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					Richard Erb / 11-2004
                    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)




                                                            Richard Erb / 11-2004
1. About China

2. Fujitsu-Siemens in Greater China




                               Richard Erb / 11-2004
1. About China

2. Fujitsu-Siemens in Greater China




                               Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
Yellow
Underdeveloped ?

             Richard Erb / 11-2004
   Perception and facts




                           3400 KM




                               1000 KM
4450 KM
                 1600 KM


                               1200 KM




                                         Richard Erb / 11-2004
                      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




                                             Richard Erb / 11-2004
Perception and facts




                       Richard Erb / 11-2004
                          Perception and facts
Chongqing   30 Mio (15 Mio central city)
Shanghai    20 Mio (13 Mio central city)
Beijing     12 Mio
Chengdu     10 Mio
Harbin       9 Mio
Tianjin      9 Mio
Wuhan        7 Mio
Qingdao      7 Mio




                                                 Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
            Cultureshock China
                Language




400 sounds * 4 tones = 1.600 sounds

56.000 characters / 1.600 sounds =

average 35 meanings per sound




                                 Richard Erb / 11-2004
                  Cultureshock China
                      Relationship




        Relationship in China is much more
            important than in Germany.

People usually know schoolmates from different classes




                                                 Richard Erb / 11-2004
                                     Cultureshock China
                                     Family Relationship
                                          Germany


                   grandmother grandfather           grandmother grandfather



   mother„s          mother„s                                        father„s           father„s
   brother            sister                                         brother             sister
      =                 =                                               =                  =
    uncle              aunt                                           uncle               aunt



                                       mother         father


     aunt             uncle                                           aunt               uncle




nephew      nice   nephew     nice              me               nephew      nice   nephew       nice




nephew      nice   nephew     nice                               nephew      nice   nephew       nice


                                                                                    Richard Erb / 11-2004
                                           Cultureshock China
                                           Family Relationship
                                                 China

                        外婆            外公                     奶奶          爺爺
                          grandmother grandfather            grandmother grandfather
                             wai po   wai gong                  nai nai    yie yie


   mother„s           mother„s                                   father„s          father„s           father„s
   brother             sister                                 older brother     younger brother        sister
       =                 =                                          =                 =                  =
    jio fu              ai yi         媽媽            爸爸          buo buo            shu shu             gu gu


舅父                 阿姨                                                 伯伯                 叔叔                  姑姑
                                      mother        father

舅媽                 姨丈                                                 伯母                 嬸嬸                  姑丈
     jio ma            yi jang                                  buo mu            shen shen          gu jang




biao ge biao jie   biao ge biao jie            me            tang ge tang jie   tang ge tang jie biao ge biao jie
表哥       表姊 表哥               表姊                               堂哥 堂姐 堂哥 堂姐 表哥 表姊


biao di biao mei biao di biao mei                            tang di tang mei   tang di tang mei biao di biao mei
表弟       表妹 表弟               表妹                               堂弟 堂妹 堂弟 堂妹 表弟 表妹
                                                                                                  Richard Erb / 11-2004
                         Cultureshock China
                             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


                                                           Richard Erb / 11-2004
                              Cultureshock China
                                   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
 Sleeping in the same
can not always be enforced 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

                                                                      Richard Erb / 11-2004
            Cultureshock China
                 Behaviour




a “YES” must not necessarily mean “YES”




                                          Richard Erb / 11-2004
                    Cultureshock China
                   Business opportunities




Examples for business difficulties based on cultural differences



        Karaoke systems in Germany

              Tanning salon in China

                    Advertisement




                                                             Richard Erb / 11-2004
          Cultureshock China




Why can‟t they behave like us ?


  Why should they ?


                               Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
                        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




                                                                 Richard Erb / 11-2004
                China the supplier




Most probably, all of you here in the audience
have something which was produced in China




                                          Richard Erb / 11-2004
                         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
                                                                Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
                      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.




                                                                   Richard Erb / 11-2004
                        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%)

        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.


                                                        Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
     China the competitor




China is a major competitor in
- Demand for raw materials

- Demand for investment money
- Supply of cheap labor




                                 Richard Erb / 11-2004
                      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)




                                                                  Richard Erb / 11-2004
                China the competitor
                        Raw material


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

            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

                                                        Richard Erb / 11-2004
China the competitor
    Raw material




                       Richard Erb / 11-2004
                                           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)                   Richard Erb / 11-2004
                      China the competitor
                             Investment




                Total direct foreign investment to Germany
                            (2000 - 2003 in mio Euro)




250000    215209

200000


150000


100000

                                              38269
 50000                       23622
                                                               11400

     0
         2000              2001            2002              2003




                                                                       Richard Erb / 11-2004
           China the competitor
                   Investment




     Direct foreign investment 2003 (in bln Euro)


                                            42,4

45
40
35
30
25
20         11,4
15
10
 5
 0
     Germany                        China




                                                    Richard Erb / 11-2004
                 China the competitor
                      Labor cost




          Salary per hour 2004 (US$)

    20

    15

US$ 10

     5

     0
         China     Turkey Sloveni   Mexico   Spain
  US$    0,92       1,15    1,68     6,79    15,08




                                                     Richard Erb / 11-2004
              China the competitor
                     Labor cost




   Germany: annual working hours / employee

2000

1500

1000

 500

   0
       1970   1980        1991    2001   China
                                         2003




                                                 Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
Perception and facts

Cultureshock China

China the supplier

China the customer

China the competitor

China the partner

                       Richard Erb / 11-2004
                 Partner China


           In 1998, a German consortium won the contract
           to built the first commercially used highspeed
           magnetic train from Shanghai Pudong airport
           to the city.




