Asia Study Tour 2007--Page two

This morning we met with Rex Wong, Vice President of Marketing and New Products for Anheuser-Busch China.  On the drive from the hotel we noticed the cultural differences of the business district of Shanghai.  There were many high end retail stores, working traffic lights, a more professional, business-like atmosphere; generally less chaos than in other areas of the city. 

Arriving at Anheuser-Busch, we were directed into a large boardroom where we received multimedia overview of operations at A-B China.  They are facing a series of challenges, including the multiple demographic, language, and cultural differences found in this one country.  An example of this diversity is the over 1000 dialects spoken in China.  Each of the 32 provinces has individual tastes and habits in all aspects of life, including alcohol consumption.  The main issues A-B China faces is marketing to such a diverse, image-sensitive, market and creating a cost-effective distribution network that covers the very large country of China within the confines of smaller profit margins than are found in other A-B markets.

A key marketing event for A-B China is the upcoming 2008 Olympics in Beijing.  They are the international sponsor of this event which will give them an opportunity to promote their brands in the "Celebration" marketing campaign that is their current focus.  One drawback of this campaign is that for the first time, there are 3 beer companies sponsoring the Olympics.  The other two companies are national and local Chinese sponsors of the event.  This could dilute the impact of A-B China’s campaign, making the $55MM investment much more of a gamble than if they were the only beer company represented.   We were all treated to a souvenir can of beer depicting the 2008 Olympic marketing campaign. 

We found it interesting that Budweiser is being marketed as a Super-Premium and Premium product in China, when it is considered a popular brand in the US.  To differentiate between Super-Premium and Premium they use different packaging for the same product.  The Super-Premium brand receives a more upscale label and a foil top, where the Premium product has a more traditional Budweiser label. 

Monday afternoon was scheduled as "free time" as some of us needed to continue our recovery from jet lag and others of us needed to explore the many Shanghai sight and shopping opportunities.  many took this opportunity to visit a "knock-off" mall where the sales people are hyper-aggressive and everything you see is an unauthorized copy of something.  There were "Nike" golf clubs and shoes, "Rolex" watches, "Mont Blanc" pen sets and just about anything else you would want.  Exhausted from shopping, the faculty director left the mall and was considering his next move when taxi after taxi pulled up with other trip participants eager to look, touch, be accosted by sales people and maybe buy.  In the end, several of us went to a nice restaurant on the Bund to help John and Leslie Ponder celebrate their 14th wedding anniversary.

This is the first day on the Asia tour that featured three visits, a tight schedule and a substantial amount of travel on our bus.  We are all amazed at the traffic in Shanghai.  It can best be described as "freestyle" and seems to follow it's own rules.  Traffic in Shanghai only superficially resembles anything we see in Charlotte or, for that matter, anything on the North American continent that we have experienced except, perhaps, for Mexico City.  For instance, there is an overwhelming amount of moped and bicycle traffic.  People on these conveyances appear fearless, cutting in and through tightly bunched traffic with abandon.  That said, we have yet to witness a fatal accident, a fact that also amazes us.  We have received information, perhaps apocryphal, that upwards of 500,000 people perish in Chinese traffic accidents annually.  There are also taxicabs, cheap and plentiful, the drivers of which apparently learned their craft from formerly driving mopeds.  The roads are mostly in excellent condition but expansion of capacity has occurred by making more and narrower lanes on the same roadways.  Judging by the width of the lanes, this has happened repeatedly.  Lanes will sometimes end rather precipitously making our driver (who also learned on a moped) appear to be a genius.  After all, we made it to all three appointments on time. 

The Nippon Valqua Company (“Valqua”) is a Japanese company based in Tokyo with manufacturing locations and sales branches spread throughout Japan, China, Korea, and Taiwan.  Valqua is in the industrial sealing business for the chemical, petrochemical, and semiconductor industries.  Valqua was created approximately 80 years ago by the Takisawa family.  Today it is a public corporation, but still managed by the Takisawa family.  Annual sales are approximately $300 million with the vast majority of the customer base in Japan. 

In 2000, Valqua opened a seal manufacturing location outside Shanghai, China.  This is a 150,000 square foot factory with 300 employees.  The management team, composed of six individuals, is all Japanese with the remainder of the employees being Chinese nationals. 

