global value chains, market entry strategies and doing ... · pdf fileglobal value chains,...

Global Value Chains, Market Entry Strategies and Doing

Business in China.

Paul Calver

UKTI Global Value Chain Specialist

Advanced Engineering([email protected])

Contents

1. The Value Chain

2. Global Value Chain Opportunities

3. Global Competitiveness

4. Key Business Issues

5. Market Entry Strategies

6. Doing Business In China.

The Value Chain

Fuel Systems Components Component Parts Raw Materials

Fuel Systems

System

The Value Chain

R&D and Concept Design

Design Development Prototype

Series Production

Static and Flight Test

Supply Chain Development

Qualification Testing

Simulation and Mock-up

Manufacturing Capability

Procurement

Market Support Capability

Financing and Marketing

Market Analysis

Training

Logistics and Material Handling

Ground Support Equipment

UKChina

USA

Global

The Value Chain - UKTI Objectives

R&D and Concept Design

Design Development Prototype

Series Production

Static and Flight Test

Supply Chain Development

Qualification Testing

Simulation and Mock-up

Manufacturing Capability

Procurement

Market Support Capability

Financing and Marketing

Market Analysis

Training

Logistics and Material Handling

Ground Support Equipment

UK UK

UK

UK

UK

Slot UK Companies Into the Value Chain

Global Value Chains Opportunities

• Leverage Current Business Activities

to Meet Market Needs.

• Increase Global Competitiveness.

• Gain Market Access.

Leading to:

Stronger UK CompaniesAdapting to meet The Challenges

of the Global Market.

What Do You Have to Offer ?

Companies Need to Focus on Key Strengths and Capabilities

WJ Brookes Ltd, who manufactured traditional hand stitched brogues faced insolvency as cheap fashionable imports

flooded the market. After a chance encounter they spotted a need for stylish „Kinky Boots‟

(for men) and relying on their unique technical expertise in strong heel design

created a new niche market thus saving the factory. The company found out that its real

strength and unique capability was in materials knowledge rather than their ability

to efficiently operate sewing machines.From the Film „Kinky Boots‟


Source: ‘Understanding China’s Manufacturing Value Chain’ Published 2008 by University of Cambridge Institute fro Manufacturing


Global Competitiveness

A Cost Base That Matches the MarketFor Labour Intensive Activities

Americas EU Asia

Order book 28% 28% 44% ($46B)

Purchasing spend 28% 65% 7%

Currency $ €/£ $

Currency judgement OK X OK

A Major Aerospace Prime‟s Global Order Book v Spend

$1Cent +/- fluctuation = £10M on bottom line


Source: Imcron Management Report - 2009

Volume Production

NPI S&A

UK/Europe Low Cost Source UK/Europe

“One-Stop-Shop” Suppliers


Source: Imcron Management Report - 2009

• Lower Costs• Lower Currency Risk

• Offset Potential

Market Entry Strategies

Low

investment

risk but

returns also

limited.

Some legal

risks.

Lower capital

investments,

but may create

dependence on

suppliers/

partners.

Benefits of

flexibility,

risks of

formal

structure.

Shared

investment

and risk.

Potential for

partner

disagreement

and culture

clash

High investment required

and corresponding risk.

Benefits of control.

Risk and Return

Licensing OutsourceCertain

Functions

StrategyAlliance

JointVenture

InternalCommercialisation


Essential: Get a „Man-on-the-Ground‟

Co

ntr

ol

Indirect Export

Time and Resource

Agent/Dist.Arrangement

Formal Agent/Structured Dist.

