Learning from the mistakes by others - the WTO column

Half a decade ago I met a former editor of the Harvard Business Review here in Shanghai and asked him why there were so few case studies about companies in China. There was one famous one about Qingdao's Haier, but that was done in 1995 and there were very few others. Harvard Business School developed this new teaching method where future business leaders would only get case studies, in stead of solid bookkeeping and other traditional elements of their business training. Other business school have taken over that strategy, at least in part. The case studies would feature mostly a major company that faced a "challenge", as disasters are called in the MBA-jargon. The case studies would have an open end, allowing the students to come up with their own solution. The cases were in theory fictive, but in most cases it would not take a lot of trouble to identify the real company behind it.

"We did not think we could learn from those cases in China," the former editor said. "There is nothing to learn for us in China."

I was shocked at the time, since I had had the opportunity to witness some of the corporate challenges in China very closely and I certainly thought others could learn from them. Since then the attitude has changed dramatically and the number of business case studies on China has exploded dramatically. No business school in the world can allow itself not to have a China-program.

A newly released set of China case studies "China CEO: A Case Guide for Business Leaders in China" by Juan Antonio Fernandez and Liu Shengjun is a welcome addition to those case studies. The book is a follow-up of the already very successful China CEO: Voices of Experience from 20 International Business Leaders by Juan Antonio Fernandez and Laurie Underwood, where 20 China CEO's got their opportunity to explain their successes. The main weak point of the first China CEO's book was of course the lack of distance and self-reflection those CEO's sometimes could show, but that has been greatly made up in the second book.

It documents some of the 'causes celebres' in recent China business history, like the early failure of the Peugeot operation in Guangdong, the GM versus Chery case and one of my all-time favorites: the illegal expansion of Carrefour in its early years in China.

The official story is always that foreign companies are in the long run better off when they stick to the rules and regulations of the country they operate in. I then always use the case of Carrefour, the French retailer, to point out that this rule is not set in stone. Carrefour went, with the blessing of local authorities, 100 percent against the restrictions the central government had imposed on the industry. While they were not alone in ignoring those rules - Taiwanese and Hong Kong companies did likewise - other foreign competitors watched their technically illegal expansion with amazement and shock, since it gave the French a huge competitive advantage. Carrefour ignored all the warnings it got.

In the end Carrefour got into trouble and was ordered to stop its expansion for six months. A Carrefour manager at the time summerized me their strategy after they really got into problems: "We went to Beijing and said we we sorry. Then it was ok." The competion was even shocked as the government allowed Carrefour to get away with their illegal practises.

In the book both participants in the process, foreign and Chinese, give their viewpoint and each case it commented by some experts, both from major business schools and experienced people in the industry. I enjoyed it.

Fons Tuinstra

China CEO. A case guide for business leaders in China, by Juan Anthonio Fernandez and Liu Shengjun. John Wiley & Sons, 2007. ISBN 9780470822241.