Doing Business with State Owned Enterprises (SOEs)

By

Moordan Trablus

The objective of this talk

• Demystifying the dragons of China

• Who are the SOEs

• What are their characteristics

• Why are they good partners

• Drawing the map

• Rules of engagement

• Common mistakes

Who are the SOEs? • The Face of China

• Estimated 35%-45% of the total GDP of $11.4 trillion (2011)

• 64 of them at the fortune 500

The Lobby

CNPC Headquarters in Beijing

What are their characteristics?

• Follow central government policy and plans

• Led by party members aged 50-62

• Promotion is loyalty based

• Seek leading edge technologies

• Large volume projects

• Large budgets for new technologies

• Plan budget

5 Year Plan (FYP 2011-2015)

Focus on Strategic Emerging Industries:

• Clean Energy Technology,

• Next Generation IT

• Biotechnology

• High end equipment manufacturing

• Alternative energy

• New materials

• Clean energy vehicles

• Scientific management NPC members convene in Beijing's Great Hall of the People. (File Photo/Xinhua)

Why State-owned • Repeat business.

• China is about stability.

• Size matters.

• There is a map thus there is a path

• Israelis are an excellent partner

• Israel is not a competitor

• Respect for the Jewish legend

Rules of Engagement

• The name of the game – Respect and cooperation

• Be Patient – 1-2 years to close a contract

• Be Persistence - You cannot be rejected, but postponed

• Repetition – Continue to market.

Rules of Engagement

• The Misconception of Guanxi Put it simply … Connect & Relate

Foreigners are not Chinese

• And will never be

• You must have a Chinese partner

• Trust your Chinese partners to do the business for you.

• Expats based governance approach reflects lack of trust and cooperation.

• SOEs employees Vs. Private sector business people – Different spicy

A toast is more than a hand shake

• Business is personal

• Do not be right… be a partner… understand the local constraints

• If negotiation is tough something is missing

• Don’t be sharp, be polite sharpness will break fast, be smooth and flexible… bamboo

During his visit to China in 1972, President Richard Nixon shares a toast with Chinese Premier Zhou Enlai.

Top Level Management

User

Technical

Top Level Management

Sales & support

R&D

SOE Levels

Solution Provider

Decision Makers

• No One decision maker - Decisions are made in three levels

• Know who are the decision makers in each level. Their personal interest, and organizational interests.

Understanding incentives and interests

• Leaders take pride in driving “home” innovative technologies for a good value

• Strong post sale support and services – SOEs do not like to pay for maintenance… product packaging

• Technology Transfer – Chinese do not seek to steal your technology…

• Buyer / Seller Vs. Partnership and cooperation

Giving Face

A delicate dance: the future premier was given privileged access to the Oval Office Xi Jinping

Market Entry Strategy

• Do the homework – Research as you go, adapt and change based on local needs

• Differentiate with Product Uniqueness. Not Price.

• Embassy work – Use ministers level marketing

• Market education – creating the needs, budget allocations.

Common Mistakes entering China market

• Not fully understanding the forces at play

• Treating SOEs as buyers rather than partners

• No inside information

• No patience, no adaptation

• Short term thinking

• Wrong conclusions

Thank you!

謝 謝 www.mjochina.com