Taipei Times: As China trade ties warm with the opening of the "three small links," more and more Taiwanese firms are seeking to enter or expand into China. What strategies should local firms adopt to establish themselves and build brand recognition across the Strait?
Matthew Anderson: What's happening between Taiwan and China you have to view within the context of WTO, which will create a much larger investment flow into China. So Taiwan companies have to look at this vis-a-vis not only their own past but vis-a-vis enormous new foreign competition from everywhere. Everyday we are talking to firms from the US, from Europe who say how do we do this very same thing. So the competitive threshold will be hard.
PHOTO: CHEN CHENG-CHANG,TAIPEI TIMES
I think the second point is you must focus in China -- China is so big -- so choosing your points of entry, and really succeeding in those locations is very, very important.
I think its going to imply quite a transformation for many Taiwanese companies, from building things to selling more ideas -- that's really a leap for brand building.
So its not about the speeds and feeds on your computer chip or PC, it's about the relevance of whatever you sell to people's lives. From our offices in Beijing, Shanghai and Guangzhou, we are seeing huge growth in the sophistication of consumers. And brands are not really successful when companies say they are successful -- they're successful when consumers say they are.
So one of the things Taiwanese companies will have to do is listen a great deal. And that means going out and getting market understanding and consumer insights. Regardless of the short distance between Taiwan and China the two sides are very, very different. Take styles for example: Some cities in China take their lead from Hong Kong, others take it from Japanese teenage girls, a third group are looking to Silicon Valley. So its very important to develop that listening skill.
TT: What kinds of access to information do most organizations -- foreign or domestic -- need when moving into the China market?
Anderson: In any country there is a premium tier of influence that often relates to industry analysts or industry watchers. The cutting edge of PR is sitting down with a CEO and saying how is it that we can work with the telecom or Internet analysts? How do we get Goldman Sachs or Merrill Lynch to recognize the future potential of this company? How do we work with the venture capitalists?
VCs in Hong Kong will be investing billions of US dollars into China and into Taiwanese companies who have a strong China strategy. That [money] is in some ways greater than what some of the public capital markets will invest in the short term.
So many people are asking how do I find these influencers and access to capital? Some of the new tools of the trade are road shows, individual meetings with analysts, high-level presentations, sessions with investor groups.
A lot of major media groups in China are now holding their own press conferences which are often exclusive to get into. So these are becoming new channels of communications where companies can show their leadership.
They're also the places where deals get brokered, where people do mergers and acquisition proposals or create joint ventures. So, whereas the conception of PR of old was how do I send out a few press releases, it's really now about a more systematic approach to relations -- and that's really important on the mainland and elsewhere.
TT: Given the massive size of the China market, how do the small and medium companies -- the backbone of Taiwan's economy -- go about building networks in China?
Anderson: There are pools of influence in China -- take the media for example. There is a tremendously strong overseas press corps in China. Companies like the Financial Times, The Wall Street Journal, CNN or the BBC, all have very developed bureau's there. So your ability to work with those to tell a broader global story, is one network. Then there is the Chinese media, and there are thousands of publications.
So your ability to build networks with them is also important. Many publications are aligned with ministries, so your capacity to work with a ministry -- which may be necessary to operating in the country -- and your ability to get editorial coverage from those publications that are linked to the government body is also important. Understanding which groups regulate your industry is also key because there are some differences that Taiwanese firms face [over foreign firms] because of the way cross-strait relations are handled.
One of the things that people are are doing constantly in China is rushing to get an edge in business development. So a sustained program that gets a smaller company noticed, through trade publications, attendance at key events -- those are more important than a one-off article here or there. And what you want is a result that offers an outcome such as a partnership or acquisition or new contract.
One of the new yardsticks for measuring public relations, we find, is usually relating to a fundamental business objective that's related to growth, partnership, expansion and a lot on the side of recruitment of people. So if you look at the companies that are seen as leaders, they tend to be able to compete for staff much more effectively than others.
TT: The government's plan to develop a knowledge-based economy entails shifting away from labor intensive manufacturing and OEM production. What are the key hurdles Taiwan faces and how important will a stronger focus on R&D and corporate creativity be?
Anderson: There are two fundamental shifts to accomplish that, and one is, since some firms are locked into a short-term trading mentality, they need to move to one based on longer-term relationships, and that includes relationships with both employees and partners.
In a knowledge-based economy longer-term trust is what gets you greater efficiency, rather than squeezing 0.2 percent out of a deal and having to re-educate your partner the next time because you have a new one every six months.
The second approach is creativity. If you look at countries that are export powerhouses, they are not just selling [volumes of] products, but they are adding value through brandbuilding. They are adding value through the long-term strength of the corporate brand, or a product brand that fits into to the lives of the people who can use it.
Strengthening creativity is very important and Taiwan isn't the only country in Asia to face [a lack of] it. Certainly Singapore, which has had a great deal of success is wresting with how to be a creative powerhouse.
