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Fujitsu Siemens. Internationalization Strategy. Focus on China. Name : Richard Erb Education : Diploma in Biology minor subject Chemistry Age : 55 years Business : 2 years software development

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slide1

Fujitsu Siemens

Internationalization Strategy

Focus on China

slide2

Name : Richard Erb

Education : Diploma in Biology

minor subject Chemistry

Age : 55 years

Business : 2 years software development

experience : 14 years sales and marketing

4 years purchasing

Actual position : Managing Director Fujitsu-Siemens

Taiwan and China

Since 1992 in Asia

(Singapore, Tokyo, Beijing, Hongkong, Taipei, Suzhou)

slide3

1. About China

  • 2. Fujitsu-Siemens in Greater China
slide4

1. About China

  • 2. Fujitsu-Siemens in Greater China
slide5

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide6

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide7

Large

Yellow

Underdeveloped ?

slide8

3400 KM

1000 KM

4450 KM

1600 KM

1200 KM

Perception and facts

slide9

Perception and facts

45.800.000 internet users

310.450.000 fixed line phones

320.240.000 mobile phones

410.000.000 TV sets

457.000.000 Radios

170.000.000.000 SMS

slide11

Chongqing 30 Mio (15 Mio central city)

Chongqing 30 Mio (15 Mio central city)

Shanghai 20 Mio (13 Mio central city)

Beijing 12 Mio

Chengdu 10 Mio

Chengdu 10 Mio

Harbin 9 Mio

Tianjin 9 Mio

Wuhan 7 Mio

Qingdao 7 Mio

Perception and facts

slide12

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide13

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide14

CultureshockChina

Language

400 sounds * 4 tones = 1.600 sounds

56.000 characters / 1.600 sounds =

average 35 meanings per sound

slide15

CultureshockChina

Relationship

Relationship in China is much more

important than in Germany.

People usually know schoolmates from different classes

slide16

grandmother

grandfather

grandmother

grandfather

mother‘s

brother

=

uncle

mother‘s

sister

=

aunt

father‘s

brother

=

uncle

father‘s

sister

=

aunt

mother

father

aunt

uncle

aunt

uncle

nephew

nephew

nephew

nephew

nice

nice

nice

nice

nephew

nephew

nephew

nephew

nice

nice

nice

nice

CultureshockChina

Family Relationship

Germany

me

slide17

外婆

外公

奶奶

爺爺

grandmother

grandfather

grandmother

grandfather

wai gong

nai nai

yie yie

wai po

mother‘s

brother

=

jio fu

mother‘s

sister

=

ai yi

father‘s

older brother

=

buo buo

father‘s

sister

=

gu gu

媽媽

爸爸

阿姨

舅父

伯伯

姑姑

mother

father

舅媽

姨丈

伯母

嬸嬸

姑丈

buo mu

shen shen

gu jang

jio ma

yi jang

biaoge

biao ge

tang ge

me

tang jie

tang ge

biao ge

tang jie

biao jie

biao jie

biao jie

表姊

堂哥

堂姐

表哥

表姊

表哥

堂哥

堂姐

表哥

表姊

biao di

biao di

tang di

biao di

tang di

biao mei

biao mei

tang mei

tang mei

biao mei

表弟

堂弟

堂妹

表弟

表妹

表弟

表妹

堂弟

堂妹

表妹

CultureshockChina

Family Relationship

China

father‘s

younger brother

=

shu shu

叔叔

slide18

CultureshockChina

Relationship

Relationship in China is much more important than in Germany

Each family relation has its own name

People usually know schoolmates from different classes

Business in China is done based on relationship

Contracts may support the business, but are not mandatory

Business in Europe is done based on contracts

Relationship may support the business, but are not mandatory

Mistrust between people without established relationship

is not necessarily impolite

No business without lunch or dinner

slide19

CultureshockChina

Behaviour

Example: Negotiations about future business partnership

In western countries it is not unusual to give a leap of faith to the future

business partner.

This behaviour is based on the assumption, that the future partner will follow

the agreed contractual terms and conditions

In China it is not unusual to start with a lack of trust to the future business

partner.

This behaviour is based on the fact, that contractual terms and conditions

can not always be enforced

Sleeping in the same bed, but dreaming different dreams

This can lead to a situation, where the western partner shows his trust

and the chinese partner shows his mistrust.

The western part is concerned, because the future partner shows openly

a lack of trust.

The Chinese partner is concerned, because the western partner is so

naïve to trust someone he does not yet know.

