De-mystifying China’s Outbound FDI

On the occasion of the first “1+1” Zurich session, Prof. Dr. Zhang Hua lectured on forei

On the occasion of the first “1+1” Zurich session, Prof. Dr. Zhang Hua lectured on foreign domestic investments, referencing the „Dalian Wanda“ case. Dalian Wanda purchased the U.S. film studio, ‘Legendary Entertainment’ last year, which represented a historic new step in the entertainment market for the Chinese Real Estate giant. Owner of the Dalian Wanda Group is China`s wealthiest man, Wang Jianlin. The group is one of the biggest private companies in the world.

 


Why would a Chinese real estate company wish to buy an American entertainment company? One reason is that for Chinese companies, globalization really means upgrading their capabilities domestically. Prof. Zhang explained that most of the Chinese companies going abroad have one motivating factor in common: they are not seeking new markets, but rather new resources and capabilities.  Ultimately their goal is to upgrade their own capabilities and learn from western firms, so that they can better compete in the Chinese domestic market.  At the end of the day, the goal of such acquisitions is to bring the best of both worlds together, and design a “win-win” transaction structure which bridges cultures and sustains the business long-term, Prof. Zhang said.

In the case of AMC, Dalian Wanda turned the entertainment company around.  On August 31, 2012 Wanda bought AMC for 700 Mio USD.  AMC owned 343 theaters with a total of 5000 screens, which accounted for 20% of the US box offices.

2004 AMC was acquired by a group, which included JP Morgan, Bain and others for 1.5 Bio USD.  
2010 An IPO resulted in 1.5 Bio USD
2010 AMC rejected Wanda`s initial offer of 1.2 Bio USD
2012 AMC had 3.6 B in debt.
2012 Wanda was Chinas biggest cinema company and bought AMC for only 700 Mio USD.

Prof. Dr. Zhang Hua

Dr. Hua Zhang is Associate Professor of Finance at CEIBS. Dr. Zhang received his Ph.D. in Economics from the School of Economics, University of Hong Kong. He holds M.A. and B.A. degrees from Fudan University, both in economics.

His current research interests are corporate finance, corporate governance and business ethics, entrepreneurship, and financial economics. His research papers have been published in Journal of Business Venturing, Journal of International Business Studies, Journal of Business Ethics, Corporate Governance: An International Review, as well as other academic journals and newspapers.

 

Why General Motors lost the global marketing challenge...

General Motors had a perfect start to a new world after the second world war, but it did not exploit its chances, as we know.In Europe, General Motors had products which would have fit the market situation perfectly, but failed to bring the smaller Opel to the US market.

... and will be gone in less than ten years as an independent company

by Jimmi Rembiszewski

Looking at GM's business and brand strategy (or rather the lack of any) over the past 50 years, you cannot be surprised by the fall of a former world leader. It will most probably end with the sale of GM’s European division. Why did it go so wrong for the clear post-world war market leader?

It had a perfect start to a new world after the second world war: it was market leader in the United States, by far the biggest and most profitable car market with great brands recognized all over the world, such as Cheri, Cadillac, and Buick. Everybody saw them in Hollywood movies and dreamt about them.



Was this not the perfect starting position for GM to establish itself as the leader in the world with Ford as its only real competition? Most of GM’s other competitors, i.e., German, Italian, French, and Asian manufacturers, were looking to restart from scratch.

In Europe, GM eventually owned two strong brands with Opel and Vauxhall, and made it into Europe’s two biggest markets, Germany and the UK.

It did not exploit its chances, as we know. What followed was the resurgence of German, Italian, and French cars, using the car boom in the 50s and 60s when a car became the symbol of the postwar economic boom.

GM was literally sitting on products and brands that could have taken the emerging global market, but left it to various local businesses and brands. It was the most amazing lack of a corporate/global brand strategy.

For example, its portfolio in the US, Germany, and the UK was not coordinated. How can a company not merge Opel and Vauxhall to form one brand as a spring board to compete at least in Europe against Volkswagen, Ford, FIAT, Mercedes, etc.?

The next big failure in terms of an integrated brand and product strategy came in 1973, when the oil price went through the roof. As a result, global demand for smaller cars led to major reshaping of the product mix. This included the US market, where there was demand for smaller cars consuming less petrol.

In Europe, GM had products which would have fit the market situation perfectly, but again it failed to bring the smaller Opel, for example, to the US market, although Opel did well in Germany.

This opened the door for German and particularly Japanese manufacturers to establish themselves in the US. Again, a vital fault of the GM leadership at the time.

The last chapter began in the late 1980s, with the fall of the Berlin Wall and the opening up of a truly global market.

With brands and products like Opel, GM had the perfect contender to build a global brand, including the “Made in Germany” badge, which in most parts of the emerging markets stood for superiority in auto quality.

