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  Chinese firms need to improve work on home turf  

  

 

With nearly two decades of experience in providing consulting services for multinational companies, Ruggero Jenna believes Chinese companies need to concentrate on planning and improving their services, creative product designs, and plan their strategic priorities before they go abroad.

The managing director of Value Partners China supervises and coordinates consulting services for a string of major Chinese companies engaged in the telecommunications, automobile, consumer goods and textile and apparels industries.

Globalization

When some domestic companies ask for suggestions on how to realize globalization, Jenna says they'd better improve their work on their home turf before looking overseas.

"Not just for going abroad, but also for increasing their competitive capability comprehensively, they'd better improve their performance at home in things like organization, customer service, and then think over their overall strategy - what markets to invest in," says the consultancy veteran from Italy.

The quality of customer service, for example - from telecommunications to the banking industry - that Chinese companies give to their clients, in general, "is still not what it should be", he notes.

Chinese companies are facing increasing competition from both international brands and local players, so they need to protect themselves first, he says.

Chinese consumers are also becoming increasingly demanding and sophisticated and if Chinese companies can meet their needs, they can be more competitive on the international market, says Jenna.

"If they want to win against the competitors at home and abroad, improving customer services is the key topic that we know about and what Chinese companies have to do now," Jenna says.

He points out that another key goal for Chinese companies is quality product design. In China's early developing stage when growth was focused on fast expansion and low value products to reach scale, the game was easy.

But now China has stepped into another stage, which requires more value added services and products. Domestic companies should quickly respond to the transition, he says.

Jenna cites China's car manufacturers as an example. Cars designed by Chinese producers, even joint ventures, are not at the same level as those in the most sophisticated markets. That fact limits the potential of companies such as Chery and Geely to fully expand in the international market.

"If Chinese companies, including car makers, want to go globally successfully, they need to have creative products or services, which have superior characteristics and their own personalities," says Jenna.

Concerning globalization, it's a case-to-case issue, with no magic bullet for all companies, especially when it comes to establishing priorities

"If you are a telecommunication company, your priority is at home now where there is a restructuring of the industry, people's needs are increasing and there is a lot of competition among various operators. So you have to win that first and then go abroad," he advises, adding that it makes more immediate sense for automakers to think about global marketing.

With an international network of 15 offices in 40 nations and regions and more than 3,000 professionals, including 55 partners, Value Partners has successfully backed a series of Chinese companies to establish their overseas foothold.

Huawei is one. When China's top telecom equipment maker goes abroad, it has to compete with local peers on bidding.

Value Partners helped Huawei respond to the local standards, adopt their offers and meet the needs of other overseas telecommunication corporations.

"We help them understand the local market, tailor their proposals and prove to the local operators that Huawei is better than other international companies," says Jenna.

Value Partners has been doing that for Huawei in many countries in the Middle East, Central America and Europe, including Italy.

Jenna says Huawei has very advanced technologies and strong R&D department and is very aggressive on the market, but it doesn't use many consultants.

"They are very protective company, they don't tell others too much about themselves, but they are happy with our work, as we really bring results faster than others and our cooperation is flexible," says Jenna.

Competitive edge

Entering China in 2005, Value Partners has set up three offices in Beijing, Shanghai and Hong Kong with around 30 consultants. Its Chinese business, to date, contributes around 5 percent to its global revenue.

This year's growth rate for Value Partners China is estimated to be 50 percent, and the trend is expected to continue for several years.

"We are quite small so far, but my goal is that within four to five years, we will have 90 to 100 professionals and make up 15 percent of Value Partners' global business," says Jenna.

At the moment, the Italian-headquartered firm's client portfolio is more composed of multinational companies but Jenna says the company is working for a 50-50 balance.

Sources from the China Consulting Industry Association say there were about 30,000 consulting institutions, both domestic and foreign, registered in China by the end of last year.

They are engaged in diversified industries such as IT, corporate management, public relations, human resources, and marketing and the number of firms has been rising at a double digital growth annually.

"We don't look too much at the competition, we are more about having a clear direction of what we want to do and working well for our clients," says Jenna. He says that the consulting market in China is growing at probably 20 to 30 percent annually now and will do so for the next five years at least, so there is room for more.

And he says Value Partners' real challenge is to distinguish itself from competitors.

Last year, Value Partners helped Eurizon Financial Group S.P.A., the top financial group in Italy and third largest in Europe, acquire a 19.9 percent stake in Beijing-based Union Life Insurance Co Ltd for 800 million euros and to buy a 49 percent stake in Shenzhen Penghua Fund Management Co Ltd, one of China's top 10 fund managers.

It did strategy design and investment consultancy for Eurizon, which helps Eurizon's investment grow more than 100 percent so far and establish it as a significant presence in China's financial industry.

The case of Pirelli, an Italy-based large tire manufacturer, demonstrates Value Partners' technique of aiding multinational companies entering China.

When Pirelli came to China in 2005, it decided to find a local partner and the consulting firm helped it invest in Lutong company in Shandong province, which initially manufactured only truck tires.

"Most of the work we have done is improving the performance of the joint venture, because Lutong was mainly around Shandong, not around China, and the products' quality is relatively poor and Lutong is a relatively poor brand," recalls Jenna.

Then Value Partner designed the strategy to improve the distribution, selected the best distributors in every province, improved market share, and introduced better quality products with the Pirelli brand. It resulted in a 100 percent sales increase in the first six months after the distribution restructuring.

Jenna says Value Partners' internal communications is another plus. "The connections between different offices in order to have the best resources available is our strong point," Jenna stresses.

 

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