Both behave different, however, both are right from their personal point of view

slide20

CultureshockChina

Behaviour

a “YES” must not necessarily mean “YES”

slide21

CultureshockChina

Business opportunities

Examples for business difficulties based on cultural differences

Karaoke systems in Germany

Tanning salon in China

Advertisement

slide22

CultureshockChina

Why can’t they behave like us ?

Why should they ?

slide23

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide24

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide25

China the supplier

In 2004, Germany imported products from China

at a value of 25 bln Euro (+ 17,3%)

If China does not ship, German shops are empty

The majority was represented by products of the IT industry, clothing (textile as well as leather goods) and household appliances

slide26

China the supplier

Most probably, all of you here in the audience

have something which was produced in China

slide27

China the supplier

35% of all microwave ovens are produced by Galanz in Shenzen

35% of all mobile phones are produced in China

40% of all harddisc drives, scanners, and PC housing are produced in

China (Shanghai, Suzhou, Wujiang, Kunshan, Shunde, Dongguan)

50% of all shoes are produced in China

55% of all digital cameras are produced in China

60% of all bicycles are produced in China

70% of all notebooks are produced in Taiwanese factories in China

70% of all toys are produced in China

75% of all photocopiers are produced in Dongguan

80% of all PC motherboards are produced in Taiwanese factories in China

80% of all DVD players are produced in China

slide28

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide29

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide30

China the customer

In 2004, Germany exported products to China

at a value of 18,2 bln Euro (+ 24,9%)

The majority was represented by machinery and complete industrial facilities, specialized technical equipment and cars.

slide31

Diamonds 2003:

1.5 bln US$ revenue (+ 8 %)

Body care 2003:

5.5 bln US$ revenue (+ 25 %)

Tourism to Germany Jan. – Jun. 2004:

344.000 people (+ 48 %)

average spending per person and day: 200 Euro

Expectation for 2010: 1 mio tourists p.a.

China the customer

~ 100 mio people earn more than 5.000 US$ per year

~ 40 mio people earn more than 25.000 US$ per year

~ 300K people earn more than 1.000.000 US$ per year

Swiss luxury watches 2003:

150 mio US$ revenue (+ 15%)

slide32

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide33

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide34

China the competitor

China is a major competitor in

- Demand for raw materials

- Demand for investment money

- Supply of cheap labor

slide35

China the competitor

Raw material

Stannous : Price increase from < 4 US$ / kg to 9 US$ / kg within 2 years

(Zinn)

Copper : Price increase of 70% within one year (cabling, electronics)

(Kupferl)

Lead : Price increase of 65% within one year (car batteries)

(Blei)

Nickel : Price increase of 40% within one year (steel coating)

Coke : Price increase of 500% within two years (steel production)

(Koks)

slide36

Raw material consumption in % of world consumption 2003

China US EU Japan

Coal 31,3 22,3 8,6 4,4

Steel 26,0 11,6 16,2 8,5

Oil 8,0 25,1 17,6 6,8

China the competitor

Raw material

In the first 6 months of 2004,

the consumption of mineral oil and steel grew by 50%

In 2004, China consumes:

- 50% of worldwide cement production

- 25% of worldwide copper

- 33% of worldwide steel production

slide38

China the competitor

Investment

FDI CI 2003 *

2004 2003 2002

1 1 1 China

2 2 2 USA

3 6 15 India

4 7 3 Great Britain

5 5 4 Germany

6 11 5 France

7 19 10 Australia

8 22 18 Hong Kong

9 12 6 Italy

10 15 12 Japan

* (Foreign Direct Investment Confidence Index A.T.Kearney)

slide43

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide44

Perception and facts

  • Cultureshock China
  • China the supplier
  • China the customer
  • China the competitor
  • China the partner
slide45

In 1998, a German consortium won the contract

to built the first commercially used highspeed

magnetic train from Shanghai Pudong airport

to the city.

In 2003 we can see the first test train, completey

developed and produced in a cooperation of

Chinese companies and universities.

Partner China

Part of the deal was the involvement of chinese

companies and a reasonable know how transfer

slide46

Partner China

The Yangtse River Dam Project

saves annually

2 million tons of sulfur dioxide

100 million tons of carbon dioxide

Power generation equivalent to 14 nuclear power stations or 22 coal-fired power stations.

Compared to power generation with conventional coal-fired power stations,

the Yangtse river power generation saves annually 40 million tons of coal for China

slide47

In the early nineties, a German consortium

won the contract to built 8 power generators

(each 700 MWatt for the Yangtse river project.

Partner China

Part of the deal was the involvement of chinese companies

and a reasonable know how transfer to enable them to built

the other 16 generators.

