Stop 3: Guangzhou

Company Brief

US Department of Commerce

American Consulate

The goal of the US Department of Commerce is to “Cultivate peace and commerce with all” – Jefferson. They say to think of China as three markets: 1.  6 cities (first tier cities) penetrated by western firms 2. 300-400 million people 3. 1 billion people who are poor but we aren’t interested in that market for another decade. They emphasized how market research is quintessential in the Chinese market. Home Depot’s failure in China can attest to this. People in China are not interested in the DIY mentality that makes up the Home Depot markets. Because Home Depot didn’t adapt to the market needs, they failed in China.

A business has to do market research for not only the country but the province as well. China is a very picky market (take longer to select a toothpaste than any where else in the world). A Chinese consumer will go one time to discuss product they want to buy, then they will bring spouse or friend, and then come back a couple weeks later to make final decision of making the purchase. China has developed tremendously in the last 30 years. Everything here has been made to quickly export products to world. They don’t spend enough time dispersing products. P&G set up the second largest logistic center in China. American firms here experience within the first year revenue growth of 20-30% because they came to Chinese market.

The business culture here is very important to understand and respect in china. In person meetings are pivotal when doing business in China. American advertising in China: TV is still key in china, but you can’t come here in think that traditional marketing and advertising will work, in China you seriously have to take into account social media marketing and will account 40% of all advertising next year. Local media is state controlled here so this method isn’t always the best in China. A Chinese consumer would never be caught with a fake bag. The status is very important to them and they value quality in the products. Culture of legality is in its infancy here. Restaurants and such aren’t held accountable.

We also got to hear from the commercial department (vs. the state). She assist over 110 us export assistance centers. The main goal is to work diligently to create jobs. There are various trends to follow: 1. Household consumption will more than double 2. Disposable income is constantly going up 3. 170 cities with over 1 million (vs. 9 in us). Western food service chains are accelerating their roll out of new outlets. McDonald’s doesn’t have as high revenues as KFC because of marketing error. In China they enjoy chicken. McDonald’s focused it’s advertising on its Big Mac’s while KFC focused its initiatives on different types of chicken recipes which the Chinese enjoyed more.

Brownshoe

The mission of Brownshoe is “to inspire people to feel good and live better…feet first!” There are many categories within the company: Healthy Living—Naturalizer, Dr. Schools (product innovation), Contemporary Fashion—Via Speiga, Sam Edelman (design capabilities), Family—Famous Footwear (casual and fitness lifestyles). They have office locations all over the world. China is the biggest producer of shoes for the US market. Brownshoe was established in June 2007. We went on a tour of the facility where they made product samples to distribute across the country. Later, we went on a tour to see the actual shoes being made. It was interesting to see the assembly line of shoes and different levels of development.

Cultural Analysis

Guangghou

It’s where the real action is. We were in the center of the most American part of China considering the number of minority residents there. The southern area of china is known for Africans or Middle Easterners migrating there.

Aside from migration and illegal residents, the city is known for its food. In Shanghai people rather have designer bags and shoe, but in Guanghou they’d rather have chicken feet and boiling pots of lamb, beef, cow stomach and veggies with the spices of the orient.

Guanghou felt like Florida’s weather, warm and muggy.  It was the only city that had the appeal of a dangerous slum behind the five star hotel we stayed in, but everyone was safe and we learned more about American companies in the Chinese market.

Umbra was so fitting for us.  Many of the retailers purchased household items for functionality at local retail stores like Target. With stylish design and modern function umbra products had options for kitchen bath and bedroom.

Step out in style with one of the four brands featured in BrownShoe-Leeway’s closet. Top designers like Sam Edelman and musicians like Carlos Santana provide top-line fashion for women’s shoes that wear comfortably.

It nice to know that our domestic companies have a helping had when they get to the Chinese market. The US commerce office in Guangzhou is the primary consultant and liaison for American companies in China.  It assists with economic backing and social support of entering the booming economy.

Friday, May 18th

We arrived at the US Commerce Office to learn more about their role in assisting American businesses and companies entering into the Chinese market. The US Commercial Service in China is part of the trade promotion division of the U.S. Department of Commerce’s International Trade Administration and comprises over 1400 civil servants, seeking to help U.S. companies succeed in markets around the world. Our meeting was with Terri Tyminski, a former IBM consultant, who had also worked for twelve years in supervising McDonald’s entry into China.

We learned about KFC, McDonalds, and Starbucks and their influence in China. We learned about the specifics of each of their establishments, their successes individually, and the challenges they had to overcome to maintain their business and be able to establish other franchises in China. After our meeting, we boarded the bus, headed to lunch. Late that afternoon, we visited Brownshoe-Leeway.

At Brownshoe, they manufacture and market footwear brands including Famous Footwear, shoes.com, Via Spiga, Vera Wang, Sam Edelman, Franco Sarto, Fergie, Etienne Aigner, Carlos, Life Stride, Dr. Scholls, Naya, Naturalizer, Ryka and Avia. Like Collective Brands, we were also able to see the factory for Brownshoe-Leeway. Their factory amazed me. It was a quaint community – fixed with the factory on site, housing for the factory workers, as well as a library, work out center, two restaurants (one American and one Chinese), and a store (housing the shoes produced in the factory).

