From Enterprises to Companies

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Structural Transformation of the Economic Sphere
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'Hey, there's actually another way of running a business.'

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<p>I returned to mainland China in the early 1990s, and when I was in China, the Chinese had no concept of what a company was, they only had enterprises. And, at that time, a state-owned enterprise was really just an arm of the state, and they fulfilled the designed role by the state for each of the enterprises. Which was, of course, a very different notion than what a company is all about. But, over time, many of the Chinese enterprises turned into companies. But, when they interact with multinationals they actually find out that, &quot;Hey, there's actually another way of running a business.&quot; And so, the Chinese companies were trying to learn from the foreign companies in many different ways, not only about technology and about products and services and so on, but, importantly, the Chinese were trying to learn about management practices, about corporate governance and the legal aspects and so on and so forth. And Chinese companies are very curious about this, they are eager to learn, because the very best Chinese companies are actually very ambitious. Many of them, of course, want to be the leaders in their industries in China and also, an increasing number of them would like to become international companies of their own right. And, in the Chinese way of saying, they want to go outside. So, more and more Chinese companies are coming to us asking us to help them design their globalization strategy. How should they internationalize? Which markets should they go to? How should they set up their product strategy? Should they form local partnerships when they go outside? And so on and so forth. So, the Chinese are learning a lot, and they continue to be very ambitious. They are believers in a lot of experimentation. They don't necessarily want to get everything sort of precise and right. They'd much rather try something, if it's 80% right and see how the market responds and then adapt. So, they work at a rythm that is much faster than the usual competitor in western multinationals. Whereas typical multinationals would typically operate in this manner, the Chinese would typically operate in a much faster rhythm. So, by the time the multinationals are ready to make decisions, the Chinese have already made cycles of decisions and have learned a great deal through their experimentation. So it's very dynamic, but we've seen more and more Chinese companies who are able to leverage this kind of model to grow very fast and more and more of them have become bonafide competitors to the multinationals and the multinationals have found it, in many cases, very surprising to see this kind of new competitor which operates in a very different way than the traditional multinational competitor.</p>
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Edward Tse describes Chinese entrepreneurs' reactions to the introduction of the concept of a multinational company. He also points out some of modern Chinese businesses' biggest strengths.