A hat tip to Dan Harris and the China Law Blog for this lead ….

Here is a really, really interesting power point presentation by advertising giant Ogilvy on consumers in China’s Tier II and III cities. Some great stuff in here that will relate to what you are studying or will study in your MBA marketing class this winter quarter (e.g., branding, market segmentation, packaging, impulse buying, distribution channels, price sensitivity, who makes the family buying decisions, etc. anyone?). This material also highlights why so many foreign firms are trying to get into the market there — the consumer class and their spending power in these lower tier cities are on the upswing. This presentation is worth spending a few minutes to click through and study. Doing so, via this compare and contrast measure, also helped me better understand the marketing of products here in the US. Once in China, as you walk in and out of stores, and as you bus from A to B and look out the window, you need to think back to this material and connect some of the dots as related to your coursework ….

I came across this NY Times article and video on Grand Central Station in NYC.

Does this article and video apply to the train stations of China in Beijing and Shanghai?

Well, in my view, maybe the part about feeling ‘vigorous’ and ‘hypnotic’ from a people watching standpoint.

But any ‘ballet’ comparison? In China?

Uh, I don’t think so.  My experience has been that it’s often a free-for-all with massive numbers of bodies trying to get out of the train station with their life and luggage intact, including me.

I was recently contacted by Christine Lu of the China Business Network re: our MBA trip to China, our MBA program, and our MS in Industrial Technology (IT) program.

Click HERE to listen to the radio interview (5 minutes) re: our annual China trip.

Click HERE to listen to the podcast (20 minutes) about our MBA and MS in IT program.

For the record, the latter 20 minute podcast is a textbook case of how an interviewee (me) can muddle up an interview.

In my enthusiasm for what we seek to accomplish and are doing at Cal Poly I talked waaaaay too much, should have let her talk more, should have let the dialogue naturally flow. Drs. Whitaker and Beamon, who teach your Communication for Mangers course, would rightfully and justifiably take me to task for this blabbing. I would rate my own performance a “D”, at best. I am clearly rusty at giving interviews.

Listen … and learn … how not to do it. Christine Lu was very good and a gracious interviewer. I was not a very good interviewee this go-around.

My main point for this self-criticism is to actually make and educational point: More and more the soft skills are becoming the hard skills in business. 

It can be tough for some students and professionals to swallow that something without a formula, something so subjective as communication, can really knock them on their behinds.

My secondary point is that these skills can easily atrophy. They need to be nurtured and developed and refreshed throughout your career — a one time MBA class dealing with communication issues only means you are on your way, not that you are set for life in this important area of business. Don’t assume that just because you made it through your MBA communication course that you can now run back to the back room of your firm and you never have to speak or write in front of people again.

Don’t believe it? Then click HERE and HERE for these recent Wall Street Journal articles [subscription may be required] on this topic.

Ms. Lu has such an interesting background — as I understand it she moved to the US from Taiwan with her family when she was very young, grew up in the Los Angeles area in a Latino neighborhood, did her undergrad at Boston University, spent 4 or 5 years in Shanghai working with/for the Home Shopping Network seeking to make inroads into the Chinese market, and she is now back living in the San Diego area.

I have been perusing her blog. It’s great. I wish I had 1/100th of her web and technology skills. It is a wealth of information and resources. Check it out.

I grew up hearing the song Route 66 playing on the AM radio (yes, this thing called an AM radio really did exist). Great memories, and I often fantasized about hoping into a convertible and experiencing the Route 66 journey.

Rob Gifford, of NPR fame, recently came out with a book titled, China Road. Gifford spent the past six years working and traveling as a reporter for National Public Radio (NPR) in China.

I bought it this past Friday, could not put it down over the weekend, and finished it last night.

I loved this book, and would put it right up there with some of the other vicarious pleasure reads about China I have experienced with such books as Peter Hessler’s, River Town: Two Years on the Yangtze; John Pomfret’s, Chinese Lessons: Five Classmates and the Story of the New China, Tim Clissold’s, Mr. China: A Memoir; and Jung Chang’s, Wild Swans: Three Daughters of China, among others.