Third PartyCommercial

Rep Office

JV

LicenceOverseas

Manufacture

WOFEParts

Assembly

Service Centre

Representative Office

• Limited to Services that Do Not Give Rise to Earnings or Profit• Market Research• Customer and Supplier Liaison• Assisting Trade Visits to China• Parent Company Co-Ordination


• Form a Company with a Chinese Partner

Joint Venture

Why JV• Commitment to IPR Protection• Good Market Access• Facilities and Workforce• In Country Knowledge

Why Not JV• Finding a Good Partner.• Due Diligence.• Loss of Control.• Different Business Cultures.• Share Profit

WOFE (Wholly Owned Foreign Enterprise)

• General Use Accepted (Manufacturing and Services)

• Some Market Sector Restrictions (MOFCOM: Guidance Catalogue for Foreign Investment)

• Why• Independence and Freedom.• Invoicing in RMB.• Convert RMB to USD and Other Foreign Currencies.• IP Protection.• Operational Efficiency.


Purchase

Get Experience, Save Costs and Increase

Global Competitiveness.

Establish

Build a Network, Enter the Culture, and Obtain a Local Market Cost Base.

Sell

Rationalise, Become Global, and Obtain Local

Market Revenue.

Purchase. Establish. Then. Sell

Is it Right for You

Internal Assessment

Supplier/Partner Selection

Testing the Water

Realising Full Benefits and

Keeping it Right

Expanding the

Relationship

„Establish‟

„Sell‟

Market Entry Strategies– P.E.T.S

Doing Business In ChinaKey Business Issues

• Understanding the Market.

• Selecting Your Market Offering.

• Developing Your Market Entry Strategy.

• Amortising Your Costs.

• Sourcing Aerospace Materials.

• Intellectual Property Protection.

• Where to Locate.

• Business and Cultural Differences.

• Legal Barriers.

• Finding a Partner/Getting a „Man-on-The- Ground‟.

• Making Money Quickly

IPR Theft• Huge problem of piracy / counterfeits

• The majority of the world‟s counterfeits originate in China• [at least] 86% software in use in China unlicensed

In China Copying is the Highest Form of Flattery

Doing Business In ChinaIntellectual Property

Provided Courtesy of Rouse – © Rouse 2008

„There Should be a Law Against it!‟- There is!

• June 1980 China joins WIPO and begins roll- out of IPR statutes

• Dec 2001: China joins WTO – signs TRIPS Agreement

• China’s IP laws are in line with international standards and being regularly upgraded

• Dec 2008 Patent Law has just been amended for third time

• Issue is effective enforcement.



Managing Your IP in China

1. Get a good IPR position

2. Due diligence

3. Good contracts & licences

4. Preventative measures

5. Swift & effective enforcement



FIRST MEETING

• Arrive early

• Formal

• Shake Hands

• Ni Hau; Nimen Hau; Zao

• Hierarchical seating

BUSINESS CARDS

• Take lots

• English and Mandarin

• Your name

• Offer & accept with both hands

• Study

• Respect

INTERPRETERS

• Yours and/or theirs

• Speak clearly, simply, short sentences

• Don’t assume

Doing Business In ChinaBusiness Culture

Provided Courtesy of Hopkinsholt – [email protected]

TEA

• Green

• No milk

• OK to slurp

HIERARCHY – TITLES

MOBILE PHONES

GUANXI

• Connections; long-term relationships; personal; network

• Enhances esteem

• Mistaken for corruption

FACE

• Take great care

• Tact needed

• Give and receive face

• Lose face

GIFTS

• Be prepared

• Not high value

• ‘Cultural’



CORRUPTION

• WTO improving matters ....slowly

• Still a way of life

• Poorly understood in Chinese culture

STATE OWNED ENTERPRISES (SOE vs Private Companies)

• Totally different business culture

• Insular

• Hierarchical

• Risk averse

• Non-business drivers

BANQUETS

• Essential part of business process

• Rituals

TOASTS

• Endless!

• Hierarchy



NEGOTIATION

• Much better than us

• Empowered?

• Lock in agreed points

• Indirect

• Patience, Patience, Patience

HEALTH & SAFETY

• A Challenge!

AGE

MANDARIN Learn Some!!

