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First Stop: Beijing, China. Presented by Meredith Mao & Josh Rosen April 27, 2005. Tonight’s Agenda. Beijing Company and Embassy Visits Lenovo Group Limited American Embassy in China Facts & Figures History Today’s Beijing Map of Beijing Culture Focal Points Regional Cuisine Beverage
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First Stop: Beijing, China Presented by Meredith Mao & Josh RosenApril 27, 2005
Tonight’s Agenda • Beijing Company and Embassy Visits • Lenovo Group Limited • American Embassy in China • Facts & Figures • History • Today’s Beijing • Map of Beijing • Culture • Focal Points • Regional Cuisine • Beverage • Language
Who is Lenovo Group Limited? • Largest PC maker in China (3rd largest in world) • Primary Products and Services include: • Servers, handheld computers, imaging equipment, mobile phone handsets, manufacturing and IT integration support services • December 2004: Agreed to purchase IBM’s PC operations for approximately US $1.75 billion “Leveraging on the excellent environment created under China's reform and open door policy, together with the encouragement and support of government leaders and people from various sectors of the community, Lenovo Group has been able to develop rapidly. Today, many people in China and the Asia-Pacific Region agree that Lenovo is the typical model of an high-tech enterprise of the Chinese people, which is becoming more matured and getting stronger everyday.” - Liu Chuanzhi, Lenovo Chairman
What are Lenovo’s products? • Principle businesses classified into 3 groups: • Corporate IT Products: Commercial desktop PCs, Notebook Computers, Servers, Peripherals (Laser printer, scanner, etc.) • Consumer IT Products: Desktop PCs, Notebook Computers, Mobile Handsets, Inkjet Printers • Other Services: Manufacturing and IT integration support
How geographically concentrated is Lenovo? • In 2004, nearly 99% of Lenovo sales were generated in China • Based in Beijing with majority shareholder (~60%) Legend Group Holdings controlled by the Chinese government • PC assembly lines in Beijing, Shanghai and Huiyang (Guangdong province) with a total annual production capacity of about 5 million
How did Lenovo grow to become so large? 1984: Established and began the distribution of computers such as IBM and AST, as well as HP printers and peripherals 1989: Began the design and manufacture of motherboards and provided systems integration services for large corporate and government clients in the PRC 1990: First company to introduce the home computer in the PRC 1994: Listed on The Stock Exchange of Hong Kong 1998: The one millionth computer left the production line, Best selling brand in the PRC 2004: Agreed to purchase IBM PC operations for approximately US $1.75 billion. Transaction expected to be completed during Q2 2005. Pre-acquisition employment exceeds 11,400.
What’s ahead for Lenovo? (Discussion topics for visit) Strengths • Dominance in Chinese market • Strong Branding • Superior Distribution and Manufacturing Operations Weaknesses • High concentration in low-margin business • Late entry into handset business (market share <2%) Opportunities • Increased capability in Notebook PCs • Will benefit from strengthening Chinese dollar relative to US dollar • Low Cost PC market and alliance with AMD Threats • Lack of technology capabilities in handset marketing • Integration risks with IBM • Anticipated PC price wars and declining handset prices
Tips & Tricks … Key Takeaways: • Carry Toilet Paper With You • Consider Bribery Where Necessary Created in February 2000, The Bathroom Diariesrates 6000+ public bathrooms in more than 100 countries, providing a wealth of information to both travelers and urban dwellers. The largest enterprise of its kind in the world, The Bathroom Diaries was founded and is operated by Mary Ann Racin, an entrepreneur whose professional background is in education and international finance. http://www.thebathroomdiaries.com/china/beijing.html
What is the American Embassy in China? • Located in Beijing and contains 4 supporting Consulates • Serve American business and travel interests in China and as an education resource for Chinese looking to learn about American economy, politics, and business practices • Divided into many, many Departments Clark T. Randt, Jr., American Ambassador to China US Consular Districts and Embassy Location
So, what do all of these departments do? • US Citizen Services • Consular services (passports and birth registrations), Information and assistance in a number of other areas (tax and voting information, marriage, adoption, etc.) • Visa Section • Application procedures and requirements for qualifying for visas • Information Resource Center • Provides reference and research services on U.S. policy, legislation, and social issues to Chinese seeking information about the United States • Subject emphasis is on rule of law, economics and trade, regional security, the environment, and U.S. society and values