In the late nineties, China was able to offer

large power generators to a project in Iran.

slide48

Partner China

What does China need ?

- know how in managent and controlling

- know how in marketing

  • technical know how in special areas
  • (ex. server computer)
slide49

Investments into our future

„Germany is China’s largest European investor,

between 1990 and 2003 German companies have

done direct investments in an amount of

9 billion Euro”

(German president Koehler in Wirtschaftswoche Special Edition Nr. 1, 30.09.2004)

slide51

Population

80 Mill

Population

20 Mill

Investments into our future

slide52

?

Investments into our future

slide53

1. About China

  • 2. Fujitsu-Siemens in Greater China
slide54

1. About China

  • 2. Fujitsu-Siemens in Greater China
slide55

Fujitsu-Siemens in Greater China

In 1999, Siemens Germany and Fujitsu Japan decided

to join their European it activities.

Fujitsu became responsible for Americas and Asia Pacific and

Fujitsu Siemens Computers took the sales region EMEA.

Americas

EMEA

Asia / Pacific

SCENIC

Deskpower

CELSIUS

LIFEBOOK

PRIMERGY

PRIMEPOWER

Millennium

GS8000

BS2000

FSC Ownership

slide56

Fujitsu-Siemens in Greater China

Purchase Volume per Region

* ROA = Rest of Asia e.g. China / Taiwan, Korea

slide57

Fujitsu-Siemens in Greater China

With the growing importance of China and Taiwan as a supplier

of high quality IT products, it became necessary to establish

an organization in the region.

In 2001, a purchasing office was established in Taiwan.

Until 2004, this office became the hub for 36 employees from

purchasing, engineering, product marketing and service.

In 2004, a logistics office was established in Suzhou.

In the future, additional engineering and purchasing staff will

be added to the existing logistics employees.

slide58

Fujitsu-Siemens in Greater China

Major Tasks

  • Supplier selection

select the best available supplier in terms of total cost of ownership

  • Contract negotiation

negotiate and sign master purchase agreement

  • Product sourcing

provide information about new opportunities and future products

  • Joint development

Develop products in cooperation with local engineering teams

  • Quality assurance

Qualification and test of products

  • Purchasing & Logistics

Buy products and ensure on-time delivery

  • Risc management

Manage riscs which may endanger product availability

  • Relationship management

Establish excellent relationship in order to secure product availability

slide59

Fujitsu-Siemens in Greater China

Joint development

  • Supplier selection

select the best available supplier in terms of total cost of ownership

  • Contract negotiation

negotiate and sign master purchase agreement

  • Product sourcing

provide information about new opportunities and future products

  • Joint development

Develop products in cooperation with local engineering teams

  • Quality assurance

Qualification and test of products

  • Purchasing & Logistics

Buy products and ensure on-time delivery

  • Risc management

Manage riscs which may endanger product availability

  • Relationship management

Establish excellent relationship in order to secure product availability

slide60

Testing &

Qualification

Testing &

Qualification

Testing &

Qualification

Testing &

Qualification

Sales &

Marketing

Sales &

Marketing

Sales &

Marketing

Sales &

Marketing

Purchasing

Purchasing

Purchasing

Purchasing

Production

Production

Production

Production

Logistics

Logistics

Logistics

Logistics

Service

Service

Service

Service

Development

Development

Development

Development

1990’s

2004

others

Fujitsu-Siemens in Greater China

PC value chain

1980’s

slide61

Unix Server

Intel Server

Blade Server

PC

Fujitsu-Siemens in Greater China

Joint development

China:

Moving up

the value chain

slide62

Fujitsu-Siemens in Greater China

Joint development

How to prevent to get caught?

Team up

Find a win-win proposition

If you can‘t beat them, join them !

Discover your strenght

and weaknesses

Maintain a technology headstart

Invest in R&D

slide63

Fujitsu-Siemens in Greater China

Joint development

  • Supplier selection

select the best available supplier in terms of total cost of ownership

  • Contract negotiation

negotiate and sign master purchase agreement

  • Product sourcing

provide information about new opportunities and future products

  • Joint development

Develop products in cooperation with local engineering teams

  • Quality assurance

Qualification and test of products

  • Purchasing & Logistics

Buy products and ensure on-time delivery

  • Risc management

Manage riscs which may endanger product availability

  • Relationship management

Establish excellent relationship in order to secure product availability

slide64

Fujitsu-Siemens in Greater China

Quality assurance

  • Supplier selection

select the best available supplier in terms of total cost of ownership

  • Contract negotiation

negotiate and sign master purchase agreement

  • Product sourcing

provide information about new opportunities and future products

  • Joint development

Develop products in cooperation with local engineering teams

  • Quality assurance

Qualification and test of products

  • Purchasing & Logistics

Buy products and ensure on-time delivery

  • Risc management

Manage riscs which may endanger product availability

  • Relationship management

Establish excellent relationship in order to secure product availability

slide65

Fujitsu-Siemens in Greater China

Quality assurance

HP replaces defect notebook memory (27. 06.2004)