 This factory produces several different varieties of seals and gaskets.  The first type is hydraulic seals, used for sealing oil in semi-dynamic applications, such as cylinders.  The second type is sheet gaskets.  These sheets are cut to size by local distribution companies for specific gasket needs of end-user customers, primarily in the chemical processing industry.  These materials historically were made of asbestos, but that has recently changed to non-asbestos materials.  A third type of seal made at this location is spiral wound gaskets.  These are used in refinery and pipeline applications.  They are manufactured by layers of thin compressible material, such as graphite or Teflon, surrounded by thin layers of stainless steel for strength and rigidity.  Spiral wound gasket technology is about eighty years old and the gaskets are a true commodity where cost is the primary selector of product.

The last product manufactured at this location is metal bellows.  These products are used in the semiconductor industry.  Bellows enable wafers to enter semiconductor equipment processing chambers for manufacturing of chips.  The bellows expand and contract, allowing for temperature changes and the movement of the pedestal without developing leaks of the processing chemicals or destruction of the vacuum environment. 

 The welcoming to the factory was very warm.  We were greeted by the management team outside the facility holding a giant sign.  As we entered the factory, all of the employees were standing as a sign of respect.  The factory was clean and had a traditional batch and queue, non-automated layout.  The employees seemed friendly, knowledgeable, and professional.  Unlike other Chinese companies that George has visited, this company seemed to have the right number of people at each work station.  Every employee was active and busy.  There was a lot of space in the factory, and most of the work areas were not crowded. 

 Pay scales at the Valqua plant are segregated into three distinct categories with different levels in each category.  The top level is management with five pay scales, followed by assistant management with three pay scales.  Management levels consist of higher educated employees.  The final level is the worker level which has ten different pay levels.  The pay scales for the entry level worker are determined by government regulation.

Mr. Lee Ah-Boon, Deputy Chairman of the Consumer Group for Citigroup is working to increase the footprint of consumer business in Shanghai, China. Currently Citi has 17 branches in 7 cities in China, mostly located on the eastern seaboard because of that is where wealth and commerce is concentrated. China’s economy has the most people, the largest emerging economic market, the fastest growing GDP and is rapidly gaining a share of the world’s GDP. There is no checking system in China and therefore 80 percent of transactions are in cash. In China, 1.2 billion debit cards have been issued but only 30 percent are active.

Citi’s competition in China are the Big 5 banks, which includes: ICBC, China Construction Bank, Agricultural Bank of China, Bank of Communication and the Bank of China, which are all controlled by the government and control 80 percent of the banking business. Citi’s plan for the future to develop consumer banking is to learn: risk management, compliance and how other successful banks manage these complexities within China's unique set of regulatory and cultural conditions. Their steps to achieve this are (1) to get the right perspective, (2) to be organized and (3) to strengthen their infrastructure and policies.

On May 22 of our trip to Shanghai we visited ARUP.  Their offices are located on the 39^th floor with floor to ceiling windows that provided one of the most beautiful views we have seen in Shanghai.  ARUP is an international company that specializes in sustainable urban development and has 8,000 employees worldwide.  While their corporate office is located in London, they are currently working on four projects in China.  ARUP’s corporate philosophy is that we should adapt ourselves into the world around us so that humans and nature can coexist.  They believe in using resources efficiently to ensure their sustainability and focus on a comprehensive approach to living our lives better. 

Our speakers were Shan-feng Dong, the Project Manager of ECO-Projects who is an architect and Andrew Simons (an American) who is a cultural planner.  The discussion focused on a sustainable city they are planning in Dongtan China.  The planners first considered three questions:  what to develop, how to develop and why to develop.  From there, they considered the economic, social and environmental impacts of the development.  Planners held a sustainable workshop where local, national and international parties agreed on the objectives of the project. 

Dongtan is located on the water and therefore water quality and energy conservation were major factors in the planning of this sustainable city.  All energy used in the city will come from renewable energy sources.  There will be zero emission transportation and near zero landfill materials.  This will enable to the city to hold more residents, provide more jobs and receive more visitors while having a drastically smaller imprint on the environment.

This project is a very exciting look at one of the ways we will consider “green” development in the future.  Our group had many insightful questions for the speakers and I encourage you to log onto their website to learn more about this and their other sustainable projects.