So, what do all of these departments do? • Press, Culture & Education (Public Affairs) • Manages the United States government's official information, educational and cultural exchange activities in China • Handles all public affairs matters and media relations concerning the Embassy, the United States government and its policies toward China • Coordinates and supports U.S. cultural and educational activities in China • Environment, Science, Technology & Health • Works to improve understanding and cooperation between the Chinese and U.S. governments on environment, science, technology and health issues, while managing cooperation between the two countries under the Sino-U.S. Science and Technology Agreement
So, what do all of these departments do? • Political Section • Reports on topics from human rights to political changes in the US leadership • Supports the many high-level visitors that come to Beijing each year • Economic Section • Providing reporting on bilateral trade issues such as market access and intellectual property rights, macroeconomic policy, sector specific government policies, and other topics such as labor issues • Foreign Commercial Service • Assists U.S. companies with U.S. exports to China, emphasizing help for U.S. small to medium-sized enterprises (SMEs) • Foreign Agricultural Service • Promoting the sale of US agricultural products in northern and eastern China
Recent Developments (Discussion topics for visit) April 14 2005 – Issue warning of possible anti-Japanese demonstrations throughout China: April 16th & 17th, May 1st – 4th April 11 2005 – Visit by Assistant Secretary of Commerce for Market Access and Compliance of the United States, William Lash • “Issues related to the protection of U.S. investments and intellectual property rights” March 2, 2005 – Visit by Assistant Secretary of State for Consular Affairs, Maura Harty • “Underscore the efforts that US has made in the post-September 11th world to ensure that America continues to be and is once again seen to be the open and welcome society” Feb 4, 2005 – Speech on the development of China's Service Sector by Craig Allen, Senior Commercial Officer
Beijing Facts & Figures • Beijing means “Northern Capital” • Capital of China (except for 1928-49 during Nationalist period) • Also referred to as “Peking”
History: A snapshot of Beijing’s past • 500,000BC:Peking Man inhabits Beijing region (fossils unearthed b/w in early 1900s) • 1045BC: Earliest Chinese record of settlements in Beijing area • Turbulence (e.g. invasions by nomadic tribes) in areas surrounding Beijing* • AD938: Beijing (Nanjing, “Southern Capital”) is auxiliary capital of the Liao dynasty; enclosed by fortified walls • 1153: Beijing (Zhongdu, “Central Capital”) is capital of Jin dynasty; city walls expanded • 1215: Army (led by Genghis Khan) sacks Beijing (Zhongdu), marking beginning of Mongol era; Yuan emperor transforms city (exemplifying urban planning) & renames it Dadu, “Great Capital”; Beijing is the capital of the entire country • 1368:Zui Yuangzhang seizes Beijing (Dadu), founds Ming dynasty; capital moved elsewhere and Dadu renamed Beiping; third Ming emperor moved capital back to Beiping, which was destroyed, reconstructed, renamed Beijing, “Northern Capital”; basic grid of city designed, city wall reshaped • 1644:Beijing falls to Manchu during a peasant uprising & Qing dynasty is founded; Taiping Rebellion (1850-68); Second Opium War (1860); Empress Dowager Cixi bequeaths power to 2-year-old Puyi * Numerous dynasties existed during this time, as well as periods when the site surrounding Beijing was invaded by or controlled nomads
History: A snapshot of Beijing’s past (cont’d) • 1911:Revolution brings Nationalist Party to power, Sun Yat-sen declared president of Republic of China; capital moved to Nanjing in 1928 and Beijing renamed Beiping; communists and National Party form alliance, embark on Northern Expedition (led by Chiang Kai-shek) to reunify China and take power from warlords (1926); Chiang slaughters communist allies in Shanghai (1927) • 1937:Japanese occupy Beijing (Beiping), but defeated in 1945 by communists • 1945: Communists, led by Mao Zedong, defeat Nationalist Party, found People’s Republic of China; Beijing is capital again; historical destruction (1950s); Cultural Revolution launched (1966-76) “Modern Era” • 1980s & 1990s: Restoration efforts begin and new construction takes off • 1989: Tiananmen Square demonstrations • 1997: Jiang Zemin takes power; privatization of many industries beings • 2001: Beijing chosen to host 2008 Olympic Games
