BEIJING - (Business Wire) China is enjoying unrelenting economic growth even against the backdrop of the global recession. The business potentials of the country’s dynamic and vast market are being recognized by a growing group of returnee entrepreneurs, according to a report by Z. H. Studio. They, armed with overseas education and global experience, are able to take advantage of what for many foreign managers is still a challenging market, both in terms of business culture and consumer behavior. Despite China’s widely acclaimed reputation as an entrepreneur-friendly place, as the old adage says, in China, anything is possible but nothing is easy. As with the success of all businesses, the conjugation of a series of enabling factors is crucial for a returnee entrepreneur’s rise to prominence.
Smartly Managing the Differences
China’s returnee entrepreneurs definitely enjoy a unique position of having a foot in two different worlds. They know China very well and also understand the outside world. As such, by leveraging differences to their business’ advantage, smart returnees will get a step ahead of the curve.
One such returnee-directed enterprise is Vanguard Technologies, an HR software-development company set up in 1998, headquartered in Beijing and now with offices in Shanghai, Guangzhou, Chengdu and Tianjin.
Having lived and studied in Europe and Canada, Vanguard’s co-founder Alexander Cui claims he and his colleagues were able to identify a “burning issue” for many of the multinational corporations operating in China. “China has the most complicated HR system due to local rules.” He recalls that many foreign firms were quick to be aware of the insufficient structure for the management of HR issues in China and they required “a global software solution.”
Vanguard then developed a new eHR solution, using a shared database across a company’s multiple departments, providing the management of payroll services to multinational clients, as well as recruitment, training and attendance management, thus offering a global payroll solution and competing on the same level with leading global software companies. “A company can have, say, 10,000 people on the payroll and manage them all through the software,” Cui explains.
Vanguard now boasts a shining list of clients, including Ford, Toyota, GE, Philips, NEC, Eli Lilly, Novartis and China Telecom, among many others. Awarded the accolade of Best e-HR Brand Prize in Greater China in 2008, Vanguard has started to set foot in the Asia-Pacific region, having implemented software solutions in India, Korea and Japan.
Future plans see Vanguard moving to an even more global market, as Cui believes his company enjoys an advantage over foreign software brands, with low costs of operation and a higher degree of customization. “Through the experience of dealing with multinational corporation clients, we’ve accumulated the knowledge of policies in other countries such as tax laws,” Cui says. “We are also able to advise on security concerns. Our focus for the future also includes adapting to specific aspects sought by each company.”
Identifying a market niche and being ‘first through the door’ are key to many returnee entrepreneurs’ success. Another example of this is Qunar.com, a Beijing-based travel and lifestyle search engine.
Founded in 2005 by American Fritz Demopoulos (CEO), Chinese Zhuang Chenchao, a former World Bank systems architect in Washington, DC, and Malaysian Douglas Khoo, Qunar (which means ‘where are you going?’ in Mandarin) brought a new tool to the Chinese traveler, allowing consumers to compare prices for air tickets, hotels, car rental and tour packages in real time.
The venture is capitalizing on a burgeoning middle class in China with newfound purchasing power. “Travel is relative to people’s purchasing,” Qunar CEO Demopoulos explains. Bucking the trend in the global economic crisis, he mentions that the third quarter has seen a significant boom in leisure travel, driven primarily by China. “Approximately one-third of all online leisure-travel business in the region is coming from China now."
Qunar has no plans yet to diversify into a bilingual travel search engine. Demopoulos believes the focus on the Chinese market will make Qunar avoid the errors committed by other players in the industry, who tried to widen their focus too much and therefore lost it entirely.
A native of Los Angeles, Demopoulos is a frequent traveler and understands the vital link between the travel sector and luxury consumption. Qunar now registers 35 million unique visitors each month. "We have travel and non-travel oriented advertisers. We also find a huge interest in luxury brand advertisers in reaching our clients," Demopoulos says, “Obviously, that crossover effect will pay off significantly as well.”
Another man who is poised to maximize the crossover effect in asset utilization is Ray Zhang, founder and CEO of eHi Car Service in Shanghai. With a fleet of more than 4,000 vehicles comprising some 50 models, eHi offers a full range of car-rental services catering to three largely diverse demands, from self-drive and chauffeur-driven limousine service to the urban-oriented ‘zip car’ concept, whereby customers have access to a fleet of cars in residential areas for use for a matter of hours or days, thus fomenting a car-sharing culture.