Call-back for MSI Pentium-4-boards with defect southbridge (01.07. 2004)

Call-back for batteries of Apple 15´´ PowerBook G4 (19.08 .2004)

Call-back for IBM notebook charger because of fire hazard (03.09 .2004)

Call-back for Dell notebook charger (08.10 .2004)

On 27.02.2004, the company 4MBO declared insolvency

Broad media coverage about radiation issues with the

Volks-PC sold in Q4 2002 hurt the companies reputation severely

slide66

Fujitsu-Siemens in Greater China

Quality assurance

Quality is built in !

Therefore, FSC is involved in the design phase of products.

Foodchain products are often bought off-the-shelve

without involvement of the distributor during design.

FSC is involved in qualification and testing of all products

to avoid later call backs and customer complaints

which lead to financial loss and customer dissatisfaction

slide67

Fujitsu-Siemens in Greater China

Quality assurance

Qualification and testing

- abrasion test for paint and keyboard

- EMI test (radiation test)

- CD and DVD Media tests

- I/O interface test

- safety test (power supply and charger)

- mechanical tests

- drop test for transportation

Source assessment

following international standards

Field return information loop

weekly feedback of field return rates to production

slide68

Fujitsu-Siemens in Greater China

Quality assurance

Quality will still be remembered

when the price has been long forgotten

(Aldo Gucci )

slide69

Fujitsu-Siemens in Greater China

Quality assurance

  • Supplier selection

select the best available supplier in terms of total cost of ownership

  • Contract negotiation

negotiate and sign master purchase agreement

  • Product sourcing

provide information about new opportunities and future products

  • Joint development

Develop products in cooperation with local engineering teams

  • Quality assurance

Qualification and test of products

  • Purchasing & Logistics

Buy products and ensure on-time delivery

  • Risc management

Manage riscs which may endanger product availability

  • Relationship management

Establish excellent relationship in order to secure product availability

slide70

Fujitsu-Siemens in Greater China

Risc management

  • Supplier selection

select the best available supplier in terms of total cost of ownership

  • Contract negotiation

negotiate and sign master purchase agreement

  • Product sourcing

provide information about new opportunities and future products

  • Joint development

Develop products in cooperation with local engineering teams

  • Quality assurance

Qualification and test of products

  • Purchasing & Logistics

Buy products and ensure on-time delivery

  • Risc management

Manage riscs which may endanger product availability

  • Relationship management

Establish excellent relationship in order to secure product availability

slide71

Fujitsu-Siemens in Greater China

Risc management

Together with it´s partners, Fujitsu Siemens Computers

does a Risc assessment on a regular basis.

Generic steps of risk management:

  • Identify
  • Evaluate
  • Manage
  • Monitor
slide72

Fujitsu-Siemens in Greater China

Risc management

Identified risks which may impact our relationship

  • Acts of God - earthquakes - weather - epidemics (e.g. chicken flue)
  • Government induced risks - termination of business / export / import licenses - regional power shortage / cuts - changes in tax or duty structure
  • Management induced risk - loss of key personnel - growth management - acquisition
  • Purchasing & procurement risk - single source parts / suppliers - wrong forecasting / planning
  • Economic risks - slow down / up turn (resulting in shortage / oversupply) - price erosion (e.g. due to technology changes) - exchange rate
slide73

Avoid

Reduce

Transfer

Accept

Overall

Risk

Residual

Risk

Fujitsu-Siemens in Greater China

Risc management

Generic risk management measures

slide74

Fujitsu-Siemens in Greater China

Risc management

  • Supplier selection

select the best available supplier in terms of total cost of ownership

  • Contract negotiation

negotiate and sign master purchase agreement

  • Product sourcing

provide information about new opportunities and future products

  • Joint development

Develop products in cooperation with local engineering teams

  • Quality assurance

Qualification and test of products

  • Purchasing & Logistics

Buy products and ensure on-time delivery

  • Risc management

Manage riscs which may endanger product availability

  • Relationship management

Establish excellent relationship in order to secure product availability

slide75

Fujitsu-Siemens in Greater China

Crisis =

Wei ji

Opportunity

Danger

Wei xiao

Ji hui

slide76

Thank you for

your attention

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