Today’s Beijing: Undergoing transformation • Tremendous growth and expansion • Examples: Increased tourism, increased experimentation in the arts, exploding fashion industry • Development underway to prepare for the 2008 Summer Olympics • US$181.4 billion towards Olympic-related development • Considerable investment in transport infrastructure (roads, subway) • Environmental measures for cleaner air & greener spaces • However, there are downsides … • Historical buildings torn down for new development (over 100,000 residents relocated); yet urban renewal projects unable to meet needs of growing population, resulting in cramped living within the city and movement to satellite towns
Where in Beijing? Great Wall Airport Forbidden City Hotel US Embassy Source: www.beijingtrip.com/beijingmap.html
Culture: Today’s cultural renaissance in the arts • Government has made an effort to preserve “damaged treasures” & revive works of traditional artists • Revival of Peking opera (jingxi) • Resurgence of calligraphy and Chinese-style painting • Growing market for antiques • Innovation, creative expression transforming culture • Portrayal of “realities of modern day China” e.g. rapid modernization • Experimentation with contemporary forms (e.g. American-style pop art) • Beijing considered as China’s “rock music mecca”
Focal points: Top sights to see • Forbidden City • Imperial palace of Ming and Qing dynasties (24 emperors over 500 years) • World’s largest palace complex (more than 9,999 buildings) • Outer Court for ceremonial and administrative activities; Inner Court for royal family • Tiananmen Square • World’s largest public square • Site of Gate of Heavenly Peace, formerly largest of 4 gates of Imperial City Wall; Mao proclaimed People’s Republic from this gate • Pass through Tiananmen on way to Forbidden City • Hutong (alleyways) • Formed by lines of courtyard homes (siheyuan) • Originally prominent residences (dating as far back as Yuan dynasty), but conditions worsened during period of Republic of China • Many hutongs have been destroyed to make space for new development • Nearly all run east-west to ensure that main gate of siheyuan faces south • Great Wall • Construction of “original” wall began over 2000 yrs. ago when country was unified; took 10 years to link the separate walls built by independent kingdoms • Subsequent dynasties continued to strengthen and expand the wall • Extends for 3,000 miles; many parts have crumbled, but some sections restored
Focal points: Top sights to see (cont’d) • Temple of Heaven Park • Exemplifies Ming architecture (built 1420 AD) • Symbolism integrated into layout and architecture (e.g. ancient belief that “heaven is round, earth is square”) • Considered sacred ground where emperor performed major ceremonial rites; today, still an important meeting place • Summer Palace • Destination for royalty to escape summer heat in Forbidden City • Features palace temples, gardens, pavillions, lakes, corridors • Beihai Park • Park with lakeside temple architecture • Opportunities to relax (rent a rowboat, watch calligraphers or tai chi practitioners, stop for a drink or snack) • Jingshan Park • Highest point in Beijing City • Recommended for good views, especially at night • Made of earth removed to create palace moat • In the early morning on weekends, can see groups of elderly Chinese gather to sing
Regional Cuisine: Food for thought • Characteristics of Beijing cuisine (“northern cuisine”) • Preference for warm, filling dishes • Wheat-based noodles, buns & dumplingspreferred over rice • Vegetables limited: mostly cabbage, turnips, yams, potatoes • A lot of freshwater fish & chicken • Cooking styles: Steaming, baking, “explode frying”, Mongolian BBQ, Mongolian hot pot • Most famous dish: Peking duck • Popular snacks: tripe, filled sausages, fried liver, lamb kebabs, special breads, “rolling donkey” • Desserts: Caramelized fruit, “Eight Treasure Rice”, steamed buns filled with sweet bean paste
Beverage: Another round, please! • Most popular: Tea • Second most popular: Beer (best selling labels shown below) • Yanjing Beer and Beijing Beer are locally brewed, as is Wuxing beer Black tea Wulong (semi-fermented) tea Green tea “watery and unremarkable” but extraordinarily cheap” Yanjing Beer Tsingtao Beijing Beer
Language: Repeat after Dorothy … Hello ni hao Goodbye zaijian Please qing Thank you xiexie You’re welcome bukeqi Yes shide No (don’t have) mei you No (not so) bushi My name is … wo xing … Do you speak English? ni hui shuo yingyu ma? I understand wo tingdedong I don’t understand wo tingbudong Could you please ...? ni neng buneng ? I’d like a/an … wo xiang yao … I’d like to buy a/an … wo xiang mai … How much is it? Duoshao qian I want to go to … wo yao qu ... Where is the …? … zai nali? I’m lost wo milule Toilet (restroom) cesuo Restaurant fanguan Hotel jiudian Can I buy you a drink? Wo kebukeyi mai yi bei jiu gei ni? Do you want to dance with me? Ni keyi he wo tiao wu ma? Thanks Dorothy!!
