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China home electric appliance manufacturer: internationalization risks from thre

Internationalization is becoming a required course of more and more China enterprises, but that is impossible several years ago. At that time, internationalization was just some other’s business, and has nothing to do with most enterprises. More we can see is foreign enterprises coming in but no China enterprises go out. But today, the situation is different. It seems that, suddenly, we found a group of China enterprises has already marching on the road to internationalization, and even some enterprises are preparing for the fight.

Once talking to internationalization, people usually feel at loose ends. On one hand, big boss of big companies taking about the hope and stratagem; on the other hand, internationalization experts earnestly and tirelessly told us watch out traps. In fact, it reflect when China just opening to the foreign country, China enterprise and even the whole society is strange to internationalization. It is normal, after all, when our entrepreneur facing question such as “Can you earn profits in short time?”, they still in short of confidence.

Surely, whether enterprise can realize profit is testing the confidence of China entrepreneurs. In most cases, if they are not able to earn profits in short time, that means internationalization die on the vine. For China enterprises who do not have enough holistic power, the beginning of internationalization need to invest all round, large part of the investment comes from domestic market profits. And another fact we can not ignore is that, the China enterprise interest earning ability in mainland is not strong. So, whether it can form long term support for oversea market, this is a question. For Haier who has just been listed in World Top 500, one of the obvious characteristics of its internationalization is to go high-end road: from high-end market, products also aiming at high end. This allocation make Haier has the ability to bear loss case by internationalization in relative long period. But we can see Haier do not have strong domestic market profit earning ability, under such situation, enterprise is hard to offer long term support for internationalization.

In fact, what China enterprise internationalization facing is not only how to realize profit earning in short term. As for brands, China enterprise encounters two headaches at the same time: One is bottleneck of enterprise brand; the other one is bottleneck of country brand. What we call “enterprise brand bottleneck” is easily to be understood; that’s brand image of enterprise can’t become effective support to internationalization. From the range of global, most China brands are “Domestic brand”, and haven’t reached the height of “global brand”, their influence basically restricted in China mainland, and little influence to oversea market. What we says “ Country brand image bottleneck” is easy to understand as well. Though in recent years, China politics, economy influence has great improvement, China image in the world is “big but not strong”. The forming of this image has connection to China’s few contributions to World technology innovation.

Most products China exported are belonging to Labor integrated products. This product structure even deepens that thinking of inferior products for consumers in other countries. Many people haven’t fully realized “Country brand image” influence to enterprise internationalization. In the past, most people thought, it will be all right once enterprise image is good. It seems now this point is unilateral. Enterprise image has direct influence to market while country brand has indirect influence to market. Why nearly all goods from China just can be sold in low-end market of the U.S.A.? Are our products not as good as others? NO, it is because Chinese weak country image, and caused American consumers commonly have prejudice to China products. Enterprise brand image and country brand image are both weak, thus bring difficulty for China enterprise exploring American etc. high-end markets. And that is why though Haier have been struggling in America for several years, it hasn’t achieved great breakthrough.

But, can we conclude: “ Haier should withdraw from American market”? Obvious not. There is a complete standard for judging whether enterprise internationalization is success or not. Realizing profit earning in short time is just one term of the standard, even not a single one. Usually, a successful internationalization must achieve three condition at the same time: the first one: this brand must establish firm international influence; secondly, his position in global market must be advantaged; thirdly, he must keep earning profit in relatively long period. While internationalization met the mentioned three conditions, the internationalization can be considered success. These three indexes is a frame-like index, or mother index. Some sub-indexes are also important as well, for example: enterprise needs to establish a high qualification internationalization talent team, to realize transform from product output to capital output etc.

Sometimes Chinese are enigmatical, they can hold up boss consider not earning money when operating domestic market as nothing, but they can not accept boss get loss while doing business in oversea market. In most Chinese’s eyes, if enterprise can not make money from oversea market in short time, the internationalization must be a failure. Without fail, it is a superficial point of view, a behavior of lack of deepen knowledge for internationalization. This situation is like people watching diving contest, they don’t care whether the pose of athlete is right or wrong, but see how they control the spray after dived.

In fact, loss situation is not the same. One is managing loss, namely caused by improperly management. The other kind is strategic loss, which means loss in anticipation, leader of the company has full mental preparation and prepare money for the loss. Regarding strategic loss, there are two characteristic cases worth to be mentioned. After TCL merged with Thomson color TV business, many media ask Mr. Lee how to face the loss. Lee’s reply is trying to “earn money within 18 months”. In other words, Mr. Lee is ready for the loss before the end of 2005. But, some people still can not forget the annual report of TCL in 2004, which sounds not so good. It seem that the internationalization had met big trouble. In contrast, administrators of TCL behave like a cork. In their eyes, to cooperate with Thomson and Alcatel and bear certain loss is just as we need to pay tuition for school.

What they concern is: Can the two enterprises merge and produce competitive enterprise culture after reform. If the culture merge successfully, there is no difficulty they can not handle. The other case is LG. She just don’t care about whether she can get money or not but clinging on internationalization like crazy. LG formally entered China in 1993, but till 2004, she still hasn’t realized profit earning. But loss can’t make LG give up her internationalization process. But his investment and development strength are becoming more and more larger. If we use usual concept to judge LG, we can say LG is a real loser of internationalization. 11 years loss is the fact that not every enterprise can accept. But LG accepted. WHY? The answer is quite simple: China is a large market, and any investment and effort to this market are worthy. So, bearing ten years loss but still go on, that is the foresight of the enterprise.

If we judge Haier with this truth, we also will feel Haier today’s loss is not enough become the reason for deny its internationalization.

Generally speaking, risks for China enterprise internationalization mainly represent in three aspects:

I. Profit earning risk. At present, among China home electric appliance manufacturers who marched in international market, there is few who can achieve profit earning, especially these who have developed to capital internationalization period, the one that can earn profit is rare. Under this situation, how to guarantee internationalization capital supply? It is a question for enterprise, after all, internationalization must establish on self-supporting mechanism. It is not a good plan to survive by other’s support.

II. Brand risk. For enterprise, the importance of brand image went without saying. Internationalization without support of brand can not exist long. But in the situation that foreign advantaged brand had entered first and taken lead position in market, for China enterprise, the late comer of internationalization, the room of development is limit. How to survive and develop under such space? Undoubtedly, it is a baptism.

III. Strategy risk. At present, Strategy for China enterprise exploring international market usually is “marketing first, product second”, attention to marketing strategy is obviously much more than attention to product. This policy is much alike strategy of most international magnate. Can this kind of strategy guarantee stability for enterprise internationalization? This is also a headache.

In a word, the journey of China enterprise internationalization will not by smooth, China enterprises need to do preparation for all kinds of risks, difficulties and challenges. In fact, Chinese entrepreneur is building up such concept.

Nowadays, people tend to say it is “WTO time”. So, what is “WTO time”? In my opinion, the most characteristic sign of WTO sign is integral global market. In the past, the highest goal for China enterprise usually is to occupy China market. Now, the situation is different, time requires China enterprise focus worldwide, and considers China market as part of the global market. When make plan for China market, think about future global market, maybe for the time being, most China enterprises do not have this power, but they can’t go without this concept.

For China enterprise, internationalization is not prosperous every where, nor traps all where. Success or failure, in most extents, it depends on the strategy.

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