragedy of dairy industry clearly shows how a good business model has become a bad business model. We might as well sum up several reasons for this evolution: one reason is the convergence of competitive means. What you see in the United States is that enterprises are more willing to try some innovative ways of competition, while in China, everyone's means of competition are almost the same, that is, price war, advertising war and channel war, because these are the only axes in their hands. Everyone is fighting for speed, and the result is that there is no bottom line. Another reason is that most domestic enterprises are doing one thing, short-term goals, and do not want to build an ecological chain or industrial chain. For example, Mengniu and Yili are both leading enterprises, but in fact, in this chain, Mengniu and Yili have made a lot of money, and second-hand dealers have made a lot of money, but dairy farmers have not made a lot of money, which means that the most critical link in this chain has gone wrong. For Mengniu and Yili, all they ask is speed, speed, speed and expansion as soon as possible. Just like Mongolian cavalry, two horses rode in different directions and were killed at once. Because the price was very low, killing them destroyed local enterprises. But for Mongolian cavalry, they just graze and hunt, can't farm, and have no idea of long-term management. However, grazing in Mongolian grasslands also needs to take turns. Today it will be in this grassland, and tomorrow it will be in that grassland. But now desperately raising cattle and sheep is against the most basic ecology. No matter how good the business model is, it also has its resources and environment, and there are many related factors restricting it. If you get rid of these conditions, even a good business model may go bad. The incentive behind the system is also a very important factor. Without land concentration, supervision is impossible, so under the model of "company+farmers", individual farmers have no bargaining power. In the United States, farmers will unite and there will be a federal supervision. This association has great coercive and punitive power. It is composed of the most respected enterprises in the industry. It has a board of directors and is not controlled by a single enterprise. In other words, in addition to the control of the government, there is also the power of the third party to balance. In China, all third-party trade associations are more official than the government, that is, they conduct evaluations and collect money. They were kidnapped by both sides, with both power and big business. A healthy ecological environment should have trees, grass and shrubs. If there are only trees and nothing grows on the grass, the environment will soon become a desert. A normal business environment is subject to different constraints, including the power of the government, the power of the law and the power of the industry. Otherwise, it is also in danger of desertification. China has a lot of common sense on the dark side of business, but in practice, he despises it even more. The Shenzhen Airlines acquisition at that time was a typical absurd drama that despised common sense, full of black humor and jaw-dropping truth. Li, a prisoner of "medical parole", colluded with Xinhua Life Insurance CEO Guan, and the white wolf completed the acquisition with empty gloves. However, the purpose is to use Shenzhen Airlines, which has a continuous profit of 1 1 year, as a financing platform to repay the purchase price, engage in real estate, mingle with local officials and take away billions. Under its ravages, Shenzhen Airlines has touched the red line of "insolvency". This is "the worst privatization". After many years, the tragedy of Shenzhen Airlines finally broke out. But the problem is, four years ago, almost all discerning people saw that it was unreliable, but why couldn't it be stopped? Of course, whether it is Li or Guan, I believe they are still just stooges in front of the stage. Behind every public scandal is a black hole with no end in sight. The XX family who manipulated Jianlibao's acquisition, the Shanghai senior official who helped Zhou Zhengyi get a two-year suspended sentence, Luneng's inexplicable privatization, the rent-seeking of coal mines in Shanxi and Inner Mongolia, and the mysterious shareholder of Shenzhou Taiyue all formed the dark forces of China's business. The power to ask for rent everywhere, the umbrella behind every dirty money, and the "Hu Xueyan" logic behind every abnormal transaction. The dark forces that dragged Anakin Skywalker into the water in Star Wars, after dragging down the whole China officialdom, are also dragging down the most dynamic part of China's business. I know a rich man in private enterprise, who is among the best in Forbes list. In order to enter the real estate industry, he tried to curry favor with the national model workers in the 1950 s and was then the deputy mayor of the capital. Unfortunately, he is unpopular and has made no achievements in this industry that has produced the richest man for many years. Without an umbrella, I was even put in prison. Later, he made a name for himself in a neglected industry, and finally entered the real estate industry with great fanfare, making a lot of money in this round of real estate boom. Now he can finally eliminate all the public opinions that are not conducive to him according to his own will, so I believe he must have made a deal with the devil. By the way, he is an American citizen now. What is the key to understanding China's business paradox? Is to understand the dark side of the Force. Why should we diversify? Banks are ATMs, chain stores are printing presses, real estate is Macs, and the Internet is blowers ... Under the cover of power, it doesn't matter what it is, what matters is how to possess it and sell it to foreigners at a high price. How about corporate governance in China? Without government governance, all corporate governance is nonsense; Miss MBO? Look at what happened in Li Jingwei, Yang Rong, and see what happened in Brilliance Jianlibao. What else do you want? Is there a third way to choose between the worst privatization and the most horizontal nationalization? If not, what should you do? An investment bank executive I know has now turned to be the managing partner of XX Industrial Fund, with a background in central enterprises, and is now engaged in Pre-IPO and M&A business. What created this dark power? What makes today's market economy in China so bloody? Share to: Welcome to comment, I want to comment.