(By the way, just ignore the negators out there who nit pick these types of books apart and often just want to rain on your party of enjoyment, and ask them this simple question, ”Have YOU ever written a book like this? Have YOU even ever written and published a book at all? Since you have not done so, please sit down and shut your trap until that occurs and you earn the right to complain. Don’t grouse by the fact that I enjoyed this book and you did not. Thank you.”)

Gifford’s book is about his journey along Route 312 in China. Route 312 is China’s version of Route 66 in the US.

As the book cover notes, Route 312 flows three thousand miles from east to west, passing through the factory towns of the coastal areas, through the rural heart of China, then up into the Gobi Desert, where it merges with the Old Silk Road. The highway witnesses every part of the social and economic revolution that is turning China upside down.

This is not an academic book, but an experiential one.

I felt that in a very intimate and moving way he captured so much of the good and bad of China, so that if one is not a “China hand” one can still grasp, understand and relate to it on a number of levels.

It’s also clearly not a “I love China and you should too” book that some would predict an NPR reporter would write. When Gifford sees something that makes him love China, he let’s you know it and and when he witnesses something that make him hate China he pulls no punches.

The following quote one page 274 his book sticks in my mind:

It’s impossible to be neutral about China. Some foreigners hate it from the moment they set foot here. Others love it so much they put down roots and never go home. I wonder if other countries divide people so intensely in their emotions. For myself, I have always tried to retain my own unity of opposites, attempting to keep the love and hate in balance. But’ it’s difficult, especially as a journalist. I’m supposed not to care. I’m just supposed to observe. But how can I not care when one fifth of humanity is being convulsed before my eyes, and thousands are making millions and millions are being crushed? And if I seem a little confused about China, it’s because I am. And if you’re not confused, then you simply haven’t been paying attention.  [Emphasis mine.]

Here, here.

I was grateful for him taking the time to write and share this incredible road trip and experience with me.

Check out his book. You won’t regret it.

Between 33 students a 4 faculty, we collectively took a bizillion photos.  Click on the two below links to see just a small sample of them:

Link From OCOB Grad Programs Web Site  (see 2007 photo gallery of pics)

Erik Slayter’s China Trip Blog  (he shot some really nice pics)

For the next two and a half weeks, our Cal Poly MBA students will keep this on-line blog highlighting some their travels and experiences in the People’s Republic of China. Below is their first blog entry as of the day we arrive in Guangzhou (soon!) and get settled. Be sure to scroll down and read about subsequent days and experiences on the trip. These MBA students are to be commended for making this investment in their education and professional future. — Professor Carr

Submitted By: Bonnie, Athena, Joe, and Danny

Our trip began with a 14 hour plane ride to Guangzhou. Everyone seemed excited to start the trip and equally excited to get some sleep on the red eye flight. In between Chinese movies and bathroom breaks, we were able to talk to a few Chinese passengers. In particular, one woman was looking forward to seeing her family in Guangzhou after living in California for some time. She will be attending UC Davis next fall and was very friendly and happy to chat with us.

After our surprisingly short wait through customs, we met our guides, Paula and Ken. Their warm personalities immediately made us feel welcome and in good hands. They helped us load up into our bus and we were off to The White Swan Hotel, arguably one of the most famous hotels in China. From the outside, the hotel did not have the same flashy exterior we are accustomed to seeing in an American 5 star hotel. However, the service, breakfast and beautiful art were beyond our expectations.  China and the service aspect of its economy seem to be developing nicely.

With time to kill before check-in, our class split up to explore Guangzhou on our own. Some people took a much needed nap in the hotel room, while the more adventurous ones decided to brave the heat to learn a little more about life in the city. Unlike America, the streets were full of people doing morning exercises and playing games like badminton and cards. Almost every block had a large group practicing Tai Chi to music playing from a nearby stereo. Wandering through a park by the Pearl River, we saw a choir of locals singing lyrics from a table-sized paper hanging between two trees. Although we could not tell what they were singing, they seemed to be really enjoying themselves. We were also amazed to see several people washing and swimming in the river. We realized they do not have the luxury, as we do, to be picky about water quality. On the way back to our hotel, we saw an old man painting Chinese characters on the sidewalk. Watching him slowly and methodically paint the characters was both relaxing and peaceful. While these experiences were not extraordinary on their own, together, they gave us a good idea of what life in China is like.