When US car-rental giant Hertz made inroads in China back in 2002, it failed because the China market was not ready for the US-style car-rental model. “China’s business environment is very different from that of the US…Such things as credit-card transactions and personal credit history did not even exist several years ago,” eHi’s Zhang explains.
Not only have online transactions now become a part of everyday life in China, but also the country has emerged as the world’s largest auto market. Aided by tax incentives for buyers of smaller cars, car sales saw a 75.8 percent rise in October over the same month last year, with 946,000 cars sold, according to the China Association of Automobile Manufacturers.
Mission Alignment
While soaring car sales inherently trigger auto-related services, Zhang finds this trend potentially disastrous for China. “Look at China’s parking, traffic and pollution problems today…The ownership rate in China is still just 4 percent, as opposed to 70 percent in the US. If we double or triple the number of family cars, we are going to have serious social as well as environmental problems.”
Simply put, in Zhang’s view, China’s urban areas are not designed for two-car families. “It’s our mission to avoid that.”
He believes that nowadays all the ingredients are present for China to follow the car-sharing route. Population density aside, vehicle dislocation is another condition. It takes a lot of people to move vehicles in any given city, but low-skilled labor is cheap in China. E-commerce is also a vital part of eHi’s business, with 90% of the company’s orders received online. The zip-car service, for example, has only become available with the advent of GPS, smart-phones and wireless. “It’s prime time for the car-sharing concept to flourish.”
Born and bred in Shanghai, Zhang spent almost 20 years in the US. He founded a logistics software company for ground transportation before returning to his hometown and setting up eHi. “Understanding how that industry evolved in the US and how to avoid the potential pitfalls in China has helped. The largest car rental industry in the world will be in China in the next 10-15 years -- we are riding a tide now,” Zhang claims.
The Chinese government shows no signs of neglect for the ever-growing returnee community. In Shanghai alone, the Shanghai Overseas Returned Scholars Association (S0RSA) predicts that the city's total number of returnees will be 100,000 by 2010. Both the central government and city municipalities have announced a variety of schemes – including cash awards of up to 500,000 RMB, three-year tax exemption, free rent on business premises and other preferential policies – to promote returnee entrepreneurship.
On top of the government funding, many returnee entrepreneurs have become the darlings of the venture capital world. Qunar, for example, has received third-round financing of $15 million from GGV Capital as lead investor and co-investors Mayfield Fund, GSR Ventures and Tenaya Capital, funds the company will channel into branding, marketing and business development.
A lot more returnee entrepreneurs have achieved prominence beyond commercial success. “Being in the right place at the right time, many returnees bring to China their global experience and expertise in terms of industry standards, processes, rules and regulations,” says Xie Ning, deputy chief editor of China Economic Net. “Therefore, chances abound for them to voice opinions in policymaking and legalization processes, which is another gratifying factor for China-bound entrepreneurs.”
Not Always Rosy
In spite of the relatively higher social status, returnee entrepreneurs do face some common challenges.
“Some returnee entrepreneurs experienced a ‘reverse cultural-shock’ when coming back to China,” notes Richard Cant, a seasoned businessman with experience in several international startups in China. "There is still a lot of resistance to the adoption of 'Western views and ideas' by Chinese companies even if they are delivered by a returnee-Chinese national. Foreign-born Chinese (ABC's, CBC's, etc) often have a harder task."
According to Laurie Underwood, co-author of the book "China Entrepreneur: Voices of Experience from 40 Business Pioneers", the trick for most China-bound entrepreneurs is “to maintain international business standards in the core practices -- while adapting to local norms when possible.”
Juan A. Fernandez, a professor of Management at China Europe International Business School (CEIBS) agrees. “China is not a quick-learn market, and business development can be excruciatingly slow (at times) and blindingly fast at other times.” “So what’s the ‘right stuff’ for China-bound entrepreneurs? Be patient and learn to go with the flow, reacting quickly whenever possible, and maintaining a steadfast and positive attitude whenever necessary.”
Indeed, China is not a good place for those whose blood pressure rises when faced with unexpected setbacks. More often than not, many of the problems may be solved in a “smart way”. For instance, Vanguard Technologies is soon to release a so-called third-generation eHR system, whose primary feature is to cut down maintenance costs for clients. Yet it also has a piracy-proof format, which enables the company to better protect its intellectual property, a key consideration for software developers worldwide.
Z. H. Studio
Ms. Ada Li, 86-10-58769825
ada.li@zhstudio.net