We saw children getting off the bus at the entrance of the entry gates and running towards the housing sector of the community. The community had everything on site. We were told that many of the workers work seven days of week, but the most anyone is allowed to work in one day is eight hours. In that case, workers get double pay. Triple pay is given to those who work weekends and quadruple pay to those who work holidays. After our visit we headed back to the hotel and ventured off to grab dinner that night.

In my observations of Guangzhou, I noticed that there are an abundance of pregnant, young women. The majority of people walking the streets were actually young. Surprisingly, there were a lot of couples, including gay couples, walking the streets of Guangzhou, hand in hand. With so many couples PDA’ing in the streets of Guangzhou, one would think that the most lucrative business would be wedding photography. And so it was. On every corner is a wedding photography booth to set up personal meetings and consultations for wedding photos. Not something you see every day in Tampa or Gainesville.

Saturday, May 19th

After our usual breakfast at the hotel we were free for the entire day. With my Foders travel book in hand, Jan, Sandy, Patricia, Christine, and I taxied over to a popular shopping district in Guangzhou. Unlike Shanghai, my Chinese speaking was essential because virtually none of the locals spoke English and I was the only one who spoke Chinese among the group. I was up for the challenge. Because we couldn’t all fit in one taxi cab, I had Jan, Sandy, and Patricia go in the first taxi cab, explaining to the driver where they needed to go, and then hailed a second for both Christine and me.

I was thankful to see the three of them awaiting our arrival when we finally made it to the outdoor shopping area – thank goodness my Chinese was well understood by both taxi drivers. We spent the day walking the cobblestone road, crowded with mothers and their babies, young teenagers, and the elderly. We wandered our way over to a large department store – floor after floor of clothes, shoes, designer clothing, handbags – I was in heaven once again. I was told by a local that the top floor of the department store had good food. She was absolutely right. A couple of chains and fast food joints occupied the top floor of the department store. We selected a quaint restaurant and enjoyed the meal and complimentary wheat tea (our new favorite). After an hour or so of exploring each floor of the department store, we were ready for the bargains, enough with the expensive, luxury items.

The weather outside created a different agenda for us. Although we were warned time and time again, I had forgotten to carry my umbrella and raincoat with me. I had lugged both all the way from Tampa and had them packed in my luggage. The torrential downpour had everyone running into the beautiful department store that we were hoping to soon leave. With the unpredictable weather changing our plans, we opted to sit out the storm and wait for it to subside. With every beautiful, luxury department store, there is a Starbucks! I could stay in this store all day.

After about thirty minutes, the rain seemed heavier than it was before. There was no escape and, unfortunately, my coffee was all gone. China never lets you down when it comes to the need to purchase an item. With the ensuing rain, came hagglers trying to sell us umbrellas. I bargained and bargained until I had the umbrella at $2 and I was satisfied. With rain gear in hand we sloshed through the puddles and made our way across the brick road over to the other shopping center. We spent some time in the shopping center and after a while were ready to head back. Trying to hail a taxi cab, let alone two at the same time, around four on a Saturday was nearly impossible. It was still raining, our hotel was not nearby, and my feet were soaked in my ballet flats. I wanted so desperately to be back at the hotel with my feet in warm water.

After about an hour, I was able to get a taxi cab. I was desperate to try to fit us all in one cab, but this driver wasn’t going to allow it. I explained to him that we had been waiting an hour, we were desperate to get home, and we would do anything to have all of us ride in his taxi cab. We offered him extra money for allowing us all to ride back to the hotel in his cab. He agreed to take us for fifty yuan instead of the usual 20 yuan that it cost to get us there. In the grand scheme of things, the difference was only four bucks: not a big deal.

Sunday, May 20th

We woke up this morning, loaded the bus and departed for the airport. We flew to Shenyang. We were picked up and taken by a chartered bus transfer to Yingkou, a tier four city, unlike Shanghai, a tier one city. Yingkou is a very large city with a population of over two million people. Surprisingly, their sister city is Jacksonville, Florida. Besides strengthening the Florida relationship with Yingkou, the main purpose for our visit was to learn about its development.

As we would later learn, in our visit to the economic and industrial zone planning office, the development of Yingkou is to design the infrastructure of the city to connect the five largest cities in northern China. City planners are trying to make Yingkou the main city hub by utilizing its port for trade. In visiting the planning office, we were shown a sort of mock-showcase of the city. The model alluded to the development of factories, warehouses, parks, ports, airports, restaurants, Olympic-size stadiums, schools, shopping centers, and much more – everything a city would need. They have such extravagant plans and hopes of becoming a large port city to which people will come for travel and business. I only hope that in thirty years (their expected date of completion), that they are able to reap the benefits of both labor and development costs in developing and constructing a city from nothing.

As we drove into the city we were surrounded by construction cranes on either side of our bus. We checked into the not-so-luxurious Yingkou Fortune Center Hotel. From the outside, the hotel is quite massive, with large columns welcoming hotel guests and visitors into the elaborately designed Yingkou Fortune Center Hotel. It was as if they tried too hard in adding extra embellishments and designs to the hotel, attempting to mimic a five star hotel found in the States. Even the bathrooms of the hotel gave both Christine and I a great laugh. They had a table with maybe ten or so items with hand written price tags from which one could use and purchase. Except for the granite tiles on the shower floor which were out of place and rearranged, the not-so-satiable breakfast, the horrible WIFI connection, and the no-non-smoking rule throughout the lobby, I was floored and amazed that a city, once desolate, had the plans to develop and become a flourishing port city, bringing in both travel and commerce.

 

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