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Management article
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Reference no. 98511
Authors: Richard Yan
Published by: Harvard Business Publishing
Published in: "Harvard Business Review", 1998

Abstract

According to author Rick Yan, a vice president in the Beijing office of Bain & Company, making money in the China market in the short run is the best indicator we have that a company''s current strategy and practices are well suited to success in the longer term. Despite concerns about the continuation of China''s economic boom and the country''s political future, multinationals are flocking to China. Why? Because China may soon be one of the world''s most important economies. Companies that don''t consider exploring this vast market may be overlooking a tremendous growth opportunity. Investing in China now to build sustainable long-term positions is a credible strategy. Some companies, however, have taken the long-term argument too far. They tolerate poor short-term results in the mistaken belief that such results are a trade-off for future profitability. But underperformance in the short term is a good indicator that a company''s strategy or practices may not measure up over the long run. Drawing on the examples of multinationals already competing in China, the author finds that success is more a factor of managerial capability, critical mass scale, and product portfolio than it is length of stay. Although some early movers are market leaders, being number one requires more than longevity. Take Coca-Cola, for instance. To see it as a passive player that "waited it out" is to misunderstand the company''s aggressive strategy: Coca-Cola planned carefully for success and executed a series of smart short-term moves to make it happen. In the final analysis, players that want to be around over the long run had better make the right moves today. One mistake won''t seal a company''s fate, but organizations need to learn from their mistakes quickly and use their new knowledge to build winning strategies. Companies that fail to adapt to the fast-paced market will never enjoy long-term success in China.

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Abstract

According to author Rick Yan, a vice president in the Beijing office of Bain & Company, making money in the China market in the short run is the best indicator we have that a company''s current strategy and practices are well suited to success in the longer term. Despite concerns about the continuation of China''s economic boom and the country''s political future, multinationals are flocking to China. Why? Because China may soon be one of the world''s most important economies. Companies that don''t consider exploring this vast market may be overlooking a tremendous growth opportunity. Investing in China now to build sustainable long-term positions is a credible strategy. Some companies, however, have taken the long-term argument too far. They tolerate poor short-term results in the mistaken belief that such results are a trade-off for future profitability. But underperformance in the short term is a good indicator that a company''s strategy or practices may not measure up over the long run. Drawing on the examples of multinationals already competing in China, the author finds that success is more a factor of managerial capability, critical mass scale, and product portfolio than it is length of stay. Although some early movers are market leaders, being number one requires more than longevity. Take Coca-Cola, for instance. To see it as a passive player that "waited it out" is to misunderstand the company''s aggressive strategy: Coca-Cola planned carefully for success and executed a series of smart short-term moves to make it happen. In the final analysis, players that want to be around over the long run had better make the right moves today. One mistake won''t seal a company''s fate, but organizations need to learn from their mistakes quickly and use their new knowledge to build winning strategies. Companies that fail to adapt to the fast-paced market will never enjoy long-term success in China.

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