But again, GM tried to use brands from the US to cater to these new markets, which wanted value for money offers instead of outdated brands associated with old US movies and of inferior quality, i.e., Chevrolet models as low-priced offers.

This lack of a global vision and a brand strategy is at the heart of the sad GM story, leaving it mainly a US-centric company.

That will not be enough to master the challenges of the next chapter of the car industry, which is on the verge of total change and in which new breakthroughsfrom electronically powered to self-driving carswill be the future.

A relative small player will not have the funds or resources to play this game. Hence, I think GM will be taken over in the next decade. And all because the lack of a truly global brand strategy and its slowness in adapting to new challenges.

 

READ MORE FROM J. REMBISZEWSKI

From Great to Gone: The downfall of the Old Industry
"Some brands will quickly tumble." (Interview)

Forbes Magazine: knowledge transfer through FDI?

At this years World Economic Forum WEF in Davos, Austrian FORBES Magazine journalist Klaus Fiala met

At this years World Economic Forum WEF in Davos, Austrian FORBES Magazine journalist Klaus Fiala met CEIBS Dean Prof. Yuan Ding. He was highly interested in CEIBS moving from China to Europe as 2015 and 2016 were the years with the highest Chinese foreign domestic investments in their history.

 

CEO Philipp Boksberger: "The Chinese are really pragmatic indeed."

In his article based on talks with both the dean and CEO Dr. Philipp Boksberger he settles highly current topics: how do Chinese students who are brought up in a hierarchical society cope with modern management strategies including personal responsibilities? And how can Europeans keep pace with the speed of Chinese digitalization?

The article can be downloaded with a click (German only)

Forbes_Ceibs_zurich_Feb_17.pdf (1.06 mb)

The story of one who left Spain and discovered China.

In his latest book, Gracias China: The Myths and Realities of Doing Business in China, Professor Ped

In his latest book, Gracias China: The Myths and Realities of Doing Business in China, Professor Pedro Nueno reflects on China’s extraordinary capacity to generate economic growth, its contribution to technological development, and service industries such as health, tourism, banking and finance, as well as international trade.

Who if not he could share his insights on investing and doing business in China. As CEIBS President and Chengwei Ventures Chair Professor of Entrepreneurship Pedro Nueno has spent much of his time in China. Since 1994 he has been a member of the Board of Directors and Chairman of the Academic Council of CEIBS.

 

 

To thank China for all its contributions and its generosity is undoubtedly an act of justice. Especially for Pedro Nueno who has found in this country the best ally to spread worldwide university education. He reflects on the reasons why China is the only country capable of questioning the hegemony of the United States. "Thank you, China" is the result of these reflections and an analysis of the country.

It is a book on the recent past, the present and the future of the Asian giant, whose course may give us some clues about what will happen: opening up to foreign investment, with constant rhythms of growth, correcting possible imbalances. If this trend continues, the author concludes, sooner or later China will become what we all suspect: the world's first economy and a power that is difficult to overcome.

As China moves closer to becoming the world’s largest economy, and an increasing number of Chinese companies move up the value chain and go global, Professor Nueno’s book is an invaluable resource for executives around the world.

To recognise his outstanding contributions to business education in China, the Shanghai Municipal Government awarded him “The Golden Magnolia Award” in 2007. He also received the “China Friendship Award” from the People’s Republic of China in 2009. His dedication to business was also recognised by the Government of Spain with the Order of Civil Excellence, and the Government of Catalonia with the Saint Jordi Cross.

His research interests are entrepreneurship, management of privatisation and turnaround processes, industrial alliances, joint ventures and acquisitions, management of technology and innovation, and internationalisation processes. In addition to his work at CEIBS he is Bertran Foundation Chair for Entrepreneurial Management at IESE, Spain. He is the current Vice-Chancellor (2000-present) and past Chancellor (1993-2000) of the International Academy of Management.  

The book is written in Spanish and has been published by Plataforma Editorial.

QS Top MBA - what can you learn about MBAs?

QS MBA World Tour is a information road show for potential MBA candiates.

QS organizes the largest business education events in the world and travels to 70 cities in 39 countries. The QS TopMBA Connect 1-2-1 MBA event is a highly effective opportunity for candidates to sit down for prescheduled meetings with our client relations team.

This year, our client relations team was at events in Dusseldorf, Amsterdam and Vienna. Apart from pre-arranged 30 minute one-to-one sessions, our client relations team can also help to identify career options. Potential candidates have repeatedly said how the profited from the opportunity to meet our staff and get to know more about our Global Executive MBA.

QS Top MBA is a recurring topic in the media. Recently the Swiss Newspaper published this article about the „World MBA Tour“.