International business has been conducted in many different ways in many places over many centuries. The one constant in this field is change, meaning that practitioners and students must always remain attentive to new trends. This is particularly true at present, with the astonishing rise of countries that used to be much more peripheral to the international trade system, starting with China.
As job markets get tighter in many of the worldâ€™s older industrialized countries, more and more business school graduates from Western universities find themselves tempted by opportunities found in Asia. The phenomenon is not new but what has changed is the speed and extent of Asiaâ€™s emergence. This has changed the trickle of international business hopefuls relocating to the East into a flood.
In Singapore and Hong Kong, for instance, the community of French business expatriates more than doubled between 2006 and 2011 to number more than 9000 and 10,000 practitioners, respectively (Wassener 2012). The same phenomenon has also been observed in Thailand and India. This is particularly noteworthy given that these are parts of the world where French entrepreneurs and managers have always accounted for a much smaller proportion of the foreign business community than their American and British counterparts. The sudden interest can be explained by the fact that Chinaâ€™s emergence process is now at a stage where there is a growing population of middle class households with enough spending power to purchase the kind of luxury items in which many French companies have traditionally specialized. Indeed, as Chapter 15 discusses, whereas export used to be the prime driver behind Chinese development, today this role is played by domestic consumption in both the private and public sectors, a category of economic activity that accounted for more than half of Chinese GDP in 2011, for the first time in a decade (Economist 2012). The â€˜whatâ€™ and the â€˜whereâ€™ of international business are often closely interconnected.
As Chinese householdsâ€™ disposable income rises, so has their demand for items from a number of sectors dominated by longer established foreign multinationals. One example is bottled water. Chinaâ€™s rapid industrialization has been accompanied by many environmental problems (see Chapter 16) and it has been estimated that only a small proportion of the countryâ€™s overall water resources are clean (Jing 2011). Thus, there is a very good health reason for local consumers to pay for bottled water, especially now that they can afford it. The market has enjoyed an annual growth rate of 20 per cent over the past decade and its high-priced, premium sector is predicted to grow by a further 80 per cent over the next few years, reaching annual sales of around $1.5 billion. Of course, what remains to be seen is whether the famous international brands (led by French household names such as Perrier and Evian) will be the ones that benefit most from this trend, or if local companies, such as Tibet 5100 Water Resources Holding Ltd (first listed on the Hong Kong stock exchange in June 2011) will gain market share. Domestic water is much less expensive than the foreign variety. What remains uncertain, however, is whether Chinese consumers will trust its quality.
This uncertainty reflects widespread problems in China with the quality of manufactured goods. One example is the market for tyres. Up to 43 per cent of all Chinese highway accidents and casualties in 2010 were blamed on the poor quality of tyres, most of which had been manufactured in local factories (Nan 2011). Following a long series of negative headlines, six large and medium-sized Chinese tyre-makers went out of business. A market survey published the same year found that 64 per cent of all car owners in the Shanghai area preferred European, US, or Japanese tyres to ones made in China. Well-established international rivals like Continental AG from Germany or Michelin from France took note of the situation and moved quickly to intensify their market presence in China.
Opportunism has always been a key part of international business strategies. It is not at all evident, however, that in the future foreign producers will dominate as many market sectors in China as is currently the case. Chinese companies have proved themselves very capable of learning quickly and their growing exposure to the quality levels that are taken for granted in many overseas markets will have a major impact on their domestic activities as well. When this occurs, there is every chance that they might regain some domestic market share back from the foreign MNEs. Deciding if and when this will happen is crucial to the career plans of anyone interested in moving East. Having a coherent vision of the future is an essential skill for any international business practitioner.