KARAOKE......... A Serious Business



The Indian Aerospace Market

Paul Calver

UKTI Global Value Chain Specialist

Advanced Engineering([email protected])

General Aviation/ Helicopters, $168

Airport & Airport Services, $4,749

Commercial MRO,

$2,100

Certification, $1

Consulting, $82

Training, $356

Pilot Supplies & Navaids, $35

Financing, Leasing,

Insurance etc, $4,200

Indian MarketCivil Aerospace

Aviation: Forecast Spend 2015 (USD Millions)

Total = $11.8bn

CivilResearch and Development

• Design, development and fabrication of multirole lighttransport aircraft.

• Development of India's first all-composite traineraircraft.

• Hardware and software initiatives in parallel processingtechnologies

• Design and fabrication of advanced compositestructures.

Dept. of Science & Industrial Research ($1.84bn)

Civil Aircraft ProgrammesNAL

70 Seater Programme

Hansa Trainer - CompositeSARAS – 14 Seat

• $75m (of $480m) Approved• Target In Service 2015

• Up to 5000 Short Haul Planes Required (maybe)

Maintenance Repair and Overhaul

Design and Engineering Services

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2010 2011 2012 2013 2014 2015

Market Projections: Engineering Services(USD Millions)

(Source: National Asscoaition of Software & Servcies Companies)

Engineering Services

Embedded Software

Technical Publications

Other Software

India Becoming an Aerospace Technology Sourcing Hub

Defence Projects

Dominated by the Russians in the past -Sukhoi 30s, Mig 29s, transport, helicopters etc.

Opportunities for UK include:

•126 Medium Multi-Role Combat Aircraft.

• 12 VVIP Helicopters

• 57 Advanced Trainers (Air Force and Navy).

• 16 Multi-Role Helicopters

• Jaguar Upgrade.

• Light Combat Aircraft

• AN-32 Aircraft Upgrade (100+ Aircraft)

• Light Utility Helicopter (187 aircraft)

• Boarder Security.

34% Increase Over Last Fiscal Year

Offset is a Key Issue

Defence Research & Development Organisation

• 37 Listed Laboratories/Establishments (www.drdo.org)• 20 Technology Gaps Indentified

• superior aerodynamics• hypersonic flight technologies• new-generation antennae• stealth• lasers• tank protection• nanotech• auto take off and landing• aerostats and high-energy microwave• network centric operations

DefenceResearch and Development

http://www.drdo.org/

Defence and Space Manufacturing

Indigenous Defence & Space - Manufacturing Forecast Spend 2015 (USD Millions)

Metals, $1,084

Composities, $591

Systems and Accessories,

$1,478

Avionics, $1,380

Standard Parts, $394

Manufacturing Ooutsourcing,

$1,478

Consumables, $492

Spend or ‘buy’ Projection of Indian CompaniesSource: Genser Aerospace 2007 Growth $2.8bn to $6.9bn

Traditional Supply Chain

Hindustan Aerospace• >$2000m• Dominate ComponentMarket

• Outsourcing 35% of Manufacturing Capacity(www.hal-india.com)

Bharat Electronics Ltd• >$1000m• Main Customer HALand Indian Defence

Changes to Defence Procurement

• Private Indian Companies Can Bid to Supply Directly to the Indian Government Teaming

with Foreign Companies.

• On a Case by Case Basis the FDI Limit can be Increased from 26% to 49%.

• 13 Companies on the RUR Approved List.

UKTI Will Bring The RUR Companies to the UK on the 8th – 12th March 2010.

• Tata Motors

• Godrej & Boyce

• Mahindra & Mahindra

• Ashok Leyland

• Bharat Forge

• Bharat Heavy Electricals (a public sector company)

• HCL Technologies

• Infosys Technologies

• Kirloskar

• Larsen and Toubro

• Tata Consultancy

• Tata Power

• Wipro

Changes to Defence ProcurementThe RUR Companies

Thank you.

www.uktradeinvest.gov.uk

www.ukadvancedengineering.com

http://www.uktradeinvest.gov.uk/

global value chains, market entry strategies and doing ... · pdf fileglobal value chains,...

Documents