Hong Kong itself, thinking about its future vis-a-vis China is putting a big emphasis on creative industries. So we are seeing that there is a very big role for creativity in this new economy.
TT: You mentioned the need for employers to retain quality staff by building long-term relationships with their employees. How important is this in the scheme of shifting to a knowledge-based economy?
Anderson: This point should be stressed heavily. We have come out of such a robust economy, and have learned that the market for professional staff was a more difficult market to compete in than the market for clients or customers. So the initial question facing most new ventures is do you have the people to do this, not how much will it cost or can you do the job?
Our corporate strategy is "AGK," which stands for Attract, Grow and Keep the best people. It involves everything from hiring the right people from the start, inducting them into the organization quickly so the become productive as soon as possible, and lastly, train them and allow them to grow.
We also find out that there are a lot of reasons that people leave jobs, and understanding why people leave an organization is critical. Once you understand the why, then you can close that door by addressing those concerns.
As Taiwan globalizes and regionalizes more, keeping management level staff loyal is a big challenge. A recent survey of corporate CEOs we did recently found that what was keeping CEOs up at night ... and employee communications was absolutely critical.
TT: Taiwan's traditional industries are currently engaged in a battle to bolster sagging profits, shed bureaucratic management practices and survive the economic slowdown. How important is adjusting to change to this sector?
Anderson: Adjusting to change is hugely important for this sector. Across Asia and in Taiwan as well, there are going to be some families and some managers who grasp the nettle, and really take up change. You see it in the chaebols in South Korean, we have seen it in Southeast Asia.
It is a paradox of family-run businesses, where its hard to get an agent of change sometimes when a hierarchical corporate structure [is so strongly focused on] stability [and not on changing things].
Right now, one of the key things to keep an eye on is which traditional industry firms will effectively decide what they'll focus on, and go out and do it.
The good news is there is help coming. A lot of investment funds that are interested in partnering in Taiwan in the next year or two, can go in and sit at the board level and help these companies that are willing to face change.
These changes will require huge amounts of communications. The new CEOs must be very effective at communicating, particularly in knowledge industries and R&D where employees know more about their jobs than the managers do. So the managers have to be in a sort of a partnership rather than a command and control position.
In addition, these companies will have to focus more. We have seen this with Nokia: 150 years ago they had over 100 different lines of business and now they are very focused and very big.
So you don't have to get smaller by focusing, often it helps accelerate your growth and people understand better what you are doing more. Around the world right now there is more of a premium on ability to grow earnings, consistently, and not have surprises, than there are on some of the older metrics, which were scale, or the number of employees or factories you have.
In addition, modern electronic media has put a huge amount of pressure on performance. It's critical when you have analysts from Bloomberg, CNN and CNBC who are commenting daily on companies. If you do have a down quarter or some surprise, you better get them out. We are an enormous advocate of straight talk. When you have bad news, get it out quickly and consistently -- and make sure people understand your plan for moving forward.
TT: What advise can you give to Taiwan firms trying to adjust to the changing economic landscape?
Anderson: A lot of Taiwanese businesses are saying, "How do I manage my corporate communications, particularly when I have to do some belt-tightening?"
What we saw through recessions in Southeast Asia was that money would flow from other marketing disciplines into PR as a way of keeping brands relevant and in the public eye. It is a way to communicate cost effectively.
The second thing is helping people adjust to change, and in Taiwan and Asia, we have lived through a lot of change -- and the [level of] change is only going to become more volatile. So there is no longer one message you send to the outside world, another message you send to your investors and a third to your employees. Companies have got to be consistent and effectively adjust to change.
TT: Who will profit in slowing economy and can we expect to see a backlash in the consumer markets in the near future?
Anderson: During the recession in Thailand in 1997 when the baht crashed, I got several of my colleagues together and said, "What are we going to do?" And we decided to focus on four areas: crisis management, mergers and acquisitions -- we knew there would be lots of restructuring -- third was internal communications, and last was what happens to a brand when its threatened in a time of economic difficulty.
We were able to grow our business through the worst of times because we chose a few things to do that were particularly relevant. At the time we did studies on other recessions, and what we found was that companies that maintained marketing spending during a recession had a disproportionally higher market share after the recession.
We saw this happen in Latin America, in Mexico and in the UK recession in Europe. There we found a brand of ice cream, Haagen-Dazs, which is very premium brand, but was highly successful for a product launched during a recession.
It was positioned as a sort of "affordable luxury." While consumers may not have been able to go on a vacation to Paris that year, they certainly felt they could spring for a US$5 frozen yogurt.
Basic household spending tends to rise in a recession. People cancel foreign holidays, skip buying the new car -- but buying a new television, buying good food for the family and taking the family out to eat grow in popularity.
So the real question in recession marketing is the question of relevance. No matter what happens there are opportunities out there -- the worst sin is complacency.
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