We were next escorted by several English speaking Zhongkai University students to an electronics market.   The point of this short excursion set up by Professor Carr was not for us to immediately get off the plane and make a bee-line for the first counterfeit shop we could find in China, but for us use some down time while waiting for hotel check in to get a feel for the sheer enormity of the counterfeiting problem in China and the role that it plays in their economy, despite Western press reports that things are often getting better on this important issue between our two countries.  We got the point — the size of this not so underground economy in China is massive.    And, it was here that we faced a real world ethical dilemma to test us that any Westerner faces who complains about the counterfeiting problem in China:  to himself/herself buy or not to buy the available knockoff merchandise they complain about that comes from China once THEY arrive in China. This market was also an interesting contrast to the massive shopping complex across the street, where prices are high and bargaining is not an option. With the guidance of Lonnie Hodge, an expat American professor who now lives in Guangzhou and previously taught at Zhongkai University, everyone got good advice about Guangzhou and its shopping.

After some fun in the pool and showers at our hotel after check-in, we got back on the bus toward Zhongkai University for a tour.  Riding the bus through Guangzhou showed a seemingly endless number of apartment complexes, lined with clothes drying in the sun. After later talking with Lisi, a Zhongkai English major, we found out that the limitless apartment skyrises are necessary to accommodate Guangzhou’s ten million residents. With ten thousand students, Zhongkai University actually has a small student population for a Chinese university.  However, expectations for increased growth and a government certification inspection have spurred the University to renovate their library and add some more landscaping touches. Visiting one of the classrooms where students spent thirty hours a week in stiff chairs and no air conditioning made us respect the drive and dedication of these students and appreciate the facilities we sometimes take for granted back in California and at Cal Poly.

Professor Hodge was gracious enough to take us for a walk-through tour of a middle class Chinese neighborhood and then show us his apartment and fantastic view of the Pearl River. He gave us a unique insight into what life might be like were we to live in China as an expat.  We bombarded him with questions as our curiousity was peeked.  He had nothing but wonderful things to say about the people he worked with and the Chinese culture. He explained that Southern China is the up and coming place for business opportunities and growth and that individuals with our background are in high demand. His comments reinforced the value of our China trip and may have caused a few of us to reconsider China as a possible career destination.

As we sat with stomachs full of Dim Sum during the evening dinner, everyone had an opportunity to reflect on the day and spend more time getting to know our new Chinese friends. Today was just a teaser of all we will see in China in the days to come. And yes, for all our family and friends who wondered about the weather, it is very humid and hot!

Professor Carr Addendum:  See this realted posted by Professor Hodge titled C-MBA Programs: Trans-Pacific Crossings. He makes some key points that relate to our visit and one of the reasons we have brought these students to China.

Submitted By: Peter, Lindsay, James, and Ashley

After our last night in Guangzhou, where our group bid farewell to Lonnie Hodge and the delightful Chinese students of Zhongkai University, everyone found themselves being woken up by alarms and wake-up calls for our earliest morning yet. We knew we had a long day of travel ahead of us as we checked out of the White Swan Hotel, but today would hold more educational value than we could have possibly imagined. We would learn much not only from our intriguing firm visits in Shenzhen, but also from our (mis)adventures with Chinese transportation.

The bus ride to our main destination was relatively uneventful, as most of the students chose to catch up on their sleep. But after a two and a half hour ride, our bus finally rolled into Shenzhen, a fast-growing and bustling metropolis. Almost immediately, students could be heard commenting on our new surroundings and how different they were from those in Guangzhou. Shenzhen has a distinctly modern feel to it, which is fitting for a city whose population of 300,000 twenty years ago has grown nearly thirty-fold to its current size of 8 million people. Professor Carr spoke to the class on the way into town, citing Deng Xiaoping’s decision to designate Shenzhen as a Special Economic Zone (SEZ) as the primary catalyst for this incredible growth.

As everyone attempted to grasp the scope of such economic development, Professor Lancaster implored us to also consider the ecological consequences that come with such rampant growth. Shenzhen was once an expansive marsh, but there is little trace of this environment left. Such a rapid alteration of a region’s ecology undoubtedly increases the potential for more dire repercussions years down the road.

