EMERSION ELECTRIC STRATEGY FOR MICROMOTION S ENTRANCE INTO CHINA
EMERSION ELECTRIC STRATEGY FOR MICROMOTION’S ENTRANCE INTO CHINA SITUATION ANALYSIS The Micro Motion product line of Emerson’s Electric’s Rosemont Division is considering an expansion into China. The company currently markets its products into this country and throughout Asia. The product is then exported into this region from operations located in the United States. Micro Motion believes it can increase sales and profitability by establishing a manufacturing presence in China. This strategy needs evaluation along with the different logistic options to be chosen from. ENVIRONMENTAL ANALYSIS Opportunities - China has 20% of the world’s population. ... The potential market growth for Micro Motion products in China is 10-18% per year. ... Labor costs in China are only $. ... China currently has limitations on this investment however regulations are becoming less restrictive. Threats - China’s government is still communistic and its future stability is uncertain even though there are no present indications in the climate to welcome economic development and foreign investment. ... China’s infrastructure is still underdeveloped, albeit being improved in many regions at a rapid pace. Many areas have primitive roads, limited telecommunication, poor or no water and unreliable electric supply. ... Most factory workers are younger women who come to the factories from the farms to earn dory’s or to supplement family incomes. ... Another large issue with labor as it relates to working in joint ventures with Chinese companies (JV’s) is the historic communistic policy of full employment. It is very difficult to reduce the workforce in these JV’s since it simply has not been done in the past and is foreign concept to many Chinese. Once humorous example shared with me by Steve Cortinovis, Emerson’s former VP of Asian Business Development, was that the workers kept reporting to the factory every day for months after they were “laid” off from the Branson JV in Shanghai and literally continued to perform operations. ... Relationships are very important when doing business in China. A foreign company doing business in China needs to carefully select the correct people to employ within the country to make the necessary arrangements for customer visits, recruiting employees or building factories. Many companies partner with Chinese entities in joint ventures (JV’s). ... There are many Western business conventions that are not customary in China. ... Westerners refer to this as always have to begin at square one in China. The employer in China assumes a patriarchal role over its workers. ... Companies that enter China need to be prepared to assume these responsibilities and also can not expect to substitute this role with higher wages because Chinese workers prefer the benefits to paying taxes on the wages. ... However, new process plant growth is highest in Asia and China in particular. ... Both the German and the Japanese competitors import their products into China and do not produce locally. ... INTERNAL ANALYSIS Strengths - Emerson Electric is an $81 billion company with 15+ years of experience in China with both JV’s and wholly owned startups. ... Emerson is one of 25 companies who have a preferred status with the Chinese government since they have established more than 3 JV’s and have invested more than $10 million in capital investment. Emerson has an extensive support structure for a division to establish operations in China. ... Emerson also cross trains management from Asia at other Emerson sites worldwide to indoctrinate them into their corporate culture. ... The first is that their customers must apply for import licenses in order to bring Micro Motion products into China. ... COMPANY MISSION* Emerson’s mission is to manufacture the highest quality products at the lowest relevant global cost. ... STRATEGY Current Strategy – Emerson’s current strategy is to expand globally with specific focus on the Chinese market. This strategy was developed to seize higher than average growth expected in this market and to have access to low labor costs.