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February 8, 2006 

 Q&A: Steven Ganster of Technomic Asia on Chinese Readiness 2/7/2006
The mission of Going Global, which appears on ePrairie on most Tuesdays, is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.

CHICAGO – Steve Ganster is managing director of Technomic Asia. He has 27 years of experience in international market strategy consulting primarily in Asia. He has assisted 150 multi-national firms in their assessment of opportunities in Asia and their resultant business strategy development.

In part three of a three-part Q&A, Ganster sat down with international expert Michael Muth to discuss what makes a company ready to approach the Chinese market.

Michael Muth: How do you assess whether or not a company is ready to approach the Chinese market? What is a “China-ready company”?
Steve Ganster: First of all, what’s their motivation to go to China? While a company’s motivation may seem obvious on the surface, many companies pursue China without clearly understanding their motivation at a deeper level.

If you are going to reduce cost, have you validated that you will get the cost reduction you need in China? If you’re going to follow your customer base to China, will the customer still be there when you get there? What happens if you don’t go? Companies need to understand these issues in detail.

We then determine the company’s organizational preparedness to deal with the challenges China will present. A company must have the right profile in terms of their operation, management team and financial resources. Virtually every company will have some shortfalls here. Understanding what they are in advance will better prepare a company to face the many challenges China will present.

MM commentary: You’ve got to be able to manage your resources well before you can think about investing significant resources in China.

MM: How were you able to help Midwestern companies like Abbott, Dow, Emerson Electric, GATX, General Motors and Sara Lee?
SG: In the 1990s, our work with these companies was oriented to market-entry investigation and strategy. Being on the ground in China, we helped them understand the markets and their opportunities to play in them. We also worked with them on their entry strategies, which included a lot of work in alliances and acquisitions.

While we do similar work today, it’s more oriented toward market expansion and growth off the bases they established in the 1990s and early 2000s. We continue to address key marketing issues like segmentation, distribution, brand building, partner identification and qualification.

An increasing focus for us today is on mid-sized companies that comprise the second wave of investment in China. In addition to going after local China market opportunities, these companies are coming to China specifically to serve their U.S. customer base that has migrated there.

MM: How do you assist companies with sourcing in China?
SG: We help companies as they move from opportunistic sourcing (e.g. through a trader or sourcing company) to strategic sourcing where they need to invest in their own resources in China.

We see many companies that are in this transition. China sourcing is becoming a bigger issue to many companies. Maybe half of their product is now made outside the U.S. It then becomes a strategic issue. They need to control their sourcing activity more directly. As a result, they need to more strategically think through their structure and approach.

MM: Will you be assisting Chinese companies in coming to America?
SG: Though we haven’t yet, we are looking at that. Our concern is just getting paid for it. We see many Chinese companies facing the task of globalization. We hope to start to work with some of them in the near future. We can bring a good view to them.

MM commentary: Watch out. They’re coming.

MM: What’s the success of your online China readiness assessment?
SG: The China readiness assessment is primarily an interactive workshop process. It has been very successful and we continue to adapt it to China’s changing environment. We recently developed an online version of this more comprehensive approach that offers a simple first step in the process.

MM: Who’s clicking on your podcasts and blogs?
SG: While I was skeptical in the beginning about the quality of the clicks we get, a client of ours who attended one of our workshops complimented us on a recent podcast. That told me we need to pay attention to podcasts as a marketing tool.

MM: How do costs for your services compare to market research firms and management consultants?
SG: We tend to fall in between a market research firm and a more general management consultancy. We get our hands dirty out in the marketplace and we also provide a lot of insight and analysis to help companies do something with the information.

MM commentary: Because they’re small and don’t have a lot of overhead, they’re quite competitive.

MM: How did SARS affect your business a few years ago?
SG: SARS shut our business down for a few months. We weren’t able to do field work or visit clients. It was very rocky for a few months. We used the time to come up with a special multi-client program in the auto industry aftermarket in China. It turned out to be a huge success.