Our first stop in Shenzhen was the Wal-Mart Global Procurement Center. We arrived right on time and were treated to a wonderfully thorough presentation detailing the Wal-Mart philosophy and how it is applied in procurement operations. Amy Wong, from the Corporate People (Human Resources) department, explained the history and corporate culture of Wal-Mart to establish a foundation for understanding how the company handles its employees, customers, and suppliers. Her presentation was followed by that of Lotus Wong, a divisional merchandising manager, who continued by explaining Wal-Mart Global Procurement, its origins, and its mission. We learned that a whopping 76% of Wal-Mart’s sourced products come from China and that the company conducts ethical audits of every factory to ensure local laws are being followed. After Mr. Wong finished his section, Kenneth Chan, the general merchandising manager, delved into the nitty gritty details of how procurement is handled by various Wal-Mart teams. It was evident from this section of the presentation that the supply chain for retail products is getting very fast and suppliers are expected to catch up. Though maintaining high product quality is certainly a concern for Wal-Mart, that high quality must be delivered quickly and at the lowest possible cost. Efficiency and speed is the name of the game in the retail procurement world.

Following the presentation, our group was able to tour the Wal-Mart offices. The work environment was startlingly westernized in both layout and atmosphere. Casual attire prevailed and cubicles with colorful name tags filled each room. We were fascinated to see such a distinctly American work environment be embraced in a foreign country so wholeheartedly.

Following Wal-Mart, our group departed for the Port of Shenzhen and its most prolific terminal: Yantian. At Yantian, we were set to learn of the marvel that is Chinese transportation. However, en route, we were beleaguered by engine and air conditioning problems from our bus. The irony that the Chinese transport system had failed us did not elude the sweat soaked students.

After 30 minutes of driving in the Shenzhen heat without air conditioning, we arrived at Yantian. Their friendly staff was there to greet us with towels and coldwater. Yantian then provided us with a dazzling presentation about the wonders of the China supply chain. With government support and backing, Yantian was able to gain 50% market share in the Shenzhen port. Furthermore, because of 9/11 and the need for improved security, Yantian and its commitment to technology enticed suppliers and shippers away from other ports. This can be seen in the marked decline in exports that Hong Kong has seen in the last few years, while just a little down the road, Shenzhen is blossoming. Another reason Yantian is prospering is because of the long term view they have taken towards shipping. Realizing early on that mega ships were the wave of the future, Yantian invested heavily in the infrastructure necessary to service them. These Goliaths of the ocean can carry over 13,000 cargo units. Not even the Panama Canal can hold these ships.

The largest ship in the world was unloaded at Yantian in only 9 hours. This world record holding feat is a signpost of the increasing speed of the supply chain. Goods can be transported much faster, with more accuracy, and with better quality control. However, the massive discrepancy between intra and international transportation was made infinitely apparent in our experience at the Shenzhen airport. After a flight cancellation and a 3 hour delay for no apparent reason, we were on our way to Shanghai. To quote airport authorities, “Flight 1361 to Shanghai has been delayed due to delays.” In the time accumulated at the airport, the group got a little taste of home in the form of Big Macs. It will please readers to know that the food quality is on par with any McDonalds in the U.S., and the service, even better.

At the end of the day, we had seen much China has to offer in the way of supply chain management. Wal-Mart has a 97% on time delivery rate and Yantian is capable of handling whatever the shipping industry may throw at it. On the bus ride to Shanghai, we saw signs for the Maglev train: a harbinger of the future of transportation and Chinese efficiency.

Submitted By: Eric, Victoria, Brian and Evelyn

Shanghai is China’s largest and greatest commercial city, and today was full of sightseeing to witness this firsthand. We explored a live/traditional market, the French Concession, Tian Zi Fan (small art street), Yuyan Garden/Temple, and the Bund. Each location had a different story and a different ambience. We were joined by Claire, a student from Peking University, who identified important facts related to our journey.

