To Catch The Cubs You Must Enter The Tiger’s Lair
September 19th, 2007
Kudos for Lonnie Hodge and David DeGeest of The Dreamblogue for bringing these excellent You Tube videos to my attention.
These clips are incredible for how they illustrate the risks, rewards and realities of doing business in China. And remember that its the addiction of the West, i.e., you and me, for goods, that fuels much of what you see in these videos.
And for a book that just came out which relates to this issue that has received some very good reviews, see Sara Bongiorni’s, A Day Without ‘Made in China’: One Family’s True Life Adventure in a Global Economy, where the author decides to test whether she and her family can live for a year without buying anything ‘Made in China’. See also Thomas Friedman’s recent op-ed pieces, Doha and Dalian and Lead, Follow or Move Aside.
Enjoy …. and please come back and tell me what you think of these videos.
December 28, 2007 Update: Christine Lu of the China Business Network just scored an interview with Vance Miller. Click HERE to check it out.
Entry Filed under: Pre-Departure, China, Misc.
9 Comments Add your own
1. Lonnie | September 28th, 2007 at 5:40 am
I plan on doing a series called ‘Professors get poor in China”….
2. Chris Carr | September 28th, 2007 at 7:55 am
Can I be your first speaker on that series?
3. Christine | September 28th, 2007 at 9:21 pm
I’m closing in on an interview with Vance Miller from this documentary. After about 10 back and forth emails with his personal assistant on the questions and format of the interview, it just might finally happen!
If you or your students have any questions in particular you’d like to ask him (like where he parks that fake Olympic bus) let me know!
4. Lonnie | September 29th, 2007 at 5:49 am
Sure, but travel and lodging are on you….
5. Chris Carr | September 29th, 2007 at 6:59 am
Hi Christine and Lonnie. Thanks for the check in.
Lonnie — rats, I was really hoping to get a free trip to China out of you and your documentary team.
Christine — what a great score and interview that would be!!
While watching his segment, I too, laughed really hard at his fake Olympic bus. What a push the envelope idea! The last time I was in Beijing, however, there was no counterfeit Olympic t-shirts to be found, as Beijing had made it clear to the locals to not even go there. But it appears that Vance’s trademark infringement, via his bus, went untouched. How did he pull that off? Has Beijing since slapped a fine on him after the show came out?
Just kidding. You don’t have to ask him that.
But maybe ask him this … I did wonder if some of the entrepreneurs in the show have been in any way hassled by local, provincial or national authorities since the show came out? I know that it is becoming more difficult for expats and foreign firms to operate in China if they have not dotted their i’s, crossed their t’s, have the right permits, pay the right taxes, hire people the right way, etc.
It seemed to me this show made one or two of these fellows a bullseye for the government to chase them on some possible issues in this regard and hence possibly use that to shoe them out of China. I also know some Chinese lawyers/law firms who represent Chinese companies and they are having a field day knocking illegally operating foreign firms out of business. Has that occurred in any way or has it remained business as usual for folks like Vance?
6. Morgan O'Hara | December 18th, 2008 at 12:32 pm
What did I think of the documentary? I loved it! It took me on a roller-coast ride of entrepreneurship in China. I’m still gathering my bearings.
The documentary reveals how ruthless business can be in China. I was of the impression that Tony and Peter didn’t have the mettle or the wits to make it. But I was wrong. Tony seemed too naïve. Hiring that woman as his partner – she was a stranger – and in turn she hired her uncle-in-law to oversee the factory. Risky business, but it worked out; he had Lady Luck on his side. Still, Tony’s approach was a bit too dicey in my eyes, especially with so much money at stake. I’m happy things worked out for him; he seemed like such a nice guy, and now he’s the cushion king.
Speaking of cushions, and toilets, and faucets – the one city one product trend is wild. Though I presume those cities must be pretty nondescript and dull. We talked a bit about countries finding their niche in the global marketplace. And now cities. I don’t know if I’d want to live in Toilet city, but I presume they’ve got a good shot to remain one of the hubs of the lavatory industry for some time to come.
I liked the mysterious Cecil Pih’s quote – business in China is “very difficult … and very easy at the same time.” Even with the best product, or the best business model, you need to have connections up the chain in order to push your merchandise, or you’re not penetrating the Chinese market – or getting your stuff manufactured according to plan, for that matter.
I was most impressed by Vance. In the beginning, he seemed like a bully. And he was, in part. But he was very nimble, too. He learned as he went along. When push came to shove, he didn’t let his emotions get the best of him – he tried to keep his ‘enemies’ close. I was convinced he was going to attack the man who stole his money, but no. And Vance had some nerve – buying a quarry in no man’s land, putting up his own factories, and, of course, driving around in a fake Olympics Inspector Bus! Vance was an astute entrepreneur – in the end, he began selling kitchens back to the Chinese. He made up his own rules, and he didn’t pass up any opportunity. And I was pleasantly surprised when he went to the village, and his softer side came out.
Watching the documentary drove home the notion that bargaining is a skill. And not just haggling, as Vance did with the faucet dealer. In China, and in business in general, you have to adopt a strategic view of bargaining. It’s as we learned in economics – improve your bargaining position, either by increasing your opponent’s gain or reducing your own gain from reaching agreement. For example, if you’re doing business with a factory that’s been giving lackluster results, you better have some options when you confront them. They have to believe there’s a risk of them losing business if they don’t perform. If not, they’ll take advantage. I don’t know if Sun Tzu’s The Art of War is an appropriate manual for how to do business in China, but it does seem to get quite cutthroat at times.