MM: What’s the difference between doing business in Shanghai and in Beijing?
SG: Beijing is the political center of China while Shanghai is the commercial center. Shanghai is more strategically located in the geographic center, too. Economically and culturally, it’s more competition than conflict in that context.

MM commentary: I’d liken them to New York versus Washington, D.C.

MM: How did your education prepare you for your experience in China?
SG: I went to Vassar College for my undergraduate degree. I was in the first full male class at Vassar. That was probably my first cultural shock. It was in the early 1970s when China was just opening up. I wanted to study Chinese, but because the program didn’t fit with my major, I studied Japanese instead.

That started my interest in Asia. My boss in my first job after college went to Thunderbird. He was my mentor on the international side. After working for a few years, I went back to Thunderbird and continued in Japanese.

MM commentary: Thunderbird had a significant percentage of students before Sept. 11, 2001. Because of visa restrictions, that percentage has dropped drastically.

MM: How were you able to work in China before it opened up?
SG: We set up a joint venture in 1985 in Guangzhou as a facade to get access from Hong Kong. Our partner was able to connect us locally. We established our own direct office in the early 1990s. Until China opened up in the early 1990s, there wasn’t much consulting business to be had. It then took off like the gold rush in the Yukon Territories.

MM commentary: That’s one of the advantages of establishing yourself early and growing with the market.

MM: Where else have you worked?
SG: I lived in Singapore for six years and I’ve traveled and worked throughout Asia. I started to focus on China in the mid- to late-1990s after the financial crisis in Southeast Asia. Much of my foreign interest focused on China after that. Though I worked in Latin America in the 1980s, my passion is Asia.

MM: What other languages do you speak?
SG: My Mandarin is enough to get around in taxis. Though I have people around me in Shanghai who are locals, my role isn’t to speak Chinese. Even if I go to a meeting, I don’t need it in my business role. Logistically, though, it would be helpful and even enjoyable.

MM commentary: While it’s kind of surprising and disappointing that language isn’t that relevant here, Chinese is a laborious language to learn.

MM: How do you overcome the barrier that you’re not one of them?
SG: It hasn’t been an obstacle because it has never been a goal. We’re clear who we are and what roles we play as foreigners. Our value as a firm is providing a combined east/west perspective. We provide local street smarts with a deep understanding of western management business needs. Our team looks to me to help them understand the west.

MM commentary: I’ve run into this problem when I was in Europe where we look like they do. If it were a goal, it would be even tougher there.

MM: What brings you back to Chicago?
SG: Several reasons (mostly for business development). We’re targeting small- to mid-sized firms. We can’t reach them from China. Logistically, there is no better place to be than Chicago.

MM: Where were you during the Tiananmen Square protests?
SG: I was in Chicago then but my partner was there. Our business was pretty much stopped across the country. Because we weren’t very big then, the impact wasn’t as significant. Our business exploded a few years later.

MM commentary: The proletariat rising up against the bourgeoisie is still a significant political risk in China.

Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at mike@intlalliances.com.
Click here for Muth’s full biography.