The live traditional market was a few minutes from our hotel in Shanghai, the Jian Gong Jin Jiang Hotel. We walked into an exhibition hall, where different merchants were selling everything from vegetables to live turtles for eating. We walked down each aisle observing how the Chinese went shopping and picked out the food items. In one section, chickens were in stacked cages where people picked one out and on the spot they were butchered. It was interesting to see how many of us were so stunned by this while the Chinese did not even flinch. Everything was fresh, from fish to tomatoes. The market showed how some do not want packaged goods and want to be able to see the “food” alive to know how fresh it truly is. Many Americans live in a culture of processed food, while this market was the complete opposite. The smell was also very pungent. Chinese demand extreme freshness while Americans want a sanitary environment. This shows some differences between American and Chinese shopping demands. Some students toured around the market, which had many tea merchants. A few students purchased tea made in China, harvested to their standards.

After this experience we loaded the bus and drove through the French Concession. After the Opium Wars, Shanghai became an open port by its colonialists, resulting in France, Britian, the Russians, et al. setting up concessions. The colonialists left Shanghai, but left their beautiful architecture still standing. Our next stop was Tian Zi Fang, a small art street. We explored the art galleries and studios. Here we learned that these Chinese artists and the government are working together to protect the intellectual property rights of these artists. Perhaps this is a sign that China is learning to better appreciate that IP protection is not just important to the mutlinationals, but their own populace and economy.   If so, this is an encouraging development.

Yuyan Garden/Temple was where we ate lunch and spent around 2 hours shopping. We learned that is called a “temple”, but here in 2007 it is more of just an area for gathering, not for a congregation of parishners. Thus, words in different cultures have very different meanings. This is similar to Chinese characters, where one character can mean many things based on the pronunciation. In addition, the building structure was ornate. This shopping trip was very successful for many students. People bought purses, magnetic bracelets, silk robes, and handmade stamps. You could see the variety of cultural goods, as well as the tourist souvenirs. There were many more ethnicities here than in other areas we have visited.

The Shanghai Bund, one of the most famous tourist destinations in Shanghai, is located on the Hangpu River.  It once and still does house many historical buildings. It shows a very impressive skyline that includes many historical buildings as well as new five star hotels. An interesting observation we made was the mix of people living in different demographics. For example, we saw middle class business workers, the working class, “little emperors,” and even children who were forced to beg for money. We learned that even though Shanghai is a very prosperous city, there are still those who have not grown consistently with the city’s growth. Hopefully in the near future, there will be a more even economic demographic among its population.

Tomorrow … back to visiting more firms.

Submitted By: Peter, Andrew, Adib and Chuck

In day 2 of our Shanghai trip, we visited the Shanghai Urban Planning Exhibition Center, Shanghai Museum, and KPMG Shanghai.

Our first stop of the day was the Shanghai Urban Planning Exhibition Hall. Shanghai is known as the “Pearl of the Orient;” the city has transformed since the 1930s because of tremendous developments by both domestic and foreign developers. The exhibition center consisted of 5 floors plus one basement floor. As we ascended through the floors, our tour guide revealed Shanghai’s early history through interactive photos, showed us the principle of Shanghai city model plan for developments to year 2020, and walked us through the detail planning of the key infrastructures such as the Shanghai Air Port, and the Shanghai deep water port. Shanghai is also hosting the 2010 World Expo; in preparing for this event, the city plans to build an expo center, extend the magnetic bullet train route to the expo center, and improve Shanghai airport’s capacity to handle 100 million passengers per year.

Seeing the exhibition center made us realize the determination and commitment by the Chinese to develop Shanghai into a world class city. The model plans shown to us, along with the logistics of extending railways and bridges, demonstrated the change needed to support the city’s anticipated growth and infrastructure development through 2020. This massive task will involve a great deal of tedious planning and organizational activities. The exhibition center educates and reveals to the public Shanghai’s plans of becoming the next greatest city in the world. Our visit to the Urban Planning Exhibition Hall was a nice set-up for our next day visit with Callison, a Seattle based architecture firm with an office in Shanghai.

We next visited the Shanghai Museum. Though this was more of a cultural experience, it was very telling of China and its place in history and its place in the world today. Currently, foreigners may view China as a third world nation with nothing to offer the world other than cheap and abundant labor. While this perception cannot be farther from the truth, what makes it truly unfortunate is that it is also applied to China’s past. In fact, many probably don’t even realize that China has much of a past. Stepping into this museum erases these unfounded and uncorroborated notions that people may possess.