Sources • www.beijingtrip.com • www.frommers.com • www.travelchinaguide.com • www.x-rates.com • www.buyusa.gov/china/en/ • www.hoovers.com • www.ibm.com • www.lenovogrp.com • www.usembassy-china.org.cn/ • DataMonitor Report – Lenovo Group Limited, December 2004. • Hoovers Database - Lenovo Group Limited • Lenovo Group Limited Annual Reports, 2002 – 2004 • OneSource Database – Lenovo Group Limited
Suggested Questions to Ask During GATE Visit to:The American Embassy of China (Beijing, China) 1. What are some pressing issues that the Embassy currently faces? 2. How much coordination exists between the multiple departments within the Embassy? Are they structured more as independent or interdependent entities? 3. Talk with us about the members of the Beijing community that rely on the Embassy to learn about economic, political, social, cultural, etc. practices in the US. What types of officials/citizens are most commonly represented? 4. How do you foresee the Embassy changing over the next 5 years as China become more and more of an economic powerhouse? 5. Overall the American Embassy in China website contains a significant collection of online political, economic, cultural, and financial resources as well as detailed contact information for those that wish to seek additional information. However, while many of the resources are superb, the website is difficult to navigate. Has there been any initiative to improve the design/structure of the site? 6. Talk to us about some of the major changes in the Embassy since Bush was elected (Randt was named ambassador) US President in 2000. 7. Tell us about how the Embassy would help a US based company interested in outsourcing manufacturing operations to China assess the potential human rights concerns that foreigner investors may have. 8. We learned that on April 21, 2005, Deborah Seligsohn, Counselor for Environment, Science, Technology and Health, spoke at the Embassy for Earth Day 2005. Can you tell us about how the US EPA and Chinese State EPA are working together to reduce air pollution and improve water protection?
Suggested Questions to Ask During GATE Visit to:Lenovo Group Limited (Beijing, China) 1. How do you plan to position your Legend brand that has been incredibly successful in China as well as within the Asia-Pacific region as compared to the IBM/Thinkpad brand? 2. Have you considered adding/moving any of your manufacturing locations to areas outside of China? Are lower cost areas for production available and feasible? 3. Talk about the cost advantages that you have over US-based competition (e.g. Dell and HP) due to the fact that (a) your operating plants are owned by Lenovo and contained within China and (b) your close connection with the Chinese government. 4. Given that worldwide PC prices and most component prices (inputs) are declining rapidly, how will you continue to maintain revenue and profitability growth? 5. Tell us about the opportunity that Lenovo faces in the handset business. 6. When you choose to pursue a strategic alliance with a company such as Microsoft or Intel, what are the key considerations? 7. Describe some of the challenges faced within integrating the Lenovo culture with the IBM culture and how you plan to address these. 8. Customer service operations is one of Lenovo’s greatest strengths and differentiators in the Chinese market. Will you strive to achieve a similar level of service in the US in other areas of where IBM products have highly penetrated the market? 9. We’re read that the integrated (Lenovo/IBM) PC Division will be headquartered in NYC, NY. What changes does that mean for this Beijing location? • What do you foresee will be some of the key technological developments affecting the PC industry in the next 5 years?