Part of the deal was the involvement of chinese
companies and a reasonable know how transfer



           In 2003 we can see the first test train, completey
           developed and produced in a cooperation of
           Chinese companies and universities.




                                                       Richard Erb / 11-2004
                                   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




                                                                             Richard Erb / 11-2004
                       Partner China




                         In the early nineties, a German consortium
                         won the contract to built 8 power generators
                         (each 700 MWatt for the Yangtse river project.




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.




                                                             Richard Erb / 11-2004
            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)




                                         Richard Erb / 11-2004
                           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)




                                                                     Richard Erb / 11-2004
                                               Investments into our future




                                      Direct German investment to China
                                                 1990 - 2003


                       bln. Euro
                                      15
                                      10
                                           5
                                           0

   Deutsche Direktinvestitionen in China
               1990 - 2003

Mrd. US$
   150

   100

    50

     0
           Germany
                                                                             Richard Erb / 11-2004
                                               Investments into our future




                                           Direct investment to China
                                                    1990 - 2003
                      bln. US$
                          120
                          100
                           80
                               60
                               40
                               20
                                  0
                                           Deutschland         Taiwan
   Deutsche Direktinvestitionen in China
                                             Population        Population
                 Investitionen
               1990 - 2003                   80 Mill           20 Mill
Mrd. US$
Mrd. US$
  1500
   150
  1000
  100

   500
   50
                         120
              10,8
    00
           Germany
            Germany   Taiwan
                                                                             Richard Erb / 11-2004
                                             Investments into our future




                       bln. US$
                        1500

                        1000
                                                     Investment

                                                                  1440
                                                                           ?
                           500
                                                       120
                                          10,8
                                0
                                     Deutschland   Taiw an    Aufbau Ost

                     Investitionen
Mrd. US$
  1500

  1000

   500
                         120
              10,8
     0
           Germany    Taiwan
                                                                           Richard Erb / 11-2004
1. About China

2. Fujitsu-Siemens in Greater China




                               Richard Erb / 11-2004
1. About China

2. Fujitsu-Siemens in Greater China




                               Richard Erb / 11-2004
             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                 BS2000                      GS8000
                                                            FSC Ownership

                                                                 Richard Erb / 11-2004
    Fujitsu-Siemens in Greater China



Purchase Volume per Region

                  EUR
                  12%


                                                    EUR
                           JAP
                                                    JAP
                           13%
      USA
      47%
                                                    ROA
                                                    USA

                   ROA *
                    28%




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



                                                            Richard Erb / 11-2004
              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.




                                                               Richard Erb / 11-2004
              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

                                                          Richard Erb / 11-2004
              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

                                                           Richard Erb / 11-2004
                         Fujitsu-Siemens in Greater China
                                  PC value chain

                                       1980‟s
Development Purchasing    Production   Testing &       Logistics   Sales &
                                                                               Service
                                       Qualification               Marketing



                                       1990‟s
Development Purchasing    Production   Testing &       Logistics   Sales &
                                                                               Service
                                       Qualification               Marketing



                                        2004
Development Purchasing    Production   Testing &       Logistics   Sales &
                                                                               Service
                                       Qualification               Marketing



                                       others
Development Purchasing    Production   Testing &       Logistics   Sales &
                                                                               Service
                                       Qualification               Marketing


                                                                               Richard Erb / 11-2004
               Fujitsu-Siemens in Greater China
                         Joint development




     China:
  Moving up
the value chain



                                                  Unix Server
                              Intel Server

          Blade Server


 PC


                                                         Richard Erb / 11-2004
       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



                                          Richard Erb / 11-2004
              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

                                                           Richard Erb / 11-2004
              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

                                                             Richard Erb / 11-2004
                 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




                                                                    Richard Erb / 11-2004
            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




                                                               Richard Erb / 11-2004
              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



                                                      Richard Erb / 11-2004
         Fujitsu-Siemens in Greater China
               Quality assurance




   Quality will still be remembered
when the price has been long forgotten      (Aldo Gucci )




                                                 Richard Erb / 11-2004
              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

                                                             Richard Erb / 11-2004
              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

                                                          Richard Erb / 11-2004
           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




                                                    Richard Erb / 11-2004
                       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

                                                                       Richard Erb / 11-2004
           Fujitsu-Siemens in Greater China
                  Risc management


          Generic risk management measures



          Avoid

                    Reduce

                                Transfer

                                              Accept




Overall
                                                Residual
 Risk                                             Risk



                                                       Richard Erb / 11-2004
              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

                                                          Richard Erb / 11-2004
      Fujitsu-Siemens in Greater China




Crisis =
               危 機            Wei ji




               險 會
                 Danger            Opportunity
                   Wei xiao              Ji hui

                                                  Richard Erb / 11-2004
Thank you for
your attention




       Richard Erb / 11-2004
Richard Erb / 11-2004
Richard Erb / 11-2004

				
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