Previous Columns:
Q&A: Steven Ganster of Technomic Asia on Chinese, U.S. Differences (1/24/2006)
Q&A: Steven Ganster of Technomic Asia on Approaching Chinese Expansion (1/17/2006)
Q&A: George Deeb, CEO of iExplore in Chicago, on the Internet Advantage (11/22/2005)
Q&A: George Deeb, CEO of iExplore in Chicago, on Competitive Distinction (11/15/2005)
Q&A: George Deeb, CEO of iExplore in Chicago, on Online Adventure Travel (11/8/2005)
Q&A: Steve Pazol, CEO of nPhase in Chicago, on International Business (8/30/2005)
Q&A: Steve Pazol, CEO of nPhase in Chicago, on Outsourcing to India (8/23/2005)
Q&A: nPhase CEO Steve Pazol on Machine-to-Machine Service Industry (8/17/2005)
Q&A: Daitan Labs Founder James Bergamini on Brazilian Workers (8/2/2005)
Q&A: Daitan Labs Founder James Bergamini on Brazil’s Silicon Valley (7/26/2005)
Q&A: Daitan Labs Founder James Bergamini on Next-Generation Telecom (7/19/2005)
Q&A: Op2mize Founder Geoffrey Kasselman on Asian Advancement (6/28/2005)
Q&A: Op2mize Founder Geoffrey Kasselman on Findings From Asia (6/14/2005)
Q&A: Op2mize Founder Geoffrey Kasselman on Analog, Smart Buildings (6/7/2005)
Q&A: Manpower CEO Jeffrey Joerres on Changing European Regulations (5/31/2005)
Q&A: Manpower CEO Jeffrey Joerres on Comparison Between U.S., France (5/17/2005)
Q&A: Federal Reserve Bank’s William Testa on Cautionary, Hopeful Prospects (5/3/2005)
Q&A: Federal Reserve Bank’s William Testa on Chicago Business (4/26/2005)
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Q&A: Lisle Technology Partners CEO Adarsh Arora on Keys to Outsourcing (4/5/2005)
Q&A: Lisle Technology Partners CEO Adarsh Arora on Outsourcing in India (3/22/2005)
Q&A: Lisle Technology Partners CEO Adarsh Arora on Offshore Outsourcing (3/15/2005)
Q&A: CEC’s David Weinstein, Kapil Chaudhary on International Experience (3/1/2005)
Q&A: CEC’s David Weinstein, Kapil Chaudhary on Internationalization (2/22/2005)
Q&A: Brian Briggs of Acclaro on Whether to Outsource Localization (2/8/2005)
Q&A: Brian Briggs of Acclaro on the Complexities of Localization (2/1/2005)
Q&A: Brian Briggs of Acclaro on International Localization Services (1/25/2005)
Q&A: RPX’s Robert Okabe, IEC’s John Janowiak on Global Events (1/11/2005)
Q&As: FastRoot’s Terry Howerton, Doug Cogswell of ADVIZOR Solutions (1/4/2005)
Q&A: Opportunity International’s John Kamperschroer on Partnerships (12/21/2004)
Q&A: Opportunity International’s John Kamperschroer on Technology (12/14/2004)
Q&A: Opportunity International’s John Kamperschroer on Innovative Financing (12/7/2004)
Q&A: IEC Senior Director John Janowiak on Trade Show Realities (11/16/2004)
Q&A: International Engineering Consortium Senior Director John Janowiak (11/9/2004)
Q&A: Founder John Lee of Chicago’s Hostway on Web Site Localization (11/2/2004)
Q&A: Founder John Lee of Chicago’s Hostway on Growing Globally (10/26/2004)
International M.B.A. Guide to Moore School of Business, Thunderbird (10/12/2004)
Your International M.B.A. Guide to Northwestern, Loyola University (10/5/2004)
Entrepreneur’s Guide to International M.B.A. Programs in Chicago (9/28/2004)
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Q&A: Origin Ventures Founder Steven Miller on Investments, Angels (8/17/2004)
Q&A: Origin Ventures Founder Steven Miller on the Canadian Way (8/9/2004)
Q&A: CPCP Founder David Baeckelandt on Multilingual Importance, Mentoring (8/3/2004)
Q&A: CPCP Founder David Baeckelandt on Japanese Disclosure, Due Diligence (7/27/2004)
Q&A: Chicago Pacific Capital Founder David Baeckelandt on Overseas Funding (7/20/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on the Art of Partnering (7/13/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on BP, AstraZeneca Wins (7/6/2004)
Q&A: ADVIZOR Solutions CEO Doug Cogswell on Global Software (6/29/2004)
Q&A: CEO Terry Howerton on Why Chicago, Ukraine Made FastRoot (6/22/2004)
Q&A: FastRoot CEO Terry Howerton on Blended Chicago Approach (6/15/2004)

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