Doing Business in China: The Experiences of

Google and AppleSaleha Ahmed, Rachel Amberg, Meme Gottwald,

Yessery Morales, Kelsey Rhoads

International Finance: ECON 158/MGMT 21922 April 2014

Outline

China● Background Information:

o Governmento Economyo Demographicso History

● Business Environmento Political Environmento Market Environmento Social/Cultural

Environment● Business Practices and

Traditions

Tech Companies: Google and Apple

● Why go to China?● Google

o About Googleo Experience in Chinao Implications and Takeaways

● Appleo About Appleo Experience in Chinao Implication and Takeaways

Analysis and Discussion

Background Information

Geography, Government, Economy, and Demographics

China : United States China : India

Background Information: Government● People’s Republic

of China● Communist State

o No political opposition

● President: Xi Jinping since 2013

● Before: Hu Jintao

Background Information: Economy

•Official GDP: $8.939 trillion (2013)

•Purchasing Power GDP: $13.37 trillion (2013)

•GDP Real Growth Rate: 7.6% (2013) 9.3% (2011)

•Labor Force: 797.6 million (2013)

•Inflation Rate: 2.6% (2013)

•Imports and Exports: $1.772 trillion & $2.21 trillion (2013)

•Unemployment Rate: 6.4% (2013)

•Average Income: $5,720 (2012)

Background Information: Demographics ● Coastal vs. Inland Development● Distribution of Poverty● Distribution of Industry● Environmental Issues

Background Information: Five-Year Plans

Goals of the plans have shifted from basic goals of increasing GDP and modernization to a balanced economy focusing on infrastructure, social welfare, and environmental issues.

Business EnvironmentPolitical and Economic Context

Political Environment

● Government Intervention● Support of Foreign Companies● Transparency● Regulations● Corruption● Labor Laws● Government Debt

Meme Gottwald

Found this online, maybe this would be good for the exchange rate and also the inflation rate...

Market Environment

● Prevalence of State-Owned Firms● Focus on Exports● Beliefs of Consumers and Rivals● Actual and Potential Rivals

o Increasing competition from local firms

● Cost and Speed of Entry● Corporate Welfare

Social and Cultural Environment

● Average Age of Population● Consumer/Population Demands● Emerging Middle Class● Perception of Government● Role of (Self-)Censorship● Savings rate of 38% (!)

Business Practices and Traditions

Tech CompaniesBusiness Implications: Why go to China?

Google in China

Google’s Mission

“To organize the world’s information and make it universally accessible and

useful”● “Democracy on the web works.”● “You can make money without doing evil.”● “There’s always more information out there.”● “The need for information crosses all borders.”● “Great just isn’t good enough.”

Google China: Timeline

Google China: Timeline

Apple in China

Apple’s Mission

● “Every detail matters.”

● “Simplicity isn’t simple.”

● “Creativity from every corner.”

Apple in China: Timeline

Apple in China: Timeline

Apple Breaking into China’s Consumer Market

Apple’s Move to China

Consequences and Aftermath ● Shenzen plant became known as the

“Foxconn Suicide Express”.● After these incidents, Foxconn and

Apple moved production processes to more remote areas.

● NOTE: Apple is moving some of its production process back to the U.S. (announced as of the end of 2012).

AnalysisWhat does this mean for the U.S.?● When Chinese contractors grow, they have an

advantage over U.S.● Their national industrialPolicy = Innovation and Creation

Analysis and Discussion

Implications for Firms

● Working within different business practices

● Adapting to foreign norms vs. home values

● Learning effects● Impact on perception● Cooperation from

foreign government

Implications for China

● Pressure on Governmento Growth = Political Legitimacy

● Pressure on GDP o Exports and Consumption

● Pressure of Inflation● Debt● Role of the Internet

DiscussionShould companies go to China? Why or why not? What kind of companies will do best?

Why did Google and Apple have such drastically different experiences? How should they have done it differently?

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