The museum is overflowing with relics from China’s past that testify to its greatness and elevated position in history. One can view carvings dating back to the 31st century B.C. One can view art, calligraphy, hand crafted furniture, and money which was all created before the birth of America and even any sort of modern development in Europe. China was advanced far beyond any other nation for centuries. It is only recently that it has stumbled. The exhibits at the museum humbled us westerners. They made us realize that our 150 year old antiques are nothing when viewed in the proper light of Chinese history. China has a past that is unparalleled and unrivaled.

Our final visit of the day was a stop at KPMG Shanghai.

KPMG is an accounting firm that provides audit, tax, and advisory services. It currently has 5500 employees in China. Mr. John Lee, the partner in charge from the tax department in Shanghai, gave us an excellent presentation about KPMG’s history and its current business status in Hong Kong and China. While most of us have the perception of China’s cheap labor domination in manufacturing sector, Mr. Lee opened our eyes and stated that China is now being selective in doing the work that creates “more value” rather than simply manufacturing high volume, low quality goods. Mr. Lee explained that companies are shifting towards R&D using talented engineers from all over the country rather than hiring cheap labor just to do manufacturing. Mr. Lee also discussed KPMG’s business plan on doubling its size every three years in China. This is a testimony to China’s rapid growth. KPMG also has offices in Hong Kong, but its growth there has leveled off, because as Mr. Lee mentioned, Hong Kong is a mature market; China is growing exponentially. Multinational firms are rushing over to China.

However, Mr. Lee cautioned us about some of the pitfalls that exist and that he has seen firms fall prey to. He mentioned that if you are looking to open operations in China, you should be willing to send your best people here to establish your China branch. Just sending second or third tier people here will not get the job done. Firms coming to China also need to be flexible and willing to assume some risk. In China nothing is black and white; there is a lot of gray. You must also be willing to accept the fact that things will be ambiguous which will require you to make decisions on the fly. You will not succeed if you are looking to have a 100% guarantee or a “yes” or “no” answer to every issue before moving forward. It is also important to know your partner. In China, Chinese citizens often need to have some stake in the businesses. Consequently, it is important to do your homework before hand and have a good idea of what the person you are partnering with is expecting. What are their goals and expectations? What are they looking to gain from the joint venture? Not having the right partner can result in failure.

Also, Mr. Lee mentioned that parties need to be willing to walk away from the deal or business if necessary. If you see that your company is struggling and things are not going as planned, it may not be in your best interest to push the envelope and try to force success that simply isn’t there. The better option may be to cut bait and exit China, before you lose too much of your investment.

We really enjoyed our visit to KPMG.  It was very informative and we greatly appreciated their time with us.

Submitted By:  Lee, Ryan, Jared and Derrik

The second day of firm visits in Shanghai presented a very unique learning experience for the group.  The primary visits of the day were focused on the main Chinese offices for Starbucks and Callison Architecture.  Each firm is based in Seattle, Washington and each has chosen to capitalize on the endless amount of opportunity presented by the Chinese marketplace. 

Several mantras continued to ring true during the visits; China is a tremendous growth market with unrivaled growth potential, market research and knowledge of local customs is paramount to success, and China is a marketplace where only the best and brightest of a company’s employees should be sent. 

Starbucks has a very unique and short history as an international retail power but nevertheless one must respect their rapid international success since their first international store opened in 1996.  The company was originally founded in 1971 as a roasted coffee bean and grounds retailer.  They originally offered high quality product for at home brewing.  The concept of the Starbucks we are so familiar with is the result of the breeding of the third place concept.  “Third place” meaning that people inevitably flock to three distinct locations in their everyday lives; home, work, and a restaurant or other retailer.  Starbucks successfully designed a place for the consumer to purchase a high quality product at an acceptable price as well as design an area to converse and congregate with friends, co-workers, and family. 