7. Raquel Rusing | December 19th, 2008 at 4:33 pm
Most people think I’m a good negotiator. Well, the truth is that I hate negotiating. I’m only really good at it when nothing is actually at stake. I mean ultimately I want the best outcome, but often it is too difficult for me to fight ruthlessly enough to get that because it hurts the other party. Even in a very trivial example, if I were to go to China and want to buy a purse… obviously I don’t want to pay $20 for it if I can get the salesman to take $2 for it. But what am I taking away from someone who needs the money more than me? …and it is this question that makes me a TERRIBLE bargainer. And then I feel like an even worse person because I’ll only pay $2 for the purse in the end because capitalism consumes me.
I think what I should conclude from this is that if I want to play in the big leagues, I need to grow some… because I’d be eaten alive in a Chinese negotiation room. Unless we’re all role-playing cause then I could get down and dirty!
Also, I find it interesting that this “reality” show allows three British entrepreneurs to succeed in China… that’s not very plausible. If it’s a risky endeavor then I would anticipate to see some pain. I watched this documentary on YouTube called “The Unseen China” about how the corruption associated with economic reforms are hurting a lot of poor people. So obviously, it’s purpose is to provide some counter-examples.
8. Andrea Muntzel | December 20th, 2008 at 10:29 pm
I really enjoyed the documentary. I think it taught some important lessons by showing three British businessmen facing different challenges in China. Like Morgan, my favorite Chinese entrepreneur was Vance. From the very beginning when he was at the granite factory explaining the how cunning the Chinese would be if he let them, he showed that he had a deep understanding of doing business in China. Although he was not above being scammed, he illustrated a resourcefulness and resilience that made him incredibly successful in the end.
These are my take-aways from the documentary:
1) If you don’t know the culture, get a business partner you can trust. Both Tony and Peter did this. Without their partners, there’s no way they could have been successful. Tony proves this at his factory’s grand opening when he thanks his partner first and gratuitously.
2) Buying cheap in China has its problems. Vance bought the least expensive products he could get his hands on in China, knowing that quality might suffer sometimes. Sometimes he had to bite his tongue when things weren’t delivered on time or at all, because even if he paid extra, he would still be getting the best deal in the world.
3) Image is important. Before Peter left Great Britain, the documentary showed him getting fitted for a suit. He said something along the lines of, “I want to appear to be the CEO of the company, even if the company is only me.”
4) Intellectual property is NOT SAFE in China. Tony was having problems as he chased photographers and spies away from his cushion designs. Peter knew that as soon as he unveiled his energy box in China, it would be a race against the clock before somebody else copied it.
5) According to Cecil Pih, you need “connections, cash, clout, and cultural understanding” to do business in China. Further, the ‘correct’ way to gain clients is by “wining, dining, and wenching.”
6) When doing business in China, expect high risks and high rewards. Also, the only way to learn is by getting your hands dirty. Like Vance said, this can be a very expensive education. China isn’t just for those who want to make money; it is for those who invite adventure.
9. Jason Larocco | December 27th, 2008 at 2:50 pm
This was a very interesting posting! Like Morgan I also thought both Tony and especially Peter were going to fail. Peter reminded me of the ugly westerner from Gregg Bissky’s podcast interview. He felt that it was a gift from god to be born British, and because his product won a British award, the Chinese would just start throwing money at him. Peter’s story was interesting but it seemed like his success extremely dependent on luck. He put a lot of blind faith in Cecil. If Cecil didn’t succeed in selling Peter’s project I don’t think Cecil’s lively hood would have changed much, where Peter’s lively hood would have changed drastically.
Tony, like Peter, also depended heavily on a Chinese insider, but at least he aligned his partner’s incentives with the success of his business. By giving up some ownership of the company he tied the success of his business to his business partner’s desire to be a prominent business woman in China.
Vance was the most entertaining and it seemed like the most financially successful in his endeavor. I don’t think he was firing on all cylinders, but I admired his ability to take things as they were in China and find a way to make it work for him. This was most evident with the counterfeit Olympic bus idea. He obviously was not afraid to bend or break the rules. I don’t know that I would have the guts to make a counterfeit Olympic bus, but Vance took advantage of the fact that in a less structured business environment you are more likely to get away with bending or breaking. However, if caught I am sure the penalties are pretty severe.
Vance also didn’t play into the assumption that you go to China for price not quality. Vance demanded both “European quality” and China pricing. To achieve this he was involved and got his hands dirty at each stage of his supply chain all the way down to the raw material suppliers. When he went to inspect the marble counter tops he could have showed up in a well tailored suit and just performed a song and dance quality audit, but he didn’t. He made the supplier dig out the bottom crate and found the quality issues that he was worried about. He understood that he was getting a bargain price but he also understood that the Chinese were capable of providing good quality when the right incentives are put in place. In the end he bought the whole quarry, which was awesome but not a realistic solution for every supply chain problem.
After the counter top segment I thought Vance was pretty one dimensional and only had a brute force style of doing business. Then at Mr. Lee’s cabinet assembly factory and later the village factory, Vance showed some emotional intelligence as well. After spending a full day with Mr. Lee Vance showed a commitment to Mr. Lee finishing the project, but he held his ground on giving him more money. He was able to win Mr. Lee’s respect and kept his low prices. When he went to visit the village factory Vance realized that supporting the lively hood of the village would pay greater dividends than pulling his product.
The entrepreneurial spirit of Tony and Vance is much stronger than mine, but watching these videos gave some good insight entrepreneurial insight. One way or another you have to be able to motivate those individuals who your business depends on.
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