Dr. Eden Woon shared many of the guiding principles that have accounted for Starbucks’ rapid success.   He also provided insight into Starbucks market entry strategy and milestones for achieving success.  Starbucks opened its first location in China in 1999 after more than two-years of discussion on the topic and an exhaustive amount of market research.  We learned that the first location opened in Beijing as the result of a joint venture with a small Chinese firm.  The firm licensed the Starbuck’s name and leveraged their brand image to allow early success.  However thanks to China’s entrance into the WTO in 2005 Starbucks was able to repurchase this location from their licensee.  Starbucks plans to continue this strategy for their more than 500 locations in mainland China, one-half of which are owned by their partner firm. 

Obviously Starbuck’s coffee is considered a luxury item in China where the level of discretionary income of the majority of the populous does not allow for the same purchasing patterns of American consumers.  In fact, this reality causes a dramatic shift in the target market for the firm, forcing them to rely upon the purchasing power of a much younger segment than the one that frequents their stores in the United States.  This also has caused Starbucks to redesign their store fronts, because Starbucks in China offers a product that is not widely consumed, coffee (China has a tea drinking culture), their value adding service becomes more the location to meet and relax than the coffee itself.  Though they are offering a good alternative to a good cup of tea, and offering some products more catered to the Chinese palette.  It is said that “if you are not at Starbucks, you are on your way to Starbucks”.  Their stores have become a popular destination, thus increasing the importance of their brand identity related to corporate social responsibility and their core values. 

Nothing would be more tragic to Starbucks than a bad experience or a sour taste in the mouth of the consumer with regard to their brand.  That said, Starbucks has worked diligently to support the goals of the Chinese people by offering over $5 million dollars for philanthropic efforts.  This form of  public relations should create the positive image Starbucks seeks to garner throughout the 40 countries they are currently serving. 

It is also important to note that because the Chinese have such a unique palette and loyalty towards brands that Starbucks works diligently to continuously improve its product. Being on the ground and active in China is extremely important to a firm’s success in the market and Starbucks intends to continue it’s expansion organically so as to prevent the dilution of the brand.

Looking back on the day, our most important take away as it relates to Starbucks is that an American firm can be successful with the same product with very little modification for local taste.  Starbucks’ success seems to stem from the fact that the experience at a Starbucks is similar in all 40 countries they operate in.  Their product and brand has not been changed to suit existing demands or conceptions like many other firms in the same category (e.g.m, YUM Brands, McDonald’s). 

Callison Architecture was our next stop.  It is one of the world’s foremost designers of retail space.  According to Callison, the architectural industry of the United States is comprised of firms that specialize in specific areas including residential, mixed-use, corporate office and public works projects.  However, in the Chinese market firms are expected to be much more generalist in their expertise and ability.

China’s centrally planned governmental structure creates unique challenges for architectural firms. In order to be successful, a firm must balance their artistic desires with the government’s vision for the city.  This highlights several of the key issues in doing business in China.  First, relationships within the government and private industry are key to getting things done.  Secondly, the realities of a centrally planned city and regional expansion, where the government is the owner of the land, allows for a greater influence from individual political officials than it would in a more pure market structure.

Callison, the number one retail space designer in the world, has had a hand in many of the most impressive mixed use and pure retail projects worldwide.  These include the Pearl in Doha, Qatar, the retail space underneath the World Trade Center Memorial Building in New York City, Microsoft’s Main operations office in Redmond Washington, and multiple resorts, hospitals, and corporate offices around the world.

Their experience in China began in 1987 and the learning curve was steep as it is with many American firms entering the market.  One difference mentioned was  the proliferation of large mixed-use projects not common to the United States.  The scale of projects within China tends to be over 3 million square feet per development.  Such size tends to naturally allow only the largest of firms with a breadth of resources to compete successfully in the Chinese market.

China is strategically one of the most important markets for Callison.  Given China’s low standard wages, knowledge based work such as rendering and drafting can be performed at a much lower cost  This makes the importance of a successful Chinese office even greater.  In order to remain competitive in an industry where costs can rise quickly, minimizing costs becomes increasingly important. They have recently moved to a larger office in order to accommodate their plans for growth from 16 architects to 30 by year’s end and 45 by the end of next year. 

The day ended with an incredible cultural experience.  We had the opportunity to dine at a restaurant that served food from the most northwestern region of China.  We all had a wonderful time dancing with the locals and enjoying their music.